-----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, EBFlCQ+yXqEveFaWHbqk5ybP9fmpMl3uJZNbDBVQ4KqS1+yaRywZADygFU+lw8HT Vb4N1L6IzFaB0LV3yhC0Bg== 0000753281-97-000005.txt : 19971113 0000753281-97-000005.hdr.sgml : 19971113 ACCESSION NUMBER: 0000753281-97-000005 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971113 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: SEC FILE NUMBER: 001-11059 FILM NUMBER: 97716712 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 September 30, 1997 ------------------ 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 September 30, 1997, 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 SEPTEMBER 30, 1997 Page ---- PART I. Financial Information Item 1. Financial Statements Balance Sheets - September 30, 1997 (unaudited) and December 31, 1996 . . . . . . . . . . . 3 Statements of Operations - for the three and nine months ended September 30, 1997 and 1996 (unaudited) . . . . . . . . . . . . . . . 4 Statement of Changes in Partners' Equity - for the nine months ended September 30, 1997 (unaudited) . . . . . . . . . . . . . 5 Statements of Cash Flows - for the nine months ended September 30, 1997 and 1996 (unaudited) . . . . . . . . . . . . . 6 Notes to Financial Statements (unaudited) . . 8 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
September 30, December 31, 1997 1996 ------------- ------------ (unaudited) ASSETS Investment in FHA-Insured Certificates and GNMA Mortgage- Backed Securities, at fair value: Acquired insured mortgages $152,553,058 $159,959,297 Originated insured mortgages 16,738,003 16,646,943 ------------ ------------ 169,291,061 176,606,240 ------------ ------------ Investment in FHA-Insured Loans, at amortized cost, net of unamortized discount and premium: Acquired insured mortgages 14,453,124 14,556,595 Originated insured mortgages 12,954,731 13,030,131 ------------ ------------ 27,407,855 27,586,726 Cash and cash equivalents 9,920,642 9,716,786 Receivables and other assets 1,629,186 1,727,662 Investment in affiliate -- 314,072 ------------ ------------ Total assets $208,248,744 $215,951,486 ============ ============ 4 LIABILITIES AND PARTNERS' EQUITY Distributions payable $ 10,558,576 $ 10,684,274 Accounts payable and accrued expenses 259,999 198,964 Note payable and due to affiliate -- 380,877 ------------ ------------ Total liabilities 10,818,575 11,264,115 ------------ ------------ Partners' equity: Limited partners' equity 190,928,515 198,836,652 General partner's deficit (2,082,951) (1,762,017) Unrealized gain on investment in FHA-Insured Certificates and GNMA Mortgage-Backed Securities 9,100,178 8,715,942 Unrealized loss on investment in FHA-Insured Certificates and GNMA Mortgage-Backed Securities (515,573) (1,103,206) ------------ ------------ Total partners' equity 197,430,169 204,687,371 ------------ ------------ Total liabilities and partners' equity $208,248,744 $215,951,486 ============ ============
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. STATEMENTS OF OPERATIONS (Unaudited)
For the three months ended For the nine months ended September 30, September 30, ----------------------------- ----------------------------- 1997 1996 1997 1996 ------------ ------------ ------------ ------------ Income: Mortgage investment income $ 4,022,828 $ 4,397,124 $ 12,506,840 $ 13,434,378 Interest and other income 100,065 49,868 208,815 154,130 ------------ ------------ ------------ ------------ 4,122,893 4,446,992 12,715,655 13,588,508 ------------ ------------ ------------ ------------ Expenses: Asset management fee to related parties 466,278 493,214 1,421,123 1,503,270 General and administrative 176,708 117,065 491,669 446,721 Interest expense to affiliate -- 5,783 5,783 17,349 ------------ ------------ ------------ ------------ 642,986 616,062 1,918,575 1,967,340 ------------ ------------ ------------ ------------ Net earnings before net gains on mortgage dispositions/ modifications 3,479,907 3,830,930 10,797,080 11,621,168 Net gains (losses) on mortgage dispositions/modifications 319 (40,554) 205,536 514,378 ------------ ------------ ------------ ------------ Net earnings $ 3,480,226 $ 3,790,376 $ 11,002,616 $ 12,135,546 ============ ============ ============ ============ Net earnings allocated to: Limited partners - 96.1% $ 3,344,497 $ 3,642,552 $ 10,573,514 $ 11,662,260 General partner - 3.9% 135,729 147,824 429,102 473,286 ------------ ------------ ------------ ------------ $ 3,480,226 $ 3,790,376 $ 11,002,616 $ 12,135,546 ============ ============ ============ ============ Net earnings per Limited Partnership Unit $ 0.28 $ 0.30 $ 0.88 $ 0.96 ============ ============ ============ ============
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. STATEMENT OF CHANGES IN PARTNERS' EQUITY For the nine months ended September 30, 1997 (Unaudited)
