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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998
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Commission file number 1-11060
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AMERICAN INSURED MORTGAGE INVESTORS
- - -----------------------------------------------------------------
(Exact name of registrant as specified in charter)
California 13-3180848
- - ------------------------------------- ----------------------
(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)
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
- - ----------------------------------- ---------------------------
Depositary Units of Limited American Stock Exchange
Partnership Interest
Securities registered pursuant to Section 12(g) of the Act:
None
- - -----------------------------------------------------------------
(Title of class)
Indicated 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 (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
2
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.[X]
As of March 5, 1999, 10,000,125 depositary units of limited partnership
interest were outstanding and the aggregate market value of such units held by
non-affiliates of the Registrant on such date was $27,467,220.
3
AMERICAN INSURED MORTGAGE INVESTORS
1998 ANNUAL REPORT ON FORM 10-K
TABLE OF CONTENTS
PART I
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Page
----
Item 1. Business................................................ 4
Item 2. Properties.............................................. 5
Item 3. Legal Proceedings....................................... 5
Item 4. Submission of Matters to a Vote of
Security Holders...................................... 6
PART II
-------
Item 5. Market for Registrant's Securities and
Related Security Holder Matters....................... 7
Item 6. Selected Financial Data................................. 8
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................................ 9
Item 7A. Qualitative and Quantitative Disclosures
About Market Risk..................................... 15
Item 8. Financial Statements and Supplementary Data............. 15
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure................ 15
PART III
--------
Item 10. Directors and Executive Officers of the
Registrant............................................ 15
Item 11. Executive Compensation.................................. 18
Item 12. Security Ownership of Certain Beneficial
Owners and Management................................. 19
Item 13. Certain Relationships and Related
Transactions.......................................... 19
PART IV
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Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K................................... 20
Signatures ........................................................ 23
4
PART I
ITEM 1. BUSINESS
Development and Description of Business
- - ---------------------------------------
Information concerning the business of American Insured Mortgage
Investors (the Partnership) is contained in Part II, Item 7, Management's
Discussion and Analysis of Financial Condition and Results of Operations and in
Notes 1, 4, 5 and 6 of the notes to the financial statements of the Partnership
(filed in response to Item 8 hereof), which is incorporated herein by reference.
Also see Schedule IV-Mortgage Loans on Real Estate for the table of the Insured
Mortgages (as defined below) invested in by the Partnership as of December 31,
1998, which is hereby incorporated by reference herein.
Employees
- - ---------
The Partnership has no employees. The business of the Partnership is
managed by CRIIMI, Inc. (the General Partner), while its portfolio of mortgages
is managed by AIM Acquisition Partners, L.P. (the Advisor) pursuant to an
advisory agreement (the Advisory Agreement). CRIIMI, Inc. is a wholly-owned
subsidiary of CRIIMI MAE Inc. (CRIIMI MAE).
The general partner of the Advisor is AIM Acquisition Corporation (AIM
Acquisition) and the limited partners include, but are not limited to, AIM
Acquisition, The Goldman Sachs Group, L.P., Broad, Inc. and CRIIMI MAE.
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, Inc., managed the Partnership's portfolio. In connection with
the transaction in which CRIIMI MAE became a self-administered real estate
investment trust (REIT), an affiliate of CRIIMI MAE acquired the Sub-advisory
Agreement. As a consequence of this transaction, effective June 30, 1995, CRIIMI
MAE Services Limited Partnership manages the Partnership's portfolio. These
transactions had no effect on the Partnership's financial statements.
Competition
- - -----------
In disposing of mortgage investments, the Partnership competes with
private investors, mortgage banking companies, mortgage brokers, state and local
government agencies, lending institutions, trust funds, pension funds, and other
entities, some with similar objectives to those of the Partnership and some of
which are or may be affiliates of the Partnership, its General Partner, the
Advisor or their respective affiliates. Some of these entities may have
substantially greater capital resources and experience in disposing of Federal
Housing Administration (FHA) insured mortgages than the Partnership.
CRIIMI MAE and its affiliates also may serve as general partners,
sponsors or managers of real estate limited partnerships, REITS or other
entities in the future. The Partnership may attempt to dispose of mortgage
5
investments at or about the same time that CRIIMI MAE, one or more of the "AIM
Funds" (defined as the Partnership, American Insured Mortgage Investors - Series
85, L.P. ("AIM 85"), American Insured Mortgage Investors L.P. - Series 86 ("AIM
86") and American Insured Mortgage Investors L.P. - Series 88 ("AIM 88")),
and/or other entities sponsored or managed by CRIIMI MAE are attempting to
dispose of mortgages. As a result of market conditions that could limit
dispositions, CRIIMI MAE Services Limited Partnership and its affiliates could
be faced with conflicts of interest in determining which mortgages would be
disposed of. Both CRIIMI MAE Services Limited Partnership and CRIIMI, Inc.,
however, are subject to their fiduciary duties in evaluating the appropriate
action to be taken when faced with such conflicts.
Forward-Looking Statements
- - --------------------------
In accordance with the Private Securities Litigation Reform Act of
1995, the Partnership can obtain a "Safe Harbor" for forward-looking statements
by identifying those statements and by accompanying those statements with
cautionary statements which identify factors that could cause actual results to
differ from those in the forward-looking statements. Accordingly, the following
information contains or may contain forward-looking statements: (1) information
included or incorporated by reference in this Annual Report on Form 10-K,
including, without limitation, statements made under Item 7, Management's
Discussion and Analysis of Financial Condition and Results of Operations, (2)
information included or incorporated by reference in future filings by the
Partnership with the Securities and Exchange Commission including, without
limitation, statements with respect to growth, projected revenues, earnings,
returns and yields on its portfolio of mortgage assets, the impact of interest
rates, costs and business strategies and plans and (3) information contained in
written material, releases and oral statements issued by or on behalf of, the
Partnership, including, without limitation, statements with respect to growth,
projected revenues, earnings, returns and yields on its portfolio of mortgage
assets, the impact of interest rates, costs and business strategies and plans.
The Partnership's actual results may differ materially from those contained in
the forward-looking statements identified above. Factors which may cause such a
difference to occur include, but are not limited to (i) regulatory and
litigation matters, (ii) interest rates, (iii) trends in the economy, (iv)
prepayment of mortgages and (v) defaulted mortgages.
ITEM 2. PROPERTIES
Although the Partnership does not own the underlying real estate, the
mortgages underlying the Partnership's mortgage investments are non-recourse
first liens on the respective multifamily residential developments.
ITEM 3. LEGAL PROCEEDINGS
There are no material legal proceedings to which the Partnership is a
party.
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to the security holders to be voted on during
the fourth quarter of 1998.
PART II
ITEM 5. MARKET FOR REGISTRANT'S SECURITIES AND RELATED SECURITY HOLDER MATTERS
Principal Market and Market Price for Units and Distributions
- - -------------------------------------------------------------
The Units are traded on the American Stock Exchange (AMEX) with a
trading symbol of "AIA". The high and low trade prices for the Units as reported
on AMEX and the distributions, as applicable, for each quarterly period in 1998
and 1997 were as follows:
Amount of
1998 Distribution
Quarter Ended High Low Per Unit
--------------------- --------- --------- ---------------
March 31 $ 3 1/2 $ 3 1/4 $ 0.07
June 30 3 1/2 3 1/4 0.07
September 30 3 11/16 3 5/16 1.06 (1)
December 31 3 15/16 2 5/8 0.09
---------
$ 1.29
=========
Amount of
1997 Distribution
Quarter Ended High Low Per Unit
--------------------- --------- --------- ---------------
March 31 $ 3 1/2 3 1/4 $ 0.07
June 30 3 9/16 3 1/4 0.07
September 30 3 9/16 3 3/16 0.07
December 31 3 7/16 3 1/8 0.08
---------
$ 0.29
=========
(1) This amount includes approximately $0.99 per Unit representing net
proceeds from the prepayment of the mortgage on Water's Edge
Apartments.
There are no material legal restrictions upon the Partnership's present
or future ability to make distributions in accordance with the provisions of the
Partnership Agreement.
