-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RRbE4oLHg2QFaTZgTcDFknVfoVFZsz5dvwRbEv6WP5Uka5Aw4VsEbWdtJ5iE0sl9 HsPYkuRWc2ZTk4fknZcblg== 0000784014-03-000030.txt : 20031113 0000784014-03-000030.hdr.sgml : 20031113 20031113151150 ACCESSION NUMBER: 0000784014-03-000030 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20030930 FILED AS OF DATE: 20031113 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN INSURED MORTGAGE INVESTORS L P SERIES 86 CENTRAL INDEX KEY: 0000784014 STANDARD INDUSTRIAL CLASSIFICATION: INVESTORS, NEC [6799] IRS NUMBER: 132943272 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-15615 FILM NUMBER: 03997724 BUSINESS ADDRESS: STREET 1: 11200 ROCKVILLE PIKE CITY: ROCKVILLE STATE: MD ZIP: 20852 BUSINESS PHONE: 3014689200 MAIL ADDRESS: STREET 1: 11200 ROCKVILLE PIKE CITY: ROCKVILLE STATE: MD ZIP: 20852 10-Q 1 sept03_aim86-10q.txt AIM 86 SEPTEMBER 03 10Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarter ended September 30, 2003 ------------------ Commission file number 1-12704 ------------------- AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 86 ---------------------------------------------------- (Exact name of registrant as specified in charter) Delaware 13-2943272 - -------------------------------- ----------------------------------- (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 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 by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X] As of September 30, 2003, 9,576,290 Depositary Units of Limited Partnership Interest were outstanding. 2 AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 86 INDEX TO FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 2003
PAGE ---- PART I. Financial Information Item 1. Financial Statements Balance Sheets - September 30, 2003 (unaudited) and December 31, 2002 3 Statements of Income and Comprehensive Income - for the three and nine months ended September 30, 2003 and 2002 (unaudited) 4 Statement of Changes in Partners' Equity - for the nine months ended September 30, 2003 (unaudited) 5 Statements of Cash Flows - for the nine months ended September 30, 2003 and 2002 (unaudited) 6 Notes to Financial Statements (unaudited) 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 11 Item 3. Qualitative and Quantitative Disclosures about Market Risk 14 Item 4. Controls and Procedures 14 PART II. Other Information Item 6. Exhibits and Reports on Form 8-K 15 Signature 16
3 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 86 BALANCE SHEETS
September 30, December 31, 2003 2002 ------------- ------------ (Unaudited) ASSETS Investment in FHA-Insured Certificates and GNMA Mortgage-Backed Securities, at fair value Acquired insured mortgages $ 12,990,487 $ 25,038,234 Investment in FHA-Insured Loan, at amortized cost, net of unamortized discount and premium: Originated insured mortgage 4,072,458 4,110,655 Cash and cash equivalents 9,625,114 3,409,202 Receivables and other assets 131,292 214,235 ------------ ------------ Total assets $ 26,819,351 $ 32,772,326 ============ ============ LIABILITIES AND PARTNERS' EQUITY Distributions payable $ 9,465,523 $ 1,510,455 Accounts payable and accrued expenses 90,541 72,313 ------------ ------------ Total liabilities 9,556,064 1,582,768 ------------ ------------ Partners' equity: Limited partners' equity, 15,000,000 Units authorized, 9,576,290 Units issued and outstanding 25,848,317 38,800,534 General partner's deficit (8,553,488) (7,886,129) Accumulated other comprehensive (loss) income (31,542) 275,153 ------------ ------------ Total partners' equity 17,263,287 31,189,558 ------------ ------------ Total liabilities and partners' equity $ 26,819,351 $ 32,772,326 ============ ============
The accompanying notes are an integral part of these financial statements. 4 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 86 STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (Unaudited)
For the three months ended For the nine months ended September 30, September 30, 2003 2002 2003 2002 --------- ---------- ---------- ----------- Income: Mortgage investment income $ 376,524 $ 583,468 $1,400,859 $ 1,853,731 Interest and other income 14,744 13,190 29,922 27,070 --------- ---------- --------- ----------- 391,268 596,658 1,430,781 1,880,801 --------- ---------- ---------- ----------- Expenses: Asset management fee to related parties 44,256 64,290 159,688 205,132 General and administrative 67,496 52,774 195,430 183,924 --------- ---------- ---------- ----------- 111,752 117,064 355,118 389,056 --------- ---------- ---------- ----------- Net earnings before net (loss) gain on mortgage dispositions 279,516 479,594 1,075,663 1,491,745 Net (loss) gain on mortgage dispositions (8,476) 56,880 142,117 --------- ---------- ---------- ----------- Net earnings $ 271,040 $ 479,594 $1,132,543 $ 1,633,862 ========= ========== ========== =========== Other