SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended:
JUNE 30, 1996
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to
Commission File Number 33-22805
MASTER MORTGAGE INVESTMENT FUND, INC.
(Exact name of registrant as specified in its charter)
Delaware 48-1056392
(State of jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
712 Broadway, Suite 700
Kansas City, Missouri 64105
(Address of principal offices) (Zip Code)
Registrant's telephone number, including area code: (816) 474-9333
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the preceding 12 months (or 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
As of June 30, 1996, the Registrant had 2,491.622 shares of preferred
stock and 3,628,986 shares of common stock outstanding. The aggregate
book value of all shares of the Registrant, based on the June 30, 1996
unaudited statements was $6,476,795.00.
MASTER MORTGAGE INVESTMENT FUND, INC.
INDEX
Part I. Financial Statements
Item 1: Financial Statements
A. Balance Sheets as of June 30, 1996
and December 31, 1995. 3
B. Statements of Income for the three
months ended June 30, 1996 and 1995. 4
C. Statement of Income for the six
months ended June 30, 1996 and 1995. 5
D. Statements of Changes in
Shareholders' Equity for the six months
ended June 30, 1996 and 1995. 6
E. Statements of Cash Flows for the six
months ended June 30, 1996 and 1995. 7
Notes to Unaudited Financial Statements 8-15
Item 2: Management's Discussion and
Analysis of Condition and Results of
Operations 16-20
Part II. Other Information 21
All financial statements, except the
balance sheet as of December 31, are
unaudited.
<TABLE>
Master Mortgage Investment Fund, Inc.
Balance Sheets
June 30, 1996 and December 31, 1995
<CAPTION>
June 30, 1996 December 31, 1995
(Unaudited) (Audited)
<S> <C> <C>
ASSETS
Mortgage Notes Receivable 16,002,315 15,962,800
Foreclosed Property Held for Investment 1,000,000 1,000,000
__________ __________
Total Mortgage Notes Receivable and Foreclosed Property
held for Investment 17,002,315 16,962,800
Allowance for Losses (9,302,779) (10,780,742)
___________ ___________
Net Mortgage Notes Receivable and Foreclosed Property
held for Investment 7,699,536 6,182,058
Investment in Real Estate Partnerships 334,609 307,353
Interest Receivable 400,000 240,000
Cash 338,961 687,234
Restricted Cash 4,462 0
Accounts Receivable 239,044 119,360
Property and Equipment,
at cost less accumulated depreciation 21,805,291 21,376,772
Goodwill 768,880 790,130
Other Assets 455,885 293,419
__________ __________
TOTAL ASSETS 32,046,668 29,996,326
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Notes Payable 19,465,393 19,160,892
Notes Payable, Related Party 1,162,959 1,162,959
Interest Payable 53,614 23,012
Other Liabilities 2,183,911 2,316,604
Due to Advisory Company and Affiliate 383,979 383,979
Liabilities Subject to Settlement
under Reorganization Procedings 107,655 106,091
_________ _________
TOTAL LIABILITIES 23,357,511 23,153,537
__________ __________
Minority Interest in Subsidiary 1,623,328 1,625,254
_________ _________
Shareholders' Equity
Convertible preferred stock, $.01 par, liquidation
preference up to 5% of the Fund's net assets;
authorized 2,500,000 shares; issued 2,491,622 shares 24,916 24,916
Common Stock , $.01 par; authorized 45,000,000 shares;
issued 3,628,986 shares 36,289 13,086
Capital in excess of par 36,163,592 35,667,043
Retained (Deficit) Earnings (29,158,968) (30,487,510)
____________ ____________
TOTAL SHAREHOLDERS' EQUITY 7,065,829 5,217,535
__________ __________
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY 32,046,668 29,996,326
========== ==========
</TABLE>
<TABLE>
Master Mortgage Investment Fund, Inc.
