-----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, V/rqioY+4OHWB/V3wTzqQUG5Yqb7HSOkjSYEVqGt8GChvqbT+98vRcP1HoyyIc2F hKPLzKIBU3UAC59giL33ww== 0000753281-96-000003.txt : 19960816 0000753281-96-000003.hdr.sgml : 19960816 ACCESSION NUMBER: 0000753281-96-000003 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960814 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN INSURED MORTGAGE INVESTORS SERIES 85 L P CENTRAL INDEX KEY: 0000753281 STANDARD INDUSTRIAL CLASSIFICATION: INVESTORS, NEC [6799] IRS NUMBER: 133257662 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-11059 FILM NUMBER: 96615043 BUSINESS ADDRESS: STREET 1: 11200 ROCKVILLE PIKE CITY: ROCKVILLE STATE: MD ZIP: 20852 BUSINESS PHONE: 3014689200 FORMER COMPANY: FORMER CONFORMED NAME: INTEGRATED RESOURCES AMERICAN INSURED MTG INVTS SERIES 85 DATE OF NAME CHANGE: 19911203 FORMER COMPANY: FORMER CONFORMED NAME: AMERICAN INSURED MORTGAGE INVESTORS SERIES 85 DATE OF NAME CHANGE: 19900404 FORMER COMPANY: FORMER CONFORMED NAME: INTEGRATED RESOURCES AMERICAN INS MORTGAGE INVTS SERIES 85 DATE OF NAME CHANGE: 19890917 10-Q 1 AIM85 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 QUARTERLY REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarter ended June 30, 1996 ------------- Commission file number 1-11059 ----------------- AMERICAN INSURED MORTGAGE INVESTORS - SERIES 85, L.P. ----------------------------------------------------------------- (Exact name of registrant as specified in charter) California 13-3257662 ------------------------------- ------------------ (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 12, 1996, 12,079,389 depositary units of limited partnership interest were outstanding. 2 AMERICAN INSURED MORTGAGE INVESTORS - SERIES 85, L.P. 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 - SERIES 85, L.P. BALANCE SHEETS
June 30, December 31, 1996 1995 ------------- ------------ (unaudited) ASSETS Investment in FHA-Insured Certificates and GNMA Mortgage- Backed Securities, at fair value: Acquired insured mortgages $160,976,299 $169,460,375 Originated insured mortgages 22,420,015 22,960,468 ------------ ------------ 183,396,314 192,420,843 Investment in FHA-Insured Loans, at amortized cost, net of unamortized discount and premium: Acquired insured mortgages 14,622,622 14,684,828 Originated insured mortgages 13,077,935 13,123,855 ------------ ------------ 27,700,557 27,808,683 Cash and cash equivalents 6,976,316 3,368,700 Receivables and other assets 1,836,517 1,775,746 Investment in affiliate 317,151 317,151 ------------ ------------ Total assets $220,226,855 $225,691,123 ============ ============ LIABILITIES AND PARTNERS' EQUITY Distributions payable $ 8,044,630 $ 4,525,104 Accounts payable and accrued expenses 206,128 163,737 Note payable and due to affiliate 335,731 320,920 ------------ ------------ Total liabilities 8,586,489 5,009,761 ------------ ------------ Partners' equity: Limited partners' equity 207,145,194 210,842,615 General partner's deficit (1,424,833) (1,274,782) Unrealized gains on investment in FHA-Insured Certificates and GNMA Mortgage- Backed Securities 8,798,461 12,159,559 Unrealized losses on investment in FHA-Insured Certificates and GNMA Mortgage-Backed Securities (2,878,456) (1,046,030) ------------ ------------ Total partners' equity 211,640,366 220,681,362 ------------ ------------ Total liabilities and partners' equity $220,226,855 $225,691,123 ============ ============
The accompanying notes are an integral part of these financial statements. 4 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS AMERICAN INSURED MORTGAGE INVESTORS - SERIES 85, L.P. 