<PAGE>1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Quarterly Report Under Section 13 OR 15(d)
of the Securities Exchange Act of 1934
For the Quarter Ended March 31, 1994
------------------
Commission file number 1-10359
-----------------
CRI LIQUIDATING REIT, INC.
-----------------------------------------------------------------
(Exact name of registrant as specified in charter)
Maryland 52-1647537
------------------------------------- ----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
11200 Rockville Pike, Rockville, Maryland 20852
----------------------------------------- ----------------------
(Address of principal executive offices) (Zip Code)
(301) 468-9200
-----------------------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
and (2) has been subject to such filing requirements for the past
90 days. Yes X No
--- ---
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date.
Class Outstanding at May 9, 1994
---------------------------- -----------------------------
--
Common Stock, $.01 par value 30,422,711
<PAGE>
<PAGE>2
CRI LIQUIDATING REIT, INC.
INDEX TO FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 1994
Page
----
PART I. Financial Information (Unaudited)
Item 1. Financial Statements
Balance Sheets - March 31, 1994 and
December 31, 1993 . . . . . . . . . . . . . 3
Statements of Income - for the three
months ended March 31, 1994 and 1993 . . . 4
Statement of Changes in Shareholders' Equity -
for the three months ended March 31,
1994 . . . . . . . . . . . . . . . . . . . 5
Statements of Cash Flows - for the three
months ended March 31, 1994 and 1993 . . . 6
Notes to Financial Statements . . . . . . . . 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . 17
PART II. Other Information
Item 6. Exhibits and Reports on Form 8-K . . . . . . 25
Signature . . . . . . . . . . . . . . . . . . . . . . . 26
<PAGE>
<PAGE>3<TABLE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CRI LIQUIDATING REIT, INC.
BALANCE SHEETS
ASSETS
<CAPTION>
March 31, December 31,
1994 1993
------------- ------------
(Unaudited)
<S> <C> <C>
Investment in mortgages, at
fair value $182,148,346 $243,095,642
Investment in limited
partnerships 318,345 436,090
Cash and cash equivalents 3,602,300 2,907,147
Receivables and other assets 1,571,692 2,175,453
Deferred costs, principally
paid to related parties, net
of accumulated amortization of
$1,493,473 and $1,635,320,
respectively 174,580 312,802
------------ ------------
Total assets $187,815,263 $248,927,134
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Accounts payable and accrued
expenses $ 493,304 $ 429,957
------------ ------------
Commitments and contingencies
Shareholders' equity:
Common stock 304,227 304,227
Net unrealized gains on
investment in mortgages 27,626,490 51,349,764
Additional paid-in capital 159,391,242 196,843,186
------------ ------------
Total shareholders' equity 187,321,959 248,497,177
------------ ------------
Total liabilities and
shareholders' equity $187,815,263 $248,927,134
============ ============
The accompanying notes are an integral part
of these financial statements.
</TABLE>
<PAGE>
<PAGE>4<TABLE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CRI LIQUIDATING REIT, INC.
STATEMENTS OF INCOME
(Unaudited)
<CAPTION>
For the three months ended
March 31,
----------------------------
1994 1993
------------- ------------
<S> <C> <C>
Income:
Mortgage investment income $ 4,292,721 $ 5,833,199
Other investment income 283,247 525,792
(Loss) income from investment
in limited partnerships (54,372) 114,954
------------ ------------
4,521,596 6,473,945
------------ ------------
Expenses:
Annual fee to related party 194,501 389,797
Interest expense -- 420,094
General and administrative 187,227 199,631
Professional fees 78,066 63,792
Amortization of deferred costs 60,896 71,076
Mortgage servicing fees 39,447 50,039
------------ ------------
560,137 1,194,429
------------ ------------
Income before gains from
mortgage dispositions 3,961,459 5,279,516
Gains from mortgage dispositions 11,826,341 2,058,901
------------ ------------
Net income $ 15,787,800 $ 7,338,417
============ ============
Net income per share $ .52 $ .24
============ ============
Weighted average shares
outstanding 30,422,711 30,422,711
============ ============
The accompanying notes are an integral part
of these financial statements.
<PAGE>
<PAGE>5
</TABLE>
<TABLE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CRI LIQUIDATING REIT, INC.
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
For the three months ended March 31, 1994
(Unaudited)
<CAPTION>
Net
Unrealized
Gains on Additional Total
Common Stock Investment Paid-In Undistributed Shareholders'
Shares Par Value in Mortgages Capital Net Income Equity
---------- --------- ------------ ------------ ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1993 30,422,711 $304,227 $ 51,349,764 $196,843,186 $ -- $248,497,177
Net income -- -- -- -- 15,787,800 15,787,800
Dividends (including return of
capital) of $1.75 per share -- -- -- (37,451,944) (15,787,800) (53,239,744)
Adjustment to net unrealized
gains on investment in
mortgages due to mortgage
dispositions -- -- (12,288,871) -- -- (12,288,871)
Adjustment to net unrealized
gains on investment in
mortgages due to market
revaluation -- -- (11,434,403) -- -- (11,434,403)
---------- -------- ------------ ------------ ------------- ------------
Balance, March 31, 1994 30,422,711 $304,227 $ 27,626,490 $159,391,242 $ -- $187,321,959
========== ======== ============ ============ ============= ============
The accompanying notes are an integral part
of these financial statements.
