10-Q 1 0001.txt FORM 10-Q 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, 2000 ------------------ Commission file number 1-11060 ------- AMERICAN INSURED MORTGAGE INVESTORS ------------------------------------------------ (Exact name of registrant as specified in charter) California 13-3180848 ------------------------------- ------------------------------------ (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 [ ] As of September 30, 2000, 10,000,125 depository units of limited partnership interest were outstanding. AMERICAN INSURED MORTGAGE INVESTORS INDEX TO FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 2000
PAGE ---- PART I. Financial Information (Unaudited) Item 1. Financial Statements Balance Sheets - September 30, 2000 (unaudited) and December 31, 1999 4 Statements of Income and Comprehensive Income - for the three and nine months ended September 30, 2000 and 1999 (unaudited) 5 Statement of Changes in Partners' Equity - for the nine months ended September 30, 2000 (unaudited) 6 Statements of Cash Flows - for the nine months ended September 30, 2000 and 1999 (unaudited) 7 Notes to Financial Statements 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 12 Item 2A. Qualitative and Quantitative Disclosures About Market Risk 14 PART II. Other Information Item 6. Exhibits and Reports on Form 8-K 15 Signature 16
PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS AMERICAN INSURED MORTGAGE INVESTORS BALANCE SHEETS
September 30, December 31, 2000 1999 ------------ ------------ (Unaudited) ASSETS Investment in FHA-Insured Loans, at amortized cost, net of unamortized discount: Originated insured mortgages $ 4,890,096 $ 4,936,416 Acquired insured mortgages 7,746,867 7,814,612 ------------ ------------ 12,636,963 12,751,028 Investment in FHA-Insured Certificates, at fair value 12,357,901 12,468,348 Cash and cash equivalents 573,186 982,930 Receivables and other assets 252,215 213,468 ------------ ------------ Total assets $ 25,820,265 $ 26,415,774 ============ ============ LIABILITIES AND PARTNERS' EQUITY Distributions payable $ 514,940 $ 926,891 Accounts payable and accrued expenses 75,747 67,190 ------------ ------------ Total liabilities 590,687 994,081 Partners' equity: Limited partners' equity, 10,000,125 Units authorized, issued and outstanding 28,687,070 28,865,520 General partners' deficit (5,262,060) (5,256,730) Accumulated other comprehensive income 1,804,568 1,812,903 ------------ ------------ Total Partners' equity 25,229,578 25,421,693 ------------ ------------ Total liabilities and partners' equity $ 25,820,265 $ 26,415,774 ============ ============
The accompanying notes are an integral part of these financial statements. PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS AMERICAN INSURED MORTGAGE INVESTORS STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (Unaudited)
For the three months ended For the nine months ended September 30, September 30, ------------------------- ------------------------- 2000 1999 2000 1999 ----------- ----------- ----------- ----------- Income: Mortgage investment income $ 566,592 $ 581,267 $ 1,705,034 $ 1,748,638 Interest and other income 2,940 1,930 9,766 24,743 ----------- ----------- ----------- ----------- 569,532 583,197 1,714,800 1,773,381 ----------- ----------- ----------- ----------- Expenses: Asset management fee to related parties 59,316 60,120 177,948 181,145 General and administrative 54,479 67,934 175,814 198,560 ----------- ----------- ----------- ----------- 113,795 128,054 353,762 379,705 ----------- ----------- ----------- ----------- Net earnings $ 455,737 $ 455,143 $ 1,361,038 $ 1,393,676 =========== =========== =========== =========== Other comprehensive loss 110,720 260,263 (8,335) (187,203) ----------- ----------- ----------- ----------- Comprehensive income $ 566,457 $ 715,406 $ 1,352,703 $ 1,206,473 ----------- ----------- ----------- ----------- Net earnings allocated to: Limited partners - 97.1% $ 442,521 $ 441,944 $ 1,321,568 $ 1,353,259 General Partner - 2.9% 13,216 13,199 39,470 40,417 ----------- ----------- ----------- ----------- $ 455,737 $ 455,143 $ 1,361,038 $ 1,393,676 =========== =========== =========== =========== Net earnings per Unit of limited partnership interest - basic $ 0.04 $ 0.04 $ 0.13 $ 0.14 ====== ====== ====== ======
The accompanying notes are an integral part of these financial statements. PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS AMERICAN INSURED MORTGAGE INVESTORS STATEMENT OF CHANGES IN PARTNERS' EQUITY For the nine months ended September 30, 2000 (Unaudited)
