-----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, PZee4jdOdM+HzUZkPjiCVBzjgDshGZnrsh30ByOz8cu+/josx5irWhCFyXpG6Heh uvX/Rd/pPjU1F32Py01FYg== 0000753281-96-000004.txt : 19961115 0000753281-96-000004.hdr.sgml : 19961115 ACCESSION NUMBER: 0000753281-96-000004 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961113 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: 96661935 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, 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 September 30, 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 SEPTEMBER 30, 1996 Page ---- PART I. Financial Information Item 1. Financial Statements Balance Sheets - September 30, 1996 (unaudited) and December 31, 1995 . . . . . . . . . . . 3 Statements of Operations - for the three and nine months ended September 30, 1996 and 1995 (unaudited) . . . . . . . . . . . . . . . 4 Statement of Changes in Partners' Equity - for the nine months ended September 30, 1996 (unaudited) . . . . . . . . . . . . . . . . 5 Statements of Cash Flows - for the nine months ended September 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 . . . . . . . . . . . . . . . 14 PART II. Other Information Item 6. Exhibits and Reports on Form 8-K . . . . . . 18 Signature . . . . . . . . . . . . . . . . . . . . . . . 19 3 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS AMERICAN INSURED MORTGAGE INVESTORS - SERIES 85, L.P. BALANCE SHEETS
September 30, December 31, 1996 1995 ------------- ------------ (unaudited) ASSETS Investment in FHA-Insured Certificates and GNMA Mortgage- Backed Securities, at fair value: Acquired insured mortgages $159,962,605 $169,460,375 Originated insured mortgages 22,516,685 22,960,468 ------------ ------------ 182,479,290 192,420,843 Investment in FHA-Insured Loans, at amortized cost, net of unamortized discount and premium: Acquired insured mortgages 14,590,366 14,684,828 Originated insured mortgages 13,054,271 13,123,855 ------------ ------------ 27,644,637 27,808,683 Cash and cash equivalents 4,557,028 3,368,700 Receivables and other assets 1,776,328 1,775,746 Investment in affiliate 314,073 317,151 ------------ ------------ Total assets $216,771,356 $225,691,123 ============ ============ LIABILITIES AND PARTNERS' EQUITY Distributions payable $ 5,404,986 $ 4,525,104 Accounts payable and accrued expenses 156,718 163,737 Note payable and due to affiliate 386,659 320,920 ------------ ------------ Total liabilities 5,948,363 5,009,761 ------------ ------------ Partners' equity: Limited partners' equity 205,593,554 210,842,615 General partner's deficit (1,487,803) (1,274,782) Unrealized gains on investment in FHA-Insured Certificates and GNMA Mortgage- Backed Securities 9,074,913 12,159,559 Unrealized losses on investment in FHA-Insured Certificates and GNMA Mortgage-Backed Securities (2,357,671) (1,046,030) ------------ ------------ Total partners' equity 210,822,993 220,681,362 ------------ ------------ Total liabilities and partners' equity $216,771,356 $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 nine months ended September 30, September 30, ----------------------------- ----------------------------- 1996 1995 1996 1995 ------------ ------------ ------------ ------------ Income: Mortgage investment income $ 4,397,124 $ 4,555,595 $ 13,434,378 $ 13,854,372 Interest and other income 49,868 70,890 154,130 129,701 ------------ ------------ ------------ ------------ 4,446,992 4,626,485 13,588,508 13,984,073 ------------ ------------ ------------ ------------ Expenses: Asset management fee to related parties 493,214 507,990 1,503,270 1,534,896 General and administrative 53,085 96,676 244,346 289,924 Mortgage servicing fees 63,980 71,961 202,375 216,661 Interest expense to affiliate 5,783 5,784 17,349 17,350 ------------ ------------ ------------ ------------ 616,062 682,411 1,967,340 2,058,831 ------------ ------------ ------------ ------------ Net earnings before gain (loss) on mortgage dispositions/ modifications 3,830,930 3,944,074 11,621,168 11,925,242 Gains on mortgage dispositions/ modifications -- -- 658,973 52,730 Losses on mortgage dispositions/ modifications (40,554) -- (144,595) (36,632) ------------ ------------ ------------ ------------ Net earnings $ 3,790,376 $ 3,944,074 $ 12,135,546 $ 11,941,340 ============ ============ ============ ============ Net earnings allocated to: Limited partners - 96.1% $ 3,642,552 $ 3,790,255 $ 11,662,260 $ 11,475,628 General partner - 3.9% 147,824 153,819 473,286 465,712 ------------ ------------ ------------ ------------ $ 3,790,376 $ 3,944,074 $ 12,135,546 $ 11,941,340 ============ ============ ============ ============ Net earnings per Limited Partnership Unit $ 0.30 $ 0.31 $ 0.96 $ 0.95 ============ ============ ============ ============
