- --------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999 Commission file number 1-12724
AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 88
(Exact name of registrant as specified in its charter)
Delaware 13-3398206
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification No.)
11200 Rockville Pike
Rockville, Maryland 20852
(301) 816-2300
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
------------------- ------------------------
Depositary Units of Limited American Stock Exchange
Partnership Interest
Securities registered pursuant to Section 12(g) of the Act:
None.
------------------------------
Indicated 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 (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
As of February 17, 2000, 8,802,091 depositary units of limited partnership
interest were outstanding and the aggregate market value of such units held by
non-affiliates of the Registrant on such date was $60,509,261.
Documents incorporated by Reference
None
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<PAGE>
AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 88
1999 ANNUAL REPORT ON FORM 10-K
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I
------
Page
----
<S> <C> <C>
Item 1. Business....................................................................... 4
Item 2. Properties..................................................................... 5
Item 3. Legal Proceedings.............................................................. 5
Item 4. Submission of Matters to a Vote of Security Holders............................ 5
PART II
-------
Item 5. Market for Registrant's Securities and Related Security Holder Matters......... 5
Item 6. Selected Financial Data........................................................ 6
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations............................................................... 7
Item 7A. Qualitative and Quantitative Disclosures About Market Risk..................... 13
Item 8. Financial Statements and Supplementary Data.................................... 14
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure........................................................ 14
PART III
--------
Item 10. Directors and Executive Officers of the Registrant............................. 14
Item 11. Executive Compensation......................................................... 16
Item 12. Security Ownership of Certain Beneficial Owners and Management................. 16
Item 13. Certain Relationships and Related Transactions................................. 16
PART IV
-------
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K................ 17
Signatures ............................................................................... 19
</TABLE>
<PAGE>
PART I
ITEM 1. BUSINESS
FORWARD-LOOKING STATEMENTS. When used in this Annual Report on Form 10-K, 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 Annual Report on Form 10-K 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 Annual Report on Form 10-K,
including, without limitation, statements made under Item 7, 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.
Development and Description of Business
- ---------------------------------------
Information concerning the business of American Insured Mortgage Investors
L.P.-Series 88 (the "Partnership") is contained in Part II, Item 7, Management's
Discussion and Analysis of Financial Condition and Results of Operations and in
Notes 1, 5, 6 and 7 of the Notes to Financial Statements of the Partnership
(filed in response to Item 8 hereof), all of which are incorporated by reference
herein. See also Schedule IV-Mortgage Loans on Real Estate, for the table of the
Insured Mortgages (as defined below), invested in by the Partnership as of
December 31, 1999, which is hereby incorporated herein by reference.
Employees
- ---------
The Partnership has no employees. The business of the Partnership is
managed by CRIIMI, Inc. (the "General Partner"), while its portfolio of
mortgages is managed by AIM Acquisition Partners, L.P. (the "Advisor") pursuant
to an advisory agreement (the "Advisory Agreement"). The General Partner is a
wholly owned subsidiary of CRIIMI MAE Inc. ("CRIIMI MAE").
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. and
(successor to Broad, Inc.)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.
Competition
- -----------
In disposing of mortgage investments, the Partnership competes with private
investors, mortgage banking companies, mortgage brokers, state and local
government agencies, lending institutions, trust funds, pension funds, and other
entities, some with similar objectives to those of the Partnership and some of
which are or may be affiliates of the Partnership, its General Partner, the
Advisor, CMSLP or their respective affiliates. Some of these entities may have
substantially greater capital resources and experience in disposing of Federal
Housing Administration ("FHA") insured mortgages than the Partnership.
CRIIMI MAE and its affiliates also may serve as general partners, sponsors
or managers of real estate limited partnerships, REITS or other entities in the
future. The Partnership may attempt to dispose of mortgage investments at or
about the same time that CRIIMI MAE, one or more of the other "AIM Funds"
[defined as the Partnership, American Insured Mortgage Investors ("AIM 84"),
American Insured Mortgage Investors - Series 85, L.P. ("AIM 85") and American
Insured Mortgage Investors L.P. - Series 86 ("AIM 86")], and/or other entities
sponsored or managed by CRIIMI MAE, or its affiliates, are attempting to dispose
of mortgages. As a result of market conditions that could limit dispositions,
CMSLP and its affiliates could be faced with conflicts of interest in
determining which mortgages would be disposed of. Both CMSLP and the General
Partner, however, are subject to their fiduciary duties in evaluating the
appropriate action to be taken when faced with such conflicts.
ITEM 2. PROPERTIES
Although the Partnership does not own the underlying real estate, the
mortgages underlying the Partnership's mortgage investments are non-recourse
first liens on the respective multifamily residential developments.
ITEM 3. LEGAL PROCEEDINGS
Reference is made to Note 5 of the Notes to Financial Statements on pages
38 through 40.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to the security holders to be voted on during the
fourth quarter of 1999.
PART II
ITEM 5. MARKET FOR REGISTRANT'S SECURITIES AND RELATED SECURITY
HOLDER MATTERS
Principal Market and Market Price for Units and Distributions
The Units are traded on the American Stock Exchange ("AMEX") with a trading
symbol of "AIK." The high and low trade prices for the Units as reported on AMEX
and the distributions, as applicable, for each quarterly period in 1999 and 1998
were as follows:
<TABLE>
<CAPTION>
1999 Amount of
Distribution
Quarter Ended High Low Per Unit
- ------------- ---- --- ----------
<S> <C> <C> <C>
March 31, $11 7/16 $10 9/16 $ 0.61 (1)
June 30, 11 5/8 10 1/2 3.26 (2)(3)(4)
September 30, 11 7 3/8 0.15
December 31, 7 15/16 6 1/4 1.04 (5)(6)(7)
-----------
$ 5.06
===========
</TABLE>
<TABLE>
<CAPTION>
1998 Amount of
Distribution
Quarter Ended High Low Per Unit
------------- ---- --- -----------
<S> <C> <C> <C>
March 31, $14 1/4 $13 5/16 $ 1.21 (8)(9)
June 30, 14 12 1/2 1.50 (10)(11)
September 30, 13 1/4 11 7/8 1.42 (12)
December 31, 12 5/8 10 11/16 0.21
-----------
$ 4.34
===========
The following disposition proceeds are included in the distributions listed
above:
Net
Type of Distibution
Complex Name Disposition Per Unit
------------ ----------- --------
<S> <C> <C> <C>
(1) Olde Mill Apartments Prepayment $ 0.37
(2) Seven Springs Apartments Prepayment 0.53
(3) Kon Tiki Apartments Prepayment 0.06
(4) The Breakers Golf Mill Prepayment 2.43
(5) Oak Grove Apartments Prepayment 0.06
(6) Heather Ridge Apartments Prepayment 0.49
(7) St. Charles Place - Phase II Sale 0.32
(8) Northpoint Apartments Prepayment 0.19
(9) Olmstead Apartments Prepayment 0.73
(10) Olde Mill Apartments Curtailment 0.08
(11) Arbor Village Prepayment 1.18
(12) Water's Edge II Apartments Prepayment 1.19
</TABLE>
There are no material legal restrictions upon the Partnership's present or
future ability to make distributions in accordance with the provisions of the
partnership agreement.
Approximate Number
of Unitholders
Title of Class as of December 31, 1999
- -------------- -----------------------
Depositary Units of Limited 6,700
Partnership Interest
ITEM 6. SELECTED FINANCIAL DATA
(Dollars in thousands, except per Unit amounts)
<TABLE>
<CAPTION>
For the Years Ended December 31,
1999 1998 1997 1996 1995
---------- ---------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C>
Income $ 7,294 $ 9,998 $ 12,167 $ 12,465 $ 13,236
Net gains (losses) on mortgage
dispositions 1,072 756 (354) (378) 2,452
Net earnings 7,053 9,179 10,097 10,293 13,795
Composition of distributions per Limited
Partnership Unit(1)(2):
Net earnings - Basic $ 0.76 $ 0.99 $ 1.09 $ 1.11 $ 1.49
Return of capital 4.30 3.35 1.44 0.11 0.17
Total $ 5.06 $ 4.34 $ 2.53 $ 1.22 $ 1.66
For the Years Ended December 31,
1999 1998 1997 1996 1995
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Total assets $ 83,455 $ 116,464 $ 150,616 $ 159,554 $ 161,927
Partners' equity $ 73,702 $ 114,442 $ 146,977 $ 156,644 $ 158,806
(1) Calculated based upon the weighted average number of Units outstanding. See
Note 2 to Notes to Financial Statements of the Partnership.
(2) Includes distributions due the Unitholders for the Partnership's fiscal
quarters ended December 31, 1999, 1998, 1997, 1996 and 1995, which were
paid subsequent to year end. See Notes 7 and 8 to Notes to Financial
Statements of the Partnership contained in Item 9, "Financial Statements
and Supplementary Data."
</TABLE>
The selected income data presented above for the years ended December 31,
1999, 1998 and 1997, and the balance sheet data as of December 31, 1999 and
1998, are derived from and are qualified by reference to the Partnership's
financial statements which have been included elsewhere in this Form 10-K. The
income data for the years ended December 31, 1996 and 1995 and the balance sheet
data as of December 31, 1997, 1996 and 1995 are derived from audited financial
statements not included in this Form 10-K. This data should be read in
conjunction with the financial statements and the notes thereto.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
General
- -------
The following discussion and analysis contains statements that may be
considered forward looking. These statements contain a number of risks and
uncertainties as discussed herein and in Item 1 of this Form 10-K that could
cause actual results to differ materially.
The 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. During the period from October 2, 1987 (the
initial closing date of the Partnership's public offering) through March 10,
1989 (the termination date of the offering), the Partnership, pursuant to its
public offering of Units, raised a total of $177,039,320 in gross proceeds. In
addition, the initial limited partner contributed $2,500 to the capital of the
Partnership and received 125 units of limited partnership interest in exchange
therefor.
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 pursuant to an advisory agreement (the "Advisory Agreement").
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.
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.
Mortgage Investments
- --------------------
Prior to the expiration of the Partnership's reinvestment period in
December 1996, the Partnership was engaged in the business of originating
mortgage loans ("Originated Insured Mortgages") and acquiring mortgage loans
("Acquired Insured Mortgages", and together with "Originated Insured Mortgages",
referred to herein as "Insured Mortgages"). In accordance with the terms of the
partnership agreement, the Partnership is no longer authorized to originate or
acquire Insured Mortgages and, consequently, its primary objective is to manage
its portfolio of mortgage investments, all of which are insured or guaranteed,
in whole or in part, by the Federal Housing Administration ("FHA") under section
221(d)(4) or section 231 of the National Housing Act of 1937, as amended (the
"National Housing Act"). The Partnership is a liquidating partnership and as it
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. The
partnership agreement states that the Partnership will terminate on December 31,
2021, unless previously terminated under the provisions of the partnership
agreement.
