<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 June 30, 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 August 2, 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 JUNE 30, 1994
Page
----
PART I. Financial Information (Unaudited)
Item 1. Financial Statements
Balance Sheets - June 30, 1994 and
December 31, 1993 . . . . . . . . . . . . . 3
Statements of Income - for the three and six
months ended June 30, 1994 and 1993 . . . . 4
Statement of Changes in Shareholders' Equity -
for the six months ended June 30,
1994 . . . . . . . . . . . . . . . . . . . 5
Statements of Cash Flows - for the six months
ended June 30, 1994 and 1993 . . . . . . . 6
Notes to Financial Statements . . . . . . . . 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . 18
PART II. Other Information
Item 6. Exhibits and Reports on Form 8-K . . . . . . 24
Signature . . . . . . . . . . . . . . . . . . . . . . . 25
<PAGE>
<PAGE>3<TABLE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CRI LIQUIDATING REIT, INC.
BALANCE SHEETS
ASSETS
<CAPTION>
June 30, December 31,
1994 1993
------------ ------------
(Unaudited)
<S> <C> <C>
Investment in mortgages, at
fair value $174,425,446 $243,095,642
Investment in limited
partnerships 316,482 436,090
Cash and cash equivalents 3,121,020 2,907,147
Receivables and other assets 1,647,288 2,175,453
Deferred costs, principally
paid to related parties, net
of accumulated amortization of
$1,538,909 and $1,635,320,
respectively 112,813 312,802
------------ ------------
Total assets $179,623,049 $248,927,134
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Accounts payable and accrued
expenses $ 295,191 $ 429,957
------------ ------------
Commitments and contingencies
Shareholders' equity:
Common stock 304,227 304,227
Net unrealized gains on
investment in mortgages 23,499,693 51,349,764
Additional paid-in capital 155,523,938 196,843,186
------------ ------------
Total shareholders' equity 179,327,858 248,497,177
------------ ------------
Total liabilities and
shareholders' equity $179,623,049 $248,927,134
============ ============
The accompanying notes are an integral part
of these financial statements.
<PAGE>
<PAGE>4
</TABLE>
<TABLE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CRI LIQUIDATING REIT, INC.
STATEMENTS OF INCOME
(Unaudited)
<CAPTION>
For the three months ended
For the six months ended
June 30,
June 30,
---------------------------
---------------------------
1994 1993 1994 1993
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Income:
Mortgage investment income $ 3,828,664 $ 5,509,075 $ 8,121,385 $ 11,342,274
Other investment income 66,707 931,107 349,954 1,456,899
Income from investment
in limited partnerships 61,410 5,175 7,038 120,129
------------ ------------ ------------ ------------
3,956,781 6,445,357 8,478,377 12,919,302
Expenses:
Annual fee to related party 171,346 258,446 365,847 648,243
Interest expense -- 664,486 -- 1,084,580
General and administrative 102,121 258,695 367,414 522,118
Amortization of deferred costs 62,441 66,095 123,337 137,171
Mortgage servicing fees 34,912 49,802 74,359 99,841
------------ ------------ ------------ ------------
370,820 1,297,524 930,957 2,491,953
------------ ------------ ------------ ------------
Income before gains from
mortgage dispositions 3,585,961 5,147,833 7,547,420 10,427,349
Gains from mortgage dispositions 456,640 436,123 12,282,981 2,495,024
------------ ------------ ------------ ------------
Net income $ 4,042,601 $ 5,583,956 $ 19,830,401 $ 12,922,373
============ ============ ============ ============
Net income per share $ .13 $ .18 $ .65 $ .42
============ ============ ============ ============
Weighted average shares outstanding 30,422,711 30,422,711 30,422,711 30,422,711
============ ============ ============ ============
The accompanying notes are an integral part
of these financial statements.
</TABLE>
<PAGE>
<PAGE>5<TABLE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CRI LIQUIDATING REIT, INC.
