<PAGE>
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
For the fiscal year ended December 31, 1995
---------------------
Commission file number 33-11096
---------------------
CRI HOTEL INCOME PARTNERS, L.P.
--------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
Delaware 52-1500621
- ------------------------------- -----------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
11200 Rockville Pike, Rockville, Maryland 20852
- ----------------------------------------- -----------------------------
(Address of principal executive officer) (Zip Code)
(Registrant's telephone number, including area code) (301) 468-9200
------------------
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
- --------------------------------- -----------------------------
N/A N/A
Securities registered pursuant to Section 12(g) of the Act.
Beneficial Assignee Certificates
- --------------------------------------------------------------------------
(Title of class)
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 twelve months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES [X] NO [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. (X)
The partnership interests of the Registrant are not traded in any market.
Therefore, the partnership interests had neither a market selling price nor an
average bid or asked price within the 60 days prior to the date of this filing.
<PAGE>
CRI HOTEL INCOME PARTNERS, L.P.
1995 ANNUAL REPORT ON FORM 10-K
TABLE OF CONTENTS
PART I
------
Page
----
Item 1. Business . . . . . . . . . . . . . . . . . . . . . I-1
Item 2. Properties . . . . . . . . . . . . . . . . . . . . I-1
Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . I-1
Item 4. Submission of Matters to a Vote
of Security Holders . . . . . . . . . . . . . . . I-2
PART II
-------
Item 5. Market for the Registrant's Partnership
Interests and Related Partnership Matters . . . . II-1
Item 6. Selected Financial Data . . . . . . . . . . . . . . II-1
Item 7. Management's Discussion and Analysis
of Financial Condition and Results
of Operations . . . . . . . . . . . . . . . . . . II-3
Item 8. Financial Statements and Supplementary Data . . . . II-12
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosures . . . . . II-12
PART III
--------
Item 10. Directors and Executive Officers
of the Registrant . . . . . . . . . . . . . . . . III-1
Item 11. Executive Compensation . . . . . . . . . . . . . . III-2
Item 12. Security Ownership of Certain Beneficial
Owners and Management . . . . . . . . . . . . . . III-2
Item 13. Certain Relationships and Related Transactions . . III-3
PART IV
-------
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K . . . . . . . . . . . . . . . IV-1
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . IV-4
Exhibit Index . . . . . . . . . . . . . . . . . . . . . . . . IV-25
<PAGE>
PART I
------
ITEM 1. BUSINESS
--------
Development and Description of Business
- ---------------------------------------
The information required by Part I, Item 1 is contained in (1) Part II,
Item 6, Selected Financial Data; (2) Part II, Item 7, Management's Discussion
and Analysis of Financial Condition and Results of Operations and (3) Part IV,
Item 14 in Notes 1, 2, 3 and 4 of the notes to financial statements, which are
incorporated herein by reference.
Employees
- ---------
The Company has no employees. Services are performed by the General Partner
and agents retained by it.
ITEM 2. PROPERTIES
----------
The following is a description of the hotels and the leasehold interests
owned by the Partnership as of December 31, 1995:
I-1
<PAGE>
PART I
------
<TABLE>
<CAPTION>
NAME AND LOCATION NO OF ROOMS FINANCED BY DATE ACQUIRED
- ------------------------ ----------- --------------------------- -------------
<S> <C> <C> <C>
Minneapolis Days Inn 130 Proceeds of public offering 11/01/87
Minneapolis, Minnesota and Zero Coupon Purchase
Money Note
Plymouth Days Inn 115 Proceeds of public offering 12/30/87
Plymouth, Minnesota and Zero Coupon Purchase
Money Note
Roseville Days Inn 114 Proceeds of public offering 03/01/88
Roseville, Minnesota and Zero Coupon Purchase
Money Note
Clearwater Days Inn 120 Proceeds of public offering 04/01/88
Clearwater, Florida and Zero Coupon Purchase
Money Note
Scottsdale Days Inn 165 Proceeds of public offering 07/01/88
Scottsdale, Arizona
(leasehold interest)
</TABLE>
On July 19, 1995, the Partnership sold the Days Inn Kankakee to American
Indus Hotels, Inc., an unaffiliated entity. See Part II, Item 7, Management's
Discussion and Analysis of Financial Condition and Results of Operations and the
notes to the financial statements for additional information pertaining to the
sale.
ITEM 3. LEGAL PROCEEDINGS
-----------------
There are no material pending 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 security holders during the fourth
quarter of 1995.
I-2
<PAGE>
PART II
-------
ITEM 5. MARKET FOR THE REGISTRANT'S PARTNERSHIP INTERESTS AND
-----------------------------------------------------
RELATED PARTNERSHIP MATTERS
---------------------------
(a), (b) and (c)
The information required in these sections is part of the Selected
Financial Data included in Part II, Item 6, which is incorporated herein by
reference.
II-1
<PAGE>
PART II
-------
ITEM 6. SELECTED FINANCIAL DATA
-----------------------
<TABLE>
<CAPTION>
For the years ended December 31,
1995 1994 1993 1992 1991
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Total revenue $ 10,301,679 $ 10,445,337 $ 9,363,791 $ 8,910,570 $ 8,306,336
Total operating costs and
expenses (1) 8,930,004 9,715,380 9,357,726 8,705,133 8,287,612
------------ ------------ ------------ ------------ ------------
Operating income 1,371,675 729,957 6,065 205,437 18,724
Total other (expenses) income,
net, before provision for
cash flow guarantee defaults(1) (609,095) (583,740) (1,137,497) (135,892) (159,613)
Provision for cash flow guarantee
defaults -- -- -- -- (236,735)
------------ ------------ ------------ ------------ ------------
Net income (loss) 762,580 146,217 (1,131,432) 69,545 (377,624)
============ ============ ============ ============ ============
Net income (loss) allocated to
BAC Holders $ 747,328 $ 143,293 $ (1,108,803) $ 68,154 $ (370,072)
============ ============ ============ ============ ============
Net income (loss) per weighted
average BAC outstanding $ 0.86 $ 0.16 $ (1.28) $ 0.08 $ (0.43)
============ ============ ============ ============ ============
Cash distribution per
weighted average BAC
outstanding $ 2.34 $ 1.95 $ 1.14 $ 1.58 $ 1.59
============ ============ ============ ============ ============
Weighted average BACs
outstanding 868,662 868,662 868,662 868,662 868,662
============ ============ ============ ============ ============
Total assets $ 15,358,173 $ 16,847,185 $ 17,805,910 $ 19,125,596 $ 19,898,738
============ ============ ============ ============ ============
Total long-term debt $ 6,604,974 $ 6,865,486 $ 6,276,689 $ 5,738,389 $ 5,246,255
============ ============ ============ ============ ============
</TABLE>
(1) Certain amounts in the 1993, 1992 and 1991 selected financial data have
been reclassified to conform to the 1995 presentation.
Market Data
- -----------
The Partnership's Beneficial Assignee Certificates (BACs) of limited
partnership interests were sold through a public offering managed by CRICO
Securities Corporation and certain participating broker-dealers. As of February
28, 1996, there were approximately 1,700 registered holders of BACs in the
Partnership. The Partnership BACs are not publicly traded on any registered
stock exchange but can be traded on an informal secondary market. The
Partnership has been informed by Equity Resource Fund XVIII (Fund XVIII), a
Massachusetts limited partnership, that Fund XVIII initiated a tender offer on
February 16, 1996, to purchase up to 30,000 BACs on a "first-come, first-buy"
basis, at a price of $8 per BAC. Fund XVIII has stated that it made the offer
for the express purpose of holding the BACs as a long-term investment. The
purchase offer of $8 per BAC was determined solely at the discretion of Fund
XVIII and does not necessarily represent the fair market value of each BAC. The
General Partner takes no position as to recommending or not recommending this
II-2
<PAGE>
PART II
-------
ITEM 6. SELECTED FINANCIAL DATA - Continued
-----------------------
offer to BAC Holders. The offer is expected to expire on March 16, 1996. As of
February 16, 1996, Fund XVIII and/or its affiliates held a 1.1% limited partner
interest in the Partnership. If Fund XVIII is successful in acquiring 30,000
BACs, it would hold an additional 3.5% limited partner interest in the
Partnership, bringing the total ownership percentage of Fund XVIII and/or its
affiliates to 4.6%. There is no assurance that Fund XVIII will acquire any or
all of the 30,000 BACs as a result of this solicitation to BAC Holders. As of
February 28, 1996, the Partnership was not aware of any BACs having been
purchased by Fund XVIII as a result of this solicitation. Other than the Fund
XVIII solicitation, it is not anticipated that there will be any other market
for resale of BACs. As a result, an investor may be unable to sell or otherwise
dispose of his or her interest in the Partnership.
Cash available for distribution, as defined in the Partnership Agreement,
is intended to be distributed on a quarterly basis within sixty days after the
end of each calendar quarter. The Partnership paid or accrued distributions of
$2,033,028 and $1,690,915 to BAC Holders during 1995 and 1994, respectively. See
Part II, Item 7, Management's Discussion and Analysis of Financial Condition and
Results of Operations, for additional information regarding the distributions
during the years ended December 31, 1995 and 1994 and for a discussion of
factors which may affect future distribution levels.
II-3
<PAGE>
PART II
-------
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS
-----------------------------------
General
-------
CRI Hotel Income Partners, L.P. (the Partnership) is a limited partnership
which was formed under the Delaware Revised Uniform Limited Partnership Act as
of September 23, 1986 and will continue until December 31, 2016, unless
dissolved earlier in accordance with the Partnership Agreement. The Partnership
was formed for the purpose of investing in hotels that were acquired from Days
Inns of America, Inc. (Days Inns). The Partnership's primary objective continues
to be cash flow growth and capital appreciation. However, the attainment of this
objective is principally dependent on the hotels' operations. The hotels are
operated by Buckhead Hotel Management Company, Inc. (Buckhead), formerly known
as Days Inns Management Company, Inc., under the nationally recognized franchise
name of Days Inns.