As of December 31, 1999, the Partnership had invested in 25 Insured
Mortgages with aggregate amortized cost, face value and fair value of
approximately $70 million, $71 million and $68 million, respectively, as
discussed below.
Investment in Insured Mortgages
- -------------------------------
The Partnership's investment in Insured Mortgages is comprised of
participation certificates evidencing a 100% undivided beneficial interest in
government insured multifamily mortgages issued or sold pursuant to FHA programs
("FHA-Insured Certificates"), mortgage-backed securities guaranteed by GNMA
("GNMA Mortgage-Backed Securities") and FHA-insured mortgage loans ("FHA-Insured
Loans"). The mortgages underlying the FHA-Insured Certificates, the GNMA
Mortgage-Backed Securities and the FHA-Insured Loans are non-recourse first
liens on multifamily residential developments or retirement homes.
Payments of principal and interest on FHA-Insured Certificates and
FHA-Insured Loans are insured by the United States Department of Housing and
Urban Development ("HUD") pursuant to Title 2 of the National Housing Act.
Payments of principal and interest on GNMA Mortgage-Backed Securities are
guaranteed by GNMA pursuant to Title 3 of the National Housing Act.
The following is a discussion of the Partnership's insured mortgage
investments, along with the risks related to each type of investment:
Fully Insured FHA-Insured Certificates and GNMA Mortgage-Backed Securities
- --------------------------------------------------------------------------
Listed below is the Partnership's aggregate investment in Fully Insured
Mortgages as of December 31, 1999 and 1998:
<TABLE>
<CAPTION> December 31,
1999 1998
------------ ------------
<S> <C> <C>
Number of:
GNMA Mortgage-Backed Securities (1)(2)(3) 20 22
FHA-Insured Certificates (1)(4) 2 3
Amortized Cost $ 55,763,736 $ 65,698,059
Face Value 55,736,170 65,930,408
Fair Value 54,329,225 67,018,830
</TABLE>
(1) As of March 6, 2000, all of the Partnership's fully insured mortgage
investments are current with respect to payment of principal and interest.
(2) In April 1999, the mortgage on Seven Springs Apartments was prepaid. The
Partnership received net proceeds of approximately $4.9 million and
recognized a gain of approximately $436,000 for the year ended December 31,
1999. A distribution of approximately $0.53 per Unit related to the
prepayment of this mortgage was declared in May and was paid to Unitholders
in August 1999.
(3) In October 1999, the mortgage on Oak Grove Apartments was prepaid. The
Partnership received net proceeds of approximately $580,000 and recognized
a gain of approximately $32,000 for the year ended December 31, 1999. A
distribution of $0.06 per Unit related to this prepayment was declared in
November 1999 and paid to Unitholders in February 2000.
(4) In November 1999, the mortgage on Heather Ridge Apartments was prepaid. The
Partnership received net proceeds of approximately $4.5 million and
recognized a gain of approximately $164,000 for the year ended December 31,
1999. A distribution of $0.49 per Unit related to this prepayment was
declared in November 1999 and paid to Unitholders in February 2000.
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 December 31, 1999, the Partnership had received
approximately $10.2 million on 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 Corporation, 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 December 31, 1999, is sufficient to provide for amounts that may not be
recovered from the servicer.
Coinsured Mortgages
- -------------------
Under the HUD coinsurance program, both HUD and the coinsurance lender are
responsible for paying a portion of the insurance benefits if a mortgagor
defaults and the sale of the development collateralizing the mortgage produces
insufficient net proceeds to repay the mortgage obligation. In such case, the
coinsurance lender will be liable to the Partnership for the first part of such
loss in an amount up to 5% of the outstanding principal balance of the mortgage
as of the date foreclosure proceedings are instituted or the deed is acquired in
lieu of foreclosure. For any loss greater than 5% of the outstanding principal
balance, the responsibility for paying the insurance benefits will be borne on a
pro-rata basis, 85% by HUD and 15% by the coinsurance lender.
While the Partnership is due payment of all amounts owed under the
mortgage, the coinsurance lender is responsible for the timely payment of
principal and interest to the Partnership. The coinsurance lender is prohibited
from entering into any workout arrangement with the borrower without the
Partnership's consent and must file a claim for coinsurance benefits with HUD,
upon default, if the Partnership so directs. As an ongoing HUD-approved
coinsurance lender, and under the terms of the participation documents, the
coinsurance lender is required to satisfy certain minimum net worth requirements
as set forth by HUD. However, it is possible that the coinsurance lender's
potential liability for loss on these developments, and others, could exceed its
HUD-required minimum net worth. In such case, the Partnership would bear the
risk of loss if the coinsurance lenders were unable to meet their coinsurance
obligations. In addition, HUD's obligation for the payment of its share of the
loss could be diminished under certain conditions, such as the lender not
adequately pursuing regulatory violations of the borrower or the failure to
comply with other terms of the mortgage. However, the General Partner is not
aware of any conditions or actions that would result in HUD diminishing its
insurance coverage.
As of December 31, 1999 and 1998, the Partnership held investments in one
and three coinsured FHA-Insured Certificates secured by coinsured mortgages,
respectively. 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 December 31, 1999, the remaining FHA-Insured
Certificates was coinsured by Integrated Funding, Inc. ("IFI"), an affiliate of
the Partnership, and is discussed below.
Coinsured by affiliate
- ----------------------
As of December 31, 1999 and 1998, the Partnership held investments in one
and two coinsured FHA-Insured Certificates secured by coinsured mortgages,
respectively, where the coinsurance lender is IFI. These investments were made
on behalf of the Partnership by the former managing general partner. As
structured by the former managing general partner, with respect to these
mortgages, the Partnership bears the risk of loss upon default for IFI's portion
of the coinsurance loss on these mortgage investments.
<TABLE>
<CAPTION>
December 31, 1999 December 31, 1998
----------------- -----------------
Amortized Face Fair Amortized Face Fair
Cost Value Mkt. Value Cost Value Mkt. Value
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Summerwind Apts. - Phase
II(1)(3) $ 7,863,659 $ 9,231,460 $ 8,452,851 $ 7,913,874 $ 9,307,962 $ 8,638,778
The Breakers at Golf
Mill(2)(3) -- -- -- 22,113,145 22,113,146 20,470,263
----------- ----------- ----------- ---------- ---------- ----------
$ 7,863,659 $ 9,231,460 $ 8,452,851 $30,027,019 $31,421,108 $29,109,041
=========== =========== =========== =========== =========== ===========
</TABLE>
(1) As of March 6, 2000, the mortgagor was current with respect to payment of
principal and interest on this mortgage.
(2) In May 1999, the mortgage on The Breakers at Golf Mill was prepaid. The
Partnership received net proceeds of approximately $22.5 million and
recognized a gain of approximately $441,000 for the year ended December 31,
1999. A distribution of approximately $2.43 per Unit related to the
prepayment of this mortgage was declared in June 1999 and was paid to
Unitholders in August 1999.
(3) There were no loan losses recognized for the years ended 1999 and 1998. The
cumulative loan losses recognized in prior years were $980,000 for The
Breakers at Golf Mill, and $1,511,743 for Summerwind Apartments - Phase II.
Coinsured by third party
- ------------------------
Listed below is the Originated Insured Mortgage coinsured by an
unaffiliated third party coinsurance lender, The Patrician Mortgage Company
("Patrician"), under the HUD coinsurance program.
December 31,
1999 1998
------------ ------------
Amortized Cost $ -- $ 3,710,287
Face Value -- 3,710,287
Fair Value -- 3,422,177
On October 14, 1993, Patrician filed a foreclosure action on the property
underlying this coinsured mortgage, St. Charles Place-Phase II. 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. 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
December 31, 1999, is approximately $2 million. 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. 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. The Partnership does not expect to recognize a
loss related to this disposition, as it expects to recover all amounts due from
Patrician.
The General Partner intends to continue to oversee the Partnership's
interest in this liability to ensure that Patrician meets its coinsurance
obligations. 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.
FHA-Insured Loans
- -----------------
Listed below is the Partnership's aggregate investment in fully insured
Originated Insured Mortgages as of December 31, 1999 and 1998:
December 31,
1999 1998
----------- -----------
Number of Mortgages (1) 1 1
Amortized Cost $ 5,676,336 $ 5,721,754
Face Value 5,676,336 5,721,754
Fair Value 5,169,038 5,725,377
(1) As of March 6, 2000, the Partnership's fully insured originated Insured
Loan was current with respect to the payment of principal and interest.
Listed below is the Partnership's aggregate investment in fully insured
Acquired Insured Mortgages as of December 31, 1999 and 1998:
December 31,
1999 1998
---------- ----------
Number of Mortgages (1)(2) 1 2
Amortized Cost $ 461,081 $1,055,778
Face Value 460,441 1,053,273
Fair Value 459,177 1,061,917
(1) As of March 6, 2000, the Partnership's fully insured Acquired Insured Loan
was current with respect to the payment of principal and interest.
(2) In May 1999, the mortgage on Kon Tiki Apartments was prepaid. The
Partnership received net proceeds of approximately $554,000 and recognized
a loss of approximately $400 for the year ended December 31, 1999. A
distribution of approximately $0.06 per Unit related to the prepayment of
this mortgage was declared in June 1999 and was paid to Unitholders in
August 1999.
In addition to base interest payments from 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"). During the years ended December 31, 1999, 1998 and
1997, the Partnership received additional interest of $0, $69,820 and $134,769,
respectively, from the FHA-Insured Loans through these Participations. These
amounts, if any, are included in mortgage investment income on the accompanying
statements of income and comprehensive income.
Results of Operations
- ---------------------
1999 versus 1998
- ----------------
Net earnings decreased for 1999 as compared to 1998, primarily due to a
decrease in mortgage investment income caused by the reduction in the mortgage
asset base. This decrease was partially offset by an increase in net gains on
mortgage dispositions.
Mortgage investment income decreased for 1999 as compared to 1998. This
decrease was primarily due to the prepayment of five mortgages and the sale of
one property during 1999 for approximately $36 million in proceeds. Also
contributing to the decrease was the normal amortization of the mortgage base.
Interest and other income increased for 1999 as compared to 1998. This
increase was primarily due to the timing of the temporary investment of proceeds
from mortgage prepayments.
Asset management fee expense decreased for 1999 as compared to 1998. This
decrease was due to the reduction in the mortgage base, primarily due to
mortgage prepayments as previously discussed.
General and administrative expenses increased for 1999 as compared to 1998.
This increase primarily was due to the legal fees related to the mortgage issues
on Water's Edge of New Jersey as previously discussed.