Accumulated Other General Limited Comprehensive Partner Partner Income Total -------------- -------------- -------------- -------------- Balance, December 31, 1999 $ (5,256,730) $ 28,865,520 $ 1,812,903 $ 25,421,693 Net Earnings 39,470 1,321,568 - 1,361,038 Adjustment to unrealized gains (losses) on investments in insured mortgages - - (8,335) (8,335) Distributions paid or accrued of $0.15 per Unit, including return of capital of $0.02 per Unit (44,800) (1,500,018) - (1,544,818) -------------- -------------- -------------- -------------- Balance, September 30, 2000 $ (5,262,060) $ 28,687,070 $ 1,804,568 $ 25,229,578 ============== ============== ============== ============== Limited Partnership Units outstanding - basic, as of September 30, 2000 10,000,125 ==========
The accompanying notes are an integral part of these financial statements. PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS AMERICAN INSURED MORTGAGE INVESTORS STATEMENTS OF CASH FLOWS (Unaudited)
For the nine months ended September 30, 2000 1999 ------------ ------------ Cash flows from operating activities: Net earnings $ 1,361,038 $ 1,393,676 Adjustments to reconcile net earnings to net cash provided by operating activities: Changes in assets and liabilities: (Increase) decrease in receivables and other assets (38,747) 53,433 Increase in accounts payable and accrued expenses 8,557 7,598 ------------ ------------ Net cash provided by operating activities 1,330,848 1,454,707 ------------ ------------ Cash flows from investing activities: Receipt of mortgage principal from scheduled payments 216,177 199,050 Debenture proceeds received from affiliate - 1,148,049 ------------ ------------ Net cash provided by investing activities 216,177 1,347,099 ------------ ------------ Cash flows from financing activities: Distributions paid to partners (1,956,769) (3,192,624) ------------ ------------ Net cash used in financing activities (1,956,769) (3,192,624) ------------ ------------ Net decrease in cash and cash equivalents (409,744) (390,818) Cash and cash equivalents, beginning of period 982,930 958,375 ------------ ------------ Cash and cash equivalents, end of period $ 573,186 $ 567,557 ============ ============
The accompanying notes are an integral part of these financial statements. AMERICAN INSURED MORTGAGE INVESTORS NOTES TO FINANCIAL STATEMENTS (Unaudited) 1. ORGANIZATION American Insured Mortgage Investors (the "Partnership") was formed under the Uniform Limited Partnership Act in the state of California on July 12, 1983. The Partnership Agreement ("Partnership Agreement") states that the Partnership will terminate on December 31, 2008, unless previously terminated under the provisions of the Partnership Agreement. CRIIMI, Inc. (the "General Partner") holds a partnership interest of 2.9% and is a wholly owned subsidiary of CRIIMI MAE Inc. ("CRIIMI MAE"). AIM Acquisition Partners L.P. (the "Advisor") serves as 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, AIM Acquisition, The Goldman Sachs Group, L.P., Sun America Investments, Inc. (successor to Broad, Inc.) and CRI/AIM Investment, L.P., an affiliate of CRIIMI MAE. AIM Acquisition is a Delaware corporation that is primarily owned by Sun America Investments, Inc. and The Goldman Sachs Group, L.P. Under the Advisory Agreement, the Advisor will render 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 will be 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. The Advisor is permitted to delegate the performance of services pursuant to a sub-advisory agreement (the "Sub-Advisory Agreement"). The delegation of such services will not relieve the Advisor of its obligation to perform such services. CRIIMI MAE Services Limited Partnership ("CMSLP"), an affiliate of CRIIMI MAE, manages the Partnership's portfolio, pursuant to the Sub-Advisory Agreement. The general partner of CMSLP is CRIIMI MAE Services, Inc., an affiliate of CRIIMI MAE. The Partnership's investment in mortgages consists of 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) and FHA-insured mortgage loans (FHA-Insured Loans, and together with FHA-Insured Certificates referred to herein as Insured Mortgages). The mortgages underlying the FHA-Insured Certificates and FHA-Insured Loans are non-recourse first liens on multifamily residential developments. On October 5, 1998, CRIIMI MAE, the parent of the General Partner, and CRIIMI MAE Management, Inc., an affiliate of CRIIMI MAE and provider of personnel