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, and 5 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, 1994.
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) and CRI/AIM Management, Inc. (the Sub-advisor) pursuant to a sub-advisory agreement (the Sub-advisory Agreement). CRIIMI, Inc. is a wholly-owned subsidiary of CRIIMI MAE Inc. (CRIIMI MAE), formerly CRI Insured Mortgage Association, Inc., which is managed by an adviser whose general partner is C.R.I., Inc. (CRI). CRI and CRIIMI MAE are also affiliates of the Sub-advisor.
CRIIMI MAE's Board of Directors has determined that it is in CRIIMI MAE's best interest to consider a proposed transaction in which CRIIMI MAE would become a self-managed and self-administered real estate investment trust (REIT). Under the terms of the proposed transaction, CRIIMI MAE and its affiliates would acquire certain mortgage investment, servicing, origination and advisory business from affiliates of CRI, including the Sub-advisory Agreement in place with respect to the Partnership. This transaction will have no effect on the Partnership's financial statements.
Competition - ----------- In disposing of Insured Mortgages, 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.
Pursuant to the Sub-advisory Agreement, the Advisor retained the Sub- advisor to perform the services required of the Advisor under the Advisory Agreement. CRI also serves as a general partner of the advisers to CRIIMI MAE and CRI Liquidating REIT, Inc., which have investment objectives similar to those 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) as well as the Partnership (collectively, the AIM Partnerships). CRI and its affiliates are also general partners of a number of other real estate limited partnerships. CRI 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 mortgages at or about the same time that one or more of the other AIM Partnerships and/or other entities sponsored or managed by CRI, including CRIIMI MAE and CRI Liquidating REIT, Inc., are attempting to dispose of mortgages. As a result of market conditions that could limit dispositions, the Sub-advisor and its affiliates could be faced with conflicts of interest in determining which mortgages would be disposed of. Both CRI and CRIIMI, Inc., however, are subject to their fiduciary duties in
evaluating the appropriate action to be taken when faced with such conflicts.
ITEM 2.
ITEM 2. PROPERTIES
Although the Partnership does not own the underlying real estate, the mortgages underlying the Partnership's mortgage investments are first non- recourse liens on the respective multifamily residential developments.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
There are no material legal proceedings to which the Partnership is a party.
ITEM 4.
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 1994.
PART II
ITEM 5.
ITEM 5. MARKET FOR REGISTRANT'S SECURITIES AND RELATED SECURITY HOLDER MATTERS
Principal Market and Market Price for Units and Distributions - ------------------------------------------------------------- From November 5, 1985 through July 6, 1989, the Units were included in the NASDAQ National Market System. From July 7, 1989 through April 7, 1992, the Units were traded in the over-the-counter market and quoted on the NASDAQ quotation system under the symbol "AIMAZ."
Since April 8, 1992, the Units have traded on the American Stock Exchange (AMEX) with a trading symbol of AIA.
The high and low bid prices for the Units as reported on AMEX and the distributions, as applicable, for each quarterly period in 1994 and 1993 were as follows:
Amount of 1994 Distribution Quarter Ended High Low Per Unit - ------------------- ------- ------- ------------ March 31, $4 7/8 $3 3/4 $ 0.89(1) June 30, 3 13/16 3 3/8 0.08 September 30, 3 11/16 3 7/16 0.08 December 31, 3 11/16 3 1/4 0.08 --------- $ 1.13 =========
Amount of 1993 Distribution Quarter Ended High Low Per Unit - ------------------- ------- ------- ------------ March 31, $4 7/8 $4 5/16 $ 0.095 June 30, 4 3/4 4 5/16 0.090 September 30, 4 13/16 4 7/16 0.090 December 31, 5 1/8 4 1/4 0.370(2) --------- $ 0.645 ========= (1) This includes a special distribution of $0.81 per Unit comprised of: (i) $0.80 per Unit return of capital and capital gain from the disposition of the mortgage on Hidden Oaks Apartments and (ii) $.01 per Unit of previously accrued but undistributed interest received from the mortgage on Creekside Village.
