1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended September 30, 1996
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Commission file number 1-11060
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AMERICAN INSURED MORTGAGE INVESTORS
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(Exact name of registrant as specified in charter)
California 13-3180848
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
11200 Rockville Pike, Rockville, Maryland 20852
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(Address of principal executive offices) (Zip Code)
(301) 816-2300
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(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, 10,000,000 depositary units of limited
partnership interest were outstanding.
2
AMERICAN INSURED MORTGAGE INVESTORS
INDEX TO FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 1996
PAGE
----
PART I. Financial Information (Unaudited)
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.............. 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................... 11
PART II. Other Information
Item 6. Exhibits and Reports on Form 8-K........... 13
Signature............................................ 14
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AMERICAN INSURED MORTGAGE INVESTORS
BALANCE SHEETS
September 30, December 31,
1996 1995
------------- ------------
(Unaudited)
ASSETS
Investment in FHA-Insured Loans,
at amortized cost, net of unamortized
discount:
Originated insured mortgages $ 14,295,878 $ 14,533,066
Acquired insured mortgages 9,005,980 9,056,545
------------ ------------
23,301,858 23,589,611
Investment in FHA-Insured Certificates,
at fair value:
Acquired insured mortgages 14,052,401 14,774,772
Cash and cash equivalents 598,813 673,733
Receivables and other assets 360,642 377,323
------------ ------------
Total assets $ 38,313,714 $ 39,415,439
============ ============
LIABILITIES AND PARTNERS' EQUITY
Distributions payable $ 720,916 $ 823,903
Accounts payable and accrued expenses 70,575 98,292
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Total liabilities 791,491 922,195
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Partners' equity:
Limited partners' equity 39,748,966 40,059,771
General partner's deficit (4,931,684) (4,922,401)
Unrealized gains on investment
in FHA-Insured Certificates 2,704,941 3,355,874
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Total partners' equity 37,522,223 38,493,244
------------ ------------
Total liabilities and partners'
equity $ 38,313,714 $ 39,415,439
============ ============
The accompanying notes are an integral part
of these financial statements.
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AMERICAN INSURED MORTGAGE INVESTORS
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 $ 833,902 $ 886,843 $ 2,581,356 $ 2,692,925
Interest and other income 7,546 8,259 24,543 28,982
------------ ------------ ------------ ------------
841,448 895,102 2,605,899 2,721,907
------------ ------------ ------------ ------------
Expenses:
Asset management fee to
related parties 85,773 85,773 257,319 257,319
General and administrative 33,698 59,888 153,483 189,879
------------ ------------ ------------ ------------
119,471 145,661 410,802 447,198
------------ ------------ ------------ ------------
Earnings before loss on
mortgage modification 721,977 749,441 2,195,097 2,274,709
Loss on mortgage modification -- -- (146,464) --
------------ ------------ ------------ ------------
Net earnings $ 721,977 $ 749,441 $ 2,048,633 $ 2,274,709
============ ============ ============ ============
Net earnings allocated to:
Limited partners - 97.1% $ 701,040 $ 727,707 $ 1,989,223 $ 2,208,742
General partner - 2.9% 20,937 21,734 59,410 65,967
------------ ------------ ------------ ------------
$ 721,977 $ 749,441 $ 2,048,633 $ 2,274,709
============ ============ ============ ============
Net earnings per Unit of limited
partnership interest $ 0.07 $ 0.07 $ 0.20 $ 0.22
============ ============ ============ ============
The accompanying notes are an integral part
of these financial statements.
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AMERICAN INSURED MORTGAGE INVESTORS
STATEMENT OF CHANGES IN PARTNERS' EQUITY
For the nine months ended September 30, 1996
(Unaudited)
Unrealized
Gains on
Investment in
General Limited FHA-Insured
Partner Partners Certificates Total
------------ ------------ -------------- -------------
Balance, December 31, 1995 $ (4,922,401) $ 40,059,771 $ 3,355,874 $ 38,493,244
Net earnings 59,410 1,989,223 -- 2,048,633
Distributions paid or accrued of
$0.23 per Unit (68,693) (2,300,028) -- (2,368,721)
Adjustment to unrealized gains
on investment in FHA-Insured
Certificates -- -- (650,933) (650,933)
------------ ------------- ------------- -------------
Balance, September 30, 1996 $ (4,931,684) $ 39,748,966 $ 2,704,941 $ 37,522,223
============ ============= ============= =============
Limited Partnership Units
outstanding - September 30,
1996 10,000,125
=============
The accompanying notes are an integral part
of these financial statements.