Statement of Income
Three Months End
June 30, 1996 and 1995
<CAPTION>
Three months ended
June 30
1996 1995
<S> <C> <C>
REVENUES:
Rental income 538,843 872,553
Hotel Income 594,584 721,603
Interest and fees on mortgage loans 80,371 91,899
Other income (loss) (44,659) (94,280)
_________ _________
TOTAL REVENUES 1,169,139 1,591,775
_________ _________
EXPENSES:
Loan Servicing fees 13,488 13,235
Property Management Fees 8,320 13,049
Rental operating expenses 329,710 720,203
Hotel operating expenses 367,765 655,552
Provision for loan losses (recoveries) (704,422) (1,566,870)
General and administrative 37,712 49,538
Legal and accounting 59,681 145,104
Payroll and employee benefits 107,320 104,790
Interest expense 392,334 358,556
Depreciation and amortization 185,838 167,771
_______ _______
TOTAL EXPENSES 797,746 660,928
_______ _______
MINORITY INTEREST IN SUBS INCOME 6,355 14,345
NET INCOME (LOSS) 365,038 916,502
======= =======
Earnings (loss) per common and common
equivalent share (non-diluted) 0.06 0.24
==== ====
</TABLE>
<TABLE>
Master Mortgage Investment Fund, Inc.
Statement of Income
Six Months Ended
June 30, 1996 and 1995
<CAPTION>
Six months ended
June 30
1996 1995
<S> <C> <C>
REVENUES:
Rental income 1,090,861 1,120,984
Hotel Income 1,105,268 1,175,370
Interest and fees on mortgage loans 150,905 250,397
Other income (loss) (32,184) (60,830)
________ ________
TOTAL REVENUES 2,314,850 2,485,921
========= =========
EXPENSES:
Loan Servicing fees 27,705 48,893
Property Management Fees 17,820 22,397
Rental operating expenses 650,961 852,822
Hotel operating expenses 706,058 1,042,869
Provision for loan losses (recoveries) (1,953,340) (1,566,870)
General and administrative 67,366 88,629
Legal and accounting 112,690 337,847
Payroll and employee benefits 225,270 229,780
Interest expense 796,621 794,831
Depreciation and amortization 333,230 325,061
Partnership Expense 250
_______ ________
TOTAL EXPENSES 984,381 2,176,509
_______ _________
MINORITY INTEREST IN SUBS INCOME 1,926 26,875
NET INCOME (LOSS) 1,328,543 282,537
========= =======
Earnings (loss) per common and common
equivalent share (non-diluted) 0.22 0.07
==== ====
</TABLE>
<TABLE>
Statement of Changes in Shareholders' Equity
Three Months Ended in June 30, 1996 and 1995
<CAPTION>
Capital in Undistributed Total
Preferred Stock Common Stock excess of earnings shareholders'
Shares Amount Shares Amount par value (deficit) equity
<S> <C> <C> <C> <C> <C> <C> <C>
Balances, 12-31-94 2,491,622 $24,916 1,308,669 $13,086 $35,667,043 ($32,370,908) $3,334,137
Net income for the period 282,537 282,537
_________ _______ _________ _______ ___________ _____________ __________
Balances, 6-30-95 2,491,622 24,916 1,308,669 13,086 35,667,043 (32,088,371) 3,616,674
========= ====== ========= ====== =========== ============= ===========
Balances, 12-31-95 2,491,622 $24,916 1,308,669 $13,086 $35,667,043 ($30,487,510) $5,217,535
Net income for the period $1,328,543 $1,328,543
_________ _______ _________ _______ ___________ ___________ ___________
Balances, 6-30-96 2,491,622 24,916 1,308,669 13,086 35,667,043 (29,158,967) 6,546,078
========= ====== ========= ====== =========== ============ ===========
</TABLE>
<TABLE>
Master Mortgage Investment Fund, Inc.