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 $ 4,469,099 $ 4,676,253 $ 9,037,254 $ 9,298,777 Interest and other income 60,369 40,888 104,262 58,811 ------------ ------------ ------------ ------------ 4,529,468 4,717,141 9,141,516 9,357,588 ------------ ------------ ------------ ------------ Expenses: Asset management fee to related parties 502,066 513,453 1,010,056 1,026,906 General and administrative 91,117 71,216 191,261 193,248 Mortgage servicing fees 69,748 73,094 138,395 144,700 Interest expense to affiliate 5,783 5,783 11,566 11,566 ------------ ------------ ------------ ------------ 668,714 663,546 1,351,278 1,376,420 ------------ ------------ ------------ ------------ Net earnings before gain (loss) on mortgage dispositions/ modifications 3,860,754 4,053,595 7,790,238 7,981,168 Net gains/(losses) on mortgage dispositions/modifications 556,121 (36,632) 554,932 16,098 ------------ ------------ ------------ ------------ Net earnings $ 4,416,875 $ 4,016,963 $ 8,345,170 $ 7,997,266 ============ ============ ============ ============ Net earnings allocated to: Limited partners - 96.1% $ 4,244,616 $ 3,860,302 $ 8,019,708 $ 7,685,373 General partner - 3.9% 172,259 156,661 325,462 311,893 ------------ ------------ ------------ ------------ $ 4,416,875 $ 4,016,963 $ 8,345,170 $ 7,997,266 ============ ============ ============ ============ Net earnings per Limited Partnership Unit $ 0.35 $ 0.32 $ 0.66 $ 0.64 ============ ============ ============ ============
The accompanying notes are an integral part of these financial statements. 5 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS AMERICAN INSURED MORTGAGE INVESTORS - SERIES 85, L.P. 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 General Limited and GNMA Mortgage- and GNMA Mortgage- Partner Partners Backed Securities Backed Securities Total ------------- ------------- ----------------- ----------------- ------------- Balance, December 31, 1995 $ (1,274,782) $ 210,842,615 $ 12,159,559 $ (1,046,030) $ 220,681,362 Net earnings 325,462 8,019,708 -- -- 8,345,170 Distributions paid or accrued of $0.97 per Unit (475,513) (11,717,129) -- -- (12,192,642) Adjustments to unrealized gains (losses) on investments in FHA-Insured Certificates and GNMA Mortgage-Backed Securities -- -- (3,361,098) (1,832,426) (5,193,524) ------------- ------------- -------------- ------------ ------------- Balance, June 30, 1996 $ (1,424,833) $ 207,145,194 $ 8,798,461 $ (2,878,456) $ 211,640,366 ============= ============= ============== ============ ============= Limited Partnership Units outstanding - June 30, 1996 12,079,514 =============
The accompanying notes are an integral part of these financial statements. 6 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS AMERICAN INSURED MORTGAGE INVESTORS - SERIES 85, L.P. STATEMENTS OF CASH FLOWS (Unaudited)
For the six months ended June 30, 1996 1995 ------------ ------------ Cash flows from operating activities: Net earnings $ 8,345,170 $ 7,997,266 Adjustments to reconcile net earnings to net cash provided by operating activities: Gain on mortgage dispositions/modifications (658,974) (52,730) Loss on mortgage dispositions/modifications 104,042 36,632 Changes in assets and liabilities: Increase (decrease) in accounts payable and accrued expenses 42,391 (153,128) (Increase) decrease in receivables and other assets (60,771) 14,200 Increase (decrease) in note payable and due to affiliate 14,811 (105,782) ------------ ------------ Net cash provided by operating activities 7,786,669 7,736,458 ------------ ------------ Cash flows from investing activities: Receipt of mortgage principal from scheduled payments 669,306 643,002 Proceeds from mortgage dispositions 3,824,757 2,105,820 ------------ ------------ Net cash provided by investing activities 4,494,063 2,748,822 ------------ ------------ Cash flows from financing activities: Distributions paid to partners (8,673,116) (9,050,208) ------------ ------------ Net cash used in financing activities (8,673,116) (9,050,208) ------------ ------------ Net increase in cash and cash equivalents 3,607,616 1,435,072 Cash and cash equivalents, beginning of period 3,368,700 3,462,825 ------------ ------------ Cash and cash equivalents, end of period $ 6,976,316 $ 4,897,897 ============ ============