Net realized gains on mortgage dispositions increased for 1999 as compared
to 1998. Gains or losses on mortgage dispositions are based on the number,
carrying amounts and proceeds of mortgage investments disposed of during the
period. During 1999, the partnership recognized gains of approximately $1
million related to the prepayment of the mortgages on Seven Spring Apartments,
The Breakers at Golf Mill, Oak Grove Apartments, and Heather Ridge. This
compares to gains recognized in 1998 of approximately $1.1 million related to
the prepayments of the mortgages on Northpoint Apartments, Olmstead Park
Apartments, Water's Edge II Apartments, and Olde Mill Apartments. During 1999,
the Partnership incurred a loss of approximately $400 on the disposition of Kon
Tiki Apartments versus a loss of approximately $350,000 on the disposition of
the mortgage on Arbor Village in 1998.
1998 versus 1997
- ----------------
Net earnings decreased for 1998 as compared to 1997, primarily as a result
of a decrease in mortgage investment income caused by the reduction in the
mortgage asset base. This decrease was partially offset by an increase in net
gains on mortgage dispositions.
Mortgage investment income decreased for 1998 as compared to 1997. This
decrease was primarily due to the prepayment of the mortgages on Northpoint
Apartments, Olmstead Park Apartments, Arbor Village, Water's Edge II Apartments,
and Olde Mill Apartments, as discussed previously.
Interest and other income increased for 1998 as compared to 1997. This
increase was primarily due to the temporary
investment of proceeds from mortgage prepayments.
Net realized gains on mortgage dispositions increased for 1998 as compared
to 1997. Gains or losses on mortgage dispositions are based on the number,
carrying amounts and proceeds of mortgage investments disposed of during the
period. During 1998, the Partnership recognized gains on mortgage dispositions
of approximately $1.1 million related to the prepayment of the mortgages on
Northpoint Apartments, Olmstead Park Apartments, Water's Edge II Apartments, and
Olde Mill Apartments. This compares to gains recognized in 1997 of approximately
$21,000 related to the prepayment of the mortgage on Parkside Estates. During
1998, the Partnership incurred a loss of approximately $350,000 on the
disposition of the mortgage on Arbor Village, compared to no losses in 1997.
Additionally, during 1997, the Partnership provided $375,000 to reserve for
possible losses in connection with a claim filed with HUD for the mortgage on
Water's Edge of New Jersey.
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. Furthermore, the bankruptcy filings could negatively impact CMSLP
which could result in the need to obtain another party to perform the services
currently performed by CMSLP, as subadvisor, pursuant to the Sub-Advisory
Agreement.
On December 23, 1999, CRIIMI MAE and CRIIMI MAE Management, Inc. filed
their Amended Joint Plan of Reorganization and proposed disclosure statement
with the United States Bankruptcy Court for the District of Maryland, in
Greenbelt, Maryland (the "Bankruptcy Court"). The filing of such Amended Joint
Plan of Reorganization and proposed disclosure statement on December 23, 1999
was filed with the full support of the official committee of Equity Security
Holders in the CRIIMI MAE Chapter 11 case, which is a co-proponent of such
Amended Joint Plan of Reorganization. On or about February 11, 2000, the
Official Committee of Unsecured Creditors of CRIIMI MAE filed its own second
amended plan of reorganization and second amended proposed disclosure statement,
which, in general, provides for the liquidation of the assets of CRIIMI MAE. A
hearing has been scheduled for April 25 and April 26, 2000 on the proposed
disclosure statements filed with the Bankruptcy Court. There can be no assurance
at this time that CRIIMI MAE's Amended Joint Plan of Reorganization 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 years ended December 31, 1999, 1998 and 1997 to meet
operating requirements. The Partnership anticipates its cash flows to be
sufficient to meet operating expense requirements for 2000.
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 after paying all
expenses of the Partnership. 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 payment receipts are
temporarily invested prior to the payment of quarterly distributions, (2) the
reduction in the asset base, resulting from monthly mortgage payment receipts 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.
Since the Partnership is obligated to distribute the Proceeds of Mortgage
Prepayments, Sales and Insurance on Insured Mortgages (as defined in the
partnership agreement) to its Unitholders, the size of the Partnership's
portfolio will continue to decrease. The magnitude of the decrease will depend
upon the size of the Insured Mortgages, which are prepaid, sold or assigned for
insurance proceeds.
Cash flow - 1999 versus 1998
- ----------------------------
Net cash provided by operating activities decreased for 1999 as compared to
1998 primarily due to a decrease in net earnings in 1999. This decrease was
primarily the result of a decrease in mortgage investment income discussed
previously. Also contributing to the decrease was a decrease in receivables and
other assets during 1999 related to the sale of the property underlying St.
Charles Place-Phase II and the remaining amounts due from the coinsurance
lender.
Net cash provided by investing activities increased for 1999 as compared to
1998 due to an increase in mortgage disposition proceeds from approximately $36
million in 1999 versus approximately $33.8 million received in 1998.
Net cash used in financing activities decreased for 1999 as compared to
1998 primarily due to a decrease in distributions paid to partners.
Cash flow - 1998 versus 1997
- ----------------------------
Net cash provided by operating activities decreased for 1998 as compared to
1997 primarily due to a reduction in net earnings, which was caused by a
decrease in the mortgage asset base. Additionally, cash provided by operating
activities decreased for 1998 as compared to 1997 due to a decrease in
receivables and other assets.
Net cash provided by investing activities increased for 1998 as compared to
1997 primarily due to the increase in the amount of mortgage disposition
proceeds received in 1998 as compared to 1997.
Net cash used in financing activities increased for 1998 as compared to
1997 due to an increase in distributions paid to partners as a result of the
disposition of the mortgages on Northpoint Apartments, Olmstead Park Apartments,
Arbor Village, Water's Edge II Apartments and Olde Mill Apartments, and a
principal curtailment made on the mortgage for Olde Mill Apartments prior to the
disposition of the mortgage.
ITEM 7A. 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.
The table below provides information about the Partnership's Insured
Mortgages, all of which were entered into for purposes other than trading. The
table presents anticipated principal and interest cash flows based upon the
assumptions used in determining the fair value of these securities and the
related weighted average interest rates by expected maturity.
<TABLE>
<CAPTION>
2000 2001 2002 2003 2004 Thereafter Total Fair Value
---- ---- ---- ---- ---- ---------- ----- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Insured Mortgages
(in millions) $11.3 $10.3 $9.4 $8.7 $10.0 $61.5 $111.2 $68.4
Average Interest Rate 7.81 % 7.81 % 7.80 % 7.80 % 7.81 % 7.91 % -- --
</TABLE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this Item is set forth in this Annual Report on
Form 10-K commencing on page 25.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURES
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(a),(b),(c),(e)
The Partnership has no officers or directors. CRIIMI, Inc. holds a general
partnership interest of 4.9%. The affairs of the Partnership are managed by the
General Partner, which is wholly owned by CRIIMI MAE, a corporation whose shares
are listed on the New York Stock Exchange.
The general partner of the Advisor is AIM Acquisition and the limited
partners include, but are not limited to, AIM Acquisition, The Goldman Sachs
Group, L.P., Sun America Investments, Inc. and CRI/AIM Investment, L.P., an
affiliate of CRIIMI MAE. Pursuant to the terms of certain amendments to the
partnership agreement, 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. 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 General Partner is also the general partner of AIM 84, AIM 85 and AIM
86, limited partnerships with investment objectives similar to those of the
Partnership.
The following table sets forth information concerning the executive
officers and directors of CRIIMI MAE, the sole shareholder of the General
Partner as of March 15, 2000:
Name Age Position
---- --- --------
William B. Dockser 63 Chairman of the Board
H. William Willoughby 53 President, Secretary, and
Director
Cynthia O. Azzara 40 Senior Vice President,
Chief Financial Officer and
Treasurer
David B. Iannarone 39 Senior Vice President and
General Counsel
Brian L. Hanson 38 Senior Vice President
Garrett G. Carlson, Sr. 62 Director
G. Richard Dunnells 62 Director
Robert Merrick 54 Director
Robert E. Woods 52 Director
William B. Dockser has served as Chairman of the Board of the General
Partner since 1991. Mr. Dockser has been Chairman of the Board of CRIIMI MAE
since 1989 and Chairman of the Board of CRIIMI MAE Financial Corporation since
1995. Mr. Dockser is also the founder of C.R.I., Inc. ("CRI"), serving as its
Chairman of the Board since 1974.
H. William Willoughby has served as President and Secretary of the General
Partner since 1991. Mr. Willoughby has been President of CRIIMI MAE since 1990
and a Director and Secretary of CRIIMI MAE since 1989. He has also served as a
director of CRIIMI MAE Financial Corporation since 1995. Mr. Willoughby has been
a director of CRI since 1974, Secretary of CRI from 1974 to 1990 and President
of CRI since 1990.
Cynthia O. Azzara has served as Chief Financial Officer of the General
Partner since 1994. Ms. Azzara has served as Chief Financial Officer of CRIIMI
MAE since 1994. She has also served as Senior Vice President of CRIIMI MAE since
1995 and Treasurer of CRIIMI MAE since 1997, Accounting and Finance Departments
of CRI from 1985 to June 1995.
David B. Iannarone has served as Senior Vice President of the General
Partner since March 1998. Mr. Iannarone has served as Senior Vice President of
CRIIMI MAE since March 1998; General Counsel of CRIIMI MAE since July 1996;
Counsel-Securities and Finance for Federal Deposit Insurance
Corporation/Resolution Trust Corporation from 1991 to July 1996.
Brian L. Hanson has served as Senior Vice President of the General Partner
since March 1998. Mr. Hanson has served as Senior Vice President of CRIIMI MAE
since March 1998; Group Vice President of CRIIMI MAE from March 1996 to March
1998; Chief Operating Officer, Director of Asset Operations and Portfolio
Director of JCF Partners, Lanham, Maryland from 1991 to March 1996.
Garrett G. Carlson, Sr. has served as Director of the General Partner since
1989. Mr. Carlson has served as Director of CRIIMI MAE since 1989; President of
Can-American Realty Corp. and Canadian Financial Corp. since 1979 and 1974,
respectively; President of Garrett Real Estate Development since 1982; President
of the Satellite Broadcasting Corporation since 1996; Chairman of the Board of
SCA Realty Holdings Inc. from 1985 to 1995; Vice Chairman of Shelter Development
Corporation Ltd. from 1983 to 1995 and member of the board of Bank Windsor from
1992 to 1994.
G. Richard Dunnells has served as Director of the General Partner since
1991. Mr. Dunnells has served as Director of CRIIMI MAE since 1991; Firm-wide
Hiring of the law firm of Holland & Knight since 1995; Chairman of the
Washington, D.C. law firm of Dunnells & Duvall from 1989 to 1993; Senior Partner
of such law firm from 1973 to 1993; Special Assistant to the Under-Secretary and
Deputy Assistant Secretary for Housing and Urban Renewal and Deputy Assistant
Secretary for Housing Management with the U.S. Department of Housing and Urban
Development from 1969 to 1973; President's Commission on Housing from 1981 to
1982.