comprehensive (loss) income - adjustment to unrealized gains and losses on investments in insured mortgages (115,129) 583,792 (306,695) 1,532,572 --------- ---------- ---------- ----------- Comprehensive income $ 155,911 $1,063,386 $ 825,848 $ 3,166,434 ========= ========== ========== =========== Net earnings allocated to: Limited partners - 95.1% $ 257,759 $ 456,094 $1,077,048 $ 1,553,803 General Partner - 4.9% 13,281 23,500 55,495 80,059 --------- ---------- ---------- ----------- $ 271,040 $ 479,594 $1,132,543 $ 1,633,862 ========= ========== ========== =========== Net earnings per Unit of limited partnership interest - basic $ 0.03 $ 0.05 $ 0.11 $ 0.16 ========= ========== ========== =========== The accompanying notes are an integral part of these financial statements.
5 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 86 STATEMENT OF CHANGES IN PARTNERS' EQUITY For the nine months ended September 30, 2003 (Unaudited)
Accumulated Other General Limited Comprehensive Partner Partners Income (Loss) Total ------------ ------------ -------------- ------------ Balance, December 31, 2002 $ (7,886,129) $ 38,800,534 $ 275,153 $ 31,189,558 Net earnings 55,495 1,077,048 - 1,132,543 Adjustment to unrealized gains and losses on investments in insured mortgages - - (306,695) (306,695) Distributions paid or accrued of $1.465 per Unit, including return of capital of $1.355 per Unit (722,854) (14,029,265) - (14,752,119) ------------ ------------ --------- ------------ Balance, September 30, 2003 $ (8,553,488) $ 25,848,317 $ (31,542) $ 17,263,287 ============ ============ ========= ============ Limited Partnership Units outstanding - basic, as of September 30, 2003 9,576,290 ============
The accompanying notes are an integral part of these financial statements. 6 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 86 STATEMENTS OF CASH FLOWS (Unaudited)
For the nine months ended September 30, 2003 2002 ---------- ---------- Cash flows from operating activities: Net earnings $1,132,543 $1,633,862 Adjustments to reconcile net earnings to net cash provided by operating activities: Net gain on mortgage dispositions (56,880) (142,117) Changes in assets and liabilities: Increase (decrease) in accounts payable and accrued expenses 18,228 (59,176) Decrease in receivables and other assets 82,943 47,341 ---------- ---------- Net cash provided by operating activities 1,176,834 1,479,910 ---------- ---------- Cash flows from investing activities: Receipt of mortgage principal from scheduled payments 280,113 344,965 Proceeds received from redemption of debenture - 230,670 Proceeds received from mortgage dispositions 11,556,016 5,279,845 ---------- ---------- Net cash provided by investing activities 11,836,129 5,855,480 ---------- ---------- Cash flows used in financing activities Distributions paid to partners (6,797,051) (7,300,539) ---------- ---------- Net increase in cash and cash equivalents 6,215,912 34,851 Cash and cash equivalents, beginning of period 3,409,202 691,264 ---------- ---------- Cash and cash equivalents, end of period $9,625,114 $ 726,115 ========== ==========
The accompanying notes are an integral part of these financial statements. 7 AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 86 NOTES TO FINANCIAL STATEMENTS (Unaudited) 1. ORGANIZATION American Insured Mortgage Investors L.P. - Series 86 (the "Partnership") was formed pursuant to a limited partnership agreement, as amended, ("Partnership Agreement") under the Uniform Limited Partnership Act of the state of Delaware on October 31, 1985. During the period from May 2, 1986 (the initial closing date of the Partnership's public offering) through June 6, 1987 (the termination date of the offering), the Partnership, pursuant to its public offering of 9,576,165 Depository Units of limited partnership interest ("Units"), raised a total of $191,523,300 in gross proceeds. In addition, the initial limited partner contributed $2,500 to the capital of the Partnership in exchange for 125 units of limited partnership interest. CRIIMI, Inc., a wholly-owned subsidiary of CRIIMI MAE Inc. ("CRIIMI MAE"), acts as the General Partner (the "General Partner") for the Partnership and holds a partnership interest of 4.9%. The General Partner provides management and administrative services on behalf of the Partnership. AIM Acquisition Partners L.P. serves as the advisor (the "Advisor") to the Partnership. The general partner of the Advisor is AIM Acquisition Corporation ("AIM Acquisition") and the limited partners include, but are not limited to, The Goldman Sachs Group, L.P., Sun America Investments, Inc. (successor to Broad, Inc.) and CRI/AIM Investment, L.P., a subsidiary of CRIIMI MAE, over which CRIIMI MAE exercises 100% voting control. AIM Acquisition is a Delaware corporation that is primarily owned by Sun America Investments, Inc. and The Goldman Sachs