Adjustment Adjustment to to Unrealized Unrealized Gains on Losses on Investment Investment General Limited in Insured in Insured Partner Partners Mortgages Mortgages Total ------------- ------------- ------------- ------------ ------------- Balance, December 31, 1996 $ (1,762,017) $ 198,836,652 $ 8,715,942 $ (1,103,206) $ 204,687,371 Net earnings 429,102 10,573,514 -- -- 11,002,616 Distributions paid or accrued of $1.53 per Unit, including return of capital of $0.65 (750,036) (18,481,651) -- -- (19,231,687) Adjustments to unrealized gains (losses) on investments in FHA-Insured Certificates and GNMA Mortgage-Backed Securities -- -- 384,236 587,633 971,869 ------------- ------------- -------------- ------------ ------------- Balance, September 30, 1997 $ (2,082,951) $ 190,928,515 $ 9,100,178 $ (515,573) $ 197,430,169 ============= ============= ============== ============ ============= Limited Partnership Units outstanding - September 30, 1997 12,079,514 =============
The accompanying notes are an integral part of these financial statements. 7 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS AMERICAN INSURED MORTGAGE INVESTORS - SERIES 85, L.P. STATEMENTS OF CASH FLOWS (Unaudited)
For the nine months ended September 30, 1997 1996 ------------ ------------ Cash flows from operating activities: Net earnings $ 11,002,616 $ 12,135,546 Adjustments to reconcile net earnings to net cash provided by operating activities: Gain on mortgage dispositions/modifications (205,536) (658,973) Loss on mortgage dispositions/modifications -- 144,595 Changes in assets and liabilities: Increase (decrease) in accounts payable and accrued expenses 61,035 (7,019) Decrease in receivables and other assets 98,476 138,276 Decrease in investment in affiliate 314,072 3,078 ------------ ------------ Net cash provided by operating activities 11,270,663 11,755,503 ------------ ------------ Cash flows from investing activities: Receipt of mortgage principal from scheduled payments 1,243,345 1,190,264 Proceeds from mortgage dispositions 7,428,110 4,894,568 ------------ ------------ Net cash provided by investing activities 8,671,455 6,084,832 ------------ ------------ Cash flows from financing activities: Distributions paid to partners (19,357,385) (16,717,746) Decrease (increase) in note payable and due to affiliate (380,877) 65,739 ------------ ------------ Net cash used in financing activities (19,738,262) (16,652,007) ------------ ------------ Net increase in cash and cash equivalents 203,856 1,188,328 Cash and cash equivalents, beginning of period 9,716,786 3,368,700 ------------ ------------ Cash and cash equivalents, end of period $ 9,920,642 $ 4,557,028 ============ ============
The accompanying notes are an integral part of these financial statements. 8 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). 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 and together with FHA-Insured Certificates and GNMA Mortgage-Backed Securities referred to herein as Insured Mortgages). 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 September 30, 1997 and December 31, 1996 and the results of its operations for the three and nine months ended September 30, 1997 and 1996 and its cash flows for the nine months ended September 30, 1997 and 1996. 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, 1996. New Accounting Standards ------------------------ In February 1997, FASB issued SFAS No. 128 "Earnings per Share" ("FAS 128"). FAS 128 changes the requirements for calculation and disclosure of earnings per share. This statement eliminates the calculation of primary earnings per share and requires the disclosure of basic earnings per share and diluted earnings per share. There will be no impact to the earnings per Unit of limited partnership interest. During 1997, FASB issued SFAS No. 129 "Disclosure of Information about Capital Structure" ("FAS 129"). FAS 129 continues the existing requirements to disclose the pertinent rights and privileges of all securities other than ordinary common stock but expands the number of companies subject to portions of its requirements. The Partnership does 9 AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 85 NOTES TO FINANCIAL STATEMENTS (Unaudited) 2. BASIS OF PRESENTATION - Continued not anticipate an impact to its current disclosures. During 1997, FASB issued SFAS No. 130 "Reporting Comprehensive Income" ("FAS 130"). FAS 130 states that all items that are required to be recognized under accounting standards as components of comprehensive income are to be reported in either the statement of income or another statement of comprehensive income. This would include 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". FAS 130 is effective beginning January 1, 1998. 3. INVESTMENT IN FHA-INSURED CERTIFICATES AND GNMA MORTGAGE- BACKED SECURITIES Fully Insured Mortgage Investments ---------------------------------- Listed below is the Partnership's aggregate investment in Fully Insured Mortgages:
September 30, December 31, 1997 1996 ------------ ------------ Fully Insured Acquired: Number of GNMA Mortgage-Backed Securities(4) 10 9 FHA-Insured Certificates (1)(2) (3)(4)(5) 58 62 Amortized Cost $143,661,077 $151,866,819 Face Value 149,270,956 157,889,594 Fair Value 152,553,058 159,959,297 Fully Insured Originated: Number of GNMA Mortgage-Backed Securities 1 1 FHA-Insured Certificates 1 1 Amortized Cost $ 17,045,388 $ 17,126,685 Face Value 16,688,771 16,770,069 Fair Value 16,738,003 16,646,943
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 (1) On October 11, 1996, the servicer of the mortgage on Meadow Park Apartments I filed a Notice of Default and Election to Assign the mortgage with HUD. On January 24, 1997, the Partnership received approximately $628,000 representing approximately 90% of the assignment proceeds. The Partnership recognized a gain of approximately $139,000 for the nine months ended September 30, 1997. A distribution of $0.05 per Unit related to this assignment, was declared in February 1997 and was paid to Unitholders in May 1997. The remaining 9% of proceeds due from HUD were received in May 1997, since the distribution was less than $0.01 per Unit, these proceeds were distributed with regular cash flow in August 1997. (2) In late February 1997, the mortgage on Security Apartments was prepaid. The Partnership received net proceeds of approximately $304,000, and recognized a gain of approximately $66,000 for the nine months ended September 30, 1997. A distribution of approximately $0.02 per Unit related to this prepayment was declared in March 1997 and was paid to Unitholders in May 1997. (3) On July 1, 1997, the mortgage on Peachtree Apartments was prepaid. The Partnership received net proceeds of approximately $6.5 million, and recognized a gain of less than $1,000 for the nine months ended September 30, 1997. A distribution of approximately $0.52 per Unit related to this prepayment was declared in July 1997, and was paid to Unitholders in November 1997. (4) In September 1997, the mortgage on Pine Tree Lodge was converted to a GNMA Mortgage-Backed Security from an FHA-Insured certificate. A distribution of approximately $0.02 per Unit related to the final settlement of this mortgage was declared in September 1997 and paid in November 1997. (5) In October 1997, the mortgages on Ashford Place Apartments, Silverwood Village Apartments and Fleetwood Village Apartments were prepaid. The Partnership received net proceeds of approximately $3.4 million for the mortgage on Ashford Place Apartments and declared a distribution of approximately $0.27 in October 1997, payable in February 1998. The Partnership received net proceeds aggregating approximately $2.9 million for the mortgages on Silverwood Village Apartments and Fleetwood Village Apartments and intends to declare a distribution in November 1997. As of November 4, 1997, 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 mortgages on Portervillage I Apartments, which has been delinquent since January 1997, as discussed below, and Country Club Terrace Apartments and Gold Key Village Apartments, which are delinquent with respect to the September 1997 payment of principal and interest. In May 1997, the servicer of the mortgage on Portervillage I Apartments filed a Notice of Default and an Election to Assign the mortgage with HUD. The face value of this mortgage was approximately $1.2 million at December 31, 1996. The Partnership expects to receive 99% of this amount plus accrued interest. 11 AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 85 NOTES TO FINANCIAL STATEMENTS (Unaudited) 4. INVESTMENT IN FHA-INSURED LOANS Fully Insured FHA-Insured Loans ------------------------------- Listed below is the Partnership's aggregate investment in FHA-Insured Loans:
September 30, December 31, 1997 1996 ------------- ------------ Fully Insured Acquired: Number of Loans 12 12 Amortized Cost $ 14,453,124 $ 14,556,595 Face Value 17,227,109 17,405,640 Fair Value 17,314,232 17,706,486 Fully Insured Originated: Number of Loans 3 3 Amortized Cost $ 12,954,731 $ 13,030,131 Face Value 12,613,018 12,681,532 Fair Value 13,188,781 12,969,589
As of November 4, 1997, all of the Partnership's FHA-Insured Loans, recorded at amortized cost, were current with respect to the payment of principal and interest. 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 nine months ended September 30, 1997, the Partnership received additional interest of $0 and $89,222 from the Participations, as compared to $0 and $42,417 for the corresponding periods in 1996. These amounts, if any, are included in mortgage investment income on the accompanying statements of operations. 