Robert J. Merrick has served as Director of the General Partner since 1997.
Mr. Merrick has served as Director of CRIIMI MAE since 1997; Chief Credit
Officer and Director of MCG Credit Corporation since February 1998; Executive
Vice President from 1985 and Chief Credit Officer of Signet Banking Corporation
through 1997, also served as Chairman of the Credit Policy Committee and member
of the Asset and Liability Committee and Management Committee; Credit
Officer-Virginia Banking Corporation, an affiliate of Signet Bank/Virginia, from
1980 to 1984; Senior Vice President of Bank of Virginia from 1976 to 1980.
Robert E. Woods has served as Director of the General Partner since 1998.
Mr. Woods has served as Director of CRIIMI MAE since 1998; Managing Director and
head of loan syndications for the Americas at Societe Generale, New York since
1997; Managing Director, head of Real Estate Capital Markets and Mortgage-backed
Securities division, Citicorp from 1991 to 1997, Head of Citicorp's
syndications, private placements, money markets and asset-backed businesses from
1985 to 1990.
(d) There is no family relationship between any of the officers
and directors of the General Partner.
(f) Involvement in certain legal proceedings.
None.
(g) Promoters and control persons.
Not applicable.
(h) Section 16(a) Beneficial Ownership Reporting Compliance -
Based solely on its review of Forms 3, 4, and 5 and
amendments thereto furnished to the Partnership, and written
representations from certain reporting persons that no Form
5s were required for those persons, the Partnership believes
that all reporting persons have filed on a timely basis
Forms 3, 4 and 5 as required in the fiscal year ended
December 31, 1999.
ITEM 11. EXECUTIVE COMPENSATION
The Partnership does not have any directors or officers. None of the
directors or officers of the General Partner receive compensation from the
Partnership, and the General Partner does not receive reimbursement from the
Partnership for any portion of their salaries. Other information required by
Item 11 is hereby incorporated by reference herein to Note 5 of the Notes to
Financial Statements of the Partnership.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) As of December 31, 1999, no person was known by the Partnership to be the
beneficial owner of more than five percent (5%) of the outstanding Units of
the Partnership.
(b) The following table sets forth certain information regarding the beneficial
ownership of the Partnership's Units as of February 17, 2000 by each
director of the General Partner, each Named Executive Officer of the
General Partner, and by affiliates of the Partnership. Unless otherwise
indicated, each Unitholder has sole voting and investment power with
respect to the Units beneficially owned.
Amount and Nature
of Units Percentage of Units
Name Beneficially Owned Outstanding
---- ------------------ -----------
William B. Dockser 3,000 *
CRIIMI MAE 744 *
* Less than 1%
(c) There are no arrangements known to the Partnership, the operation of which
may at any subsequent date result in a change in control of the
Partnership.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
(a) Transactions with management and others.
Note 7 of the Notes to Financial Statements of the Partnership which
contains a discussion of the amounts, fees and other compensation paid
or accrued by the Partnership to the directors and executive officers
of the General Partner and their affiliates, and is hereby
incorporated by reference herein.
(b) Certain business relationships.
Other than as set forth in Item 11 of this report which is hereby
incorporated by reference herein, the Partnership has no business
relationship with entities of which the current General Partner of the
Partnership are officers, directors or equity owners.
(c) Indebtedness of management.
None.
(d) Transactions with promoters.
Not applicable.
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)(1) Financial Statements:
<TABLE>
<CAPTION>
Page
Description Number
- ----------- ------
<S> <C>
Balance Sheets as of December 31, 1999 and 1998..........................................................................22
Statements of Income and Comprehensive Income for the years ended December 31, 1999,1998 and 1997........................23
Statements of Changes in Partners' Equity for the years ended December 31, 1999, 1998 and 1997...........................24
Statements of Cash Flows for the years ended December 31, 1999, 1998 and 1997............................................25
Notes to Financial Statements............................................................................................26
(a)(2) Financial Statement Schedules:
IV - Mortgage Loans on Real Estate..............................................................................36
</TABLE>
All other schedules have been omitted because they are inapplicable, not
required, or the information is included in the Financial Statements or Notes
thereto.
(a)(3) Exhibits:
3. Certificate of Limited Partnership is incorporated by reference
to Exhibit 4(a) to Amendment No. 1 to the Partnership's
Registration Statement on Form S-11 (No. 33-12479) filed with the
Commission on June 10, 1987.
4. Agreement of Limited Partnership, incorporated by reference to
Exhibit 3 to the Post-Effective Amendment No. 1 to the
Partnership's Registration Statement on Form S-11 (No. 33-12479)
filed with the Commission on March 8, 1988 (such Amendment is
referred to hereinbelow as Post-Effective Amendment No.1).
4.1 Material Amendments to Agreement of Limited Partnership are
incorporated by reference to Exhibit 3(a) to Post-Effective
Amendment No.1.
4.2 Amendment to the Amended and Restated Agreement of Limited
Partnership of the Partnership dated February 12,
1990.
10.0 Escrow Agreement is incorporated by reference to Exhibit 10(a) to
the Partnership's Annual Report on Form 10-K for the year ended
December 31, 1987.
10.1 Origination and Acquisition Services Agreement is incorporated by
reference to Exhibit 10(b) to the Partnership's Annual Report on
Form 10-K for the year ended December 31, 1987.
10.2 Management Services Agreement is incorporated by reference to
Exhibit 10(c) to the Partnership's Annual Report on Form 10-K for
the year ended December 31, 1987.
10.3 Disposition Services Agreement is incorporated by reference to
Exhibit 10(d) to the Partnership's Annual Report on Form 10-K for
the year ended December 31, 1987.
10.4 Agreement among the former managing general partner, the former
associate general partner and Integrated Resources, Inc. is
incorporated by reference to Exhibit 10(e) to the Partnership's
Annual Report on Form 10-K for the year ended December 31, 1987.
10.5 Reinvestment Plan is incorporated by reference to Exhibit 10(f)
to Post- Effective Amendment No. 1.
10.6 Mortgagor-Participant Agreement, Mortgage Assignment of Rents and
Security Agreement and Mortgage Note with respect to The Breakers
(sometimes also referred to as the Niles Senior Lifestyle
Community) is incorporated by reference to Exhibit 10(g) to
Post-Effective Amendment No. 1.
10.7 Mortgagor-Mortgagee Agreement, Mortgage Note and Mortgage with
respect to the Arlington development is incorporated by reference
to Exhibit 10(h) to Post-Effective Amendment No. 1.
10.8 Pages A-1 - A-5 of the partnership agreement of Registrant,
incorporated by reference to Exhibit 28 to the Partnership's
Annual Report on Form 10-K for the year ended December 31, 1990.
10.9 Purchase Agreement among AIM Acquisition, the former managing
general partner, the former corporate general partner, IFI and
Integrated dated as of December 13, 1990, as amended January 9,
1991, incorporated by reference to Exhibit 28(a) to the
Partnership's Annual Report on Form 10-K for the year ended
December 31, 1990.
10.10 Purchase Agreement among CRIIMI, Inc., AIM Acquisition, the
former managing general partner, the former corporate general
partner, IFI and Integrated dated as of December 13, 1990 and
executed as of March 1, 1991, incorporated by reference to
Exhibit 28(b) to the Partnership's Annual Report on Form 10-K for
the year ended December 31, 1990.
10.11 Amendments to partnership agreement dated August 13, 1991.
Incorporated by reference to Exhibit 28(c) to the Partnership's
Annual Report on Form 10-K for the year ended December 31, 1991.
10.12 Sub-management Agreement by and between AIM Acquisition and
CRI/AIM Management, Inc., dated as of March 1, 1991, incorporated
by reference to Exhibit 28(e) the Partnership's Annual Report on
Form 10-K for the year ended December 31, 1992.
10.13 Expense Reimbursement Agreement by Integrated Funding Inc. and
the AIM Funds, effective December 31, 1992, incorporated by
reference to Exhibit 28(f) to the Partnership's Quarterly Report
on Form 10-Q for the quarter ended June 30, 1993.
10.14 Non-negotiable promissory note from American Insured Mortgage
Investors L.P. - Series 85 in the amount of $319,074.67 dated
April 1, 1994, incorporated by reference to Exhibit 10(p) to the
Partnership's Annual Report on Form 10-K for the year ended
December 31, 1994.
10.15 Non-negotiable promissory note from American Insured Mortgage
Investors L.P. - Series 86 in the amount of $478,612.00 dated
April 1, 1994, incorporated by reference to Exhibit 10(q) to the
Partnership's Annual Report on Form 10-K for the year ended
December 31, 1994.
10.16 Amendment to Reimbursement Agreement by Integrated Funding, Inc.
and the AIM Funds, effective April 1, 1994, incorporated by
reference to Exhibit 10(r) to the Partnership's Annual Report on
Form 10-K for the year ended December 31, 1994.
10.17 Second Amendment to Reimbursement Agreement by Integrated
Funding, Inc. and the AIM Funds, effective April 1, 1997,
incorporated by reference to Exhibit 10.17 to the Partnership's
Annual Report on Form 10-K for the year ended December 31, 1997.
10.18 Non-negotiable promissory note from American Insured Mortgage
Investors, L.P. - Series 86, in the amount of $658,486 dated
April 1, 1997, incorporated by reference to Exhibit 10.18 to the
Partnership's Annual Report on Form 10-K for the year ended
December 31, 1997.
27.0 Financial Data Schedule (filed herewith).
(b) Reports on Form 8-K filed during the last quarter of the fiscal year: None.
All other items are not applicable.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, 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/ March 1, 2000 /s/ William B. Dockser
DATE William B. Dockser
Chairman of the Board
/s/ March 1, 2000 /s/ H. William Willoughby
DATE H. William Willoughby
President and Secretary
/s/ March 1, 2000 /s/ Cynthia O. Azzara
DATE Cynthia O. Azzara
Senior Vice President,
Chief Financial Officer and
Treasurer
/s/ March 1, 2000 /s/ Garrett G. Carlson, Sr.
DATE Garrett G. Carlson, Sr.
Director
/s/ March 1, 2000 /s/ G. Richard Dunnells
DATE G. Richard Dunnells
Director
/s/ March 1, 2000 /s/ Robert J. Merrick
DATE Robert J. Merrick
Director
/s/ March 1, 2000 /s/ Robert E. Woods
DATE Robert E. Woods
Director
<PAGE>
AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 88
Financial Statements
as of December 31, 1999 and 1998
and for the Years Ended
December 31, 1999, 1998 and 1997
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners of American Insured Mortgage Investors L.P. - SERIES 88:
We have audited the accompanying balance sheets of American Insured
Mortgage Investors L.P. - Series 88 (the "Partnership") as of December 31, 1999
and 1998, and the related statements of income and comprehensive income, changes
in partners' equity and cash flows for the years ended December 31, 1999, 1998
and 1997. These financial statements and the schedule referred to below are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these financial statements and the schedule based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the Partnership as of
December 31, 1999 and 1998, and the results of its operations and its cash flows
for the years ended December 31, 1999, 1998 and 1997, in conformity with
accounting principles generally accepted in the United States.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. Schedule IV-Mortgage Loans on Real Estate
as of December 31, 1999 is presented for purposes of complying with the
Securities and Exchange Commission's rules and regulations and is not a required
part of the basic financial statements. The information in this schedule has
been subjected to the auditing procedures applied in our audits of the basic
financial statements and, in our opinion, is fairly stated in all material
respects in relation to the basic financial statements taken as a whole.