The accompanying notes are an integral part of these financial statements. 7 AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 85 NOTES TO FINANCIAL STATEMENTS (Unaudited) 1. ORGANIZATION American Insured Mortgage Investors - Series 85, L.P. (the Partnership) was formed under the Uniform Limited Partnership Act of the state of California on June 26, 1984. The Partnership will terminate on December 31, 2009, 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), formerly CRI Insured Mortgage Association, Inc. 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 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), 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 Partnership's Annual Report filed on Form 10-K for the year ended December 31, 1995. 8 AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 85 NOTES TO FINANCIAL STATEMENTS (Unaudited) 3. INVESTMENT IN FHA-INSURED CERTIFICATES AND GNMA MORTGAGE- BACKED SECURITIES Fully Insured Mortgage Investments ---------------------------------- As of June 30, 1996, the Partnership's investment in fully insured acquired insured mortgages, recorded at fair value consisted of 63 FHA- Insured Certificates and nine GNMA Mortgage-Backed Securities with an aggregate amortized cost of $153,841,469, an aggregate face value of $159,992,573, and an aggregate fair value of $160,976,299. As of December 31, 1995, the Partnership's investment in fully insured acquired insured mortgages, recorded at fair value consisted of 66 FHA-Insured Certificates and nine GNMA Mortgage-Backed Securities with an aggregate amortized cost of $157,656,694, an aggregate face value of $164,397,459, and an aggregate fair value of $169,460,375. As of June 30, 1996, the Partnership's investment in fully insured originated insured mortgages, recorded at fair value consisted of one GNMA Mortgage-Backed Security and one FHA-insured certificate with an aggregate amortized cost of $16,821,820, an aggregate face value of $16,830,261, and an aggregate fair value of $16,311,404. As of December 31, 1995, the Partnership's investment in fully insured originated insured mortgages, recorded at fair value consisted of one GNMA Mortgage-Backed Security with an amortized cost of $10,666,346, a face value of $10,760,496 and a fair value of $10,925,754. In December 1992, the Partnership entered into a modification agreement with the mortgagor of Waterford Green Apartments. This agreement effectively lowered the interest rate on the mortgage from 8.5% to 6.5% for a period continuing through November 1995. The mortgagor assumed an additional note for the difference between the interest due under the principal mortgage and the modified interest paid under the agreement. On April 30, 1996, the mortgage on Waterford Green was restated under the HUD 223(a)(7) program converting this originated mortgage from a coinsured to fully insured status at a fixed rate of 7.25%. As a result of converting a coinsured mortgage to a fully insured mortgage, the Partnership recognized a loss of approximately $103,000 on the modification. Payments due under the new mortgage began June 1, 1996. Prior to this restatement, as part of the prior workout arrangements with the borrower, a portion of the interest due under the original note had been deferred temporarily. At the same time the borrower had deferred a portion of its management fees. Concurrent with this HUD modification, the deferred interest and deferred management fees are now evidenced in the form of cash surplus notes in the amount of $356,600 for interest and $103,573 for management fees. To the extent available, surplus cash, as defined by HUD, will be split 50/50 in repayment of deferred interest and management fees. Once all deferred management fees have been repaid, 100% of surplus cash, if any, will be applied against the remaining deferred interest obligation. Upon repayment of both of these obligations, any surplus cash will be distributed based upon the terms of the participation agreement. In April 1996, the Partnership entered into a modification agreement with the mortgagor of Oak Forest Apartments II. This agreement lowered the interest rate on the mortgage from 8.5% to 7.5% effective May 1, 1996, through the maturity of the note. The agreement also modified the restrictions on prepayment of the note. The modification agreement resulted in a gain of approximately $148,000. 