The Registration Statement of the Partnership was declared effective by the
Securities and Exchange Commission (SEC) on April 17, 1987, and subsequently, a
Prospectus of the same date was printed. The Partnership registered a total of
6,000,000 Beneficial Assignee Certificates (BACs), at $25 per BAC, with the SEC.
BACs represent beneficial assignments of limited partnership interests which
were held by CRICO Hotel Fund, Inc. (CRICO Hotel Fund). BACs were to be offered
in series, with Series A having a minimum of 196,000 BACs, or $4,900,000, and a
maximum amount of 2,344,000 BACs, or $58,600,000. The Partnership terminated
the Series A offering on March 31, 1988 with 868,662 BACs, or gross proceeds of
$21,716,550, and does not intend to offer another series.
The General Partner of the Partnership is CRICO Hotel Associates I, L.P.
(CRICO Associates), a Delaware limited partnership, the general partner of which
is C.R.I., Inc. (CRI), a Delaware corporation. The General Partner has complete
authority in the overall management and control of the Partnership. The Assignor
Limited Partner of the Partnership is CRICO Hotel Fund.
The number of BACs sold generated sufficient proceeds to purchase the
following hotels and leasehold interest:
Hotels Date of Purchase Amount of Purchase
- -------------------- ---------------- ------------------
Clearwater Days Inn 4/01/88 $3,750,000
Days Inn Kankakee (A) 11/01/87 $2,250,000
Minneapolis Days Inn 11/01/87 $4,800,000
Plymouth Days Inn 12/30/87 $4,000,000
Roseville Days Inn 3/01/88 $4,200,000
Leasehold interest Date of Purchase Amount of Purchase
- -------------------- ---------------- ------------------
Scottsdale Days Inn (B) 7/01/88 $2,000,000
(A) The Kankakee hotel was sold on July 19, 1995, as discussed below.
(B) Included in the purchase of the Scottsdale leasehold interest was $618,000
allocated to furniture, fixtures and equipment.
II-4
<PAGE>
PART II
-------
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS - Continued
-----------------------------------
Financial Condition/Liquidity
-----------------------------
The Partnership expects that the hotels in the aggregate will generate
sufficient cash flow to achieve a positive cash flow after operating expenses.
During 1996, certain hotels are expected to retain aggregate additional
replacement reserves of approximately $138,000 for the purpose of funding the
purchase of electronic door locks. The installation of these electronic door
locks is required by the American Automobile Association (AAA) as a condition of
the hotels being listed in AAA travel books. Other than the purchase of
electronic door locks and the periodic replacement of fixed assets, which are
also funded from the replacement reserves, there are no material commitments for
capital expenditures.
Due to the expiration of all remaining cash flow guarantees in 1993, the
Partnership's liquidity and future results of operations are primarily dependent
upon the performance of the underlying hotels. Hotel operations may be
materially affected by changing market conditions and by seasonality caused by
variables such as vacations, holidays and climate. The Partnership closely
monitors its cash flow position in an effort to ensure that sufficient cash is
available for operating requirements and distributions to BAC Holders. The
Partnership's net cash provided by operating activities for 1995 and 1994 was
adequate to support operating, investing and financing requirements and declared
distributions to BAC Holders and the General Partners. Cash and cash
equivalents decreased in 1994 principally due to deposits to the Partnership's
working capital reserves. The Partnership estimates that existing cash and cash
equivalents along with future cash flows from the hotels' operations, in the
aggregate, will be sufficient to pay operating expenses and short term
commitments, fund replacement reserves, and make distributions to BAC Holders.
Short-term liabilities of $1,506,245 increased slightly from 1994. This
resulted principally from an increase in declared distributions payable as a
result of improved operations in 1995. In addition, accrued expenses at four
hotels increased in 1995 as compared to 1994. These increases were offset by a
decrease in hotel trade payables at five hotels, as well as a decrease in
building lease payable resulting from the timing of lease payments made by one
hotel.
On October 20, 1994, a contract for the sale of the Kankakee hotel was
signed. The sale was completed on July 19, 1995. Accordingly, the assets of
this hotel were classified as an asset held for sale on the balance sheet as of
December 31, 1994. The sale price of the property of $1.2 million generated
sufficient proceeds to the Partnership to retire the purchase money note
obligation of the Partnership with respect to such property. The sale resulted
in a net financial statement loss and a net tax loss in 1995 of approximately
$7,000, and $607,000, respectively. Reserves for loss on the sale of the
Kankakee hotel of $400,000 and $200,000 were recognized for financial statement
purposes in 1994 and 1993, respectively. The sale of the Kankakee hotel is not
expected to have a negative effect on the future net income or cash flow of the
Partnership.
On February 21, 1995 and May 10, 1995, the Partnership advanced $35,000 and
$42,000, respectively, from the working capital reserves to the Kankakee hotel
to fund the hotel's short-term working capital needs. These advances were
repaid and the working capital reserves were replenished on July 19, 1995 from
II-5
<PAGE>
PART II
-------
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS - Continued
-----------------------------------
sale proceeds of the Kankakee hotel, as discussed above. Additionally, 1994
advances of $62,055 were repaid from sale proceeds and were included in cash
distributions from operating activities in the third quarter of 1995.
Working Capital Reserve
- -----------------------
The working capital reserve of $225,000 and $150,000 as of December 31,
1995 and 1994, respectively, represents funds held in reserve, initially
established in an amount of not less than 1% of Series A gross offering
proceeds, which are maintained as working capital for the Partnership. The
working capital reserves may be increased or reduced by the General Partner as
it deems appropriate. The General Partner increased the working capital
reserves by $75,000 and $100,000 during 1995 and 1994, respectively. Advances
to the Kankakee hotel from working capital reserves during 1995 and 1994 were
repaid to working capital reserves in 1995, as discussed above.
Statement of Financial Accounting Standards No. 107, "Disclosures About
Fair Value of Financial Instruments" (SFAS 107), requires the disclosure of fair
value information about financial instruments for which it is practicable to
estimate that value. The Partnership implemented SFAS 107 in 1995 and has
determined that the carrying amount of its working capital reserves approximate
fair value.
Guaranteed Return on Hotels
- ---------------------------
The Partnership entered into an agreement with Days Inns, Days Inns
Corporation and Buckhead (collectively the Guarantors) whereby the Guarantors
guaranteed a return on four hotels equal to 10.5% per year of the combined
purchase price of the hotels for the first three consecutive twelve-month
periods after the acquisition of each hotel. The guarantee period for the
Minneapolis, Kankakee and Plymouth Days Inns expired in 1990, and the Roseville
Days Inn guarantee expired in 1991. The Clearwater Days Inn 10.5% guarantee
(for five consecutive twelve-month periods) expired March 31, 1993. The
Scottsdale Days Inn 14% guarantee (for five consecutive twelve-month periods)
expired June 30, 1993.
During 1993, the remaining cash flow guarantees expired. The guarantee
periods were on a fiscal year basis as compared to the guarantee
payments which were paid quarterly on a calendar year basis. As a result of
this timing difference, at the expiration of the guarantee period for the
Clearwater and Scottsdale Days Inns, certain guarantee payments received by the
Partnership were returned to the Guarantors and classified as recoveries on the
statement of operations in 1993. Also included in recoveries on the statement
of operations for 1993 are adjustments arising from a change in accounting
estimate related to the timing differences between hotel operations and cash
flows recorded by the Partnership.
On September 27, 1991, the Guarantors filed in the Bankruptcy Court for the
District of Delaware a voluntary petition for reorganization (the Bankruptcy)
pursuant to the provisions of Chapter 11 of the Federal Bankruptcy Code. The
Partnership filed a proof of claim with the Bankruptcy Court. The Guarantors
filed their plan for reorganization (the Plan), and the Plan was confirmed by
II-6
<PAGE>
PART II
-------
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS - Continued
-----------------------------------
the Bankruptcy Court in 1992. As of December 31, 1993, $23,798 of the $145,549
remaining cash flow guarantee payment for the third quarter of 1991 and 2,345
shares of Buckhead America Corp. common stock had been received by the
Partnership. On February 10, 1994, the Partnership received $3,589 and 261
shares of Buckhead America Corp. common stock. In 1995, the Partnership
received $12,339 and 229 shares of Buckhead America Corp. common stock as a
distribution from its beneficial interest in a trust (the Trust) established to
receive proceeds from certain Buckhead litigation if such litigation is
successful. The total recovery of cash flow guarantee payments to the
Partnership aggregated $53,950 as of December 31, 1995, based on cash received
and the market value of the common stock at the date of receipt. The common
stock, which has a carrying value of $14,224 as of December 31, 1995, is
included in receivables, reserve for replacements and other assets on the
balance sheets. Based on the quoted market price of these instruments, the
Partnership estimates that the fair value of the common stock approximates
$18,000 as of December 31, 1995. The cash, shares of common stock and the
beneficial interest in the Trust constitute full settlement of the Partnership's
claim. There is no assurance that further distributions will be received as a
result of the Partnership's beneficial interest in the Trust.
Purchase Money Notes
- --------------------
In addition to the capital provided by the sale of BACs, the Partnership
received Zero Coupon Purchase Money Note (the Notes) financing from Days Inns
for the acquisition of the hotels. The Notes are nonrecourse notes
collateralized by the various properties. Each Note provides for a ten year
maturity from the date of acquisition with an accrual of interest at 9% per
annum, compounded on a monthly basis. Principal and accrued interest, which will
equal 47.4% of the original purchase price of the hotel, is due to BancBoston
Mortgage Corporation upon maturity of each Note. The Notes may be prepaid at the
initial note balance plus accrued interest at any time without premium or
penalty. The Kankakee note payable of $434,925 plus accrued interest of
$440,746 was retired on July 19, 1995 in connection with the sale of the hotel,
as discussed below. The Managing General Partner is currently investigating
refinancing options for the remaining notes. There is no assurance that a
refinancing or refinancings will be completed.