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
For the six months ended June 30, 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 -- -- -- -- 19,830,401 19,830,401
Dividends (including return of
capital) of $2.01 per share -- -- -- (41,319,248) (19,830,401) (61,149,649)
Adjustment to net unrealized
gains on investment in
mortgages due to mortgage
dispositions -- -- (12,571,917) -- -- (12,571,917)
Adjustment to net unrealized
gains on investment in
mortgages due to market
revaluation -- -- (15,278,154) -- -- (15,278,154)
----------- --------- ------------ ------------ ------------- ------------
Balance, June 30, 1994 30,422,711 $ 304,227 $ 23,499,693 $155,523,938 $ -- $179,327,858
=========== ========= ============ ============ ============= ============
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 six months
ended June 30,
1994 1993
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 19,830,401 $ 12,922,373
Adjustments to reconcile net income to net cash provided
by operating activities:
Amortization of deferred costs 123,337 137,171
Mortgage discount amortization (495,112) (661,370)
Mortgage premium amortization 3,245 3,340
Other short-term investments premium amortization -- 1,740,953
Gains on mortgage dispositions (12,282,981) (2,495,024)
Equity earnings from investment in limited partnerships (7,038) (120,129)
Interest received under the equity method of accounting but
treated as a reduction of investment in limited partnerships -- 308,093
Changes in assets and liabilities:
Decrease (increase) in receivables and other assets 528,165 (391,468)
Decrease in accounts payable and accrued expenses (134,766) (15,063)
Increase in interest payable -- 729,990
------------ ------------
Net cash provided by operating activities 7,565,251 12,158,866
------------ ------------
Cash flows from investing activities:
Proceeds from mortgage dispositions 52,427,900 34,486,424
Purchase of other short-term investments -- (78,110,230)
Receipt of mortgage and other short-term investment principal from
scheduled payments 1,167,073 1,524,820
Decrease in deferred costs 76,652 48,628
Annual return from investment in limited partnerships 126,646 126,645
------------ ------------
Net cash provided by (used in) investing activities 53,798,271 (41,923,713)
------------ ------------
</TABLE>
<PAGE>
<PAGE>7
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
CRI LIQUIDATING REIT, INC.
STATEMENTS OF CASH FLOWS (Continued)
(Unaudited)
<CAPTION>
For the six months
ended June 30,
1994 1993
------------ ------------
<S> <C> <C>
Cash flows from financing activities:
Dividends and return of capital paid to shareholders (61,149,649) (48,351,347)
Proceeds from short-term debt -- 77,292,906
------------ ------------
Net cash (used in) provided by financing activities (61,149,649) 28,941,559
------------ ------------
Net increase (decrease) in cash and cash equivalents 213,873 (823,288)
Cash and cash equivalents, beginning of period 2,907,147 2,557,264
------------ ------------
Cash and cash equivalents, end of period $ 3,121,020 $ 1,733,976
============ ============
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 June 30, 1994, owned a portfolio of 50 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
48 loans insured pursuant to programs of the United States
government through the Federal Housing Administration (FHA) (FHA-
Insured Loans) and 2 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 CRI 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
June 30, 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 (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 (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 six months ended June 30,
1994, the Liquidating Company disposed of thirteen mortgage
investments which constituted approximately 21% of the December
31, 1993 portfolio balance. For the remaining two quarters of
1994, the Business Plan assumes an aggregate disposition of an
additional 4% 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 June 30, 1994, the
carrying value of the mortgage investments on a tax basis was
approximately $136 million; the par value was approximately $184
million; and the fair market value was approximately $174
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 June 30, 1994 and December 31, 1993,
and the results of its operations for the three and six months
ended June 30, 1994 and 1993 and its cash flows for the six
months ended June 30, 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 and six months ended
June 30, 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 June 30, 1994 and December 31, 1993, the Liquidating
Company owned 50 and 63 mortgage investments, respectively. During
the six months ended June 30, 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
Stonewood Village June 1994 Prepayment 3,265,144 3,721,784 456,640 849,443
------------ ------------ ------------ ------------
$ 40,144,919 $ 52,427,900 $ 12,282,981 $ 15,638,104
============ ============ ============ ============
(a) Tax basis income is the basis for determining dividends.