Group, L.P. Pursuant to the terms of certain origination and acquisition services, management services and disposition services agreements between the Advisor and the Partnership (collectively the "Advisory Agreements"), the Advisor renders services to the Partnership, including but not limited to, the management of the Partnership's portfolio of mortgages and the disposition of the Partnership's mortgages. Such services are subject to the review and ultimate authority of the General Partner. However, the General Partner is required to receive the consent of the Advisor prior to taking certain significant actions, including but not limited to the disposition of mortgages, any transaction or agreement with the General Partner or its affiliates, or any material change as to policies regarding distributions or reserves of the Partnership (collectively the "Consent Rights"). The Advisor is permitted and has delegated the performance of services to CRIIMI MAE Services Limited Partnership ("CMSLP"), a subsidiary of CRIIMI MAE, pursuant to a sub-management agreement (the "Sub-Advisory Agreement"). The general partner and limited partner of CMSLP are wholly-owned subsidiaries of CRIIMI MAE. The delegation of such services by the Advisor to CMSLP does not relieve the Advisor of its obligation to perform such services. Furthermore the Advisor has retained its Consent Rights. The General Partner also serves as the General Partner for American Insured Mortgage Investors ("AIM 84"), American Insured Mortgage Investors - Series 85, L.P. ("AIM 85") and American Insured Mortgage Investors L.P. - Series 88 ("AIM 88") and owns general partner interests therein of 2.9%, 3.9% and 4.9%, respectively. The Partnership, AIM 84, AIM 85 and AIM 88 are collectively referred to as the "AIM Limited Partnerships." Prior to December 1994, the Partnership was engaged in the business of originating government insured mortgage loans ("Originated Insured Mortgages") and acquiring government insured mortgage loans ("Acquired Insured Mortgages" and, together with Originated Insured Mortgages, referred to herein as "Insured Mortgages"). In accordance with the terms of the Partnership Agreement, the Partnership is no longer authorized to originate or acquire Insured Mortgages and, consequently, its primary objective is to manage its portfolio of mortgage investments, all of which are insured under Section 221(d)(4) or Section 231 of the National Housing Act of 1937, as amended (the "National Housing Act"). The Partnership Agreement states that the Partnership will terminate on December 31, 2020, unless terminated earlier under the provisions thereof. The Partnership is required, pursuant to the Partnership Agreement, to dispose of its assets prior to this date. Early prepayment of the Partnership's Insured Mortgages or other disposition by 8 the General Partner in accordance with the terms of the Partnership Agreement may effect an early termination and dissolution of the Partnership before the stated termination date. 2. BASIS OF PRESENTATION The Partnership's financial statements are prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States ("GAAP"). The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. In the opinion of the General Partner, the accompanying unaudited financial statements contain all adjustments of a normal recurring nature necessary to present fairly the financial position of the Partnership as of September 30, 2003, the results of its operations for the three and nine months ended September 30, 2003 and 2002, and its cash flows for the nine months ended September 30, 2003 and 2002. 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 GAAP have been condensed or omitted. While the General Partner believes that the disclosures presented are adequate to make the information not misleading, these financial statements should be read in conjunction with the financial statements and the notes to the financial statements included in the Partnership's Annual Report on Form 10-K for the year ended December 31, 2002. 3. INVESTMENT IN INSURED MORTGAGES Listed below is the Partnership's aggregate investment in Insured Mortgages as of September 30, 2003 and December 31, 2002:
September 30, 2003 December 31, 2002 ------------------ ----------------- Originated Mortgages: Number of Mortgages (6) 1 1 Amortized Cost $ 4,072,458 $ 4,110,655 Face Value 3,935,485 3,970,042 Fair Value 3,951,887 3,973,235 Acquired Mortgages: Number of: GNMA Mortgage-Backed Securities (1) through (5) 2 7 FHA-Insured Certificates 1 1 Amortized Cost $ 13,022,029 24,763,081 Face Value 12,926,944 24,642,829 Fair Value 12,990,487 25,038,234
