<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, 1997
---------------------
Commission file number 33-11096
---------------------
CRI HOTEL INCOME PARTNERS, L.P.
--------------------------------------------------------------------------
(Exact name of registrant as specified in its 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 officers) (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.
1997 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-2
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-24
<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
- ---------
CRI Hotel Income Partners, L.P. (the Partnership) has no employees.
Services are performed by C.R.I., Inc., the general partner of the General
Partner, and agents retained by it.
I-1
<PAGE>
PART I
------
ITEM 2. PROPERTIES
----------
A description of the hotels and the leasehold interests owned by the
Partnership as of December 31, 1997, follows.
<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.
As indicated above, the Partnership financed the acquisition of the hotels
it owns by proceeds of a public offering and the issuance of Zero Coupon
Purchase Money Notes (the Notes). On December 19, 1997, the Partnership
refinanced the Notes with Citicorp Real Estate, Inc. 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 refinancing.
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 1997.
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,
--------------------------------------------------------------------------------
1997 1996 1995 1994 1993
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenue (1) $ 10,122,629 $ 10,087,730 $ 10,218,916 $ 10,359,778 $ 9,342,154
Departmental expenses (1) (3,077,425) (3,060,227) (3,108,035) (3,187,327) (3,018,138)
------------ ------------ ------------ ------------ ------------
Gross operating income 7,045,204 7,027,503 7,110,881 7,172,451 6,324,016
Unallocated operating income
(expenses) (1) (5,849,383) (5,630,877) (5,739,206) (6,442,494) (6,317,951)
------------ ------------ ------------ ------------ ------------
Operating income 1,195,821 1,396,626 1,371,675 729,957 6,065
Other income (expenses) (674,613) (619,593) (609,095) (583,740) (1,137,497)
------------ ------------ ------------ ------------ ------------
Net income (loss) 521,208 777,033 762,580 146,217 (1,131,432)
============ ============ ============ ============ ============
Net income (loss) allocated to
BAC Holders $ 510,784 $ 761,492 $ 747,328 $ 143,293 $ (1,108,803)
============ ============ ============ ============ ============
Net income (loss) per weighted
average BAC outstanding $ 0.59 $ 0.88 $ 0.86 $ 0.16 $ (1.28)
============ ============ ============ ============ ============
Cash distribution per
weighted average BAC
outstanding $ 1.54 $ 2.05 $ 2.34 $ 1.95 $ 1.14
============ ============ ============ ============ ============
Weighted average BACs
outstanding 868,662 868,662 868,662 868,662 868,662
============ ============ ============ ============ ============
Total assets $ 15,529,997 $ 14,702,754 $ 15,358,173 $ 16,847,185 $ 17,805,910
============ ============ ============ ============ ============
Total long-term debt $ 8,778,243 $ 3,381,018 $ 6,604,974 $ 6,865,486 $ 6,276,689
============ ============ ============ ============ ============
</TABLE>
(1) Certain amounts in the 1995, 1994 and 1993 selected financial data have
been reclassified to conform to the 1997 and 1996 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
27, 1998, there were approximately 1,550 registered holders of BACs in the
Partnership. The Partnership's BACs are not publicly traded on any registered
stock exchange but can be traded on an informal secondary market. It is not
anticipated that there will be any other active 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.
II-2
<PAGE>
PART II
-------
ITEM 6. SELECTED FINANCIAL DATA - Continued
-----------------------
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
$1,337,739, $1,780,755 and $2,033,028 to BAC Holders during 1997, 1996 and 1995,
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, 1997, 1996 and
1995 and for a discussion of factors which will 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 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
authority in the overall management and control of the Partnership. The
Assignor Limited Partner of the Partnership is CRICO Hotel Fund, Inc. (CRICO
Hotel Fund).
The Registration Statement of the Partnership was declared effective by the
Securities and Exchange Commission (SEC) on April 17, 1987, and 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 partner interests which are held by
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 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 number of BACs sold, along with debt instruments issued by the
Partnership, as discussed below, generated sufficient proceeds to purchase five
hotels and one leasehold interest, as follows.
II-4
<PAGE>
PART II
-------
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS - Continued
-----------------------------------
<TABLE>
<CAPTION>
Hotels Date of Purchase Amount of Purchase
- -------------------- ---------------- ------------------
<S> <C> <C>
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
</TABLE>
(A) The Kankakee hotel was sold on July 19, 1995.
(B) Included in the purchase of the Scottsdale leasehold interest was $618,000
allocated to furniture, fixtures and equipment.
In addition to the capital provided by the sale of BACs, the Partnership
issued Zero Coupon Notes (the Notes) to finance its acquisition of the hotels.
The Partnership's original prospectus indicated that the hotels would need to be
sold or the debt would need to be refinanced at the time the Notes mature. The
prospectus also indicated that the Partnership intended to sell the hotels
(after a period of time not likely to be longer than twelve years after the date
of acquisition) if financial conditions in the future make such sales desirable.