7
ITEM 5. MARKET FOR REGISTRANT'S SECURITIES AND RELATED SECURITY HOLDER
MATTERS - Continued
Approximate Number
of Unitholders as of
Title of Class December 31, 1998
- - --------------------------- ----------------------
Depositary Units of Limited
Partnership Interest 8,000
8
PART II
ITEM 6. SELECTED FINANCIAL DATA
(Dollars in thousands, except per Unit amounts)
For the years ended December 31,
1998 1997 1996 1995 1994
------------ ------------ ------------ ------------ -----------
Income $ 3,191 $ 3,415 $ 3,445 $ 3,626 $ 3,736
Net gains (losses) from
mortgage modifications/dispositions 1,290 -- (146) -- 196
Net earnings 3,978 2,879 2,758 3,041 3,280
Composition of distributions
per Limited Partnership
Unit(1)(2):
Net earnings - Basic $ 0.39 $ 0.28 $ 0.27 $ 0.30 $ 0.32
Return of capital 0.90 0.01 0.03 0.02 0.81
------------ ----------- ----------- ----------- ----------
Total $ 1.29 $ 0.29 $ 0.30 $ 0.32 $ 1.13
============ =========== =========== =========== ==========
As of December 31,
--------------------------
1998 1997 1996 1995 1994
------------- ------------ ------------ ------------ -----------
Total assets $ 28,735 $ 38,551 $ 38,385 $ 39,415 $ 38,161
Partners' equity 27,750 37,661 37,590 38,493 37,241
(1) Calculated based upon the weighted average number of Limited Partnership
Units outstanding.
(2) Includes distributions due the Unitholders for the Partnership's fiscal
quarters ended December 31, 1998, 1997, 1996, 1995 and 1994 which were
paid subsequent to each year end. See Notes 4 and 7 of the Notes to
Financial Statements contained in Item 8. "Financial Statements and
Supplementary Data."
The selected statements of income and comprehensive income data
presented above for the years ended December 31, 1998, 1997 and 1996 and the
balance sheet data as of December 31, 1998 and 1997, are derived from and are
qualified by reference to the Partnership's financial statements which have been
included elsewhere in this Form 10-K. The statements of income and comprehensive
income data for the years ended December 31, 1995 and 1994 and the balance sheet
data as of December 31, 1996, 1995 and 1994 are derived from audited financial
statements not included in this Form 10-K. This data should be read in
conjunction with the financial statements and the notes thereto.
9
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
General
- - -------
American Insured Mortgage Investors (the Partnership) was formed under
the Uniform Limited Partnership Act in the state of California on July 12, 1983.
During the period from March 1, 1984 (the initial closing date of the
Partnership's public offering) through December 31, 1984, the Partnership,
pursuant to its public offering of 10,000,000 depositary units of limited
partnership interest (Units), raised a total of $200,000,000 in gross proceeds.
In addition, the initial limited partner contributed $2,500 to the capital of
the Partnership and received 125 Units of limited partnership interest in
exchange therefor.
CRIIMI, Inc. (the General Partner) holds a partnership interest of
2.9%. CRIIMI, Inc. is a wholly owned subsidiary of CRIIMI MAE Inc.
(CRIIMI MAE). Prior to June 30, 1995, CRIIMI MAE was managed by an advisor
whose general partner is CRI, Inc. (CRI). However, effective June 30, 1995,
CRIIMI MAE became a self-administered real estate investment trust (REIT) and,
as a result, the advisor no longer advises CRIIMI MAE.
AIM Acquisition Partners L.P. (the Advisor) serves as the advisor to
the Partnership. The general partner of the Advisor is AIM Acquisition
Corporation (AIM Acquisition) and the limited partners include, but are not
limited to, AIM Acquisition, The Goldman Sachs Group, L.P., Broad, Inc. and
CRIIMI MAE. Pursuant to the terms of certain amendments to the Partnership
agreement, the General Partner is required to receive the consent of the Advisor
prior to taking certain significant actions which affect the management and
policies of the Partnership.
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, Inc. managed the Partnership's portfolio. In connection
with the transaction in which CRIIMI MAE became a self-administered REIT, an
affiliate of CRIIMI MAE acquired the Sub-advisory Agreement. As a consequence of
this transaction, effective June 30, 1995, CRIIMI MAE Services Limited
Partnership (CMSLP), an affiliate of CRIIMI MAE, manages the Partnership's
portfolio. These transactions had no effect on the Partnership's financial
statements.
On October 5, 1998, CRIIMI MAE, the parent of the General Partner, and
the parent to AIM Investment L.P., and CRIIMI MAE Management, Inc., an affiliate
of CRIIMI MAE and provider of personnel and administrative services to the
Partnership, filed a voluntary petition for reorganization under Chapter 11 of
the U.S. Bankruptcy Code. As a debtor-in-possession, CRIIMI MAE will not be
permitted to provide any available capital to the General Partner without
approval from the bankruptcy court. This restriction or potential loss of the
availability of a potential capital resource could adversely affect the General
Partner and the Partnership; however, CRIIMI MAE has not historically
represented a significant source of capital for the General Partner or the
Partnership. Such bankruptcy filings could also result in the potential need to
replace CRIIMI MAE Management, Inc. as a provider of personnel and
administrative services to the Partnership.
10
PART II
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - Continued
Year 2000
- - ---------
The Year 2000 issue is a computer programming issue that may affect
many electronic processing systems. Until relatively recently, in order to
minimize the length of data fields, most date-sensitive programs eliminated the
first two digits of the year. This issue could affect information technology
("IT") systems and date sensitive embedded technology that controls certain
systems (such as telecommunications systems, security systems, etc.) leaving
them unable to properly recognize or distinguish dates in the twentieth and
twenty-first centuries. This treatment could result in significant
miscalculations when processing critical date-sensitive information relating to
dates after December 31, 1999.
The General Partner is currently in the process of assessing and
testing Year 2000 compliance of its IT systems, which include software systems
to administer and manage mortgage assets and for internal accounting purposes.
A majority of the IT systems used by the Partnership is licensed from third
parties. These third parties have either provided upgrades to existing systems
or have indicated that their systems are Year 2000 compliant. The General
Partner has applied upgrades and has completed a substantial amount of
compliance testing as of March 30, 1999. There can be no assurance, however,
that the Partnership's IT systems will be Year 2000 compliant by December 31,
1999.
The Year 2000 issue may also affect the General Partner's
date-sensitive embedded technology, which controls systems such as the
telecommunications systems, security systems, etc. The General Partner does not
believe that the cost to modify or replace such technology to make it Year 2000
compliant will be material. The failure of any such systems to be Year 2000
compliant could be material to the Partnership.
The potential impact of the Year 2000 issue depends not only on the
corrective measures the General Partner has undertaken and will undertake, but
also on the ways in which the Year 2000 issue is addressed by third parties with
whom the Partnership directly interfaces or whose financial condition or
operations are important to the Partnership. The Partnership has initiated
communications with third parties with which it directly interfaces to evaluate
the risk of their failure to be Year 2000 compliant and the extent to which the
Partnership may be vulnerable to such failure. There can be no assurance that
the systems of these third parties will be Year 2000 compliant by December 31,
1999. The failure of these third parties to be Year 2000 compliant could have a
material adverse effect on the operations of the Partnership.
The Partnership believes that its greatest risk with respect to the
Year 2000 issue relates to failures by third parties to be Year 2000 compliant.
In addition to risks posed by third parties with which the Partnership
interfaces directly, risks are created by third parties providing services to
large segments of society. The failure of third parties to be Year 2000
compliant could, among other things, cause disruptions in the capital and real
estate markets and borrower defaults on real estate loans and mortgage-backed
securities as well as the pools of mortgage loans underlying such securities.
The Partnership believes that its greatest exposure to the Year 2000 issue
involves the loan servicing operations of an affiliate of the Partnership. CMSLP
currently services approximately 21% of the total mortgage investments in the
AIM Funds. CMSLP has applied a vendor upgrade and has substantially completed
compliance testing on the upgrade.
11
PART II
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - Continued
Currently the Partnership estimates the cost of system upgrades related
to Year 2000 issues to be immaterial.
Although the General Partner has substantially completed its compliance
testing and remediation, it is also in the process of developing contingency
plans for the risks of the failure of the Partnership or third parties to be
Year 2000 compliant. The General Partner intends to complete contingency plans
for the Year 2000 issue by May 31, 1999. Due to the inability to predict all of
the potential problems that may arise from the Year 2000 issue, there can be no
assurance that all contingencies will be adequately addressed by such plans.
Mortgage Investments
- - --------------------
Prior to the expiration of the Partnership's reinvestment period in
November 1988, the Partnership was engaged in the business of originating
mortgage loans (Originated Insured Mortgages) and acquiring mortgage loans
(Acquired Insured Mortgages and, together with Originated Insured Mortgages,
referred to herein as Insured Mortgages). In accordance with the terms of the
Partnership Agreement, the Partnership is no longer authorized to originate or
acquire Insured Mortgages and, consequently, its primary objective is to manage
its portfolio of mortgage investments, all of which are insured under Section
221(d)(4) or Section 231 of the National Housing Act. The Partnership Agreement
states that the Partnership will terminate on December 31, 2008, unless
previously terminated under the provisions of the Partnership Agreement.
As of December 31, 1998, the Partnership had invested in 13 Insured
Mortgages, with an aggregate amortized cost of approximately $24.0 million, a
face value of approximately $28.6 million and a fair value of approximately
$28.7 million, as discussed below.
