-----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, Sk+5ilTDbJG+VmvgEgwWRpY1RfIRYizDR79zfVgqTdsehTK1cypdvdXGGcvhaDU1 aNwvAtgh+bCHPpSUO4EIOw== 0000784014-96-000003.txt : 19960807 0000784014-96-000003.hdr.sgml : 19960807 ACCESSION NUMBER: 0000784014-96-000003 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960806 SROS: AMEX 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: 96604368 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 AIM86 10-Q 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 June 30, 1996 ------------------ 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 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 ---- ---- As of August 5, 1996, 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 JUNE 30, 1996 Page ---- PART I. Financial Information Item 1. Financial Statements Balance Sheets - June 30, 1996 (unaudited) and December 31, 1995 . . . . . . . . . . . 3 Statements of Operations - for the three and six months ended June 30, 1996 and 1995 (unaudited) . . . . . . . 4 Statement of Changes in Partners' Equity - for the six months ended June 30, 1996 (unaudited) . . . . . . . . . . . . . 5 Statements of Cash Flows - for the six months ended June 30, 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 . . . . . . . . . . . . . . . . 15 PART II. Other Information Item 6. Exhibits and Reports on Form 8-K . . . . . . 17 Signature . . . . . . . . . . . . . . . . . . . . . . 18 3 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 86 BALANCE SHEETS
June 30, December 31, 1996 1995 -------------- ------------- (Unaudited) ASSETS Investment in FHA-Insured Certificates and GNMA Mortgage-Backed Securities, at fair value: Originated insured mortgages $ 55,874,686 $ 57,776,934 Acquired insured mortgages 40,357,681 41,449,297 -------------- ------------- 96,232,367 99,226,231 Investment in FHA-Insured Loans, at amortized cost, net of unamortized premium and discount: Originated insured mortgages 62,398,598 62,595,492 Acquired insured mortgage 992,260 995,255 -------------- ------------- 63,390,858 63,590,747 Cash and cash equivalents 2,317,549 8,774,654 Investment in affiliate 475,726 475,726 Receivables and other assets 2,947,630 2,470,604 -------------- ------------- Total assets $ 165,364,130 $ 174,537,962 ============== ============= LIABILITIES AND PARTNERS' EQUITY Distributions payable $ 3,020,912 $ 3,323,003 Note payable and due to affiliate 495,962 478,612 Accounts payable and accrued expenses 183,309 153,998 -------------- ------------- Total liabilities 3,700,183 3,955,613 -------------- ------------- Partners' equity: Limited partners' equity 169,072,196 174,986,113 General partner's deficit (1,173,919) (869,206) Unrealized losses on investment in FHA-Insured Certificates and GNMA Mortgage-Backed Securities (6,338,691) (3,941,092) Unrealized gains on investment in FHA- Insured Certificates and GNMA Mortgage- Backed Securities 104,361 406,534 -------------- ------------- Total partners' equity 161,663,947 170,582,349 -------------- ------------- Total liabilities and partners' equity $ 165,364,130 $ 174,537,962 ============== =============
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 OPERATIONS (Unaudited)
For the three months ended For the six months ended June 30, June 30, ---------------------------- ---------------------------- 1996 1995 1996 1995 ------------ ------------ ------------ ------------ Income: Mortgage investment income $ 3,468,561 $ 3,595,228 $ 6,805,923 $ 7,042,362 Interest and other income 64,344 27,056 203,596 54,878 ------------ ------------ ------------ ------------ 3,532,905 3,622,284 7,009,519 7,097,240 ------------ ------------ ------------ ------------ Expenses: Asset management fee to related parties 395,670 410,226 791,340 820,452 General and administrative 148,202 200,449 272,440 334,747 Interest expense to affiliate 8,675 8,675 17,350 17,350 ------------ ------------ ------------ ------------ 552,547 619,350 1,081,130 1,172,549 ------------ ------------ ------------ ------------ Earnings before gain on mortgage disposition 2,980,358 3,002,934 5,928,389 5,924,691 Gain