Torrance Officials Worried About $1-Million, Long-Term Investment : Finances: The funds are tied up in a 30-year insured loan program that pays interest but has lost about half its value.

Torrance officials, already reeling from the disappearance of $6.2 million in a financial scandal, are concerned that another $1 million in city money is tied up in a long-term investment that may not be fully redeemable for 30 years.

The $1-million investment, in an insured loan program known as American Insured Mortgage-88, is currently worth about $450,000 to $500,000, according to industry analysts and others familiar with the holding.

Clearly, the city’s investment in AIM-88, a Delaware-chartered limited partnership, might not be at issue were it not for the fact that Torrance is among several cities stung by a scandal involving Steve Wymer, an Irvine investment adviser who has been accused of 30 counts of securities fraud. Wymer, to whom Torrance entrusted $6.2 million, has pleaded innocent to the federal charges.

Torrance Treasurer Thomas C. Rupert on Thursday defended his decision to invest in AIM-88, noting that it is an insured holding that has produced a higher interest return than could be realized in other financial endeavors such as bank savings accounts. The investment return, according to industry traders, was as high as 8.6% in 1990 and is now about 6%--still higher than the return rate on other investments.

Rupert, whose investment policies have been called into question by the council amid the Wymer scandal, also noted that the AIM-88 investment represents only a small portion of the city’s $68-million portfolio. As such, he said, it would be “ridiculous” for city officials to consider selling the AIM-88 investment at a loss.

“We could afford to keep it come hell or high water,” said Rupert, who is currently on sick leave from his job. “It is not something to get excited about.”

But other city officials expressed concern Thursday about the current market value of the investment as well as the possibility that its full value might not be realized until 2021--the year AIM-88’s limited partnership expires.

The city’s investment policy--following state law--prohibits investments longer than five years to prevent public funds from being locked up for extended periods. Rupert says the five-year limit was not in effect when the AIM-88 investment was made.

“I am very much concerned about it,” Mayor Katy Geissert said. “Tom has said that this is just a small portion of our investment portfolio. But my response is that it is $1 million.”

Torrance City Attorney Kenneth L. Nelson, whose office is working with an outside counsel on the Wymer investment, said that, as early as next week, the city will hire another law firm to review the $1-million AIM-88 holding. The review will take two to three weeks, he said.

“There is no question that if this (investment) is tied up for 20 or so years, that can’t be good” for the city, Nelson said. “The question I can’t answer is how bad it could be.”

The city’s auditors, Deloitte & Touche, also have been reviewing the structure of the $1-million AIM-88 holding, and a report is expected early next week, city Finance Director Mary Giordano said Thursday.

The AIM-88 partnership was one of four sponsored in the mid- to late-1980s by the New York investment firm Integrated Resources, which filed for bankruptcy in February, 1990. The partnerships are now managed by CRI Inc., a Maryland-based real estate investment fund.

Like the earlier partnerships, AIM-88 is an insured loan program for mortgages on multifamily housing developments like apartment buildings. In all, AIM-88 includes 16 insured mortgages with about $170 million in capital from both public and private investors. The capital includes $1 million from Torrance, which purchased 50,000 units of AIM-88 at the selling price of $20 per unit.

While the partnership provides an attractive return rate for investors, according to industry officials, it is structured in such a way that the full return on investments is not guaranteed until the partnership terminates. In the case of AIM-88, that termination date is Dec. 31, 2021, according to a recent quarterly report on the partnership filed with the Securities and Exchange Commission.

Because AIM-88 is not a publicly traded partnership, industry officials say, investors can sell their stake only through so-called secondary markets where companies either purchase or broker the investment for resale.

At present, according to two of those companies contacted Thursday, the recent purchase price for AIM-88 has been running $9-10 per unit.