FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended September 30, 2001
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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 Identification No.)
incorporation or organization)
11200 Rockville Pike, Rockville, Maryland 20852
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(Address of principal executive offices) (Zip Code)
(301) 816-2300
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(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
As of September 30, 2001, 10,000,125 depository units of limited
partnership interest were outstanding.
2
AMERICAN INSURED MORTGAGE INVESTORS
INDEX TO FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 2001
PAGE
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PART I. Financial Information (Unaudited)
Item 1. Financial Statements
Balance Sheets - September 30, 2001 (unaudited) and December 31, 2000 3
Statements of Income and Comprehensive Income - for the three and
nine months ended September 30, 2001 and 2000 (unaudited) 4
Statement of Changes in Partners' Equity - for the nine months ended
September 30, 2001 (unaudited) 5
Statements of Cash Flows - for the nine months ended September 30, 2001
and 2000 (unaudited) 6
Notes to Financial Statements (unaudited) 7
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations 12
Item 2A. Qualitative and Quantitative Disclosures About Market Risk 14
PART II. Other Information
Item 6. Exhibits and Reports on Form 8-K 15
Signature 16
3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AMERICAN INSURED MORTGAGE INVESTORS
BALANCE SHEETS
September 30, December 31,
2001 2000
------------ ------------
(Unaudited)
ASSETS
Investment in FHA-Insured Loans, at amortized cost,
net of unamortized discount:
Originated insured mortgages $ 4,824,010 $ 4,874,050
Acquired insured mortgages 7,647,640 7,723,048
------------ ------------
12,471,650 12,597,098
Investment in FHA-Insured Certificates,
at fair value 10,146,911 11,258,675
Cash and cash equivalents 1,813,522 567,491
Receivables and other assets 198,852 203,781
Due from affiliate 1,213,860 1,230,180
------------ ------------
Total assets $ 25,844,795 $ 25,857,225
============ ============
LIABILITIES AND PARTNERS' EQUITY
Distributions payable $ 1,750,794 $ 514,940
Accounts payable and accrued expenses 81,663 71,763
------------ ------------
Total liabilities 1,832,457 586,703
------------ ------------
Partners' equity:
Limited partners' equity, 10,000,125 Units authorized,
issued and outstanding 27,605,888 28,817,932
General partners' deficit (5,294,352) (5,258,151)
Accumulated other comprehensive income 1,700,802 1,710,741
------------ ------------
Total Partners' equity 24,012,338 25,270,522
------------ ------------
Total liabilities and partners' equity $ 25,844,795 $ 25,857,225
============ ============
The accompanying notes are an integral part
of these financial statements.
4
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AMERICAN INSURED MORTGAGE INVESTORS
STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(Unaudited)
For the three months ended For the nine months ended
September 30, September 30,
------------------------------- -------------------------------
2001 2000 2001 2000
------------ ------------ ------------ ------------
Income:
Mortgage investment income $ 527,386 $ 566,592 $ 1,602,435 $ 1,705,034
Interest and other income 26,805 2,940 78,913 9,766
------------ ------------ ------------ ------------
554,191 569,532 1,681,348 1,714,800
------------ ------------ ------------ ------------
Expenses:
Asset management fee to related parties 56,706 59,316 170,118 177,948
General and administrative 50,516 54,479 169,008 175,814
------------ ------------ ------------ ------------
107,222 113,795 339,126 353,762
------------ ------------ ------------ ------------
Net earnings before gain on
mortgage disposition 446,969 455,737 1,342,222 1,361,038
Gain on mortgage disposition 190,207 - 190,207 -
------------ ------------ ------------ ------------
Net earnings $ 637,176 $ 455,737 $ 1,532,429 $ 1,361,038
============ ============ ============ ============
Other comprehensive income (loss) 118,685 110,720 (9,939) (8,335)
------------ ------------ ------------ ------------
Comprehensive income $ 755,861 $ 566,457 $ 1,522,490 $ 1,352,703
------------ ------------ ------------ ------------
Net earnings allocated to:
Limited partners - 97.1% $ 618,698 $ 442,521 $ 1,487,989 $ 1,321,568
General Partner - 2.9% 18,478 13,216 44,440 39,470
------------ ------------ ------------ ------------
$ 637,176 $ 455,737 $ 1,532,429 $ 1,361,038
============ ============ ============ ============
Net earnings per Unit of limited
partnership interest - basic $ 0.06 $ 0.04 $ 0.15 $ 0.13
============ ============ ============ ============
The accompanying notes are an integral part
of these financial statements.