The balances of the Notes, including accrued interest, due upon maturity
are as follows:
II-7
<PAGE>
PART II
-------
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS - Continued
-----------------------------------
<TABLE>
<CAPTION>
Maturity
Date Balance
-------- -----------
<S> <C> <C>
Minneapolis Days Inn 10/31/97 $ 2,274,467
Plymouth Days Inn 12/29/97 1,867,275
Roseville Days Inn 2/28/98 1,990,159
Clearwater Days In 3/31/98 1,776,927
-----------
$ 7,908,828
===========
</TABLE>
SFAS 107 requires the disclosure of fair value information about financial
instruments for which it is practicable to estimate that value. The Partnership
has determined that it is not practicable to estimate the fair value of the
Notes due to the lack of an active market for this type of financial instrument,
as well as the excessive costs associated with an independent appraisal of the
Notes.
Distributions
- -------------
The following distributions were paid or accrued to BAC Holders of record
during 1995, 1994 and 1993:
II-8
<PAGE>
PART II
-------
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS - Continued
-----------------------------------
<TABLE>
<CAPTION>
1995 1994 1993
Distributions to Distributions to Distributions to
BAC Holders BAC Holders BAC Holders
------------------------ ------------------------ ------------------------
Quarter Ended Total Per BAC Total Per BAC Total Per BAC
- ---------------------- ----------- ------- ----------- ------- ----------- -------
<S> <C> <C> <C> <C> <C> <C>
March 31 $ 443,018 $ 0.51 $ 349,550 $ 0.41 $ 240,986 $ 0.28
June 30 469,077 0.54 443,968 0.51 227,415 0.26
September 30 582,362* 0.67* 454,379 0.52 284,661 0.33
December 31 538,571 0.62 443,018 0.51 235,320 0.27
----------- ------- ----------- ------- ----------- -------
Total $ 2,033,028 $ 2.34 $ 1,690,915 $ 1.95 $ 988,382 $ 1.14
=========== ======= =========== ======= =========== =======
</TABLE>
* Includes the distribution of net cash proceeds from the sale of the
Kankakee hotel of $52,478 (approximately $0.06 per BAC), which is net
of payment of outstanding Kankakee real estate taxes, retirement of
the related note payable and repayment of Partnership advances.
The General Partner expects the distribution for the quarter ended March
31, 1996 to range from approximately $0.52 to $0.60 per BAC. The General
Partner expects the distribution for the year ending December 31, 1996 to range
from approximately $2.15 to $2.35 per BAC. Due to the expiration of the
remaining cash flow guarantees during 1993, distributions are dependent on the
net cash flow produced from hotel operations, net of Partnership expenses. The
cash flow from certain hotels may be materially affected by changing market
conditions and by seasonality. Also, cash flow from certain hotels in 1996 is
expected to be reduced due to additions to replacement reserves in the first
quarter of 1996 to fund the purchase of electronic door locks, as previously
discussed.
Results of Operations
---------------------
1995 versus 1994
- ----------------
The Partnership's net income, which consists principally of revenues from
hotel operations, increased in 1995 from 1994 primarily due to an 8% decrease in
total hotel operating costs and expenses for 1995 as compared to 1994.
Operating costs and expenses decreased 4% as a result of the reserve for loss on
sale of the Kankakee hotel recognized in 1994, and decreased another 4% as a
result of decreased operations and the eventual sale of the Kankakee hotel.
Operating costs and expenses of the remaining hotels did not change
significantly in 1995 from 1994. Partially offsetting the increase in net
income was a .7% decrease in room revenue. Room revenue decreased 5% as a
result of the sale of the Kankakee hotel in the third quarter of 1995, as
discussed above. This decrease in room revenue was partially offset by a 4%
II-9
<PAGE>
PART II
-------
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS - Continued
-----------------------------------
increase in room revenue from the remaining hotels, primarily due to an increase
in average room rates at all hotels.
1994 versus 1993
- ----------------
The Partnership's net income increased in 1994 from 1993. Room revenue
increased approximately 11% in 1994 from 1993 primarily due to an increase in
average occupancy at five of the six hotels, as well as an increase in average
room rates at all six hotels. Contributing to the increase in net income was
the return in 1993 of previously received guarantee payments due to the timing
of guarantee payments, as discussed above. Also contributing to the increase in
net income was a decrease in depreciation and amortization expense in 1994 from
1993, principally due to certain assets becoming fully amortized in the first
quarter of 1994. An increase in telephone revenue relating to the increase in
hotel occupancies also contributed to the increase in net income. Partially
offsetting the increase in net income was an additional reserve for loss on the
anticipated sale of the Kankakee hotel recorded in 1994, as discussed above.
Also partially offsetting the increase in net income was an increase in room
expenses relating to the increases in hotel occupancy, as well as an increase in
management fees due to the payment of incentive management fees on two hotels in
accordance with the amended management agreements, as discussed below. The
hotel operations are further described in "Hotels' Results of Operations."
Hotels' Results of Operations
-----------------------------
The hotels' results of operations are affected by changing market
conditions and by seasonality caused by variables such as vacations, holidays
and climate. Based on the hotels' operating budgets, the following months should
provide the highest gross operating income and net cash flow:
Hotel Location Peak Months
------------------ ---------------------
Clearwater, FL October through April
Minneapolis, MN May through October
Plymouth, MN June through October
Roseville, MN May through October
Scottsdale, AZ January through May
The Statements of Operations include operating results for each of the
hotels as outlined below. Gross Operating Income represents total revenue less
departmental expenses. Net Cash Flow represents cash flow after operating
expenses and before replacement reserves and guarantee payments. The operating
results and average occupancy for the hotels for the years ended December 31,
1995, 1994 and 1993 are as follows:
II-10
<PAGE>
PART II
-------
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS - Continued
-----------------------------------
<TABLE>
<CAPTION>
Gross Operating Income
-----------------------------------------------------------------
Hotel Location 1995 1994 1993
- -------------- ------------ ------------ ------------
<S> <C> <C> <C>
Clearwater, FL $ 1,076,290 $ 1,023,121 $ 1,027,315
Minneapolis, MN 1,601,091 1,457,937 1,234,010
Plymouth, MN 856,083 789,847 630,584
Roseville, MN 920,388 887,543 760,186
Scottsdale, AZ 2,531,176 2,535,522 2,245,532
------------ ------------ ------------
Total from continuing operations 6,985,028 6,693,970 5,897,627
Kankakee, IL (1) 125,853 478,481 426,389
------------ ------------ ------------
Total $ 7,110,881 $ 7,172,451 $ 6,324,016
============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
Net Cash Flow (Deficit)
-----------------------------------------------------------------
Hotel Location 1995 1994 1993
- -------------- ------------ ------------ ------------
<S> <C> <C> <C>
Clearwater, FL $ 462,751 $ 408,849 $ 407,709
Minneapolis, MN 779,991 639,339 501,710
Plymouth, MN 278,097 265,122 161,953
Roseville, MN 326,079 257,059 167,630
Scottsdale, AZ 665,605 626,728 493,927
------------ ------------ ------------
Total from continuing operations 2,512,523 2,197,097 1,732,929
Kankakee, IL (1) (112,939) 33,212 (9,938)
------------ ------------ ------------
Total $ 2,399,584 $ 2,230,309 $ 1,722,991
============ ============ ============
</TABLE>
II-11
<PAGE>
PART II
-------
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS - Continued
-----------------------------------
<TABLE>
<CAPTION>
Average Occupancy
-----------------------------------------------------------------
Hotel Location 1995 1994 1993
- -------------- ------------ ------------ ------------
<S> <C> <C> <C>
Clearwater, FL 74% 75% 76%
Minneapolis, MN 88% 89% 84%
Plymouth, MN 79% 80% 64%
Roseville, MN 90% 89% 82%
Scottsdale, AZ 93% 95% 93%
------------ ------------ ------------
Total from continuing operations (2) 85% 86% 81%
Kankakee, IL (1) 30% 50% 48%
------------ ------------ ------------
Total (2) 81% 82% 76%
============ ============ ============
</TABLE>
(1) The 1995 operating results presented for the Kankakee hotel are through
July 19, 1995, the date of sale.
(2) The sub-totals and totals for average occupancy are based on a weighted
average taking into consideration the number of rooms at each location.
On January 1, 1993, the management agreements between the Partnership and
Buckhead, pertaining to Buckhead's management of each of the hotels, were
amended to extend the existing term of each agreement for an additional two to
five years and increase the base management fee from 2.5% to 3.5% of gross
revenue. The amendments for the Clearwater Days Inn and the Scottsdale Days Inn
included a modification to the method of calculating the incentive management
fee. Incentive management fees of $78,408, $64,328 and $22,830 were earned or
paid in 1995, 1994 and 1993, respectively. These agreements were amended as
part of the bankruptcy process. The Partnership accepted these modifications to
the management agreements in lieu of having the agreements terminated by
Buckhead in its Chapter 11 Bankruptcy case (filed in 1991). Had the Partnership
contracted another management agent, costs (which would have included franchise
fees currently not payable because of Buckhead's management of the hotels) were
expected to exceed the increase in management fees.
1995 versus 1994
- ----------------
Gross operating income and net cash flow for the Clearwater hotel increased
in 1995 from 1994 primarily due to an increase in average room rates, as well as
management's implementation of cost-control strategies. The hotel lost a major
client in the fourth quarter of 1995 when the client relocated its training
facilities out of the Clearwater area. This client accounted for approximately
11% of total room revenue for the Clearwater hotel in 1995. Gross operating
income and net cash flow for the Minneapolis hotel increased in 1995 from 1994
primarily due to an increase in room rates resulting from management's marketing
II-12
<PAGE>
PART II
-------
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS - Continued
-----------------------------------
programs. Gross operating income and net cash flow for the Plymouth hotel
increased in 1995 from 1994 primarily due to an increase in room rates resulting
from increased group volume. Gross operating income and net cash flow for the
Roseville hotel increased in 1995 from 1994 primarily due to an increase in
occupancy and average room rates resulting from increased room demand in the
Roseville area. Gross operating income for the Scottsdale hotel did not change
significantly in 1995 from 1994 as a decrease in occupancy was offset by an
increase in average room rates. Net cash flow for the Scottsdale hotel
increased in 1995 from 1994 as a result of increased cost control efforts in
1995. The Kankakee hotel was sold on July 19, 1995, as previously discussed.
From January 1, 1995 to the date of sale, gross operating income and net cash
flow for the Kankakee hotel decreased from the same period in 1994 primarily due
to the re-opening of a nearby competitor, as well as the opening of a new
competitor in 1994.
