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 March 31, 2000
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Commission file number 1-12724
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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 Identification No.)
incorporation or organization)
11200 Rockville Pike, Rockville, Maryland 20852
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(Address of principal executive offices) (Zip Code)
(301) 816-2300
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(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 March 31, 2000, 8,802,091 depositary units of limited partnership
interest were outstanding.
<PAGE>
AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 88
INDEX TO FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 2000
<TABLE>
<CAPTION>
PAGE
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<S> <C> <C>
PART I. Financial Information
Item 1. Financial Statements
Balance Sheets - March 31, 2000 (unaudited) and December 31, 1999................ 4
Statements of Income and Comprehensive Income - for the three
months ended March 31, 2000 and 1999 (unaudited) .............................. 5
Statement of Changes in Partners' Equity - for the three months ended
March 31, 2000 (unaudited)..................................................... 6
Statements of Cash Flows - for the three months ended March 31, 2000
and 1999 (unaudited)........................................................... 7
Notes to Financial Statements (unaudited)........................................ 8
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.................................................................. 13
Item 2A. Qualitative and Quantitative Disclosures About Market Risk ........................ 16
PART II. Other Information
Item 6. Exhibits and Reports on Form 8-K................................................... 17
Signature ................................................................................... 18
</TABLE>
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 88
BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
------------- ------------
<S> <C> <C>
(Unaudited)
ASSETS
Investment in FHA-Insured Certificates and GNMA
Mortgage-Backed Securities, at fair value
Acquired insured mortgages $ 52,287,388 $ 54,329,225
Originated insured mortgages 8,456,998 8,452,851
------------ ------------
60,744,386 62,782,076
Investment in FHA-Insured Loans, at amortized cost,
net of unamortized discount and premium:
Originated insured mortgages 5,664,405 5,676,336
Acquired insured mortgages 450,759 461,081
------------ ------------
6,115,164 6,137,417
Cash and cash equivalents 3,320,829 9,412,244
Investment in affiliate 1,250,860 1,250,860
Notes receivable from affiliates and due from affiliates 693,585 658,493
Receivables and other assets 3,098,674 3,213,483
------------ ------------
Total assets $ 75,223,498 $ 83,454,573
============ ============
LIABILITIES AND PARTNERS' EQUITY
Distributions payable $ 3,424,578 $ 9,625,841
Accounts payable and accrued expenses 114,622 126,648
------------ ------------
Total liabilities 3,539,200 9,752,489
------------ ------------
Partners' equity:
Limited partners' equity, 15,000,000 Units authorized,
8,802,091 Units issued and outstanding 78,180,671 80,173,264
General partners' deficit (5,109,778) (5,007,111)
Less: Repurchased Limited Partnership
Units - 50,000 Units (618,750) (618,750)
Accumulated other comprehensive income (767,845) (845,319)
------------ ------------
Total Partners' equity 71,684,298 73,702,084
------------ ------------
Total liabilities and partners' equity $ 75,223,498 $ 83,454,573
============ ============
</TABLE>
The accompanying notes are an integral part
of these financial statements.
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 88
STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(Unaudited)
<TABLE>
<CAPTION>
For the three months ended
March 31,
------------------------------
2000 1999
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<S> <C> <C>
Income:
Mortgage investment income $ 1,399,519 $ 2,035,583
Interest and other income 64,068 55,365
----------- -----------
1,463,587 2,090,948
----------- -----------
Expenses:
Asset management fee to related parties 190,881 272,871
General and administrative 50,316 161,412
----------- -----------
241,197 434,283
----------- -----------
Net earnings before gains on
Mortgage dispositions 1,222,390 1,656,665
Net gains on mortgage dispositions 106,928 -
----------- -----------
Net earnings $ 1,329,318 $ 1,656,665
=========== ===========
Other comprehensive income (loss) 77,474 (992,100)
----------- -----------
Comprehensive income $ 1,406,792 $ 664,565
----------- -----------
Net earnings allocated to:
Limited partners - 95.1% $ 1,264,181 $ 1,575,488
General Partner - 4.9% 65,137 81,177
----------- -----------
$ 1,329,318 $ 1,656,665
=========== ===========
Net earnings per Unit of limited
partnership interest - basic $ 0.14 $ 0.18
=========== ===========
</TABLE>
The accompanying notes are an integral part
of these financial statements.