5. DISTRIBUTIONS TO UNITHOLDERS The distributions paid or accrued to Unitholders on a per Unit basis for the nine months ended September 30, 1997 and 1996 are as follows: 1997 1996 ------ ------ Quarter ended March 31, $ 0.39(1) $ 0.33 Quarter ended June 30, 0.30 0.64(3) Quarter ended September 30, 0.84(2) 0.43(4) ------ ------ $ 1.53 $ 1.40 ====== ====== 12 AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 85 NOTES TO FINANCIAL STATEMENTS (Unaudited) 5. DISTRIBUTIONS TO UNITHOLDERS - Continued (1) This amount includes approximately $0.07 per Unit return of capital and gain from the disposition of the following mortgages: Meadow Park Apartments I $0.05 and Security Apartments $0.02. (2) This amount includes approximately $0.54 per Unit return of capital related to the following mortgages: The prepayment of the mortgage on Peachtree Apartments ($0.52 per Unit) and the conversion of the mortgage on Pine Tree Lodge to a GNMA-Mortgage-Backed Security from an FHA-Insured Loan ($0.02 per Unit). (3) 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. (4) This amount includes approximately $0.10 per Unit representing net proceeds from the assignment of the mortgage on Woodland Village 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 payment receipts are temporarily invested prior to the payment of quarterly distributions, (2) the reduction in the asset base and monthly mortgage payments resulting from monthly mortgage payments received or mortgage dispositions, (3) variations in the cash flow attributable to the delinquency or default of Insured Mortgages and professional fees 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 nine months ended September 30, 1997 and 1996, earned or received compensation or payments for services from the Partnership as follows: 13 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 nine months ended Capacity in Which September 30, September 30, Name of Recipient Served/Item 1997 1996 1997 1996 - ----------------- ---------------------------- ---------- ---------- ---------- ---------- CRIIMI, Inc. General Partner/Distribution $ 411,784 $ 210,794 $ 750,036 $ 686,307 AIM Acquisition Advisor/Asset Management Fee 466,278 493,214 1,421,123 1,503,270 Partners, L.P.(1) CRIIMI MAE Affiliate of General Partner/ 12,176 1,687 47,200 67,360 Management, Inc. Expense Reimbursement (1) The Advisor, pursuant to the Partnership Agreement, effective June 26, 1984, 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, the sub- advisor to the Partnership (the Sub-advisor) is entitled to a fee of 0.28% of Total Invested Assets. Of the amounts paid to the Advisor, the Sub-advisor earned a fee equal to $137,665 and $418,870 for the three and nine months ended September 30, 1997, respectively, and $145,373 and $443,080 for the three and nine months ended September 30, 1996, respectively. The Sub- advisor is an affiliate of CRIIMI MAE.
14 AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 85 NOTES TO FINANCIAL STATEMENTS (Unaudited) 7. INVESTMENT IN AFFILIATE, NOTE PAYABLE AND DUE TO AFFILIATE Integrated Funding, Inc. (IFI), an affiliate of the Partnership, was the coinsurance lender for coinsured mortgages previously held by the Partnership. In order to capitalize IFI with sufficient net worth under HUD regulations, in April 1994, American Insured Mortgage Investors L.P. - Series 88 (AIM 88), an affiliate of the Partnership, transferred a GNMA mortgage-backed security in the amount of $2.0 million to IFI. The Partnership and American Insured Mortgage Investors L.P. - Series 86 (AIM 86), an affiliate of the Partnership, each issued a demand note payable to AIM 88 and recorded an investment in IFI through an affiliate (AIM Mortgage, Inc.) in proportion to each entity's coinsured mortgages for which IFI was mortgagee of record as of April 15, 1994. Interest expense on the note payable was based on an interest rate of 7.25% per annum. IFI had entered into an expense reimbursement agreement with the Partnership, AIM 86 and AIM 88 (collectively the AIM Funds) whereby IFI reimburses the AIM Funds for general and administrative expenses incurred on behalf of IFI. The expense reimbursement is allocated to the AIM Funds based on an amount proportionate to each entity's IFI coinsured mortgages. The expense reimbursement, interest from the two notes and the Partnership's equity interest in IFI's net income or loss, substantially equals the mortgage principal and interest on the GNMA mortgage-backed security transferred to IFI. The final coinsured mortgages held by the Partnership were prepaid in late 1996. As a result, the aforementioned demand note payable to AIM 88 and the expense reimbursement agreement from IFI were cancelled as of April 1, 1997. 