(2) This includes a special distribution of $0.28 per Unit comprised of: (i) $0.21 per Unit return of capital from the disposition of the mortgages on Chapelgate Apartments and Cumberland Village and (ii) $0.07 per Unit capital gain from these two dispositions plus additional sales proceeds from the sale of the mortgage on Clark and Elm 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.
The Partnership's Dividend Reinvestment Plan was amended effective April 10, 1992 to exclude the amount of any special distributions from reinvestment under the Plan. The regular distributions will continue to be automatically reinvested in additional Units as in the past.
Approximate Number
PART II
ITEM 5. MARKET FOR REGISTRANT'S SECURITIES AND RELATED SECURITY HOLDER MATTERS - Continued
of Unitholders as of Title of Class December 31, 1994 - --------------------------- ----------------------
Depositary Units of Limited Partnership Interest 10,000
PART II
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA (Dollars in thousands, except per Unit amounts)
The selected statements of operations data presented above for the years ended December 31, 1994, 1993 and 1992 and the balance sheet data as of December 31, 1994 and 1993, 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 operations data for the years ended December 31, 1991 and 1990 and the balance sheet data as of December 31, 1992, 1991 and 1990 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.
PART II
ITEM 7.
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 limited partnership interests in exchange therefor.
At a special meeting of the limited partners and Unitholders of the Partnership held on August 16, 1991, a majority of these interests approved, among other items, the assignment of the general partner interests and the shares of the company which acts as the assignor limited partner in the Partnership, as described below, and the adoption of provisions which prohibit a "Reorganization Transaction" (including transactions commonly known as "roll- ups") for a period of five years unless approved by a super-majority.
Effective September 6, 1991, CRIIMI, Inc. (the General Partner) succeeded AIM Capital Management Corp. (the former managing general partner with a partnership interest of 2.8%) and IRI Properties Capital Corp. (the former corporate general partner with a partnership interest of 0.1%) as the sole general partner of the Partnership. CRIIMI, Inc. is a wholly-owned subsidiary of CRIIMI MAE Inc. (CRIIMI MAE), formerly CRI Insured Mortgage Association, Inc., which is managed by an adviser whose general partner is CRI. In addition, the General Partner acquired the shares of the company which acts as the assignor limited partner in the Partnership. The interest of the former associate general partner (0.1%) was purchased by the Partnership on September 6, 1991, pursuant to the terms of the Partnership Agreement. The former managing general partner, former corporate general partner and former associate general partner are sometimes collectively referred to as former general partners.
Also, on September 6, 1991, AIM Acquisition Partners, L.P. (the Advisor) succeeded Integrated Funding, Inc. (Integrated Funding) as the advisor to the Partnership. AIM Acquisition Corporation (AIM Acquisition) 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 a limited partnership formed by CRI and CRIIMI MAE. Pursuant to the terms of certain amendments to the Partnership Agreement, as discussed below, 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. The limited partners and Unitholders of the Partnership approved the execution of a Sub-advisory agreement (the Sub-advisory Agreement) with CRI/AIM Management, Inc., an affiliate of CRI, pursuant to which CRI/AIM Management, Inc. manages the Partnership's portfolio and disposes of the Partnership's mortgage investments.
CRIIMI MAE's Board of Directors has determined that it is in CRIIMI MAE's best interest to consider a proposed transaction in which CRIIMI MAE would become a self-managed and self-administered real estate investment trust (REIT). Under the terms of the proposed transaction, CRIIMI MAE and its affiliates would acquire certain mortgage investment, servicing, origination and advisory business from affiliates of CRI, including the Sub-advisory Agreement in place with respect to the Partnership. This transaction will have no effect on the Partnership's financial statements.
Prior to the expiration of the Partnership's reinvestment period in
PART II
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued
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). The Partnership purchased the Acquired Insured Mortgages from unaffiliated third parties at a discount from the outstanding principal balance. Through November 1988, the former managing general partner had the right to reinvest the proceeds from any sale or prepayment of an Insured Mortgage or any insurance proceeds received from the assignment of an Insured Mortgage (subject to the conditions set forth in the Partnership Agreement). After the expiration of the reinvestment period, the Partnership is required (subject to the conditions set forth in the Partnership Agreement) to distribute such proceeds to its Unitholders. The Partnership Agreement states that the Partnership will terminate on December 31, 2008, unless previously terminated under the provisions of the Partnership Agreement.