Statement of Cash Flows
Six Months Ended June 30, 1996 and 1995
<CAPTION>
Six months ended
June 30
1996 1995
<S> <C> <C>
Cash flows from operating activities
Net income (loss) 1,259,260 282,538
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities
Minority Interest (1,926) (26,964)
Decrease (increase) in operating assets
Restricted Cash (4,462)
Interest receivable (160,000) (170,850)
Investment in subsidiaries 43,768
Accounts receivable (119,684) 502,983
Prepaid expenses (47,500) (15,949)
All other, net (75,332) 3,626
Increase (decrease) in operating liabilities
Due to advisory company and affiliate 17,925 (30,853)
Accounts payable and accrued liabilities 345,422
Other liabilities (150,618) 631,230
Prepetition liabilities 1,564 (132,087)
Interest payable 30,602 82,620
_______ _________
Net cash provided by (used in) operating activities 793,597 1,471,716
_______ _________
Cash flows from investing activities
Increase mortgage notes receivable (39,515) (227,739)
Decrease in foreclosed investment property (1,500,000)
Decrease in partnership real estate (110,658) (43,332)
Decrease in allowance for losses (1,477,963) (764,500)
Increase in fixed assets (428,519) (112,575)
Decrease in goodwill 21,250 21,250
All other 79,565
__________ __________
Net cash provided by (used in) investing activities (2,035,405) (2,547,331)
__________ __________
Cash flows from financing activities
Increase (Decrease) in notes payable - related 0 10,624,424
Increase in notes payable 893,535 (10,252,492)
________ __________
Net cash provided by (used in) financing activities 893,535 371,932
_______ _______
Net increase (decrease) in cash (348,273) (703,683)
Cash beginning of period 687,234 1,176,431
Cash, end of period 338,961 472,748
</TABLE>
MASTER MORTGAGE INVESTMENT FUND, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1995
(Unaudited)
1. Unaudited Financial Statements:
The accompanying unaudited financial statements should be read in conjunction
with the Company's annual report on Form 10-K for the year ended December 31,
1995 filed with the Securities and Exchange Commission. The statements
herein have been prepared in accordance with the instructions to the
Securities and Exchange Commission Form 10-Q and do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements.
In the opinion of management, the unaudited financial statements contain all
adjustments necessary to present fairly and accurately the financial position
as of June 30, 1996 and 1995, and the results of operations and cash flows
for the six months then ended.
Certain amounts as of June 30, 1995 have been reclassified to conform with
the June 30, 1996 presentation.
MASTER MORTGAGE INVESTMENT FUND, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1995
(Unaudited)
2. Mortgage notes receivable
June 30, December 31,
1996 1995
MORTGAGE NOTES RECEIVABLE
Earning None None
Partially-earning $ 6,476,200 $ 3,000,000
Non-earning $ 9,526,115 $12,962,800
__________ ___________
TOTAL MORTGAGE NOTES
RECEIVABLE $16,002,315 $15,962,800
=========== ===========
Mortgage notes receivable are collateralized by real estate, assignment
of rents, certain future earnings of borrowers, other borrower assets,
investor notes and borrower personal guarantees. The collateralized real
estate is located at various geographical locations, with a concentration
in the downtown district of Kansas City, Missouri. A substantial portion
of the Company's debtors' ability to honor their contracts is dependent upon
the recovery of the real estate economy.
Due to the uncertainty of future collections and possible foreclosures,
management is unable to estimate the scheduled maturities of mortgage notes
receivable over the next five years and thereafter.
3. Foreclosed property held for investment
June 30, December 31,
1996 1995
Land in New Mexico $1,000,000 $1,000,000
__________ __________
Total foreclosed property
held for investment $1,000,000 $1,000,000
========== ==========
4. Investment in real estate partnerships
Investment in real estate partnerships consists of the following:
Ownership Ownership % Ownership %
Partnership Name Interest at 6/30/96 at 12/31/95
OPP IX, Limited Partnership Limited 24.9% 24.9%
OPP X, Limited Partnership Limited 2.4% 2.4%
Historic Suites of America - KC Limited 19.8% 19.8%
River Market Venture I, L.P. General 80.0% 80.0%
In March of 1994, the Company, through River Market Venture, Inc. acquired
a 1% general partnership interest in River Market Venture I, L.P. and 100%
of the common stock of a related corporation, Old Town Redevelopment
Corporation. The partnership and corporation own real estate and
development rights in the River Market area of Kansas City, Missouri. The
Company acquired an additional 79% general partner interest in May, 1995.
Commencing June 1995, the Company consolidated its 80% interest in the
general partnership into their financial statements. The business
combination has been accounted for under the purchase method of accounting.
Pro forma financial information has not been presented because the Company's
investment in the subsidiary does not result in a significant business
combination based on materiality.