15 PART I. FINANCIAL INFORMATION ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Introduction - ------------ The Partnership's Management's Discussion and Analysis of Financial Condition and Results of Operations contains statements that may be considered forward looking. These statements contain a number of risks and uncertainties as discussed herein and in the Partnership's other reports filed with the Securities and Exchange Commission that could cause actual results to differ materially. General - ------- As of September 30, 1997, the Partnership had invested in 85 Insured Mortgages with an aggregate amortized cost of approximately $188 million, an aggregate face value of approximately $196 million and an aggregate fair value of approximately $200 million, as discussed below. As of November 4, 1997, 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 mortgages on Portervillage I Apartments, which has been delinquent since January 1997, as discussed below, and Country Club Terrace Apartments and Gold Key Village Apartments, which are delinquent with respect to the September 1997 payment of principal and interest. In May 1997, the servicer of the mortgage on Portervillage I Apartments filed a Notice of Default and an Election to Assign the mortgage with HUD. The face value of this mortgage was approximately $1.2 million at December 31, 1996. The Partnership expects to receive 99% of this amount plus accrued interest. Results of Operations - --------------------- Net earnings for the three and nine months ended September 30, 1997 decreased as compared to the corresponding periods in 1996. This decrease was primarily the result of a reduction in mortgage investment income due to the disposition of seven mortgages since May 1996. In addition, net gains on mortgage dispositions/modifications decreased, as discussed below. Interest and other income increased for the three and nine months ended September 30, 1997, as compared to the corresponding periods in 1996, primarily due to the investment of proceeds received from the disposition of mortgages, prior to distribution, as discussed in Note 3 of the financial statements. Asset management fees decreased for the three and nine months ended September 30, 1997, as compared to the corresponding periods in 1996, resulting from the reduction in the asset base. General and administrative expenses increased for the three and nine months ended September 30, 1997, as compared to the corresponding periods in 1996. This increase is primarily due to an increase in legal expenses related to the settlement of the mortgage on Pine Tree Lodge. Interest expense to affiliate decreased for the three and nine months ended September 30, 1997, as compared to the corresponding periods in 1996. This decrease was due to the cancellation of the note payable to affiliate, as discussed in Note 7 of the financial statements. Net gains on mortgage dispositions decreased for the nine months ended September 30, 1997, as compared to the corresponding period in 1996. During the first nine months of 1997, the Partnership recognized gains of approximately $66,000 from the prepayment of the mortgage on Security Apartments in February 1997, and approximately $139,000 from the assignment of the mortgage on Meadow Park Apartments I in January 1997. During the first nine months of 1996, the Partnership recognized gains on the prepayment of the mortgages on Cambridge 16 PART I. FINANCIAL INFORMATION ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued Arms Apartments and Bear Creek Apartments II and the modification of the Oak Forest loan. In addition, the Partnership recognized a loss on the assignment of the mortgage on Woodland Village Apartments during the three months ended September 30, 1996. 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 nine months of 1997 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 decreased for the nine months ended September 30, 1997, as compared to the corresponding period in 1996, primarily due to the decrease in net earnings, as discussed above. In addition, investment in affiliate decreased due to the cancellation of an agreement with IFI and AIM 88 as discussed in Note 7 of the financial statements. Net cash provided by investing activities increased for the nine months ended September 30, 1997, as compared to the corresponding period in 1996. This increase is primarily due to more proceeds received in 1997 versus 1996, from the disposition of mortgages, as discussed in Note 3 of the financial statements. In addition, the receipt of mortgage principal from scheduled payments increased due to the normal amortization of mortgages. Net cash used in financing activities increased for the nine months ended September 30, 1997, as compared to the corresponding period in 1996. This increase was due to the distribution of net proceeds received from the disposition of mortgages, as discussed in Note 3 of the financial statements. 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 September 30, 1997. 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 November 13, 1997 /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 SEPTEMBER 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH QUARTERLY REPORT ON FORM 10-Q. 1,000 9-MOS DEC-31-1997 JAN-01-1997 SEP-30-1997 9,921 169,291 29,037 0 0 0 0 0 208,249 10,819 0 0 0 0 197,430 208,249 0 12,921 0 0 1,918 0 0 11,003 0 11,003 0 0 0 11,003 .88 0
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