</TABLE>
<PAGE>
<PAGE>6<TABLE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CRI LIQUIDATING REIT, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
For the three months
ended March 31,
1994 1993
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 15,787,800 $ 7,338,417
Adjustments to reconcile net income to net cash provided
by operating activities:
Amortization of deferred costs 60,896 71,076
Mortgage discount amortization (255,524) (320,317)
Mortgage premium amortization 1,611 1,490
Other short-term investments premium amortization -- 689,153
Gains on mortgage dispositions (11,826,341) (2,058,901)
Equity losses (earnings) from investment in limited partnerships 54,372 (114,954)
Interest received under the equity method of accounting but
treated as a reduction of investment in limited partnerships -- 192,054
Changes in assets and liabilities:
Decrease (increase) in receivables and other assets 603,761 (288,163)
Increase in accounts payable and accrued expenses 63,347 31,838
Increase in interest payable -- 65,504
------------ ------------
Net cash provided by operating activities 4,489,922 5,607,197
------------ ------------
Cash flows from investing activities:
Proceeds from mortgage dispositions 48,706,116 11,937,987
Purchase of other short-term investments -- (78,110,230)
Receipt of mortgage and other short-term investment principal from
scheduled payments 598,160 801,901
Decrease in deferred costs 77,326 20,842
Annual return from investment in limited partnerships 63,373 63,324
------------ ------------
Net cash provided by (used in) investing activities 49,444,975 (65,286,176)
------------ ------------
</TABLE>
<PAGE>
<PAGE>7<TABLE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CRI LIQUIDATING REIT, INC.
STATEMENTS OF CASH FLOWS (Continued)
(Unaudited)
<CAPTION>
For the three months
ended March 31,
1994 1993
------------ ------------
<S> <C> <C>
Cash flows from financing activities:
Dividends and return of capital paid to shareholders (53,239,744) (18,862,081)
Proceeds from short-term debt -- 77,257,127
Reimbursement of prior years' dividends -- 20,764
------------ ------------
Net cash (used in) provided by financing activities (53,239,744) 58,415,810
------------ ------------
Net increase (decrease) in cash and cash equivalents 695,153 (1,263,169)
Cash and cash equivalents, beginning of period 2,907,147 2,557,264
------------ ------------
Cash and cash equivalents, end of period $ 3,602,300 $ 1,294,095
============ ============
Cash payments for interest expense $ -- $ 354,590
============ ============
The accompanying notes are an integral part
of these financial statements.
</TABLE>
<PAGE>
<PAGE>8
CRI LIQUIDATING REIT, INC.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
1. ORGANIZATION
CRI Liquidating REIT, Inc. (the Liquidating Company) is a
finite-life, self-liquidating real estate investment trust (REIT)
which as of March 31, 1994, owned a portfolio of 51 United States
government insured and guaranteed mortgage investments secured by
multifamily housing complexes located throughout the United
States. Mortgage investments in the portfolio are comprised of
49 loans insured pursuant to programs of the United States
government through the Federal Housing Administration (FHA) (FHA-
Insured Loans) and two securities backed by FHA-Insured Loans
which have been securitized by private issuers and guaranteed by
the Government National Mortgage Association (GNMA) as to timely
payment of principal and interest (Mortgage-Backed Securities).
As discussed further below, the Liquidating Company does not
intend to acquire any additional mortgage investments, except as
may be necessary in connection with maintaining its REIT status,
and intends to liquidate its portfolio by March 31, 1997.
The Liquidating Company was created in November 1989 in
connection with the merger (the Merger) of three funds which
owned government insured multifamily mortgages (the CRIIMI
Funds), all of which were sponsored by C.R.I., Inc. (CRI). The
Merger resulted in two new REITs: (i) the Liquidating Company, a
finite-life, self-liquidating REIT, and (ii) CRIIMI MAE Inc.
(CRIIMI MAE) (formerly CRI Insured Mortgage Association, Inc.) an
infinite-life, growth-oriented REIT. CRIIMI MAE owns
approximately 57% of the Liquidating Company's common stock as of
March 31, 1994.
The Liquidating Company intends to dispose of its existing
government insured mortgage investments by March 31, 1997 through
an orderly liquidation. Consequently, the Liquidating Company's
Adviser (the Adviser) developed a business plan which is intended
to effect the orderly liquidation of the portfolio by March 31,
1997, which plan of liquidation was approved by the Liquidating
Company's Board of Directors. The Business Plan assumes that the
portfolio will be liquidated by March 31, 1997 through a
combination of defaults on or prepayments of (Involuntary
Dispositions) and sales of (Voluntary Dispositions) government
insured multifamily mortgages. During the term of the Business
Plan, the Liquidating Company expects to generate cash flow from
scheduled mortgage payments, Involuntary Dispositions, Voluntary
Dispositions and interest earned on short-term investments.