The Partnership's investment in Insured Mortgages consists of
FHA-insured mortgage loans (FHA-Insured Loans) and 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). The mortgages underlying the
FHA-Insured Certificates and FHA-Insured Loans are non-recourse first liens on
multifamily residential developments.
12
PART II
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - Continued
Investment in FHA-Insured Loans
- - --------------------------------
Listed below is the Partnership's aggregate investment in FHA-Insured
Loans as of December 31, 1998 and 1997:
December 31,
1998 1997
--------------- ----------------
Number of
Acquired Insured Mortgages (1) 3 4
Originated Insured Mortgages (2) 1 2
Amortized Cost $ 12,891,015 $ 23,096,728
Face Value 15,170,295 26,077,186
Fair Value 15,238,597 26,840,133
(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 84 and 50% by an affiliate of the Partnership,
American Insured Mortgage Investors - Series 85, L.P. (AIM 85). The
debenture, with a face value of $2,296,098, was issued to AIM 85, with
interest payable semi-annually on January 1 and July 1. The Partnership
recognized a gain of approximately $200,000 for the year ended December
31, 1998 related to this assignment. The net proceeds and accrued
interest are included in the Balance Sheet as of December 31, 1998. In
January 1999, the debenture was liquidated at par value. The
Partnership received approximately $1.2 million for their share of the
debenture proceeds, including interest of approximately $55,000.
Accordingly, a distribution of $0.12 per Unit related to the receipt of
these proceeds was declared in March 1999 and is expected to be paid to
Unitholders in May 1999.
(2) On September 1, 1998, the mortgage on Water's Edge Apartments was
prepaid. The Partnership received net proceeds of approximately $10.2
million, and recognized a gain of approximately $1.1 million for the
year ended December 31, 1998. A distribution of $0.99 per Unit related
to this prepayment was declared in September 1998 and paid to
Unitholders in November 1998.
All of the FHA-Insured Loans were current with respect to the payment
of principal and interest as of March 26, 1999.
In addition to base interest payments received from Originated Insured
Mortgages, the Partnership is entitled to additional interest based on a
percentage of the net cash flow from the underlying development and of the net
proceeds from the refinancing, sale or other disposition of the underlying
development (referred to as Participations). During the years ended December 31,
1998, 1997 and 1996, the Partnership received $52,526, $61,988 and $12,158,
respectively, from the Participations. These amounts are included in mortgage
investment income on the accompanying statements of income and comprehensive
income.
13
PART II
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - Continued
Investment in FHA-Insured Certificates
- - --------------------------------------
Listed below is the Partnership's aggregate investment in FHA-Insured
Certificates as of December 31, 1998 and 1997:
December 31,
1998 1997
--------------- ----------------
Number of mortgages 9 9
Amortized Cost $ 11,099,580 $ 11,216,144
Face Value 13,440,088 13,648,992
Fair Value 13,458,100 14,178,168
All of the FHA-Insured Certificates were current with respect to the
payment of principal and interest as of March 26, 1999.
Results of Operations
- - ---------------------
1998 versus 1997
- - ----------------
Net earnings increased for 1998 as compared to 1997 primarily due to an
increase in gains on mortgage dispositions. In 1998, gains were realized on the
prepayment of the mortgage on Waters Edge Apartments and the assignment of the
mortgage on Portervillage I Apartments, as discussed below. No mortgages were
disposed of or modified during 1997.
The increase in net earnings was partially offset by a decrease in
mortgage investment income, caused by the reduction in the mortgage base, as
discussed previously.
1997 versus 1996
- - ----------------
Net earnings increased for 1997 as compared to 1996 primarily due to
the loss incurred in 1996 on the mortgage modification of Creekside Village. No
mortgages were disposed of or modified during 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, are the Partnership's principal sources of cash flows,
and were sufficient for the years ended December 31, 1998, 1997 and 1996 to meet
operating requirements. The Partnership anticipates its cash flows to be
sufficient to meet operating requirements for 1999.
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 after paying all
expenses of the Partnership. 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 payment receipts are temporarily
invested prior to the payment of quarterly distributions, (2) the reduction in
the asset base 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 (4) changes in the Partnership's operating
expenses.
14
PART II
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - Continued
Since the Partnership is obligated to distribute the Proceeds of
Mortgage Prepayments, Sales and Insurance of Insured Mortgages (as defined in
the Partnership Agreement) to its Unitholders, the size of the Partnership's
portfolio will continue to decrease. The magnitude of the decrease will depend
upon the size of the Insured Mortgages which are prepaid, sold or assigned for
insurance proceeds.
Cash Flow - 1998 versus 1997
- - ----------------------------
Net cash provided by operating activities decreased for 1998 as
compared to 1997 primarily due to an increase in due from affiliate, as
discussed previously, and a reduction in net earnings (excluding gains from
mortgage dispositions) in 1998.
Net cash provided by investing activities increased for 1998 as
compared to 1997 due to proceeds received from the prepayment and assignment of
two mortgages in 1998.
Net cash used in financing activities increased for 1998 as compared to
1997 primarily due to larger distributions to Unitholders in 1998 related to the
prepayment of one mortgage.
Cash flow - 1997 versus 1996
- - ----------------------------
Net cash provided by operating activities decreased for 1997 as
compared to 1996 primarily due to an increase in receivables and other assets
due to the delinquent mortgage on Portervillage I Apartments, which was assigned
to HUD in May 1997.
Net cash provided by investing activities decreased slightly for 1997
as compared to 1996 primarily due to a reduction in the receipt of mortgage
principal from scheduled payments as a result of the normal amortization of the
mortgage base.
Net cash used in financing activities decreased for 1997 as compared to
1996 primarily due to a decrease in the quarterly distributions in 1997 as
compared to 1996.
15
PART II
ITEM 7A. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK
The Partnership's principal market risk is exposure to changes in
interest rates in the US Treasury market, which coupled with the related spread
to treasury investors required for the Partnership's Insured Mortgages, will
cause fluctuations in the market value of Partnership's assets.
The table below provides information about the Partnership's Insured
Mortgages all of which were entered into for purposes other than trading. The
table presents anticipated principal and interest cash flows based upon the
assumptions used in determining the fair value of these securities and the
related weighted average interest rates by expected maturity.
Fair
1999 2000 2001 2002 2003 Thereafter Total Value
------ ------ ------ ------ ------ ------------ ------- -------
Insured Mortgages
(in millions) $3.9 $3.7 $3.6 $3.6 $3.5 $29.1 $47.4 $28.7
Average Interest Rate 7.48% 7.48% 7.48% 7.48% 7.48% 7.53% -- --
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this item is contained on pages 24 through
42.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURES
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(a), (b), (c) and (e)
The Partnership has no officers or directors. CRIIMI, Inc. (the General
Partner) holds a general Partnership interest of 2.9%. The affairs of the
Partnership are generally managed by the General Partner, which is wholly owned
by CRIIMI MAE, a corporation whose shares are listed on the New York Stock
Exchange. Prior to June 30, 1995, CRIIMI MAE was managed by an advisor whose
general partner was CRI, Inc. However, effective June 30, 1995, CRIIMI MAE
became a self-administered REIT and, as a result, such advisor no longer advises
CRIIMI MAE.
AIM Acquisition Partners L.P., (the Advisor) serves as the advisor to
the Partnership. AIM Acquisition Corporation is the general partner of the
Advisor and the limited partners include, but are not limited to, AIM
Acquisition, The Goldman Sachs Group, L.P., Broad, Inc. and CRIIMI MAE. Pursuant
to the terms of certain amendments to the Partnership Agreement, the General
Partner is required to receive the consent of the Advisor prior to taking
certain significant actions which affect the management and policies of the
Partnership. Effective September 6, 1991 and through June 30, 1995, a
16
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT - Continued
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
REIT, an affiliate of CRIIMI MAE acquired the Sub-advisory Agreement. As a
consequence of this transaction, effective June 30, 1995, CMSLP, an affiliate of
CRIIMI MAE, manages the Partnership's portfolio. These transactions had no
effect on the Partnership's financial statements.
The General Partner is also the general partner of American Insured
Mortgage Investors - Series 85, L.P. (AIM 85), American Insured Mortgage
Investors L.P. - Series 86 (AIM 86) and American Insured Mortgage Investors L.P.
- - - Series 88 (AIM 88), limited partnerships with investment objectives similar to
those of the Partnership.
The following table sets forth information concerning the executive officers and
directors of the General Partner as of March 15, 1999:
Name Age Position
- - ---- ----- -----------
William B. Dockser 62 Chairman of the Board
H. William Willoughby 52 President and Secretary
Frederick J. Burchill (a) 50 Executive Vice President
Cynthia O. Azzara 39 Senior Vice President, Chief Financial Officer and Treasurer
Brian L. Hanson 37 Senior Vice President
David B. Iannarone 38 Senior Vice President and General Counsel
Garrett G. Carlson, Sr. 61 Director
G. Richard Dunnells 61 Director
Robert Merrick 54 Director
Robert E. Woods 51 Director
William B. Dockser has served as Chairman of the Board of the General
Partner since 1991. Mr. Dockser has been Chairman of the Board of CRIIMI MAE
since 1989 and Chairman of the Board of CRIIMI MAE Financial Corporation since
1995. Mr. Dockser is also the founder of CRI, serving as its Chairman of the
Board since 1974.
