<PAGE>1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended March 31, 1996
--------------
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) 816-2300
- -----------------------------------------------------------------
(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 the latest practicable date.
Class Outstanding at May 3, 1996
- ---------------------------- -----------------------------
Common Stock, $.01 par value 30,422,711
<PAGE>2
CRI LIQUIDATING REIT, INC.
INDEX TO FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 1996
Page
----
PART I. Financial Information
Item 1. Financial Statements
Balance Sheets - March 31, 1996 (unaudited)
and December 31, 1995 . . . . . . . . . . . 3
Statements of Income - for the three
months ended March 31, 1996 and 1995
(unaudited) . . . . . . . . . . . . . . . 4
Statement of Changes in Shareholders'
Equity - for the three months ended
March 31, 1996 (unaudited) . . . . . . . . 5
Statements of Cash Flows - for the three
months ended March 31, 1996 and 1995
(unaudited) . . . . . . . . . . . . . . . . 6
Notes to Financial Statements (unaudited) . . 7
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations . . . . . . . . . . . . . . . 12
PART II Other Information
Item 6. Exhibits and Reports on Form 8-K . . . . . . 16
Signature . . . . . . . . . . . . . . . . . . . . . . 17
<PAGE>3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CRI LIQUIDATING REIT, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
------------- --------------
(unaudited)
<S> <C> <C>
ASSETS
Investment in mortgages, at fair value $ 55,298,130 $114,685,204
Cash and cash equivalents 4,012,860 3,740,437
Receivables and other assets 567,768 1,085,930
------------ ------------
Total assets $ 59,878,758 $119,511,571
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Accounts payable and accrued expenses $ 198,568 $ 234,593
------------ ------------
Commitments and contingencies
Shareholders' equity:
Common stock 304,227 304,227
Net unrealized gains on investment
in mortgages 15,944,300 28,011,840
Additional paid-in capital 43,431,663 90,960,911
------------ ------------
Total shareholders' equity 59,680,190 119,276,978
------------ ------------
Total liabilities and
shareholders' equity $ 59,878,758 $119,511,571
============ ============
The accompanying notes are an integral part
of these financial statements.
</TABLE>
<PAGE>4
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CRI LIQUIDATING REIT, INC.
STATEMENTS OF INCOME
(unaudited)
<TABLE>
<CAPTION>
For the three months ended
March 31,
1996 1995
------------ ------------
<S> <C> <C>
Income:
Mortgage investment income $ 1,457,334 $ 2,586,525
Other investment income 649,935 683,795
------------ ------------
2,107,269 3,270,320
------------ ------------
Expenses:
Annual fee to related party 171,116 129,874
General and administrative 120,844 154,471
Mortgage servicing fees 9,478 17,594
Amortization of deferred costs 7,264 8,987
------------ ------------
308,702 310,926
------------ ------------
Income before mortgage dispositions 1,798,567 2,959,394
Mortgage dispositions:
Gains 9,692,244 1,752,243
Losses -- (173,379)
------------ ------------
Net income $ 11,490,811 $ 4,538,258
============ ============
Net income per share $ 0.38 $ 0.15
============ ============
Weighted average shares outstanding 30,422,711 30,422,711
============ ============
The accompanying notes are an integral part
of these financial statements.
</TABLE>
<PAGE>5
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, 1996
(unaudited)
<TABLE>
<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, 1995 30,422,711 $ 304,227 $ 28,011,840 $ 90,960,911 $ -- $119,276,978
Net income -- -- -- -- 11,490,811 11,490,811
Dividends of $0.38 per share -- -- -- -- (11,490,811) (11,490,811)
Return of capital of $1.56
per share -- -- -- (47,529,248) -- (47,529,248)
Adjustment to net unrealized
gains on investment in
mortgages -- -- (12,067,540) -- -- (12,067,540)
----------- --------- ------------ ------------ ------------- ------------
Balance, March 31, 1996 30,422,711 $ 304,227 $ 15,944,300 $ 43,431,663 $ -- $ 59,680,190
=========== ========= ============ ============ ============= ============
The accompanying notes are an integral part
of these financial statements.