During the three months ended March 31, 1994, the Liquidating
Company sold 12 mortgage investments which constituted
approximately 20% of the December 31, 1993 portfolio balance. For
the remaining three quarters of 1994, the Business Plan assumes
an aggregate disposition of an additional 5% of the December 31,
1993 portfolio balance. In each of the next three calendar
years, the business plan assumes a total annual disposition rate
of approximately 33% of the portfolio as of December 31, 1994.
Although the Liquidating Company expects to profitably dispose of
its government insured multifamily mortgages, there can be no
assurance as to when any government insured mortgage investment
will be disposed of by the Liquidating Company or the amount of
proceeds the Liquidating Company would receive from any such
disposition. The determination of whether and when to dispose of
a particular government insured multifamily mortgage will be made
by considering a variety of factors, including, without
limitation, the market conditions at that time. As of March 31,
1994, the carrying value of the mortgage investments on a tax
basis was approximately $139 million; the par value was
approximately $188 million; and the fair market value was
approximately $182 million.
<PAGE>
<PAGE>9
CRI LIQUIDATING REIT, INC.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
2. BASIS OF PRESENTATION
In the opinion of the Adviser, the accompanying unaudited
financial statements of the Liquidating Company contain all
adjustments (consisting of only normal recurring adjustments)
necessary to present fairly the financial position of the
Liquidating Company as of March 31, 1994 and December 31, 1993,
and the results of its operations and its cash flows for the
three months ended March 31, 1994 and 1993.
These unaudited financial statements have been prepared
pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and note disclosures
normally included in annual financial statements prepared in
accordance with generally accepted accounting principles have
been condensed or omitted. While the Adviser believes that the
disclosures presented are adequate to make the information not
misleading, it is suggested that these financial statements be
read in conjunction with the financial statements and the notes
included in the Liquidating Company's Annual Report filed on Form
10-K for the year ended December 31, 1993.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Reclassification
----------------
Certain amounts in the financial statements as of December
31, 1993 and for the three months ended March 31, 1993 have
been reclassified to conform to the 1994 presentation.
<PAGE>
<PAGE>10
CRI LIQUIDATING REIT, INC.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
4. INVESTMENT IN MORTGAGES
As of March 31, 1994 and December 31, 1993, the Liquidating
Company owned 51 and 63 mortgage investments, respectively. During
the three months ended March 31, 1994, the Liquidating Company
disposed of the following mortgage investments:
<TABLE><CAPTION> Financial
Disposition/ Statement Tax Basis
Recognition Type of Amortized Net Gain Gain
Complex Name Date Disposition Cost Proceeds Recognized (c) Recognized(a)
---------------------- ------------- ------------ ------------ ------------ -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Windermere House February 1994 Sale $ 5,896,761 $ 8,162,613 $ 2,265,852(b) $ 2,090,613(b)
Hidden Oaks II February 1994 Sale 1,797,170 2,637,817 840,647(b) 788,102(b)
The Glen February 1994 Sale 1,812,491 2,650,555 838,064(b) 785,586(b)
Timberlake Apts. February 1994 Sale of 3,465,881 4,502,330 1,036,449 1,450,746
Defaulted
Mortgage
Lincoln Countrywood
Apts. February 1994 Sale of 4,366,310 5,016,993 650,683 1,165,582
Defaulted
Mortgage
Holly Station Tnhs. I February 1994 Sale 3,176,619 4,184,314 1,007,695 1,383,970
Brookridge Tnhs. II February 1994 Sale 3,610,280 4,800,987 1,190,707 1,620,669
Westwind Apts. February 1994 Sale 2,852,351 3,762,095 909,744 1,246,792
The Tree House February 1994 Sale 4,856,892 6,393,906 1,537,014 2,112,243
Hidden Valley Apts. February 1994 Sale 2,889,715 3,765,154 875,439 1,213,288
Treehaven Apts. February 1994 Sale 904,047 1,183,758 279,711 387,159
Holly Station Tnhs. II February 1994 Sale 1,251,258 1,645,594 394,336 543,911
------------ ------------ ------------ ------------
$ 36,879,775 $ 48,706,116 $ 11,826,341 $ 14,788,661
============ ============ ============ ============
(a) Tax basis income is the basis for determining dividends.
(b) Net of aggregate incentive fees of $394,812.
(c) Under SFAS 115 (as defined below), realized gains are calculated based on amortized cost.
</TABLE>
<PAGE>
<PAGE>11
CRI LIQUIDATING REIT, INC.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
4. INVESTMENT IN MORTGAGES - Continued
In accordance with the Liquidating Company's implementation
of Statement of Financial Accounting Standards No. 115 "Accounting
for Certain Investments in Debt and Equity Securities" (SFAS 115)
as of December 31, 1993, the Liquidating Company's Investment in
Mortgages is recorded at fair value, as estimated below, as of
March 31, 1994 and December 31, 1993. The difference between the
amortized cost and the fair value of the mortgage investments
represents the net unrealized gains on the Liquidating Company's
mortgage investments and is reported as a separate component of
shareholders' equity.