on mortgage disposition -- -- 37,325 -- ------------ ------------ ------------ ------------ Net earnings $ 2,980,358 $ 3,002,934 $ 5,965,714 $ 5,924,691 ============ ============ ============ ============ Net earnings allocated to: Limited partners - 95.1% $ 2,834,320 $ 2,855,790 $ 5,673,394 $ 5,634,381 General partner - 4.9% 146,038 147,144 292,320 290,310 ------------ ------------ ------------ ------------ $ 2,980,358 $ 3,002,934 $ 5,965,714 $ 5,924,691 ============ ============ ============ ============ Net earnings per Limited Partnership Unit $ 0.29 $ 0.30 $ 0.59 $ 0.59 ============ ============ ============ ============ 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 six months ended June 30, 1996 (Unaudited)
Unrealized Unrealized Gains on Losses on Investment Investment in FHA-Insured in FHA-Insured Certificates Certificates and GNMA and GNMA Mortgage- Mortgage- General Limited Backed Backed Partner Partners Securities Securities Total ------------- ------------- ------------- ------------ ------------ Balance, December 31, 1995 $ (869,206) $ 174,986,113 $ 406,534 $ (3,941,092) $170,582,349 Net earnings 292,320 5,673,394 -- -- 5,965,714 Distributions paid or accrued of $1.21 per Unit, including return of of capital of $0.62 per Unit (597,033) (11,587,311) -- -- (12,184,344) Adjustment to unrealized gains (losses) on investment in FHA-Insured Certificates and GNMA- Mortgage-Backed Securities -- -- (302,173) (2,397,599) (2,699,772) ------------- ------------- ------------- ------------ ------------ Balance, June 30, 1996 $ (1,173,919) $ 169,072,196 $ 104,361 $ (6,338,691) $161,663,947 ============= ============= ============= ============ ============ Limited Partnership Units outstanding - June 30, 1996 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 six months ended June 30, 1996 1995 ------------ ------------ Cash flows from operating activities: Net earnings $ 5,965,714 $ 5,924,691 Adjustments to reconcile net earnings to net cash provided by operating activities: Gain on mortgage disposition (37,325) -- Changes in assets and liabilities: Increase in note payable and due to affiliate 17,350 17,350 Increase (decrease) in accounts payable and accrued expenses 29,311 (81,894) Increase in receivables and other assets (477,026) (66,349) ------------ ------------ Net cash provided by operating activities 5,498,024 5,793,798 ------------ ------------ Cash flows from investing activities: Proceeds from mortgage disposition 37,325 -- Receipt of principal from scheduled payments 493,981 554,362 ------------ ------------ Net cash provided by investing activities 531,306 554,362 ------------ ------------ Cash flows from financing activities: Distributions paid to partners (12,486,435) (6,041,823) ------------ ------------ Net cash used in financing activities (12,486,435) (6,041,823) ------------ ------------ Net (decrease) increase in cash and cash equivalents (6,457,105) 306,337 Cash and cash equivalents, beginning of period 8,774,654 2,833,820 ------------ ------------ Cash and cash equivalents, end of period $ 2,317,549 $ 3,140,157 ============ ============
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 under the Uniform Limited Partnership Act of the state of Delaware on October 31, 1985. The Partnership's reinvestment period expired on December 31, 1994. After the expiration of the reinvestment period, the Partnership was required (subject to the conditions set forth in the Partnership Agreement) to distribute net proceeds from mortgage dispositions to its Unitholders. The Partnership Agreement states that the Partnership will terminate on December 31, 2020, unless previously terminated under the provisions of the Partnership Agreement. Effective September 6, 1991, CRIIMI, Inc. (the General Partner) succeeded the former general partners to become the sole general partner of the Partnership. CRIIMI, Inc., is a wholly owned subsidiary of CRIIMI MAE Inc. (CRIIMI MAE). AIM Acquisition Partners L.P. (the Advisor) serves as the advisor of the Partnership. The general partner of the Advisor is AIM Acquisition Corporation and the limited