1994 versus 1993
- ----------------
Gross operating income and net cash flow for the Clearwater hotel did not
change significantly in 1994 from 1993 despite an overall decline in Florida
tourism. Gross operating income and net cash flow for the Minneapolis hotel
increased in 1994 from 1993 primarily due to an increase in occupancy and room
rates resulting from management's marketing programs and increased room demand
in the Minneapolis area. Gross operating income and net cash flow for the
Plymouth hotel increased in 1994 from 1993 primarily due to an increase in
occupancy and room rates resulting from increased room demand in the Plymouth
area. Gross operating income and net cash flow for the Roseville hotel
increased in 1994 from 1993 primarily due to an increase in occupancy resulting
from increased room demand in the Roseville area and an increase in room rates
resulting from management's strategy to displace lower rated volume business
with higher rated segments. Gross operating income and net cash flow for the
Scottsdale hotel increased in 1994 from 1993 primarily due to an increase in
room rates and occupancy resulting from increased room demand in the Scottsdale
area combined with new corporate accounts secured in 1994. Gross operating
income and net cash flow for the Kankakee hotel increased in 1994 from 1993
primarily due to an increase in occupancy and room rates resulting from the
temporary closing of a major competitor and a decrease in operating expenses
resulting from a reduction in hotel staff and other cost-saving measures.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
-------------------------------------------
The information required by this item is contained in Part IV.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
------------------------------------------------
ACCOUNTING AND FINANCIAL DISCLOSURES
------------------------------------
None.
II-13
<PAGE>
PART III
--------
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
--------------------------------------------------
(a), (b) and
(c) The Partnership has no directors, executive officers or
significant employees of its own.
(a), (b), (c)
and (e) The names, ages and business experience of the directors and
executive officers of C.R.I., Inc. (CRI), the Managing General
Partner of the Partnership, are as follows:
William B. Dockser, 59, has been the Chairman of the Board of CRI and a Director
since 1974. Prior to forming CRI, he served as President of Kaufman and Broad
Asset Management, Inc., an affiliate of Kaufman and Broad, Inc., which managed a
number of publicly held limited partnerships created to invest in low and
moderate income multifamily apartment complexes. For a period of 2-1/2 years
prior to joining Kaufman and Broad, he served in various positions at HUD,
culminating in the post of Deputy FHA Commissioner and Deputy Assistant
Secretary for Housing Production and Mortgage Credit, where he was responsible
for all federally insured housing production programs. Before coming to
Washington, Mr. Dockser was a practicing attorney in Boston and also was a
special Assistant Attorney General for the Commonwealth of Massachusetts. He
holds a Bachelor of Laws degree from Yale University Law School and a Bachelor
of Arts degree, cum laude, from Harvard University. He is also Chairman of the
Board of CRIIMI MAE Inc., CRIIMI, Inc. and CRI Liquidating REIT, Inc.
H. William Willoughby, 49, President, Secretary and a Director of CRI since
January 1990 and Senior Executive Vice President, Secretary and a Director of
CRI from 1974 to 1989. He is principally responsible for the financial
management of CRI and its associated partnerships. Prior to joining CRI in
1974, he was Vice President of Shelter Corporation of America and a number of
its subsidiaries dealing principally with real estate development and equity
financing. Before joining Shelter Corporation, he was a senior tax accountant
with Arthur Andersen & Company. He holds a Juris Doctorate degree, a Master of
Business Administration degree and a Bachelor of Science degree in Business
Administration from the University of South Dakota. He is also a Director and
executive officer of CRIIMI MAE Inc., CRIIMI, Inc. and CRI Liquidating REIT,
Inc.
Richard J. Palmer, 44, Senior Vice President-Chief Financial Officer. Prior to
joining CRI in 1983 as Director of Tax Policy, he was a Tax Manager at Grant
Thornton (formerly Alexander Grant & Company). He also served in the Tax and
Audit Departments of Peat, Marwick, Main and Company (formerly Peat, Marwick,
Mitchell and Company) prior to his seven years at Grant Thornton. He holds a
Bachelor of Business Administration degree from the Florida Atlantic University
and is also a Certified Public Accountant.
Ronald W. Thompson, 49, Group Executive Vice President-Hotel Asset Management.
Prior to joining CRI in 1985, he was employed at the Hyatt Organization where he
most recently served as the General Manager of the Hyatt Regency in Flint,
Michigan. During his nine year tenure with Hyatt, Mr. Thompson held senior
management positions with the Hyatt Regency in Dearborn, Michigan, the Hyatt in
Richmond, Virginia, the Hyatt in Winston-Salem, North Carolina and the Hyatt
Regency in Atlanta, Georgia. Before joining Hyatt, Mr. Thompson worked in
London, England for the English Tourist Board as well as holding management
positions in Europe, Australia, and New Zealand in the hotel industry. Mr.
Thompson received his education in England where he received a business degree
in Hotel Administration from Winston College.
III-1
<PAGE>
PART III
--------
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT - Continued
--------------------------------------------------
Susan R. Campbell, 37, Senior Vice President-CRI Realty Services. Prior to
joining CRI in March 1985, she was employed by the B. F. Saul Advisory Company.
She holds a Bachelor of Science degree in business from the University of
Maryland.
Melissa Cecil Lackey, 39, Senior Vice President and General Counsel. Prior to
joining CRI in 1990, she was associated with the firms of Zuckerman, Spaeder,
Goldstein, Taylor & Kolker in Washington, D.C. and Hirsch & Westheimer in
Houston, Texas. She holds a Juris Doctorate from the University of Virginia
School of Law and a Bachelor of Arts degree from the College of William & Mary.
(d) There is no family relationship between any of the foregoing directors
and executive officers.
(f) Involvement in certain legal proceedings.
None.
(g) Promoters and control persons.
Not applicable.
ITEM 11. EXECUTIVE COMPENSATION
----------------------
The information required by Item 11 is incorporated herein by
reference to Note 6 of the notes to the financial statements contained in
Part IV, Item 14.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
---------------------------------------------------
MANAGEMENT
----------
(a) Security ownership of certain beneficial owners.
No person or "group", as that term is used in Section 13(d)(3) of the
Securities Exchange Act of 1934, is known by the Partnership to be the
beneficial owner of more than 5% of the issued and outstanding BACs at
February 28, 1996.
(b) Security ownership of management.
The following table sets forth certain information concerning all BACs
beneficially owned, as of February 28, 1996, by each director and by all
directors and officers as a group of the managing general partner of the
Partnership's General Partner. The voting and investment powers for the
BACs listed are held solely by the named beneficial owner.
III-2
<PAGE>
PART III
--------
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
---------------------------------------------------
MANAGEMENT - Continued
----------
<TABLE>
<CAPTION>
Name of Amount and Nature % of total
Beneficial Owner of Beneficial Ownership Units issued
- ---------------- ----------------------- ------------
<S> <C> <C>
William B. Dockser None 0%
H. William Willoughby None 0%
All Directors and Officers
as a Group (6 persons) None 0%
</TABLE>
(c) Changes in control.
There exists no arrangement known to the Partnership, the operation of
which may, at a subsequent date, result in a change in control of the
Partnership. There is a provision in the Limited Partnership Agreement
which allows, under certain circumstances, the ability to change control.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
----------------------------------------------
(a) Transactions with management and others.
The Partnership has no directors or officers. In addition, the
Partnership has had no transactions with individual officers or directors
of the managing general partner of the General Partner of the Partnership
other than any indirect interest such officers and directors may have in
the amounts paid to the General Partner or its affiliates by virtue of
either their partnership interest in the managing general partner of the
General Partner or their stock ownership in CRI, respectively. Item 11 of
this report, which contains a discussion of the fees and other compensation
paid or accrued by the Partnership to the General Partner or its
affiliates, is incorporated herein by reference.
(b) Certain business relationships.
The Partnership's response to Item 13(a) is incorporated herein by
reference. In addition, the Partnership has no business relationship with
entities of which the managing general partner of the General Partner of
the Partnership are officers, directors or equity owners other than as set
forth in the Partnership's response to Item 13(a).
(c) Indebtedness of management.
None.
(d) Transactions with promoters.
Not applicable.
III-3
<PAGE>
PART IV
-------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
-------------------------------------------------------
FORM 8-K
--------
(a) 1. Financial Statements Page
-------------------- ----
Report of Independent Certified Public
Accountants IV-5
Balance Sheets as of December 31, 1995 and
1994 IV-6
Statements of Operations for the years
ended December 31, 1995, 1994 and 1993 IV-8
Statements of Changes in Partners' Capital
(Deficit) for the years ended December 31,
1995, 1994 and 1993 IV-9
Statements of Cash Flows for the years ended
December 31, 1995, 1994 and 1993 IV-10
Notes to Financial Statements IV-11
(a) 2. Financial Statement Schedules
-----------------------------
Report of Independent Certified Public Accountants
on Financial Statement Schedules IV-22
Schedule III - Real Estate and Accumulated
Depreciation IV-23
The remaining schedules are omitted because the required
information is included in the financial statements and notes
thereto or they are not applicable or not required.
(a) 3. Exhibits (listed according to the number assigned in the table in
Item 601 of Regulation S-K)
Exhibit 1 - Underwriting Agreement
a. Forms of Sales Agency Agreement, incorporated by reference to the
Registration Statement on Form S-1 filed on December 24, 1986.
b. Forms of Selected Dealer Agreements, incorporated by reference to
the Registration Statement on Form S-1 filed on December 24,
1986.
IV-1
<PAGE>
PART IV
-------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
-------------------------------------------------------
FORM 8-K - Continued
--------
Exhibit 3 - Articles of Incorporation and Bylaws
a. Certificate of Limited Partnership dated as of September 23, 1986
of CRI Hotel Income Partners, L.P. (formerly named CRI Hotel
Income Fund, L.P.), incorporated by reference to the Registration
Statement on Form S-1 filed on December 24, 1986.