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 88
STATEMENT OF CHANGES IN PARTNERS' EQUITY
For the three months ended March 31, 2000
(Unaudited)
<TABLE>
<CAPTION>
Repurchased Accumulated
Limited Other
General Limited Partnership Comprehensive
Partner Partner Units Income Total
------------ ------------ ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1999 $ (5,007,111) $ 80,173,264 $ (618,750) $ (845,319) $ 73,702,084
Net Earnings 65,137 1,264,181 - - 1,329,318
Adjustment to unrealized gains (losses) on
investments in insured mortgages - - - 77,474 77,474
Distributions paid or accrued of $0.37 per Unit,
including return of capital of $0.23 per Unit (167,804) (3,256,774) - - (3,424,578)
------------ ------------ ----------- ------------ ------------
Balance, March 31, 2000 $ (5,109,778) $ 78,180,671 $ (618,750) $ (767,845) $ 71,684,298
============ ============ =========== ============ ============
Limited Partnership Units outstanding - basic, as
of March 31, 2000 8,802,091
=========
</TABLE>
The accompanying notes are an integral part
of these financial statements.
<PAGE>
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 three months ended
March 31,
2000 1999
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 1,329,318 $ 1,656,665
Adjustments to reconcile net earnings to net cash provided by operating activities:
Net gain on mortgage dispositions (106,928) -
Changes in assets and liabilities:
(Increase) decrease in investment in affiliate, note
receivable from affiliates and due from affiliates (35,092) 47,017
(Decrease) increase in accounts payable and accrued expenses (12,026) 312,344
Decrease in receivables and other assets 114,809 5,660
----------- -----------
Net cash provided by operating activities 1,290,081 2,021,686
----------- -----------
Cash flows from investing activities:
Receipt of mortgage principal from scheduled payments 186,998 253,216
Proceeds from mortgage dispositions 2,057,347 -
----------- -----------
Net cash provided by investing activities 2,244,345 253,216
----------- -----------
Cash flows from financing activities:
Distributions paid to partners (9,625,841) (1,943,679)
----------- -----------
Net cash used in financing activities (9,625,841) (1,943,679)
----------- -----------
Net (decrease) increase in cash and cash equivalents (6,091,415) 331,223
Cash and cash equivalents, beginning of period 9,412,244 5,524,324
----------- -----------
Cash and cash equivalents, end of period $ 3,320,829 $5,855,547
=========== ==========
</TABLE>
The accompanying notes are an integral part
of these financial statements.
<PAGE>
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 Agreement ("Partnership Agreement") states
that the Partnership will terminate on December 31, 2021, unless previously
terminated under the provisions of the Partnership Agreement.
CRIIMI, Inc. (the "General Partner") holds a partnership interest of 4.9%
and is a wholly owned subsidiary of CRIIMI MAE Inc. ("CRIIMI MAE"). AIM
Acquisition Partners L.P. (the "Advisor") serves as the advisor to the
Partnership. The general partner of the Advisor is AIM Acquisition Corporation
("AIM Acquisition") and the limited partners include, but are not limited to,
AIM Acquisition, The Goldman Sachs Group, L.P., Sun America Investments, Inc.
(successor to Broad, Inc.) and CRI/AIM Investment, L.P., an affiliate of CRIIMI
MAE. AIM Acquisition is a Delaware corporation that is primarily owned by Sun
America Investments, Inc. and The Goldman Sachs Group, L.P.