5
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AMERICAN INSURED MORTGAGE INVESTORS
STATEMENT OF CHANGES IN PARTNERS' EQUITY
For the nine months ended September 30, 2001
(Unaudited)
Accumulated
Other
General Limited Comprehensive
Partner Partner Income Total
------------ ------------ ------------- -------------
Balance, December 31, 2000 $ (5,258,151) $ 28,817,932 $ 1,710,741 $ 25,270,522
Net Earnings 44,440 1,487,989 - 1,532,429
Adjustment to unrealized gains on
investments in insured mortgages - - (9,939) (9,939)
Distributions paid or accrued of $0.27 per Unit,
including return of capital of $0.12 per Unit (80,641) (2,700,033) - (2,780,674)
------------ ------------ ------------ ------------
Balance, September 30, 2001 $ (5,294,352) $ 27,605,888 $ 1,700,802 $ 24,012,338
============ ============ ============ ============
Limited Partnership Units outstanding - basic, as
of September 30, 2001 10,000,125
==========
The accompanying notes are an integral part
of these financial statements.
6
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AMERICAN INSURED MORTGAGE INVESTORS
STATEMENTS OF CASH FLOWS
(Unaudited)
For the nine months ended
September 30,
2001 2000
------------ ------------
Cash flows from operating activities:
Net earnings $ 1,532,429 $ 1,361,038
Adjustments to reconcile net earnings to net cash provided by operating activities:
Net gain on mortgage disposition (190,207) -
Changes in assets and liabilities:
Decrease (increase) in due from affiliate, receivables and other assets 33,176 (38,747)
Increase in accounts payable and accrued expenses 9,900 8,557
------------ ------------
Net cash provided by operating activities 1,385,298 1,330,848
------------ ------------
Cash flows provided by investing activities:
Proceeds from disposition of mortgage prepayments 1,184,199 -
Receipt of mortgage principal from scheduled payments 221,354 216,177
------------ ------------
Net cash provided by investing activities 1,405,553 216,177
------------ ------------
Cash flows used in financing activities:
Distributions paid to partners (1,544,820) (1,956,769)
------------ ------------
Net increase (decrease) in cash and cash equivalents 1,246,031 (409,744)
Cash and cash equivalents, beginning of period 567,491 982,930
------------ ------------
Cash and cash equivalents, end of period $ 1,813,522 $ 573,186
============ ============
The accompanying notes are an integral part
of these financial statements.
7
AMERICAN INSURED MORTGAGE INVESTORS
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
1. ORGANIZATION
American Insured Mortgage Investors (the "Partnership") was formed under
the Uniform Limited Partnership Act in the state of California on July 12, 1983.
The Partnership Agreement ("Partnership Agreement") states that the Partnership
will terminate on December 31, 2008, unless previously terminated under the
provisions of the Partnership Agreement.
CRIIMI, Inc. (the "General Partner") holds a partnership interest of 2.9%
and is a wholly owned subsidiary of CRIIMI MAE Inc. ("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., Sun America Investments, Inc.
(successor to Broad, Inc.) and CRI/AIM Investment, L.P., an affiliate of CRIIMI
MAE. AIM Acquisition is a Delaware corporation that is primarily owned by Sun
America Investments, Inc. and The Goldman Sachs Group, L.P.