and administrative services to the Partnership, filed voluntary petitions for relief under chapter 11 of title 11 of the United States Code (the "Bankruptcy Code"). Such bankruptcy filings could result in certain adverse effects to the Partnership. For example, as a debtor-in-possession, CRIIMI MAE will not be permitted to provide any available capital to the General Partner or to the general partner of CMSLP, the Partnership's sub-advisor, without approval from the Bankruptcy Court. Even though this restriction or potential loss of the availability of a potential capital resource could adversely affect the General Partner and the Partnership, CRIIMI MAE has not historically represented a significant source of capital for the General Partner or the Partnership. Such bankruptcy filings could also result in the potential need to replace CRIIMI MAE Management, Inc. as a provider of personnel and administrative services to the Partnership. The United States Bankruptcy Court for the District of Maryland, in Greenbelt, Maryland (the "Bankruptcy Court") held a hearing on August 23, 2000 with respect to the proposed ballots submitted to the Bankruptcy Court to be sent to members of all classes of impaired creditors and equity security holders in connection with the Third Amended Joint Plan of Reorganization (as amended and supplemented by praecipes filed with the Bankruptcy Court on July 13, 14 and 21, 2000, the "Plan"). On August 24, 2000, the Bankruptcy Court entered an order approving the proposed Second Amended Joint Disclosure Statement (as amended and supplemented by praecipes filed with the Bankruptcy Court on July 13, 21, and August 18, 2000, the "Disclosure Statement") and other proposed solicitation materials. The Bankruptcy Court scheduled a confirmation hearing on the Plan for November 15, 2000 and set September 5, 2000 as the voting record date for determining the holders of common stock, preferred stock, 9-1/8 percent senior notes and general unsecured creditors entitled to vote to accept or reject the Plan. CRIIMI MAE and CRIIMI MAE Management, Inc. distributed copies of the Plan, the Proposed Disclosure Statement and other solicitation materials including ballots during the week of September 10, 2000 to members of all classes of impaired creditors and all equity security holders for acceptance or rejection. The votes by impaired classes of creditors and shareholders on the Plan have been tabulated. All impaired classes, which voted on the Plan, voted overwhelmingly to accept the Plan. An affidavit certifying the voting results was filed with the Bankruptcy Court on November 3, 2000. On November 3, 2000, Merrill Lynch, German American Capital Corporation ("GACC") (two of CRIIMI MAE's largest secured creditors) and a shareholder filed objections to confirmation of the Plan. Discussions are continuing in an effort to resolve those objections before the November 15, 2000 confirmation hearing date. There can be no assurance that CRIIMI MAE will reach a mutually acceptable agreement with Merrill Lynch, GACC and the shareholder prior to the confirmation hearing date. The Plan and Disclosure Statement has the support of the Official Committee of Equity Security Holders in the CRIIMI MAE Chapter 11 case, which is a co-proponent of the Plan. Subject to the completion of mutually acceptable documentation, evidencing the secured financing to be provided by the unsecured creditors, the Official Committee of Unsecured Creditors of CRIIMI MAE has agreed to support confirmation of the Plan. The Official Committee of Unsecured Creditors had previously filed its own plan of reorganization and proposed disclosure statement, but has asked the Bankruptcy Court, subject to completion of mutually acceptable debt documentation, to defer consideration of its plan and proposed disclosure statement. CRIIMI MAE, CRIIMI MAE Management, Inc., the Official Committee of Equity Security Holders, and the Official Committee of Unsecured Creditors are now all proceeding jointly toward confirmation of the Plan. There can be no assurance at this time that CRIIMI MAE's Plan will be confirmed and consummated. 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 September 30, 2000 and December 31, 1999, the results of its operations for the three and nine months ended September 30, 2000 and 1999 and its cash flows for the nine months ended September 30, 2000 and 1999. These unaudited financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and note disclosures normally included in annual financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. While the 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 filed on Form 10-K for the year ended December 31, 1999. 3. INVESTMENT IN FHA-INSURED LOANS Listed below is the Partnership's aggregate investment in FHA-Insured Loans:
September 30, December 31, 2000 1999 ------------ ------------ Number of Acquired Insured Mortgages 3 3 Originated Insured Mortgages 1 1 Amortized Cost $ 12,636,963 $ 12,751,028 Face Value 14,757,859 14,941,299 Fair Value 13,987,837 14,215,731
As of November 1, 2000, all of the FHA-Insured Loans are current with respect to payment of principal and interest. In addition to base interest payments from originated insured mortgages, the Partnership is entitled to additional interest based on a percentage of the net cash flow from the underlying development and of the net proceeds from the refinancing, sale or other disposition of the underlying development (referred to as Participations). During the three and nine months ended September 30, 2000 and 1999, the Partnership received nothing from the Participations. These amounts, if any, are included in mortgage investment income on the accompanying statements of income and comprehensive income. 4. INVESTMENT IN FHA-INSURED CERTIFICATES Listed below is the Partnership's aggregate investment in FHA-Insured Certificates:
September 30, December 31, 2000 1999 ------------ ------------ Number of mortgages 8 8 Amortized Cost $ 10,553,333 $ 10,655,445 Face Value 12,660,130 12,835,126 Fair Value 12,357,901 12,468,348
All of the FHA-Insured Certificates were current with respect to the payment of principal and interest as of November 1, 2000. The Partnership no longer receives monthly principal and interest from the mortgage on Fox Run Apartments, as discussed below. In May 2000, the servicer of the mortgage on Fox Run Apartments filed an application for insurance benefits under Section 221. The face value of this mortgage was approximately $1.2 million as of the insurance application date. As of November 1, 2000, the Partnership has not received approval for assignment of this mortgage. Under the Section 221 program of the National Housing Act of 1937, as amended, a mortgagee has the right to assign a mortgage ("put") to FHA at the expiration of 20 years from the date of final endorsement if the mortgage is not in default at such time. Any mortgagee electing to assign an FHA-insured mortgage to FHA will receive, in exchange therefor, HUD debentures having a total face value equal to the then outstanding principal balance of the FHA-insured mortgage plus accrued interest to the date of assignment. These HUD debentures will mature 10 years from the date of assignment and will bear interest at a rate announced semi-annually by HUD in the Federal Register ("going Federal rate") at such date. This assignment procedure is applicable to an insured mortgage, which had a firm or conditional FHA commitment for insurance on or before November 30, 1983. Once the servicer of a mortgage has filed an application for insurance benefits under Section 221, the Partnership will no longer receive the monthly principal and interest on the applicable mortgage. The Partnership expects to receive 99% of the outstanding principal balance of the applicable mortgage, as of the insurance application date, plus accrued interest at the "going Federal rate". The Partnership will recognize a gain or a loss on the assignment once the servicer brings forth a notice from HUD showing approval of the assignment. In general, the Partnership plans to hold the debentures until called or date of maturity, whichever comes first. At that time debenture proceeds will be distributed to Unitholders. 5. DISTRIBUTIONS TO UNITHOLDERS The distributions paid or accrued to Unitholders on a per Unit basis for the nine months ended September 30, 2000 and 1999 are as follows:
Quarter Ended 2000 1999 ------------- -------- -------- March 31, $ 0.05 $ 0.17 (1) June 30, 0.05 0.05 September 30, 0.05 0.05 -------- -------- $ 0.15 $ 0.27 ======== ======== (1) This amount includes approximately $0.12 per Unit due to redemption of debentures received from the assignment of the mortgage on Portervillage I Apartments. This amount was received from an affiliate of the Partnership, American Insured Mortgage Investors - Series 85, L.P. (AIM 85). The debenture was issued to AIM 85, since the mortgage on Portervillage I Apartments was owned 50% by the Partnership and 50% by AIM 85.