Under the Advisory Agreement, the Advisor will render services to the
Partnership, including but not limited to, the management of the Partnership's
portfolio of mortgages and the disposition of the Partnership's mortgages. Such
services will be subject to the review and ultimate authority of the General
Partner. However, the General Partner is required to receive the consent of the
Advisor prior to taking certain significant actions, including but not limited
to the disposition of mortgages, any transaction or agreement with the General
Partner, or its affiliates, or any material change as to policies regarding
distributions or reserves of the Partnership. The Advisor is permitted to
delegate the performance of services pursuant to a sub-advisory agreement (the
"Sub-Advisory Agreement"). The delegation of such services will not relieve the
Advisor of its obligation to perform such services. CRIIMI MAE Services Limited
Partnership ("CMSLP"), an affiliate of CRIIMI MAE, manages the Partnership's
portfolio, pursuant to the Sub-Advisory Agreement. The general partner of CMSLP
is CRIIMI MAE Services, Inc., an affiliate of 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.
On October 5, 1998, CRIIMI MAE, the parent of the General Partner, and
CRIIMI MAE Management, Inc., an affiliate of CRIIMI MAE and provider of
personnel and administrative services to the Partnership, filed voluntary
petitions for relief under chapter 11 of title 11 of the United States Code (the
"Bankruptcy Code"). Such bankruptcy filings could result in certain adverse
effects to the Partnership. For example, as a debtor-in-possession, CRIIMI MAE
will not be permitted to provide any available capital to the General Partner or
to the general partner of CMSLP, the Partnership's sub-advisor, without approval
from the bankruptcy court. Even though this restriction or potential loss of the
availability of a potential capital resource could adversely affect the General
Partner and the Partnership, CRIIMI MAE has not historically represented a
significant source of capital for the General Partner or the Partnership. Such
bankruptcy filings could also result in the potential need to replace CRIIMI MAE
Management, Inc. as a provider of personnel and administrative services to the
Partnership.
On April 25, 2000, CRIIMI MAE and CRIIMI MAE Management, Inc. filed their
Third Amended Joint Plan of Reorganization (the "Plan") and proposed Second
Amended Disclosure Statement (the "Disclosure Statement") with the United States
Bankruptcy Court for the District of Maryland, in Greenbelt, Maryland (the
"Bankruptcy Court"). The Plan and Disclosure Statement were filed with the
support of the Official Committee of Equity Security Holders in the CRIIMI MAE
Chapter 11 case, which is a co-proponent of the Plan. Subject to the completion
of mutually satisfactory unsecured debt documentation, the Plan also has the
support of the Official Committee of Unsecured Creditors of CRIIMI MAE, which
was previously pursuing its own plan of reorganization. CRIIMI MAE, CRIIMI MAE
Management, Inc., the Official Committee of Equity Security Holders, and the
Official Committee of Unsecured Creditors are now all proceeding jointly toward
confirmation of the Plan. On April 25, 2000, the Bankruptcy Court held a hearing
on approval of the Disclosure Statement filed by CRIIMI MAE and CRIIMI MAE
Management, Inc. At the conclusion of the hearing, the Bankruptcy Court directed
CRIIMI MAE and Citicorp Real Estate,Inc./Salomon Smith Barney Inc., the only
creditor whose objection to the Disclosure Statement was before the Bankruptcy
Court, to submit additional legal briefs by May 9, 2000. There can be no
assurance at this time that CRIIMI MAE's Plan will be confirmed and consummated.
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 March 31, 2000
and December 31, 1999 and the results of its operations for the three months
ended March 31, 2000 and 1999 and its cash flows for the three months ended
March 31, 2000 and 1999.
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 annual 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, 1999.
Comprehensive Income
--------------------
Comprehensive income is the change in Partners' equity during a period
from transactions from non-owner sources. This includes 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." Unrealized gains and losses are reported in the equity section
of the Balance Sheet as "Accumulated Other Comprehensive Income."
3. INVESTMENT IN FHA-INSURED CERTIFICATES AND GNMA MORTGAGE-BACKED SECURITIES
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> March 31, 2000 December 31, 1999
-------------- -----------------
<S> <C> <C>
Number of:
GNMA Mortgage-Backed Securities (1) 19 20
FHA-Insured Certificates (2) 2 2
Amortized Cost $ 53,661,919 $ 55,763,736
Face Value 53,619,881 55,736,170
Fair Value 52,287,388 54,329,225
</TABLE>
(1) In March 2000, the mortgage on Linville Manor was prepaid. The Partnership
received net proceeds of approximately $2.0 million and recognized a gain
of approximately $107,000. A distribution of approximately $0.22 per Unit
related to the prepayment of this mortgage was declared in March and was
paid to Unitholders in May 2000.