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AMERICAN INSURED MORTGAGE INVESTORS
STATEMENTS OF CASH FLOWS
(Unaudited)
For the nine months ended
September 30,
1996 1995
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Cash flows from operating activities:
Net earnings $ 2,048,633 $ 2,274,709
Adjustments to reconcile net
earnings to net cash provided by
operating activities:
Loss on modification of insured mortgage 146,464 --
Changes in assets and liabilities:
Decrease (increase) in receivables and
other assets 16,681 (1,366)
Decrease in accounts payable and
accrued expenses (27,717) (8,970)
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Net cash provided by operating
activities 2,184,061 2,264,373
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Cash flows from investing activities:
Proceeds from modification of
insured mortgage 35,748 --
Receipt of mortgage principal from
scheduled payments 176,979 152,558
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Net cash provided by investing
activities 212,727 152,558
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Cash flows from financing activities:
Distributions paid to partners (2,471,708) (2,471,709)
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Net cash used in financing activities (2,471,708) (2,471,709)
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Net decrease in cash and cash
equivalents (74,920) (54,778)
Cash and cash equivalents, beginning
of period 673,733 722,986
------------ ------------
Cash and cash equivalents, end of
period $ 598,813 $ 668,208
============ ============
The accompanying notes are an integral part
of these financial statements.
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AMERICAN INSURED MORTGAGE INVESTORS
NOTES TO FINANCIALSTATEMENTS
(Unaudited)
1. ORGANIZATION
American Insured Mortgage Investors (the Partnership) was formed under the
Uniform Limited Partnership Act in the state of California on July 12, 1983. The
Partnership Agreement states that the Partnership will terminate on December 31,
2008, unless previously terminated under the provisions of the Partnership
Agreement.
Effective September 6, 1991, CRIIMI, Inc. (the General Partner) succeeded
the former general partners to become the sole general partner of the
Partnership. CRIIMI, Inc. is a wholly owned subsidiary of CRIIMI MAE Inc.
(CRIIMI MAE).
AIM Acquisition Partners L.P. (the Advisor) serves as the advisor 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) and FHA-insured
mortgage loans (FHA-Insured Loans). The mortgages underlying the FHA-Insured
Certificates and FHA-Insured Loans are non-recourse first liens on multifamily
residential developments.
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.
3. INVESTMENT IN FHA-INSURED LOANS
As of September 30, 1996 and December 31, 1995, the Partnership's
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AMERICAN INSURED MORTGAGE INVESTORS
NOTES TO FINANCIALSTATEMENTS
(Unaudited)
3. INVESTMENT IN FHA-INSURED LOANS - Continued
investment in FHA-Insured Loans consisted of four acquired insured mortgages and
two originated insured mortgages.
As of September 30, 1996 and December 31, 1995, these investments had an
aggregate amortized cost of $23,301,858 and $23,589,611, respectively, face
value of $26,401,133 and $26,573,553, respectively, and fair value of
$26,764,293 and $27,625,663, respectively. All of the FHA-Insured Loans are
current with respect to payment of principal and interest as of October 31,
1996.
In May 1996, the mortgage note on Creekside Village was amended to reduce
the mortgage interest rate from 11.5% (with no lockout provision) to 7.75%,
(which includes a lockout provision and prepayment penalty). In connection with
this modification, the Partnership received proceeds of $35,748 and recognized a
loss of $146,464 on the accompanying statements of operations for the nine
months ended September 30, 1996, primarily representing the unamortized balance
of acquisition and closing costs paid in connection with the origination of this
mortgage.
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 and the net proceeds from the
refinancing, sale or other disposition of the underlying development (referred
to as Participations). During the nine months ended September 30, 1996 and
1995, the Partnership received $12,158 and $28,524, respectively, from the
Participations. During the three months ended September 30, 1996 and 1995 the
Partnership received no additional interest from the Participations. These
amounts, if any, are included in mortgage investment income on the accompanying
statements of operations.
4. INVESTMENT IN FHA-INSURED CERTIFICATES
As of September 30, 1996 and December 31, 1995, the Partnership's
investment in FHA-Insured Certificates consisted of nine acquired insured
mortgages with an aggregate amortized cost of $11,347,460 and $11,418,898,
respectively, face value of $13,889,789 and $14,023,399, respectively, and fair
value of $14,052,401 and $14,774,772, respectively. All of the FHA-Insured
Certificates are current with respect to payment of principal and interest as of
October 31, 1996.
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:
Quarter Ended 1996 1995
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March 31, $ 0.08 $ 0.08
June 30, 0.08 0.08
September 30, 0.07 0.08
-------- --------
Total $ 0.23 $ 0.24
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AMERICAN INSURED MORTGAGE INVESTORS
NOTES TO FINANCIALSTATEMENTS
(Unaudited)
5. DISTRIBUTIONS TO UNITHOLDERS - Continued
The basis for paying distributions to Unitholders is net proceeds from
mortgage dispositions, if any, and cash flow from operations, which includes
regular interest income and principal from insured mortgages. Although insured
mortgages yield a fixed monthly mortgage payment once purchased, the cash
distributions paid to the Unitholders will vary during each period due to (1)
the fluctuating yields in the short-term money market where the monthly mortgage
payments received are temporarily invested prior to the payment of quarterly
distributions, (2) the reduction in the asset base 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 (4) changes
in the Partnership's operating expenses.