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 Insured Mortgages yield a fixed monthly mortgage payment once purchased, the cash distributions paid to the Unitholders will vary during each period due to (1) the fluctuating yields in the short-term money market where 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 (4) changes in the Partnership's operating expenses. As the Partnership continues to liquidate its mortgage investments and investors receive distributions of return of capital and taxable gains, investors should expect a reduction in earnings and distributions due to the decreasing mortgage base. 6. TRANSACTIONS WITH RELATED PARTIES The General Partner and certain affiliated entities have, during the three and nine months ended September 30, 2000 and 1999, earned or received compensation or payments for services from the Partnership as follows:
COMPENSATION PAID OR ACCRUED TO RELATED PARTIES ----------------------------------------------- For the three months For the nine months ended September 30, ended September 30, Capacity in Which ------------------- ------------------- Name of Recipient Served/Item 2000 1999 2000 1999 ----------------- ----------------- -------- -------- -------- -------- CRIIMI, Inc. (1) General Partner/Distribution $ 14,933 $ 14,934 $ 44,800 $ 80,640 AIM Acquisition Advisor/Asset Management Fee 59,316 60,120 177,948 181,145 Partners, L.P. (2) CRIIMI MAE Management, Affiliate of General Partner/ 9,209 8,739 32,682 28,568 Inc. Expense Reimbursement (1) The General Partner, pursuant to the Partnership Agreement, is entitled to receive 2.9% 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 (both as defined in the Partnership Agreement). (2) The Advisor, pursuant to the Partnership Agreement, is entitled to an Asset Management Fee equal to 0.95% of Total Invested Assets (as defined in the Partnership Agreement). CMSLP is entitled to a fee equal to 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 $17,481 and $52,443 for the three and nine months ended September 30, 2000, respectively and $17,718 and $53,385 for the three and nine months ended September 30, 1999, respectively. The limited partner of CMSLP is a wholly owned subsidiary of CRIIMI MAE Inc., which filed for protection under chapter 11 of the Bankruptcy Code.
PART I. FINANCIAL INFORMATION ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FORWARD-LOOKING STATEMENTS. When used in this Quarterly Report on Form 10-Q, the words "believes," "anticipates," "expects," "contemplates," 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 future filings by the Partnership with the Securities and Exchange Commission 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 and (v) defaulted mortgages. 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. General ------- As of September 30, 2000, the Partnership had invested in 12 Insured Mortgage Investments, with an aggregate amortized cost of approximately $23 million, face value of approximately $27 million and fair value of approximately $26 million. All of the FHA-Insured Loans and FHA-Insured Certificates were current with respect to the payment of principal and interest as of November 1, 2000. The Partnership no longer receives monthly principal and interest from the mortgage on Fox Run Apartments, as discussed below. In May 2000, the servicer of the mortgage on Fox Run Apartments filed an application for insurance benefits under Section 221. The face value of this mortgage was approximately $1.2 million as of the insurance application date. As of November 1, 2000, the Partnership has not received approval for assignment of this mortgage. Under the Section 221 program of the National Housing Act of 1937, as amended, a mortgagee has the right to assign a mortgage ("put") to FHA at the expiration of 20 years from the date of final endorsement if the mortgage is not in default at such time. Any mortgagee electing to assign an FHA-insured mortgage to FHA will receive, in exchange therefor, HUD debentures having a total face value equal to the then outstanding principal balance of the FHA-insured mortgage plus accrued interest to the date of assignment. These HUD debentures will mature 10 years from the date of assignment and will bear interest at a rate announced semi-annually by HUD in the Federal Register ("going Federal rate") at such date. This assignment procedure is applicable to an insured mortgage, which had a firm or conditional FHA commitment for insurance on or before November 30, 1983. Once the servicer of a mortgage has filed an application for insurance benefits under Section 221, the Partnership will no longer receive the monthly principal and interest on the applicable mortgage. The Partnership expects to receive 