<PAGE>1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended June 30, 1998
------------------
Commission file number 1-12724
-----------------
AMERICAN INSURED MORTGAGE INVESTORS - L.P.- SERIES 88
-----------------------------------------------------------------
(Exact name of registrant as specified in charter)
Delaware 13-3398206
------------------------------- ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
11200 Rockville Pike, Rockville, Maryland 20852
- ----------------------------------------- -----------------
(Address of principal executive offices) (Zip Code)
(301) 816-2300
----------------------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
---- ----
As of June 30, 1998, 8,802,091 depositary units of limited partnership
interest were outstanding.
<PAGE>2
AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 88
INDEX TO FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 1998
Page
----
PART I. Financial Information
Item 1. Financial Statements
Balance Sheets - June 30, 1998 (unaudited)
and December 31, 1997 . . . . . . . . . . . 3
Statements of Operations - for the three and
six months ended June 30, 1998 and
1997 (unaudited) . . . . . . . . . . . . . 4
Statement of Changes in Partners' Equity -
for the six months ended June 30,
1998 (unaudited) . . . . . . . . . . . . . 5
Statements of Cash Flows - for the six
months ended June 30, 1998 and
1997 (unaudited) . . . . . . . . . . . . . 6
Notes to Financial Statements (unaudited) . . 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results
of Operations . . . . . . . . . . . . . . . 17
PART II. Other Information
Item 6. Exhibits and Reports on Form 8-K . . . . . . 20
Signature . . . . . . . . . . . . . . . . . . . . . . . 21
<PAGE>3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 88
BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
------------- ------------
(Unaudited)
ASSETS
<S> <C> <C>
Investment in FHA-Insured Certificates
and GNMA Mortgage-Backed Securities,
at fair value:
Acquired insured mortgages $ 73,349,267 $ 74,963,747
Originated insured mortgages 33,279,009 44,222,754
------------- -------------
106,628,276 119,186,501
Investment in FHA-Insured Loans,
at amortized cost, net of unamortized
discount and premium:
Originated insured mortgages 16,572,958 22,609,310
Acquired insured mortgages 1,075,620 1,094,502
------------- -------------
17,648,578 23,703,812
Due from HUD 603,496 663,410
Cash and cash equivalents 13,535,044 2,721,306
Investment in affiliate 1,281,884 1,281,884
Notes receivable from affiliates and due
from affiliates 658,486 728,684
Receivables and other assets 2,169,820 2,330,128
------------- -------------
Total assets $ 142,525,584 $ 150,615,725
============= =============
LIABILITIES AND PARTNERS' EQUITY
Distributions payable $ 13,883,424 $ 3,517,134
Accounts payable and accrued expenses 72,849 121,331
------------ -------------
Total liabilities 13,956,273 3,638,465
------------ -------------
Partners' equity:
Limited partners' equity 128,328,104 147,475,554
General partner's deficit (2,525,947) (1,539,380)
Less: Repurchased Limited Partnership
Units - 50,000 Units (618,750) (618,750)
Net unrealized losses on investment
in FHA-Insured Certificates and GNMA
Mortgage-Backed Securities (1,484,182) (1,902,187)
Net unrealized gains on investment
in FHA-Insured Certificates and GNMA
Mortgage-Backed Securities 4,870,086 3,562,023
------------ -------------
Total partners' equity 128,569,311 146,977,260
------------ -------------
Total liabilities and
partners' equity $142,525,584 $150,615,725
============ ============
The accompanying notes are an integral part
of these financial statements.