Arthur Andersen LLP
Vienna, VA
March 15, 2000
<PAGE>
AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 88
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, December 31,
1999 1998
------------ ------------
<S> <C> <C>
ASSETS
Investment in FHA-Insured Certificates and GNMA
Mortgage-Backed Securities, at fair value:
Acquired insured mortgages $ 54,329,225 $ 67,018,830
Originated insured mortgages 8,452,851 32,531,218
------------ ------------
62,782,076 99,550,048
Investment in FHA-Insured Loans, at amortized cost,
net of unamortized discount and premium:
Originated insured mortgages 5,676,336 5,721,754
Acquired insured mortgages 461,081 1,055,778
------------ ------------
6,137,417 6,777,532
Cash and cash equivalents 9,412,244 5,524,324
Investment in affiliates 1,250,860 1,266,971
Notes receivable from affiliates and due from affiliates 658,493 705,507
Receivables and other assets 3,213,483 2,639,242
------------ ------------
Total assets $ 83,454,573 $116,463,624
============ ============
LIABILITIES AND PARTNERS' EQUITY
Distributions payable $ 9,625,841 $ 1,943,679
Accounts payable and accrued expenses 126,648 77,729
------------ ------------
Total liabilities 9,752,489 2,021,408
------------ ------------
Partners' equity:
Limited partners' equity, 15,000,000 Units authorized,
8,802,091 Units issued and outstanding 80,173,264 118,004,167
General partner's deficit (5,007,111) (3,057,885)
Less: Repurchased Limited Partnership
Units - 50,000 Units (618,750) (618,750)
Accumulated other comprehensive (loss) income (845,319) 114,684
------------ ------------
Total Partners' equity 73,702,084 114,442,216
------------ ------------
Total liabilities and partners' equity $ 83,454,573 $116,463,624
============ ============
The accompanying notes are an integral part
of these financial statements.
</TABLE>
<PAGE>
AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 88
STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
<TABLE>
<CAPTION> For the years ended December 31,
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Income:
Mortgage investment income $ 6,848,840 $ 9,606,555 $11,892,090
Interest and other income 444,944 391,565 274,652
----------- ----------- -----------
7,293,784 9,998,120 12,166,742
----------- ----------- -----------
Expenses:
Asset management fee to related parties 942,910 1,287,672 1,469,320
General and administrative 369,751 287,395 245,921
----------- ----------- -----------
1,312,661 1,575,067 1,715,241
----------- ----------- -----------
Earnings before gains (losses) on
mortgage dispositions 5,981,123 8,423,053 10,451,501
Mortgage dispositions:
Gains 1,072,589 1,106,588 20,746
Losses (422) (350,159) --
Provision for loss -- -- (375,000)
----------- ----------- -----------
Net earnings $ 7,053,290 $ 9,179,482 $10,097,247
=========== =========== ===========
Other comprehensive income (960,003) (1,545,152) 1,801,409
----------- ----------- -----------
Comprehensive income $ 6,093,287 $ 7,634,330 $11,898,656
=========== =========== ===========
Net earnings allocated to:
Limited partners - 95.1% $ 6,707,679 $ 8,729,687 $ 9,602,482
General Partner - 4.9% 345,611 449,795 494,765
----------- ----------- -----------
$ 7,053,290 $ 9,179,482 $10,097,247
=========== =========== ===========
Net earnings per Limited Partnership
Unit outstanding - Basic $ 0.76 $ 0.99 $ 1.09
=========== =========== ===========
The accompanying notes are an integral part
of these financial statements.
</TABLE>
<PAGE>
AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 88
STATEMENTS OF CHANGES IN PARTNERS' EQUITY
For the years ended December 31, 1999, 1998, and 1997
<TABLE>
<CAPTION> Repurchased Accumulated
Limited Other Total
General Limited Partnership Comprehensive Partners'
Partner Partners Units Income/(Loss) Equity
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1997 $ (977,432) $158,381,944 $ (618,750) $ (141,573) $156,644,189
Net Earnings 494,765 9,602,482 -- -- 10,097,247
Adjustment to unrealized gains (losses)
on investments in insured mortgages -- -- -- 1,801,409 1,801,409
Distributions paid or accrued of $2.23
per Unit, including return of capital
of $1.24 per Unit (1,056,713) (20,508,872) -- -- (21,565,585)
------------ ------------ ------------ ------------ ------------
Balance, December 31, 1997 (1,539,380) 147,475,554 (618,750) 1,659,836 146,977,260
Net Earnings 449,795 8,729,687 -- -- 9,179,482
Adjustment to unrealized gains (losses) on
investments in insured mortgages -- -- -- (1,545,152) (1,545,152)
Distributions paid or accrued of $4.34
per Unit, including return of capital of
$3.35 per Unit (1,968,300) (38,201,074) -- -- (40,169,374)
------------ ------------ ------------ ------------ -----------
Balance, December 31, 1998 (3,057,885) 118,004,167 (618,750) 114,684 114,442,216
Net Earnings 345,611 6,707,679 -- -- 7,053,290
Adjustment to unrealized gains (losses) on
investments in insured mortgages -- -- -- (960,003) (960,003)
Distributions paid or accrued of $5.06
per Unit, including return of capital of
$4.30 per Unit (2,294,837) (44,538,582) -- -- (46,833,419)
------------ ------------ ------------ ----------- ------------
Balance, December 31, 1999 $ (5,007,111) $ 80,173,264 $ (618,750) $ (845,319) $ 73,702,084
============ ============ ============ ============ ============
Limited Partnership Units outstanding -
basic, as of December 31, 1999, 1998,
and 1997 8,802,091
============
The accompanying notes are an integral part
of these financial statements.
</TABLE>
<PAGE>
AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 88
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the years ended December 31,
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities: $ 7,053,290 $ 9,179,482 $10,097,247
Net earnings
Adjustments to reconcile net earnings to net cash provided by
operating activities:
Gain on mortgage dispositions (1,072,589) (1,106,588) (20,746)
Loss on mortgage dispositions 422 350,159 --
Changes in assets and liabilities:
Decrease (increase) in investment in affiliate, note
receivable from affiliates and due from affiliates 63,125 38,090 (35,107)
Decrease in receivables and other assets 132,524 354,296 2,255,203
Increase (decrease) in accounts payable and accrued expense 48,919 (43,602) (12,153)
Provision for loss -- -- 375,000
----------- ----------- -----------
Net cash provided by operating activities 6,225,691 8,771,837 12,659,444
----------- ----------- -----------
Cash flows used in investing activities:
Proceeds from dispositions of Insured mortgages 35,966,462 33,845,966 7,016,157
----------- ----------- -----------
Receipt of mortgage principal from scheduled payments 847,024 1,928,044 1,952,500
----------- ----------- -----------
Net cash provided by investing activities 36,813,486 35,774,010 8,968,657
---------- ----------- -----------
Cash flows used by financing activities:
Distributions paid to partners (39,151,257) (41,742,829) (20,825,136)
----------- ----------- -----------
Net cash used in financing activities: (39,151,257) (41,742,829) (20,825,136)
----------- ----------- -----------
Net increase in cash and cash equivalents 3,887,920 2,803,018 802,965
----------- ----------- -----------
Cash and cash equivalents, beginning of year 5,524,324 2,721,306 1,918,341
----------- ----------- -----------
Cash and cash equivalents, end of year $ 9,412,244 $ 5,524,324 $ 2,721,306
=========== =========== ===========
Non cash investing activity:
Increased receivable due from Patrician as
a result of the forclosure and sale of the
property unerlying the mortgage on
St. Charles Place-Phase II $ 706,765 $ -- $ --
=========== =========== ===========
The accompanying notes are an integral part
of these financial statements.
</TABLE>
<PAGE>
AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 88
NOTES TO FINANCIAL STATEMENTS
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.
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.
Prior to the expiration of the Partnership's reinvestment period in
December 1996, the Partnership was in the business of originating mortgage loans
("Originated Insured Mortgages") and acquiring mortgage loans ("Acquired Insured
Mortgages", and together with "Originated Insured Mortgages", referred to herein
as "Insured Mortgages"). In accordance with the partnership agreement, the
Partnership is no longer authorized to originate or acquire Insured Mortgages
and, consequently, its primary objective is to manage its portfolio of mortgage
investments, all of which are insured or guaranteed, in whole or in part, by the
Federal Housing Administration ("FHA") or Acquired Insured Mortgages which are
fully insured (as more fully described below). The partnership agreement states
that the Partnership will terminate on December 31, 2021, unless previously
terminated under the provisions of the partnership agreement.
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. Furthermore, the bankruptcy filings could negatively impact CMSLP
which could result in the need to obtain another party to perform the services
currently performed by CMSLP, as subadvisor, pursuant to the Sub-Advisory
Agreement.
On December 23, 1999, CRIIMI MAE and CRIIMI MAE Management, Inc. filed
their Amended Joint Plan of Reorganization and proposed disclosure statement
with the United States Bankruptcy Court for the District of Maryland, in
Greenbelt, Maryland (the "Bankruptcy Court"). The filing of such Amended Joint
Plan of Reorganization and proposed disclosure statement on December 23, 1999
was filed with the full support of the official committee of Equity Security
Holders in the CRIIMI MAE Chapter 11 case, which is a co-proponent of such
Amended Joint Plan of Reorganization. On or about February 11, 2000, the
Official Committee of Unsecured Creditors of CRIIMI MAE filed its own second
amended plan of reorganization and second amended proposed disclosure statement,
which, in general, provides for the liquidation of the assets of CRIIMI MAE. A
hearing has been scheduled for April 25 and April 26, 2000 on the proposed
disclosure statements filed with the Bankruptcy Court. There can be no assurance
at this time that CRIIMI MAE's Amended Joint Plan of Reorganization will be
confirmed and consummated.
2. SIGNIFICANT ACCOUNTING POLICIES
Method of Accounting
- --------------------
The Partnership's financial statements are prepared on the accrual basis of
accounting in accordance with generally accepted accounting principles. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
Reclassifications
- -----------------
Certain amounts in the financial statements for the years ended December
31, 1997 have been reclassified to conform to the 1999 and 1998 presentation.