1. Amendment dated as of March 12, 1987.
2. Amendment dated as of April 17, 1987.
Exhibit 10 - Material Contracts
a. Sale/Purchase Agreement, dated as of October 9, 1986, by and
between Days Inns of America, Inc. (DIA), Days Inns Corp. (DIC),
Days Inns Management Company, Inc. (DIMC), and CRI Hotel Income
Fund, L.P., and six modifications thereof, incorporated by
reference to the Registration Statement on Form S-1 filed on
December 24, 1986.
b. Form of Management Agreement by and between DIMC and CRI Hotel
Income Fund, L.P., incorporated by reference to the Registration
Statement on Form S-1 filed on December 24, 1986.
c. Forms of Cash Flow Guarantee Agreement (Interim and Permanent) by
and between DIC, DIA, DIMC and CRI Hotel Income Fund, L.P.,
incorporated by reference to the Registration Statement on Form
S-1 filed on December 24, 1986.
d. Form of Bond Escrow Agreement by and between DIA, CRI Hotel
Income Fund, L.P. and Escrow Agent, incorporated by reference to
the Registration Statement on Form S-1 filed on December 24,
1986.
e. Form of Escrow Agreement between Registrant and Escrow Agent,
incorporated by reference to the Registration Statement on Form
S-1 filed on December 24, 1986.
f. Form of Beneficial Assignee Certificate, incorporated by
reference to the Registration Statement on Form S-1 filed on
December 24, 1986.
g. Forms of Amendment to Hotel Management Agreement by and between
CRI Hotel Income Partners, L.P. and Buckhead Hotel Management
Company, Inc. incorporated by reference to the 1994 Annual Report
of Form 10-K filed on March 15, 1995.
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K
-------------------
No reports on Form 8-K were filed during the quarter ended December
31, 1995.
IV-2
<PAGE>
PART IV
-------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
-------------------------------------------------------
FORM 8-K - Continued
--------
(c) Exhibits
--------
This list of Exhibits required by Item 601 of Regulation S-K is
included in Item (a)(3) above.
(d) Financial Statement Schedules
-----------------------------
See Item a (2), above.
IV-3
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Registrant has duly caused this Annual Report to be signed
on its behalf by the undersigned, thereunto duly authorized.
CRI Hotel Income Partners, L.P.
By: CRICO Hotel Associates I, L.P.,
General Partner
By: C.R.I., Inc., General Partner
March 5, 1996 /s/ William B. Dockser
- -------------- ------------------------------------
DATE William B. Dockser, Director
Chairman of the Board,
Treasurer and Principal
Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:
March 5, 1996 /s/ H. William Willoughby
- -------------- ------------------------------------
DATE H. William Willoughby
Director, President and Secretary
March 5, 1996 /s/ Richard J. Palmer
- -------------- ------------------------------------
DATE Richard J. Palmer
Senior Vice President, Finance
Chief Financial Officer
Principal Financial and
Principal Accounting Officer
IV-4
<PAGE>
Report of Independent Certified Public Accountants
--------------------------------------------------
To the Partners
CRI Hotel Income Partners, L.P.
We have audited the accompanying balance sheets of CRI Hotel Income
Partners, L.P. as of December 31, 1995 and 1994, and the related statements of
operations, changes in partners' capital (deficit), and cash flows for the years
ended December 31, 1995, 1994 and 1993. These financial statements are the
responsibility of the Partnership's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of CRI Hotel Income Partners,
L.P. as of December 31, 1995 and 1994 and the results of its operations, changes
in partners' capital (deficit) and cash flows for the years ended December 31,
1995, 1994 and 1993, in conformity with generally accepted accounting
principles.
Grant Thornton LLP
Vienna, VA
February 28, 1996
IV-5
<PAGE>
CRI HOTEL INCOME PARTNERS, L.P.
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
December 31,
1995 1994
------------ ------------
<S> <C> <C>
Property and equipment - at cost
Land $ 1,574,490 $ 1,574,490
Buildings and site improvements 13,112,968 13,112,968
Furniture, fixtures and equipment 4,501,971 4,194,226
Leasehold improvements 1,382,000 1,382,000
------------ ------------
20,571,429 20,263,684
Less accumulated depreciation and
amortization (7,700,997) (6,891,531)
------------ ------------
12,870,432 13,372,153
Asset held for sale -- 1,135,556
Cash and cash equivalents 677,454 537,352
Working capital reserve 225,000 150,000
Receivables, reserve for replacements
and other assets 700,722 727,480
Acquisition fees, principally paid
to related parties, net of
accumulated amortization of
$269,926 and $235,923,
respectively 750,178 784,181
Property purchase costs, net of
accumulated amortization of
$47,880 and $41,804,
respectively 134,387 140,463
------------ ------------
Total assets $ 15,358,173 $ 16,847,185
============ ============
</TABLE>
The accompanying notes are an integral part of these
financial statements.
IV-6
<PAGE>
CRI HOTEL INCOME PARTNERS, L.P.
BALANCE SHEETS
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
<TABLE>
<CAPTION>
December 31,
1995 1994
------------ ------------
<S> <C> <C>
Distributions payable $ 549,562 $ 452,059
Accounts payable and accrued expenses 433,043 317,438
Hotel trade payables 305,473 390,541
Accrued management fees 107,804 95,797
Accrued salaries and wages 71,767 76,435
Building lease payable 38,596 91,608
------------ ------------
1,506,245 1,423,878
------------ ------------
Notes payable 6,604,974 6,865,486
------------ ------------
Total liabilities 8,111,219 8,289,364
------------ ------------
Commitments and contingencies
Partners' capital (deficit)
General Partner (243,841) (218,674)
Beneficial Assignee Certificates (BACs)
Series A; 868,662 BACs issued and
outstanding 7,490,795 8,776,495
------------ ------------
Total partners' capital 7,246,954 8,557,821
------------ ------------
Total liabilities and partners'
capital $ 15,358,173 $ 16,847,185
============ ============
</TABLE>
The accompanying notes are an integral part of these
financial statements.
IV-7
<PAGE>
CRI HOTEL INCOME PARTNERS, L.P.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the years ended December 31,
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
Revenue:
Rooms $ 9,428,934 $ 9,495,986 $ 8,562,814
Rental and other 395,961 407,655 402,346
Telephone 384,162 434,841 300,075
Food and beverage 58,629 68,417 76,919
Interest and other income 33,993 38,438 21,637
------------ ------------ ------------
Total revenue 10,301,679 10,445,337 9,363,791
------------ ------------ ------------
Operating costs and expenses:
Rooms 2,772,864 2,714,167 2,533,671
General and administrative 985,696 1,135,365 1,172,253
Marketing 930,861 1,017,959 995,890
Depreciation and amortization 865,363 980,876 1,291,768
Building lease expense 661,179 669,267 617,666
Property operations and maintenance 618,159 618,789 554,077
Property taxes 569,016 497,207 521,506
Energy 514,904 537,790 547,954
Management fees 436,241 448,321 303,596
Telephone 151,964 201,733 176,905
Rental and other 122,396 186,627 131,505
Base asset management fee, paid to related parties 99,956 105,000 105,000
Professional fees 92,472 92,433 87,267
Food and beverage 64,022 65,197 78,373
Miscellaneous 44,911 44,649 40,295
Reserve for loss on sale of hotel -- 400,000 200,000
------------ ------------ ------------
Total operating costs and expenses 8,930,004 9,715,380 9,357,726
------------ ------------ ------------
Operating income 1,371,675 729,957 6,065
------------ ------------ ------------
Other (expenses) income:
Cash flow guarantees/(recoveries) 13,369 5,057 (599,197)
Interest expense (615,159) (588,797) (538,300)
Loss of disposition of hotel (7,305) -- --
------------ ------------ ------------
Total other (expenses) income (609,095) (583,740) (1,137,497)
------------ ------------ ------------
Net income (loss) $ 762,580 $ 146,217 $ (1,131,432)
============ ============ ============
Net income (loss) allocated to General Partner (2%) $ 15,252 $ 2,924 $ (22,629)
============ ============ ============
Net income (loss) allocated to BAC Holders (98%) $ 747,328 $ 143,293 $ (1,108,803)
============ ============ ============
Net income (loss) per BAC based on
868,662 BACs outstanding $ 0.86 $ 0.16 $ (1.28)
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these
financial statements.
IV-8
<PAGE>
CRI HOTEL INCOME PARTNERS, L.P.
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
For the years ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
Beneficial
Assignee
Certificate General
Holders Partner Total
------------ ---------- ------------
<S> <C> <C> <C>
Partners' capital (deficit),
December 31, 1992 $ 12,421,302 $ (144,260) $ 12,277,042
Distributions of $1.14
per BAC (988,382) (20,200) (1,008,582)
Net loss (1,108,803) (22,629) (1,131,432)
------------ ---------- ------------
Partners' capital (deficit),
December 31, 1993 10,324,117 (187,089) 10,137,028
Distributions of $1.95
per BAC (1,690,915) (34,509) (1,725,424)
Net income 143,293 2,924 146,217
------------ ---------- ------------
Partners' capital (deficit),
December 31, 1994 8,776,495 (218,674) 8,557,821
Distributions of $2.34
per BAC (2,033,028) (40,419) (2,073,447)
Net income 747,328 15,252 762,580
------------ ---------- ------------
Partners' capital (deficit),
December 31, 1995 $ 7,490,795 $ (243,841) $ 7,246,954
============ ========== ============
</TABLE>
The accompanying notes are an integral part of these
financial statements.
