UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
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For the fiscal year ended December 31, 2004 |
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Commission file number 1-11059 |
AMERICAN INSURED MORTGAGE INVESTORS - SERIES 85, L.P.
(Exact name of registrant as specified in its charter)
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California |
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13-3257662 |
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(State or other jurisdiction
of |
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(I.R.S. Employer |
11200 Rockville Pike
Rockville, Maryland 20852
(Address of principal executive offices)
Registrant’s telephone number,
including area code (301) 255-4700
Securities registered pursuant to Section 12(b) of the Act:
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Name of each exchange on |
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Title of each class |
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which registered |
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Depositary Units of Limited |
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American Stock Exchange |
Securities registered pursuant to Section 12(g) of the Act:
None
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 (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 ý No o
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. ý
Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes o No ý
As of December 31, 2004, 12,079,514 depositary units of limited partnership interest were outstanding. The aggregate market value of such units held by non-affiliates of the Registrant, based on the last reported sale price on June 30, 2004, was $30,068,030.
Documents incorporated by Reference
None
AMERICAN INSURED MORTGAGE INVESTORS - SERIES 85, L.P.
2004 ANNUAL REPORT ON FORM 10-K
TABLE OF CONTENTS
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FORWARD-LOOKING STATEMENTS. When used in this Annual Report on Form 10-K, the words “believe,” “anticipate,” “expect,” “contemplate,” “may,” “will,” and similar expressions are intended to identify forward-looking statements. Statements looking forward in time are included in this Annual Report on Form 10-K 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 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 prior and future filings by the Partnership (defined below) with the Securities and Exchange Commission (“SEC”) including, without limitation, statements with respect to growth, projected revenues, earnings, returns, distributions 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 disposition of investments, 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 matters, (ii) interest rates, (iii) prepayment of mortgages, (iv) defaulted mortgages, (v) errors in servicing defaulted mortgages and (vi) sales of mortgage investments below fair market value. 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.
American Insured Mortgage Investors - Series 85, L.P. (the “Partnership”) was formed pursuant to a limited partnership agreement, as subsequently amended (“Partnership Agreement”) under the Uniform Limited Partnership Act of the state of California on June 26, 1984. The Partnership’s business consists of holding government insured mortgage investments primarily on multifamily housing properties, and distributing the payments of principal and interest on such mortgage investments, including debentures issued by the United States Department of Housing and Urban Development (“HUD”) in exchange for such mortgages, to the holders of its depositary units of limited partnership interests (“Unitholders”). During the period from March 8, 1985 (the initial closing date of the Partnership’s public offering) through January 27, 1986 (the termination date of the offering), the Partnership, pursuant to its public offering of 12,079,389 depositary Units of limited partnership interest (“Units”) raised a total of $241,587,780 in gross proceeds. In addition, the initial limited partner contributed $2,500 to the capital of the Partnership in exchange for 125 Units.
CRIIMI, Inc., a wholly-owned subsidiary of CRIIMI MAE Inc. (“CRIIMI MAE”), acts as the General Partner (the “General Partner”) for the Partnership and holds a partnership interest of 3.9%. The General Partner provides management and administrative services on behalf of the Partnership. AIM Acquisition Partners L.P. serves as the advisor (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, The Goldman Sachs Group, L.P., Sun America Investments, Inc. (successor to Broad, Inc.) and CRI/AIM Investment, L.P., a subsidiary of CRIIMI MAE, over which CRIIMI MAE exercises 100% voting control. AIM Acquisition is a Delaware corporation that is primarily owned by Sun America Investments, Inc. and The Goldman Sachs Group, L.P.
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Pursuant to the terms of certain origination and acquisition services, management services and disposition services agreements between the Advisor and the Partnership (collectively the “Advisory Agreements”), the Advisor renders 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 are 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 (collectively the “Consent Rights”). The Advisor is permitted to delegate and has delegated the performance of services to CRIIMI MAE Services Limited Partnership (“CMSLP”), a subsidiary of CRIIMI MAE, pursuant to a sub-management agreement (the “Sub-Advisory Agreement”). The general partner and limited partner of CMSLP are wholly-owned subsidiaries of CRIIMI MAE. The delegation of such services by the Advisor to CMSLP does not relieve the Advisor of its obligation to perform such services. Furthermore, the Advisor has retained its Consent Rights.
Prior to December 1993, the Partnership was engaged in the business of originating government insured mortgage loans (“Originated Insured Mortgages”) and acquiring government insured 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 of 1937, as amended (the “National Housing Act”). The Partnership Agreement states that the Partnership will terminate on December 31, 2009, unless terminated earlier under the provisions thereof. The Partnership is required, pursuant to the Partnership Agreement, to dispose of its assets prior to this date.