H. William Willoughby has served as President and Secretary of the
General Partner since 1991. Mr. Willoughby has been President of CRIIMI MAE
since 1990 and a Director and Secretary of CRIIMI MAE since 1989. He has also
served as a director of CRIIMI MAE Financial Corporation since 1995. Mr.
Willoughby has been a director of CRI since 1974, Secretary of CRI from 1974 to
1990 and President of CRI since 1990.
17
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT - Continued
(a) Mr. Burchill was Executive Vice President of the General Partner
until his resignation from CRIIMI MAE and the General Partner on February 8,
1999.
Cynthia O. Azzara has served as Chief Financial Officer of the General
Partner since 1994. Ms. Azzara has served as Chief Financial Officer of CRIIMI
MAE since 1994. She has also served as Senior Vice President of CRIIMI MAE since
1995 and Treasurer of CRIIMI MAE since 1997, Accounting and Finance Departments
of CRI from 1985 to June 1995.
Brian L. Hanson has served as Senior Vice President of the General
Partner since March 1998. Mr. Hanson has served as Senior Vice President of
CRIIMI MAE since March 1998; Group Vice President of CRIIMI MAE from March 1996
to March 1998; Chief Operating Officer, Director of Asset Operations and
Portfolio Director of JCF Partners, Lanham, Maryland from 1991 to March 1996.
David B. Iannarone has served as Senior Vice President of the General
Partner since March 1998. Mr. Iannarone has served as Senior Vice President of
CRIIMI MAE since March 1998; General Counsel of CRIIMI MAE since July 1996;
Counsel-Securities and Finance for Federal Deposit Insurance
Corporation/Resolution Trust Corporation from 1991 to July 1996.
Garrett G. Carlson, Sr. has served as Director of the General Partner
since 1989. Mr. Carlson has served as Director of CRIIMI MAE since 1989;
President of Can-American Realty Corp. and Canadian Financial Corp. since 1979
and 1974, respectively; President of Garrett Real Estate Development since 1982;
President of the Satellite Broadcasting Corporation since 1996; Chairman of
the Board of SCA Realty Holdings Inc. from 1985 to 1995; Vice Chairman of
Shelter Development Corporation Ltd. from 1983 to 1995 and member of the board
of Bank Windsor from 1992 to 1994.
G. Richard Dunnells has served as Director of the General Partner since
1991. Mr. Dunnells has served as Director of CRIIMI MAE since 1991; Firm-wide
Hiring Partner, Partner in the Washington, D.C. office and former Director of
the law firm of Holland & Knight since January 1994; Chairman of the Washington,
D.C. law firm of Dunnells & Duvall from 1989 to 1993; Senior Partner of such law
firm from 1973 to 1993; Special Assistant to the Under-Secretary and Deputy
Assistant Secretary for Housing and Urban Renewal and Deputy Assistant Secretary
for Housing Management with the U.S. Department of Housing and Urban Development
from 1969 to 1973; President's Commission on Housing from 1981 to 1982.
18
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT - Continued
Robert J. Merrick has served as Director of the General Partner since
1997. Mr. Merrick has served as Director of CRIIMI MAE since 1997; Director of
MCG Credit Corporation since February 1998; Executive Vice President from 1985
and Chief Credit Officer of Signet Banking Corporation through 1997, also served
as Chairman of the Credit Policy Committee and member of the Asset and Liability
Committee and Management Committee; Credit Officer-Virginia Banking Corporation,
an affiliate of Signet Bank/Virginia, from 1980 to 1984; Senior Vice President
of Bank of Virginia from 1976 to 1980.
Robert E. Woods has served as Director of the General Partner since
1998. Mr. Woods has served as Director of CRIIMI MAE since 1998; Managing
Director and head of loan syndications for the Americas at Societe Generale, New
York since 1997; Managing Director, head of Real Estate Capital Markets and
Mortgage-backed Securities division, Citicorp from 1991 to 1997, Head of
Citicorp's syndications, private placements, money markets and asset-backed
businesses from 1985 to 1990.
(d) There is no family relationship between any of the officers
and directors of the General Partner.
(f) Involvement in certain legal proceedings.
None.
(g) Promoters and control persons.
Not applicable.
(h) Section 16 (a) Beneficial Ownership Reporting Compliance-
Based solely on its review of Forms 3 and 4 and amendments
thereto furnished to the Partnership, and written
representations from certain reporting persons that no Form
5's were required for those persons, the Partnership believes
that all reporting persons have filed on a timely basis Forms
3, 4, and 5 as required in the fiscal year ended December 31,
1998.
ITEM 11. EXECUTIVE COMPENSATION
The Partnership does not have any directors or officers. None of the
directors or officers of the General Partner receive compensation from the
Partnership, and the General Partner does not receive reimbursement from the
Partnership for any portion of their salaries. Other information required by
Item 11 is hereby incorporated by reference herein to Note 4 of the notes to the
financial statements of the Partnership.
19
PART III
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
(a) As of December 31, 1998, no person was known by the Partnership to be
the beneficial owner of more than five percent (5%) of the outstanding
Units of the Partnership.
(b) As of December 31, 1998, neither the officers and directors, as a
group, of the General Partner nor any individual director of the
General Partner, are known to own more than 1% of the outstanding Units
of the Partnership.
(c) There are no arrangements known to the Partnership, the operation of
which may at any subsequent date result in a change in control of the
Partnership.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
(a) Transactions with management and others.
Note 4 of the notes to the Partnership's financial statements
of this report contains a discussion of the amounts, fees and
other compensation paid or accrued by the Partnership to the
directors and executive officers of the General Partner and
their affiliates, and is hereby incorporated by reference
herein.
(b) Certain business relationships.
Other than as set forth in Item 11 of this report which is
hereby incorporated by reference herein, the Partnership has
no business relationship with entities of which the General
Partner of the Partnership are officers, directors or equity
owners.
(c) Indebtedness of management.
None.
(d) Transactions with promoters.
Not applicable.
20
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
(a)(1) Financial Statements:
Page
Description Number
- - ----------- --------------
Balance Sheets as of December 31, 1998
and 1997 26
Statements of Income and Comprehensive Income
for the years ended December 31, 1998, 1997 and 1996 27
Statements of Changes in Partners' Equity
for the years ended December 31, 1998,
1997 and 1996 28
Statements of Cash Flows for the years
ended December 31, 1998, 1997 and 1996 29
Notes to Financial Statements 30
(a)(2) Financial Statement Schedules:
IV - Mortgage Loans on Real Estate 40
All other schedules have been omitted because they
are inapplicable, not required, or the information is
included in the Financial Statements or Notes
thereto.
(a)(3) Exhibits:
4.0 Amended and Restated Certificates of Limited
Partnership are incorporated by reference to Exhibit
4(a) to the Registration Statement on Form S-11
(No. 33-6747) dated June 25, 1986 (such Registration
Statement, as amended, is referred to herein as the
"Registration Statement").
4.1 Agreement of Limited Partnership, incorporated by
reference to Exhibit 3 to the Registration Statement.
4.2 Form of Depository Receipt, incorporated by reference
to Exhibit 4(b) to the Registration Statement.
4.3 Amendment to the Amended and Restated Agreement of
Limited Partnership of the Partnership dated February
12, 1990, incorporated by reference to Exhibit 4(c)
to the Partnership's Annual Report on Form 10-K for
the year ended December 31, 1989.
4.4 Amendments to Partnership Agreement dated August 16,
1991, incorporated by reference to Exhibit 28(c) to
the Partnership's Annual Report on Form 10-K for the
year ended December 31, 1991.
21
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K - Continued
10.0 Origination and Acquisition Services Agreement, dated
September 1, 1983, between the Partnership and IFI,
incorporated by reference to Exhibit 10(b) to the
registration statement on Form S-11 (No. 2-85476)
dated November 30, 1983 (such registration statement,
as amended, is referred to herein as the "Initial
Registration Statement").
10.1 Management Services Agreement, dated November 30,
1983, between the Partnership and IFI, incorporated
by reference to Exhibit 10(c) to the Initial
Registration Statement.
10.2 Disposition Services Agreement, dated November 30,
1983, between the Partnership and IFI, incorporated
by Reference to Exhibit 10(d) to the Initial
Registration Statement.
10.3 Agreement, dated November 30, 1983, among the former
managing general partner, the former associate
general partner and Integrated, incorporated by
reference to Exhibit 10(e) to the Initial
Registration Statement.