Under the Advisory Agreement, the Advisor will render services to the
Partnership, including but not limited to, the management of the Partnership's
portfolio of mortgages and the disposition of the Partnership's mortgages. Such
services will be subject to the review and ultimate authority of the General
Partner. However, the General Partner is required to receive the consent of the
Advisor prior to taking certain significant actions, including but not limited
to the disposition of mortgages, any transaction or agreement with the General
Partner, or its affiliates, or any material change as to policies regarding
distributions or reserves of the Partnership. The Advisor is permitted to
delegate the performance of services pursuant to a sub-advisory agreement (the
"Sub-Advisory Agreement"). The delegation of such services will not relieve the
Advisor of its obligation to perform such services. CRIIMI MAE Services Limited
Partnership ("CMSLP"), an affiliate of CRIIMI MAE, manages the Partnership's
portfolio, pursuant to the Sub-Advisory Agreement. The general partner of CMSLP
is CMSLP Management Company, Inc., an affiliate of CRIIMI MAE.
The Partnership's investment in mortgages consists of participation
certificates evidencing a 100% undivided beneficial interest in government
insured multifamily mortgages issued or sold pursuant to Federal Housing
Administration (FHA) programs (FHA-Insured Certificates) and FHA-insured
mortgage loans (FHA-Insured Loans, and together with FHA-Insured Certificates
referred to herein as Insured Mortgages). The mortgages underlying the
FHA-Insured Certificates and FHA-Insured Loans are non-recourse first liens on
multifamily residential developments.
On October 5, 1998, CRIIMI MAE, the parent of the General Partner, and
CRIIMI MAE Management, Inc., an affiliate of CRIIMI MAE and provider of
personnel and administrative services to the Partnership, filed voluntary
petitions for relief under chapter 11 of title 11 of the United States Code (the
"Bankruptcy Code"). On November 22, 2000, the United States Bankruptcy Court for
the District of Maryland, in Greenbelt, Maryland (the "Bankruptcy Court")
confirmed CRIIMI MAE's and CRIIMI MAE Management, Inc.'s Third Amended Joint
Plan of Reorganization (as amended and supplemented by praecipes filed with the
Bankruptcy Court on July 13, 14 and 21, and November 22, 2000). On April 17,
2001, CRIIMI MAE and CRIIMI MAE Management, Inc. announced the completion of
their confirmed joint plan of reorganization and emerged from bankruptcy. This
marks the conclusion of CRIIMI MAE's and CRIIMI MAE Management, Inc.'s financial
reorganization.
8
2. BASIS OF PRESENTATION
In the opinion of the General Partner, the accompanying unaudited financial
statements contain all adjustments of a normal recurring nature necessary to
present fairly the financial position of the Partnership as of September 30,
2001 and December 31, 2000, the results of its operations for the three and nine
months ended September 30, 2001 and 2000 and its cash flows for the nine months
ended September 30, 2001 and 2000.
These unaudited financial statements have been prepared pursuant to the
rules and regulations of the Securities and Exchange Commission. Certain
information and note disclosures normally included in annual financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. While the General Partner believes that the
disclosures presented are adequate to make the information not misleading, these
financial statements should be read in conjunction with the financial statements
and the notes to the financial statements included in the Partnership's Annual
Report filed on Form 10-K for the year ended December 31, 2000.
Comprehensive Income
--------------------
Comprehensive income is the change in Partners' equity during a period from
transactions from non-owner sources. 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. Unrealized
gains and losses are reported in the equity section of the Balance Sheet as
Accumulated Other Comprehensive Income.
3. INVESTMENT IN FHA-INSURED LOANS
Listed below is the Partnership's aggregate investment in FHA-Insured Loans
as of September 30, 2001 and December 31, 2000:
September 30, December 31,
2001 2000
------------ ------------
Number of
Acquired Insured Mortgages 3 3
Originated Insured Mortgages 1 1
Amortized Cost $ 12,471,650 $ 12,597,098
Face Value 14,496,566 14,694,371
Fair Value 14,400,773 14,222,808
As of November 1, 2001, all of the FHA-Insured Loans are current with
respect to payment of principal and interest.