Investment in Insured Mortgages - ------------------------------- The Partnership's investment in insured mortgages is comprised of 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) 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.
In connection with the Partnership's implementation of Statement of Financial Accounting Standards No. 115 "Accounting for Certain Investments in Debt and Equity Securities" (SFAS 115) as of January 1, 1994 (see Note 2 to the financial statements), the Partnership's investments in FHA-Insured Certificates are recorded at fair value, as estimated below, as of December 31, 1994. The difference between the amortized cost and the fair value of FHA-Insured Certificates represents the net unrealized gains on these investments and is reported as a separate component of partners' equity as of December 31, 1994. The fair value of FHA-Insured Certificates is based on quoted market prices. The Partnership's Investment in FHA-Insured Loans is recorded at amortized cost as of December 31, 1994 and 1993.
As of December 31, 1994, the Partnership had remaining investments in nine FHA-Insured Certificates and six FHA-Insured Loans with an aggregate amortized cost of $35,214,547, face value of $40,966,282, and fair value of $39,420,211, all of which were originated or acquired by the former managing general partner. All of the Partnership's mortgage investments are insured by the United States Department of Housing and Development (HUD) for 100% of their current face value, less a 1% assignment fee, and are non-recourse first liens on multifamily residential developments owned by entities unaffiliated with the Partnership, its General Partner, or their affiliates and are insured under Section 221(d)(4) or Section 231 of the National Housing Act. As of December 31, 1994, all of the Partnership's mortgage investments are current with respect to the payment of principal and interest.
The following table summarizes the Partnership's investment in Insured Mortgages as of December 31, 1994:
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 of the net proceeds from the refinancing, sale or other disposition of the underlying development (referred to as Participations). During the year ended December 31, 1994, the Partnership received $13,010 from the Participations. During the years ended December 31, 1993 and 1992, the Partnership did not receive any monies from the Participations. These amounts, if any, are included in mortgage investment income in the accompanying statements of operations.
PART II
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued
Mortgage Dispositions - --------------------- A summary of dispositions that are included in the statements of operations for the years ended December 31, 1994, 1993 and 1992 are as follows:
The accompanying notes are an integral part of these financial statements.
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. From inception through September 6, 1991, AIM Capital Management Corp. served as managing general partner (with a partnership interest of 2.8%), IRI Properties Capital Corp. served as corporate general partner (with a partnership interest of 0.1%) and Z Square G Partners II served as the associate general partner (with a partnership interest of 0.1%). All of the foregoing general partners are sometimes collectively referred to as former general partners.
At a special meeting of the limited partners and unitholders of the Partnership held on August 16, 1991, a majority of these interests approved, among other items, the assignment of the general partner interests and the shares of the company which acts as the assignor limited partner in the Partnership.
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. purchased the interests of the former managing general partner and the former corporate general partner pursuant to the terms of the Partnership Agreement. The interest of the former associate general partner was purchased by the Partnership on September 6, 1991, pursuant to the terms of the Partnership Agreement. CRIIMI, Inc. is a wholly-owned subsidiary of CRIIMI MAE Inc. (CRIIMI MAE), formerly CRI Insured Mortgage Association, Inc. CRIIMI MAE is managed by an adviser whose general partner is C.R.I., Inc. (CRI).
Also, on September 6, 1991, AIM Acquisition Partners, L.P. (the Advisor) succeeded Integrated Funding, Inc. (Integrated Funding) as the advisor to the Partnership. AIM Acquisition Corporation (AIM Acquisition) 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 a limited partnership formed by CRI and CRIIMI MAE. Pursuant to the terms of certain amendments to the Partnership Agreement, as discussed below, 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. The limited partners and Unitholders of the Partnership approved the execution of a Sub-advisory agreement (the Sub-advisory Agreement) with CRI/AIM Management, Inc., an affiliate of CRI, pursuant to which CRI/AIM Management, Inc. manages the Partnership's portfolio and disposes of the Partnership's mortgage investments.