</TABLE>
<PAGE>6
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CRI LIQUIDATING REIT, INC.
STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
For the three months ended
March 31,
1996 1995
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 11,490,811 $ 4,538,258
Adjustments to reconcile net income to net
cash provided by operating activities:
Amortization of deferred costs 7,264 8,987
Mortgage discount/premium amortization (107,970) (157,726)
Gains/losses on mortgage dispositions (9,692,244) (1,578,864)
Other operating activities (63,323) (29,881)
Changes in assets and liabilities:
Decrease in receivables and other
assets 497,859 525,692
(Decrease) increase in accounts
payable and accrued expenses (36,025) 58,024
------------ ------------
Net cash provided by operating
activities 2,096,372 3,364,490
------------ ------------
Cash flows from investing activities:
Proceeds from mortgage dispositions 56,948,053 49,720,952
Receipt of mortgage principal from
scheduled payments 171,695 301,889
Decrease in deferred costs 13,039 16,463
Annual return from investment in limited
partnerships 63,323 63,323
------------ ------------
Net cash provided by investing
activities 57,196,110 50,102,627
------------ ------------
Cash flows from financing activities:
Dividends and return of capital paid to
shareholders (59,020,059) (52,935,517)
------------ ------------
Net cash used in financing activities (59,020,059) (52,935,517)
------------ ------------
Net increase in cash and cash equivalents 272,423 531,600
Cash and cash equivalents, beginning of
period 3,740,437 3,294,161
------------ ------------
Cash and cash equivalents, end of period $ 4,012,860 $ 3,825,761
============ ============
The accompanying notes are an integral part
of these financial statements.
</TABLE>
<PAGE>7
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 owns United States
government insured and guaranteed mortgage investments secured by multifamily
housing complexes located throughout the United States (Government Insured
Multifamily Mortgages). 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 Liquidating Company is governed by a board of directors (the Board of
Directors) which includes the two shareholders of CRI. The Board of Directors
has engaged CRI Insured Mortgage Associates Adviser Limited Partnership (the
Adviser) to act in the capacity of adviser to the Liquidating Company. The
Adviser's general partner is CRI, and its limited partners include the
shareholders of CRI. The Adviser (1) manages the Liquidating Company's assets
with the goal of maximizing the returns to shareholders and (2) conducts the
day-to-day operations of the Liquidating Company. The Adviser receives fees in
connection with the administration and operation of the Liquidating Company.
The Adviser also formerly acted in a similar capacity for CRIIMI MAE Inc.
(CRIIMI MAE), a REIT which owns 57% of the Liquidating Company's outstanding
common stock. However, effective June 30, 1995, CRIIMI MAE became a self-
administered, full service mortgage company and, as a result, the Adviser no
longer advises CRIIMI MAE.
The Liquidating Company intends to dispose of its existing Government
Insured Multifamily Mortgages by the end of 1997 through an orderly liquidation
as described in a business plan (the Business Plan) which was approved by the
Liquidating Company's Board of Directors. The Business Plan is updated for
movements in interest rates and assumes that the portfolio will be liquidated
through a combination of defaults on or prepayments of (collectively,
Involuntary Dispositions) and sales of (Voluntary Dispositions) Government
Insured Multifamily Mortgages.
As discussed further in Note 5, during the three months ended March 31,
1996, in accordance with the Business Plan, the Liquidating Company sold 11
mortgage investments, representing approximately 52% of the tax basis carrying
value of the portfolio as of December 31, 1995. The Business Plan assumes 6% of
the December 31, 1995 tax basis carrying value will be disposed of through
Involuntary Dispositions in both 1996 and 1997 with the remaining mortgage
investments being disposed of through Voluntary Dispositions during 1997.
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 Multifamily Mortgage will be disposed of by the
Liquidating Company or the amount of proceeds the Liquidating Company would
receive from any such disposition.
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, 1996 and December 31, 1995,
and the results of its operations and cash flows for the three months ended
March 31, 1996 and 1995.
These unaudited financial statements have been prepared pursuant to the
<PAGE>8
CRI LIQUIDATING REIT, INC.
NOTES TO FINANCIAL STATEMENTS
(unaudited)
2. Basis of Presentation - Continued
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, 1995.