In addition to base interest payments 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 three and nine months ended September 30, 2001
and 2000, the Partnership received nothing from the Participations. These
amounts, if any, are included in mortgage investment income on the accompanying
statements of income and comprehensive income.
9
4. INVESTMENT IN FHA-INSURED CERTIFICATES
Listed below is the Partnership's aggregate investment in FHA-Insured
Certificates as of September 30, 2001 and December 31, 2000:
September 30, December 31,
2001 2000
------------ ------------
Number of mortgages (1) 6 7
Amortized Cost $ 8,446,109 $ 9,536,007
Face Value 10,087,747 11,433,137
Fair Value 10,146,911 11,258,675
(1) In September 2001, the mortgage on Berryhill Apartments was prepaid. The
Partnership received net proceeds of approximately $1.2 million and
recognized a gain of approximately $190,000 for the nine months ended
September 30, 2001. A distribution of approximately $0.12 per Unit related
to the prepayment of this mortgage was declared in September and paid to
Unitholders in November 2001.
All of the FHA-Insured Certificates were current with respect to the
payment of principal and interest as of November 1, 2001, except for the
mortgage on Westbrook Apartments, which is delinquent with respect to the
October payment of principal and interest.
Most of the Insured Mortgages held by the Partnership apply to the Section
221 program of the National Housing Act of 1937, as amended, (the "Section 221
program"). Under the Section 221 program 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. The Partnership has initiated its request to put these
mortgages to FHA as they become due. Once the servicer of a mortgage has filed
an application for insurance benefits under Section 221, the Partnership will no
longer receive the monthly principal and interest on the applicable mortgage.
The servicer of the mortgage on Fox Run Apartments filed an application for
insurance benefits under the Section 221 program of the National Housing Act of
1937 in May 2000. In December 2000, HUD issued assignment proceeds in the form
of a 7.125% debenture for this mortgage. The 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 $2,385,233 as of
September 30, 2001, was issued to AIM 85 and earns interest semi-annually on
January 1 and July 1. The Partnership expects to receive net proceeds of
approximately $1.2 million. The net proceeds and accrued interest are included
on the Balance Sheet in Due from affiliate. In August 2001, HUD issued a call
notice for redemption of this debenture on January 1, 2002, at par, plus accrued
interest. A distribution will be declared at that time.
10
5. DISTRIBUTIONS TO UNITHOLDERS
The distributions paid or accrued to Unitholders on a per Unit basis for
the nine months ended September 30, 2001 and 2000 are as follows:
Quarter Ended 2001 2000
------------- -------- --------
March 31, $ 0.05 $ 0.05
June 30, 0.05 0.05
September 30, 0.17(1) 0.05
-------- --------
$ 0.27 $ 0.15
======== ========
(1) This amount includes approximately $0.12 per Unit representing net proceeds
from the prepayment of the mortgage on Berryhilll Apartments.
The basis for paying distributions to Unitholders is net proceeds from
mortgage dispositions, if any, and cash flow from operations, which includes
regular interest income and principal from Insured Mortgages. Although Insured
Mortgages yield a fixed monthly mortgage payment once purchased, the cash
distributions paid to the Unitholders will vary during each period due to (1)
the fluctuating yields in the short-term money market where the monthly mortgage
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. As the Partnership continues to
liquidate its mortgage investments and investors receive distributions of return
of capital and taxable gains, investors should expect a reduction in earnings
and distributions due to the decreasing mortgage base.