(1) In April 2003, the mortgage on Mountain Village Apartments was prepaid. The Partnership received net proceeds of approximately $1.3 million and recognized a gain of approximately $7,000 during the nine months ended September 30, 2003. A distribution of approximately $0.125 per Unit related to the prepayment of this mortgage was declared in April 2003 and paid to Unitholder in August 2003. (2) In May 2003, the mortgage on Maple Manor Apartments was prepaid. The Partnership received net proceeds of approximately $1.2 million and recognized again of approximately $5,000 during the nine months ended September 30, 2003. A distribution of approximately $0.115 per Unit related to the prepayment of this mortgage was declared in June 2003 and paid to Unitholders in August 2003. (3) In June 2003, the mortgage on Regency Park Apartments was prepaid. The Partnership received net proceeds of approximately $1.3 million and recognized a gain of approximately $30,000 during the nine months ended 9 September 30, 2003. A distribution of approximately $0.13 per Unit related to the prepayment of this mortgage was declared in July 2003 paid to Unitholders in November 2003. (4) In June 2003, the mortgage on Main Street Square was prepaid. The Partnership received net proceeds of approximately $1.3 million and recognized a gain of approximately $24,000 during the nine months ended September 30, 2003. A distribution of approximately $0.13 per Unit related to the prepayment of this mortgage was declared in July 2003 and paid to Unitholders in November 2003. (5) In September 2003, the mortgage on Cypress Cove was prepaid. The Partnership received net proceeds of approximately $6.5 million and recognized a loss of approximately $8,000 during the three and nine months ended September 30, 2003. A distribution of approximately $0.64 per Unit related to the prepayment of this mortgage was declared in September 2003 and paid to Unitholders in November 2003. (6) In late October 2003, the mortgage on Colony Square Apartments was prepaid.The Partnership received net proceeds of approximately $4.0 million and expects to recognize a loss of approximately $76,000 during the fourth quarter of 2003. The Partnership expects to announce a distribution related to the prepayment of this mortgage in November 2003 with payment expected in February 2004. As of November 1, 2003 all of the Partnership's Insured Mortgage investments are current with respect to the payment of principal and interest. 4. DISTRIBUTIONS TO UNITHOLDERS The distributions paid or accrued to Unitholders on a per Unit basis for the nine months ended September 30, 2003 and 2002 are as follows: 2003 2002 ------ ------ Quarter ended March 31 $0.230(1) $0.27(4) Quarter ended June 30 0.295(2) 0.39(5) Quarter ended September 30 0.940(3) 0.06 ------ ----- $1.465 $0.72 ====== ===== (1) This amount includes approximately $0.17 per Unit representing net proceeds from the prepayment of the mortgage on Sunflower Apartments. (2) This amount includes approximately $0.24 per Unit representing net proceeds from the following: (a) approximately $0.125 per Unit related to the prepayment of Mountain Village Apartments and (b) approximately $0.115 per Unit related to the prepayment of the mortgage on Maple Manor Apartments. (3) This amount includes approximately $0.90 per Unit representing net proceeds from the following: (a)approximately $0.13 per Unit related to the prepayment of the mortgage on Main Street Square (b) approximately $0.13 per Unit related to the prepayment of the mortgage on Regency Park Apartments and (c) approximately $0.64 per Unit related to the prepayment of the mortgage on Cypress Cove. (4) This amount includes approximately $0.21 per Unit representing net proceeds from the following: (a) approximately $0.19 per Unit related to the prepayment of the mortgage on Southampton Apartments and (b) approximately $0.02 per Unit related to the redemption of the debenture issued by HUD in exchange for the Spring Lake Village claim. (5) This amount includes approximately $0.33 per Unit representing net proceeds from the prepayment of the mortgage on Hickory Tree Apartments. 10 The basis for paying distributions to Unitholders is net proceeds from mortgage dispositions, if any, and cash flow from operations, which includes regular interest income and principal from Insured Mortgages. Although the Partnership's Insured Mortgages pay a fixed monthly mortgage payment, the cash distributions paid to the Unitholders will vary during each quarter due to (1) the fluctuating yields in the short-term money market in which the monthly mortgage payment receipts are temporarily invested prior to the payment of quarterly distributions, (2) the reduction in the asset base resulting from monthly mortgage payments received or mortgage dispositions, (3) variations in the cash flow attributable to the delinquency or default of Insured Mortgages and professional fees incurred in connection with those Insured Mortgages and (4) changes in the Partnership's operating expenses. As the Partnership continues to liquidate its mortgage