3. Summary of Significant Accounting Policies
Reclassification
- ----------------
Certain amounts in the income statement and the statement of cash flows for
the three months ended March 31, 1995 have been reclassified to conform to the
1996 presentation.
4. Transactions with Related Parties
Below is a summary of the amounts paid or accrued to related parties during
the three months ended March 31, 1996 and 1995.
<TABLE>
<CAPTION>
For the three months ended
March 31,
1996 1995
------------ ------------
<S> <C> <C>
Adviser:
- -------
Annual fee $ 171,116(c) $ 129,874(c)
Incentive fee 568,638(a) --
------------ ------------
Total $ 739,754 $ 129,874
============ ============
Expense reimbursement (b)(d):
CRI $ -- $ 69,421
CRIIMI MAE Management, Inc. 53,161 --
------------ ------------
$ 53,161 $ 69,421
============ ============
(a) Included as a component of net 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 certain specified performance goals during the
three months ended March 31, 1996 and 1995, the Liquidating Company paid
deferred annual fees during the three months ended March 31, 1996 and 1995
of $108,809 and $28,467, respectively. The amount paid for the three
months ended March 31, 1996 included $86,739 paid for the last three
quarters of 1995.
(d) Effective June 30, 1995, pursuant to a reimbursement agreement between
CRIIMI MAE and the Adviser, the reimbursements previously paid to CRI in
connection with services provided by the Adviser, are paid to CRIIMI MAE
Management, Inc., an affiliate of CRIIMI MAE.
<PAGE>9
CRI LIQUIDATING REIT, INC.
NOTES TO FINANCIAL STATEMENTS
(unaudited)
5. Investment in Mortgages
As of March 31, 1996 and December 31, 1995, the Liquidating Company owned
11 and 22 mortgage investments, respectively. As of March 31, 1996, these
mortgage investments have a weighted average net coupon rate of approximately
7.4%, a weighted average net effective interest rate of approximately 11.3% and
a weighted average remaining term based on amortized cost of approximately 26
years. This compares to a weighted average net coupon rate of approximately
7.7%, a weighted average net effective interest rate of approximately 10.7% and
a weighted average remaining term based on amortized cost of approximately 27
years as of December 31, 1995.
In accordance with Statement of Financial Accounting Standards No. 115
"Accounting for Certain Investments in Debt and Equity Securities" (SFAS 115),
the Liquidating Company's Investment in Mortgages is recorded at fair value, as
estimated below, as of March 31, 1996 and December 31, 1995. 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.
<PAGE>10
CRI LIQUIDATING REIT, INC.
NOTES TO FINANCIAL STATEMENTS
(unaudited)
As of March 31, 1996 As of December 31, 1995
Amortized Fair Amortized Fair
Cost Value Cost Value
------------ ------------ ------------ ------------
Investment in mortgages $ 39,353,830 $ 55,298,130 $ 86,673,364 $114,685,204
============ ============ ============ ============
As previously stated, during the three months ended March 31, 1996, the
Liquidating Company disposed of 11 mortgage investments with an aggregate
amortized cost of approximately $47 million, which constituted approximately 52%
of the December 31, 1995 tax basis portfolio balance. The 11 dispositions
resulted in financial statement gains of approximately $9.7 million and tax
basis gains of approximately $14.5 million.
6. Reconciliation of Financial Statement Net Income to Tax
Basis Income
On an annual basis, the Liquidating Company expects to distribute to its
shareholders virtually all of its tax basis income.
Reconciliations of the financial statement net income to the tax basis
income for the three months ended March 31, 1996 and 1995 are as follows:
</TABLE>
<TABLE><CAPTION>
For the three months ended
March 31,
1996 1995
------------ ------------
<S> <C> <C>
Financial Statement net income $ 11,490,811 $ 4,538,258
Adjustments:
Nondeductible expense:
Amortization of deferred costs 4,957 6,724
Additional income (loss) due to basis
differences:
Mortgage dispositions 4,790,004 7,877,249
Reamortization of mortgages 8,367 49,027
Loss from investment in
limited partnerships (73,872) (43,251)
------------ ------------
Tax basis income $ 16,220,267 $ 12,428,007
============ ============
Tax basis income per share $ 0.53 $ 0.41
============ ============
</TABLE>
Differences in the financial statement net income and the tax basis income
principally relate to differences in the tax bases of assets and liabilities and
their related financial reporting amounts resulting from the Merger.