9 AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 85 NOTES TO FINANCIAL STATEMENTS (Unaudited) 3. INVESTMENT IN FHA-INSURED CERTIFICATES AND GNMA MORTGAGE- BACKED SECURITIES - Continued During March 1996, a retained yield holder in the Harbor View Estates loan, exercised its right to purchase the participation interests with respect to this insured mortgage after a notice of default was filed with HUD. The Partnership received net proceeds of approximately $693,000 from this prepayment in March 1996, resulting in a loss of approximately $1,000. A distribution of $0.08 per Unit related to this prepayment was declared in April 1996 and was distributed to Unitholders in August 1996. During May 1996, the mortgages on Cambridge Arms Apartments and Bear Creek Apartments II were prepaid. The Partnership received net proceeds of approximately $2.9 million. The partnership recognized a gain of $276,500 from the prepayment of the mortgage on Cambridge Arms Apartments and a gain of approximately $235,000 from the prepayment of the mortgage on Bear Creek Apartments II. A distribution of $0.23 per Unit related to these prepayments was declared in June 1996 and was distributed to Unitholders in August 1996. As of July 31, 1996, all of the fully insured FHA-Insured Certificates and GNMA Mortgage-Backed Securities are current with respect to the payment of principal and interest except for the mortgage on Woodland Village Apartments, for which payments of principal and interest have been received through August 1995 and Country Club which is delinquent with respect to the June 1996 payment. On October 31, 1995, the General Partner instructed the servicer of the mortgage on Woodland Village Apartments to file a Notice of Default and Election to Assign the mortgage with HUD. The claim was filed in October 1995, however, as of July 1996, the proceeds have not been received. Coinsured Mortgage Investments ------------------------------ As discussed in the Partnership's Annual Report on Form 10-K for the year ended December 31, 1995, under the 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. Coinsured by affiliate ---------------------- As of June 30, 1996, the Partnership had invested in one FHA-Insured Certificate secured by a coinsured mortgage where the coinsurance lender is Integrated Funding Inc. (IFI). As of December 31, 1995, the Partnership had invested in two FHA-Insured Certificates secured by coinsured mortgages where the coinsurance lender is IFI. On April 30, 1996, one of the coinsured mortgages, Waterford Green Apartments, was converted from a coinsured mortgage to fully insured mortgage, as discussed further above. The coinsured mortgage investments were made by the former managing general partner on behalf of the Partnership. As structured by the former managing general partner, with respect to the remaining coinsured mortgage, Westlake 10 AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 85 NOTES TO FINANCIAL STATEMENTS (Unaudited) 3. INVESTMENT IN FHA-INSURED CERTIFICATES AND GNMA MORTGAGE- BACKED SECURITIES - Continued Village, the Partnership bears the risk of loss upon default for IFI's portion of the coinsurance loss. The General Partner believes there is adequate collateral value underlying the Westlake Village mortgage. Accordingly, no loan losses were recognized on this investment during the six months ended June 30, 1996 and 1995. As of July 31, 1996, the mortgage on Westlake Village shown in the table below was current with respect to the payment of principal and interest. As of June 30, 1996, this mortgage had a fair value of $6,108,611. As of December 31, 1995, these two coinsured mortgages had an aggregate fair value of $12,034,714, respectively. The following table summarizes this information as of June 30, 1996 and December 31, 1995: 11 AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 85 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 ------------- ------------- ------------ ------------ Westlake Village $ 6,456,403 $ 6,454,481 $ 6,473,072 $ 6,471,133 Waterford Green Apts.(1) $ -- $ -- $ 6,511,202 $ 6,526,094 (1) On April 30, 1996, the coinsured mortgage on Waterford Green Apartments, was converted from a coinsured mortgage to a fully insured mortgage, as discussed above.
