-----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, NtZL8xkvS27Y5Ph/2GkUbs84ycEGfJl5N14tgWaqlPtY47JaekTxVubYKCFDIjU2 qGo2XqwN18BwgyfZdQBuNA== 0000753281-98-000002.txt : 19980814 0000753281-98-000002.hdr.sgml : 19980814 ACCESSION NUMBER: 0000753281-98-000002 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980813 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: 98685191 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 AIM 85 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, 1998 ------------------ 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 June 30, 1998, 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, 1998 Page ---- PART I. Financial Information Item 1. Financial Statements Balance Sheets - June 30, 1998 (unaudited) and December 31, 1997 . . . . . . . . . . . 3 Statements of Operations - for the three and six months ended June 30, 1998 and 1997 (unaudited) . . . . . . . . . . . . . . . 4 Statement of Changes in Partners' Equity - for the six months ended June 30, 1998 (unaudited). . . . . . . . . . . . . . 5 Statements of Cash Flows - for the six months ended June 30, 1998 and 1997 (unaudited) . . . . . . . . . . . . . 6 Notes to Financial Statements (unaudited) . . 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . . . . . . . . . 13 PART II. Other Information Item 6. Exhibits and Reports on Form 8-K . . . . . . 15 Signature . . . . . . . . . . . . . . . . . . . . . . . 16 3 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS AMERICAN INSURED MORTGAGE INVESTORS - SERIES 85, L.P. BALANCE SHEETS
June 30, December 31, 1998 1997 ------------- ------------ (unaudited) ASSETS Investment in FHA-Insured Certificates and GNMA Mortgage- Backed Securities, at fair value: Acquired insured mortgages $128,362,339 $142,822,793 Originated insured mortgages 16,808,780 16,887,282 ------------ ------------ 145,171,119 159,710,075 ------------ ------------ Investment in FHA-Insured Loans, at amortized cost, net of unamortized discount and premium: Acquired insured mortgages 13,405,511 14,416,917 Originated insured mortgages 12,874,651 12,928,572 ------------ ------------ 26,280,162 27,345,489 Cash and cash equivalents 6,645,963 14,718,103 Receivables and other assets 3,812,431 1,676,021 ------------ ------------ Total assets $181,909,675 $203,449,688 ============ ============ 4 LIABILITIES AND PARTNERS' EQUITY Distributions payable $ 7,290,445 $ 15,460,772 Accounts payable and accrued expenses 186,478 306,715 Due to affiliate 1,266,454 -- ------------ ------------ Total liabilities 8,743,377 15,767,487 ------------ ------------ Partners' equity: Limited partners' equity 167,277,939 180,044,243 General partner's deficit (3,042,756) (2,524,665) Unrealized gain on investment in FHA-Insured Certificates and GNMA Mortgage-Backed Securities 9,265,167 10,482,727 Unrealized loss on investment in FHA-Insured Certificates and GNMA Mortgage-Backed Securities (334,052) (320,104) ------------ ------------ Total partners' equity 173,166,298 187,682,201 ------------ ------------ Total liabilities and partners' equity $181,909,675 $203,449,688 ============ ============ 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, ------------------------------ ----------------------------- 1998 1997 1998 1997 ------------ ------------ ------------ ------------ Income: Mortgage investment income $ 3,533,125 $ 4,266,946 $ 7,239,023 $ 8,484,014 Interest and other income 218,085 51,496 371,291 108,750 ------------ ------------ ------------ ------------ 3,751,210 4,318,442 7,610,314 8,592,764 ------------ ------------ ------------ ------------ Expenses: Asset management fee to related parties 405,959 476,952 824,061 954,845 General and administrative 147,924 166,969 292,377 320,742 ------------ ------------ ----------- ------------ 553,883 643,921 1,116,438 1,275,587 ------------ ------------ ----------- ------------ Net earnings before net gains on mortgage dispositions 3,197,327 3,674,521 6,493,876 7,317,177 Net gains on mortgage dispositions 857,977 -- 961,789 205,217 ------------ ------------ ----------- ------------ Net earnings $ 4,055,304 $ 3,674,521 $ 7,455,665 $ 7,522,394 ============ ============ =========== ============ Net earnings allocated to: Limited partners - 96.1% $ 3,897,147 $ 3,531,215 $ 7,164,894 $ 7,229,021 General partner - 3.9% 158,157 143,306 290,771 293,373 ------------ ------------ ----------- ------------ $ 4,055,304 $ 3,674,521 $ 7,455,665 $ 7,522,394 ============ ============ =========== ============ Net earnings per Limited Partnership Unit - basic $ 0.32 $ 0.29 $ 0.59 $ 0.60 ============ ============ =========== ============ 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, 1998 (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, 1997 $ (2,524,665) $ 