7. Dividends to Shareholders
For the three months ended March 31, 1996, dividends of $1.94 per share
were paid to shareholders. The composition of the dividend shown below remains
subject to year-end adjustment:
<PAGE>11
CRI LIQUIDATING REIT, INC.
NOTES TO FINANCIAL STATEMENTS
(unaudited)
7. Dividends to Shareholders - Continued
<TABLE><CAPTION>
Non-taxable Capital Ordinary
Dividend Gain Income Total Record Date
----------- ------- -------- ------- ------------------
<S> <C> <C> <C> <C> <C>
Quarter ended
March 31, 1996 $ 1.41 $ 0.47 $ 0.06 $ 1.94 March 18, 1996
=========== ======= ======== =======
</TABLE>
<PAGE>12
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
- -------
CRI Liquidating REIT, Inc. (the Liquidating Company), formed in November
1989, is a finite-life, self-liquidating real estate investment trust (REIT)
which owns United States government insured and guaranteed mortgage investments
secured by multifamily housing complexes located throughout the United States
(Government Insured Multifamily Mortgages). Pursuant to its business plan (the
Business Plan), which was approved by the board of directors (the Board of
Directors), the Liquidating Company intends to dispose of its existing
investments by the end of 1997 and does not intend to acquire any additional
mortgage investments. The Liquidating Company's shares trade on the New York
Stock Exchange under the trading symbol CFR.
The Board of Directors includes the two shareholders of C.R.I., Inc. (CRI).
The Board of Directors has engaged CRI Insured Mortgage Associates Adviser
Limited Partnership (the Adviser) to act in the capacity of adviser to the
Liquidating Company. The Adviser's general partner is CRI, and its limited
partners include the shareholders of CRI. The Adviser (i) manages the
Liquidating Company's assets with the goal of maximizing the returns to
shareholders and (ii) conducts the day-to-day operations of the Liquidating
Company. The Adviser receives fees in connection with the administration and
operation of the Liquidating Company. The Adviser also formerly acted in a
similar capacity for CRIIMI MAE Inc. (CRIIMI MAE), a REIT which owns
approximately 57% of the Liquidating Company's outstanding common stock.
However, effective June 30, 1995, CRIIMI MAE became a self-administered full
service mortgage company and, as a result, the Adviser no longer advises CRIIMI
MAE.
Business Plan
- -------------
Pursuant to the Business Plan, the Liquidating Company intends to dispose
of its existing Government Insured Multifamily Mortgages by the end of 1997
through an orderly liquidation. The Business Plan is updated for movements in
interest rates and assumes that the portfolio will be liquidated through a
combination of defaults on, or prepayments of (collectively, Involuntary
Dispositions) and sales of (Voluntary Dispositions) Government Insured
Multifamily Mortgages.
During the three months ended March 31, 1996, the Liquidating Company
disposed of 11 mortgage investments which constituted approximately 52% of the
December 31, 1995 tax basis carrying value. The dispositions generated net
proceeds of approximately $57 million and resulted in financial statement gains
of approximately $9.7 million and tax basis gains of approximately $14.5
million. The Business Plan assumes 6% of the December 31, 1995 tax basis
carrying value will be disposed of through Involuntary Dispositions in both 1996
and 1997 with the remaining mortgage investments being disposed of through
Voluntary Dispositions during 1997.
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 Multifamily Mortgage 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.
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
<PAGE>13
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued
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 assumptions used in the Business Plan, including the
assumptions that the interest rate environment as of March 31, 1996 will be
maintained over the remaining 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 4.8%. Based on the foregoing assumptions,
including the assumption that the current interest rate environment will be
maintained over the remaining term of the Business Plan, the Liquidating Company
expects an investment in the Liquidating Company shares made on March 29, 1996
at a price of $3.75 per share would achieve a total return over the remaining
term of the Business Plan of approximately 13.0%.