(b) Net of aggregate incentive fees recognized 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
June 30, 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 June 30, 1994
As of December 31, 1993
Amortized Fair Amortized Fair
Cost Value Cost Value
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Investment in mortgages $150,925,753 $174,425,446 $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 June 30, 1994 the following mortgages, classified as Investment
in Mortgages, have been assigned 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. 3,731,704 265,056 669,589
------------ ------------ ------------
$ 3,763,212 $ 261,241 $ 672,322
============ ============ ============
(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 virtually all
of its 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 and six months ended June 30, 1994
and 1993 are as follows:
<TABLE><CAPTION>
For the three months ended
For the six months ended
June 30,
June 30,
---------------------------
---------------------------
1994 1993 1994 1993
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Financial statement net income $ 4,042,601 $ 5,583,956 $ 19,830,401 $ 12,922,373
Adjustments:
Nondeductible expense:
Amortization of deferred costs 62,441 66,095 123,337 137,171
Additional income (loss) due to basis
differences:
Mortgage dispositions 392,803 4,362,582 3,355,123 5,234,462
Reamortization of mortgages 125,599 270,123 254,361 612,946
Amortization of premium-other short-term
investments -- 998,073 -- 1,675,653
Loss from investment in limited
partnerships (42,618) (17,472) (6,347) (135,836)
------------ ------------ ------------ ------------
Tax basis income $ 4,580,826 $ 11,263,357 $ 23,556,875 $ 20,446,769
============ ============ ============ ============
Tax basis income per share $ .15 $ 0.37 $ .77 $ 0.67
============ ============ ============ ============
</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 six months ended June 30,
1994, dividends of $2.01 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
Quarter ended June 30, 1994 0.11 0.03 0.12 0.26 June 20, 1994
------ ------ ------ ------
Year-to-date June 30, 1994 $ 1.25 $ .51 $ .25 $ 2.01
====== ====== ====== ======
</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 and six months ended June 30, 1994 and
1993.
<TABLE><CAPTION>
For the three months ended
For the six months ended
June 30,
June 30,
--------------------------
--------------------------
1994 1993 1994 1993
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Adviser:
-------
Annual fee $ 171,346(c) $ 258,446(c) $ 365,847(c) $ 648,243(c)
Incentive fee (a) -- -- 394,812 201,876
----------- ----------- ----------- -----------
Total $ 171,346 $ 258,446 $ 760,659 $ 850,119
=========== =========== =========== ===========
CRI:
---
Expense reimbursement (b) $ 69,527 $ 67,842 $ 145,613 $ 146,545
=========== =========== =========== ===========
(a) Included as a component of gains from 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 and second quarters of 1994 the
Liquidating Company paid deferred annual fees of $31,279 and $29,068, respectively as compared to $127,819 for
the first quarter of 1993. 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 June 30, 1994 and December 31, 1993, the Liquidating
Company owned 50 and 63 mortgage investments, respectively.
During the six months ended June 30, 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
Stonewood Village June 1994 Prepayment 3,265,144 3,721,784 456,640 849,443
------------ ------------ ------------ ------------
$ 40,144,919 $ 52,427,900 $ 12,282,981 $ 15,638,104
============ ============ ============ ============
(a) Tax basis income is the basis for determining dividends.
(b) Net of aggregate incentive fees recognized 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
Total income decreased for the three and six months ended
June 30, 1994 as compared to the corresponding periods in 1993
primarily due to decreases in mortgage investment income, as
described below.
Mortgage investment income decreased for the three and six
months ended June 30, 1994 as compared to the corresponding
periods in 1993 primarily as a result of a reduction in the
mortgage base resulting from the dispositions of mortgage
investments during 1994 and 1993.
Other investment income decreased for the three and six
months ended June 30, 1994 as compared to the corresponding
periods in 1993. These decreases were 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. These
decreases were partially offset by income earned from the short-
term investment of mortgage disposition proceeds received in
1994.
Total expenses, excluding the Annual Fee, decreased for the
three and six months ended June 30, 1994 from the corresponding
periods in 1993 primarily due to decreases in interest expense.