investments and Unitholders receive distributions of return of capital and taxable gains, Unitholders should expect a reduction in earnings and distributions due to the decreasing mortgage base. Early prepayment of the Partnership's Insured Mortgages or other disposition by the General Partner in accordance with the terms of the Partnership Agreement are likely to result in reduced operating cash receipts to meet the Partnership's operating expenses, and may effect an early termination and dissolution of the Partnership before the stated termination date of December 31, 2020. Accordingly, Unitholders' yield to maturity on their respective investments in the Partnership may be adversely affected by such early termination of the Partnership. Upon the termination and liquidation of the Partnership, distributions to Unitholders will be made in accordance with the terms of the Partnership Agreement, as amended. A final distribution to Unitholders will be based on the Partnership's remaining net assets, and such distribution to Unitholders is likely to be substantially less than the amount referenced in limited partners' equity in the Partnership's financial statements. 5. TRANSACTIONS WITH RELATED PARTIES The General Partner, CMSLP and certain affiliated entities earned or received compensation or payments for services from the Partnership during the three and nine months ended September 30, 2003 and 2002, as follows: COMPENSATION PAID OR ACCRUED TO RELATED PARTIES ---------------------------------------------------
For the For the three months ended nine months ended September 30, September 30, Name of Recipient Capacity in Which Served/item 2003 2002 2003 2002 - ----------------- ----------------------------- -------- ------- -------- -------- CRIIMI, Inc.(1) General Partner/Distribution $463,811 $29,605 $722,854 $355,259 AIM Acquisition Partners, L.P.(2) Advisor/Asset Management Fee 44,256 64,290 159,688 205,132 CRIIMI MAE Management, Inc.(3) Affiliate of General Partner/Expense Reimbursement 18,000 7,207 43,592 32,745
(1) The General Partner, pursuant to amendments to the Partnership Agreement, is entitled to receive 4.9% of the Partnership's income, loss,capital and distributions, including, without limitation, the Partnership's adjusted cash from operations and proceeds of mortgage prepayments, sales or insurance (as defined in the Partnership Agreement). (2) The Advisor, pursuant to the Partnership Agreement, is entitled to an Asset Management Fee equal to 0.75% of Total Invested Assets (as defined in the Partnership Agreement). CMSLP, pursuant to the Sub-Advisory Agreement, is entitled to a fee of 0.28% of Total Invested Assets from the Advisor's Asset Management Fee. Of the amounts paid to the Advisor, CMSLP earned a fee equal to $16,523 and $59,620 for the three and nine months ended September 30, 2003, respectively, and $24,000 and $76,576 for the three and nine months ended September 30, 2002, respectively. The general partner and limited partner of CMSLP are wholly owned subsidiaries of CRIIMI MAE Inc. (3) CRIIMI MAE Management, Inc., an affiliate of the General Partner, is reimbursed for personnel and administrative services on an actual cost basis. 11 PART I. FINANCIAL INFORMATION ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS FORWARD-LOOKING STATEMENTS. When used in this Quarterly Report on Form 10-Q, the words "believe," "anticipate," "expect," "contemplate," "may," "will," and similar expressions are intended to identify forward-looking statements. Statements looking forward in time are included in this Quarterly Report on Form 10-Q pursuant to the "safe harbor" provision of the Private Securities Litigation Reform Act of 1995. Such statements are subject to certain risks and uncertainties, which could cause actual results to differ materially. Accordingly, the following information contains or may contain forward-looking statements: (1) information included or incorporated by reference in this Quarterly Report on Form 10-Q, including, without limitation, statements made under Item 2, Management's Discussion and Analysis of Financial Condition and Results of Operations, (2) information included or incorporated by reference in prior and future filings by the Partnership with the Securities and Exchange Commission ("SEC") including, without limitation, statements with respect to growth, projected revenues, earnings, returns and yields on its portfolio of mortgage assets, the impact of interest rates, costs and business strategies and plans and (3) information contained in written material, releases and oral statements issued by or on behalf of, the Partnership, including, without limitation, statements with respect to growth, projected revenues, earnings, returns and yields on its portfolio of mortgage assets, the impact of interest rates, costs and business strategies and plans. Factors which may cause actual results to differ materially from those contained in the forward-looking statements identified above include, but are not limited to (i) regulatory and litigation matters, (ii) interest rates, (iii) trends in the economy, (iv) prepayment of mortgages, (v) defaulted mortgages, (vi) errors in servicing defaulted mortgages and (vii) sales of mortgage investments below fair market value. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only of the date hereof. The Partnership undertakes no obligation to publicly revise these forward-looking statements to reflect events or circumstances occurring after the date hereof or to reflect the occurrence of unanticipated events. Mortgage Investments - -------------------- As of September 30, 2003, the Partnership had invested in 4 insured mortgages, with an aggregate amortized cost of approximately $17.1 million, an aggregate face value of approximately $16.9 million and an aggregate fair value of approximately $16.9 million, as discussed below. In late October 2003, the mortgage on Colony Square Apartments was prepaid. The Partnership received net proceeds of approximately $4.0 million and expects to recognize a loss of approximately $76,000 during the fourth quarter of 2003. The Partnership expects to announce a distribution related to the prepayment of this mortgage in November 2003 with payment expected in February 2004. As of November 1, 2003, all of the Partnership's Insured Mortgage investments are current with respect to the payment of principal and interest. Results of Operations - ---------------------- Net earnings decreased by approximately $209,000 and $501,000 for the three and nine months ended September 30, 2003, respectively, as compared to the corresponding periods in 2002, primarily due to a decrease in mortgage investment income, as discussed below. Mortgage investment income decreased by approximately $207,000 and $453,000 for the three and nine months ended September 30, 2003, respectively, as compared to the corresponding periods in 2002, primarily due to a reduction in the mortgage base. The mortgage base decreased due to seven mortgage dispositions with an aggregate principal balance of approximately $14.2 million, representing an approximate 45% decrease in the aggregate principal balance of the total mortgage portfolio since September 2002. Interest and other income increased by approximately $1,600 and $2,900 for the three and nine months ended September 30, 2003, respectively, as compared to the corresponding periods in 2002, 12 primarily due to the timing of temporary investment of mortgage disposition proceeds prior to distribution to Unitholders. Asset management fee to related parties decreased by approximately $20,000 and $45,000 for the three and nine months ended September 30, 2003, respectively, as compared to the corresponding periods in 2002, primarily due to a reduction in the mortgage base, as previously discussed. General and administrative expenses increased by approximately $15,000 and $12,000 for the three and nine months ended September 30, 2003, respectively, as compared to the corresponding period in 2002, primarily due to an increase in legal and audit fees related to the Partnership's Corporate Governance. Net (loss) gain on mortgage dispositions decreased by approximately $8,500 and $85,000 for the three and nine months ended September 30, 2003, respectively, as compared to the corresponding periods in 2002. During the three months ended September 30, 2003, the Partnership recognized a loss of approximately $8,500 from the prepayment of the mortgage on Cypress Cove. During the three months ended September 30, 2002, the Partnership recognized no gains or losses. During the nine months ended September 30, 2003, the Partnership recognized aggregate gains of approximately $65,000 from the prepayment of the mortgages on Mountain Village Apartments, Maple Manor Apartments, Regency Park Apartments and Main Street Square, which were partially offset by the previously discussed loss on Cypress Cove. During the nine months ended September 30, 2002, the Partnership recognized aggregate gains of approximately $116,000 from the prepayment of the mortgages on Southampton Apartments and Hickory Tree Apartments and an additional gain of approximately $26,000 from the disposition of The Villas, a delinquent mortgage coinsured by a third party. Liquidity and Capital Resources - ---------------------------------- The Partnership's operating cash receipts, derived from payments of principal and interest on Insured Mortgages, plus cash receipts from interest on short-term investments, were sufficient during the nine months ended September 30, 2003 to meet operating requirements. The basis for paying distributions to Unitholders is net proceeds from mortgage dispositions, if any, and cash flow from operations, which