11
6. TRANSACTIONS WITH RELATED PARTIES
The General Partner and certain affiliated entities have, during the nine
months ended September 30, 2001 and 2000, earned or received compensation or
payments for services from the Partnership as follows:
COMPENSATION PAID OR ACCRUED TO RELATED PARTIES
-----------------------------------------------
For the three months For the nine months
Capacity in Which ended September 30, ended September 30,
Name of Recipient Served/Item 2001 2000 2001 2000
----------------- ------------------- ---------- ---------- ---------- ----------
CRIIMI, Inc. (1) General Partner/Distribution $ 50,773 $ 14,933 $ 80,641 $ 44,800
AIM Acquisition
Partners, L.P.(2) Advisor/Asset Management Fee 56,706 59,316 170,118 177,948
CRIIMI MAE Management, Affiliate of General Partner/ 7,017 9,209 29,682 32,682
Inc. Expense Reimbursement
American Insured Mortgage Affiliate of General partner/
Investors - Series 85, L.P. (3) Reimbursement of Debenture Proceeds 21,243 - 63,729 -
(1) The General Partner, pursuant to the Partnership Agreement, is entitled to
receive 2.9% of the Partnership's income, loss, capital and distributions,
including, without limitation, the Partnership's adjusted cash from
operations and proceeds of mortgage prepayments, sales or insurance (both
as defined in the Partnership Agreement).
(2) The Advisor, pursuant to the Partnership Agreement, is entitled to an Asset
Management Fee equal to 0.95% of Total Invested Assets (as defined in the
Partnership Agreement). CMSLP 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, CMSLP earned a fee equal to $16,713 and $50,139 for
the three and nine months ended September 30, 2001, respectively and
$17,481 and $52,443 for the three and nine months ended September 30, 2000,
respectively. The limited partner of CMSLP is a wholly owned subsidiary of
CRIIMI MAE Inc.
(3) In December 2000, HUD issued assignment proceeds in the form of a 7.125%
debenture for the mortgage on Fox Run 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 $2,385,233, was issued to AIM 85 and earns interest semi-annually
on January 1 and July 1. The Partnership expects to receive net proceeds of
approximately $1.2 million. In August 2001, HUD issued a call notice for
redemption of this debenture in January 2002.
12
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FORWARD-LOOKING STATEMENTS. When used in this Quarterly Report on Form 10-Q, the
words "believes," "anticipates," "expects," "contemplates," and similar
expressions are intended to identify forward-looking statements. Statements
looking forward in time are included in this Quarterly Report on Form 10-Q
pursuant to the "safe harbor" provision of the Private Securities Litigation
Reform Act of 1995. Such statements are subject to certain risks and
uncertainties, which could cause actual results to differ materially.
Accordingly, the following information contains or may contain forward-looking
statements: (1) information included or incorporated by reference in this
Quarterly Report on Form 10-Q, including, without limitation, statements made
under Item 2, 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. Factors which may cause actual results to differ
materially from those contained in the forward-looking statements identified
above 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. Readers are cautioned not to place undue reliance
on these forward-looking statements, which speak only of the date hereof. The
Partnership undertakes no obligation to publicly revise these forward-looking
statements to reflect events or circumstances occurring after the date hereof or
to reflect the occurrence of unanticipated events.
General
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As of September 30, 2001, the Partnership had invested in 10 Insured
Mortgage Investments, with an aggregate amortized cost of approximately $21
million, face value of approximately $25 million and fair value of approximately
$25 million.
As of November 1, 2001, all of the FHA-Insured Loans and FHA-Insured
Certificates are current with respect to payment of principal and interest,
except for the mortgage on Westbrook Apartments, which is delinquent with
respect to the October payment of principal and interest.
Most of the Insured Mortgages held by the Partnership apply to the Section
221 program of the National Housing Act of 1937, as amended, (the "Section 221
program"). Under the Section 221 program 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. The Partnership has initiated its request to put these
mortgages to FHA as they become due.
13
Results of Operations
---------------------
Net earnings increased for the three and nine months ended September 30,
2001, as compared to the corresponding periods in 2000, primarily due to the
gain on mortgage disposition, as discussed below.
Mortgage investment income decreased for the three and nine months ended
September 30, 2001, as compared to the corresponding periods in 2000, primarily
due to a reduction in the mortgage base. The mortgage base decreased due to two
mortgage dispositions with a principal balance of approximately $2.4 million,
representing an approximate 9% decrease in the aggregate principal balance of
the total mortgage portfolio since November 2000.
