-----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, Nzcr02jqcTmz86gsIYpZ+6V3V/os35ADPJlyFf5O/aDiAsWiMUIxpj5vIWKVG5Tp J53NFL3v9BebVWyD16riPQ== 0000724533-99-000002.txt : 19990816 0000724533-99-000002.hdr.sgml : 19990816 ACCESSION NUMBER: 0000724533-99-000002 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19990813 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN INSURED MORTGAGE INVESTORS CENTRAL INDEX KEY: 0000724533 STANDARD INDUSTRIAL CLASSIFICATION: INVESTORS, NEC [6799] IRS NUMBER: 133180848 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-11060 FILM NUMBER: 99687875 BUSINESS ADDRESS: STREET 1: 11200 ROCKVILLE PIKE CITY: ROCKVILLE STATE: MD ZIP: 20852 BUSINESS PHONE: 3012310275 MAIL ADDRESS: STREET 1: 11200 ROCKVILLE PIKE CITY: ROCKVILLE STATE: MD ZIP: 20852 10-Q 1 AIM 84 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, 1999 ------------- 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 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 June 30, 1999, 10,000,125 depository units of limited partnership interest were outstanding. 2 AMERICAN INSURED MORTGAGE INVESTORS INDEX TO FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1999 PAGE ---- PART I. Financial Information (Unaudited) Item 1. Financial Statements Balance Sheets - June 30, 1999 (unaudited) and December 31, 1998.................... 3 Statements of Income and Comprehensive Income - for the three and six months ended June 30, 1999 and 1998 (unaudited)................. 4 Statement of Changes in Partners' Equity - for the six months ended June 30, 1999 (unaudited)......................... 5 Statements of Cash Flows - for the six months ended June 30, 1999 and 1998 (unaudited).............................. 6 Notes to Financial Statements.............. 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations............................... 11 Item 2A. Qualitative and Quantitative Disclosures About Market Risk. . . . . . . . . . . 15 PART II. Other Information Item 6. Exhibits and Reports on Form 8-K........... 16 Signature............................................ 17 3 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS AMERICAN INSURED MORTGAGE INVESTORS BALANCE SHEETS
June 30, December 31, 1999 1998 ----------- -------------- (Unaudited) ASSETS Investment in FHA-Insured Loans, at amortized cost, net of unamortized discount: Originated Insured Mortgages $ 4,965,838 $ 4,994,145 Acquired Insured Mortgages 7,856,842 7,896,870 ------------- ------------- 12,822,680 12,891,015 Investment in FHA-Insured Certificates, at fair value 12,947,881 13,458,100 Cash and cash equivalents 556,122 958,375 Due from Affiliate -- 1,148,049 Receivables and other assets 216,410 279,302 ------------- ------------- Total assets $ 26,543,093 $ 28,734,841 ============= ============= LIABILITIES AND PARTNERS' EQUITY Distributions payable $ 514,940 $ 926,891 Accounts payable and accrued expenses 52,930 58,060 ------------ ------------- Total liabilities 567,870 984,951 ------------ ------------- Partners' equity: Limited partners' equity, 10,000,125 Units authorized, issued and outstanding 29,307,694 30,596,406 General partner's deficit (5,243,525) (5,205,036) Accumulated other comprehensive income 1,911,054 2,358,520 ------------- ------------- Total partners' equity 25,975,223 27,749,890 ------------- ------------- Total liabilities and partners' equity $ 26,543,093 $ 28,734,841 ============= ============= The accompanying notes are an integral part of these financial statements.