10.4 Reinvestment Plan, incorporated by reference to the
Prospectus contained in the Registration Statement.
10.5 Mortgage Note dated March 26, 1986 between Mastic
Associates and IFI, incorporated by reference to
Exhibit 10(l) to the Partnership's Annual Report on
Form 10-K for the year ended December 31, 1986.
10.6 Mortgage dated March 26, 1986 between Mastic
Associates and IFI, incorporated by reference to
Exhibit 10(m) to the Partnership's Annual Report on
Form 10-K for the year ended December 31, 1986.
10.7 Mortgagor/Mortgagee Agreement dated March 26, 1986
between Mastic Associates and IFI, incorporated by
reference to Exhibit 10(n) to the Partnership's
Annual Report on Form 10-K for the year ended
December 31, 1986.
10.8 Lease Agreement dated as of December 10, 1984 between
NHP Land Associates, as Landlord and Mastic
Associates, as Tenant, incorporated by reference to
Exhibit 10(o) to the Partnership's Annual Report on
Form 10-K for the year ended December 31, 1986.
10.9 Purchase Agreement among AIM Acquisition, the former
managing general partner, the former corporate
general partner, IFI and Integrated dated as of
December 1, 1990, as amended January 9, 1991,
incorporated by reference to Exhibit 28(a) to the
Partnership's Annual Report on Form 10-K for the year
ended December 31, 1990.
22
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K - Continued
10.10 Purchase Agreement among CRIIMI, Inc., AIM
Acquisition, the former managing general partner, the
former corporate general partner, IFI and Integrated
dated as of December 13, 1990 and executed as of
September 6, 1991, incorporated by reference to
Exhibit 28(b) to the Partnership's Annual Report on
Form 10-K for the year ended December 31, 1990.
10.11 Sub-Management Agreement by and between AIM
Acquisition and CRI/AIM Management, Inc. dated as of
March 1, 1991, incorporated by reference to Exhibit
28(d) to the Partnership's Annual Report on Form 10-K
for the year ended December 31, 1992.
27. Financial Data Schedule (filed herewith).
(b) Reports on Form 8-K filed during the last quarter of the
fiscal year: None
All other items are not applicable.
23
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, 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/ March 30, 1999 /s/ William B. Dockser
- - --------------------------- -----------------------------
DATE William B. Dockser
Chairman of the Board
and Principal Executive Officer
/s/ March 30, 1999 /s/ H. William Willoughby
- - --------------------------- ----------------------------
DATE H. William Willoughby
President and Director
/s/ March 30, 1999 /s/ Cynthia O. Azzara
- - --------------------------- ----------------------------
DATE Cynthia O. Azzara
Principal Financial and
Accounting Officer
/s/ March 30, 1999 /s/ Garrett G. Carlson, Sr.
- - --------------------------- ----------------------------
DATE Garrett G. Carlson, Sr.
Director
/s/ March 30, 1999 /s/ G. Richard Dunnells
- - --------------------------- ----------------------------
DATE G. Richard Dunnells
Director
/s/ March 30, 1999 /s/ Robert J. Merrick
- - --------------------------- ----------------------------
DATE Robert J. Merrick
Director
/s/ March 30, 1999 /s/ Robert E. Woods
- - --------------------------- ----------------------------
DATE Robert E. Woods
Director
24
AMERICAN INSURED MORTGAGE INVESTORS
Financial Statements as of December 31, 1998 and 1997
and for the Years Ended December 31, 1998, 1997 and 1996
25
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners of
American Insured Mortgage Investors:
We have audited the accompanying balance sheets of American Insured
Mortgage Investors (the Partnership) as of December 31, 1998 and 1997, and the
related statements of income and comprehensive income, changes in partners'
equity and cash flows for the years ended December 31, 1998, 1997 and 1996.
These financial statements and the schedule referred to below are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these financial statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of the Partnership as
of December 31, 1998 and 1997, and the results of its operations and its cash
flows for the years ended December 31, 1998, 1997 and 1996, in conformity with
generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. Schedule IV-Mortgage Loans on Real Estate
as of December 31, 1998 and for the year then ended is presented for purposes of
complying with the Securities and Exchange Commission's rules and regulations
and is not a required part of the basic financial statements. The information in
this schedule has been subjected to the auditing procedures applied in our
audits of the basic financial statements and, in our opinion, is fairly stated
in all material respects in relation to the basic financial statements taken as
a whole.
Arthur Andersen LLP
Washington, DC
March 30, 1999
26
AMERICAN INSURED MORTGAGE INVESTORS
BALANCE SHEETS
December 31, December 31,
1998 1997
------------ ------------
ASSETS
Investment in FHA-Insured Loans,
at amortized cost, net of unamortized
discount:
Originated insured mortgages $ 4,994,145 $ 14,184,505
Acquired insured mortgages 7,896,870 8,912,223
------------ ------------
12,891,015 23,096,728
Investment in FHA-Insured Certificates,
at fair value 13,458,100 14,178,168
Cash and cash equivalents 958,375 878,867
Due from Affiliate 1,148,049 --
Receivables and other assets 279,302 397,201
------------ ------------
Total assets $ 28,734,841 $ 38,550,964
============ ============
LIABILITIES AND PARTNERS' EQUITY
Distributions payable $ 926,891 $ 823,903
Accounts payable and accrued expenses 58,060 66,482
------------ ------------
Total liabilities 984,951 890,385
------------ ------------
Partners' equity:
Limited partners' equity, 10,000,125
Units authorized, issued and outstanding 30,596,406 39,633,683
General partner's deficit (5,205,036) (4,935,128)
Accumulated other
comprehensive income 2,358,520 2,962,024
------------ ------------
Total partners' equity 27,749,890 37,660,579
------------ ------------
Total liabilities and partners'
equity $ 28,734,841 $ 38,550,964
============ ============
The accompanying notes are an
integral part of these
financial statements.
27
AMERICAN INSURED MORTGAGE INVESTORS
STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
For the years ended December 31,
1998 1997 1996
------------ ------------ -------------
Income:
Mortgage investment income $ 2,987,164 $ 3,376,465 $ 3,413,739
Interest and other income 204,152 38,282 31,263
------------ ------------ ------------
3,191,316 3,414,747 3,445,002
------------ ------------ ------------
Expenses:
Asset management fee to related parties 319,794 343,092 343,092
General and administrative 183,621 192,218 197,413
------------ ------------ ------------
503,415 535,310 540,505
------------ ------------ ------------
Earnings before mortgage dispositions/modifications 2,687,901 2,879,437 2,904,497
Gains (losses) on mortgage dispositions/modifications 1,290,352 -- (146,464)
------------ ------------ ------------
Net earnings $ 3,978,253 $ 2,879,437 $ 2,758,033
============ ============ ============
Other comprehensive income (603,504) 177,991 (571,841)
------------ ------------ ------------
Comprehensive income $ 3,374,749 $ 3,057,428 $ 2,186,192
------------ ------------ ------------
Net earnings allocated to:
Limited partners - 97.1% $ 3,862,884 $ 2,795,933 $ 2,678,050
General partner - 2.9% 115,369 83,504 79,983
------------ ------------ ------------
$ 3,978,253 $ 2,879,437 $ 2,758,033
============ ============ ============
Net earnings per limited
partnership Unit - Basic $ 0.39 $ 0.28 $ 0.27
============ ============ ============
The accompanying notes are an
integral part of these
financial statements.
28
AMERICAN INSURED MORTGAGE INVESTORS
STATEMENTS OF CHANGES IN PARTNERS' EQUITY
For the years ended December 31, 1998, 1997 and 1996
Accumulated
Other Total
General Limited Comprehensive Partners'
Partner Partners Income Equity
------------- ----------- ------------- -----------
Balance, January 1, 1996 (4,922,401) 40,059,771 3,355,874 38,493,244
Net earnings 79,983 2,678,050 -- 2,758,033
Adjustment to unrealized gains
(losses) on investment in
insured mortgages -- -- (571,841) (571,841)
Distributions paid or accrued of
$0.30 per Unit, including return
of capital of $0.03 per Unit (89,600) (3,000,036) -- (3,089,636)
------------- ----------- ------------- -----------
Balance, December 31, 1996 (4,932,018) 39,737,785 2,784,033 37,589,800
Net earnings 83,504 2,795,933 -- 2,879,437
Adjustment to unrealized gains
(losses) on investments in
insured mortgages -- -- 177,991 177,991
Distributions paid or accrued of
$0.29 per Unit, including return
of capital of $0.01 per Unit (86,614) (2,900,035) -- (2,986,649)
------------- ----------- ------------- -----------
Balance, December 31, 1997 (4,935,128) 39,633,683 2,962,024 37,660,579
Net earnings 115,369 3,862,884 -- 3,978,253
Adjustment to unrealized gains
(losses) on investments in
insured mortgages -- -- (603,504) (603,504)
Distributions paid or accrued of
$1.29 per Unit, including return
of capital of $0.90 per Unit (385,277) (12,900,161) -- (13,285,438)
------------- ------------ ------------- -----------
Balance, December 31, 1998 (5,205,036) 30,596,406 2,358,520 27,749,890
============= ============ ============= ===========
Limited Partnership Units outstanding -
basic, as of December 31, 1998, 1997,
and 1996 10,000,125
==========
The accompanying notes are an
integral part of these
financial statements.