The fair value of the mortgage investments is based on quoted
market prices.
<TABLE><CAPTION>
As of March 31, 1994
As of December 31, 1993
Amortized Fair Amortized Fair
Cost Value Cost Value
------------ ------------ ----------- -----------
<S> <C> <C> <C> <C>
Investment in mortgages $154,521,856 $182,148,346 $191,745,878 $243,095,642
============ ============ ============ ============
</TABLE>
<PAGE>
<PAGE>12
CRI LIQUIDATING REIT, INC.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
4. INVESTMENT IN MORTGAGES - Continued
As of March 31, 1994, the Liquidating Company has elected to
assign the following mortgage investments, which are included in
Investment in Mortgages, to the United States Department of
Housing and Urban Development:
<TABLE><CAPTION>
Anticipated
Financial Anticipated
Net Carrying Statement Tax Basis
Complex Name Value(a) (Loss)/Gain Gain
------------------------ ------------ ------------ ------------
<S> <C> <C> <C>
Booker Gardens Apts.(9%) $ 31,508 $ (3,815) $ 2,733
Turtle Creek Apts. 3,733,886 239,347 642,706
------------ ------------ ------------
$ 3,765,394 $ 235,532 $ 645,439
============ ============ ============
(a) In connection with the Liquidating Company's implementation of SFAS
115, all mortgage investments are recorded at fair value.
</TABLE>
<PAGE>
<PAGE>13
CRI LIQUIDATING REIT, INC.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
5. RECONCILIATION OF FINANCIAL STATEMENT NET INCOME TO TAX
BASIS INCOME
On an annual basis, the Liquidating Company expects to pay
its shareholders quarterly cash dividends equal to at least 95%
of its annual tax basis income (see Note 6).
<PAGE>
<PAGE>14
CRI LIQUIDATING REIT, INC.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
5. RECONCILIATION OF FINANCIAL STATEMENT NET INCOME TO TAX
BASIS INCOME - Continued
Reconciliations of the financial statement net income to the
tax basis income for the three months ended March 31, 1994 and
1993 are as follows:
<TABLE><CAPTION>
For the three months ended
March 31,
---------------------------
1994 1993
------------ ------------
<S> <C> <C>
Financial statement net income $ 15,787,800 $ 7,338,417
Adjustments:
Nondeductible expense:
Amortization of deferred costs 60,896 71,076
Additional income (loss) due to basis
differences:
Mortgage dispositions 2,962,320 871,880
Reamortization of mortgages 128,762 342,823
Amortization of premium-other short-term
investments -- 677,580
Income (loss) from investment in limited
partnerships 36,271 (118,364)
------------ ------------
Tax basis income $ 18,976,049 $ 9,183,412
============ ============
Tax basis income per share $ .62 $ .30
============ ============
</TABLE>
<PAGE>
<PAGE>15
CRI LIQUIDATING REIT, INC.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
6. DIVIDENDS TO SHAREHOLDERS
Dividends to shareholders consist of ordinary income, capital
gain and return of capital. Shareholders should expect
distributions representing ordinary income and the market price of
the Liquidating Company shares to decrease as the Liquidating
Company liquidates its assets and distributes return of capital
over time to its shareholders. For the three months ended
March 31, 1994, dividends of $1.75 per share were paid to
shareholders. The composition of these dividends shown below
remains subject to year-end adjustment:
<TABLE><CAPTION>
Non-taxable Capital Ordinary
Dividend Gain Income Total Record Date
----------- ------- -------- ------- ------------------
<S> <C> <C> <C> <C> <C>
Quarter ended March 31, 1994 $ 1.14 $ 0.48 $ 0.13 $ 1.75 March 24, 1994
</TABLE>
<PAGE>
<PAGE>16
CRI LIQUIDATING REIT, INC.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
7. TRANSACTIONS WITH RELATED PARTIES
Below is a summary of the amounts paid or accrued to related
parties during the three months ended March 31, 1994 and 1993.
<TABLE><CAPTION>
For the three months ended
March 31,
----------------------------
1994 1993
------------ ------------
<S> <C> <C>
Adviser:
-------
Annual fee $ 194,501(c) $ 389,797(c)
Incentive fee (a) 394,812 201,876
----------- -----------
Total $ 589,313 $ 591,673
=========== ===========
CRI:
---
Expense reimbursement (b) $ 76,086 $ 78,703
=========== ===========
(a) Netted from gains on mortgage dispositions on the accompanying statements of income.
(b) Included as general and administrative expenses on the accompanying statements of income.
(c) As a result of reaching the Carryover CRIIMI I Target Yield during the first quarter of 1994 and 1993, the
Liquidating Company paid deferred annual fees of $31,279 and $127,819, respectively. The amount paid in
the first quarter of 1993 included deferred annual fees of $86,395 from the third and fourth quarters of
1992.