partners include an affiliate of CRIIMI MAE (and through June 30, 1995, an affiliate of C.R.I., Inc. (CRI)). Effective September 6, 1991 and through June 30, 1995, a sub-advisory agreement (the Sub-advisory Agreement) existed whereby CRI/AIM Management, Inc., an affiliate of CRI, managed the Partnership's portfolio. In connection with the transaction in which CRIIMI MAE became a self-administered real estate investment trust (REIT) on June 30, 1995, CRIIMI MAE Services Limited Partnership, an affiliate of CRIIMI MAE, acquired the Sub-advisory Agreement. As a result of this transaction, CRIIMI MAE Services Limited Partnership manages the Partnership's portfolio. These transactions had no effect on the Partnership's financial statements. The Partnership's investment in mortgages includes participation certificates evidencing a 100% undivided beneficial interest in government insured multifamily mortgages issued or sold pursuant to Federal Housing Administration (FHA) programs (FHA-Insured Certificates), mortgage-backed securities guaranteed by the Government National Mortgage Association (GNMA) (GNMA Mortgage-Backed Securities) and FHA-insured mortgage loans (FHA-Insured Loans). The mortgages underlying the FHA-Insured Certificates, GNMA Mortgage- Backed Securities and FHA-Insured Loans are non-recourse first liens on multifamily residential developments or retirement homes. 2. BASIS OF PRESENTATION 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 June 30, 1996 and December 31, 1995 and the results of its operations for the three and six months ended June 30, 1996 and 1995 and its cash flows for the six months ended June 30, 1996 and 1995. 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 financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. While the General Partner 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 to the financial statements included in the 8 AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 86 NOTES TO FINANCIAL STATEMENTS (Unaudited) 2. BASIS OF PRESENTATION - Continued Partnership's Annual Report filed on Form 10-K for the year ended December 31, 1995. 3. INVESTMENT IN FHA-INSURED CERTIFICATES AND GNMA MORTGAGE-BACKED SECURITIES The following is a discussion of the Partnership's investment in FHA- Insured Certificates and GNMA Mortgage-Backed Securities as of June 30, 1996 and December 31, 1995: Fully Insured GNMA Mortgage-Backed Securities and FHA-Insured Certificates ---------------------------------------------- As of June 30, 1996 and December 31, 1995, the Partnership's investment in fully-insured acquired insured mortgages, carried at fair value, consisted of ten GNMA Mortgage-Backed Securities and two FHA-Insured Certificates with an aggregate amortized cost of $40,944,574 and $41,127,351, respectively, an aggregate face value of $40,885,758 and $41,067,493, respectively, and an aggregate fair value of $40,357,681 and $41,449,297, respectively. As of July 31, 1996, all of the fully insured FHA-Insured Certificates and GNMA Mortgage-Backed Securities were current with respect to payment of principal and interest. Originated Coinsured FHA-Insured Certificates --------------------------------------------- As discussed in the Partnership's Annual Report on Form 10-K for the year ended December 31, 1995, under the United States Department of Housing and Urban Development (HUD) coinsurance program, both HUD and the coinsurance lender are responsible for paying a portion of the insurance benefits if a mortgagor defaults and the sale of the development collateralizing the mortgage produces insufficient net proceeds to repay the mortgage obligation. In such case, the coinsurance lender will be liable to the Partnership for the first part of such loss in an amount up to 5% of the outstanding principal balance of the mortgage as of the date foreclosure proceedings are instituted or the deed is acquired in lieu of foreclosure. For any loss greater than 5% of the outstanding principal balance, the responsibility for paying the insurance benefits will be borne on a pro-rata basis, 85% by HUD and 15% by the coinsurance lender. As of June 30, 1996 and December 31, 1995, the former managing general partner, on behalf of the Partnership, had invested in seven FHA-Insured Certificates secured by coinsured mortgages. As of June 30, 1996, two of the seven FHA-Insured Certificates secured by coinsured mortgages are coinsured by an unaffiliated third party coinsurance lender, The Patrician Mortgage Company (Patrician), under the HUD coinsurance program. 