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 nine months ended September 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 473,286 11,662,260 -- -- 12,135,546 Distributions paid or accrued of $1.40 per Unit (686,307) (16,911,321) -- -- (17,597,628) Adjustments to unrealized gains (losses) on investments in FHA-Insured Certificates and GNMA Mortgage-Backed Securities -- -- (3,084,646) (1,311,641) (4,396,287) ------------- ------------- ---------------- ----------------- ------------- Balance, September 30, 1996 $ (1,487,803) $ 205,593,554 $ 9,074,913 $ (2,357,671) $ 210,822,993 ============= ============= ================ ================= ============= Limited Partnership Units outstanding - September 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 nine months ended September 30, 1996 1995 ------------ ------------ Cash flows from operating activities: Net earnings $ 12,135,546 $ 11,941,340 Adjustments to reconcile net earnings to net cash provided by operating activities: Gains on mortgage dispositions/modifications (658,973) (52,730) Losses on mortgage dispositions/modifications 144,595 36,632 Changes in assets and liabilities: Decrease in accounts payable and accrued expenses (7,019) (105,694) Decrease in other receivables and other assets 138,276 18,084 Decrease in investment in affiliate 3,078 -- Increase (decrease) in note payable and due to affiliate 65,739 (101,955) ------------ ------------ Net cash provided by operating activities 11,821,242 11,735,677 ------------ ------------ Cash flows from investing activities: Receipt of mortgage principal from scheduled payments 1,190,264 975,618 Proceeds from mortgage dispositions 4,894,568 2,314,351 ------------ ------------ Net cash provided by investing activities 6,084,832 3,289,969 ------------ ------------ Cash flows from financing activities: Distributions paid to partners (16,717,746) (13,198,221) ------------ ------------ Net cash used in financing activities (16,717,746) (13,198,221) ------------ ------------ Net increase in cash and cash equivalents 1,188,328 1,827,425 Cash and cash equivalents, beginning of period 3,368,700 3,462,825 ------------ ------------ Cash and cash equivalents, end of period $ 4,557,028 $ 5,290,250 ============ ============
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 September 30, 1996 and December 31, 1995 and the results of its operations for the three and nine months ended September 30, 1996 and 1995 and its cash flows for the nine months ended September 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 September 30, 1996, the Partnership's investment in fully insured acquired insured mortgages, recorded at fair value consisted of 62 FHA-Insured Certificates and nine GNMA Mortgage-Backed Securities with an aggregate amortized cost of $152,161,451, an aggregate face value of $158,241,678, and an aggregate fair value of $159,962,605. 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 September 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 $17,152,798, an aggregate face value of $16,796,183, and an aggregate fair value of $16,422,596. 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. Concurrent with this HUD modification, the deferred interest is now evidenced in the form of a cash surplus note in the amount of $356,600. To the extent available, surplus cash, as defined by HUD, will be split 50/50 in repayment of this deferred interest and another note due the property manager for deferred management fees. Once 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. As of September 30, 1996, the balance of this note is $356,600. 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 $1,100. 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 approximately $235,000 from the prepayment of the mortgage on Cambridge Arms Apartments and a gain of approximately $276,500 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. In October 1995, the Partnership filed a Notice of Default and an Election to Assign with the United States Department of Housing and Urban Development (HUD) related to the mortgage on Woodland Village Apartments. On August 30, 1996, the Partnership received approximately $1.4 million, representing approximately 90% of the assignment proceeds. The remaining proceeds of approximately $139,000 are included in receivables and other assets on the accompanying balance sheet as of September 30, 1996. The Partnership recognized a loss of approximately $41,000 as of September 30, 1996. A distribution of $0.10 per unit related to this assignment was declared in September 1996 and was paid to Unitholders on November 1, 1996. As of October 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 Meadow Park Apartments I, which was assigned in October 1996, as discussed below, and Country Club Terrace Apartments and Colony West Apartments which are delinquent with respect to the September 1996 payment of principal and interest. The Partnership expects to receive the payments on Country Club Terrace Apartments and Colony West Apartments. 