IV-9
<PAGE>
CRI HOTEL INCOME PARTNERS, L.P.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the years ended December 31,
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 762,580 $ 146,217 $ (1,131,432)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation and amortization 865,363 980,876 1,291,768
Accrued interest on notes payable 615,159 588,797 538,300
Loss on disposition of hotel 7,305 -- --
Reserve for loss on sale of hotel -- 400,000 200,000
Changes in assets and liabilities:
Decrease (increase) in receivables and other
assets, net 29,818 (79,043) (46,859)
Increase (decrease) in accounts payable and
accrued expenses 115,605 (3,060) 409,364
(Decrease) increase in hotel trade payables (85,068) 117,416 (111,017)
(Decrease) increase in accrued salaries and wages (4,668) (58,242) 42,188
(Decrease) increase in building lease payable (53,012) (325,711) 48,836
Increase in accrued management fees 12,007 89,439 615
------------ ------------ ------------
Net cash provided by operating activities 2,265,089 1,856,689 1,241,763
------------ ------------ ------------
Cash flows from investing activities:
Purchase of property and equipment (307,745) (351,116) (271,722)
Net deposits to working capital reserves (75,000) (100,000) --
Net (deposits to) withdrawals from reserve
for replacements (18,878) 42,613 (7,429)
Net proceeds for disposition of hotel 1,128,251 -- --
------------ ------------ ------------
Net cash provided by (used in) investing activities 726,628 (408,503) (279,151)
------------ ------------ ------------
Cash flows from financing activities:
Distributions paid to BAC Holders and General Partner (1,975,944) (1,513,581) (1,116,540)
Retirement of note payable (875,671) -- --
------------ ------------ ------------
(2,851,615) (1,513,581) (1,116,540)
------------ ------------ ------------
Net increase (decrease) in cash and cash equivalents 140,102 (65,395) (153,928)
Cash and cash equivalents, beginning of year 537,352 602,747 756,675
------------ ------------ ------------
Cash and cash equivalents, end of year $ 677,454 $ 537,352 $ 602,747
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these
financial statements.
IV-10
<PAGE>
CRI HOTEL INCOME PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Organization and offering
-------------------------
CRI Hotel Income Partners, L.P. (the Partnership) is a limited
partnership which was formed under the Delaware Revised Uniform Limited
Partnership Act as of September 23, 1986 and will continue until December
31, 2016, unless dissolved earlier in accordance with the Partnership
Agreement. The Partnership was formed for the purpose of investing in
hotels that were acquired from Days Inns of America, Inc. (Days Inns). The
Partnership's primary objective continues to be cash flow growth and
capital appreciation. However, the attainment of this objective is
principally dependent on the hotels' operations. The hotels are operated by
Buckhead Hotel Management Company, Inc. (Buckhead), formerly known as Days
Inns Management Company, Inc., under the nationally recognized franchise
name of Days Inns.
The Registration Statement of the Partnership was declared effective
by the Securities and Exchange Commission (SEC) on April 17, 1987, and
subsequently, a Prospectus of the same date was printed. The Partnership
registered a total of 6,000,000 Beneficial Assignee Certificates (BACs), at
$25 per BAC, with the SEC. BACs represent beneficial assignments of limited
partnership interests which were held by CRICO Hotel Fund, Inc. (CRICO
Hotel Fund). BACs were to be offered in series, with Series A having a
minimum of 196,000 BACs, or $4,900,000, and a maximum amount of 2,344,000
BACs, or $58,600,000. The Partnership terminated the Series A offering on
March 31, 1988 with 868,662 BACs, or gross proceeds of $21,716,550, and
does not intend to offer another series.
The General Partner of the Partnership is CRICO Hotel Associates I,
L.P. (CRICO Associates), a Delaware limited partnership, the general
partner of which is C.R.I., Inc. (CRI), a Delaware corporation. The
General Partner has complete authority in the overall management and
control of the Partnership. The Assignor Limited Partner of the Partnership
is CRICO Hotel Fund.
Cumulative offering costs in the amount of $2,580,132, consisting of
legal and filing fees and certain travel, communication and other expenses,
were recorded as a reduction of partners' capital when incurred and are not
amortized for financial statement or income tax purposes.
b. Method of Accounting
--------------------
The financial statements of the Partnership have been prepared on the
accrual basis of accounting in accordance with generally accepted
accounting principles.
IV-11
<PAGE>
CRI HOTEL INCOME PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
c. Use of estimates
----------------
In preparing financial statements in conformity with generally
accepted accounting principles, the Partnership is required to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the
date of the financial statements and revenues and expenses during the
reporting period. Actual results could differ from those estimates.
d. Fair value of financial instruments
-----------------------------------
Statement of Financial Accounting Standards No. 107, "Disclosures
About Fair Value of Financial Instruments" (SFAS 107), requires the
disclosure of fair value information about financial instruments for which
it is practicable to estimate that value. The Partnership implemented SFAS
107 in 1995.
e. Cash and cash equivalents
-------------------------
Cash and cash equivalents consist of all time and demand deposits,
repurchase agreements and commercial paper with original maturities of
three months or less. The Partnership has determined that the carrying
amount of its cash and cash equivalents approximate fair value.
f. Working capital reserve
-----------------------
The working capital reserve of $225,000 and $150,000 as of December
31, 1995 and 1994, respectively, represents funds held in reserve,
initially established in an amount of not less than 1% of Series A gross
offering proceeds, which are maintained as working capital for the
Partnership. The working capital reserves may be increased or reduced by
the General Partner as it deems appropriate. The General Partner increased
the working capital reserves by $75,000 and $100,000 during 1995 and 1994,
respectively. Advances to the Kankakee hotel from working capital reserves
during 1995 and 1994 were repaid to working capital reserves in 1995, as
discussed below. The Partnership has determined that the carrying amount
of its working capital reserves approximate fair value.
g. Reserve for replacements
------------------------
Pursuant to the terms of the Management Agreement, the hotels retain
3% of gross hotel revenues for a reserve for replacement of fixed assets.
IV-12
<PAGE>
CRI HOTEL INCOME PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
h. Depreciation and amortization
-----------------------------
Depreciation is based on the estimated useful lives of depreciable
assets using the straight-line method. The estimated lives used in
determining depreciation are as follows:
Type of Asset Estimated Life
--------------------------------- -----------------
Building and site improvements 30 years
Furniture, fixtures and equipment 5-10 years
Leasehold improvements 5 years, 7 months
Amortization of property purchase costs and acquisition fees is
provided for over a 30-year period on a straight-line basis.
i. Income taxes
------------
For federal and state income tax purposes, each partner reports on his
or her personal income tax return his or her share of the Partnership's
income or loss as determined for tax purposes. Accordingly, no provision
has been made for income taxes in these financial statements.
j. Statements of Cash Flows
------------------------
The statements of cash flows are intended to reflect only cash receipt
and cash disbursement activity; therefore, the statements do not reflect
investing and financing activity affecting recognized assets or liabilities
which was not a result of cash receipts or payments. This non-cash activity
principally consists of distributions payable of $549,562 and $452,059 at
December 31, 1995 and 1994, respectively. Other than the pay-off of the
Kankakee purchase money note principal and accrued interest of $434,925 and
$440,746, respectively, in connection with the sale of the hotel in 1995,
as discussed below, the Partnership did not pay interest on long-term debt
during 1995, 1994 or 1993, pursuant to the terms of the debt agreements.
k. Assets held for sale
--------------------
On October 20, 1994, a contract for the sale of the Kankakee hotel was
signed. The sale was completed on July 19, 1995. Accordingly, the assets
of this hotel were classified as an asset held for sale on the balance
sheet as of December 31, 1994. Assets held for sale are not recorded in
excess of estimated net realizable value. Reserves for loss on the sale of
the Kankakee hotel of $400,000 and $200,000 were recognized for financial
statement purposes in 1994 and 1993, respectively, to reduce the asset to
its estimated net realizable basis.
IV-13
<PAGE>
CRI HOTEL INCOME PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
l. Implementation of accounting standards
--------------------------------------
In March 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 121 "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of". This statement addresses how entities should measure impairment on
long-lived assets. This statement is effective for fiscal years beginning
after December 15, 1995 and will be implemented by the Partnership in 1996.
The adoption of SFAS 121 is not expected to have a material effect on the
Partnership's financial statements.
m. Reclassifications
-----------------
Certain amounts in the 1993 financial statements have been
reclassified to conform to the 1995 presentation.
2. HOTELS AND LEASEHOLD INTEREST OWNED BY THE PARTNERSHIP
The number of BACs sold generated sufficient proceeds to purchase the
following hotels and leasehold interest:
Hotels Date of Purchase Amount of Purchase
- -------------------- ---------------- ------------------
Clearwater Days Inn 4/01/88 $3,750,000
Days Inn Kankakee (A) 11/01/87 $2,250,000
Minneapolis Days Inn 11/01/87 $4,800,000
Plymouth Days Inn 12/30/87 $4,000,000
Roseville Days Inn 3/01/88 $4,200,000
Leasehold interest Date of Purchase Amount of Purchase
- -------------------- ---------------- ------------------
Scottsdale Days Inn (B) 7/01/88 $2,000,000
(A) The Kankakee hotel was sold on July 19, 1995, as discussed below.
(B) Included in the purchase of the Scottsdale leasehold interest was $618,000
allocated to furniture, fixtures and equipment.
On October 20, 1994, a contract for the sale of the Kankakee hotel was
signed. The sale was completed on July 19, 1995. Accordingly, the assets of
this hotel were classified as an asset held for sale on the balance sheet as of
December 31, 1994. The sale price of the property of $1.2 million generated
sufficient proceeds to the Partnership to retire the purchase money note
obligation of the Partnership with respect to such property. The sale resulted
in a net financial statement loss and a net tax loss in 1995 of approximately
$7,000, and $607,000, respectively. Reserves for loss on the sale of the
Kankakee hotel of $400,000 and $200,000 were recognized for financial statement
purposes in 1994 and 1993, respectively. The sale of the Kankakee hotel is not
expected to have a negative effect on the future net income or cash flow of the
Partnership.
On February 21, 1995 and May 10, 1995, the Partnership advanced $35,000 and
$42,000, respectively, from the working capital reserves to the Kankakee hotel
to fund the hotel's short-term working capital needs. These advances were
IV-14
<PAGE>
CRI HOTEL INCOME PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS
2. HOTELS AND LEASEHOLD INTEREST OWNED BY THE PARTNERSHIP -
Continued
repaid and the working capital reserves were replenished on July 19, 1995 from
sale proceeds of the Kankakee hotel, as discussed above. Additionally, 1994
advances of $62,055 were repaid from sale proceeds and are included in cash
distributions from operating activities in the third quarter of 1995.