1. Coinsured by third party ------------------------ As of June 30, 1996, the two originated coinsured mortgages which are coinsured by Patrician, The Villas and St. Charles Place - Phase II, were delinquent with respect to the payment of principal and interest. The following is a discussion of those mortgage investments. As of June 30, 1996 and December 31, 1995, the Partnership's investment in the mortgage on The Villas had an amortized cost of $15,583,356 and $15,635,379, respectively, a face value of $15,817,065 9 AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 86 NOTES TO FINANCIAL STATEMENTS (Unaudited) 3. INVESTMENT IN FHA-INSURED CERTIFICATES AND GNMA MORTGAGE-BACKED SECURITIES - Continued and $15,869,089, respectively, and a fair value of $14,768,120 and $15,173,465, respectively. As of July 24, 1996, the mortgagor has made payments of principal and interest due on the original mortgage through August 1995, and has made payments of principal and interest due under a modification agreement through August 1993. Patrician is litigating the case in bankruptcy court while pursuing negotiations on a modification agreement with the borrower. The Partnership's investment in the mortgage on St. Charles Place- Phase II had an amortized cost equal to its face value of $3,060,569 and $3,068,173 as of June 30, 1996 and December 31, 1995, respectively. As of June 30, 1996 and December 31, 1995, this mortgage had a fair value of $2,856,714 and $2,933,205, respectively. These amounts represent the Partnership's approximate 45% ownership interest in the mortgage. The remaining 55% ownership interest is held by American Insured Mortgage Investors L.P. - Series 88, an affiliate of the Partnership. As of July 24, 1996, the mortgagor has made payments of principal and interest due on the mortgage through May 1995 to the Partnership. Patrician is litigating the case in bankruptcy court while pursuing negotiations on a modification agreement with the borrower. The General Partner intends to continue to oversee the Partnership's interest in these mortgages to ensure that Patrician meets its coinsurance obligations. The General Partner's assessment of the realizability of The Villas and St. Charles Place-Phase II mortgages is based on the most recent information available, and to the extent these conditions change or additional information becomes available, then the General Partner's assessment may change. However, the General Partner does not believe that there would be a material adverse impact on the Partnership's financial condition or its results of operations should Patrician be unable to comply with its full coinsurance obligation. 2. Coinsured by affiliate ---------------------- As of June 30, 1996 and December 31, 1995, the Partnership held investments in five FHA-Insured Certificates secured by coinsured mortgages, where the coinsurance lender is Integrated Funding, Inc. (IFI), an affiliate of the Partnership. As of July 31, 1996, these five IFI coinsured mortgages, as shown in the table below, were current with respect to the payment of principal and interest. The mortgage on Spring Lake Village, which had been previously delinquent, had been modified a second time as of February 1996. The interest rate on this mortgage was reduced to 6% through December 1996, increasing to 6.75% for 1997 and 7% for all subsequent years. Delinquent principal and interest payments from September 1, 1995 through December 1, 1995 have been deferred with quarterly payments to be paid out of available cash flow on the deferred amount. No payments have been made on the deferred amount due to insufficient cash flows. The impact of this modification