180,044,243 $ 10,482,727 $ (320,104) $ 187,682,201 Net earnings 290,771 7,164,894 -- -- 7,455,665 Distributions paid or accrued of $1.65 per Unit, including return of capital of $1.06 (808,862) (19,931,198) -- -- (20,740,060) Adjustments to unrealized gains (losses) on investments in FHA-Insured Certificates and GNMA Mortgage-Backed Securities -- -- (1,217,560) (13,948) (1,231,508) ------------- ------------- -------------- ------------ ------------- Balance, June 30, 1998 $ (3,042,756) $ 167,277,939 $ 9,265,167 $ (334,052) $ 173,166,298 ============= ============= ============== ============ ============= Limited Partnership Units outstanding - basic, as of June 30, 1998 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, 1998 1997 ------------ ------------ Cash flows from operating activities: Net earnings $ 7,455,665 $ 7,522,394 Adjustments to reconcile net earnings to net cash provided by operating activities: Net gain on mortgage dispositions (961,789) (205,217) Changes in assets and liabilities: (Decrease) increase in accounts payable and accrued expenses (120,237) 10,291 Decrease in receivables and other assets 280,061 50,727 Decrease in investment in affiliate -- 314,072 ------------ ------------ Net cash provided by operating activities 6,653,700 7,692,267 ------------ ------------ Cash flows from investing activities: Receipt of mortgage principal from scheduled payments 680,474 774,127 Proceeds from mortgage dispositions 13,504,073 904,891 ------------ ------------ Net cash provided by investing activities 14,184,547 1,679,018 ------------ ------------ Cash flows from financing activities: Distributions paid to partners (28,910,387) (15,586,469) Decrease in note payable and due to affiliate -- (375,094) ------------ ------------ Net cash used in financing activities (28,910,387) (15,961,563) ------------ ------------ Net decrease in cash and cash equivalents (8,072,140) (6,590,278) Cash and cash equivalents, beginning of period 14,718,103 9,716,786 ------------ ------------ Cash and cash equivalents, end of period $ 6,645,963 $ 3,126,508 ============ ============ Non cash investing activity: 9.5% debenture received from HUD in exchange for the mortgage on Portervillage I Apartments $ 2,296,098 -- Portion of debenture due to affiliate, AIM 84 (1,148,049) -- 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). 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 June 30, 1998 and December 31, 1997 and the results of its operations for the three and six months ended June 30, 1998 and 1997 and its cash flows for the six months ended June 30, 1998 and 1997. 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, 1997. 8 AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 85 NOTES TO FINANCIAL STATEMENTS (Unaudited) 2. Basis of Presentation - Continued New Accounting Standards - ------------------------ 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 a separate statement of 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 was adopted by the Partnership January 1, 1998. For the three and six months ended June 30, 1998, comprehensive income was $2,197,121 and $6,224,157, respectively. For the three and six months ended June 30, 1997, comprehensive income was $5,775,220 and $6,899,794, respectively. 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:
June 30, December 31, 1998 1997 ------------ ------------ Fully Insured Acquired: Number of GNMA Mortgage-Backed Securities(1) 8 9 FHA-Insured Certificates (2)(3)(4) 52 55 Amortized Cost $119,280,539 $132,530,176 Face Value 123,533,506 137,674,964 Fair Value 128,362,339 142,822,793 Fully Insured Originated: Number of GNMA Mortgage-Backed Securities 1 1 FHA-Insured Certificates 1 1 Amortized Cost $ 16,959,465 $ 17,017,276 Face Value 16,602,849 16,660,658 Fair Value 16,808,780 16,887,282
(1) In February 1998, the mortgage on Spanish Trace Apartments was prepaid. The Partnership received net proceeds of approximately $9.7 million and recognized a loss of approximately $96,000 for the six months ended June 30, 1998. A distribution of approximately $0.77 per unit related to this prepayment was declared in March 1998 and was paid to Unitholders in May 1998. (2) In April 1998, the mortgages on Emerald Green Apartments and Isle of Pines Village Apartments were prepaid. The Partnership received net proceeds, for the two mortgages, of approximately $2.3 million resulting in an aggregate gain of approximately $520,000 for the six months ended June 30, 1998. A distribution of approximately $0.19 per Unit related to the prepayment of these mortgages was declared in May 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 1998 and was paid to Unitholders in August 1998. (3) In May 1998, the mortgage on Stoney Brook Apartments was prepaid. The