(2) In May 2000, the mortgage on Park Avenue Plaza was prepaid. The Partnership
received net proceeds of approximately $1.9 million and expects to
recognize a gain of approximately $95,000. The Partnership expects to
declare approximately $0.22 per Unit in May 2000, related to the prepayment
of this mortgage.
As of May 1, 2000, 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
HUD. The property underlying this construction loan is a nursing home located in
Trenton, New Jersey. As of March 31, 2000, the Partnership had received
approximately $10.2 million of the assignment proceeds, including partial
repayment of the outstanding principal and accrued interest. HUD has disallowed
approximately $1.65 million of the assignment claim, which is included in
Receivables and Other Assets. The General Partner retained counsel in this
matter and is actively pursuing litigation against the loan servicer, Greystone
Servicing Contract, Inc. ("Greystone"), for the amount disallowed by HUD. On
July 30, 1998, the Partnership filed a Motion for Judgment against Greystone in
the Circuit Court of Fauquier County, Virginia. The Motion for Judgment alleges
breach of contract and negligence claims and seeks judgment for $1,653,396, the
amount disallowed by HUD, plus interest, attorneys' fees and costs. In the
Motion for Judgement, the General Partner alleges as follows: Pursuant to a
mortgage servicing contract, the Participation and Servicing Agreement ("PSA"),
Greystone was obligated to ensure that the requirements for preserving HUD
insurance on the loan was satisfied. Specifically, the PSA required Greystone to
prepare a written notice of default in the event the borrower defaulted on the
mortgage loan repayment obligation and to file notice of such default with HUD
within thirty (30) days after an uncured borrower's cure period. Due to
Greystone's failure to timely file a notice of default with HUD, HUD applied a
surcharge of $1,653,396 to the insurance proceeds due AIM 88, as permitted
pursuant to the FHA Insurance Contract. On February 28, 2000, American Insured
Mortgage Investors, L.P.-Series 88 and Greystone Servicing Corporation, Inc.
presented oral arguments for summary judgement before the Court in this matter
and the Court has taken those Motions under advisement. A trial date has been
set for the end of July 2000 and a ruling on these Motions may be issued at any
time. The Partnership believes that the allowance for loan losses of $375,000 as
of March 31, 2000, is sufficient to provide for amounts that may not be
recovered from the servicer.
Coinsured by affiliate
----------------------
As of March 31, 2000 and December 31, 1999, the Partnership held an
investment in one FHA-Insured Certificate secured by a coinsured mortgage, where
the coinsurance lender is Integrated Funding Inc. (IFI), an affiliate of the
Partnership.
As of May 1, 2000, the IFI coinsured mortgage, as shown in the table below,
was current with respect to the payment of principal and interest.
<TABLE>
<CAPTION>
March 31, 2000 December 31, 1999
------------------------------------------------ ------------------------------------------------
Amortized Face Fair Amortized Face Fair
Cost Value Value Cost Value Value
------------ ------------ ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Summerwind Apts.-
Phase II $ 7,850,311 $ 9,211,287 $ 8,456,998 $ 7,863,659 $ 9,231,460 $ 8,452,851
</TABLE>
Coinsured by third party
------------------------
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. On October 14, 1993, Patrician filed a
foreclosure action on the property underlying this coinsured mortgage. On
November 2, 1993, the mortgagor filed for protection under chapter 11 of the
U.S. Bankruptcy Code. The property was acquired and vested with Patrician in
November 1998 and subsequently sold on October 12, 1999. Patrician filed a
coinsurance claim for insurance benefits with HUD in October 1999, for remaining
amounts due, including past due interest. In November 1999, the Partnership
received sales proceeds of approximately $3 million. A distribution of
approximately $0.32 per Unit related to the sale was declared in November 1999
and was paid to Unitholders in February 2000. Prior to the sale, the mortgagor
had made payments of principal and interest due on the mortgage through November
1995 to the Partnership. The remaining balance due, including accrued interest,
as of March 31, 2000, is approximately $2 million and is expected to be received
by the end of 2000. The amount of the Partnership's investment in this mortgage
represents the Partnership's approximate 55% ownership interest in the mortgage.