CRIIMI MAE's Board of Directors has determined that it is in CRIIMI MAE's best interest to consider a proposed transaction in which CRIIMI MAE would become a self-managed and self-administered real estate investment trust (REIT). Under the terms of the proposed transaction, CRIIMI MAE and its affiliates would acquire certain mortgage investment, servicing origination and advisory business from affiliates of CRI, including the Sub-advisory Agreement in place with respect to the Partnership. This transaction will have 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
AMERICAN INSURED MORTGAGE INVESTORS
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION - Continued
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.
During the first quarter of 1992, the General Partner applied to list the Units on the American Stock Exchange (AMEX) and the application was approved by AMEX. Trading commenced on April 8, 1992 with a trading symbol of AIA.
2. SIGNIFICANT ACCOUNTING POLICIES
Method of Accounting -------------------- The financial statements of the Partnership are prepared on the accrual basis of accounting in accordance with generally accepted accounting principles.
Investment in Insured Mortgages -------------------------------
The Partnership's investment in Insured Mortgages is comprised of 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) 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.
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.
Prior to January 1, 1994, the Partnership accounted for its investment in Insured Mortgages at amortized cost in accordance with Statement of Financial Accounting Standard No. 65 "Accounting for Certain Mortgage Banking Activities" (SFAS 65) since it had the ability and intent to hold these assets for the foreseeable future. The difference between the cost and the unpaid principal balance at the time of purchase is carried as a discount or premium and amortized over the remaining contractual life of the mortgage using the effective interest method. The effective interest method provides a constant yield of income over the term of the mortgage. Mortgage investment income is comprised of amortization of the discount plus the stated mortgage interest payments received or accrued less amortization of the premium.
In May 1993, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 115 "Accounting for Certain Investments in Debt and Equity Securities" (SFAS 115). This statement requires that investments in debt and equity securities be classified into one of the following investment categories based upon the circumstances under which such securities might be sold: Held to Maturity, Available for Sale, and Trading. Generally, certain debt securities for which an
AMERICAN INSURED MORTGAGE INVESTORS
NOTES TO FINANCIAL STATEMENTS
2. SIGNIFICANT ACCOUNTING POLICIES - Continued
enterprise has both the ability and intent to hold to maturity, should be accounted for using the amortized cost method and all other securities must be recorded at their fair values.
As of December 31, 1994, the weighted average remaining term of the Partnership's investments in FHA-Insured Certificates is approximately 27 years. However, the Partnership Agreement states that the Partnership will terminate in approximately 14 years, on December 31, 2008, unless previously terminated under the provisions of the Partnership Agreement. As the Partnership is anticipated to terminate 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, 1994, 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 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 January 1, 1994, and for the first three quarters of 1994, the Partnership adopted SFAS 115 for all of its mortgage investments. Upon further consideration and interpretation of SFAS 115, as of December 31, 1994, the Partnership has only applied this accounting pronouncement to the FHA-Insured Certificates held in its portfolio. The Partnership continues to account for its FHA-Insured Loans in accordance with SFAS 65, or at amortized cost, because such loans are not securities and therefore are not subject to SFAS 115. The impact of this change is immaterial to the financial statements of the Partnership.
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
AMERICAN INSURED MORTGAGE INVESTORS
NOTES TO FINANCIAL STATEMENTS
2. SIGNIFICANT ACCOUNTING POLICIES - Continued
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.
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.
Reclassification ---------------- Certain amounts in the financial statements for the year ended December 31, 1993 have been reclassified to conform with the 1994 presentation.
3. TRANSACTIONS WITH RELATED PARTIES
The principal officers of the General Partner for the years ended December 31, 1994, 1993 and 1992 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 Partnership's years ended December 31, 1994, 1993 and 1992, earned or received compensation or payments for services from the Partnership as follows:
AMERICAN INSURED MORTGAGE INVESTORS
NOTES TO FINANCIAL STATEMENTS
3. TRANSACTIONS WITH RELATED PARTIES - Continued
(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 Purchase Agreement and amendments 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).