Investment in Mortgages
- -----------------------
The Partnership's investment in Insured Mortgages is comprised of
participation certificates evidencing a 100% undivided beneficial interest in
government insured multifamily mortgages issued or sold pursuant to FHA programs
("FHA-Insured Certificates"), mortgage-backed securities guaranteed by GNMA
("GNMA Mortgage-Backed Securities") and FHA-insured mortgage loans ("FHA-Insured
Loans"). The mortgages underlying the FHA-Insured Certificates, GNMA
Mortgage-Backed Securities and FHA-Insured Loans are non-recourse first liens on
multifamily residential development.
Payments of principal and interest on FHA-Insured Certificates and
FHA-Insured Loans are insured by the United States Department of Housing and
Urban Development ("HUD") pursuant to Title 2 of the National Housing Act.
Payments of principal and interest on GNMA Mortgage-Backed Securities are
guaranteed by GNMA pursuant to Title 3 of the National Housing Act.
As of December 31, 1999, the weighted average remaining term of the
Partnership's investments in GNMA Mortgage-Backed Securities and FHA-Insured
Certificates is approximately 29 years. However, the partnership agreement
states that the Partnership will terminate in approximately 21 years, on
December 31, 2021, unless previously terminated under the provisions of the
partnership agreement. As the Partnership is anticipated to terminate prior to
the weighted average remaining term of its investment in GNMA Mortgage-Backed
Securities and FHA-Insured Certificates, the Partnership does not have the
ability or intent, at this time, to hold these investments to maturity.
Consequently, the General Partner believes that the Partnership's investments in
GNMA Mortgage-Backed Securities and FHA-Insured Certificates should be included
in the Available for Sale category. Although the Partnership's investments in
GNMA Mortgage-Backed Securities and FHA-Insured Certificates are classified as
Available for Sale for financial statement purposes, the General Partner does
not intend to voluntarily sell these assets other than those which may be sold
as a result of a default.
In connection with this classification, as of December 31, 1999 and 1998,
the Partnership's investments in GNMA Mortgage-Backed Securities and FHA-Insured
Certificates are recorded at fair value, with the net unrealized gains and
losses on these assets reported as other comprehensive income and as a separate
component of partners' equity. Subsequent increases or decreases in the fair
value of GNMA Mortgage-Backed Securities and FHA-Insured Certificates,
classified as Available for Sale, will be included as a separate component of
partners' equity. Realized gains and losses on GNMA Mortgage-Backed Securities
and FHA-Insured Certificates, classified as Available for Sale, will continue to
be reported in earnings. The amortized cost of the investments in GNMA
Mortgage-Backed Securities and FHA-Insured Certificates in this category is
adjusted for amortization of discounts and premiums to maturity. Such
amortization is included in mortgage investment income.
Gains from dispositions of mortgage investments are recognized upon the
receipt of cash or HUD debentures.
Losses on dispositions of mortgage investments are recognized when it
becomes probable that a mortgage will be disposed of and that the disposition
will result in a loss. In the case of Insured Mortgages fully insured by HUD,
the Partnership's maximum exposure for purposes of determining the loan losses
would generally be an assignment fee charged by HUD representing approximately
1% of the unpaid principal balance of the Insured Mortgage at the date of
default, plus the unamortized balance of acquisition fees and closing costs paid
in connection with the acquisition of the Insured Mortgage and the loss of
approximately 30 days accrued interest.
Cash and Cash Equivalents
- -------------------------
Cash and cash equivalents consist of money market funds, time and demand
deposits, commercial paper, and repurchase agreements with original maturities
of three months or less.
Investment in affiliate
- -----------------------
Represents an investment in Integrated Funding, Inc. ("IFI"), an affiliate
of the Partnership. This investment is accounted for under the equity method
which results in the original invested amount being increased for the
Partnership's share of income and decreased for the Partnership's share of
losses and distributions.
Income Taxes
- ------------
No provision has been made for Federal, state or local income taxes in the
accompanying statements of income and comprehensive income since they are the
personal responsibility of the Unitholders.
Statements of Cash Flows
- ------------------------
No cash payments were made for interest expense during the years ended
December 31, 1999, 1998, and 1997. Since the statements of cash flows are
intended to reflect only cash receipt and cash payment activity, the statements
of cash flows do not reflect operating activities that affect recognized assets
and liabilities while not resulting in cash receipts or cash payments.
Provision for Loss
- ------------------
The Partnership assesses the realizability of its investments on an
investment by investment basis. As a result, the Partnership provided a reserve
of $375,000 for the year ended December 31, 1997, related to a particular
investment discussed in Note 5. No provision was made for the years ended
December 31, 1998 and 1999.
3. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following estimated fair values of the Partnership's financial
instruments are presented in accordance with generally accepted accounting
principles which define fair value as the amount at which a financial instrument
could be exchanged in a current transaction between willing parties, other than
in a forced or liquidation sale. These estimated fair values, however, do not
represent the liquidation value or the market value of the Partnership.
<TABLE>
<CAPTION>
As of December 31, 1999 As of December 31, 1998
Amortized Fair Amortized Fair
Cost Value Cost Value
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Investment in FHA-Insured
Certificates and GNMA
Mortgage-Backed Securities:
Originated Insured Mortgages $ 55,763,736 $ 54,329,225 $ 65,698,059 $ 67,018,830
Acquired Insured Mortgages 7,863,659 8,452,851 33,737,306 32,531,218
------------ ------------ ------------ ------------
$ 63,627,395 $ 62,782,076 $ 99,435,365 $ 99,550,048
============ ============ ============ ============
Investment in FHA-Insured Loans:
Acquired Insured Mortgages $ 5,676,336 $ 5,169,038 $ 5,721,754 $ 5,725,377
Originated Insured Mortgage 461,081 459,177 1,055,778 1,061,917
------------ ------------- ------------ ------------
$ 6,137,417 $ 5,628,215 $ 6,777,532 $ 6,787,294
============ ============= ============ ============
Cash and cash equivalents $ 9,412,244 $ 9,412,244 $ 5,524,324 $ 5,524,324
Accrued interest receivable $ 466,974 $ 466,974 $ 670,406 $ 670,406
</TABLE>
The following methods and assumptions were used to estimate the fair value
of each class of financial instrument:
Investment in FHA-Insured Certificates, GNMA Mortgage-Backed Securities
and FHA-Insured Loans
- -----------------------------------------------------------------------
The fair value of the fully insured FHA-Insured Certificates, GNMA
Mortgage-Backed Securities and FHA-Insured Loans is based on quoted market
prices from an investment banking institution which trades these instruments as
part of its day-to-day activities. In order to determine the fair value of the
coinsured FHA-Insured Certificates, the Partnership valued the coinsured
FHA-Insured Certificates as though they were fully insured (in the same manner
fully insured FHA-Insured Certificates were valued). From this amount, the
Partnership deducted a discount factor from the face value of the loan. This
discount factor is based on the Partnership's historical analysis of the
difference in fair value between coinsured FHA-Insured Certificates and fully
insured FHA-Insured Certificates.
Cash and cash equivalents and accrued interest receivable
- ---------------------------------------------------------
The carrying amount approximates fair value because of the short maturity
of these instruments.
4. COMPREHENSIVE INCOME
Comprehensive Income includes net earnings as currently reported by the
Partnership adjusted for other comprehensive income. Other comprehensive income
for the Partnership is changes in unrealized gains and losses related to the
Partnership's mortgages accounted for as available for sale. The table below
breaks out other comprehensive income for the periods presented into the
following two categories: (1) the change to unrealized gains and losses that
relate to mortgages which were disposed of during the period with the resulting
realized gain or loss reflected in net earnings (reclassification adjustments)
and (2) the change in the unrealized gain or loss related to those investments
that were not disposed of during the period.
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Reclassification adjustment for losses
included in net income $ 1,577,427 $ 146,033 $ --
Unrealized holding (losses) gains arising during
the period (2,537,430) (1,691,185) 1,801,409
------------ ------------ ------------
Net adjustment to unrealized (losses) gains on mortgages $ (960,003) $ (1,545,152) $ 1,801,409
============ ============ ============
</TABLE>
5. INVESTMENT IN FHA-INSURED CERTIFICATES AND GNMA MORTGAGE-BACKED SECURITIES
The following is a discussion of the Partnership's insured mortgage
investments, along with the risks related to each type of investment:
Fully Insured Originated Insured Mortgages and Acquired Insured Mortgages
- -------------------------------------------------------------------------
Listed below is the Partnership's aggregate investment in Fully Insured
Mortgages as of December 31, 1999 and 1998:
<TABLE>
<CAPTION> December 31,
1999 1998
<S> <C> <C>
Number of:
GNMA Mortgage-Backed Securities(1)(2)(3) 20 22
FHA-Insured Certificates(1)(4) 2 3
Amortized Cost $ 55,763,736 $ 65,698,059
Face Value 55,736,170 65,930,408
Fair Value 54,329,225 67,018,830
(1) As of March 6, 2000, all of the Partnership's fully insured mortgage investments are current with respect to the payment of
principal and interest.
(2) In April 1999, the mortgage on Seven Springs Apartments was prepaid. The Partnership received net proceeds of
approximately $4.9 million and recognized a gain of approximately $436,000 for the year ended December 31, 1999. A
distribution of approximately $0.53 per Unit related to the prepayment of this mortgage was declared in May 199 and was
paid to Unitholders in August 1999.
(3) In October 1999, the mortgage on Oak Grove Apartments was prepaid. The Partnership received net proceeds of approximately
$580,000 and recognized a gain of approximately $32,000 for the year ended December 31, 1999. A distribution of $0.06 per
Unit related to this prepayment was declared in November 1999 and paid to Unitholders in February 2000.
(4) In November 1999, the mortgage on Heather Ridge Apartments was prepaid. The Partnership received net proceeds of
approximately $4.5 million and recognized a gain of approximately $164,000 for the year ended December 31, 1999. A
distribution of $0.49 per Unit related to this prepayment was declared in November 1999 and paid to Unitholders in February
2000.
</TABLE>
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 December 31, 1999, the Partnership had received
approximately $10.2 million on 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 December 31, 1999, is sufficient to provide for amounts that may not be
recovered from the servicer.
Coinsured FHA-Insured Certificates
- ----------------------------------
Under the HUD coinsurance program, both HUD and the coinsurance lender are
responsible for paying a portion of the insurance benefits if a mortgagor
defaults and the sale of the development collateralizing the mortgage produces
insufficient net proceeds to repay the mortgage obligation. In such cases, the
coinsurance lender will be liable to the Partnership for the first part of such
loss in an amount up to 5% of the outstanding principal balance of the mortgage
as of the date foreclosure proceedings are instituted or the deed is acquired in
lieu of foreclosure. For any loss greater than 5% of the outstanding principal
balance, the responsibility for paying the insurance benefits will be borne on a
pro-rata basis, 85% by HUD and 15% by the coinsurance lender.