99% of the outstanding principal balance of the applicable mortgage, as of the insurance application date, plus accrued interest at the "going Federal rate". The Partnership will recognize a gain or a loss on the assignment once the servicer brings forth a notice from HUD showing approval of the assignment. In general, the Partnership plans to hold the debentures until called or date of maturity, whichever comes first. At that time debenture proceeds will be distributed to Unitholders. Results of Operations --------------------- Net earnings increased slightly for the three months ended September 30, 2000 and decreased slightly for the nine months ended September 30, 2000, as compared to the corresponding periods in 1999, as discussed below. Mortgage investment income decreased slightly for the three and nine months ended September 30, 2000, as compared to the corresponding periods in 1999, primarily due to the normal amortization of the mortgage base. In addition, the mortgage base decreased due to one mortgage disposition in November 1999 with a principal balance of approximately $382,000. This represents an approximate 1.4% decrease in the aggregate principal balance of the total mortgage portfolio since October 1999. Interest and other income increased for the three months ended September 30, 2000 and decreased for the nine months ended September 30, 2000, as compared to the corresponding periods in 1999, primarily due to the timing of temporary investment of mortgage disposition proceeds prior to distribution. General and administrative expenses decreased for the three and nine months ended September 30, 2000, as compared to the corresponding periods in 1999, primarily due to a decrease in temporary employment costs. Liquidity and Capital Resources ------------------------------- On October 5, 1998, CRIIMI MAE, the parent of the General Partner, and CRIIMI MAE Management, Inc., an affiliate of CRIIMI MAE and provider of personnel and administrative services to the Partnership, filed voluntary petitions for relief under chapter 11 of title 11 of the United States Code (the "Bankruptcy Code"). Such bankruptcy filings could result in certain adverse effects to the Partnership. For example, as a debtor-in-possession, CRIIMI MAE will not be permitted to provide any available capital to the General Partner or to the general partner of CMSLP, the Partnership's sub-advisor, without approval from the Bankruptcy Court. Even though this restriction or potential loss of the availability of a potential capital resource could adversely affect the General Partner and the Partnership, CRIIMI MAE has not historically represented a significant source of capital for the General Partner or the Partnership. Such bankruptcy filings could also result in the potential need to replace CRIIMI MAE Management, Inc. as a provider of personnel and administrative services to the Partnership. The United States Bankruptcy Court for the District of Maryland, in Greenbelt, Maryland (the "Bankruptcy Court") held a hearing on August 23, 2000 with respect to the proposed ballots submitted to the Bankruptcy Court to be sent to members of all classes of impaired creditors and equity security holders in connection with the Third Amended Joint Plan of Reorganization (as amended and supplemented by praecipes filed with the Bankruptcy Court on July 13, 14 and 21, 2000, the "Plan"). On August 24, 2000, the Bankruptcy Court entered an order approving the proposed Second Amended Joint Disclosure Statement (as amended and supplemented by praecipes filed with the Bankruptcy Court on July 13, 21, and August 18, 2000, the "Disclosure Statement") and other proposed solicitation materials. The Bankruptcy Court scheduled a confirmation hearing on the Plan for November 15, 2000 and set September 5, 2000 as the voting record date for determining the holders of common stock, preferred stock, 9-1/8 percent senior notes and general unsecured creditors entitled to vote to accept or reject the Plan. CRIIMI MAE and CRIIMI MAE Management, Inc. distributed copies of the Plan, the Proposed Disclosure Statement and other solicitation materials including ballots during the week of September 10, 2000 to members of all classes of impaired creditors and all equity security holders for acceptance or rejection. The votes by impaired classes of creditors and shareholders on the Plan have been tabulated. All impaired classes, which voted on the Plan, voted overwhelmingly to accept the Plan. An affidavit certifying the voting results was filed with the Bankruptcy Court on November 3, 2000. On November 3, 2000, Merrill Lynch, German American Capital Corporation ("GACC") (two of CRIIMI MAE's largest secured creditors) and a shareholder filed objections