</TABLE>
<PAGE>
<PAGE>17
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
---------------------
As of March 31, 1994 and December 31, 1993, the Liquidating
Company owned 51 and 63 mortgage investments, respectively.
During the three months ended March 31, 1994, the Liquidating
Company disposed of the following mortgage investments:
<TABLE><CAPTION> Financial
Disposition/ Statement Tax Basis
Recognition Type of Amortized Net Gain Gain
Complex Name Date Disposition Cost Proceeds Recognized (c) Recognized(a)
---------------------- ------------- ------------ ------------ ------------ -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Windermere House February 1994 Sale $ 5,896,761 $ 8,162,613 $ 2,265,852(b) $ 2,090,613(b)
Hidden Oaks II February 1994 Sale 1,797,170 2,637,817 840,647(b) 788,102(b)
The Glen February 1994 Sale 1,812,491 2,650,555 838,064(b) 785,586(b)
Timberlake Apts. February 1994 Sale of 3,465,881 4,502,330 1,036,449 1,450,746
Defaulted
Mortgage
Lincoln Countrywood
Apts. February 1994 Sale of 4,366,310 5,016,993 650,683 1,165,582
Defaulted
Mortgage
Holly Station Tnhs. I February 1994 Sale 3,176,619 4,184,314 1,007,695 1,383,970
Brookridge Tnhs. II February 1994 Sale 3,610,280 4,800,987 1,190,707 1,620,669
Westwind Apts. February 1994 Sale 2,852,351 3,762,095 909,744 1,246,792
The Tree House February 1994 Sale 4,856,892 6,393,906 1,537,014 2,112,243
Hidden Valley Apts. February 1994 Sale 2,889,715 3,765,154 875,439 1,213,288
Treehaven Apts. February 1994 Sale 904,047 1,183,758 279,711 387,159
Holly Station Tnhs. II February 1994 Sale 1,251,258 1,645,594 394,336 543,911
------------ ------------ ------------ ------------
$ 36,879,775 $ 48,706,116 $ 11,826,341 $ 14,788,661
============ ============ ============ ============
(a) Tax basis income is the basis for determining dividends.
(b) Net of aggregate incentive fees of $394,812.
(c) Under SFAS 115 (as defined below), realized gains are calculated based on amortized cost.
</TABLE>
<PAGE>
<PAGE>18
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS -
Continued
As of March 31, 1994, the Liquidating Company has elected to
assign the following mortgage investments, which are included in
Investment in Mortgages, to the United States Department of
Housing and Urban Development:
<TABLE><CAPTION>
Anticipated
Financial Anticipated
Net Carrying Statement Tax Basis
Complex Name Value(a) (Loss)/Gain Gain
------------------------ ------------ ------------ ------------
<S> <C> <C> <C>
Booker Gardens Apts.(9%) $ 31,508 $ (3,815) $ 2,733
Turtle Creek Apts. 3,733,886 239,347 642,706
------------ ------------ ------------
$ 3,765,394 $ 235,532 $ 645,439
============ ============ ============
(a) In connection with the Liquidating Company's implementation of SFAS
115 (as defined below), all mortgage investments are recorded at fair value.
</TABLE>
<PAGE>
<PAGE>19
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS -
Continued
Total income decreased for the three months ended March 31,
1994 as compared to the corresponding period in 1993 primarily
due to the decrease in mortgage investment income, as described
below.
Mortgage investment income decreased for the three months
ended March 31, 1994 as compared to the corresponding period in
1993 primarily as a result of a reduction in the mortgage base
resulting from the disposition of mortgage investments during
1994 and 1993.
Other investment income decreased for the three months ended
March 31, 1994 as compared to the corresponding period in 1993.
This decrease was primarily attributable to income earned in 1993
from other short-term investments acquired by the Liquidating
Company during 1993 (approximately $75 million) which were
disposed of by December 31, 1993. This decrease was partially
offset by income earned from the short-term investment of
mortgage disposition proceeds received in February 1994 pending
the distribution to shareholders on March 31, 1994.
Total expenses, excluding the Annual Fee, decreased for the
three months ended March 31, 1994 from the corresponding period
in 1993 primarily due to a decrease in interest expense. For the
three months ended March 31, 1993, interest expense was based on
the financing of approximately 99% of the other short-term
investments acquired by the Liquidating Company in 1993
(approximately $77.3 million) at an interest rate of
approximately 3.35%. The Liquidating Company disposed of these
other short-term investments and repaid the related debt by
December 31, 1993.
Annual Fees are paid to the Adviser for managing the
Liquidating Company portfolio. These fees include a base
component equal to a percentage of average invested assets. In
addition, Annual Fees paid to the Adviser by the Liquidating
Company may include a performance-based component that is
referred to as the deferred component. The deferred component,
which is also calculated as a percentage of average invested
assets, is computed each quarter but paid (and expensed) only
upon meeting certain cumulative performance goals. If these
goals are not met, the deferred component accumulates and may be
paid in the future if cumulative goals are met. In addition,
certain incentive fees are paid by the Liquidating Company on a
current basis if certain performance goals are met.