</TABLE>
<PAGE>4
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 88
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
For the three months ended For the six months ended
June 30, June 30,
---------------------------- ----------------------------
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Income:
Mortgage investment income $ 2,497,356 $ 3,060,884 $ 5,248,774 $ 6,120,230
Interest and other income 128,044 43,293 188,687 106,373
------------ ------------ ------------ ------------
2,625,400 3,104,177 5,437,461 6,226,603
------------ ------------ ------------ ------------
Expenses:
Asset management fee to
related parties 338,004 372,870 691,422 745,740
General and administrative 159,033 101,799 233,285 154,779
------------ ------------ ----------- ------------
497,037 474,669 924,707 900,519
------------ ------------ ----------- ------------
Earnings before net gains on
mortgage dispositions 2,128,363 2,629,508 4,512,754 5,326,084
Net gains/(losses) on mortgage
dispositions (350,159) -- 435,949 --
------------ ------------ ----------- -----------
Net earnings $ 1,778,204 $ 2,629,508 $ 4,948,703 $ 5,326,084
============ ============ =========== ===========
Net earnings allocated to:
Limited partners - 95.1% $ 1,691,072 $ 2,500,662 $ 4,706,217 $ 5,065,106
General partner - 4.9% 87,132 128,846 242,486 260,978
------------ ------------ ----------- -----------
$ 1,778,204 $ 2,629,508 $ 4,948,703 $ 5,326,084
============ ============ =========== ===========
Net earnings per Limited Partnership
Unit - Basic $ 0.19 $ 0.28 $ 0.53 $ 0.57
============ ============ =========== ===========
The accompanying notes are an integral part
of these financial statements.
</TABLE>
<PAGE>5
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 88
STATEMENT OF CHANGES IN PARTNERS' EQUITY
For the six months ended June 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
Unrealized Unrealized
Losses on Gains on
Investment Investment
in FHA-Insured in FHA-Insured
Repurchased Certificates Certificates
Limited and GNMA and GNMA Total
Limited General Partnership Mortgage-Backed Mortgage-Backed Partners'
Partner Partners Units Securities Securities Equity
------------ ------------- ----------- --------------- ---------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1997 $ 147,475,554 $ (1,539,380) $ (618,750) $ (1,902,187) $ 3,562,023 $ 146,977,260
Net earnings 4,706,217 242,486 -- -- -- 4,948,703
Distributions paid or accrued
of $2.71 per Unit,
including return of capital
of $2.18 per Unit (23,853,667) (1,229,053) -- -- -- (25,082,720)
Adjustment to net unrealized
gains on investment in
FHA-Insured Certificates and
GNMA Mortgage-Backed
Securities -- -- -- 418,005 1,308,063 1,726,068
------------ ------------- ----------- -------------- ------------ ------------
Balance, June 30, 1998 $ 128,328,104 $ (2,525,947) $(618,750) $ (1,484,182) $ 4,870,086 $128,569,311
============ ============= =========== ============== ============ ============
Limited Partnership Units
outstanding - June 30, 1998 8,802,091
=============
The accompanying notes are an integral part
of these financial statements.
</TABLE>
<PAGE>6
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 88
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For the six months
ended June 30,
1998 1997
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 4,948,703 $ 5,326,084
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Net gain on mortgage dispositions (435,949) --
Changes in assets and liabilities:
Decrease (increase) in receivables and
other assets 160,308 (174,332)
(Decrease) increase in accounts payable and
accrued expenses (48,482) 4,010
Decrease in investment in affiliate
and notes receivable from affiliates and
due from affiliates 70,198 68,194
------------ ------------
Net cash provided by operating activities 4,694,778 5,223,956
------------ ------------
Cash flows from investing activities:
Proceeds from dispositions of insured mortgages 19,406,190 --
Decrease in Due from HUD 59,914 2,558,201
Receipt of principal from scheduled payments 1,369,286 1,340,231
Increase in investment in affiliate -- (139,201)
------------ ------------
Net cash provided by investing activities 20,835,390 3,759,231
------------ ------------
Cash flows from financing activities:
Distributions paid to partners (14,716,430) (8,237,499)
------------ ------------
Net cash used in financing activities (14,716,430) (8,237,499)
------------ ------------
Net increase in cash and cash equivalents 10,813,738 745,688
Cash and cash equivalents, beginning of period 2,721,306 1,918,341
------------ ------------
Cash and cash equivalents, end of period $ 13,535,044 $ 2,664,029
============ ============
The accompanying notes are an integral part
of these financial statements.