29
AMERICAN INSURED MORTGAGE INVESTORS
STATEMENTS OF CASH FLOWS
For the years ended December 31,
1998 1997 1996
------------ ------------ ------------
Cash flows from operating activities:
Net earnings $ 3,978,253 $ 2,879,437 $ 2,758,033
Adjustments to reconcile net earnings to net cash
provided by operating activities:
(Gains) losses on mortgage dispositions/modifications (1,290,352) -- 146,464
Changes in assets and liabilities:
Decrease (increase) in receivables and other assets 117,899 (36,561) 16,683
(Decrease) in accounts payable and
accrued expenses (8,422) (7,991) (23,819)
------------ ------------- ------------
Net cash provided by operating activities 2,797,378 2,834,885 2,897,361
------------ ------------- ------------
Cash flows from investing activities:
Proceeds from disposition of mortgages 10,195,241 -- --
Receipt of mortgage principal from scheduled payments 269,339 271,593 277,580
------------ ------------- ------------
Net cash provided by investing activities 10,464,580 271,593 277,580
------------ ------------- ------------
Cash flows from financing activities:
Distributions paid to partners (13,182,450) (2,883,662) (3,192,623)
------------ ------------- ------------
Net increase (decrease) in cash and cash equivalents 79,508 222,816 (17,682)
Cash and cash equivalents, beginning of year 878,867 656,051 673,733
------------ ------------ ------------
Cash and cash equivalents, end of year $ 958,375 $ 878,867 $ 656,051
============ ============ ============
Non-cash investing activity:
50% share of debenture received from HUD in exchange for the
mortgage on Portervillage I Apartments (debenture is held by an
affiliate, AIM 85) $ 1,148,049 -- --
The accompanying notes are an
integral part of these
financial statements.
30
AMERICAN INSURED MORTGAGE INVESTORS
NOTES TO FINANCIAL STATEMENTS
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.
CRIIMI, Inc. (the General Partner) holds a partnership interest of
2.9%. CRIIMI, Inc. is a wholly owned subsidiary of CRIIMI MAE Inc.
(CRIIMI MAE). Prior to June 30, 1995, CRIIMI MAE was managed by an advisor
whose general partner is CRI, Inc. (CRI). However, effective June 30, 1995,
CRIIMI MAE became a self-administered real estate investment trust (REIT) and,
as a result, the advisor no longer advises CRIIMI MAE.
AIM Acquisition Partners L.P. (the Advisor) serves as the advisor to
the Partnership. The general partner of the Advisor is AIM Acquisition
Corporation (AIM Acquisition) and the limited partners include, but are not
limited to, AIM Acquisition, The Goldman Sachs Group, L.P., Broad, Inc. and
CRIIMI MAE. Pursuant to the terms of certain amendments to the Partnership
Agreement, the General Partner is required to receive the consent of the Advisor
prior to taking certain significant actions which affect the management and
policies of the Partnership.
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, Inc., managed the Partnership's portfolio. In connection
with the transaction in which CRIIMI MAE became a self-administered REIT, an
affiliate of CRIIMI MAE acquired the Sub-advisory Agreement. As a consequence of
this transaction, effective June 30, 1995, CMSLP, an affiliate of CRIIMI MAE,
manages the Partnership's portfolio. These transactions had no effect on the
Partnership's financial statements.
Prior to the expiration of the Partnership's reinvestment period in
November 1988, the Partnership was engaged in the business of originating
mortgage loans (Originated Insured Mortgages) and acquiring mortgage loans
(Acquired Insured Mortgages and, together with Originated Insured Mortgages,
referred to herein as Insured Mortgages). In accordance with the terms of the
Partnership Agreement, the Partnership is no longer authorized to originate or
acquire Insured Mortgages and, consequently, its primary objective is to manage
its portfolio of mortgage investments, all of which are insured under Section
221(d)(4) or Section 231 of the National Housing Act. The Partnership Agreement
states that the Partnership will terminate on December 31, 2008, unless
previously terminated under the provisions of the Partnership Agreement.
On October 5, 1998, CRIIMI MAE, the parent of the General Partner, and
the parent to AIM Investment L.P., and CRIIMI MAE Management, Inc., an affiliate
of CRIIMI MAE and provider of personnel and administrative services to the
Partnership, filed a voluntary petition for reorganization under Chapter 11 of
the U.S. Bankruptcy Code. As a debtor-in-possession, CRIIMI MAE will not be
permitted to provide any available capital to the General Partner without
31
AMERICAN INSURED MORTGAGE INVESTORS
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION - Continued
approval from the bankruptcy court. This restriction or potential loss of the
availability of a potential capital resource could adversely affect the General
Partner and the Partnership; however, CRIIMI MAE has not historically
represented a significant source of capital for the General Partner or the
Partnership. Such bankruptcy filings could also result in the potential need to
replace CRIIMI MAE Management, Inc. as a provider of personnel and
administrative services to the Partnership.
2. SIGNIFICANT ACCOUNTING POLICIES
Method of Accounting
--------------------
The Partnership's financial statements are prepared on the
accrual basis of accounting in accordance with generally accepted
accounting principles. The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Reclassifications
-----------------
Certain amounts in the financial statements for the years
ended December 31, 1997 and 1996 have been reclassified to conform to
the 1998 presentation.
Investment in Insured Mortgages
-------------------------------
The Partnership's investment in Insured Mortgages is comprised
of FHA-insured mortgage loans (FHA-Insured Loans) and participation
certificates evidencing a 100% undivided beneficial interest in
government insured multifamily mortgages issued or sold pursuant to
programs of the Federal Housing Administration (FHA) (FHA-Insured
Certificates). The mortgages underlying the FHA-Insured Certificates
and FHA-Insured Loans are non-recourse first liens on multifamily
residential developments.
Payment of principal and interest on FHA-Insured Certificates
and FHA-Insured Loans is insured by the United States Department of
Housing and Urban Development (HUD) pursuant to Title 2 of the National
Housing Act.
As of December 31, 1998, the weighted average remaining term
of the Partnership's investments in FHA-Insured Certificates is
approximately 23 years. However, the Partnership Agreement states that
the Partnership will terminate in approximately 10 years, on December
31, 2008, unless previously terminated under the provisions of the
Partnership Agreement. As the Partnership is anticipated to terminate
32
AMERICAN INSURED MORTGAGE INVESTORS
NOTES TO FINANCIAL STATEMENTS
2. SIGNIFICANT ACCOUNTING POLICIES - Continued
prior to the weighted average remaining term of its FHA-Insured
Certificates, the Partnership does not have the ability, at this time,
to hold these investments to maturity. Consequently, the General
Partner believes that the Partnership's FHA-Insured Certificates should
be included in the Available for Sale category. Although the
Partnership's FHA-Insured Certificates are classified as Available for
Sale for financial statement purposes, the General Partner does not
intend to voluntarily sell these assets other than those which may be
sold as a result of a default or those which are eligible to be put to
FHA at the expiration of 20 years from the date of the final
endorsement.
In connection with this classification, as of December 31,
1998 and 1997, all of the Partnership's investments in
FHA-Insured Certificates are recorded at fair value, with the net
unrealized gains on these investments reported as comprehensive income
and as a separate component of partners' equity. Subsequent increases
or decreases in the fair value of FHA-Insured Certificates classified
as Available for Sale will be included as a separate component of
partners' equity. Realized gains and losses on FHA-Insured Certificates
classified as Available for Sale will continue to be reported in
earnings. The amortized cost of the investments in this category is
adjusted for amortization of discounts to maturity. Such amortization
is included in mortgage investment income.
As of December 31, 1998 and 1997, Investment in FHA-Insured
Loans are recorded at amortized cost.
Gains from dispositions of mortgage investments are recognized
upon the receipt of cash or debentures.
Losses on dispositions of mortgage investments are recognized
when it becomes probable that a mortgage will be disposed of and that
the disposition will result in a loss. In the case of Originated
Insured Mortgages fully insured by HUD, the Partnership's maximum
exposure for purposes of determining the loan losses would generally be
an assignment fee charged by HUD representing approximately 1% of the
unpaid principal balance of the Originated Insured Mortgage at the date
of default, plus the unamortized balance of acquisition fees and
closing costs paid in connection with the acquisition of the Originated
Insured Mortgage and the loss of 30 days accrued interest.