will result in a decrease in mortgage interest income for the first two years of the 10 AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 86 NOTES TO FINANCIAL STATEMENTS (Unaudited) 3. INVESTMENT IN FHA-INSURED CERTIFICATES AND GNMA MORTGAGE-BACKED SECURITIES - Continued modification. The General Partner believes there is adequate collateral value underlying these coinsured mortgages. Accordingly, no loan losses were recognized on these mortgages during the six months ended June 30, 1996 and 1995. As of June 30, 1996 and December 31, 1995, these five investments had an aggregate fair value of $38,249,852 and $39,670,264, respectively. 11 AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 86 NOTES TO FINANCIAL STATEMENTS (Unaudited) 3. INVESTMENT IN FHA-INSURED CERTIFICATES AND GNMA MORTGAGE-BACKED SECURITIES - Continued
Amortized Face Amortized Face Cost Value Cost Value June 30, June 30, December 31, December 31, 1996 1996 1995 1995 ------------- ------------- ------------ ------------ Pembrook Apartments $ 15,476,591 $ 14,879,680 $ 15,521,458 $ 14,918,958 Spring Lake Village 5,047,885 4,956,778 4,984,151 4,984,151 Carmen Drive Estates 4,951,753 4,861,982 4,966,036 4,875,403 Woodbine at Lakewood Apartments 5,194,491 5,006,398 5,211,526 5,021,478 Woodland Hills Apartments 12,207,478 11,784,811 12,246,715 11,819,789
In connection with the FHA-Insured Certificates secured by coinsured mortgages, the Partnership has sought, in addition to base interest payments, additional interest (commonly termed Participations) based on a percentage of the net cash flow from the development and the net proceeds from the refinancing, sale or other disposition of the underlying development. All of the FHA-Insured Certificates secured by coinsured mortgages contain such Participations. During the three and six months ended June 30, 1996, the Partnership received additional interest of $42,799 and $110,253, respectively, from the Participations. During the three and six months ended June 30, 1995, the Partnership received additional interest of $76,431 from the Participations. These amounts are included in mortgage investment income on the accompanying statements of operations. 12 AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 86 NOTES TO FINANCIAL STATEMENTS (Unaudited) 4. INVESTMENT IN FHA-INSURED LOANS ------------------------------- The Partnership's investment in fully insured FHA-Insured Loans consisted of seven originated insured mortgages and one acquired insured mortgage as of June 30, 1996 and December 31, 1995. As of June 30, 1996 and December 31, 1995, these eight mortgage investments had an aggregate amortized cost of $63,390,858 and $63,590,747, respectively, an aggregate face value of $61,128,493 and $61,305,615 respectively, and an aggregate fair value of $61,647,793 and $63,212,800, respectively. In December 1995, the Partnership received net proceeds of approximately $6.2 million from the prepayment of the mortgage on Lakewood Villas, a fully insured FHA-Insured Loan, and recognized a gain of $5,208 for the year ended December 31, 1995. Additionally, in January 1996, the Partnership received additional proceeds of $37,325 in connection with the final settlement of this prepayment, which was recognized as additional gain during the six months ended June 30, 1996. The net disposition proceeds of $0.61 per unit were distributed to Unitholders on May 1, 1996. As of July 31, 1996, all of the FHA-Insured Loans were current with respect to payment of principal and interest. In addition to base interest payments, the Partnership is entitled to Participations on certain of the FHA-Insured Loans. During the three and six months ended June 30, 1996, the Partnership received additional interest of $120,376 and $140,815, respectively, from the Participations. During the three and six months ended June 30, 1995, the Partnership received additional interest of $38,574 and $73,357, respectively, from the Participations. These amounts, if any, are included in mortgage investment income on the accompanying statements of operations. 