</TABLE>
<PAGE>8
AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 88
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
1. ORGANIZATION
American Insured Mortgage Investors L.P. - Series 88 (the Partnership) was
formed under the Uniform Limited Partnership Act of the state of Delaware on
February 13, 1987. The Partnership's reinvestment period expired on December
31, 1996 and the Partnership will terminate on December 31, 2021, unless
previously terminated under the provisions of the Partnership Agreement.
Effective September 6, 1991, CRIIMI, Inc. (the General Partner) succeeded
the former general partners to become the sole general partner of the
Partnership. CRIIMI, Inc. is a wholly owned subsidiary of CRIIMI MAE Inc.
(CRIIMI MAE).
The Partnership's investment in mortgages consists of participation
certificates evidencing a 100% undivided beneficial interest in government
insured multifamily mortgages issued or sold pursuant to Federal Housing
Administration (FHA) programs (FHA-Insured Certificates), mortgage-backed
securities guaranteed by the Government National Mortgage Association (GNMA)
(GNMA Mortgage-Backed Securities) and FHA-insured mortgage loans (FHA-Insured
Loans and together with FHA-Insured Certificates and GNMA Mortgage-Backed
Securities, referred to herein as Insured Mortgages). The mortgages underlying
the FHA-Insured Certificates, GNMA Mortgage-Backed Securities and FHA-Insured
Loans, insured in whole or in part by the federal government, are non-recourse
first liens on multifamily residential developments or retirement homes. As
discussed in Note 3, certain of the FHA-Insured Certificates are secured by
coinsured mortgages.
2. BASIS OF PRESENTATION
In the opinion of the General Partner, the accompanying unaudited financial
statements contain all adjustments of a normal recurring nature necessary to
present fairly the financial position of the Partnership as of June 30, 1998 and
December 31, 1997 and the results of its operations for the three and six months
ended June 30, 1998 and 1997 and its cash flows for the six months ended June
30, 1998 and 1997.
These unaudited financial statements have been prepared pursuant to the
rules and regulations of the Securities and Exchange Commission. Certain
information and note disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted. While the General Partner believes that the disclosures
presented are adequate to make the information not misleading, these financial
statements should be read in conjunction with the financial statements and the
notes to the financial statements included in the Partnership's Annual Report
filed on Form 10-K for the year ended December 31, 1997.
New Accounting Standards
------------------------
During 1997, FASB issued SFAS No. 130 "Reporting Comprehensive Income"
(FAS 130). FAS 130 states that all items that are required to be
recognized under accounting standards as components of comprehensive income
are to be reported in a separate statement of income. This would include
net income as currently reported by the Partnership adjusted for unrealized
gains and losses related to the Partnership's mortgages accounted for as
"available for sale". FAS 130 was adopted by the Partnership January 1,
1998. For the three and six months ended June 30, 1998, comprehensive
income was $2,999,503 and $6,674,771, respectively. For the three and six
<PAGE>9
AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 88
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
2. BASIS OF PRESENTATION - Continued
months ended June 30, 1997, comprehensive income was $5,963,352 and
$6,485,790, respectively.
3. INVESTMENT IN FHA-INSURED CERTIFICATES AND GNMA MORTGAGE-
BACKED SECURITIES
A. Fully Insured Mortgage Investments
----------------------------------
Listed below is the Partnership's aggregate investment in fully
insured acquired FHA-Insured Certificates and GNMA Mortgage-Backed
Securities:
<TABLE><CAPTION> June 30, December 31,
1998 1997
------------ ------------
<S> <C> <C>
Number of:
GNMA Mortgage-Backed Securities 22 22
FHA-Insured Certificates(2) 4(1) 5
Amortized Cost $ 69,382,003 $ 72,251,365
Face Value 69,614,154 72,492,904
Fair Value 73,349,267 74,963,747
(1) During January 1998, the mortgage on Northpoint Apartments was prepaid.
The Partnership received net proceeds of approximately $1.7 million and
recognized a gain of approximately $6,000 on this prepayment. A distribution of
$0.19 per Unit related to this prepayment was declared in February 1998 and was
paid on May 1, 1998.
(2) In June 1998, the Partnership received approximately $778,000 in principal
curtailment made on the mortgage on Olde Mill Apartments. These proceeds of
$0.08 per Unit were declared as part of the June 1998 distribution and were paid
in August 1998.