The remaining 45% ownership interest is held by AIM 86, an affiliate of the
Partnership. The Partnership does not expect to recognize a loss related to this
disposition, as it expects to recover the amounts due from Patrician.
4. INVESTMENT IN FHA-INSURED LOANS
Listed below is the Partnership's aggregate investment in fully insured
originated FHA-Insured Loans as of March 31, 2000 and December 31, 1999:
<TABLE>
<CAPTION>
March 31, 2000 December 31, 1999
-------------- -----------------
<S> <C> <C>
Number of Mortgages 1 1
Amortized Cost $5,664,405 $5,676,336
Face Value 5,664,405 5,676,336
Fair Value 5,158,013 5,169,038
</TABLE>
Listed below is the Partnership's aggregate investment in fully insured
acquired FHA-Insured Loans as of March 31, 2000 and December 31, 1999:
<TABLE>
<CAPTION>
March 31, 2000 December 31, 1999
-------------- -----------------
<S> <C> <C>
Number of Mortgages 1 1
Amortized Cost $ 450,759 $ 461,081
Face Value 450,151 460,441
Fair Value 445,445 459,177
</TABLE>
As of May 1, 2000, 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). The one originated FHA-Insured Loan contained
Participations. During the three months ended March 31, 2000 and 1999, the
Partnership received nothing from the Participations. These amounts, if any, are
included in mortgage investment income on the accompanying statements of income
and comprehensive income.
5. DISTRIBUTIONS TO UNITHOLDERS
The distributions paid or accrued to Unitholders on a per Unit basis for
the three months ended March 31, 2000 and 1999 are as follows:
Quarter ended March 31, 2000 1999
- ----------------------- ------- -------
$ 0.37(1) $ 0.61(2)
------- -------
$ 0.37 $ 0.61
======= =======
(1) This amount includes approximately $0.22 per Unit representing net proceeds
from the prepayment of the mortgage on Linville Manor.
(2) This amount includes approximately $0.37 per Unit representing net proceeds
from the prepayment of 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
(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. As the Partnership continues to liquidate its
mortgage investments and investors receive distributions of return of capital
and taxable gains, investors should expect a reduction in earnings and
distributions due to the decreasing mortgage base.
6. TRANSACTIONS WITH RELATED PARTIES
The General Partner and certain affiliated entities, during the three
months ended March 31, 2000 and 1999, have earned or received compensation or
payments for services from the Partnership as follows:
COMPENSATION PAID OR ACCRUED TO RELATED PARTIES
-----------------------------------------------
<TABLE>
<CAPTION>
For the three months
Capacity in Which ended March 31,
Name of Recipient Served/Item 2000 1999
- ----------------- ---------------------------- --------- ---------
<S> <C> <C> <C>
CRIIMI, Inc.(1) General Partner/Distribution $ 167,804 $ 276,650
AIM Acquisition Advisor/Asset Management Fee 190,881 272,871
Partners, L.P. (2)
CRIIMI MAE Management, Affiliate of General Partner/ 11,842 9,578
Inc. Expense Reimbursement
(1) The General Partner, pursuant to amendments to the Partnership Agreement, is entitled to receive 4.9% of the Partnership's
income, loss, capital and distributions, including, without limitation, the Partnership's adjusted cash from operations and
proceeds of mortgage prepayments, sales or insurance (both as defined in the Partnership Agreement).