Of the amounts paid to the Advisor, the Sub-advisor, CRI/AIM Management, Inc., earned a fee equal to $104,880, $129,429 and $133,160 or 0.28% of Total Invested Assets, for the years ended December 31, 1994, 1993 and 1992, respectively.
(3) These amounts are paid to CRI as reimbursement for expenses incurred on behalf of the General Partner and the Partnership. As discussed in Note 1, the proposed transaction in which CRIIMI MAE would become a self-managed and self-administered REIT has no impact on the payments required to be made by the Partnership, other than that the expense reimbursement currently paid by the Partnership to CRI in connection with the provision of services by the Sub- advisor will be paid to an affiliate of CRIIMI MAE subsequent to the consummation of the proposed transaction.
(4) These amounts include special distributions resulting from mortgage dispositions, as discussed in Note 5.
4. INVESTMENT IN INSURED MORTGAGES
In connection with the Partnership's implementation of SFAS 115 as of January 1, 1994 (see Note 2), the Partnership's investments in FHA-Insured Certificates are recorded at fair value, as estimated below, as of December 31,
AMERICAN INSURED MORTGAGE INVESTORS
NOTES TO FINANCIAL STATEMENTS
4. INVESTMENT IN INSURED MORTGAGES - Continued
1994. The difference between the amortized cost and the fair value of FHA- Insured Certificates represents the net unrealized gains on these investments and is reported as a separate component of partners' equity as of December 31, 1994. The fair value of FHA-Insured Certificates is based on quoted market prices. The Partnership's Investment in FHA-Insured Loans is recorded at amortized cost as of December 31, 1994 and 1993.
As of December 31, 1994, the Partnership had remaining investments in nine FHA-Insured Certificates and six FHA-Insured Loans with an aggregate amortized cost of $35,214,547, face value of $40,966,282, and fair value of $39,420,211. All of the Partnership's Insured Mortgages are insured by HUD for 100% of their current face value, less a 1% assignment fee. The mortgages underlying the FHA- Insured Certificates and FHA-Insured Loans are non-recourse first liens on multifamily residential developments owned by entities unaffiliated with the Partnership, its General Partner, or their affiliates and are insured under Section 221(d)(4) or Section 231 of the National Housing Act. As of December 31, 1994, all of the Partnership's Insured Mortgages are current with respect to the payment of principal and interest.
The following table summarizes the Partnership's Investment in Insured Mortgages as of December 31, 1994:
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 of the net proceeds from the refinancing, sale or other disposition of the underlying development (referred to as Participations). During the year ended December 31, 1994, the Partnership received $13,010 from the Participations. During the years ended December 31, 1993 and 1992, the Partnership did not receive any monies from the Participations. These amounts, if any, are included in mortgage investment income in the accompanying statements of operations.
Mortgage Dispositions
AMERICAN INSURED MORTGAGE INVESTORS
NOTES TO FINANCIAL STATEMENTS
4. INVESTMENT IN INSURED MORTGAGES - Continued
- --------------------- A summary of dispositions that are included in the statements of operations for the years ended December 31, 1994, 1993 and 1992 are as follows:
AMERICAN INSURED MORTGAGE INVESTORS
NOTES TO FINANCIAL STATEMENTS
4. INVESTMENT IN INSURED MORTGAGES - Continued
Quarter ended March 31 June 30 September 30 December 31 ---------- ---------- ------------ -----------
Income $ 1,304 $ 1,182 $ 1,131 $ 1,129 Loss on mortgage disposition (21) -- -- -- Net earnings 1,027 927 919 994 Net earnings per Limited Partnership Unit .10 .09 .09 .10
/TABLE
AMERICAN INSURED MORTGAGE INVESTORS SCHEDULE IV - MORTGAGE LOANS ON REAL ESTATE DECEMBER 31, 1994
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% $ 6,862,561 $ 5,179,068 592,406 North River Place Chillecothe, OH 10/21 12/01 7.5% 3,222,426 2,435,541 279,509 Portervillage I Apts. Porterville, CA 8/21 5/01 7.5% 1,192,395(4) 967,618 103,733(4) Town Park Apts. Rockingham, NC 10/22 10/02 7.5% 661,419(4) 535,775 56,755(4) ------------ ------------ Total Investment in FHA-Insured Loans - Acquired Insured Mortgages 11,938,801 9,118,002 ------------ ------------ Originated Insured Mortgages - ---------------------------- Investment in FHA-Insured Loans (carried at amortized cost)(2)
Creekside Village Beaverton, OR 11/25 1/01 11.50%(6) 5,156,167 5,342,046 612,632(6) Waters Edge Apts. Columbus, OH 1/31 5/03 8.75%(6) 9,681,033 9,248,226 885,419(6) ------------ ------------ Total Investment in FHA-Insured Loans - Originated Insured Mortgages 14,837,200 14,590,272 ------------ ------------
Total Investment in FHA-Insured Loans $ 26,776,001 $ 23,708,274 ------------ ------------ See notes to Schedule IV - Mortgage Loans on Real Estate.