Annual Fees decreased for the three months ended March 31,
1994 from the corresponding period in 1993 primarily as a result
of the reduction in the Liquidating Company's mortgage base which
is a component used in determining the Annual Fees payable by the
Liquidating Company. The mortgage base has been decreasing as
the Liquidating Company effects its business plan to liquidate by
1997. This decrease was also due to a reduction in the base
component of the Annual Fees from .25% to .125% of average
invested assets formerly held by CRIIMI III, effective January 1,
1994, in accordance with the Advisory Agreement. Also
contributing to the decrease in Annual Fees was a decrease in the
deferred component paid for the three months ended March 31, 1994
as compared to the corresponding period in 1993. During the
first quarter of 1994 and 1993, the Liquidating Company achieved
the target yield with respect to mortgage investments formerly
held by CRIIMI I and as a result paid deferred Annual Fees of
$31,279 and $127,819, respectively. The amount paid in the first
quarter of 1993 included deferred Annual Fees of $86,395 from the
third and fourth quarters of 1992.
Gains from mortgage dispositions increased for the three
months ended March 31, 1994 as compared to the corresponding
period in 1993. The gains or losses on mortgage dispositions are
based on the number, carrying amounts, and proceeds of mortgage
<PAGE>
<PAGE>20
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS -
Continued
investments disposed of during the period. The increase in gains
from mortgage dispositions was primarily due to the sale of
twelve mortgage investments in February 1994, all of which
resulted in gains. The Adviser sold the mortgages during the
week before the Federal Reserve increased the Federal funds rate
and thereby locked-in gains before mortgage prices dropped. The
sales resulted in financial statement gains of approximately
$11.8 million and tax basis gains of approximately $14.8 million.
This compares to the sale of two mortgage investments during the
three months ended March 31, 1993 that generated financial
statement gains of approximately $2.1 million and tax basis gains
of approximately $2.9 million.
Business Plan
-------------
The Liquidating Company intends to dispose of its existing
government insured mortgage investments by March 31, 1997 through
an orderly liquidation. Consequently, the Liquidating Company's
Adviser (the Adviser) developed a business plan (the Business
Plan) which is intended to effect the orderly liquidation of the
portfolio by March 31, 1997, which plan of liquidation was
approved by the Liquidating Company's Board of Directors. The
Business Plan assumes that the portfolio will be liquidated by
March 31, 1997 through a combination of defaults on or
prepayments of (collectively, Involuntary Dispositions) and sales
of (Voluntary Dispositions) government insured multifamily
mortgages. During the term of the Business Plan, the Liquidating
Company expects to generate cash flow from scheduled mortgage
payments, Involuntary Dispositions, Voluntary Dispositions and
interest earned on short-term investments. During the three
months ended March 31, 1994, the Liquidating Company sold 12
mortgage investments which constituted approximately 20% of the
December 31, 1993 portfolio balance. For the remaining three
quarters of 1994, the Business Plan assumes an aggregate
disposition of an additional 5% of the December 31, 1993
portfolio balance. In each of the next three calendar years, the
Business Plan assumes a total annual disposition rate of
approximately 33% of the portfolio as of December 31, 1994. To
the extent necessary, the Liquidating Company intends to make
Voluntary Dispositions, in addition to any Involuntary
Dispositions that occur, to attempt to achieve such 33% rate and
to liquidate the portfolio by March 31, 1997 in an orderly
manner.
Although the Liquidating Company expects to profitably
dispose of its government insured multifamily mortgages, there
can be no assurance as to when any government insured mortgage
investment will be disposed of by the Liquidating Company or the
amount of proceeds the Liquidating Company would receive from any
such disposition. The determination of whether and when to
dispose of a particular government insured multifamily mortgage
will be made by considering a variety of factors, including,
without limitation, the market conditions at that time. As of
March 31, 1994, the carrying value of the mortgage investments on
a tax basis was approximately $139 million; the par value was
approximately $188 million; and the fair market value was
approximately $182 million.
The Business Plan assumes an annual Involuntary Disposition
rate of approximately 7% of each year's beginning portfolio
balance. This assumed rate is based on an average of the
historic Involuntary Disposition rates experienced by CRI
Liquidating and the CRIIMI Funds since January 1989. If the
Liquidating Company experiences Involuntary Dispositions in
excess of 7% of a given calendar year's beginning portfolio
balance, the Liquidating Company will most likely make fewer
Voluntary Dispositions in an attempt to maintain the
approximately 33% total disposition rate during such year.