Partnership received net proceeds of approximately $1.5 million resulting in a gain of approximately $338,000 for the six months ended June 30, 1998. A distribution of approximately $0.12 per Unit related to the prepayment of this mortgage was declared in June 1998 and was paid to Unitholders in August 1998. (4) In July 1998, the mortgage on Amador Residential was prepaid. The Partnership received net proceeds of approximately $1.4 million resulting in a gain of approximately $64,000. The Partnership expects to distribute $0.11 per Unit in November 1998, related to the prepayment of this mortgage. As of August 3, 1998, 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 Wayland Health Center, which is delinquent with respect to the May and June 1998 payments of principal and interest. In addition, the mortgages on Country Club Terrace Apartments and Bentgrass Hills Apartments are delinquent with respect to the June 1998 payment of principal and interest. 4. INVESTMENT IN FHA-INSURED LOANS Fully Insured FHA-Insured Loans ------------------------------- Listed below is the Partnership's aggregate investment in FHA-Insured Loans:
June 30, December 31, 1998 1997 ------------- ------------ Fully Insured Acquired: Number of Loans(1) 11 12 Amortized Cost $ 13,405,511 $ 14,416,917 Face Value 15,903,523 17,165,551 Fair Value 16,168,965 17,432,816 Fully Insured Originated: Number of Loans 3 3 Amortized Cost $ 12,874,651 $ 12,928,572 Face Value 12,540,094 12,589,214 Fair Value 13,301,329 13,431,769 (1) In March 1998, HUD issued assignment proceeds in the form of a 9.5% debenture for the mortgage on Portervillage I Apartments. This mortgage was owned 50% by AIM 85 and 50% by an affiliate, American Insured Mortgage Investors (AIM 84). The debenture face value is $2,296,098 with interest payable semi-annually on January 1 and July 1. Upon disposition of the debenture, 50% of the proceeds will be payable to AIM 84. The Partnership expects to receive net proceeds of approximately $1.1 million and has recognized a gain of approximately $200,000 for the six months 10 AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 85 NOTES TO FINANCIAL STATEMENTS (Unaudited) 4. INVESTMENT IN FHA-INSURED LOANS - Continued ended June 30, 1998. The debenture and accrued interest are included on the balance sheet in Receivables and other assets and the portion due to AIM 84 is included in Due to affiliate. A distribution will be declared in the quarter in which cash is received for the debenture.
11 AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 85 NOTES TO FINANCIAL STATEMENTS (Unaudited) 4. INVESTMENT IN FHA-INSURED LOANS - Continued As of August 3, 1998, 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 six months ended June 30, 1998, the Partnership received additional interest of $34,553 as compared to $89,222 for the corresponding periods in 1997 from the Participations. 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 three months ended March 31, 1998 and 1997 are as follows: 1998 1997 ------ ------ Quarter ended March 31, $ 1.07(1) $ 0.39(3) Quarter ended June 30, 0.58(2) 0.30 ------ ------ $ 1.65 $ 0.69 ====== ====== (1) This amount includes approximately $0.77 per Unit return of capital from the disposition of the mortgage on Spanish Trace Apartments. (2) This amount includes approximately $0.31 per Unit return of capital and gain from the disposition of the following mortgages: Emerald Green Apartments and Isle of Pines Village of $0.19 per Unit and Stoney Brook Apartments of $0.12 per Unit. (3) This amount includes approximately $0.07 per Unit return of capital and gain from the disposition of the following mortgages: Meadow Park Apartments I of $0.05 per Unit and Security Apartments of $0.02 per Unit. 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 six months ended June 30, 1998 and 1997, earned or received compensation or payments for services from the Partnership as follows: 12 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 1998 1997 1998 1997 - ----------------- ---------------------------- ---------- ---------- ---------- ---------- CRIIMI, Inc. General Partner/Distribution $ 284,327 $ 147,066 $ 808,862 $ 338,252 AIM Acquisition Advisor/Asset Management Fee 405,959 476,952 824,061 954,845 Partners, L.P.(1) CRIIMI MAE Affiliate of General Partner/ 16,361 18,081 32,544 35,024 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, pursuant to the amended partnership agreement as of October 1991. Of the amounts paid to the Advisor, the Sub-advisor earned a fee equal to $119,657 and $242,893 for the three and six months ended June 30, 1998, respectively, and $140,349 and $281,205 for the three and six months ended June 30, 1997, respectively. The Sub-advisor is an affiliate of CRIIMI MAE.