5. Property and equipment
June 30, December 31,
1996 1995
Cost
Land and land improvements $ 4,115,997 $ 3,563,643
Building and building
improvements 17,696,060 17,455,694
Furniture 1,503,781 1,544,226
__________ __________
Total Cost $ 23,315,838 $ 22,563,563
Accumulated depreciation ( 1,510,547) (1,186,791)
Net property, plant and __________ __________
equipment $21,805,291 $21,376,772
=========== ===========
The aggregate depreciation charged to operations for June 30, 1996 and the
year ended December 31, 1995, was $323,756 and $743,039, respectively.
6. Notes Payable 6-30-96 12-31-95
Note payable - F.D.I.C. (purchased
by First Bank of Missouri) due in monthly
payments, including interest at 8%, based
upon a 20 year amortization with all unpaid
interest and principle due April, 1999.
Collateralized by specific notes receivable
and foreclosed property. The Company was
in default on this loan at June 30, 1996 and
Management is finalizing the restructure of
the terms of this note. $1,950,423 $2,019,828
Note payable - F.D.I.C. due in
monthly payments of $42,000 until maturity
May 2000. Interest is based on the prime
interest rate plus 2%. The note is
collateralized by land and building located in
the River Market area of Kansas City,
Missouri. $4,100,180 $4,168,500
Note payable - BRT due September, 2000,
payable in 60 monthly payments of $7,333
with the remaining unpaid principal due at
maturity. The original note is for $600,000
and is non-interest bearing. Interest has been
imputed at the rate of 9%. The note is
unsecured. $270,931 $371,103
Convertible Subordinated Debentures issued
January, 1994. The securities were issued in
the initial aggregate principal amount of
$9,127,752, and bear interest at the rate of
6% per annum. Interest accrues
semiannually on January 1 and July 1 of
each year. The securities mature December,
2003. At any time prior to maturity, the
securities are convertible into shares of
common stock of the Company, unless the
securities are called for redemption. The
number of shares issuable upon conversion
is based on the Company's book value of
$.224/share as of the December 31, 1993.
As of June 30, 1996 $519,751 of
Debentures had been converted into
2,320,317 shares of common stock.
6-30-96 12-31-94
The securities are subordinate and junior in
right of payment to all senior indebtedness of
the Company (which includes all
collateralized debt of the Company). Senior
Indebtedness is to be paid in full before
holders of the Subordinated Debentures are
to be paid any principal or interest. $8,975,896 $9,298,938
In the Company's reorganization plan, and as
certain individuals elected an Alternative
Treatment Plan, whereby holders of certain
debentures elected the option to receive a
direct loan participation interest in a
collateral pool loan. The loan is to be
collateralized by Ramada Inn - Phoenix, a
161 room hotel, located in Phoenix, Arizona.
Upon closing, the loan is to be repaid in
quarterly installments including interest at
9% based upon a 20 year amortization with
all remaining interest and principal due
December, 2004. During 1995 and 1996
interest has been paid on a quarterly basis. $2,848,830 $2,165,809
Note payable due April, 2015, collateralized
by hotel property in Euless, Texas. The note
is payable in monthly installments of
$10,720. Interest is at 9.5%, adjusted every
five years to the prime rate plus 3.5%. $1,126,184 $1,136,714
Note payable due in monthly payments of
$2,075.84 with a sixty month amortization
all unpaid interest and principle due May 1,
1998. $ 98,136 $ ---
Note payable due in monthly payments
collateralized by a note receivable with
identical terms related to Tenant
improvements on a project in which the
Company is a participating lender. Payments
received under the note receivable are paid in
identical amount under this note payable. $94,813 $ ---
__________ __________
Total Notes Payable $19,465,393 $19,160,892
=========== ==========
The Company acquired $93,787 and $661,130 of convertible subordinated
debentures during the years ended December 31, 1995 and 1994, respectively,
as required by the Plan of Reorganization under the Guymon settlement and the
hardship provision of the debenture's agreement. These acquired debentures
were not retired and have been netted against the total debentures outstanding
to arrive at the $8,975,896 and $9,298,938 shown outstanding at June 30, 1996
and December 31, 1995.