</TABLE>
<PAGE>10
AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 88
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
3. INVESTMENT IN FHA-INSURED CERTIFICATES AND GNMA MORTGAGE-
BACKED SECURITIES - Continued
Listed below is the Partnership's aggregate investment in fully
insured originated FHA-Insured Certificates:
<TABLE><CAPTION> June 30, December 31,
1998 1997
------------ ------------
<S> <C> <C>
Number of Mortgages 0(1) 1
Amortized Cost $ 0 $ 11,296,412
Face Value 0 10,941,101
Fair Value 0 11,055,186
(1) During June 1998, the mortgage on Arbor Village was prepaid. The
Partnership received net proceeds of approximately $10.9 million and recognized
a loss of approximately $350,000 on this prepayment. A distribution of $1.18
per Unit related to this prepayment was declared in June 1998 and was paid on
August 3, 1998.
</TABLE>
As of August 1, 1998, all fully insured FHA-Insured Certificates and
GNMA Mortgage-Backed Securities were current with respect to the payment of
principal and interest.
In February 1996, the General Partner instructed the servicer for the
mortgage on Water's Edge of New Jersey, a fully insured acquired
construction loan, to file a Notice of Default and an Election to Assign
the mortgage with the Department of Housing and Urban Development (HUD).
The property underlying this construction loan is a nursing home located in
Trenton, New Jersey. As of June 30, 1998, the Partnership had received
approximately $10.2 million on this assignment including partial repayment
of the outstanding principal and accrued interest. The remainder of the
proceeds, approximately $1.5 million, is included in Due from HUD and
Receivables and other assets. HUD has disallowed approximately $1.5
million of the assignment claim. The servicer is currently negotiating
with HUD in regard to collection of the disallowed portion of the claim.
In addition, the General Partner has retained counsel in this matter and is
actively pursuing litigation. The Partnership believes that the allowance
for loan losses of $375,000 as of June 30, 1998, is sufficient to provide
for amounts that may not be recovered from the servicer.
On July 30, 1998, the Partnership filed a Motion for Judgment against
Greystone Servicing Corporation, Inc. (the servicer) in the Circuit Court
for Fauquier County, Virginia. The Motion for Judgment alleges breach of
contract and negligence claims and seeks judgment for $1,653,396 plus
interest, attorneys' fees and costs.
B. Coinsured FHA-Insured Certificates
----------------------------------
As of June 30, 1998 and December 31, 1997, the Partnership held
investments in three FHA-Insured Certificates secured by coinsured
mortgages. One of these coinsured mortgage investments, the mortgage on
St. Charles Place - Phase II, is coinsured by The Patrician Mortgage
Company (Patrician), an unaffiliated third party coinsurance lender under
the HUD coinsurance program. As of June 30, 1998 and December 31, 1997,
<PAGE>11
AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 88
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
3. INVESTMENT IN FHA-INSURED CERTIFICATES AND GNMA MORTGAGE-
BACKED SECURITIES - Continued
the remaining two FHA-Insured Certificates are coinsured by Integrated
Funding, Inc. (IFI), an affiliate of the Partnership.
1. Coinsured by third party
------------------------
As of June 30, 1998, the originated coinsured mortgage which is
coinsured by Patrician, St. Charles Place-Phase II, was delinquent
with respect to principal and interest. The following is a discussion
of actual and potential performance problems with respect to this
mortgage investment.
<PAGE>12
AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 88
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
3. INVESTMENT IN FHA-INSURED CERTIFICATES AND GNMA MORTGAGE-
BACKED SECURITIES - Continued
<TABLE><CAPTION>
June 30, 1998 December 31, 1997
-------------------------------------------- ------------------------------------------
Amortized Face Fair Amortized Face Fair
Cost Value Value Cost Value Value
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
St. Charles Place -
Phase II(1) $ 3,710,285 $ 3,710,285 $ 3,498,159 $ 3,710,287 $ 3,710,287 $ 3,484,715
(1) These amounts represent the Partnership's approximate 55% ownership interest in the mortgage. The remaining 45% ownership
interest is held by American Insured Mortgage Investors L.P. - Series 86, an affiliate of the Partnership. As of August 1,
1998, the mortgagor has made payments of principal and interest due on the mortgage through November 1995 to the Partnership.