For the three and six months ended June 30, 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 $75 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 and six months ended
June 30, 1994 from the corresponding periods 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. These decreases were 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 decreases in Annual Fees
were decreases in the deferred component paid for the three and
six months ended June 30, 1994 as compared to the corresponding
periods in 1993. During the first and second quarters of 1994
and the first six months of 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, $29,068 and $127,819, respectively. The amount
paid in the first six months 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 and
six months ended June 30, 1994 as compared to the corresponding
periods in 1993. The gains or losses on mortgage dispositions are
<PAGE>
<PAGE>19
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS -
Continued
based on the number, carrying amounts, and proceeds of mortgage
investments disposed of during the periods. The increase in
gains from mortgage dispositions was primarily due to the sale of
twelve mortgage investments and prepayment of one mortgage
investment in 1994, all of which resulted in financial statement
and tax basis gains. The Adviser disposed of twelve of the
mortgages during the week before an increase in the Federal funds
rate by the Federal Reserve and thereby locked-in gains before
mortgage prices dropped. The thirteen dispositions resulted in
financial statement gains of approximately $12.3 million and tax
basis gains of approximately $15.6 million. This compares to the
disposition of four mortgage investments during the six months
ended June 30, 1993 that generated financial statement gains of
approximately $2.5 million and tax basis gains of approximately
$7.7 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 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 six months ended June 30,
1994, the Liquidating Company disposed of thirteen mortgage
investments which constituted approximately 21% of the December
31, 1993 portfolio balance. For the remaining two quarters of
1994, the Business Plan assumes an aggregate disposition of an
additional 4% 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
June 30, 1994, the carrying value of the mortgage investments on
a tax basis was approximately $136 million; the par value was
approximately $184 million; and the fair market value was
approximately $174 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 the
Liquidating Company 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.
<PAGE>
<PAGE>20
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS -
Continued
During the period from January 1, 1989 through December 31, 1993,
approximately 90% of the proceeds received by the Liquidating
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 June 28, 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
June 28, 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 may voluntarily
dispose of its portfolio would be: first, high to low coupon
non-putable mortgages, then putable mortgages. 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 by applying an approximate 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
<PAGE>
<PAGE>21
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS -
Continued
Participations are assumed to be distributed in accordance with
the terms of the respective partnership agreements. Using these
assumptions, the Liquidating Company's portion of the proceeds
from the sale of the Participations is expected to be
approximately $2,980,000.
In July, 1994 the Liquidating Company received
correspondence from the Local General Partner regarding the
potential purchase of Liquidating Company's partnership interests
in Laurel Investors Limited Partnership. The Liquidating Company
is currently evaluating its alternatives. Although the outcome
of this transaction is unknown, if the Liquidating Company did
sell its partnership interest in Laurel Investors Limited
Partnership, there would not be a material adverse impact.
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 the Liquidating Company. Based on
current interest rates, the Business Plan assumes a short-term
investment rate of 4.53% 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 $9.00 per share
would achieve a total return over the term of the Business Plan
of approximately 4.5%. 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 June 30, 1994 at a price of $5.625 per
share would achieve a total return over the term of the Business
Plan of approximately 11%. The change in the total return is
principally attributable to the change in the interest rate
environment from December, 1993 to June, 1994.
<PAGE>
<PAGE>22
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
June 30, 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 June 30, 1994
As of December 31, 1993
Amortized Fair Amortized Fair
Cost Value Cost Value
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Investment in mortgages $150,925,753 $174,425,446 $191,745,878 $243,095,642
============ ============ ============ ============
</TABLE>
The net unrealized gains on the Liquidating Company's
mortgage investments decreased as of June 30, 1994. This decrease
was primarily due to a decrease in the mortgage base resulting
from the disposition of 13 mortgage investments in 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>23
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 six months ended June 30, 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 six months ended June 30, 1994 and 1993, the
Liquidating Company paid dividends of $2.01 and $1.59 per share,
respectively, of which approximately $1.25 and $.92 per share,
respectively, were declared as non-taxable dividends to
shareholders for tax purposes. As of June 30, 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
six months ended June 30, 1994 compared to the six months ended
June 30, 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 and second quarters of 1994 of the
interest accrued on delinquent mortgages.
Net cash provided by investing activities increased for the
six months ended June 30, 1994 as compared to the six months
ended June 30, 1993. This increase was principally due to the
disposition of thirteen mortgage investments during the first and
second quarters of 1994 which generated aggregate net proceeds of
approximately $52.4 million as compared to the disposition of
four mortgage investments during the first and second quarters of
1993 which generated aggregate net proceeds of approximately
$34.5 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 and second
quarters of 1993.
Net cash used in financing activities increased for the six
months ended June 30, 1994 compared to the six months ended June
30, 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 six months ended June 30, 1993.
<PAGE>
<PAGE>24
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the quarter ended
June 30, 1994.
All other items are not applicable.
<PAGE>
<PAGE>25
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)
August 2, 1994 By: /s/ Cynthia O. Azzara
--------------- -----------------------
Date Cynthia O. Azzara
Chief Financial Officer
<PAGE>