5. DISTRIBUTIONS TO UNITHOLDERS The distributions paid or accrued to Unitholders on a per Unit basis for the six months ended June 30, 1996 and 1995 are as follows: 13 AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 86 NOTES TO FINANCIAL STATEMENTS (Unaudited) 5. DISTRIBUTIONS TO UNITHOLDERS - Continued 1996 1995 --------- --------- Quarter ended March 31, $ 0.91(1) $ 0.26(2) Quarter ended June 30, 0.30(2) 0.34(3) --------- --------- $ 1.21 $ 0.60 ========= ========= (1) This amount includes approximately $0.61 cents per Unit return of capital from the prepayment of the mortgage on Lakewood Villas, and $0.03 per unit representing previously undistributed accrued interest received from two delinquent mortgages. (2) This amount includes approximately $0.03 per Unit representing previously undistributed accrued interest received from two delinquent mortgages. (3) This amount includes approximately $0.11 per Unit representing previously undistributed accrued interest received from five delinquent mortgages. The basis for paying distributions to Unitholders is net proceeds from mortgage dispositions and cash flow from operations, which includes regular interest income and principal from insured mortgages. Although insured mortgages yield a fixed monthly mortgage payment once purchased, the cash distributions paid to the Unitholders will vary during each quarter 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 distributions, (2) the reduction in the asset base and monthly mortgage payments due to 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 and foreclosure costs incurred in connection with those insured mortgages and (4) variations in the Partnership's operating expenses. 6. TRANSACTIONS WITH RELATED PARTIES The General Partner and certain affiliated entities, during the six months ended June 30, 1996 and 1995, earned or received compensation or payments for services from the Partnership as follows: 14 AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 86 NOTES TO FINANCIAL STATEMENTS (Unaudited) 6. TRANSACTIONS WITH RELATED PARTIES - Continued
COMPENSATION PAID OR ACCRUED TO RELATED PARTIES ---------------------------------------------- For the three months For the six months Capacity in Which ended June 30, ended June 30, Name of Recipient Served/Item 1996 1995 1996 1995 - ----------------- ---------------------------- -------- -------- -------- -------- CRIIMI, Inc. General Partner/Distribution $148,025 $167,761 $597,033 $296,049 AIM Acquisition Advisor/Asset Management Fee 395,670 410,226 791,340 820,452 Partners, L.P. (1) CRI(2) Affiliate of General Partner/ Expense Reimbursement -- 30,936 -- 50,568 CRIIMI MAE Affiliate of General Partner/ Management, Inc.(2) Expense Reimbursement 37,136 -- 57,280 -- (1) The Advisor, pursuant to the Partnership Agreement, effective October 1, 1991, is entitled to an Asset Management Fee equal to 0.95% of Total Invested Assets (as defined in the Partnership Agreement). The sub-advisor to the Partnership (the Sub-advisor) is entitled to a fee of 0.28% of Total Invested Assets. CRI/AIM Management, Inc., which acted as the Sub-advisor through June 30, 1995, earned a fee equal to $120,900 and $241,800, for the three and six months ended June 30, 1995, respectively. As discussed in note 1, CRIIMI MAE Services Limited Partnership now serves as the Sub-advisor. Of the amounts paid to the Advisor, CRIIMI MAE Services Limited Partnership earned a fee equal to $116,610 and $233,220, for the three and six months ended June 30, 1996, respectively. (2) Prior to CRIIMI MAE becoming a self-administered REIT, amounts were paid to CRI as reimbursement for expenses incurred prior to June 30, 1995 on behalf of the General Partner and Partnership. The transaction in which CRIIMI MAE became a self-administered REIT had no impact on the payments required to be made by the Partnership, other than that the expense reimbursement previously paid by the Partnership to CRI in connection with the provision of services by the Sub-advisor are, effective June 30, 1995, paid to a wholly-owned subsidiary of CRIIMI MAE, CRIIMI MAE Management, Inc.