Patrician is litigating the case in bankruptcy court while pursuing negotiations on a modification agreement with the borrower.
The Partnership has made the decision to discontinue the accrual of interest income for this mortgage as of January 1, 1998, in
the best interest of its Unitholders. For the three and six months ended June 30, 1998 the unaccrued mortgage investment
income was approximately $80,000 and $160,000, respectively.
</TABLE>
The General Partner intends to continue to oversee the Partnership's
interest in this mortgage investment in an effort to ensure that
Patrician meets its coinsurance obligations. The General Partner's
assessment of the realizability of the carrying value of the St.
Charles Place-Phase II mortgage is based on the most recent
information available and to the extent these conditions change or
additional information becomes available, the General Partner's
assessment may change. However, the General Partner does not believe
that there would be a material adverse impact on the Partnership's
financial condition or its results of operations should Patrician be
unable to comply with its full coinsurance obligation.
2. Coinsured by affiliate
----------------------
As of June 30, 1998 and December 31, 1997, the Partnership held
investments in two FHA-Insured Certificates secured by coinsured
mortgages, where the coinsurance lender is Integrated Funding Inc.
(IFI), an affiliate of the Partnership.
As of August 1, 1998, these two IFI coinsured mortgages, as shown in
the table below, were current with respect to the payment of principal
and interest.
<PAGE>13
AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 88
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
3. INVESTMENT IN FHA-INSURED CERTIFICATES AND GNMA MORTGAGE-
BACKED SECURITIES - Continued
<TABLE><CAPTION>
June 30, 1998 December 31, 1997
--------------------------------------------- ------------------------------------------
Amortized Face Fair Amortized Face Fair
Cost Value Value Cost Value Value
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
The Breakers at
Golf Mill $ 22,212,902 $ 22,212,902 $ 20,940,847 $ 22,309,235 $ 22,309,236 $20,873,845
Summerwind Apts.-
Phase II 7,937,181 9,343,823 8,840,003 7,959,366 9,378,179 8,809,008
------------ ------------ ------------ ------------ ------------ -------------
$ 30,150,083 $ 31,556,725 $ 29,780,850 $ 30,268,601. $ 31,687,415 $29,682,853
============ ============ ============ ============ ============ =============
</TABLE>
4. INVESTMENT IN FHA-INSURED LOANS
Listed below is the Partnership's aggregate investment in fully insured
originated FHA-Insured Loans as of June 30, 1998 and December 31, 1997:
<TABLE>
<CAPTION> June 30, December 31,
1998 1997
------------- ------------
<S> <C> <C>
Number of Mortgages 2(1) 3
Amortized Cost $ 16,572,958 $22,609,310
Face Value 16,397,551 22,213,954
Fair Value 16,715,742 22,428,570
(1) During February 1998, the mortgage on Olmstead Park Apartments was prepaid.
The Partnership received net proceeds of approximately $6.8 million and
recognized a gain of approximately $780,000 on this prepayment. A distribution
of $0.73 per Unit related to this prepayment was declared in March 1998 and was
paid on May 1, 1998.
</TABLE>
Listed below is the Partnership's aggregate investment in fully
insured acquired FHA-Insured Loans as of June 30, 1998 and December 31,
1997:
<TABLE><CAPTION> June 30, December 31,
1998 1997
------------- ------------
<S> <C> <C>
Number of Mortgages 2 2
Amortized Cost $ 1,075,620 $ 1,094,502
Face Value 1,073,029 1,091,827
Fair Value 1,104,664 1,107,188
</TABLE>
<PAGE>14
AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 88
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
4. INVESTMENT IN FHA-INSURED LOANS - Continued
As of August 1, 1998, all of the Partnership's FHA-Insured Loans were
current with respect to the payment of principal and interest.