As of December 31, 2004, the Partnership had investments in 8 Insured Mortgages and one debenture with an aggregate amortized cost of approximately $15.9 million, an aggregate face value of approximately $16.0 million and an aggregate fair value of approximately $16.0 million, as compared to December 31, 2003, when the Partnership had investments in 15 Insured Mortgages and five debentures with an aggregate amortized cost of approximately $51.5 million, an aggregate face value of approximately $51.6 million and an aggregate fair value of approximately $52.4 million.
During 2004, three Insured Mortgages were sold, three Insured Mortgages prepaid, five debentures were redeemed and one debenture was issued as assignment proceeds for one mortgage. The net aggregate amortized cost and aggregate face value of these assets was approximately $35.4 million as of December 31, 2003.
As the Partnership continues to liquidate its mortgage investments and Unitholders receive distributions of return of capital and taxable gains, Unitholders should expect a reduction in earnings and distributions due to the decreasing mortgage base. Based upon the current level of interest rates, the trend in mortgage prepayments over the past year is likely to continue. Such mortgage prepayments, if continued at the trend over the past year, will likely result in a termination and liquidation of the Partnership significantly earlier than the December 2009 stated termination date. Upon the termination and liquidation of the Partnership, distributions to Unitholders will be made in accordance with the terms of the Partnership Agreement. A final distribution will be based on the Unitholders’ and the General Partner’s pro-rata share of the Partnership’s remaining net assets after deducting and setting aside amounts required to satisfy and discharge any existing Partnership obligations and expenses, as stated in the Partnership Agreement. Such distribution to Unitholders will be substantially less than the amount referenced in limited partners’ equity in the Partnership’s financial statements, since the Partnership’s financial statements are prepared in accordance with GAAP and the distributions upon liquidation pursuant to the terms of the Partnership Agreement do not require the General Partner to contribute an amount equal to its General Partner’s deficit to the Partnership.
Additional information concerning the business of 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, 5, 6, 7 and 8 of the Notes to Financial Statements (included in Item 8 hereof). See also Schedule IV-Mortgage
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Loans on Real Estate for the table of the Partnership’s Insured Mortgages as of December 31, 2004.
The Partnership has no employees. The business of the Partnership is managed by its General Partner while its portfolio of mortgages is managed by the Advisor and CMSLP pursuant to the Advisory Agreements and Sub-Advisory Agreement, respectively, as discussed above. An affiliate of the General Partner, CRIIMI MAE Management, Inc. provides personnel and administrative services to the Partnership on behalf of the General Partner. The Partnership reimburses CRIIMI MAE Management, Inc. for these services on an actual cost basis pursuant to the terms of the Partnership Agreement.
The fee paid by the Partnership to the Advisor for services performed under the Advisory Agreements (the “Advisory Fee”), is equal to 0.95% of the Partnership’s Total Invested Assets. (As defined in the Partnership Agreement, “Total Invested Assets” generally means the aggregate original face value of the Partnership’s current mortgage investments.) The Advisor pays CMSLP, as sub-advisor, a fee of 0.28% (the “Sub-Advisory Fee”) of Total Invested Assets for services performed under the Sub-Advisory Agreement from its Advisory Fee. The Partnership is not liable for paying the Sub-Advisory Fee to CMSLP. Additional information concerning these fees is contained in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations and in Note 8 of the Notes to Financial Statements (included in Item 8 hereof).
The Partnership may elect to dispose of its mortgage investments through a sale to third parties subject to the consent of the Advisor. 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, CMSLP or their respective affiliates. Some of these entities may have substantially greater capital resources and experience in disposing of mortgages investments than the Partnership.
CRIIMI MAE and its affiliates also may serve as general partners or managers of real estate limited partnerships, real estate investment trusts or other similar entities in the future. The Partnership may attempt to dispose of mortgages at or about the same time that CRIIMI MAE and/or other entities managed by CRIIMI MAE or its affiliates, or the Advisor or its affiliates, are attempting to dispose of mortgages. As a result of market conditions that could have the effect of limiting the number of mortgage dispositions or adversely affecting the proceeds received from such dispositions, CMSLP, the General Partner and the Advisor and their affiliates could be faced with conflicts of interest in determining which mortgages would be disposed of and at which price. CMSLP, the General Partner and the Advisor, however, are required to exercise their fiduciary duties of good faith, care and loyalty when evaluating the appropriate action to be taken when faced with such conflicts.