(2) The Advisor, pursuant to the Partnership Agreement, is entitled to an Asset Management Fee equal to 0.95% of Total Invested
Assets (as defined in the Partnership Agreement). CRIIMI MAE Services Limited Partnership (CMSLP), the sub-advisor to
the Partnership, is entitled to a fee of 0.28% of Total Invested Assets from the Advisor's Asset Management Fee. Of
the amounts paid to the Advisor, CMSLP earned a fee equal to $54,647 and $80,421 for the three months ended March 31,
2000 and 1999, respectively. The limited partner of CMSLP is a wholly owned subsidiary of CRIIMI MAE Inc., which filed
for protection under chapter 11 of the Bankruptcy Code.
</TABLE>
7. PARTNERS' EQUITY
Depositary Units representing economic rights in limited partnership
interests (Units) were issued at a stated value of $20. A total of 8,851,966
Units were issued for an aggregate capital contribution of $177,039,320. In
addition, the initial limited partner contributed $2,500 to the capital of the
Partnership and received 125 Units in exchange therefor, and the former general
partners contributed a total of $1,000 to the Partnership. During 1994, the
Partnership repurchased 50,000 Units.
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FORWARD-LOOKING STATEMENTS. When used in this Quarterly Report on Form 10-Q, the
words "believes," "anticipates," "expects," "contemplates," and similar
expressions are intended to identify forward-looking statements. Statements
looking forward in time are included in this Quarterly Report on Form 10-Q
pursuant to the "safe harbor" provision of the Private Securities Litigation
Reform Act of 1995. Such statements are subject to certain risks and
uncertainties, which could cause actual results to differ materially.
Accordingly, the following information contains or may contain forward-looking
statements: (1) information included or incorporated by reference in this
Quarterly Report on Form 10-Q, including, without limitation, statements made
under Item 2, Management's Discussion and Analysis of Financial Condition and
Results of Operations, (2) information included or incorporated by reference in
future filings by the Partnership with the Securities and Exchange Commission
including, without limitation, statements with respect to growth, projected
revenues, earnings, returns and yields on its portfolio of mortgage assets, the
impact of interest rates, costs and business strategies and plans and (3)
information contained in written material, releases and oral statements issued
by or on behalf of, the Partnership, including, without limitation, statements
with respect to growth, projected revenues, earnings, returns and yields on its
portfolio of mortgage assets, the impact of interest rates, costs and business
strategies and plans. Factors which may cause actual results to differ
materially from those contained in the forward-looking statements identified
above include, but are not limited to (i) regulatory and litigation matters,
(ii) interest rates, (iii) trends in the economy, (iv) prepayment of mortgages
and (v) defaulted mortgages. Readers are cautioned not to place undue reliance
on these forward-looking statements, which speak only of the date hereof. The
Partnership undertakes no obligation to publicly revise these forward-looking
statements to reflect events or circumstances occurring after the date hereof or
to reflect the occurrence of unanticipated events.
Year 2000
- ---------
During the transition from 1999 to 2000, the Partnership did not experience
any significant problems or errors in its information technology ("IT") systems
or date-sensitive embedded technology that controls certain systems. Based on
operations since January 1, 2000, the Partnership does not expect any
significant impact to its business, operations, or financial condition as a
result of the Year 2000 issue. However, it is possible that the full impact of
the date change has not been fully recognized. The Partnership is not aware of
any significant Year 2000 problems affecting third parties with which the
Partnership interfaces directly or indirectly.
General
- -------
As of March 31, 2000, the Partnership had invested in 24 Insured Mortgages
with an aggregate amortized cost of approximately $68 million, a face value of
approximately $69 million and a fair value of approximately $66 million.
As of May 1, 2000, 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.