15 PART I. FINANCIAL INFORMATION ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Introduction - ------------ The Partnership's Management's Discussion and Analysis of Financial Condition and Results of Operations contains statements that may be considered forward looking. These statements contain a number of risks and uncertainties as discussed herein and in the Partnership's reports filed with the Securities and Exchange Commission that could cause actual results to differ materially. General - ------- As of June 30, 1996, the Partnership had invested in 27 insured mortgages, with an aggregate amortized cost of approximately $166 million, an aggregate face value of approximately $162 million and an aggregate fair value of approximately $158 million, as discussed below. As of July 31, 1996, all of the fully insured FHA-Insured Certificates, GNMA Mortgage Backed Securities and FHA-Insured Loans were current with respect to payment of principal and interest. As of July 31, 1996, two of the seven coinsured FHA-Insured Certificates were delinquent with respect to payment of principal and interest. As discussed in Note 3 to the financial statements, management does not anticipate that these delinquencies will have a material adverse impact on the Partnership's financial statements. Results of Operations - --------------------- Net earnings did not change significantly for the three and six months ended June 30, 1996 as compared to the corresponding periods in 1995. During the first quarter of 1996, the Partnership received additional proceeds of approximately $37,000 related to the December 1995 prepayment of the mortgage on Lakewood Villas. The increase in short term investment income during those periods resulting from the temporary investment of proceeds from the Lakewood Villas mortgage prepayment was offset by a reduction in mortgage investment income due to the decrease in the mortgage base. Asset management fees decreased for the three and six months ended June 30, 1996 as compared to the corresponding periods in 1995 due to the decrease in the mortgage base as a result of the prepayment of the mortgage on Lakewood Villas. General and administrative expenses decreased for the three and six months ended June 30, 1996 as compared to the corresponding periods in 1995. These decreases are primarily attributable to a decrease in professional fees as a result of the resolution of disputed mortgage servicing rights for three coinsured mortgages during the three months ended June 30, 1995. Gain on mortgage disposition increased for the six months ended June 30, 1996, due to the additional gain recognized from the Lakewood Villas prepayment, as previously discussed. No mortgages were disposed of during the six months ended June 30, 1995. 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 first six months of 1996 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 16 PART I. FINANCIAL INFORMATION ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued regular interest income and principal from insured mortgages. Although insured mortgages yield a fixed monthly mortgage payment once purchased, the cash distributions paid to the Unitholders will vary during each quarter 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 distributions, (2) the reduction in the asset base and monthly mortgage payments due to 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 and foreclosure costs incurred in connection with those insured mortgages and (4) variations in the Partnership's operating expenses. Net cash provided by operating activities decreased for the six months ended June 30, 1996 as compared to the corresponding period in 1995. This decrease was primarily due to an increase in receivables and other assets due to delinquent mortgage payments receivable from the mortgagors of the mortgages on The Villas and St. Charles Place Phase II. Net cash provided by investing activities decreased for the six months ended June 30, 1996 as compared to the corresponding period in 1995 due primarily to a reduction in scheduled principal payments resulting from the decrease in the mortgage base, which was partially offset by proceeds from the prepayment of the mortgage on Lakewood Villas. Net cash used in financing activities increased for the six months ended June 30, 1996 as compared to the corresponding period in 1995. This increase was due to an increase in distributions to Unitholders as a result of the prepayment of the mortgage on Lakewood Villas during the fourth quarter of 1995. The net disposition proceeds of approximately $0.61 per Unit were distributed to Unitholders on May 1, 1996. 17 PART II. OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K No reports on Form 8-K were filed with the Securities and Exchange Commission during the quarter ended June 30, 1996. The exhibits filed as part of this report are listed below: Exhibit No. Description ---------- ----------- 27 Financial Data Schedule 18 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. AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 86 (Registrant) By: CRIIMI, Inc. General Partner August 5, 1996 /s/ Cynthia O. Azzara - --------------------------- ------------------------- DATE Cynthia O. Azzara Principal Financial and Accounting Officer EX-27 2
5 THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH QUARTERLY REPORT ON FORM 10-Q. 1,000 6-MOS DEC-31-1996 JAN-01-1996 JUN-30-1996 2,318 96,232 66,338 0 0 0 0 0 165,364 3,700 0 0 0 0 161,664 165,364 0 7,047 0 0 1,081 0 0 5,966 0 5,966 0 0 0 5,966 .59 0
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