The General Partner maintains a website for the Partnership at www.americaninsuredmortgage.com. Select AIM 85 to view the Partnership’s annual reports, quarterly reports and distribution history. Select the AMEX button to access current and historical price data for the Partnership’s Units. A copy of the General Partners’ Code of Business Conduct and Ethics and any other information may be obtained by writing to the General Partner in care of the Partnership at CRIIMI, Inc., 11200 Rockville, 4th Floor, Rockville, MD 20852 or email aimfunds@criimi.com.
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The Partnership does not own or lease any properties. Generally, the mortgages underlying the Partnership’s mortgage investments are non-recourse first liens on multifamily residential developments or retirement homes.
There are no legal proceedings to which the Partnership is a party.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Partnership’s Unitholders during the fourth quarter of 2004.
ITEM 5. MARKET FOR REGISTRANT’S SECURITIES AND RELATED SECURITY HOLDER MATTERS
Principal Market and Market Price for Units and Distributions
The Units are listed for trading on the American Stock Exchange (“AMEX”) under the trading symbol of “AII.” The high and low sale prices for the Units as reported on AMEX and the distributions per Unit, as applicable, for each quarterly period in 2004 and 2003 were as follows:
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Amount of |
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2004 |
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Quarter Ended |
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High |
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Low |
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March 31 |
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$ |
5.16 |
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$ |
2.94 |
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$ |
2.010 |
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June 30 |
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3.06 |
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2.45 |
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0.925 |
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September 30 |
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2.64 |
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1.37 |
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0.890 |
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December 31 |
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1.49 |
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1.30 |
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0.030 |
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$ |
3.855 |
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Amount of |
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2003 |
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Quarter Ended |
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High |
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Low |
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March 31 |
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$ |
5.90 |
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$ |
5.43 |
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$ |
0.310 |
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June 30 |
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5.50 |
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5.36 |
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0.255 |
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September 30 |
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5.50 |
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4.86 |
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0.130 |
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December 31 |
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4.95 |
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4.58 |
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0.200 |
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$ |
0.895 |
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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 basis for paying distributions to Unitholders is net proceeds from mortgage dispositions, if any, and cash flow from operations, which includes regular interest income and principal from Insured Mortgages. Although the Partnership’s Insured Mortgages pay a fixed monthly mortgage payment, the cash distributions paid to the Unitholders will vary during each quarter due to (1) the fluctuating yields in the short-term money market in which 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, the timing of receipt of debentures, the interest rate on debentures and debenture redemptions, and (4) changes in the Partnership’s operating expenses As the Partnership continues to liquidate its mortgage investments and Unitholders receive distributions of return of capital and taxable gains, Unitholders should expect a reduction in earnings and distributions due to the decreasing mortgage base. Based upon the current level of interest rates, the trend in mortgage prepayments over the past year is
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likely to continue. Such mortgage prepayments, if continued at the trend over the past year, will likely result in a termination and liquidation of the Partnership significantly earlier than the December 2009 stated termination date. Upon the termination and liquidation of the Partnership, distributions to Unitholders will be made in accordance with the terms of the Partnership Agreement. A final distribution will be based on the Unitholders’ and the General Partner’s pro-rata share of the Partnership’s remaining net assets after deducting and setting aside amounts required to satisfy and discharge any existing Partnership obligations and expenses, as stated in the Partnership Agreement. Such distribution to Unitholders will be substantially less than the amount referenced in limited partners’ equity in the Partnership’s financial statements, since the Partnership’s financial statements are prepared in accordance with GAAP and the distributions upon liquidation pursuant to the terms of the Partnership Agreement do not require the General Partner to contribute an amount equal to its General Partner’s deficit to the Partnership.
Commencing in the first quarter of 2005, the General Partner will declare distributions of regular cash flow and mortgage proceeds, if any, once each quarter. The General Partner made the decision to declare distributions quarterly instead of monthly to reduce expenses associated with monthly declarations. The distributions are to be declared in March, June, September and December and to be paid after the end of each calendar quarter.
As of December 31, 2004, there were approximately 10,540 Unitholders.
The Partnership has no compensation plans or individual compensation arrangements under which equity securities of the Partnership are authorized for issuance.
ITEM 6. SELECTED FINANCIAL DATA
(Dollars in thousands, except per Unit amounts)
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For the Years Ended December 31, |
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2004 |
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2003 |
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2002 |
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2001 |
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2000 |
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Income |
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$ |
2,312 |
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$ |
5,080 |
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$ |
6,443 |
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$ |
8,526 |
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$ |
9,979 |
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Net gains on mortgage dispositions |
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2,055 |
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1,498 |
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1,851 |
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1,785 |
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428 |
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Net earnings |
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3,801 |
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