3. NOTES PAYABLE
In addition to the capital provided by the sale of BACs, the Partnership
received Zero Coupon Purchase Money Note (the Notes) financing from Days Inns
for the acquisition of the hotels. The Notes are nonrecourse notes
collateralized by the various properties. Each Note provides for a ten year
maturity from the date of acquisition with an accrual of interest at 9% per
annum, compounded on a monthly basis. Principal and accrued interest, which will
equal 47.4% of the original purchase price of the hotel, is due to BancBoston
Mortgage Corporation upon maturity of each Note. The Notes may be prepaid at the
initial note balance plus accrued interest at any time without premium or
penalty. The Kankakee note payable of $434,925 plus accrued interest of
$440,746 was retired on July 19, 1995 in connection with the sale of the hotel,
as discussed below. The Managing General Partner is currently investigating
refinancing options for the remaining notes. There is no assurance that a
refinancing or refinancings will be completed.
As of December 31, 1995 and 1994, the Notes, including accrued interest,
consist of the following:
IV-15
<PAGE>
CRI HOTEL INCOME PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS
3. NOTES PAYABLE - Continued
<TABLE>
<CAPTION>
December 31,
Note Maturity Date 1995 1994
---------------------- ------------- ----------- -----------
<S> <C> <C> <C>
Minneapolis Days Inn 10/31/97 $ 1,929,694 $ 1,764,199
Days Inn Kankakee (A) 10/31/97 -- 826,967
Plymouth Days Inn 12/29/97 1,584,225 1,448,359
Roseville Days Inn 2/28/98 1,638,764 1,498,221
Clearwater Days Inn 3/31/98 1,452,291 1,327,740
----------- -----------
$ 6,604,974 $ 6,865,486
=========== ===========
</TABLE>
(A) The Kankakee note payable of $434,925 plus accrued interest of
$440,746 was retired July 19, 1995 in connection with the sale of the
hotel, as discussed above.
Cumulative accrued interest on the Notes was $3,367,199 and $3,192,786 at
December 31, 1995 and 1994, respectively. Interest expense during 1995, 1994
and 1993 was $615,159, $588,797 and $538,300, respectively.
The balances of the Notes, including accrued interest, due upon maturity
are as follows:
<TABLE>
<CAPTION>
Maturity
Date Balance
-------- -----------
<S> <C> <C>
Minneapolis Days Inn 10/31/97 $ 2,274,467
Plymouth Days Inn 12/29/97 1,867,275
Roseville Days Inn 2/28/98 1,990,159
Clearwater Days Inn 3/31/98 1,776,927
-----------
$ 7,908,828
===========
</TABLE>
SFAS 107 requires the disclosure of fair value information about financial
instruments for which it is practicable to estimate that value. The Partnership
has determined that it is not practicable to estimate the fair value of the
Notes due to the lack of an active market for this type of financial instrument,
as well as the excessive costs associated with an independent appraisal of the
Notes.
IV-16
<PAGE>
CRI HOTEL INCOME PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS
4. COMMITMENTS
a. Cash flow guarantee
-------------------
The Partnership entered into an agreement with Days Inns of America,
Inc., Days Inns Corporation and Buckhead (collectively the Guarantors)
whereby the Guarantors guaranteed a return on four hotels equal to 10.5%
per year of the combined purchase price of the hotels for the first three
consecutive twelve-month periods after the acquisition of each hotel. The
guarantee period for the Minneapolis, Kankakee and Plymouth Days Inns
expired in 1990, and the Roseville Days Inn guarantee expired in 1991. The
Clearwater Days Inn 10.5% guarantee (for five consecutive twelve-month
periods) expired March 31, 1993. The Scottsdale Days Inn 14% guarantee
(for five consecutive twelve-month periods) expired June 30, 1993.
During 1993, the remaining cash flow guarantees expired. The
guarantee periods were on a fiscal year basis as compared to the guarantee
payments which were paid quarterly on a calendar year basis. As a result
of this timing difference, at the expiration of the guarantee period for
the Clearwater and Scottsdale Days Inns, certain guarantee payments
received by the Partnership were returned to the Guarantors and classified
as recoveries on the statement of operations in 1993. Also included in
recoveries on the statement of operations for 1993 are adjustments arising
from a change in accounting estimate related to the timing differences
between hotel operations and cash flows recorded by the Partnership.
On September 27, 1991, the Guarantors filed in the Bankruptcy Court
for the District of Delaware a voluntary petition for reorganization (the
Bankruptcy) pursuant to the provisions of Chapter 11 of the Federal
Bankruptcy Code. The Partnership filed a proof of claim with the
Bankruptcy Court. The Guarantors filed their plan for reorganization (the
Plan), and the Plan was confirmed by the Bankruptcy Court in 1992. As of
December 31, 1993, $23,798 of the $145,549 remaining cash flow guarantee
payment for the third quarter of 1991 and 2,345 shares of Buckhead America
Corp. common stock had been received by the Partnership. On February 10,
1994, the Partnership received $3,589 and 261 shares of Buckhead America
Corp. common stock. In 1995, the Partnership received $12,339 and 229
shares of Buckhead America Corp. common stock as a distribution from its
beneficial interest in a trust (the Trust) established to receive proceeds
from certain Buckhead litigation if such litigation is successful. The
total recovery of cash flow guarantee payments to the Partnership
aggregated $53,950 as of December 31, 1995, based on cash received and the
market value of the common stock at the date of receipt. The common stock,
which has a carrying value of $14,224 as of December 31, 1995, is included
in receivables, reserve for replacements and other assets on the balance
sheets. Based on the quoted market price of these instruments, the
Partnership estimates that the fair value of the common stock approximates
$18,000 as of December 31, 1995. The cash, shares of common stock and the
beneficial interest in the Trust constitute full settlement of the
Partnership's claim. There is no assurance that further distributions will
be received as a result of the Partnership's beneficial interest in the
Trust.
b. Hotel operations management agreements
--------------------------------------
The Partnership entered into management agreements with Buckhead in
connection with operations of the hotels. Each agreement was for an initial
IV-17
<PAGE>
CRI HOTEL INCOME PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS
4. COMMITMENTS - Continued
term of ten years, with a five-year renewal option. The agreements called
for a base management fee of 2.5% of gross revenue from operations, a
marketing fee of 1.5% of net room revenues, and a reservation fee of 2.3%
of gross revenues from rental of hotel guest rooms. The agreements also
called for incentive management fees generally equal to 25% of net cash
flow available after payment of a preferred cash flow return to the
Partnership equal to 11% of the aggregate purchase price for Series A
hotels owned by the Partnership.
On January 1, 1993, the management agreements between the Partnership
and Buckhead, pertaining to Buckhead's management of each of the hotels,
were amended to extend the existing term of each agreement for an
additional two to five years and increase the base management fee from 2.5%
to 3.5% of gross revenue. The amendments for the Clearwater Days Inn and
the Scottsdale Days Inn included a modification to the method of
calculating the incentive management fee. Incentive management fees of
$78,408, $64,328 and $22,830 were earned or paid in 1995, 1994 and 1993,
respectively. These agreements were amended as part of the bankruptcy
process. The Partnership accepted these modifications to the management
agreements in lieu of having the agreements terminated by Buckhead in the
Bankruptcy. Had the Partnership contracted another management agent, costs
(which would have included franchise fees currently not payable because of
Buckhead's management of the hotels) were expected to exceed the increase
in management fees.
c. Operating lease agreements
--------------------------
The Partnership assumed an existing lease agreement from Days Inns in
connection with the acquisition of the leasehold interest in the Scottsdale
Days Inn. The assumption transfers the rights to operate the property on
the lease's existing terms over the remaining life of the lease. Effective
January 1, 1994, the lease was renewed for an additional 5-year period.
The lease may be renewed at the option of the lessee for two additional
5-year periods. Annual Lease payments are equal to the greater of $140,450
or 22% of total room revenue and 2.5% of food and beverage revenue.
Minimum lease payments of $11,704 are payable monthly with a quarterly
analysis of the actual amount due.
The Partnership also assumed various leases entered into by Days Inns
of America for equipment used by the operating hotels. These leases expire
through 1997. Minimum lease payments under the leases, including the two
renewal periods for the Scottsdale facility lease, are as follows:
1996 $ 176,793
1997 170,344
1998 168,626
1999 168,626
2000 158,568
Thereafter 1,182,419
----------
$2,025,376
==========
IV-18
<PAGE>
CRI HOTEL INCOME PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS
4. COMMITMENTS - Continued
Total rental expense under the leases was $735,084, $710,848 and
$753,336 for the years ended December 31, 1995, 1994 and 1993,
respectively.
d. Ground lease agreement
----------------------
The Partnership entered into a ground lease with Vicorp Restaurants,
Inc. (Vicorp) effective January 1991, pursuant to which the Partnership is
leasing a portion of the Minneapolis Days Inn property to Vicorp, which is
operating a restaurant (Baker's Square) on the property. Gross rental
income pursuant to the lease agreement, which is included in Rental and
Other Revenue on the accompanying statements of operations, was $48,770,
$47,121 and $45,527 during 1995, 1994 and 1993, respectively.
5. PARTNERS' CAPITAL
The Partnership's Series A profits and losses and distributions are
allocated 98% to the BAC Holders and 2% to the General Partner. Upon reaching a
non-cumulative, annual preferred cash flow return of 12%, the Partnership's
Series A profits and losses and distributions will be allocated 85% to the BAC
Holders and 15% to the General Partner. To date, the annual preferred cash flow
return has not been achieved. Cash available for distribution, as defined in the
Partnership Agreement, is intended to be distributed on a quarterly basis within
sixty days after the end of each calendar quarter.
The following distributions were paid or accrued to BAC Holders of record
during 1995, 1994 and 1993:
IV-19
<PAGE>
CRI HOTEL INCOME PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS
5. PARTNERS' CAPITAL - Continued
<TABLE>
<CAPTION>
1995 1994 1993
Distributions to Distributions to Distributions to
BAC Holders BAC Holders BAC Holders
------------------------ ------------------------ ------------------------
Quarter Ended Total Per BAC Total Per BAC Total Per BAC
- ---------------------- ----------- ------- ----------- ------- ----------- -------
<S> <C> <C> <C> <C> <C> <C>
March 31 $ 443,018 $ 0.51 $ 349,550 $ 0.41 $ 240,986 $ 0.28
June 30 469,077 0.54 443,968 0.51 227,415 0.26
September 30 582,362* 0.67* 454,379 0.52 284,661 0.33
December 31 538,571 0.62 443,018 0.51 235,320 0.27
----------- ------- ----------- ------- ----------- -------
Total $ 2,033,028 $ 2.34 $ 1,690,915 $ 1.95 $ 988,382 $ 1.14
=========== ======= =========== ======= =========== =======
</TABLE>
* Includes the distribution of net cash proceeds from the sale of the
Kankakee hotel of $52,478 (approximately $0.06 per BAC), which is net
of payment of outstanding Kankakee real estate taxes, retirement of
the related note payable and repayment of Partnership advances.