After December 31, 1994, the electing alternative treatment plan participants
agreed to expand the collateral pool to include additional future investments
of the Company.
7. Notes payable, related party 6-30-96 12-31-95
The following notes payable consist of
advances from the 25% minority partner
of Euless, Texas 1192 General
Partnership, and must be repaid before
the Company can receive any cash
distributions from the Partnership:
10% note payable due July 31, 1998 with
interest only payments monthly based on
the cash flow of the property.
Collateralized by the property and
equipment of Euless, Texas 1192
General Partnership. $600,000 $600,000
10% note payable due on demand with
interest only payments monthly based on
the cash flow of the property.
Collateralized by the property and
equipment of Euless, Texas 1192
General Partnership. $123,843 $123,843
Unsecured note payable relating to
Euless, Texas hotel due July 31, 1998,
with interest at the prime interest rate
plus 3%. Interest is payable monthly. $439,117 $439,116
__________ _________
Total notes payable, related party $1,162,960 $1,162,959
========== ==========
8. Other liabilities
Other liabilities consisted of the following:
6-30-96 12-31-95
Accounts payable $168,926 $69,992
Accrued, current and delinquent real
estate taxes $1,519,904 $1,533,496
Other accrued expenses $369,500 $548,507
Other liabilities $125,581 $164,609
_________ _________
TOTAL $2,183,911 $2,316,604
========== ==========
The Company has tentative agreements with the various taxing
authorities for the repayment of delinquent real estate taxes.
Part of the accrued taxes are subject to the terms of the
reorganization agreement, a portion of the real estate taxes are due
to be paid in 1998 and management is currently negotiating final
repayment terms on the balance. If the Company fails to pay the
delinquent taxes, the underlying real estate could be foreclosed
by the taxing authorities.
9. Pension Plan
During 1994, the Company established a defined contribution pension
plan covering all of its employees. All contributions to the plan
are made by the Company, no contributions are required from the
employees. Employees vest in the plan over a five year period.
Total pension expense for the June 30, 1996 and year ended December
31, 1995 was $20,790 and $41,576.
MASTER MORTGAGE INVESTMENT FUND, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Business Environment
During 1990 through most of 1992 the United States, in general,
suffered through a recessionary cycle. The markets served by the
Company were affected to varying degrees. The national economic
environment continued to affect the Company's activities through
a reduction in demand for rental space and a lack of activity in
the real estate market. In particular commercial, retail, and
development activities continued to be negatively impacted during
1991-1993.
The result of over-building in certain markets, the lack of
transactions in real estate and the general decline in the economy
led to increased vacancies, declining or no growth rents and a
substantial number of defaults in mortgage notes. The market
conditions and activities of regulatory agencies created a decline
in real estate loans available. Due to the basic nature of the
Company's short-term lending policies, the national credit crisis
and the inability of borrowers to find takeout lenders were to be
the most significant factors affecting the performance of the Company.
The real estate economy, both nationally and the markets served by the
Company, improved during 1994 and 1995 and have continued to improve
in 1996. Residential vacancies have decreased and office market
leasing has improved. The hotel industry had a profitable year in
1995 and expectations for 1996 are for continued profitability.
In general, these factors have had a positive impact on the Company's
financial results.
Due to the number of assets taken through foreclosure and loan
workouts, the operating monthly cash flow of the Company has continued
to be adversely affected. The continuation of substantial non-earning
loans at June 30, 1996 and in 1995 has negatively impacted the
Company's cash flow. Although the Company has decreased its
non-earning loans through foreclosures and loan workouts, some of these
assets are still under performing. Due to a limited liquidity in the
real estate markets serving the Company, the Company is pursuing
workouts or foreclosures related to its existing debts whose terms
have expired and strategies to improve cash flow on real estate owned.
The Company has continued to operate under its Strategic Redirection Plan (SRP).
The SRP is intended to preserve and enhance the value of the Company's assets.
The SRP comprises three phases as follows:
PHASE 1
ASSET PRESERVATION - The Company is taking steps to protect its interest in
its assets. The Company has undertaken foreclosures, workouts and litigation
as its primary tools in accomplishing this first phase of the SRP. The Company
is in the process of negotiating final workouts related to all three of its
remaining assets which are under Phase I of the SRP.