In addition to base interest payments from fully insured FHA-Insured Loans,
the Partnership is entitled to additional interest based on a percentage of the
net cash flow from the underlying development and of the net proceeds from the
refinancing, sale or other disposition of the underlying development (referred
to as Participations). Currently, two of the originated FHA-Insured Loans
contain Participations. During the six months ended June 30, 1998 and 1997, the
Partnership received additional interest of $69,820 and $101,151, respectively,
from the Participations. These amounts are included in mortgage investment
income on the accompanying statements of operations.
5. DUE FROM HUD
Due from HUD consists of amounts due to the Partnership in connection with
the disposition of fully insured and coinsured mortgage investments.
As of June 30, 1998, Due from HUD includes approximately $603,500 related
to the assignment of Water's Edge of New Jersey, as discussed in Note 3.
6. DISTRIBUTIONS TO UNITHOLDERS
The distributions paid or accrued to Unitholders on a per Unit basis for
the six months ended June 30, 1998 and 1997 are as follows:
1998 1997
------- -------
Quarter ended March 31, $ 1.21(1) $0.59(2)
Quarter ended June 30, 1.50(3) 0.30
------- -----
$ 2.71 0.89
======= =====
(1) This amount includes approximately $0.19 per Unit from proceeds received in
January 1998 related to the prepayment of the mortgage on Northpoint
Apartments. In addition, this amount includes $0.73 per Unit related to
the prepayment of the mortgage on Olmstead Park Apartments in February
1998.
(2) This amount includes approximately $0.27 per Unit return of capital from
additional proceeds received in January 1997 related to the assignment of
the mortgage on Water's Edge of New Jersey. In addition, this amount
includes $0.02 per Unit return of capital due to remaining net proceeds
from mortgage dispositions not reinvested prior to the expiration of the
reinvestment period on December 31, 1996.
(3) This amount includes approximately $1.18 per Unit from proceeds received in
June 1998 related to the prepayment of the mortgage on Arbor Village
Apartments. In addition, this amount includes $0.08 per Unit representing
a curtailment on the mortgage on Olde Mill Apartments.
The basis for paying distributions to Unitholders is net proceeds from
mortgage dispositions, if any, and cash flow from operations, which includes
regular interest income and principal from Insured Mortgages. Although the
Insured Mortgages yield a fixed monthly mortgage payment once purchased, the
cash distributions paid to the Unitholders will vary during each quarter due to
<PAGE>15
AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 88
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
6. DISTRIBUTIONS TO UNITHOLDERS - Continued
(1) the fluctuating yields in the short-term money market where the monthly
mortgage payments received are temporarily invested prior to the payment of
quarterly distributions, (2) the reduction in the asset base and monthly
mortgage payments due to monthly mortgage payments received or mortgage
dispositions, (3) variations in the cash flow attributable to the delinquency or
default of Insured Mortgages and professional fees and foreclosure costs
incurred in connection with those Insured Mortgages and (4) variations in the
Partnership's operating expenses.
7. TRANSACTIONS WITH RELATED PARTIES
The General Partner and certain affiliated entities, during the six months
ended June 30, 1998 and 1997, have earned or received compensation or payments
for services from the Partnership as follows:
<PAGE>16
AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 88
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
7. TRANSACTIONS WITH RELATED PARTIES - Continued
<TABLE>
<CAPTION>
COMPENSATION PAID OR ACCRUED TO RELATED PARTIES
-----------------------------------------------
For the For the
three months ended six months ended
Capacity in Which June 30, June 30,
Name of Recipient Served/Item 1998 1997 1998 1997
- ----------------- ---------------------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
CRIIMI, Inc. General Partner/Distribution 680,288 136,057 1,229,053 403,637
AIM Acquisition Advisor/Asset Management Fee 338,004 372,870 691,422 745,740
Partners, L.P.(1)
CRIIMI MAE Affiliate of General Partner/ 15,969 15,969 34,975 32,844
Management, Inc. Expense Reimbursement
(1) The Advisor, pursuant to the Partnership Agreement is entitled to an Asset Management Fee equal to .95% of Total Invested
Assets (as defined in the Partnership Agreement) for the six months ended June 30, 1998 and 1997, respectively. The sub-
advisor to the Partnership (the Sub-advisor) is entitled to a fee of .28% of Total Invested Assets of the Advisor's Asset
Management Fee. Of the amounts paid to the Advisor, CRIIMI MAE Services Limited Partnership (the Sub-advisor) earned a fee
equal to $203,778 and $252,630 for the six months ended June 30, 1998 and 1997, respectively. The Sub-advisor is an affiliate
of CRIIMI MAE.