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. The Partnership expects to recognize a gain of approximately $130,000 on the assignment of this mortgage. 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. 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 Coinsured by affiliate ---------------------- As of September 30, 1996 and December 31, 1995, the Partnership had invested in one and two, respectively, FHA-Insured Certificate secured by a coinsured mortgage where the coinsurance lender is Integrated Funding Inc. (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 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 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 nine months ended September 30, 1996 and 1995. As of October 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 September 30, 1996, this mortgage had a fair value of $6,094,089. As of December 31, 1995, two coinsured mortgages had an aggregate fair value of $12,034,714, respectively. The following table summarizes this information as of September 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 September 30, September 30, December 31, December 31, 1996 1996 1995 1995 ------------- ------------- ------------ ------------ Westlake Village $ 6,447,799 $ 6,445,886 $ 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 September 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 $14,590,366 and $14,684,828, respectively, an aggregate face value of $17,462,682 and $17,627,453, respectively, and an aggregate fair value of $17,750,909 and $18,388,369, respectively. As of September 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 $13,054,271 and $13,123,855, respectively, an aggregate face value of $12,703,439 and $12,766,486, respectively, and an aggregate fair value of $12,964,852 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 nine months ended September 30, 1996, the Partnership received additional interest of $0 and $42,417, respectively, from the Participations. During the three and nine months ended September 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. As of October 31, 1996, all of the FHA-insured loans were current with respect to the payment of principal and interest. 5. DISTRIBUTIONS TO UNITHOLDERS The distributions paid or accrued to Unitholders on a per Unit basis for the nine months ended September 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 Quarter ended September 30, $ 0.43(2) $ 0.49 ------ ------ $ 1.40 $ 1.18 ====== ======
(1) This amount includes approximately $0.31 per Unit representing net proceeds from the prepayment of the mortgages on Harbor View Estates, Bear Creek Apartments II and Cambridge Arms Apartments. (2) 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 13 AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 85 NOTES TO FINANCIAL STATEMENTS (Unaudited) 5. DISTRIBUTIONS TO UNITHOLDERS - Continued 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. 6. TRANSACTIONS WITH RELATED PARTIES The General Partner and certain affiliated entities, during the three and nine months ended September 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 Nine months ended Capacity in Which September 30, September 30, Name of Recipient Served/Item 1996 1995 1996 1995 - ----------------- ---------------------------- ---------- ---------- ---------- ---------- CRIIMI, Inc.(1) General Partner/Distribution $ 210,794 $ 240,209 $ 686,307 $ 578,461 AIM Acquisition Advisor/Asset Management Fee 493,214 507,990 1,503,270 1,534,896 Partners, L.P.(2) CRI(3) Affiliate of General Partner/ -- 9,224 -- 71,129 Expense Reimbursement CRIIMI MAE Affiliate of General Partner/ 1,687 11,519 67,360 11,519 Management, Inc.(3) Expense Reimbursement (1) The General Partner, pursuant to amendments to the Partnership Agreement, effective September 6, 1991, is entitled to receive 3.9% 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 .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. Of the amounts paid to the Advisor, CRIIMI MAE Services Limited Partnership, the Sub-advisor, earned a fee equal to $145,373 and $443,080, for the three and nine months ended September 30, 1996, respectively, and, $149,730 for the three and nine months ended September 30, 1995. CRI/AIM Management, Inc., which acted as the Sub-advisor through June 30, 1995, earned a fee equal $302,682. (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 September 30, 1996, the Partnership had invested in 89 insured mortgages with an aggregate amortized cost of approximately $203 million, an aggregate face value of approximately $212 million and an aggregate fair value of approximately $213 million. As of October 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 mortgages on Meadow Park Apartments I, which was assigned in October 1996, as discussed below, and Country Club Terrace Apartments and Colony West Apartments which are delinquent with respect to the September 1996 payment of principal and interest. The Partnership expects to receive the payments on Country Club Terrace Apartments and Colony West Apartments. 