PHASE 2
CASH FLOW ENHANCEMENT - The Company is focusing its energies on the
re-establishing of cash flow. This phase encompasses asset monitoring,
collection efforts and control procedures over Phase 1 workout programs.
The ultimate success of this phase will be dependent on the continued
turn around of the general real estate market.
PHASE 3
SHAREHOLDER LIQUIDITY - The final phase of the SRP is to provide shareholders
of the Company with liquidity options. The first and foremost goal of this
phase will be the creation of a marketplace for the Company's stock. In
addition, a program for hardship situations in the case of death, disability
and certain retirements will be considered. The ability for Company
management to accomplish this phase will be subject to the marketplace
response to the SRP and the conversion of the Company's convertible Debentures
to stock.
Liquidity and Capital Resources
It was the policy of the Company to augment its equity capital by
borrowings in order to increase its investments in realty and mortgage
loans and thus diversify its investment risk. The Company, in its
early years, experienced favorable results from lending Companies to
borrowers at higher rates, or acquiring mortgage loans paying higher
rates, than are charged to the Company under its credit facilities.
However, due to the number of non-earning or partially earning loans
in 1990 through 1995, this technique led to an additional strain on
the Company's cash flow and operations. These issues were addressed
as part of the debt restructuring under the Company's Plan of
Reorganization.
The Company has a note payable with the First Bank of Missouri which
was formerly a revolving line of credit. The principal balance owed
under this note at June 30, 1996, was $1,950,423. The note terms
include an amortization period of twenty years with interest at eight
percent (8%) paid monthly with a balloon payment on April 11, 1999.
The Company had reached a agreement for a restructuring of this note
which will entail a substitution of certain collateral, new funding
and a requirement by the Company to convert certain of its mortgage
loans into equity in a newly formed partnership which will own a 101
room all suite hotel. The Company currently is in default on this
note but has been given a moratorium on any action by the Bank as
these negotiations on the restructuring are finalized.
The Company and its partner has a $1,104,614 first mortgage loan with
a bank in Texas relating to the Company's hotel in Euless, Texas. The
Company is a seventy-five percent (75%) partner in the partnership
which owns the Hotel. The partnership is current on its obligation
with the bank. In addition, the partnership owes to the non-Company
partner $1,162,960 as of June 30, 1996, which is being paid out of the
cash flow from the Hotel. Interest accrued of 140,292 remains unpaid
at June 30, 1996.
The Company owes $8,975,896 as of June 30, 1996 on its subordinated
debentures. The terms of the debentures include an amortization
period over twenty years with interest at six percent and a balloon
payment in 2003 of any unpaid principal and interest. The debentures
are subordinated and junior in right of payment to all senior
indebtedness of the Company (which includes all collateralized debt of
the Company).
Senior indebtedness will be paid in full before holders of the subordinated
debentures will be paid any principal or interest. Accordingly, no payment
under the debentures has been made. The Company has converted $519,751 of
Debentures into 2,320,317 shares of common stock under the conversion privilege
of the Debenture.
The Company has received $315,082 of election notices to Convert Debentures
into 1,406,616 shares of common stock which are pending conversion according
to the Debenture Trustee. These conversions should be completed by September
30, 1996.
The Company re-acquired certain debentures in 1994 and 1995. These
debentures were acquired under the hardship provisions of the
debenture instrument and under required payments under the Plan of
Reorganization.
The Plan of Reorganization included an Alternative Treatment for
debenture holders whereby the debenture holder could elect to convert
their debenture plus an equal amount of cash to a debt or a specific
property.
In 1995, those debenture holders who elected this Alternative
Treatment agreed to expand the pool of assets to which this treatment
applied.
Upon closing based on the June 30, 1996 participation the Alternative
Treatment Pool will include approximately $2,848,830 of cash and
$2,921,519 of debentures tendered to the Company. The debenture
balance due will have a corresponding reduction when the final
closing of the Alternative Treatment is completed.
As the real estate economy continues to recover and the full
implementation of the SRP is completed, the Company's management
believes the Company should be able to substantially recover from
its current short-term cash flow problems.