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
HUD. The property underlying this construction loan is a nursing home located in
Trenton, New Jersey. As of March 31, 2000, the Partnership had received
approximately $10.2 million of the assignment proceeds, including partial
repayment of the outstanding principal and accrued interest. HUD has disallowed
approximately $1.65 million of the assignment claim, which is included in
Receivables and Other Assets. The General Partner retained counsel in this
matter and is actively pursuing litigation against the loan servicer, Greystone
Servicing Contract, Inc. ("Greystone"), for the amount disallowed by HUD. On
July 30, 1998, the Partnership filed a Motion for Judgment against Greystone in
the Circuit Court of Fauquier County, Virginia. The Motion for Judgment alleges
breach of contract and negligence claims and seeks judgment for $1,653,396, the
amount disallowed by HUD, plus interest, attorneys' fees and costs. In the
Motion for Judgement, the General Partner alleges as follows: Pursuant to a
mortgage servicing contract, the Participation and Servicing Agreement ("PSA"),
Greystone was obligated to ensure that the requirements for preserving HUD
insurance on the loan was satisfied. Specifically, the PSA required Greystone to
prepare a written notice of default in the event the borrower defaulted on the
mortgage loan repayment obligation and to file notice of such default with HUD
within thirty (30) days after an uncured borrower's cure period. Due to
Greystone's failure to timely file a notice of default with HUD, HUD applied a
surcharge of $1,653,396 to the insurance proceeds due AIM 88, as permitted
pursuant to the FHA Insurance Contract. On February 28, 2000, American Insured
Mortgage Investors, L.P.-Series 88 and Greystone Servicing Corporation, Inc.
presented oral arguments for summary judgement before the Court in this matter
and the Court has taken those Motions under advisement. A trial date has been
set for the end of July 2000 and a ruling on these Motions may be issued at any
time. The Partnership believes that the allowance for loan losses of $375,000 as
of March 31, 2000, is sufficient to provide for amounts that may not be
recovered from the servicer.
Results of Operations
- ---------------------
Net earnings decreased for the three months ended March 31, 2000, as
compared to the corresponding period in 1999, primarily due to a decrease in
mortgage investment income, as discussed below. This decrease is partially
offset by a decrease in general and administrative expense, a decrease in asset
management fee to related parties and an increase in net gains on mortgage
dispositions.
Mortgage investment income decreased for the three months ended March 31,
2000, as compared to the corresponding period in 1999, primarily due to a
reduction in the mortgage base. The mortgage base decreased as a result of seven
mortgage dispositions with an aggregate principal balance of approximately $38
million, representing an approximate 35% decrease in the aggregate principal
balance of the total mortgage portfolio since March 1999.
Interest and other income increased for the three months ended March 31,
2000 as compared to the corresponding period in 1999, primarily due to the
timing of temporary investment of mortgage disposition proceeds prior to
distribution to Unitholders.
Asset management fee to related parties decreased for the three months
ended March 31, 2000, as compared to the corresponding period in 1999, due to
the reduction in the mortgage base, as discussed previously.
General and administrative expenses decreased for the three months ended
March 31, 2000 as compared to the corresponding period in 1999. This decrease is
primarily the result of a decrease in legal expenses related to the mortgage on
Water's Edge of New Jersey.
Net gains on mortgage dispositions increased for the three months ended
March 31, 2000, as compared to the corresponding period in 1999. During the
first three months of 2000, the Partnership recognized a gain of approximately
$107,000 from the prepayment of the mortgage on Linville Manor. During the first
three months of 1999, the Partnership recognized no gains or losses.
Liquidity and Capital Resources
- -------------------------------
On October 5, 1998, CRIIMI MAE, the parent of the General Partner, and
CRIIMI MAE Management, Inc., an affiliate of CRIIMI MAE and provider of
personnel and administrative services to the Partnership, filed voluntary
petitions for relief under chapter 11 of title 11 of the United States Code (the
"Bankruptcy Code"). Such bankruptcy filings could result in certain adverse
effects to the Partnership. For example, as a debtor-in-possession, CRIIMI MAE
will not be permitted to provide any available capital to the General Partner or
to the general partner of CMSLP, the Partnership's sub-advisor, without approval
from the bankruptcy court. Even though this restriction or potential loss of the
availability of a potential capital resource could adversely affect the General
Partner and the Partnership, CRIIMI MAE has not historically represented a
significant source of capital for the General Partner or the Partnership. Such
bankruptcy filings could also result in the potential need to replace CRIIMI MAE
Management, Inc. as a provider of personnel and administrative services to the
Partnership.