Since Acquired Insured Mortgages were purchased at a discount
from the unpaid principal balance of the mortgage, the Partnership's
investment in the Acquired Insured Mortgages is less than the amount
that would be recovered from HUD in the event of a default. Therefore,
the Partnership would experience no loan losses on discounted Acquired
Insured Mortgages in the case of a default.
33
AMERICAN INSURED MORTGAGE INVESTORS
NOTES TO FINANCIAL STATEMENTS
2. SIGNIFICANT ACCOUNTING POLICIES - Continued
Cash and Cash Equivalents
-------------------------
Cash and cash equivalents consist of time and demand deposits
with original maturities of three months or less.
Income Taxes
------------
No provision has been made for Federal, state or local income
taxes in the accompanying financial statements since they are the
personal responsibility of the Unitholders.
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
includes 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 on January 1, 1998. Unrealized gains and losses are
reported in the equity section of the "Balance Sheet" as "accumulated
other comprehensive income." The table below breaks out the adjustment
to unrealized gains and losses that relate to mortgages which were
disposed of during the period with the resulting gain or loss reflected
in the "Statements of Income and Comprehensive Income"
(reclassification adjustments) and the portion of the adjustment that
relates to those investments that were not disposed of during the
period.
1998 1997 1996
--------------- ------------- -------------
Reclassification adjustment for (gains) losses
included in net income $ -- -- $ --
Unrealized holding gains (losses) arising during
the period (603,504) 177,991 (571,841)
-------------- ------------ --------------
Net adjustment to unrealized gains (losses) on mortgages $ (603,504) $ 177,991 $ (571,841)
-------------- ------------ --------------
3. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following estimated fair values of the Partnership's financial
instruments are presented in accordance with generally accepted accounting
principles which define fair value as the amount at which a financial instrument
could be exchanged in a current transaction between willing parties, other than
in a forced or liquidation sale. These estimated fair values, however, do not
represent the liquidation value or the market value of the Partnership.
34
AMERICAN INSURED MORTGAGE INVESTORS
NOTES TO FINANCIAL STATEMENTS
3. FAIR VALUE OF FINANCIAL INSTRUMENTS - Continued
As of December 31, 1998 As of December 31, 1997
Amortized Fair Amortized Fair
Cost Value Cost Value
------------ ------------ ------------ ------------
Investment in FHA-Insured
Certificates $ 11,099,580 $ 13,458,100 $ 11,216,144 $ 14,178,168
============ ============ ============ ============
Investment in FHA-Insured
Loans:
Originated Insured Mortgages $ 4,994,145 $ 5,048,745 $ 14,184,505 $ 14,969,834
Acquired Insured Mortgage 7,896,870 10,189,852 8,912,223 11,870,299
------------ ------------ ------------ ------------
$ 12,891,015 $ 15,238,597 $ 23,096,728 $ 26,840,133
============ ============ ============ ============
Cash and cash equivalents $ 958,375 $ 958,375 $ 878,867 $ 878,867
Accrued interest receivable $ 195,172 $ 195,172 $ 361,525 $ 361,525
The following methods and assumptions were used to estimate the fair
value of each class of financial instrument:
Investment in FHA-Insured Certificates and
FHA-Insured Loans
------------------------------------------------
The fair value of the FHA-Insured Certificates and FHA-Insured
Loans is based on the quoted market price from an investment banking
institution which trades these instruments as part of its day-to-day
activities.
Cash and cash equivalents and accrued interest receivable
---------------------------------------------------------
The carrying amount approximates fair value because of the
short maturity of these instruments.
4. TRANSACTIONS WITH RELATED PARTIES
The principal officers of the General Partner for the years ended
December 31, 1998, 1997 and 1996 did not receive fees for serving as officers of
the General Partner, nor are any fees expected to be paid to the officers in the
future.
The General Partner and certain affiliated entities have, during the
years ended December 31, 1998, 1997 and 1996, earned or received compensation or
payments for services from the Partnership as follows:
35
COMPENSATION PAID OR ACCRUED TO RELATED PARTIES
-----------------------------------------------
Capacity in Which For the year ended December 31,
Name of Recipient Served/Item 1998 1997 1996
- - ----------------- ----------------- --------- -------- ---------
CRIIMI, Inc. General Partner/Distribution $ 385,277 $ 86,614 $ 89,600
AIM Acquisition Advisor/Asset Management Fee 319,794 343,092 343,092
Partners, L.P.(1)
CRIIMI MAE Affiliate of General Partner/ 40,569 36,226 39,974
Management, Inc. Expense Reimbursement
American Insured Mortgage Affiliate of Partnership/
Investors Series 85-L.P. Reimbursement of Debenture 1,148,049 -- --
Proceeds (See Footnote 5)
(1) The Advisor, pursuant to the Partnership Agreement, effective October
1, 1991, is entitled to an Asset Management Fee equal to 0.95% of Total
Invested Assets (as defined in the Partnership Agreement). The
sub-advisor to the Partnership (the Sub-advisor) is entitled to a fee
equal to 0.28% of Total Invested Assets from the Advisor's Asset
Management Fee. Of the amounts paid to the Advisor, CRIIMI MAE Services
Limited Partnership (CMSLP) earned a fee equal to $94,245, $101,112 and
$101,112 for the years ended December 31, 1998, 1997 and 1996,
respectively. The Limited Partner of CMSLP is a wholly-owned subsidiary
of CRIIMI MAE Inc. which filed for protection under Chapter 11 of the
U.S. Bankruptcy Code.
5. INVESTMENT IN FHA-INSURED LOANS
Listed below is the Partnership's aggregate investment in FHA-Insured
Loans as of December 31, 1998 and 1997:
December 31,
1998 1997
--------------- ----------------
Number of
Acquired Insured Mortgages (1) 3 4
Originated Insured Mortgages (2) 1 2
Amortized Cost $ 12,891,015 $ 23,096,728
Face Value 15,170,295 26,077,186
Fair Value 15,238,597 26,840,133
(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 84 and 50% by an affiliate of the Partnership,
American Insured Mortgage Investors - Series 85, L.P. (AIM 85). The
debenture, with a face value of $2,296,098, was issued to AIM 85, with
interest payable semi-annually on January 1 and July 1. The Partnership
recognized a gain of approximately $200,000 for the year ended December
31, 1998 related to this assignment. The net proceeds and accrued
interest are included in the Balance Sheet as of December 31, 1998. In
January 1999, the debenture was liquidated at par value. The
Partnership received approximately $1.2 million for their share of the
debenture proceeds, including interest of approximately $55,000.
Accordingly, a distribution of $0.12 per Unit related to the receipt of
these proceeds was declared in March 1999 and is expected to be paid to
Unitholders in May 1999.
(2) On September 1, 1998, the mortgage on Waters Edge Apartments was
prepaid. The Partnership received net proceeds of approximately $10.2
million, and recognized a gain of approximately $1.1 million for the
year ended December 31, 1998. A distribution of $0.99 per Unit related
to this prepayment was declared in September 1998 and paid to
Unitholders in November 1998.
36
AMERICAN INSURED MORTGAGE INVESTORS
NOTES TO FINANCIAL STATEMENTS
5. INVESTMENT IN FHA-INSURED LOANS - Continued
All of the FHA-Insured Loans were current with respect to the payment
of principal and interest as of March 26, 1999.
In addition to base interest payments received from Originated Insured
Mortgages, the Partnership is entitled to additional interest based on a
percentage of the net cash flow from the underlying development and of the net
proceeds from the refinancing, sale or other disposition of the underlying
development (referred to as Participations). During the years ended December 31,
1998, 1997 and 1996, the Partnership received $52,526, $61,988 and $12,158,
respectively, from the Participations. These amounts are included in mortgage
investment income on the accompanying statements of income and comprehensive
income.
6. INVESTMENT IN FHA-INSURED CERTIFICATES
Listed below is the Partnership's aggregate investment in FHA-Insured
Certificates as of December 31, 1998 and 1997:
December 31,
1998 1997
---------------- ----------------
Number of mortgages 9 9
Amortized Cost $ 11,099,580 $ 11,216,144
Face Value 13,440,088 13,648,992
Fair Value 13,458,100 14,178,168
All of the FHA-Insured Certificates were current with respect to the
payment of principal and interest as of March 26, 1999.
7. DISTRIBUTIONS TO UNITHOLDERS
The distributions paid or accrued to Unitholders on a per Unit basis
for the years ended December 31, 1998, 1997 and 1996 are as follows:
Quarter Ended 1998 1997 1996
- - ------------- -------- -------- --------
March 31 $ 0.07 $ 0.07 $ 0.08
June 30 0.07 0.07 0.08
September 30 1.06(1) 0.07 0.07
December 31 0.09 0.08 0.07
-------- -------- --------
$ 1.29 $ 0.29 $ 0.30
======== ======== ========
(1) This amount includes approximately $0.99 per Unit representing net
proceeds from the prepayment of the mortgage on Water's Edge
Apartments.