12 AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 85 NOTES TO FINANCIAL STATEMENTS (Unaudited) 4. INVESTMENT IN FHA-INSURED LOANS As of June 30, 1996 and December 31, 1995 the Partnership's investment in fully insured acquired insured mortgages, recorded at amortized cost, consisted of 12 FHA-Insured Loans with an aggregate amortized cost of $14,622,622 and $14,684,828, respectively, an aggregate face value of $17,518,651 and $17,627,453, respectively, and an aggregate fair value of $17,651,424 and $18,388,369, respectively. As of June 30, 1996 and December 31, 1995, the Partnership's investment in fully insured originated insured mortgages, recorded at amortized cost, consisted of three FHA-Insured Loans with an aggregate amortized cost of $13,077,935 and $13,123,855, respectively, an aggregate face value of $12,724,893 and $12,766,486, respectively, and an aggregate fair value of $12,999,319 and $13,160,443, respectively. In addition to base interest payments under originated insured mortgages, the Partnership is entitled to additional interest based on a percentage of the net cash flow from the underlying development (referred to as Participations). During the three and six months ended June 30, 1996, the Partnership received additional interest of $0 and $42,417, respectively, from the Participations. During the three and six months ended June 30, 1995, the Partnership received additional interest of $0 and $64,676, respectively, from the Participations. These amounts, 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 three and six months ended June 30, 1996 and 1995 are as follows:
1996 1995 ------ ------ Quarter ended March 31, $ 0.33 $ 0.36 Quarter ended June 30, $ 0.64(1) $ 0.33 ------ ------ $ 0.97 $ 0.69 ====== ====== (1) This amount includes approximately $0.31 per Unit representing proceeds from the prepayment of the mortgages on Harbor View Estates, Bear Creek Apartments II and Cambridge Arms Apartments. The basis for paying distributions to Unitholders is net proceeds from mortgage dispositions, if any, and cash flow from operations, which includes regular interest income and principal from insured mortgages. Although the 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 13 AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 85 NOTES TO FINANCIAL STATEMENTS (Unaudited) 5. DISTRIBUTIONS TO UNITHOLDERS - Continued 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 three and 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 85 NOTES TO FINANCIAL STATEMENTS (Unaudited) 6. TRANSACTIONS WITH RELATED PARTIES - Continued
COMPENSATION PAID OR ACCRUED TO RELATED PARTIES ----------------------------------------------- For the For the Three months ended Six months ended Capacity in Which June 30, June 30, Name of Recipient Served/Item 1996 1995 1996 1995 - ----------------- ---------------------------- ---------- ---------- ---------- ---------- CRIIMI, Inc. General Partner/Distribution $ 313,741 $ 161,774 $ 475,513 $ 338,252 AIM Acquisition Advisor/Asset Management Fee 502,066 513,453 1,010,056 1,026,906 Partners, L.P.(1) CRI(2) Affiliate of General Partner/ -- 30,318 -- 61,905 Expense Reimbursement CRIIMI MAE Affiliate of General Partner/ 50,431 -- 65,673 -- Management, Inc.(2) Expense Reimbursement (1) The General Partner, pursuant to amendments to the Partnership Agreement, effective September 6, 1991, is entitled to receive 4.9% of the Partnership's income, loss, capital and distribution, 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). 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 through June 30, 1995 acted as the Sub-advisor, earned a fee equal to $151,341 and $302,682 for the three and six months ended June 30, 1995, respectively. Effective June 30, 1995, CRIIMI MAE Services Limited Partnership serves as the Sub-advisor. Of the amounts paid to the Advisor, CRIIMI MAE Services Limited Partnership earned a fee equal to $147,977 and $297,707 for the three and six months ended June 30, 1996, respectively. (3) Prior to June 30, 1995, these amounts were paid to CRI as reimbursement for expenses incurred prior to June 30, 1995 on behalf of the General Partner and the Partnership. As discussed in Note 1, the transaction in which CRIIMI MAE became a self- administered REIT has no impact on the payments required to be made by the Partnership, other than that the expense reimbursements 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 General - ------- As of June 30, 1996, the Partnership had invested in 90 insured mortgages with an aggregate amortized cost of approximately $205 million, an aggregate face value of approximately $214 million and an aggregate fair value of approximately $214 million. As of July 31, 1996, all of the Partnership's mortgage investments were current with respect to the payment of principal and interest except for the fully insured mortgage on Woodland Village Apartments, which was delinquent with respect to payments of principal and interest as of September 1995 and Country Club Apartments, which is delinquent with respect to the June 1996 payment. On October 31, 1995, the General Partner