4 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 six months ended June 30, June 30, -------------------------- -------------------------- 1999 1998 1999 1998 ------------ ------------ ------------ ----------- Income: Mortgage investment income $ 582,893 $ 799,377 $ 1,167,371 $ 1,673,496 Interest and other income 8,137 37,801 22,813 50,681 ----------- ----------- ------------ ------------ 591,030 837,178 1,190,184 1,724,177 ----------- ----------- ------------ ------------ Expenses: Asset management fee to related parties 60,120 85,773 121,025 171,546 General and administrative 52,080 53,329 130,626 103,742 ----------- ----------- ------------ ------------ 112,200 139,102 251,651 275,288 ----------- ----------- ------------ ------------ Earnings before gain on mortgage dispositions 478,830 698,076 938,533 1,448,889 Gain on mortgage dispositions -- -- -- 200,074 ----------- ----------- ------------ ------------ Net earnings $ 478,830 $ 698,076 $ 938,533 $ 1,648,963 ========== =========== ============ ============ Other comprehensive income (loss) (424,083) (177,347) (447,466) (150,568) ----------- ----------- ------------ ------------ Comprehensive income $ 54,747 $ 520,729 $ 491,067 $ 1,498,395 ----------- ----------- ------------ ------------ Net earnings allocated to: Limited partners - 97.1% $ 464,944 $ 677,832 $ 911,316 $ 1,601,143 General partner - 2.9% 13,886 20,244 27,217 47,820 ----------- ----------- ------------ ------------ $ 478,830 $ 698,076 $ 938,533 $ 1,648,963 =========== =========== =========== ============ Net earnings per Unit of limited partnership interest - Basic $ 0.05 $ 0.07 $ 0.09 $ 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 STATEMENT OF CHANGES IN PARTNERS' EQUITY For the six months ended June 30, 1999 (Unaudited)
Accumulated Other General Limited Comprehensive Partner Partners Income Total ---------------- -------------- ------------------ ---------------- Balance, December 31, 1998 $ (5,205,036) $ 30,596,406 $ 2,358,520 $ 27,749,890 Net earnings 27,217 911,316 -- 938,533 Adjustment to unrealized gains (losses) on investments in insured mortgages -- -- (447,466) (447,466) Distributions paid or accrued of $0.22 per Unit, including return of capital of $0.13 per Unit (65,706) (2,200,028) -- (2,265,734) ---------------- -------------- ---------------- ---------------- Balance, June 30, 1999 $ (5,243,525) $ 29,307,694 $ 1,911,054 $ 25,975,223 ================ ============== ================ ================ Limited Partnership Units outstanding - Basic, June 30, 1999 10,000,125 ==============
The accompanying notes are an integral part of these financial statements. 6 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS AMERICAN INSURED MORTGAGE INVESTORS STATEMENTS OF CASH FLOWS (Unaudited)
For the six months ended June 30, 1999 1998 ---------------- ---------------- Cash flows from operating activities: Net earnings $ 938,533 $ 1,648,963 Adjustments to reconcile net earnings to net cash provided by operating activities: Gain on disposition of insured mortgages -- (200,074) Changes in assets and liabilities: Decrease (increase) in receivables and other assets 62,892 (40,432) Decrease in accounts payable and accrued expenses (5,130) (21,046) ---------------- ---------------- Net cash provided by operating activities 996,295 1,387,411 ---------------- ---------------- Cash flows from investing activities: Receipt of mortgage principal from scheduled payments 131,088 134,201 Debenture proceeds received from affiliate 1,148,049 -- ---------------- ---------------- Net cash provided by investing activities 1,279,137 134,201 ---------------- ---------------- Cash flows from financing activities: Distributions paid to partners (2,677,685) (1,544,818) ---------------- ---------------- Net cash used in financing activities (2,677,685) (1,544,818) ---------------- ---------------- Net decrease in cash and cash equivalents (402,253) (23,206) Cash and cash equivalents, beginning of period 958,375 878,867 ---------------- ---------------- Cash and cash equivalents, end of period $ 556,122 $ 855,661 ================ ================ Non cash investing activity: 50% share of debenture received from HUD in exchange for the mortgage on Portervillage I Apartments (Debenture is held by an affiliate, AIM 85) $ -- $ 1,148,049 The accompanying notes are an integral part of these financial statements.