</TABLE>
<PAGE>17
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Introduction
- ------------
The Partnership's Management's Discussion and Analysis of Financial
Condition and Results of Operations contains statements that may be considered
forward looking. These statements contain a number of risks and uncertainties
as discussed herein and in the Partnership's other reports filed with the
Securities and Exchange Commission that could cause actual results to differ
materially.
General
- -------
As of June 30, 1998, the Partnership had invested in 33 Insured Mortgages
with an aggregate amortized cost of approximately $120.9 million, a face value
of approximately $124.1 million and a fair value of approximately $124.5
million.
As of August 1 1998, all of the FHA-Insured Certificates, GNMA Mortgage-
Backed Securities and FHA-Insured Loans were current with respect to the payment
of principal and interest except for the coinsured mortgage on St. Charles Place
- - Phase II which has made payments through November 1995. As discussed in Note
3 to the financial statements, management does not anticipate that this
delinquency will have an adverse material impact on the Partnership's financial
statements.
In February 1996, the General Partner instructed the servicer for the
mortgage on Water's Edge of New Jersey, a fully insured acquired construction
loan, to file a Notice of Default and an Election to Assign the mortgage with
the Department of Housing and Urban Development (HUD). The property underlying
this construction loan is a nursing home located in Trenton, New Jersey. As of
June 30, 1998, the Partnership had received approximately $10.2 million on this
assignment including the outstanding principal plus partial accrued interest.
The remainder of the proceeds, approximately $1.5 million, is included in Due
from HUD and Receivables and other assets. The servicer is currently
negotiating with HUD in regard to collection of the disallowed portion of the
claim. In addition, the General Partner has retained counsel in this matter and
is actively pursuing litigation. The Partnership believes that the allowance
for loan losses of $375,000 as of June 30, 1998, is sufficient to provide for
amounts that may not be recovered from the servicer. On July 30, 1998, the
Partnership filed a Motion for Judgment against Greystone Servicing Corporation,
Inc. (the servicer) in the Circuit Court for Fauquier County, Virginia. The
Motion for Judgment alleges breach of contract and negligence claims and seeks
judgment for $1,653,396 plus interest, attorneys' fees and costs.
Results of Operations
- ---------------------
Net earnings decreased for the three months ended June 30, 1998 as compared
to the corresponding period in 1997 primarily due to a decrease in mortgage
investment income and an increase in net losses on mortgage dispositions. Net
earnings decreased for the six months ended June 30, 1998 as compared to the
corresponding period in 1997 primarily due to a decrease in mortgage investment
income, partially offset by an increase in net gains on mortgage dispositions.
Mortgage investment income decreased for the three and six months ended
June 30, 1998 as compared to the corresponding periods in 1997 primarily due to
a reduction in the mortgage base. For the six months ended June 30, 1998, the
mortgages on Northpoint Apartments, Olmstead Park Apartments and Arbor Village
were prepaid. In addition, a principal curtailment was received from Olde Mill
Apartments in June 1998. For the six months ended June 30, 1997, the mortgage
<PAGE>18
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - Continued
on Parkside Estates was prepaid and a principal curtailment was received from
Olde Mill Apartments.
Interest and other income increased for the three and six months ended June
30, 1998 as compared to the corresponding periods in 1997 due to the temporary
investment of proceeds from mortgage prepayments.
Asset management fees decreased for the three and six months ended June 30,
1998 as compared to the corresponding periods in 1997, primarily due to the
reduction in the mortgage base.
General and administrative expenses increased for the three and six months
ended June 30, 1998 as compared to the corresponding period in 1997. This
increase was primarily the result of a write-off of certain losses associated
with the final disposition of the co-insurance claim on the mortgage on
Hazeltine Shores.