Results of Operations
- ---------------------
1996 Versus 1995
- ----------------
For the three months ended March 31, 1996, total income decreased by $1.2
million or 36% to $2.1 million from $3.3 million for the corresponding period in
1995. This decrease was due primarily to a reduction in mortgage investment
income, as discussed below.
Mortgage investment income decreased by $1.1 million or 44% to $1.5 million
for the three months ended March 31, 1996 from $2.6 million for the
corresponding period in 1995. This decrease was principally the result of a
reduction in the mortgage base resulting from the disposition of mortgage
investments during 1995 and 1996. It is not anticipated that the nature of
income from mortgage investments resulting from fixed payments of principal and
interest or the expenses related to the ordinary administration of such mortgage
investments will differ materially in future periods. However, mortgage
dispositions will reduce the recurring mortgage income in future periods.
Total expenses remained substantially unchanged for the three months ended
March 31, 1996 as compared to the corresponding period in 1995. Although
general and administrative expenses and mortgage servicing fees decreased, these
decreases were partially offset by an increase in the annual fee paid to the
Adviser, as discussed below.
General and administrative expenses decreased by approximately $34,000 or
22% to approximately $121,000 for the three months ended March 31, 1996 from
approximately $154,000 for the corresponding period in 1995. This decrease was
primarily the result of a reduction in payroll and related expenses and
professional fees resulting from a reduction in the mortgage base during 1995
and 1996, as discussed above.
<PAGE>14
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued
The annual fee to related party increased by approximately $41,000 or 32%
to approximately $171,000 for the three months ended March 31, 1996 from
approximately $130,000 for the corresponding period in 1995. This increase was
primarily the result of achieving the carryover CRIIMI I target yield during the
three months ended March 31, 1996 which resulted in the payment of deferred
management fees for the first quarter of 1996 and the last three quarters of
1995. Partially offsetting the increase in the payment of deferred annual
fees, was a decrease in the base component of the annual fee due to the
reduction in the Liquidating Company's mortgage base, as the Liquidating Company
effects the Business Plan to liquidate by 1997.
Mortgage servicing fees decreased by approximately $8,000 or 46% to
approximately $9,000 for the three months ended March 31, 1996 from
approximately $18,000 for the corresponding period in 1995 due to the reduction
in the Liquidating Company's mortgage base.
Net gains on mortgage dispositions increased by $8.1 million to $9.7
million for the three months ended March 31, 1996 from $1.6 million for the
corresponding period in 1995. The gains or losses on mortgage dispositions are
based on the number, carrying amounts and proceeds of mortgage investments
disposed of during the period. The proceeds realized from the disposition of a
mortgage investment are based on the net coupon rates of the specific mortgage
investments disposed of in relation to prevailing long-term interest rates at
the date of disposition. The increase in gains from mortgage dispositions was
primarily due to the sale of 11 mortgage investments with a weighted average net
coupon rate of approximately 8.2% in 1996, which resulted in financial statement
gains of approximately $9.7 million and tax basis gains of approximately $14.5
million. This compares to the disposition of 21 mortgage investments with a
weighted average net coupon rate of approximately 7.1% during the corresponding
period in 1995, which generated net financial statement gains of approximately
$1.6 million and tax basis gains of approximately $9.5 million.
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 were sufficient for the three months ended March 31, 1996 and 1995
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 the 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, 1996 and
1995, the Liquidating Company paid dividends of $1.94 and $1.74 per share,
respectively, of which approximately $1.56 and $1.59 per share, respectively,
represented return of capital for financial statement purposes. For tax
purposes, the portion representing a non-taxable dividend for the three months
ended March 31, 1996 and 1995 was approximately $1.41 and $1.33, respectively.
As of March 31, 1996, there were no commitments for capital expenditures.
Although the mortgage investments yield a fixed monthly mortgage payment
once purchased, the cash dividends paid to shareholders may vary during each
period due to (1) the fluctuating yields in the short-term money market where
the monthly mortgage payments received are temporarily invested prior to the
payment of quarterly dividends, (2) the reduction in the asset base and monthly
mortgage payments due to monthly mortgage payments received or mortgage
<PAGE>15
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued
dispositions, (3) variations in the cash flow received from the Participations,
and (4) changes in the Liquidating Company's operating expenses. Mortgage
dispositions may increase the return to shareholders for a period, although
neither the timing nor the amount can be predicted.