During the period from January 1, 1989 through December 31, 1993,
approximately 90% of the proceeds received by the Liquidating
<PAGE>
<PAGE>21
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS -
Continued
Company from Involuntary Dispositions have been from defaults on
government insured multifamily mortgages. Accordingly,
Involuntary Dispositions are assumed for purposes of the Business
Plan to be defaults and not prepayments. Defaults on government
insured multifamily mortgages return 99% of the face value in the
case of FHA-Insured Loans and 100% of the face value in the case
of GNMA Securities, and prepayments return 100% of face value
plus any applicable prepayment penalty. Decreases in occupancy
levels, rental rates or capital appreciation of any property
underlying a government insured multifamily mortgage may result
in the mortgagor being unable or unwilling to make required
payments on the government insured multifamily mortgage and
thereby defaulting. Coupon rates in the portfolio range from
7.0% to 11.18%. Primarily mortgages with higher coupons were
selected to comprise the 7% annual Involuntary Disposition rate.
Based on the Liquidating Company's experience, however, mortgages
at any one coupon rate are no more likely to default than
mortgages at any other coupon rates.
To estimate proceeds from Voluntary Dispositions, government
insured multifamily mortgages are grouped with similar coupons
and/or maturities and are priced in each successive year assuming
a declining weighted average maturity. Government insured
multifamily mortgages are assumed to be sold based on prices as
of May 10, 1994 and on the assumption that Treasury Rates (as
defined below) remain constant throughout the term of the
Business Plan. Spreads (as defined below) were determined as of
May 10, 1994 and the Business Plan assumes that such Spreads are
held constant throughout the term of the Business Plan.
Changes in interest rates will affect the proceeds received
through Voluntary Dispositions: (i) by increasing the value of
the portfolio in the event of decreases in long-term and
intermediate-term U.S. Treasury Rates (Treasury Rates) or
decreasing the value of the portfolio in the event of increases
in Treasury Rates (assuming the interest rate differential (the
Spread) between Treasury Rates and the yields on government
insured mortgages remains constant) and (ii) if the Adviser deems
appropriate, increasing the pace at which the Liquidating Company
liquidates the portfolio in the event of decreases in Treasury
Rates or decreasing the pace of such liquidation in the event of
increases in Treasury Rates. In the event of a significant
change in the level or expected future level of interest rates,
the Liquidating Company may increase or decrease the rate of
expected dispositions.
If interest rates remain generally at the current levels,
the order in which the Liquidating Company voluntarily disposes
of its portfolio does not significantly impact the Annualized
Total Return. Over the next three months, the Liquidating
Company does not intend to voluntarily dispose of any mortgages.
The Liquidating Company also owns equity interests
(Participations) in three limited partnerships each of which owns
the property underlying a government insured multifamily mortgage
previously owned and sold at a tax gain by the Liquidating
Company. The three Participations, which in the aggregate
represent less than 1% of the Liquidating Company's total assets,
are assumed to be sold on March 31, 1997, which is approximately
10 years from their date of purchase. The properties underlying
the Participations are assumed to be sold at a price calculated
applying a 9% capitalization rate to their projected 1997 net
operating income. Based on estimates of the Adviser, net
operating income on such properties is projected to increase at
an annualized rate of 2% from the 1992 audited financial
information for such properties. Proceeds from the sale of the
properties underlying the Participations are assumed to be
distributed in accordance with the terms of the respective
partnership agreements. Using these assumptions, the Liquidating
<PAGE>
<PAGE>22
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS -
Continued
Company's portion of the proceeds from the sale of the
Participations is expected to be $2,979,900.
<PAGE>
<PAGE>23
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS -
Continued
The Liquidating Company intends to invest proceeds from
scheduled mortgage payments, Voluntary Dispositions and
Involuntary Dispositions in high quality short-term investments
until dividends are paid by Liquidating Company. Based on
current interest rates, the Business Plan assumes a short-term
investment rate of 4.38% for its entire term. Changes in short-
term interest rates will affect the interest income earned on
amounts invested in short-term investments prior to distribution
to shareholders.
All of the Liquidating Company's expenses which are not
directly based on the book value of the Liquidating Company's
assets are assumed to remain substantially the same based on the
Liquidating Company's prior experience, the expected rate of
inflation and the expected reduction in the Liquidating Company's
asset base. Annual fees and mortgage servicing fees, which are
based on the book value of the Liquidating Company's assets, are
assumed to decrease proportionately with decreases in the
Liquidating Company's assets.
Distributions representing ordinary income are expected to
decline over time as assets are liquidated and shareholders
receive return of capital. Additionally, shareholders should
expect the market price of the common stock and the liquidation
value of the Liquidating Company to decrease as the Liquidating
Company liquidates its assets and distributes return of capital
over time to its shareholders.
Based on the foregoing assumptions, including the
assumptions that a current interest rate environment will be
maintained over the term of the Business Plan, the Liquidating
Company expects that an investment in the Liquidating Company
shares made on December 1, 1993 at a price of $9.0 per share
would achieve a total return over the term of the Business Plan
of approximately 4.6%. Based on the foregoing assumptions,
including the assumption that a current interest rate environment
will be maintained over the term of the Business Plan, the
Liquidating Company expects an investment in the Liquidating
Company shares made on April 29, 1994 at a price of $6.125 per
share would achieve a total return over the term of the Business
Plan of approximately 7.5%.