Interest and other income increased for the three and nine months ended
September 30, 2001, as compared to the corresponding periods in 2000. This
increase is primarily due to an increase in interest earned on debenture due
from affiliate, as discussed below.
Asset management fee to related parties decreased for the three and nine
months ended September 30, 2001, as compared to the corresponding periods in
2000, primarily due to a reduction in the mortgage base, as previously
discussed.
General and administrative expense decreased for the three and nine months
ended September 30, 2001, as compared to the corresponding periods in 2000,
primarily due to a decrease in payroll expense and other general and
administrative expenses as a result of the decrease in mortgage base.
Gain on mortgage disposition increased for the three and nine months ended
September 30, 2001, as compared to the corresponding periods in 2000. During the
nine months ended September 30, 2001, the Partnership recognized a gain of
approximately $190,000 from the prepayment of the mortgage on Berryhill
Apartments. During the nine months ended September 30, 2000, the Partnership
recognized no gains or losses.
In December 2000, HUD issued assignment proceeds in the form of a 7.125%
debenture for the mortgage on Fox Run 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
$2,385,233 as of September 30, 2001, was issued to AIM 85 and earns interest
semi-annually on January 1 and July 1. The Partnership expects to receive net
proceeds of approximately $1.2 million. The net proceeds and accrued interest
are included on the Balance Sheet in Due from affiliate. In August 2001, HUD
issued a call notice for redemption of this debenture on January 1, 2002, at
par, plus accrued interest. A distribution will be declared at that time.
14
Liquidity and Capital Resources
-------------------------------
The Partnership's operating cash receipts, derived from payments of
principal and interest on insured mortgages, plus cash receipts from interest on
short-term investments, were sufficient for the nine months ended September 30,
2001 to meet operating requirements. The basis for paying distributions to
Unitholders is net proceeds from Insured Mortgage dispositions, if any, and cash
flow from operations, which includes regular interest income and principal from
Insured Mortgages. Although Insured Mortgages yield a fixed monthly mortgage
payment once purchased, the cash distributions paid to the Unitholders will vary
during each period due to (1) the fluctuating yields in the short-term money
market where the monthly mortgage 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. As
the Partnership continues to liquidate its mortgage investments and investors
receive distributions of return of capital and taxable gains, investors should
expect a reduction in earnings and distributions due to the decreasing mortgage
base.
Net cash provided by operating activities did not change significantly for
the nine months ended September 30, 2001, as compared to the corresponding
period in 2000.
Net cash provided by investing activities increased for the nine months
ended September 30, 2001, as compared to the corresponding period in 2000, due
to an increase in proceeds received from mortgage prepayments and the receipt of
mortgage principal from scheduled payments due to the normal amortization of the
mortgages.
Net cash used in financing activities decreased for the nine months ended
September 30, 2001, as compared to the corresponding period in 2000, due to a
decrease in the amount of distributions paid to partners during the first nine
months of 2001 as compared to the same period in 2000.
ITEM 2A. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK
The Partnership's principal market risk is exposure to changes in interest
rates in the U.S. Treasury market. The Partnership will experience fluctuations
in the market value of its assets related to changes in the interest rates of
U.S. Treasury bonds as well as increases in the spread between U.S. Treasury
bonds and the Partnership's Insured Mortgages. As of September 30, 2001, the
average treasury rate used to price the Partnership's Insured Mortgages had
decreased by approximately 57 basis points compared to December 31, 2000.
Management has determined that there has not been a material change as of
September 30, 2001, in market risk from December 31, 2000 as reported in the
Partnership's Annual Report on Form 10-K as of December 31, 2000.
15
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
No reports on Form 8-K were filed with the Securities and Exchange
Commission during the quarter ended September 30, 2001.
16
PART II. OTHER INFORMATION
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMERICAN INSURED
MORTGAGE INVESTORS
(Registrant)
By: CRIIMI, Inc.
General Partner
November 9, 2001 /s/ Cynthia O. Azzara
----------------- ---------------------------
Date Cynthia O. Azzara
Senior Vice President,
Chief Financial Officer and
Treasurer