includes regular interest income and principal from Insured Mortgages. Although the Partnership's Insured Mortgages pay a fixed monthly mortgage payment, the cash distributions paid to the Unitholders will vary during each quarter due to (1) the fluctuating yields in the short-term money market in which the monthly mortgage payment receipts are temporarily invested prior to the payment of quarterly distributions, (2) the reduction in the asset base resulting from monthly mortgage payments received or mortgage dispositions, (3) variations in the cash flow attributable to the delinquency or default of Insured Mortgages and professional fees incurred in connection with those Insured Mortgages and (4) changes in the Partnership's operating expenses. As the Partnership continues to liquidate its mortgage investments and Unitholders receive distributions of return of capital and taxable gains, Unitholders should expect a reduction in earnings and distributions due to the decreasing mortgage base. Early prepayment of the Partnership's Insured Mortgages or other disposition by the General Partner in accordance with the terms of the Partnership Agreement are likely to result in reduced operating cash receipts to meet the Partnership's operating expenses, and may effect an early termination and dissolution of the Partnership before the stated termination date December 31, 2020. Accordingly, Unitholders' yield to maturity on their respective investments in the Partnership may be adversely affected by such early termination of the Partnership. Upon the termination and liquidation of the Partnership, distributions to Unitholders will be made in accordance with the terms of the Partnership Agreement, as amended. A final distribution to Unitholders will be based on the Partnership's remaining net assets, and such distribution to Unitholders is likely to be substantially less than the amount referenced in limited partners' equity in the Partnership's financial statements. 13 Net cash provided by operating activities decreased by approximately $303,000 for the nine months ended September 30, 2003, as compared to the corresponding period in 2002, primarily resulting from a decrease in mortgage investment income, as previously discussed. Net cash provided by investing activities increased by approximately $6.0 million for the nine months ended September 30, 2003, as compared to the corresponding period in 2002, primarily due to an increase in proceeds received from mortgage dispositions. Net cash used in financing activities decreased by approximately $503,000 for the nine months ended September 30, 2003, as compared to the corresponding period in 2002, due to a decrease in the amount of distributions paid to partners in the first nine months of 2003 compared to the same period in 2002. 14 PART I. FINANCIAL INFORMATION ITEM 3. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK The General Partner has determined that there has not been a material change as of September 30, 2003, in market risk from December 31, 2002 as reported in the Partnership's Annual Report on Form 10-K as of December 31, 2002. ITEM 4. CONTROLS AND PROCEDURES Within 90 days prior to the date of filing this quarterly report on Form 10-Q, the General Partner carried out an evaluation, under the supervision and with the participation of the General Partner's management, including the General Partner's Chairman of the Board and Chief Executive Officer (CEO) and the Chief Financial Officer (CFO), of the effectiveness of the design and operation of its disclosure controls and procedures pursuant to Exchange Act Rule 13a-14. Based on that evaluation, the General Partner's CEO and CFO concluded that its disclosure controls and procedures are effective and timely in alerting them to material information relating to the Partnership required to be included in the Partnership's periodic SEC filings. There were no significant changes in the General Partner's internal controls or in other factors that could significantly affect these internal controls subsequent to the date of its most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. 15 PART II. OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits Exhibit No. Purpose ----------- ----------- 31.1 Certification pursuant to the Exchange Act Rule 13a-14(a) from Barry S. Blattman, Chairman of the Board and Chief Executive Officer of the General Partner (Filed herewith). 31.2 Certification pursuant to the Exchange Act Rule 13a-14(a) from Cynthia O. Azzara, Executive Vice President, Chief Financial Officer and Treasurer of the General Partner (Filed herewith). 32.1 Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 from Barry S. Blattman, Chairman of the Board and Chief Executive Officer of the General Partner (Filed herewith). 