While the Partnership is due payment of all amounts owed under the
mortgage, the coinsurance lender is responsible for the timely payment of
principal and interest to the Partnership. The coinsurance lender is prohibited
from entering into any workout arrangement with the borrower without the
Partnership's consent and must file a claim for coinsurance benefits with HUD,
upon default, if the Partnership so directs. As an ongoing HUD-approved
coinsurance lender, and under the terms of the participation documents, the
coinsurance lender is required to satisfy certain minimum net worth requirements
as set forth by HUD. However, it is possible that the coinsurance lender's
potential liability for loss on these developments, and others, could exceed its
HUD-required minimum net worth. In such case, the Partnership would bear the
risk of loss if the coinsurance lenders were unable to meet their coinsurance
obligations. In addition, HUD's obligation for the payment of its share of the
loss could be diminished under certain conditions, such as the lender not
adequately pursuing regulatory violations of the borrower or the failure to
comply with other terms of the mortgage. However, the General Partner is not
aware of any conditions or actions that would result in HUD diminishing its
insurance coverage.
As of December 31, 1999 and 1998, the Partnership held investments in one
and three coinsured FHA-Insured Certificates secured by coinsured mortgages,
respectively. 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 December 31, 1999 and 1998, the remaining one
FHA-Insured Certificate is coinsured by IFI, an affiliate of the Partnership.
The following is a discussion of actual and potential performance problems with
respect to the Partnership's coinsured mortgage investments.
Coinsured by affiliate
- ----------------------
As of December 31, 1999 and 1998, the Partnership held investments in one
and two coinsured FHA-Insured Certificates secured by coinsured mortgages,
respectively, where the coinsurance lender is IFI. These investments were made
on behalf of the Partnership by the former managing general partner. As
structured by the former managing general partner, with respect to these
mortgages, the Partnership bears the risk of loss upon default for IFI's portion
of the coinsurance loss on these mortgage investments.
<TABLE>
<CAPTION>
December 31, 1999 December 31, 1998
Amortized Face Fair Amortized Face Fair
Cost Value Mkt. Value Cost Value Mkt. Value
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Summerwind Apts. - Phase
II(1)(3) $ 7,863,659 $ 9,231,460 $ 8,452,851 $ 7,913,874 $ 9,307,962 $ 8,638,778
The Breakers at Golf Mill (2)(3) -- -- -- 22,113,145 22,113,146 20,470,263
----------- ----------- ----------- ---------- ---------- ----------
$ 7,863,659 $ 9,231,460 $ 8,452,851 $30,027,019 $31,421,108 $29,109,041
=========== =========== =========== =========== =========== ===========
(1) As of March 6, 1999, the mortgagor was current with respect to payment of principal and interest on this mortgage.
(2) In May 1999, the mortgage on The Breakers at Golf Mill was prepaid. The Partnership received net proceeds of approximately
$22.5 million and recognized a gain of approximately $441,000 for the year ended December 31, 1999. A distribution of
approximately $2.43 per Unit related to the prepayment of this mortgage was declared in June 1999 and was paid to
Unitholders in August 1999.
(3) There were no loan losses recognized for the years ended 1999 and 1998. The cumulative loan losses recognized in prior
years were $980,000 for the Breakers at Golf Mill, and $1,511,743 for Summerwind Apartments - Phase II.
</TABLE>
Coinsured by third party
- ------------------------
Listed below is the Originated Insured Mortgage coinsured by an
unaffiliated third party coinsurance lender, The Patrician Mortgage Company
("Patrician"), under the HUD coinsurance program.
<TABLE>
<CAPTION> December 31,
1999 1998
----------- -----------
<S> <C> <C>
Amortized Cost $ -- $ 3,710,287
Face Value -- 3,710,287
Fair Value -- 3,422,177
</TABLE>
On October 14, 1993, Patrician filed a foreclosure action on the property
underlying this coinsured mortgage, St. Charles Place-Phase II. 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. 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
December 31, 1999, is approximately $2 million. 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. 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. The Partnership does not expect to recognize a
loss related to this disposition, as it expects to recover all amounts due from
Patrician.
The General Partner intends to continue to oversee the Partnership's
interest in this liability to ensure that Patrician meets its coinsurance
obligation. 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.
6. INVESTMENT IN FHA-INSURED LOANS
Listed below is the Partnership's aggregate investment in fully insured
Originated Insured Mortgages as of December 31, 1999 and 1998:
December 31,
1999 1998
------------ ------------
Number of Mortgages(1) 1 1
Amortized Cost $ 5,676,336 $ 5,721,754
Face Value 5,676,336 5,721,754
Fair Value 5,169,038 5,725,377
(1) As of March 6, 2000, the Partnership's FHA-Insured Loan was current with
respect to payment of principal and interest.
Listed below is the Partnership's aggregate investment in fully insured
Acquired Insured Mortgages as of December 31, 1999 and 1998:
December 31,
1999 1998
------------ ------------
Number of Mortgages(1)(2) 1 2
Amortized Cost $ 461,081 $ 1,055,778
Face Value 460,441 1,053,273
Fair Value 459,177 1,061,917
(1) As of March 6, 2000, the Partnership's fully insured acquired insured Loan
was current with respect to the payment of principal and interest.
(2) In May 1999, the mortgage on Kon Tiki Apartments was prepaid. The
Partnership received net proceeds of approximately $554,000 and recognized
a loss of approximately $400 for the year ended December 31, 1999. A
distribution of approximately $0.06 per Unit related to the prepayment of
this mortgage was declared in June 1999 and was paid to Unitholders in
August 1999.
In addition to base interest payments from 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"). During the years ended December 31, 1999, 1998 and
1997, the Partnership received additional interest of $0, $69,820 and $134,769,
respectively, from the FHA-Insured Loans, through these Participations. These
amounts, if any, are included in mortgage investment income on the accompanying
statements of income and comprehensive income.
7. TRANSACTIONS WITH RELATED PARTIES
The General Partner, and certain affiliated entities, during the years
ended December 31, 1999, 1998 and 1997, have earned or received compensation or
payments for services from the Partnership as follows:
<TABLE>
<CAPTION>
COMPENSATION PAID OR ACCRUED TO RELATED PARTIES
-----------------------------------------------
Capacity in Which For the years ended December 31,
Name of Recipient Served/Item 1999 1998 1997
- ----------------- ---------------- ---- ---- ----
<S> <C> <C> <C> <C>
CRIIMI, Inc.(1) General Partner/Distribution $ 2,294,837 $ 1,968,300 $ 1,056,713
AIM Acquisition Advisor/Asset Management Fee 942,910 1,287,672 1,469,320
Partners, L.P.(2)
CRIIMI MAE Affiliate of General Partner/ 45,757 68,010 53,474
Management, Inc. Expense Reimbursement
(1) The General Partner, pursuant to amendments to the partnership agreement, effective September 6, 1991, 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). The Sub-advisor to the Partnership is entitled to a fee of 0.28% of
Total Invested Assets of the Advisor's Asset Management Fee. Of the amounts paid to the Advisor, CMSLP, the Sub-advisor,
earned a fee equal to $277,888, $379,506 and $433,040 for the years ended December 31, 1999, 1998 and 1997, respectively.
The limited partner of CMSLP is a wholly-owned subsidiary of CRIIMI MAE Inc., which filed for protection under Chapter 11
of the U.S. Bankruptcy Code.
</TABLE>
8. DISTRIBUTIONS TO UNITHOLDERS
The distributions paid or accrued to Unitholders on a per Unit basis for
the years ended December 31, 1999, 1998 and 1997 are as follows:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Quarter ended March 31 $ 0.61(1) $ 1.21(8)(9) $ 0.59(13)*
Quarter ended June 30, 3.26(2)(3)(4) 1.50(10)(11) 0.30
Quarter ended September 30, 0.15 1.42(12) 1.06(14)
Quarter ended December 31, 1.04(5)(6)(7) 0.21 0.38(15)(16)
------- ------- -------
$ 5.06 $ 4.34 $ 2.33
======= ======= =======
</TABLE>
The following disposition proceeds are included in the distributions
listed above:
<TABLE>
<CAPTION>
Net
Type of Distribution
Complex Name Disposition Per Unit
------------------------ ----------- --------
<S> <C> <C>
(1) Olde Mill Apartments Prepayment $ 0.37
(2) Seven Springs Apartments Prepayment 0.53
(3) Kon Tiki Apartments Prepayment 0.06
(4) The Breakers Golf Mill Prepayment 2.43
(5) Oak Grove Apartments Prepayment 0.06
(6) Heather Ridge Apartments Prepayment 0.49
(7) St. Charles Place - Phase II Sale 0.32
(8) Northpoint Apartments Prepayment 0.19
(9) Olmstead Apartments Prepayment 0.73
(10) Olde Mill Apartments Curtailment 0.08
(11) Arbor Village Prepayment 1.18
(12) Water's Edge II Apartments Prepayment 1.19
(13) Water's Edge of New Jersey Assignment * 0.27
(14) Parkside Estates Prepayment 0.76
(15) Olde Mills Apartments Curtailment 0.08
Previously Undistributed
(16) St. Charles Place - Phase II Accrued Interest 0.01
* This amount also includes approximately $0.02 per Unit representing proceeds from the mortgage dispositions not reinvested
prior to the expiration of the reinvestment period.
</TABLE>
The basis for paying distributions to Unitholders is net proceeds from
mortgage dispositions and cash flow from operations, which includes regular
interest income and principal from Insured Mortgages. Although 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 payment
receipts are temporarily invested prior to the payment of quarterly
distributions, (2) the reduction in the asset base resulting from 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.
9. INVESTMENT IN AFFILIATE, NOTES RECEIVABLE FROM AFFILIATES, DUE FROM
AFFILIATES AND NOTE PAYABLE AND DUE TO AFFILIATE
In addition to the related party transactions described in Note 7, in order
to capitalize IFI with sufficient net worth under HUD regulations, in April
1994, the Partnership transferred a GNMA Mortgage-Backed Security in the amount
of approximately $2.0 million to IFI. AIM 85 and AIM 86 each issued a demand
note payable to the Partnership and recorded an investment in IFI through AIM
Mortgage, Inc. at an amount proportionate to each entity's coinsured mortgages
for which IFI was the mortgagee of record as of April 1, 1994. In April 1997,
the GNMA mortgage-backed security, with a current balance of $1.9 million, was
reallocated between the Partnership and AIM 86 as AIM 85 no longer held any
mortgages coinsured by IFI. As a result, a new demand note payable from AIM 86
was issued and the investment in IFI was reallocated. Interest income on these
notes, which are based on an annual interest rate of 7.25% (representing the
interest rate on the GNMA Mortgage-Backed Security transferred by the
Partnership), was $47,470, $47,740 and $50,263 during the years ended December
31, 1999, 1998 and 1997, respectively, and is included in interest and other
income on the accompanying statements of income and comprehensive income.