On April 25, 2000, CRIIMI MAE and CRIIMI MAE Management, Inc. filed their
Third Amended Joint Plan of Reorganization (the "Plan") and proposed Second
Amended Disclosure Statement (the "Disclosure Statement") with the United States
Bankruptcy Court for the District of Maryland, in Greenbelt, Maryland (the
"Bankruptcy Court"). The Plan and Disclosure Statement were filed with the
support of the Official Committee of Equity Security Holders in the CRIIMI MAE
Chapter 11 case, which is a co-proponent of the Plan. Subject to the completion
of mutually satisfactory unsecured debt documentation, the Plan also has the
support of the Official Committee of Unsecured Creditors of CRIIMI MAE, which
was previously pursuing its own plan of reorganization. CRIIMI MAE, CRIIMI MAE
Management, Inc., the Official Committee of Equity Security Holders, and the
Official Committee of Unsecured Creditors are now all proceeding jointly toward
confirmation of the Plan. On April 25, 2000, the Bankruptcy Court held a hearing
on approval of the Disclosure Statement filed by CRIIMI MAE and CRIIMI MAE
Management, Inc. At the conclusion of the hearing, the Bankruptcy Court directed
CRIIMI MAE and Citicorp Real Estate,Inc./Salomon Smith Barney Inc., the only
creditor whose objection to the Disclosure Statement was before the Bankruptcy
Court, to submit additional legal briefs by May 9, 2000. There can be no
assurance at this time that CRIIMI MAE's Plan will be confirmed and consummated.
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 are the Partnership's principal sources of cash flows and
were sufficient during the first three months of 2000 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. As the Partnership continues to liquidate its
mortgage investments and investors receive distributions of return of capital
and taxable gains, investors should expect a reduction in earnings and
distributions due to the decreasing mortgage base.
Net cash provided by operating activities decreased for the three months
ended March 31, 2000, as compared to the corresponding period in 1999, primarily
due to the decrease in mortgage base and a decrease in the change in accounts
payable and accrued expenses. The change in accounts payable and accrued
expenses is due to the timing of the quarterly asset management fee to related
parties.
Net cash provided by investing activities increased for the three months
ended March 31, 2000, as compared to the corresponding period in 1999, primarily
due to an increase in the receipt of proceeds from mortgage dispositions. This
increase was partially offset by a decrease in scheduled principal payments as a
result of the reduction in mortgage base.
Net cash used in financing activities increased for the three months ended
March 31, 2000, as compared to the corresponding period in 1999, due to an
increase in the amount of distributions paid to partners during the first three
months of 2000, as compared to the same period in 1999.
<PAGE>
ITEM 2A. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK
The Partnership's principal market risk is exposure to changes in interest
rates in the U.S. Treasury market, which coupled with the related spread to
treasury investors required for the Partnership's Insured Mortgages, will cause
fluctuations in the market value of the Partnership's assets.
Management has determined that there has not been a material change as of
March 31, 2000, in market risk from December 31, 1999 as reported in the
Partnership's Annual Report Form 10-K for the year ended December 31, 1999.
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
No reports on Form 8-K were filed with the Securities and Exchange
Commission during the quarter ended March 31, 2000.
The exhibits filed as part of this report are listed below:
Exhibit No. Description
----------- ---------------
27 Financial Data Schedule
<PAGE>
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
May 12, 2000 /s/ Cynthia O. Azzara
- ------------ ---------------------
Date Cynthia O. Azzara
Principal Financial and
Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM
THE QUARTERLY REPORT ON FORM 10-Q FOR THE THREE MONTHS ENDED
MARCH 31, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH QUARTERLY REPORT ON FORM 10-Q.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 3,321
<SECURITIES> 60,744
<RECEIVABLES> 11,158
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 75,223
<CURRENT-LIABILITIES> 3,539
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 71,684
<TOTAL-LIABILITY-AND-EQUITY> 75,223
<SALES> 0
<TOTAL-REVENUES> 1,570
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 241
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,329
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,329
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,329
<EPS-BASIC> .14
<EPS-DILUTED> 0
</TABLE>