to confirmation of the Plan. Discussions are continuing in an effort to resolve those objections before the November 15, 2000 confirmation hearing date. There can be no assurance that CRIIMI MAE will reach a mutually acceptable agreement with Merrill Lynch, GACC and the shareholder prior to the confirmation hearing date. The Plan and Disclosure Statement has the support of the Official Committee of Equity Security Holders in the CRIIMI MAE Chapter 11 case, which is a co-proponent of the Plan. Subject to the completion of mutually acceptable documentation, evidencing the secured financing to be provided by the unsecured creditors, the Official Committee of Unsecured Creditors of CRIIMI MAE has agreed to support confirmation of the Plan. The Official Committee of Unsecured Creditors had previously filed its own plan of reorganization and proposed disclosure statement, but has asked the Bankruptcy Court, subject to completion of mutually acceptable debt documentation, to defer consideration of its plan and proposed disclosure statement. CRIIMI MAE, CRIIMI MAE Management, Inc., the Official Committee of Equity Security Holders, and the Official Committee of Unsecured Creditors are now all proceeding jointly toward confirmation of the Plan. There can be no assurance at this time that CRIIMI MAE's Plan will be confirmed and consummated. 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 nine months of 2000 to meet operating requirements. The basis for paying distributions to Unitholders is net proceeds from Insured Mortgage dispositions, if any, 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 period due to (1) the fluctuating yields in the short-term money market where 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 (4) changes in the Partnership's operating expenses. As the Partnership continues to liquidate its mortgage investments and investors receive distributions of return of capital and taxable gains, investors should expect a reduction in earnings and distributions due to the decreasing mortgage base. Net cash provided by operating activities decreased for the nine months ended September 30, 2000, as compared to the corresponding period in 1999, primarily due to a decrease in mortgage investment income, as discussed previously and the change in receivables and other assets. The change in receivables and other assets is due to a decrease in interest on debenture received from affiliate in 1999, as discussed below, offset by an increase in principal and interest accrued on the mortgage on Fox Run Apartments, as discussed previously. Net cash provided by investing activities decreased for the nine months ended September 30, 2000, as compared to the corresponding period in 1999, primarily due to a decrease in debenture proceeds received from affiliate, as discussed below. Net cash used in financing activities decreased for the nine months ended September 30, 2000, as compared to the corresponding period in 1999, due to a decrease in the amount of distributions paid to partners in the first nine months of 2000 versus the same period in 1999. In 1998, the mortgage on Portervillage I Apartments was assigned to HUD. The assignment proceeds were issued in the form of a 9.5% debenture. This mortgage was owned 50% by the Partnership and 50% by an affiliate of the Partnership, American Insured Mortgage Investors - Series 85, L.P. ("AIM 85"). The debenture, with a face value of $2,296,098, was issued to AIM 85 and earned interest semi-annually on January 1 and July 1. In January 1999, the debenture was redeemed and the net proceeds of approximately $1.1 million were received and distributed by the Partnership. ITEM 2A. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK The Partnership's principal market risk is exposure to changes in interest rates in the U.S. Treasury market, which coupled with the related spread to treasury investors required for the Partnership's Insured Mortgages, will cause fluctuations in the market value of Partnership's assets. Management has determined that there has not been a material change as of September 30, 2000, in market risk from December 31, 1999 as reported in the Partnership's Annual Report on Form 10-K as of December 31, 1999. 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 September 30, 2000. The exhibits filed as part of this report are listed below: Exhibit No. Description ----------- ----------------------- 27 Financial Data Schedule PART II. OTHER INFORMATION 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 (Registrant) By: CRIIMI, Inc. General Partner November 13, 2000 /s/ Cynthia O. Azzara ----------------- --------------------------- Date Cynthia O. Azzara Senior Vice President, Chief Financial Officer and Treasurer