As of December 31, 1999, the Partnership owns a 66% ownership interest in
AIM Mortgage, Inc. The remaining 34% ownership interest is held by AIM 86. AIM
Mortgage, Inc. owns all of the outstanding preferred stock and common stock of
IFI.
In connection with these transfers, the expense reimbursement agreement was
amended as of April 1, 1997, to adjust the allocation of the expense
reimbursement to the AIM Funds to an amount proportionate to each entity's
coinsured mortgage investments for which IFI was the mortgagee of record as of
April 1, 1997. The expense reimbursement, as amended, along with the
Partnership's interest income from the notes receivable, and the Partnership's
equity interest in IFI's net income or loss, substantially equals the mortgage
interest on the GNMA Mortgage-Backed Security transferred to IFI. In April 1997,
this agreement was amended to exclude AIM 85, which no longer held mortgages
coinsured by IFI.
10. 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>
11. SUMMARY OF QUARTERLY RESULTS OF OPERATIONS
(Dollars In Thousands, Except Per Unit Data)
The following is a summary of unaudited quarterly results of operations for
the years ended December 31, 1999, 1998 and 1997:
<TABLE><CAPTION>
1999
Quarter ended
March 31 June 30 September 30 December 31
-------- ------- ------------ -----------
<S> <C> <C> <C> <C>
Income $ 2,091 $ 2,004 $ 1,671 $ 1,528
Net earnings 1,657 2,550 1,398 1,448
Net gains from mortgage
dispositions -- 877 -- 195
Net earnings per
Limited Partnership Unit - Basic 0.18 0.27 0.16 0.15
</TABLE>
<TABLE><CAPTION>
1998
Quarter ended
March 31 June 30 September 30 December 31
-------- ------- ------------ -----------
<S> <C> <C> <C> <C>
Income $ 2,812 $ 2,625 $ 2,342 $ 2,219
Net earnings 3,170 1,778 2,174 2,057
Net gains (losses) from
mortgage dispositions 786 (350) 223 97
Net earnings per
Limited Partnership Unit - Basic 0.34 0.19 0.24 0.22
</TABLE>
<TABLE><CAPTION>
1997
Quarter ended
March 31 June 30 September 30 December 31
-------- ------- ------------ -----------
<S> <C> <C> <C> <C>
Income $ 3,122 $ 3,104 $ 2,982 $ 2,959
Net earnings 2,696 2,629 2,588 2,184
Net gains (losses) from mortgage
dispositions -- -- 21 (375)
Net earnings per
Limited Partnership Unit - Basic 0.29 0.28 0.28 0.24
</TABLE>
<PAGE>
AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 88
NOTES TO SCHEDULE IV - MORTGAGE LOANS ON REAL ESTATE
DECEMBER 31, 1999
<TABLE>
<CAPTION>
Interest Annual Payment
Rate on Face Net Principal and
Maturity Mortgage Value of Carrying Value Interest
Development Name/Location Date (5)(6) Mortgage (3)(8)(9)(11) (5)(6)(10)
- ------------------------- ----------- ------------ ------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
ACQUIRED INSURED MORTGAGES:
- ---------------------------
FHA-Insured Certificates
(carried at fair value)
Park Avenue Plaza, Omaha, NE 9/29 9.000% $ 1,941,988 $ 1,923,644 $ 187,923
Sylvan Manor, Silver Spring, MD 5/21 7.500% 3,023,893 2,756,093 284,523
------------- ------------
Total Investment in FHA-Insured
Certificates - Acquired Insured
Mortgages 4,965,881 4,679,737
------------- ------------
GNMA Mortgage-Backed Securities
(carried at fair value)
Beauvoir Manor Apts, Biloxi, MS 9/18 8.875% 1,203,698 1,199,768 127,640
Burlwood Apts., Portland, OR 8/15 9.000% 593,180 576,791 61,888
Collin Care Centers, Plano, TX 9/30 8.125% 1,674,664 1,625,419 144,255
Garden Terrace, Douglasville, GA 1/20 7.125% 2,587,034 2,514,140 236,477
Greenview Garden, Butler, PA 7/33 9.000% 873,213 869,181 78,282
Hewitt Gardens Apts., Wheaton, MD 10/29 8.750% 4,399,473 4,380,036 405,012
Holton Manor, Elkhorn, WI 11/21 8.250% 979,703 951,605 94,456
Lamplighter Apts., Port Arthur, TX 10/29 9.000% 2,199,393 2,189,612 207,195
Linville Manor Shelby, NC 7/31 8.750% 1,966,988 1,958,125 178,980
Lioncrest Towers, Richton Park, IL 10/28 7.000% 6,343,859 6,159,086 497,092
Lorenzo Carolina Apts, Tampa, FL 6/26 8.250% 1,000,083 970,926 89,266
Oaklawn Apts., Boise, ID 8/24 9.000% 468,692 455,051 40,342
Oakwood Gardens, San Jose, CA 10/23 7.750% 1,120,197 1,087,916 97,665
Orchard Creek Apts., Farmington Hills, MI 1/30 8.625% 1,263,741 1,258,159 113,194
San Jose South, San Jose, CA 10/23 7.750% 8,010,336 7,779,499 698,388
Silver Lake Plaza Apts, Los Angeles, CA 11/35 7.950% 5,269,199 5,113,212 431,705
Stoney Creek, Washington Township, MI 2/29 7.500% 5,285,191 5,130,719 427,305
Tehama Estates, Sacramento, CA 7/29 8.750% 1,330,968 1,325,106 122,752
Westview Terrace Apts., Tacoma, WA 4/30 8.550% 1,129,292 1,124,299 101,094
Woodcrest Townhomes, Chaska, MN 8/31 8.375% 3,071,385 2,980,838 269,378
Total Investment in GNMA Mortgage-
Backed Securities, carried at fair value 50,770,289 49,649,488
------------ -------------
Total Investment in Acquired Insured
Mortgages, carried at fair value 55,736,170 54,329,225
------------ -------------
ORIGINATED INSURED MORTGAGES:
- -----------------------------
Coinsured Mortgages
- -------------------
FHA-Insured Certificates
(carried at fair value)
Summerwind Apartments-Phase II, Naples, FL(1)(4)(7) 6/30 8.500% $ 9,231,460 $ 8,452,851 $ 865,175
Total Investment in coinsured
FHA-Insured Certificates,
carried at fair value 9,231,460 8,452,851
------------ ------------
Total Investment in FHA-Insured Certificates
and GNMA Mortgage-Backed Securities,
carried at fair value 64,967,630 62,782,076
------------ ------------
ACQUIRED INSURED MORTGAGES:
- ---------------------------
FHA-Insured Loans
(carried at amortized cost)(2)
Kingsway Apts.
Monroe, Louisiana 8/07 10.000% $ 460,441 $ 461,081(2) $ 86,862
Total Investment in FHA-Insured
Loans - Acquired Insured Mortgages, ------------ ------------
carried at amortized cost 460,441 461,081
------------ ------------
ORIGINATED INSURED MORTGAGES:
- -----------------------------
Fully Insured Mortgages
- -----------------------
FHA-Insured Loans
(carried at amortized cost)(2)
The Turn at Gresham
Gresham, Oregon(1) 8/29 8.000% $ 5,676,336 $ 5,676,336(2) $ 501,516
Total Investment in FHA-Insured
Loans - Originated Insured
Mortgages, carried at amortized cost 5,676,336 5,676,336
------------ ------------
Total Investment in FHA-Insured Loans 6,136,777 6,137,417
------------ ------------
TOTAL INVESTMENT IN INSURED MORTGAGES $ 71,104,407 $ 68,919,493
============ =============
</TABLE>
(1) Two Insured Mortgages, Summerwind Apartments and The Turn at Gresham,
possess a special assignment option, pursuant to certain mortgage
documents, which allows the Partnership, anytime after a certain date, to
require payment of the unpaid principal balance of the mortgages. At such
time, the borrowers must make payment to the Partnership or the Partnership
may cancel the FHA insurance and institute foreclosure proceedings.
(2) Inclusive of closing costs and acquisition fees.
(3) Prepayment of these Insured Mortgages would be based upon the unpaid
principal balance at the time of prepayment.
(4) In connection with Summerwind Apartments, the Partnership has recorded a
cumulative loan loss of $1,511,743 in prior years, no loan losses were
recognized for the years ended 1999 and 1998.
(5) This represents the base interest rate during the permanent phase of this
Insured Mortgage loan. Additional interest measured as a percentage of
surplus cash (as defined in the Participation agreements) and a percentage
of the proceeds from the sale or refinancing of the development (as defined
in the Participation agreements) will also be due. During the years ended
1999, 1998 and 1997, additional interest was recognized in the amount of
$0, $69,820 and $134,769, respectively. These amounts, if any, are included
in mortgage investment income on the accompanying statements of income and
comprehensive income.
(6) In addition, the servicer or the sub-servicer of the mortgage, primarily
unaffiliated third parties, is entitled to receive compensation for certain
services rendered.
(7) This mortgage is insured under the HUD coinsurance program. IFI is the
HUD-approved coinsurance lender and the Partnership bears the risk of any
coinsurance loss, as previously discussed.
(8) A reconciliation of the carrying value of the Partnership's investment in
Insured Mortgages, for the years ended December 31, 1999 and 1998, is as
follows:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Beginning balance $ 106,327,580 $ 142,890,313
Principal receipts on mortgages (847,024) (1,928,044)
Proceeds from mortgages assigned
or sold (35,966,462) (33,845,966)
Net gains on mortgage
dispositions 1,072,167 756,429
Coinsurance claims due from HUD (706,765) --
Net unrealized (losses) on investment in FHA-Insured
Certificates and GNMA Mortgage-Backed Securities (960,003) (1,545,152)
------------ ------------
Ending balance $ 68,919,493 $106,327,580
============ ============
</TABLE>
(9) The mortgages underlying the Partnership's investments in FHA-Insured
Certificates, GNMA Mortgage-Backed Securities and FHA-Insured Loans are
primarily non-recourse first liens on multifamily residential developments
or retirement homes.
(10) Principal and interest are payable at relatively level amounts over the
life of the Insured Mortgages.
(11) As of December 31, 1999 and 1998, the tax basis of the Insured Mortgages
was approximately $71 million and $109 million, respectively.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED
FROM THE ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED
DECEMBER 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH ANNUAL REPORT ON FORM 10-K.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 9,412
<SECURITIES> 62,782
<RECEIVABLES> 11,261
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 83,455
<CURRENT-LIABILITIES> 9,753
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 73,702
<TOTAL-LIABILITY-AND-EQUITY> 83,455
<SALES> 0
<TOTAL-REVENUES> 8,366
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,313
<LOSS-PROVISION> 350
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 7,053
<INCOME-TAX> 0
<INCOME-CONTINUING> 7,053
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,053
<EPS-BASIC> .76
<EPS-DILUTED> 0
</TABLE>