Decreases in market interest rates could result in the prepayment of
certain mortgage investments. Although decreases in interest rates could
increase prepayment levels of mortgages on single-family dwellings, the
Liquidating Company's experience with mortgages on multifamily dwellings has
been that decreases in interest rates do not necessarily result in increased
levels of prepayments primarily due to lockouts (i.e., prepayment prohibitions),
prepayment penalties on existing financing or difficulties in obtaining
refinancing. Decreases in occupancy levels, rental rates or value of any
property underlying a mortgage investment may result in the mortgagor being
unable or unwilling to make required payments on the mortgage and thereby
defaulting. Whether by prepayment, sale or assignment, the proceeds of a
disposition of a mortgage investment acquired at a discount are expected to
exceed the carrying amount of the mortgage for financial statement purposes,
while the proceeds from the disposition of a mortgage investment acquired at
par, near par or at a premium may be slightly less than, the same as or slightly
more than, the financial statement carrying amount of the mortgage. However, the
proceeds of any mortgage disposition, based on current information, including
the current interest rate environment, is expected to exceed the carrying amount
of the mortgage on a tax basis and, therefore, result in a tax gain.
Changes in interest rates may affect the proceeds received through
Voluntary Dispositions by increasing the value of the portfolio in the event of
decreases in Treasury Rates or decreasing the value of the portfolio in the
event of increases in Treasury Rates (assuming the interest rate differential
between Treasury Rates and the yields on Government Insured Multifamily
Mortgages remains constant).
Borrowing Policy
- ----------------
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.
Cash Flow
- ---------
Net cash provided by operating activities decreased for the three months
ended March 31, 1996 as compared to the corresponding period in 1995 primarily
as a result of a decrease in mortgage investment income due to the reduction in
the mortgage base, as previously discussed.
Net cash provided by investing activities increased for 1996 as compared to
the corresponding period in 1995. This increase was principally due to an
increase in proceeds from mortgage dispositions from approximately $49.7 million
for the three months ended March 31, 1995 to approximately $56.9 million for the
corresponding period in 1996.
Net cash used in financing activities increased for the three months ended
March 31, 1996 as compared to the corresponding period in 1995 due to an
increase in dividends paid to shareholders as a result of the increase in
proceeds from mortgage dispositions and the reduction in the mortgage base.
<PAGE>16
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 March 31, 1996.
The exhibits filed as part of this report are listed below:
Exhibit Number Description
-------------- -----------
27 Financial Data Schedule
<PAGE>17
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Registrant has duly caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized.
CRI LIQUIDATING REIT, INC.
May 3, 1996 /s/ Cynthia O. Azzara
- ----------------------- -------------------------
DATE Cynthia O. Azzara
Senior Vice President,
Principal Accounting
Officer and Chief
Financial Officer
PAGE>18
The Quarterly Report to the Securities and Exchange Commission on Form 10-Q is
available to shareholders and may be obtained by writing:
Investor Services/CRI Liquidating REIT, Inc.
11200 Rockville Pike
Rockville, Maryland 20852
CRI Liquidating REIT, Inc. shares are traded on the New York Stock Exchange
under the symbol CFR.<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTANS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE QUARTERLY REPORT ON FORM 10-Q AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH QUARTERLY REPORT ON FORM 10-Q.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 4,013
<SECURITIES> 55,298
<RECEIVABLES> 568
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 59,879
<CURRENT-LIABILITIES> 199
<BONDS> 0
0
0
<COMMON> 304
<OTHER-SE> 59,376
<TOTAL-LIABILITY-AND-EQUITY> 59,879
<SALES> 0
<TOTAL-REVENUES> 11,800
<CGS> 0
<TOTAL-COSTS> 309
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 11,491
<INCOME-TAX> 0
<INCOME-CONTINUING> 11,491
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,491
<EPS-PRIMARY> .38
<EPS-DILUTED> 0
</TABLE>