Net realized losses on mortgage dispositions increased for the three months
ended June 30, 1998 as compared to the corresponding period in 1997. The
Partnership recognized a loss on the prepayment of the mortgage on Arbor Village
of approximately $350,000. Net realized gains on mortgage dispositions
increased for the six months ended June 30, 1998 as compared to the
corresponding period in 1997. The Partnership recognized net gains on mortgage
dispositions of approximately $786,000 related to the prepayment of the
mortgages on Northpoint Apartments and Olmstead Park apartments and a net loss
of approximately $350,000 on the prepayment of the mortgage on Arbor Village as
previously discussed above, for total net realized gains of approximately
$436,000 for the six months ended June 30, 1998. No mortgages were disposed of
during the six months ended June 30, 1997.
Liquidity and Capital Resources
- -------------------------------
The Partnership's operating cash receipts, derived from payments of
principal and interest on Insured Mortgages, plus cash receipts from interest on
short-term investments, were sufficient during the first six months of 1998 to
meet operating requirements.
The basis for paying distributions to Unitholders is net proceeds from
mortgage dispositions, if any, and cash flow from operations, which includes
regular interest income and principal from Insured Mortgages. Although the
Insured Mortgages yield a fixed monthly mortgage payment once purchased, the
cash distributions paid to the Unitholders will vary during each quarter due to
(1) the fluctuating yields in the short-term money market where the monthly
mortgage payments received are temporarily invested prior to the payment of
quarterly distributions, (2) the reduction in the asset base and monthly
mortgage payments due to monthly mortgage payments received or mortgage
dispositions, (3) variations in the cash flow attributable to the delinquency or
default of insured mortgages and professional fees and foreclosure costs
incurred in connection with those insured mortgages and (4) variations in the
Partnership's operating expenses.
Net cash provided by operating activities decreased for the six months
ended June 30, 1998 as compared to the corresponding period in 1997 primarily
due to the decrease in mortgage investment income, as discussed previously.
Net cash provided by investing activities increased for the six months
ended June 30, 1998 as compared to the corresponding period in 1997 primarily
due to the disposition proceeds from prepayment of the aforementioned mortgages.
<PAGE>19
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - Continued
Net cash used in financing activities increased for the six months ended
June 30, 1998 as compared to the corresponding period in 1997 primarily due to
an increase in distributions paid to the partners. The distributions paid for
the six months ended June 30, 1998 included a total return of capital of $0.92
per Unit for the prepayment of the mortgages on Northpoint Apartments and
Olmstead Park Apartments, in addition to regular cash flow. This compares to
the distributions paid during the six months ended June 30, 1997, which included
$0.27 return of capital from Water's Edge of New Jersey and $0.02 not reinvested
due to the expiration of the reinvestment period.
<PAGE>20
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FROM 8-K
No reports on Form 8-K were filed with the Securities and Exchange
Commission during the quarter ended June 30, 1998.
The exhibits filed as part of this report are listed below:
Exhibit No. Description
- ------------- -----------------------
27 Financial Data Schedule
<PAGE>21
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMERICAN INSURED MORTGAGE
INVESTORS L.P. - SERIES 88
(Registrant)
By:CRIIMI, Inc.
General Partner
/s/ August 14, 1998 /s/ Cynthia O. Azzara
- -------------------- -------------------------
Date Cynthia O. Azzara
Principal Financial and
Accounting Officer<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM
THE QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED
JUNE 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH QUARTERLY REPORT ON FORM 10-Q.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 13,535
<SECURITIES> 106,628
<RECEIVABLES> 22,363
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 142,526
<CURRENT-LIABILITIES> 13,956
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 128,570
<TOTAL-LIABILITY-AND-EQUITY> 142,526
<SALES> 0
<TOTAL-REVENUES> 5,437
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 488
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 4,949
<INCOME-TAX> 0
<INCOME-CONTINUING> 4,949
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,949
<EPS-PRIMARY> .53
<EPS-DILUTED> 0
</TABLE>