/TABLE
AMERICAN INSURED MORTGAGE INVESTORS SCHEDULE IV - MORTGAGE LOANS ON REAL ESTATE DECEMBER 31, 1994
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% $ 2,150,243(4) $ 2,023,644 $ 185,272(4) Baypoint Shoreline Apts. Duluth, MN 1/22 10/01 7.5% 1,017,099(4) 957,242 87,967(4) Berryhill Apts. Grass Valley, CA 1/21 11/02 7.5% 1,324,128(4) 1,246,309 115,899(4) Brougham Estates II Kansas City, KS 11/22 3/02 7.5% 2,693,974(4) 2,535,264 230,860(4) College Green Apts. Wilmington, NC 3/23 2/02 7.5% 1,445,692(4) 1,360,488 123,455(4) Fox Run Apts. Dothan, AL 10/19 11/99 7.5% 1,305,052(4) 1,228,511 116,242(4) Kaynorth Apts. Lansing, MI 4/23 9/02 7.5% 1,961,024(4) 1,845,437 167,318(4) Lakeside Apts. Bennettsville, SC 1/22 2/02 7.5% 408,182(4) 384,160 35,303(4) Westbrook Apts. Kokomo, IN 11/22 9/02 7.5% 1,884,887(4) 1,773,971 163,177(4) ------------ ------------ Total Investment in FHA-Insured Certificates 14,190,281 13,355,026 ------------ ------------ TOTAL INVESTMENT IN INSURED MORTGAGES $ 40,966,282 $ 37,063,300 ============ ============
See notes to Schedule IV - Mortgage Loans on Real Estate /TABLE
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 therefore 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 AIM 85.
(5) In addition, the servicer of the insured mortgages, an unaffiliated third party, is entitled to receive compensation for certain services rendered in an amount up to ten basis points (.10%) of the unpaid principal balance of the insured mortgages.
(6) This represents the base interest rate during the permanent phase of these insured mortgage loans. Additional interest, (referred to as Participations) measured as a percentage of surplus cash and a percentage of the proceeds from sale or refinancing of the development (as defined in the Participation Agreements), will also be due. The Partnership received $13,010 from the Participations for the year ended December 31, 1994. No payments were received for the years ended December 31, 1993 or 1992 as a result of the Participations.
(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.
(9) A reconciliation of the carrying value of Insured Mortgages, for the years ended December 31, 1994 and 1993, is as follows:
1994 1993 ------------ ------------ Beginning balance $ 43,342,199 $ 45,760,878
Net gain on mortgage dispositions 195,820 762,250
AMERICAN INSURED MORTGAGE INVESTORS
NOTES TO SCHEDULE IV - MORTGAGE LOANS ON REAL ESTATE - Continued
Disposition of Insured Mortgages (8,137,327) (2,965,249) Principal receipts on Insured Mortgages (186,145) (215,680) Net unrealized gains on investment in Insured Mortgages 1,848,753 -- ------------ ------------ Ending balance $ 37,063,300 $ 43,342,199 ============ ============
(10) The tax basis of the Insured Mortgages was approximately $34.9 million and $43.1 million as of December 31, 1994 and 1993, respectively.