7 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 states that the Partnership will terminate on December 31, 2008, 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 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., Broad, Inc. and CRIIMI MAE. Pursuant to the terms of certain amendments to the Partnership Agreement, the General Partner is required to receive the consent of the Advisor prior to taking certain significant actions which affect the management and policies of the Partnership. 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 a voluntary petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code. As a debtor-in-possession, CRIIMI MAE will not be permitted to provide any available capital to the General Partner without approval from the bankruptcy court. This restriction or potential loss of the availability of a potential capital resource could adversely affect the General Partner and the Partnership; however, 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. CRIIMI MAE and CRIIMI MAE Management, Inc. are working diligently toward the preparation of a plan of reorganization. The Bankruptcy Court has granted the motion to extend CRIIMI MAE's and CRIIMI MAE Management, Inc.'s exclusive right to file a plan of reorganization through September 10, 1999 and to solicit acceptances thereof through November 10, 1999. CRIIMI MAE and CRIIMI MAE Management, Inc. expect to file a plan of reorganization during 1999, which would contemplate CRIIMI MAE's and CRIIMI MAE Management, Inc.'s emergence from bankruptcy later in 1999. There can be no assurance at this time, however, that a plan of reorganization will be proposed by CRIIMI MAE and CRIIMI MAE Management, Inc. during such time or that such plan will be confirmed and consummated. 8 AMERICAN INSURED MORTGAGE INVESTORS NOTES TO FINANCIAL STATEMENTS 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, 1999 and December 31, 1998, the results of its operations for the three and six months ended June 30, 1999 and 1998 and its cash flows for the six months ended June 30, 1999 and 1998. 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, 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, 1998. Comprehensive Income -------------------- Comprehensive income is the change in Partners' equity during a period from transactions from nonowner sources. This includes net income as currently reported by the Partnership adjusted for unrealized gains and losses related to the Partnership's mortgages accounted for as "available for sale." Unrealized gains and losses are reported in the equity section of the Balance Sheet as "Accumulated Other Comprehensive Income." 3. INVESTMENT IN FHA-INSURED LOANS Listed below is the Partnership's aggregate investment in FHA-Insured Loans as of June 30, 1999 and December 31, 1998:
June 30, December 31, 1999 1998 ---------------- ---------------- Number of Acquired Insured Mortgages 3 3 Originated Insured Mortgages 1 1 Amortized Cost $ 12,822,680 $ 12,891,015 Face Value 15,057,955 15,170,295 Fair Value 14,699,223 15,238,597
9 AMERICAN INSURED MORTGAGE INVESTORS NOTES TO FINANCIAL STATEMENTS (Unaudited) 3. INVESTMENT IN FHA-INSURED LOANS - Continued As of August 4, 1999, 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 six months ended June 30, 1999, the Partnership received $0 and $0, respectively from the Participations. During the three and six months ended June 30, 1998, the Partnership received $0 and $52,526, respectively, 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 as of June 30, 1999 and December 31, 1998:
June 30, December 31, 1999 1998 --------------- ---------------- Number of mortgages 9 9 Amortized Cost $ 11,036,827 $ 11,099,580 Face Value 13,329,632 13,440,088 Fair Value 12,947,881 13,458,100
All of the FHA-Insured Certificates were current with respect to the payment of principal and interest as of August 4, 1999. 10 AMERICAN INSURED MORTGAGE INVESTORS NOTES TO FINANCIAL STATEMENTS 5. DISTRIBUTIONS TO UNITHOLDERS The distributions paid or accrued to Unitholders on a per Unit basis for the six months ended June 30, 1999 and 1998 are as follows:
Quarter Ended 1999 1998 - ------------- --------- --------- March 31, $ 0.17(1) $ 0.07 June 30, 0.05 0.07 --------- --------- $ 0.22 $ 0.14 ========= ========= (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 six months ended June 30, 1999 and 1998, 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 six months Capacity in Which ended June 30, ended June 30, Name of Recipient Served/Item 1999 1998 1999 1998 - ----------------- --------------------- ---------- ---------- ----------- --------- CRIIMI, Inc. General Partner/Distribution $ 14,933 $ 20,906 $ 65,706 $ 41,813 AIM Acquisition Advisor/Asset Management Fee 60,120 85,773 121,025 171,546 Partners, L.P.(1) CRIIMI MAE Management, Inc. Affiliate of General Partner/ 13,023 11,323 19,829 18,569 Expense Reimbursement (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). CRIIMI MAE Services Limited Partnership (CMSLP), the sub-advisor to the Partnership, is entitled to a fee of 0.28% of Total Invested Assets. Of the amounts paid to the Advisor, CMSLP earned a fee equal to $17,949 and $35,667 for the three and six months ended June 30, 1999, respectively and a fee equal to $25,278 and $50,556 for the three and six months ended June 30, 1998, respectively. The limited partner of CMSLP is a wholly-owned subsidiary of CRIIMI MAE Inc. which filed for protection under Chapter 11 of the U.S. Bankruptcy Code.