The basis for paying distributions to Unitholders is net proceeds from
mortgage dispositions, if any, and cash flow from operations, which includes
37
AMERICAN INSURED MORTGAGE INVESTORS
NOTES TO FINANCIAL STATEMENTS
7. DISTRIBUTIONS TO UNITHOLDERS - Continued
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 year 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 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 (4)
changes in the Partnership's operating expenses.
8. PARTNERS' EQUITY
Depositary Units representing economic rights in limited partnership
interests (Units) were issued at a stated value of $20. A total of 10,000,000
Units were issued for an aggregate capital contribution of $200,000,000. In
addition, the initial limited partner contributed $2,500 to the capital of the
Partnership and received 125 Units in exchange therefor.
38
AMERICAN INSURED MORTGAGE INVESTORS
NOTES TO FINANCIAL STATEMENTS
9. SUMMARY OF QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The following is a summary of unaudited quarterly results of operations
for the years ended December 31, 1998, 1997 and 1996:
(In Thousands, Except Per Unit Data)
1998
Quarter ended
March 31 June 30 September 30 December 31
------------ ---------- ----------------- ----------------
Income $ 887 $ 837 $ 803 $ 664
Net earnings 951 698 1,763 566
Gain on mortgage dispositions 200 -- 1,090 --
Net earnings per Limited
Partnership Unit - Basic $ 0.09 $ 0.07 $ 0.17 $ 0.06
1997
Quarter ended
March 31 June 30 September 30 December 31
------------ ---------- ----------------- ----------------
Income $ 901 $ 840 $ 836 $ 838
Net earnings 758 701 708 712
Net earnings per Limited
Partnership Unit - Basic $ 0.07 $ 0.07 $ 0.07 $ 0.07
1996
Quarter ended
March 31 June 30 September 30 December 31
------------ ---------- ----------------- ----------------
Income $ 906 $ 859 $ 841 $ 839
Net earnings 754 572 722 710
Loss on mortgage modification -- (146) -- --
Net earnings per Limited
Partnership Unit - Basic $ 0.07 $ 0.06 $ 0.07 $ 0.07
39
AMERICAN INSURED MORTGAGE INVESTORS
SCHEDULE IV - MORTGAGE LOANS ON REAL ESTATE
DECEMBER 31, 1998
Interest Face Net Annual Payment
Maturity Put Rate on Amount of Carrying Value (Principal and
Development Name/Location Date Date(1) Mortgage(5) Mortgage (3)(7)(9)(10) Interest) (5)(8)
- - ------------------------- --------- -------- ----------- ----------- -------------- ----------------
Acquired Insured Mortgages
- - --------------------------
Investment in FHA-Insured Loans
(carried at amortized cost)(2)
Eastdale Apts.
Montgomery, AL 3/23 10/01 7.5% $ 6,501,349 $ 5,021,276 $ 592,406
North River Place
Chillecothe, OH 10/21 12/01 7.5% 3,046,607 2,357,846 279,509
Town Park Apts.
Rockingham, NC 10/22 10/02 7.5% 628,194 517,748 56,755(4)
----------- -------------
Total Investment in FHA-Insured Loans -
Acquired Insured Mortgages 10,176,150 7,896,870
----------- -------------
Originated Insured Mortgages
- - ----------------------------
Investment in FHA-Insured Loans
(carried at amortized cost)(2)
Creekside Village
Beaverton, OR 11/25 1/01 7.75% 4,994,145 4,994,145 442,754
----------- -------------
Total Investment in FHA-Insured Loans -
Originated Insured Mortgages 4,994,145 4,994,145
----------- -------------
Total Investment in FHA-Insured Loans 15,170,295 12,891,015
----------- -------------
See notes to Schedule IV - Mortgage Loans on Real Estate
40
AMERICAN INSURED MORTGAGE INVESTORS
SCHEDULE IV - MORTGAGE LOANS ON REAL ESTATE
DECEMBER 31, 1998
Interest Face Net Annual Payment
Maturity Put Rate on Amount of Carrying Value (Principal and
Development Name/Location Date Date(1) Mortgage(5) Mortgage (3)(7)(9)(10) Interest) (5)(8)
- - ------------------------- --------- -------- ----------- ----------- -------------- ----------------
Acquired Insured Mortgages
- - --------------------------
Investment in FHA-Insured
Certificates
(carried at fair value)
Bay Pointe Apts.
Lafayette, IN 2/23 10/02 7.5% 2,038,674(4) 2,041,355 185,272(4)
Baypoint Shoreline Apts.
Duluth, MN 1/22 10/01 7.5% 962,790(4) 964,095 87,967(4)
Berryhill Apts.
Grass Valley, CA 1/21 11/02 7.5% 1,247,019(4) 1,248,872 115,899(4)
Brougham Estates II
Kansas City, KS 11/22 3/02 7.5% 2,560,054(4) 2,563,272 230,860(4)
College Green Apts.
Wilmington, NC 3/23 2/02 7.5% 1,375,840(4) 1,377,519 123,455(4)
Fox Run Apts.
Dothan, AL 10/19 11/99 7.5% 1,219,703(4) 1,221,753 116,242(4)
Kaynorth Apts.
Lansing, MI 4/23 9/02 7.5% 1,866,941(4) 1,869,202 167,318(4)
Lakeside Apts.
Bennettsville, SC 1/22 2/02 7.5% 386,387(4) 386,911 35,303(4)
Westbrook Apts.
Kokomo, IN 11/22 9/02 7.5% 1,782,680(4) 1,785,121 163,177(4)
----------- ------------
Total Investment in FHA-Insured Certificates 13,440,088 13,458,100
----------- ------------
TOTAL INVESTMENT IN INSURED MORTGAGES $28,610,383 $ 26,349,115
=========== ============
See notes to Schedule IV - Mortgage Loans on Real Estate
41
AMERICAN INSURED MORTGAGE INVESTORS
NOTES TO SCHEDULE IV - MORTGAGE LOANS ON REAL ESTATE
(1) Under the Section 221 program of the National Housing Act of 1937, as
amended, a mortgagee has the right to assign a mortgage ("put") to FHA
at the expiration of 20 years from the date of final endorsement if the
mortgage is not in default at such time. Any mortgagee electing to
assign an FHA-insured mortgage to FHA will receive, in exchange
therefor, HUD debentures having a total face value equal to the then
outstanding principal balance of the FHA-insured mortgage plus accrued
interest to the date of assignment. These HUD debentures will mature 10
years from the date of assignment and will bear interest at the "going
Federal rate" at such date. This assignment procedure is applicable to
an insured mortgage which had a firm or conditional FHA commitment for
insurance on or before November 30, 1983. The Partnership anticipates
that each eligible insured mortgage, for which a prepayment has not
occurred and which has not been sold, will be assigned to FHA at the
expiration of 20 years from the date of final endorsement. The
Partnership, therefore, does not anticipate holding any eligible
insured mortgage beyond the expiration of 20 years from final
endorsement of that insured mortgage.
(2) Inclusive of closing costs and acquisition fees.
(3) Prepayment of these insured mortgages would be based upon the unpaid
principal balance at the time of prepayment.
(4) These amounts represent the Partnership's 50% interest in these insured
mortgages. The remaining 50% interest was acquired by American Insured
Mortgage Investors - Series 85, L.P. (AIM 85).
(5) In addition, the servicer of the insured mortgages (primarily
unaffiliated third parties) is entitled to receive compensation for
certain services rendered in an amount up to ten basis points (0.10%)
of the unpaid principal balance of the insured mortgages.
(6) Not used.
(7) The mortgages underlying the Partnership's investment in FHA-Insured
Certificates and FHA-Insured Loans are non-recourse first liens on
multifamily residential developments.
(8) Principal and interest are payable at level amounts over the life of
the Insured Mortgages.
42
(9) A reconciliation of the carrying value of Insured Mortgages, for the
years ended December 31, 1998 and 1997, is as follows:
1998 1997
------------ ------------
Beginning balance $ 37,274,896 $ 37,368,498
Gain on mortgage dispositions/modifications 1,290,352 --
Proceeds from disposition of mortgages (11,343,290) (1) --
Principal receipts on Insured Mortgages (269,339) (271,593)
Increase (decrease) in unrealized gains on
investment in Insured Mortgages (603,504) 177,991
------------ ------------
Ending balance $ 26,349,115 $ 37,274,896
============ ============
(1) This amount represents cash proceeds of $10,195,241 (as reflected in the
"Statement of Cash Flows") and non-cash proceeds of $1,148,049.
(10) The tax basis of the Insured Mortgages was approximately $22.9 million
and $33.7 million as of December 31, 1998 and 1997, respectively.