<PAGE>
<PAGE>24
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS -
Continued
Fair Value of Mortgage Investments
----------------------------------
In accordance with the Liquidating Company's implementation
of Statement of Financial Accounting Standards No. 115 "Accounting
for Certain Investments in Debt and Equity Securities" (SFAS 115)
as of December 31, 1993, the Liquidating Company's Investment in
Mortgages is recorded at fair value, as estimated below, as of
March 31, 1994 and December 31, 1993. The difference between the
amortized cost and the fair value of the mortgage investments
represents the net unrealized gains on the Liquidating Company's
mortgage investments and is reported as a separate component of
shareholders' equity.
The fair value of the mortgage investments was based on
quoted market prices.
<TABLE><CAPTION>
As of March 31, 1994
As of December 31, 1993
Amortized Fair Amortized Fair
Cost Value Cost Value
------------ ------------ ----------- -----------
<S> <C> <C> <C> <C>
Investment in mortgages $154,521,856 $182,148,346 $191,745,878 $243,095,642
============ ============ ============ ============
</TABLE>
The net unrealized gains on the Liquidating Company's
mortgage investments decreased as of March 31, 1994. This
decrease was primarily due to a decrease in the mortgage base
resulting from the disposition of 12 mortgage investments in
February 1994. Also contributing to the decrease in the net
unrealized gains was an increase in market interest rates, which
decreases the value of the mortgage investments, as described
above in "Business Plan."
<PAGE>
<PAGE>25
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS -
Continued
<PAGE>
<PAGE>26
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS -
Continued
Liquidity
---------
The Liquidating Company closely monitors its cash flow and
liquidity position in an effort to ensure that sufficient cash is
available for operations and to continue to qualify as a REIT.
The Liquidating Company's cash receipts, which are derived from
scheduled payments of outstanding principal of and interest on,
and proceeds from the disposition of, mortgage investments held
by the Liquidating Company, plus cash receipts from interest on
temporary investments and cash flow received from the Liquidating
Company's investment in limited partnerships, were sufficient for
the three months ended March 31, 1994 and 1993 to meet operating,
investing, and financing cash requirements. It is anticipated
that cash receipts will be sufficient in future periods to meet
similar cash requirements. Cash flow was also sufficient to
provide for the payment of dividends to shareholders. Because
the Liquidating Company is a liquidating entity, a substantial
portion of the dividends paid to shareholders represents return
of capital. For the three months ended March 31, 1994 and 1993,
the Liquidating Company paid dividends of $1.75 and $.62 per
share, respectively, of which approximately $1.14 and $.32 per
share, respectively, were declared as non-taxable dividends to
shareholders for tax purposes. As of March 31, 1994, there were
no material commitments for capital expenditures.
Subject to customary business considerations, there is no
specific limitation on the maximum amount of debt that the
Liquidating Company may incur. The Liquidating Company does not
intend to incur any indebtedness except in connection with the
maintenance of its REIT status.
Cash Flow
---------
Net cash provided by operating activities decreased for the
three months ended March 31, 1994 compared to the three months
ended March 31, 1993 primarily as a result of a decrease in
mortgage investment income and other investment income, as
previously discussed. This decrease was partially offset by a
decrease in interest expense and Annual Fees, as discussed above,
as well as the receipt in the first quarter of 1994 of the
interest accrued on delinquent mortgages.
Net cash provided by investing activities increased for the
three months ended March 31, 1994 as compared to the three months
ended March 31, 1993. This increase was principally due to the
disposition of 12 mortgage investments during the first quarter
of 1994 which generated aggregate net proceeds of approximately
$48.7 million as compared to the disposition of two mortgage
investments during the first quarter of 1993 which generated
aggregate net proceeds of approximately $11.9 million. Also
contributing to the increase in net cash provided by investing
activities was the purchase of other short-term investments of
$78.1 million during the first quarter of 1993.
Net cash used in financing activities increased for the
three months ended March 31, 1994 compared to the three months
ended March 31, 1993 due to an increase in dividends paid to
shareholders attributable to an increase in net proceeds received
from mortgage dispositions. This increase was also due to the
receipt of proceeds from short-term debt of approximately $77.3
million during the three months ended March 31, 1993.
<PAGE>
<PAGE>27
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A report on Form 8-K was filed with the Securities and
Exchange Commission on February 25, 1994, with respect to the
disposition of twelve mortgage investments as described in Notes
1 and 4 of the notes to the financial statements of CRI
Liquidating REIT, Inc., which is incorporated herein by
reference.
<PAGE>
<PAGE>28
SIGNATURE
Pursuant to the requirements of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly
authorized.
CRI Liquidating REIT, Inc.
(Registrant)
May 13, 1994 By:/s/ Cynthia O. Azzara
----------------- -------------------------
Date Cynthia O. Azzara
Chief Financial Officer
<PAGE>