11 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 other reports filed with the Securities and Exchange Commission that could cause actual results to differ materially. See Item 1, "Forward-Looking Statements" in the Partnership's Annual Report on Form 10-K for the year ended December 31, 1998 for a more detailed discussion of such risks and uncertainties. On October 5, 1998, CRIIMI MAE Inc., the parent of the General Partner, and CRIIMI MAE Management, Inc., an affiliate of CRIIMI MAE Inc. and provider of personnel and administrative services to the Partnership, filed voluntary petitions for reorganization under Chapter 11 of the Bankruptcy Code. Such bankruptcy filings could result in certain adverse effects to the Partnership including without limitation, the potential loss of CRIIMI MAE Inc. as a potential source of capital, as discussed under Liquidity and Capital Resources, and the potential need to replace CRIIMI MAE Management, Inc. as a provider of personnel and administrative services to the Partnership. CRIIMI MAE and CRIIMI MAE Management, Inc. are working diligently toward the preparation of a plan of reorganization. The Bankruptcy Court has granted the motion to extend CRIIMI MAE's and CRIIMI MAE Management, Inc.'s exclusive right to file a plan of reorganization through September 10, 1999 and to solicit acceptances thereof through November 10, 1999. CRIIMI MAE and CRIIMI MAE Management, Inc. expect to file a plan of reorganization during 1999, which would contemplate CRIIMI MAE's and CRIIMI MAE Management, Inc.'s emergence from bankruptcy later in 1999. There can be no assurance at this time, however, that a plan of reorganization will be proposed by CRIIMI MAE and CRIIMI MAE Management, Inc. during such time or that such plan will be confirmed and consummated. Year 2000 - --------- The Year 2000 issue is a computer programming issue that may affect many electronic processing systems. Until relatively recently, in order to minimize the length of data fields, most date-sensitive programs eliminated the first two digits of the year. This issue could affect information technology ("IT") systems and date sensitive embedded technology that controls certain systems (such as telecommunications systems, security systems, etc.) leaving them unable to properly recognize or distinguish dates in the twentieth and twenty-first centuries. This treatment could result in significant miscalculations when processing critical date-sensitive information relating to dates after December 31, 1999. The General Partner has substantially completed the Year 2000 testing and remediation of its IT systems, which include software systems to administer and manage mortgage assets and for internal accounting purposes. A majority of the IT systems used by the Partnership is licensed from third parties. These third parties have either provided upgrades to existing systems or have indicated that their systems are Year 2000 compliant. The General Partner has applied upgrades and has substantially completed compliance testing and remediation as of August 11, 1999. There can be no assurance, however, that the Partnership's IT systems will be Year 2000 compliant by December 31, 1999. 12 PART I. FINANCIAL INFORMATION ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued The Year 2000 issue may also affect the General Partner's date- sensitive embedded technology, which controls systems such as the telecommunications systems, security systems, etc. The General Partner does not believe that it has significant exposure, or that the cost to modify or replace such technology to make it Year 2000 compliant will be material. The failure of any such systems to be Year 2000 compliant could be material to the Partnership. The potential impact of the Year 2000 issue depends not only on the corrective measures the General Partner has undertaken and will undertake, but also on the ways in which the Year 2000 issue is addressed by third parties with whom the Partnership directly interfaces or whose financial condition or operations are important to the Partnership. The Partnership has initiated communications with third parties with which it directly interfaces to evaluate the risk of their failure to be Year 2000 compliant and the extent to which the Partnership may be vulnerable to such failure. There can be no assurance that the systems of these third parties will be Year 2000 compliant by December 31, 1999. The failure of these third parties to be Year 2000 compliant could have a material adverse effect on the operations of the Partnership. The Partnership believes that its greatest risk with respect to the Year 2000 issue relates to failures by third parties to be Year 2000 compliant. In addition to risks posed by third parties with which the Partnership interfaces directly, risks are created by third parties providing services to large segments of society. The failure of third parties (i.e., tenants in mortgage collateral, borrowers, building service providers to mortgage collateral, banks and other financial institutions, etc.) to be Year 2000 compliant could, among other things, cause disruptions in the capital and real estate markets and borrower defaults on real estate loans and mortgage-backed securities as well as the pools of mortgage loans underlying such securities. The Partnership believes that its greatest internal exposure to the Year 2000 issue involves the loan servicing operations of an affiliate of the Partnership. CRIIMI MAE Services Limited Partnership (CMSLP) currently services approximately 26% of the total mortgage investments in the AIM Funds. CMSLP has applied a vendor upgrade and has completed compliance testing on the upgrade. The General Partner believes that the results of such testing indicate that this risk has been substantially mitigated. Currently the Partnership estimates the cost of system upgrades related to Year 2000 issues to be immaterial. The General Partner has substantially completed its organizational compliance testing and remediation, and it has also drafted contingency plans for the risks of the failure of the Partnership or third parties to be Year 2000 compliant. The General Partner intends to complete contingency plans for the Year 2000 issue in late 1999. Due to the inability to predict all of the potential problems that may arise from the Year 2000 issue, there can be no assurance that all contingencies will be adequately addressed by such plans. General - ------- As of June 30, 1999, the Partnership had invested in 13 Insured Mortgage Investments, with an aggregate amortized cost of approximately $23.9 million, face value of approximately $28.4 million and fair value of approximately $27.6 million. 