The General Partner expects the distribution for the quarter ended March
31, 1996 to range from approximately $0.52 to $0.60 per BAC. The General
Partner expects the distribution for the year ending December 31, 1996 to range
from approximately $2.15 to $2.35 per BAC. Due to the expiration of the
remaining cash flow guarantees during 1993, distributions are dependent on the
net cash flow produced from hotel operations, net of Partnership expenses. The
cash flow from certain hotels may be materially affected by changing market
conditions and by seasonality. Also, cash flow from certain hotels in 1996 is
expected to be reduced due to additions to replacement reserves during the first
quarter of 1996 in the aggregate amount of approximately $138,000. Replacement
reserves from these hotels are expected to be used for the purpose of installing
electronic door locks in all the rooms. The installation of these door locks,
which is expected to be completed in 1996, is required by the American
Automobile Association (AAA) as a condition of the hotels being listed in AAA
travel books.
6. RELATED-PARTY TRANSACTIONS
In accordance with the Partnership Agreement, the Partnership paid the
General Partner a fee for services in connection with the review, selection,
evaluation, negotiation and acquisition of the hotels. The fee amounted to
$1,142,516, which was equal to 4.5% of Total Capitalization (Gross Offering
Proceeds plus all receipts of the Partnership arising from mortgage loans). The
acquisition fees were capitalized and are being amortized over a thirty-year
period using the straight-line method. Acquisition fees and accumulated
amortization of acquisition fees of $122,412 and $29,460, respectively, relating
to the Kankakee hotel were written off in connection with the sale of the hotel
in 1995, as discussed above.
The Partnership reimbursed the General Partner or its affiliates for costs
incurred on behalf of the Partnership for real estate appraisals and market
studies, engineering studies, legal consultation and accounting fees, as well as
IV-20
<PAGE>
CRI HOTEL INCOME PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS
6. RELATED-PARTY TRANSACTIONS - Continued
travel and communication expenses related to the acquisition of the hotels.
These costs, amounting to $233,474, have been capitalized as property purchase
costs and are being amortized over a thirty-year period using the straight-line
method. Property purchase costs and accumulated amortization of property
purchase costs of $51,207 and $12,160, respectively, relating to the Kankakee
hotel were written off in connection with the sale of the hotel in 1995, as
discussed above.
The Partnership, in accordance with the terms of the Partnership Agreement,
is obligated to reimburse the General Partner or its affiliates for their direct
expenses in managing the Partnership. The Partnership paid or accrued $52,226,
$62,973 and $40,383, for the years ended December 31, 1995, 1994 and 1993,
respectively, to the General Partner or its affiliates as direct reimbursement
of expenses incurred on behalf of the Partnership. Such reimbursements are
included in general and administrative expense on the statements of operations.
The annual amount of the base asset management fee earned by the General
Partner and/or its affiliates is equal to 0.50% of the weighted average balance
of the adjusted partnership investment during the period, as defined in the
Partnership Agreement. During 1995, the adjusted partnership investment
decreased from $21,000,000 to $18,750,000 as a result of the sale of the
Kankakee hotel on July 19, 1995, as discussed above. Based on the weighted
average balance of the adjusted partnership investment during 1995, the
Partnership paid or accrued a base asset management fee of $99,956 for the year
ended December 31, 1995. During each of the years ended December 31, 1994 and
1993, the Partnership paid or accrued a base asset management fee of $105,000.
7. RECONCILIATION OF NET INCOME (LOSS) PER FINANCIAL STATEMENTS TO NET INCOME
(LOSS) PER TAX RETURN
The following is a reconciliation of net income (loss) per the financial
statements to net income (loss) per the tax return for the years ended December
31, 1995, 1994 and 1993:
IV-21
<PAGE>
CRI HOTEL INCOME PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS
7. RECONCILIATION OF NET INCOME (LOSS) PER FINANCIAL STATEMENTS TO NET INCOME
(LOSS) PER TAX RETURN - Continued
<TABLE>
<CAPTION>
For the years ended December 31,
-------------------------------------------------
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
Net income (loss) per the financial statements $ 762,580 $ 146,217 $ (1,131,432)
Adjustments for tax purposes:
Provision for cash flow guarantee defaults
not allowed for tax purposes until the
expiration of guarantee periods -- -- (236,735)
Book/tax difference on sale of property-amounts
reserved on books in prior years (600,000) -- --
Provision for decline on asset market value
not allowed for tax purposes -- 400,000 200,000
Book/tax difference on sale of property- real
estate taxes expensed in prior years (33,860) -- --
Book/tax difference on sale of property-accumulated
depreciation and amortization 48,089 -- --
Depreciation of buildings and site improvements
computed on 40 years for tax purposes as compared
to 30 years for financial statement purposes 10,548 (22,633) 118,869
Book/tax difference on timing of deductions -- (259,164) 259,164
------------ ------------ ------------
Net income (loss) per the tax return $ 187,357 $ 264,420 $ (790,134)
============ ============ ============
</TABLE>
IV-22
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
--------------------------------------------------
ON FINANCIAL STATEMENT SCHEDULES
--------------------------------
Partners
CRI Hotel Income Partners, L.P.
We have also audited Schedule III of CRI Hotel Income Partners, L.P. as of
December 31, 1995. In our opinion, this schedule presents fairly, in all
material respects, the information required to be set forth therein.
Grant Thornton, LLP
Vienna, VA
February 28, 1996
IV-23
<PAGE>
CRI HOTEL INCOME PARTNERS, L.P.
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1995
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D
- -------------------- ------- ------------------------------- -------------------------------
Costs capitalized
subsequent
Initial Cost to acquisition
------------------------------- -------------------------------
Building
Description Encum- and Carrying
of Hotels (D) brances Land improvements Improvements cost
- -------------------- ------- ----------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C>
Clearwater Days Inn (A) $ 382,500 $ 2,981,250 $ -- $ --
Minneapolis Days Inn (A) 444,480 3,731,520 -- --
Plymouth Days Inn (A) 272,727 3,204,546 -- --
Roseville Days Inn (A) 474,783 3,195,652 -- --
----------- ------------ ---- ----
Subtotal 1,574,490 13,112,968 -- --
Leasehold improvements
- ----------------------
Scottsdale Days Inn -- 1,382,000 -- --
----------- ------------ ---- ----
Total $ 1,574,490 $ 14,494,968 $ -- $ --
=========== ============ ==== ====
</TABLE>
IV-24
<PAGE>
CRI HOTEL INCOME PARTNERS, L.P.
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1995
<TABLE>
<CAPTION>
COL. A COL. E COL. F COL. G COL. H COL. I
- -------------------- ------------------------------------------- ------------ ------- ------- --------------
Gross amount at which
carried at close of period Life upon
------------------------------------------- Accumulated Date which
Building depreciation of depreciation/
Description and and Const- Date amortization
Hotels Land improvements Total (C) amortization ruction acquired is computed
- -------------------- ----------- ------------ ------------- ------------ ------- -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Clearwater Days Inn $ 382,500 $ 2,981,250 $ 3,363,750 $ 770,156 1987 4/88 30 years
Minneapolis Days Inn 444,480 3,731,520 4,176,000 1,015,859 1983 11/87 30 years
Plymouth Days Inn 272,727 3,204,546 3,477,273 854,838 (B) 12/87 30 years
Roseville Days Inn 474,783 3,195,652 3,670,435 834,420 1973 3/88 30 years
----------- ----------- ------------ ------------
Subtotal 1,574,490 13,112,968 14,687,458 3,475,273
Leasehold improvements
- ----------------------
5 years
Scottsdale Days Inn -- 1,382,000 1,382,000 1,382,000 1969 7/88 7 months
----------- ----------- ------------ ------------
Total $ 1,574,490 $14,494,968 $ 16,069,458 $ 4,857,273
=========== =========== ============ ============
</TABLE>
IV-25
<PAGE>
CRI HOTEL INCOME PARTNERS, L.P.
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION - Continued
DECEMBER 31, 1995
(A) Secured by Zero Coupon Purchase Money Notes.
(B) Originally constructed in 1970, closed for full renovation in 1986, and
reopened in 1987.
(C) The aggregate cost of land for federal income tax purposes is $1,574,490
and the aggregate cost of buildings and site improvements for federal
income tax purposes is $14,494,968. The total of the above mentioned items
is $16,069,458.
(D) Excludes the Days Inn Kankakee hotel, which was sold on July 19, 1995.
IV-26
<PAGE>
EXHIBIT INDEX
-------------
Exhibit Method of Filing
- ------- -----------------------------
27 Financial Data Schedule Filed herewith electronically
IV-27
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
ANNUAL REPORT ON FORM 10-K AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH ANNUAL REPORT ON FORM 10-K.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 677,454
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 20,571,429
<DEPRECIATION> 7,700,997
<TOTAL-ASSETS> 15,358,173
<CURRENT-LIABILITIES> 1,506,245
<BONDS> 6,604,974
0
0
<COMMON> 0
<OTHER-SE> 7,246,954
<TOTAL-LIABILITY-AND-EQUITY> 15,358,173
<SALES> 0
<TOTAL-REVENUES> 10,315,048
<CGS> 0
<TOTAL-COSTS> 8,930,004
<OTHER-EXPENSES> 7,305
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 615,159
<INCOME-PRETAX> 762,580
<INCOME-TAX> 0
<INCOME-CONTINUING> 762,580
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 762,580
<EPS-PRIMARY> 0.86
<EPS-DILUTED> 0.86
</TABLE>