instructed the servicer of Woodland Village Apartments to file a Notice of Default and an Election to Assign the mortgage with HUD. The claim was filed in October 1995, however, as of July 1996, the proceeds have not been received. The General Partner does not anticipate a material adverse impact on the Partnership's financial statements as a result of these delinquencies. Results of Operations - --------------------- Net earnings for the three and six months ended June 30, 1996 increased as compared to the corresponding periods in 1995 primarily due to the increase in net gains on mortgage dispositions and modifications, as discussed below. Mortgage investment income decreased for the three and six months ended June 30, 1996, as compared to the corresponding periods in 1995 primarily due to the reduction in the mortgage base during 1995 and 1996. Interest and other income increased for the three and six months ended June 30, 1996, as compared to the corresponding periods in 1995 primarily due to short term investment of net disposition proceeds prior to distribution to Unitholders. Asset management fees to related parties decreased for the three and six months ended June 30, 1996, as compared to the corresponding periods in 1995 as a result of mortgage dispositions, as discussed below. General and administrative expenses increased for the three months ended June 30, 1996, as compared to the corresponding period in 1995, due primarily to the timing of certain expenses. General and administrative expenses for the six months ended June 30, 1996 did not change significantly from the corresponding period in 1995. Mortgage servicing fees decreased for the three and six months ended June 30, 1996, as compared to the corresponding periods in 1995 due to the reduction in the mortgage base. Net gains on mortgage dispositions increased for the three and six months ended June 30, 1996, as compared to the corresponding periods in 1995. Gains or losses on mortgage dispositions are based on the number, carrying amounts and proceeds for mortgage investments disposed of during the period. During the second quarter of 1996, the Partnership recognized a gain of approximately $659,000 as a result of prepayments of the mortgages on the Cambridge Arms Apartments and Bear Creek Apartments II and the modification of the Oak Forest loan. During the first six months of 1996, the Partnership recognized a loss of approximately $1,100 as a result of the prepayment on the Harbor View Estates loan in March 1996, and the Partnership recognized a loss of approximately $103,000 as a result of the modification of the mortgage on Waterford Green Apartments. During the first quarter of 1995, the Partnership recognized a gain 16 PART I. FINANCIAL INFORMATION ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued of approximately $53,000 as a result of the final settlement of the disposition of the mortgage on Dearborne Place Apartments. During the second quarter of 1995, the Partnership recognized a loss of approximately $37,000 as a result of the assignment to HUD of the mortgage on El Lago Apartments. 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 regular interest income and principal from insured mortgages. Although the 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 increased slightly for the six months ended June 30, 1996, as compared to the corresponding period in 1995. This increase was primarily due to the reduction in note payable and due to affiliate during 1995 resulting from the prepayment of the mortgage on Richardson Road Apartments underlying the GNMA Mortgage-Backed Security which had been transferred to IFI to meet IFI's minimum net worth requirement which resulted in lower net cash provided by operations for the six months ended June 30, 1995. Also contributing to the increase in net cash provided by operating activities was an increase in accounts payable which was primarily attributable to the timing of payments. Net cash provided by investing activities increased for the six months ended June 30, 1996, as compared to the corresponding period in 1995 due to the increase in proceeds from dispositions due to the prepayment of the mortgages on Harbor View Estates, Cambridge Arms Apartments and Bear Creek Apartments II. In addition, receipt of mortgage principal from scheduled payments increased for the six months ending June 30, 1996, as compared to the corresponding period in 1995 due to the partial prepayment on the Cambridge mortgage prior to disposition. Net cash used in financing activities decreased for the six months ending June 30, 1996, as compared to the corresponding period in 1995, as a result of a decrease in distributions paid of $.36 per Unit to $.33 per Unit from the first quarter of 1995 to the corresponding period in 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 85 (Registrant) By: CRIIMI, Inc. General Partner August 14, 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 6,976 183,396 29,855 0 0 0 0 0 220,227 8,587 0 0 0 0 211,640 220,227 0 9,696 0 0 1,351 0 0 8,345 0 8,345 0 0 0 8,345 .66 0
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