13 PART I. FINANCIAL INFORMATION ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Introduction - ------------ The Partnership's Management's Discussion and Analysis of Financial Condition and Results of Operations contains statements that may be considered forward looking. These statements contain a number of risks and uncertainties as discussed herein and in the Partnership's other reports filed with the Securities and Exchange Commission that could cause actual results to differ materially. See Item 1, "Forward-Looking Statements" in the Partnership's Annual Report for 1997 on Form 10-K for a more detailed discussion of such risks and uncertainties. General - ------- As of June 30, 1998, the Partnership had invested in 76 Insured Mortgages with an aggregate amortized cost of approximately $162.5 million, an aggregate face value of approximately $168.6 million and an aggregate fair value of approximately $174.6 million, as discussed below. In July 1998, the mortgage on Amador Residential was prepaid. The Partnership received net proceeds of approximately $1.4 million resulting in a gain of approximately $64,000. The Partnership expects to distribute $0.11 per Unit in November 1998, related to the prepayment of this mortgage. As of August 3, 1998, 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 Wayland Health Center, which is delinquent with respect to the May and June 1998 payments of principal and interest. In addition, the mortgages on Country Club Terrace Apartments and Bentgrass Hills Apartments are delinquent with respect to the June 1998 payment of principal and interest. Results of Operations - --------------------- Net earnings for the three months ended June 30, 1998 increased as compared to the corresponding period in 1997. Net earnings for the six months ended June 30, 1998 decreased as compared to the corresponding period in 1997. The increase for the three months ended June 30, 1998, is primarily due to the increase in net gains from mortgage dispositions, as discussed below. This increase was partially offset by a decrease in mortgage investment income due to the disposition of nine mortgages since June 1997. The decrease for the six months ended June 30, 1998, is primarily due to a decrease in mortgage investment income as a result of the disposition of nine mortgages since June 1997. This decrease was partially offset by an increase in net gains from mortgage dispositions, as discussed below. Interest and other income increased for the three and six months ended June 30, 1998, as compared to the corresponding periods in 1997, primarily due to the investment of proceeds received from the 14 PART I. FINANCIAL INFORMATION ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued disposition of mortgages, prior to distribution, as discussed in Notes 3 and 5 of the financial statements. Asset management fees decreased for the three and six months ended June 30, 1998, as compared to the corresponding periods in 1997, primarily from the reduction in the mortgage asset base. Net gains on mortgage dispositions increased for the three and six months ended June 30, 1998, as compared to the corresponding periods in 1997. During the first six months of 1998, the Partnership recognized gains of approximately $200,000 from the assignment of the mortgage on Portervillage I Apartments in March 1998 and approximately $858,000 from the prepayment of the mortgages on Stoney Brook Apartments, Emerald Green Apartments and Isle of Pines Village Apartments in April 1998. In addition, the Partnership recognized a loss of approximately $96,000 from the prepayment of the mortgage on Spanish Trace Apartments in February 1998. During the first six months of 1997, the Partnership recognized gains of approximately $139,000 from the assignment of the mortgage on Meadow Park Apartments I in January 1997 and approximately $66,000 from the prepayment of the mortgage on Security Apartments in February 1997. 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 1998 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 six months ended June 30, 1998, as compared to the corresponding period in 1997, primarily due to the decrease in earnings before mortgage dispositions as it relates to the reduction in mortgage base. Net cash provided by investing activities increased for the six months ended June 30, 1998, as compared to the corresponding period in 1997. This increase is primarily due to proceeds received from the disposition of mortgages, as discussed in Notes 3 and 5 of the financial statements. Net cash used in financing activities increased for the six months ended June 30, 1998, as compared to the corresponding period in 1997. This increase was due to the distribution of net proceeds received from the disposition of mortgages, as discussed in Notes 3 and 5 of the financial statements. 15 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, 1998. The exhibits filed as part of this report are listed below: Exhibit No. Description ----------- ----------------------- 27 Financial Data Schedule 16 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/ August 13, 1998 /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 SIX MONTHS ENDED JUNE 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH QUARTERLY REPORT ON FORM 10-Q. 1,000 6-MOS DEC-31-1997 JAN-01-1998 JUN-30-1998 6,646 145,171 30,093 0 0 0 0 0 181,910 8,744 0 0 0 0 173,166 181,910 0 8,572 0 0 1,116 0 0 7,456 0 7,456 0 0 0 7,456 .59 0
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