6. TRANSACTIONS WITH RELATED PARTIES
The General Partner and certain affiliated entities have, 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:
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AMERICAN INSURED MORTGAGE INVESTORS
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
6. TRANSACTIONS WITH RELATED PARTIES - Continued
COMPENSATION PAID OR ACCRUED TO RELATED PARTIES
----------------------------------------------
For the three months For the nine months
Capacity in Which ended September 30, ended September 30,
Name of Recipient Served/Item 1996 1995 1996 1995
- ----------------- ---------------------------- -------- -------- -------- --------
CRIIMI, Inc.(1) General Partner/Distribution $ 20,907 $ 23,893 $ 68,693 $ 71,679
AIM Acquisition Advisor/Asset Management Fee 85,773 85,773 257,319 257,319
Partners, L.P.(2)
CRI(3) Affiliate of General Partner/
Expense Reimbursement -- 4,455 -- 37,365
CRIIMI MAE Management, Affiliate of General Partner/ 5,912 6,449 38,741 6,449
Inc. (3) Expense Reimbursement
<FN>
(1) The General Partner, pursuant to amendments to the Partnership Agreement, effective September 6, 1991, is entitled to
receive 2.9% of the Partnership's income, loss, capital and distributions, 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, effective July 12, 1983, 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 .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 $25,278 and $75,834, for the three and nine months ended September 30, 1996, respectively,
and $25,287 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 to $50,556.
(3) Prior to CRIIMI MAE becoming a self-administered REIT, 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 reimbursement 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.
</FN>
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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 reports filed with the Securities
and Exchange Commission that could cause actual results to differ materially.
General
- -------
As of September 30, 1996, the Partnership had invested in 15 insured
mortgages, with an aggregate amortized cost of approximately $35 million, face
value of approximately $40 million and fair value of approximately $41 million.
All of the Partnership's mortgage investments are current with respect to
payment of principal and interest as of October 31, 1996.
Results of Operations
- ---------------------
Net earnings decreased for the three and nine months ended September 30,
1996 as compared to the corresponding periods in 1995. The decrease in net
earnings for the nine months ended September 30, 1996 as compared to the
corresponding period in 1995, was primarily due to the loss on the mortgage
modification of Creekside Village, 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
as a result of the modification on the Creekside Village mortgage, along with
the reduction in interest received from Participations and the reduction in the
mortgage base due to normal amortization.
Interest and other income did not change significantly for the three and
nine months ended September 30, 1996 as compared to the corresponding periods in
1995.
Asset management fees did not change for the three and nine months ended
September 30, 1996 as compared to the corresponding periods in 1995.
General and administrative expenses decreased for the three and nine months
ended September 30, 1996, as compared to the corresponding periods in 1995. The
decrease is primarily due to the overaccrual of certain expenses in 1995. Since
there were no mortgage dispositions or modifications in 1995 and only one
mortgage modification in 1996, overall general and administrative expenses have
decreased.
In May 1996, the mortgage note on Creekside Village was amended to reduce
the mortgage interest rate from 11.5% (with no lockout provision) to 7.75%,
(which includes a lockout provision and prepayment penalty). In connection with
this modification, the Partnership received proceeds of $35,748 and recognized a
loss of $146,464 on the accompanying statements of operations for the nine
months ended September 30, 1996, primarily representing the unamortized balance
of acquisition and closing costs paid in connection with the origination of this
mortgage. The Partnership did not dispose of or modify any mortgage investments
during the three and nine months ended September 30, 1995.
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
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PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
on short-term investments and proceeds from mortgage modifications, were
sufficient for the nine months ended September 30, 1996 to meet operating
requirements.
The basis for paying distributions to Unitholders is net proceeds from
insured mortgage dispositions, if any, and cash flow from operations, which
includes regular interest income and principal from insured mortgages. Although
insured mortgages yield a fixed monthly mortgage payment once purchased, the
cash distributions paid to the Unitholders will vary during each period due to
(1) the fluctuating yields in the short-term money market where the monthly
mortgage payments received are temporarily invested prior to the payment of
quarterly distributions, (2) the reduction in the asset base 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 (4)
changes in the Partnership's operating expenses.
Net cash provided by operating activities decreased for the nine months
ended September 30, 1996, as compared to the corresponding period in 1995,
primarily due to a decrease in mortgage investment income, as previously
discussed.
Net cash provided by investing activities increased for the nine months
ended September 30, 1996, as compared to the corresponding period in 1995
primarily due to certain fees received in connection with the modification of
the mortgage on Creekside Village, as discussed above.
Net cash used in financing activities did not change for the nine months
ended September 30, 1996, as compared to the corresponding period in 1995.
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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
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27 Financial Data Schedule
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMERICAN INSURED MORTGAGE
INVESTORS (Registrant)
By: CRIIMI, Inc.
General Partner
/s/ Cynthia O. Azzara
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Date Cynthia O. Azzara
Principal Financial
and Accounting Officer