32.2 Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 from Cynthia O. Azzara, Executive Vice President, Chief Financial Officer and Treasurer of the General Partner (Filed herewith). (b) Reports on Form 8-K Date ----- July 23, 2003 To report a press release issued on July 22, 2003 announcing the July 2003 distribution to the Partnership's Unitholders. August 14, 2003 To report a press release issued on August 13, 2003 announcing the Partnership's second quarter financial results. August 20, 2003 To report a press release issued on August 20, 2003 announcing the August 2003 distribution to the Partnership's Unitholders. September 24, 2003 To report a press release issued on September 19, 2003 announcing the September 2003 distribution to the Partnership's Unitholders and to report a press release issued on September 22, 2003 announcing the ex-dividend date. 16 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 86 (Registrant) By: CRIIMI, Inc. General Partner November 13, 2003 /s/ Cynthia O. Azzara - ----------------- --------------------------- DATE Cynthia O. Azzara Executive Vice President, Chief Financial Officer and Treasurer (Principal Accounting Officer) EX-31 3 aim86_cert-bsb0331.txt AIM86 BARRY S. BLATTMAN CERTIFICATION 31.1 EXHIBIT 31.1 CERTIFICATION I, Barry S. Blattman, certify that: 1. I have reviewed this quarterly report on Form 10-Q of American Insured Mortgage Investors L.P. - Series 86; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls over financial reporting. AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 86 (Registrant) By: CRIIMI, Inc. General Partner /s/ Barry S. Blattman Date: November 13, 2003 -------------------------- Barry S. Blattman Chairman of the Board and Chief Executive Officer EX-31 4 aim86_cert-coa031.txt AIM86 CYNTHIA O. AZZARA CERTIFICATION 31.2 EXHIBIT 31.2 CERTIFICATION I, Cynthia O. Azzara, certify that: 1. I have reviewed this quarterly report on Form 10-Q of American Insured Mortgage Investors L.P. - Series 86; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls over financial reporting. AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 86 (Registrant) By: CRIIMI, Inc. General Partner /s/ Cynthia O. Azzara Date: November 13, 2003 -------------------------- Cynthia O. Azzara Executive Vice President, Chief Financial Officer and Treasurer EX-32 5 aim86_cert-bsb03.txt CERTIFICATION BARRY S. BLATTMAN EXHIBIT 32.1 CERTIFICATION This certification is provided pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and accompanies the quarterly report on Form 10-Q (the "Form 10-Q") for the quarter ended September 30, 2003 of American Insured Mortgage Investors L.P. - - Series 86 (the "Issuer"). I, Barry S. Blattman, Chairman of the Board and Chief Executive Officer, certify that to the best of my knowledge: (i) the Form 10-Q fully complies with the requirements of section 13(a) or section 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a) or 78o(d)); and (ii) the information contained in the Form 10-Q fairly represents, in all material respects, the financial condition and results of operations of the Issuer. AMERICAN INSURED MORTGAGE INVESTORS L.P. -SERIES 86 (Registrant) By: CRIIMI, Inc. General Partner /s/ Barry S. Blattman November 13, 2003 ------------------------- - ------------------ Date Barry S. Blattman Chairman of the Board and Chief Executive Officer A signed original of this written statement required by Section 906 has been provided to the General Partner and will be retained by the General Partner and furnished to the Securities and Exchange Commission or its staff upon request. EX-32 6 aim86_cert-coa03.txt AIM86 CYNTHIA O. AZZARA CERTIFICATION EXHIBIT 32.2 CERTIFICATION This certification is provided pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and accompanies the quarterly report on Form 10-Q (the "Form 10-Q") for the quarter ended September 30, 2003 of American Insured Mortgage Investors L.P. - Series 86 (the "Issuer"). I, Cynthia O. Azzara, Executive Vice President, Chief Financial Officer and Treasurer, certify that to the best of my knowledge: (i) the Form 10-Q fully complies with the requirements of section 13(a) or section 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a) or 78o(d)); and (ii) the information contained in the Form 10-Q fairly represents, in all material respects, the financial condition and results of operations of the Issuer. AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 86 (Registrant) By: CRIIMI, Inc. General Partner /s/ Cynthia O. Azzara November 13, 2003 -------------------------- - ----------------- Date Cynthia O. Azzara Executive Vice President, Chief Financial Officer and Treasurer A signed original of this written statement required by Section 906 has been provided to the General Partner and will be retained by the General Partner and furnished to the Securities and Exchange Commission or its staff upon request. -----END PRIVACY-ENHANCED MESSAGE-----