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. The Partnership expects to recognize a gain of approximately $130,000 on the assignment of this mortgage. Results of Operations - --------------------- Net earnings for the three months ended September 30, 1996, decreased as compared to the corresponding period in 1995 primarily as a result of the reduction in the mortgage base due to the dispositions that occurred in the second quarter of 1996, as discussed below. Net earnings for the nine months ended September 30, 1996 increased as compared to the corresponding period 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 nine months ended September 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 decreased for the three months ended September 30, 1996, as compared to the corresponding period in 1995 due to a reduction in the mortgage base. Interest and other income increased for the nine months ended September 30, 1996, as compared to the corresponding period in 1995 primarily due to the receipt of net disposition proceeds in the second quarter of 1996 which were invested short-term prior to distribution to Unitholders in August 1996. Asset management fees to related parties decreased for the three and nine months ended September 30, 1996, as compared to the corresponding periods in 1995 as a result of mortgage dispositions, as discussed below. General and administrative expenses decreased for the three and nine months ended September 30, 1996, as compared to the corresponding periods in 1995, primarily due to decreases in certain costs related to investor services, resulting from a reduction in the number of registered holders. In addition, payroll related expenses have decreased as a result of a reduction in the mortgage base. Mortgage servicing fees decreased for the three and nine months ended September 30, 1996, as compared to the corresponding periods in 1995 due to the reduction in the mortgage base. Gains or losses on mortgage dispositions are based on carrying amounts and proceeds for mortgage investments disposed of during the period. Losses increased for the three months ended September 30, 1996, as compared to the same period in 1995, due to a loss recognized by the Partnership of approximately $41,000 as a result of the assignment to HUD of the mortgage on Woodland Village 16 PART I. FINANCIAL INFORMATION ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued Apartments. Net gains on mortgage dispositions increased for the nine months ended September 30, 1996, as compared to the corresponding period in 1995. 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 quarter 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. During the second quarter of 1996, 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 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 nine 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 nine months ended September 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 nine months ended September 30, 1995. Also contributing to the increase in net cash provided by operating activities was an increase in Due from HUD as a result of the assignment of the Woodland Village mortgage. The balance represents the remaining proceeds, plus interest due from HUD. Net cash provided by investing activities increased for the nine months ended September 30, 1996, as compared to the corresponding period in 1995 due to the increase in proceeds from mortgage dispositions. In addition, receipt of mortgage principal from scheduled payments increased for the nine months ending September 30, 1996, as compared to the corresponding period in 1995 due to the partial principal prepayment on the Cambridge mortgage prior to disposition. Net cash used in financing activities increased for the nine months ending September 30, 1996, as compared to the corresponding period in 1995, as a result of an increase in distributions paid to partners. Distributions paid to partners for the nine months ended September 30, 1996, included 17 PART I. FINANCIAL INFORMATION ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued special distributions resulting from the prepayment of the mortgages on Harbor View Estates, Cambridge Arms Apartments and Bear Creek Apartments II. 18 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, 1996. The exhibits filed as part of this report are listed below: Exhibit No. Description ----------- ----------------------- 27 Financial Data Schedule 19 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 /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, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH QUARTERLY REPORT ON FORM 10-Q. 1,000 9-MOS DEC-31-1996 JAN-01-1996 SEP-30-1996 4,557 182,479 29,735 0 0 0 0 0 216,771 5,948 0 0 0 0 210,823 216,771 0 14,103 0 0 1,967 0 0 12,136 0 12,136 0 0 0 12,136 .96 0
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