13 PART I. FINANCIAL INFORMATION ITEM 2. MANAGEMENT's DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued As of August 4, 1999, all of the mortgage investments are current with respect to payment of principal and interest. Results of Operations - --------------------- Net earnings decreased for the three and six months ended June 30, 1999, as compared to the corresponding periods in 1998, primarily due to a reduction in mortgage investment income, as discussed below. In addition, the decrease for the six month period resulted from a decrease in gains on mortgage dispositions, as discussed below. Mortgage investment income decreased for the three and six months ended June 30, 1999, as compared to the corresponding periods in 1998, primarily due to the disposition of the mortgages on Portervillage I Apartments in March 1998 and Waters Edge Apartments in September 1998. Asset management fees to related parties decreased for the three and six months ended June 30, 1999, as compared to the corresponding periods in 1998, primarily due to the decrease in the mortgage base. General and administrative expenses increased for the six months ended June 30, 1999, as compared to the corresponding period in 1998, primarily due to increased temporary employment costs during the first quarter of 1999. Gain on mortgage dispositions decreased for the six months ended June 30, 1999, as compared to the corresponding period in 1998. No gains or losses were recognized for the first six months of 1999. During the first quarter of 1998, a gain of approximately $200,000 was recognized from the assignment of the mortgage on Portervillage I Apartments. 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 by the Partnership. A distribution of $0.12 per Unit was declared in March 1999 and paid to Unitholders in May 1999. 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 for the six months ended June 30, 1999 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 14 PART I. FINANCIAL INFORMATION ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued 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 six months ended June 30, 1999, as compared to the corresponding period in 1998, primarily due to a decrease in mortgage investment income, as previously discussed. Net cash provided by investing activities increased for the six months ended June 30, 1999, as compared to the corresponding period in 1998, primarily due to an increase in debenture proceeds received from affiliate, as previously discussed. Net cash used in financing activities increased for the six months ended June 30, 1999, as compared to the corresponding period in 1998 due to larger distributions paid to Unitholders during the first quarter of 1999 as compared to the corresponding period in 1998. 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 a voluntary petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code. As a debtor-in-possession, CRIIMI MAE will not be permitted to provide any available capital to the General Partner without approval from the bankruptcy court. This restriction or potential loss of the availability of a potential capital resource could adversely affect the General Partner and the Partnership; however, 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. CRIIMI MAE and CRIIMI MAE Management, Inc. are working diligently toward the preparation of a plan of reorganization. The Bankruptcy Court has granted the motion to extend CRIIMI MAE's and CRIIMI MAE Management, Inc.'s exclusive right to file a plan of reorganization through September 10, 1999 and to solicit acceptances thereof through November 10, 1999. CRIIMI MAE and CRIIMI MAE Management, Inc. expect to file a plan of reorganization during 1999, which would contemplate CRIIMI MAE's and CRIIMI MAE Management, Inc.'s emergence from bankruptcy later in 1999. There can be no assurance at this time, however, that a plan of reorganization will be proposed by CRIIMI MAE and CRIIMI MAE Management, Inc. during such time or that such plan will be confirmed and consummated. 15 ITEM 2A. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK The Partnership's principal market risk is exposure to changes in interest rates in the US 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 June 30, 1999, in market risk from December 31, 1998 as reported in the Partnership's Annual Report on Form 10-K for the year ended December 31, 1998. 16 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, 1999. The exhibits filed as part of this report are listed below: Exhibit No. Description - ------------- ----------------------- 27 Financial Data Schedule 17 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 /s/August 12, 1999 /s/ Cynthia O. Azzara - ------------------- ------------------------ Date Cynthia O. Azzara Principal Financial and Accounting Officer EX-27 2 FDS 84
5 THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE QUARTERLY REPORT ON FORM 10-Q FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH QUARTERLY REPORT ON FORM 10-Q. 1,000 6-MOS DEC-31-1999 JAN-01-1999 JUN-30-1999 556 12,948 13,039 0 0 0 0 0 26,543 568 0 0 0 0 25,975 26,543 0 1,190 0 0 252 0 0 938 0 938 0 0 0 938 .09 0
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