Results of Operations
The Company's total assets, before giving effect to the allowance for
losses, was $41,349,447 and $40,777,068 at June 30, 1996 and December
31, 1995 respectively. Included in total assets at June 30, 1996 were
mortgage loans totaling $16,002,315. Non-earning mortgage notes
receivable were decreased at June 30, 1996 to $9,516,115 from
$12,962,000 at December 31, 1995. The allowance for possible losses
related to the mortgage notes of the Company was $9,302,779 at June
30, 1996 and $10,780,742 at December 31, 1995. The allowance for
possible losses continues to be a direct result of the lack of
liquidity in the real estate industry with respect to certain of the
Company's borrowers The Company's management, in determining the
reserve for possible loan losses, takes into consideration a number
of factors including property appraisals, the net operating cash flow
of the property, the cost of money expected, capitalization, and
national and local economic and real estate conditions in arriving
at its loan loss evaluation.
The Company had a net profit for the six months ended June 30, 1996
of $1,328,543 or $.22 per share (non-diluted) as compared to a profit
for the period ended June 30, 1995 of $282,537 or $.07 per share
(non-diluted). The continued profitability of the Company is a result
of implementation of the SRP.
Interest and fee revenue on mortgage loans for June 30, 1996 was
$150,905 compared to $250,397 for June 30, 1995. This decrease is
a direct result of the non-earning loans and the increase in real
estate owned by the Company.
Revenues from rental real estate decreased in the period ending June
30, 1996 from June 30, 1995 by $30,123. This decrease was primarily
a result of the Company's disposition of an office building in
October, 1995.
The Company recognized revenues of $865,268 and $935,370 for June 30, 1996 and
June 30, 1995 respectively from a hotel in which the Company is a seventy five
percent (75%) partner and $240,000 of hotel lease rental revenue for both June
30, 1996 and 1995.
The Company recorded a $1,953,340 recovery on its previous reserves for loan
and investment losses at June 30, 1996. This recovery is directly related to
the implementation of the SRP.
Interest expense increased from $794,831 for June 30, 1995 to $796,621
for June 30, 1996. The conversion of $519,751 of Debentures into common
stock of the Company resulted in $69,283 of previously expensed
interest to be recovered.
The Company's general and administrative expenses decreased by $21,263
for the six months ended June 30, 1996 as compared to the six months
ended June 30, 1995.
The Company's servicing fees declined in the period ending in June 30,
1996 from $48,893 at June 30, 1994 to $27,705 in the period ending June
30, 1996. This decline was a result of lower loan servicing fees
related to the decline in mortgage notes. Payroll costs for June 30,
1996 were $225,270 as compared to $229,780 at June 30, 1995.
The Company recognized rental real estate operating expenses of $650,961 and
$852,822 for the period June 30, 1996 and 1995 respectively. The decrease in
expenses was primarily related to the Company's disposition of an office
building in October, 1995.
The Company recognized hotel expenses of $706,058 and $1,042,869 for
the periods of June 30, 1996 and 1995, respectively, from a hotel in
which the Company is a seventy five percent (75%) partner.
Potential Impact of Known Facts, Commitments, Events
And Uncertainties on Future Operating Results
The Company is substantially impacted by the general economic trends
in the real estate economy. As the real estate markets served by the
Company continue to recover the Company's ability to perform under the
SRP is improved. The Company's Trustees and management believe this
improving trend will continue and will result in the Company
stabilizing its monthly operating cash flow. In the interim, the
Company must complete its debt restructurings and continue to pursue
the sale of one or more of its assets to continue its operations.
The Company has actively solicited Debenture holders to exercise their option
of conversion of their Debentures into stock of the Company. These conversions
will result in a positive impact to the Company's financial position.
PART II
OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K:
(a) Exhibits:
None
(b) Reports on Form 8-K
None
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SIGNATURES
Pursuant to the requirements to the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: Aug.-14 , 1996 MASTER MORTGAGE INVESTMENT FUND, INC.
By:
John J. Bennett, Chairman
(Principal Executive Officer)
Thomas H. Trabon, Executive
Vice President, Treasurer and
Chief Financial Officer
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