During 1997, the General Partner solicited and reviewed offers for both sale and
refinancing opportunities for the hotels. The solicitation, however, did not
result in a purchase offer which would provide an adequate return to the BAC
holders. As a result, the General Partner chose to refinance the loans on the
four hotels. Proceeds of the refinancing were adequate to pay the maturing
Notes and to set aside reserves for capital improvements, which may enhance the
potential for a higher sale price in the future. The General Partner is not
currently soliciting sale offers due to the conditions discussed above.
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.
In addition to the periodic replacement of fixed assets, which are funded from
the replacement reserves, the General Partner has determined that significant
capital improvements are needed to enhance the marketability of the hotels.
During 1997, the Partnership funded $361,584 from the working capital reserve to
the hotels to address such capital improvements. Additionally, the General
Partner intends to fund additional monies to the hotels for further needed
capital improvements during 1998. See further discussion in the working capital
reserve section below.
The Partnership's liquidity and future results of operations are primarily
dependent upon the performance of the underlying hotels. Hotel operations may
II-5
<PAGE>
PART II
-------
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS - Continued
-----------------------------------
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 1997 and 1996, along
with existing cash resources, was adequate to support operating, investing and
financing requirements, and to declare distributions to BAC Holders and the
General Partner. Cash and cash equivalents decreased in 1997 principally due to
deposits to the Partnership's working capital reserve. Cash and cash
equivalents decreased in 1996 principally due to the timing of distributions
made to BAC Holders and the General Partner. The Partnership anticipates 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 and fund working capital and replacement reserves.
Short-term liabilities as of December 31, 1997 totalled $1,388,697, which
represents a $3,726,148 decrease from the 1996 balance. This decrease resulted
primarily from a portion of the Notes which matured and were refinanced in 1997
and a decrease in distributions payable, as discussed below. Partially
offsetting the decrease in short-term liabilities was an increase in trade
payables at all hotels.
Zero Coupon Notes
- --------------------
In addition to the capital provided by the sale of BACs, the Partnership
issued Zero Coupon Notes (the Notes) to finance its acquisition of the hotels.
The Notes were nonrecourse notes collateralized by the various properties. Each
Note provided 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, equaling 47.4% of the original purchase price of each
hotel, was due to BancBoston Mortgage Corporation (BancBoston) upon maturity of
each Note. The original maturity dates were as follows.
<TABLE>
<CAPTION>
Original
Maturity
Date
--------
<S> <C>
Minneapolis Days Inn 10/31/97
Plymouth Days Inn 12/29/97
Roseville Days Inn 2/28/98
Clearwater Days Inn 3/31/98
Scottsdale Days Inn (A)
</TABLE>
(A) The Scottsdale Days Inn is held as a leasehold interest. The maturity of
the lease was originally set for January 31, 1994. This lease term was
initially extended an additional five years, thereby expiring on January
31, 1999. During 1996, this lease was extended for an additional five
years, thereby expiring January 31, 2004.
II-6
<PAGE>
PART II
-------
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS - Continued
-----------------------------------
On November 3, 1997, the Partnership refinanced with Citicorp Real Estate,
Inc. ("Citicorp") the Note secured by the Minneapolis Days Inn which matured
October 31, 1997. The new note, which was nonrecourse, was payable on demand
and its interest rate floated at one-month LIBOR plus 165 basis points (LIBOR
plus 1.65%). On December 19, 1997, the Partnership refinanced the remaining
three Notes as well as the demand note with Citicorp. The amounts due on these
Notes as of December 19, 1997, were as follows.
<TABLE>
<CAPTION>
Balance Due
at
12/19/97
-----------
<S> <C>
Minneapolis Days Inn $ 2,296,070
Plymouth Days Inn 1,890,216
Roseville Days Inn 1,955,287
Clearwater Days Inn 1,732,796
-----------
$ 7,874,369
===========
</TABLE>
The new loan proceeds of $8.9 million were in excess of the amount needed
to pay the former Notes of $7,874,369 due as of December 19, 1997. Such excess
was used to pay the costs of refinancing and to fund needed capital improvements
at the hotels. The new loan bears interest at the rate of 7.72% per annum and
matures January 1, 2008. On that date, a balloon payment in the amount of
$7,136,233 will be due. In connection with the terms of the new loan, the
Partnership will pay monthly installments of principal and interest in the
amount of $67,049 to Citicorp on the first day of each month beginning February
1998. If any such monthly installment is not paid when due, the entire
principal amount outstanding and accrued interest thereon shall at once become
due and payable, at the option of Citicorp. Commencing January 1, 2002, the new
loan may be prepaid, subject to terms and prepayment penalties as set forth in
the loan agreement. Subject to such prepayment terms, such refinancing does not
preclude the future sale of the hotels, either individually or as a portfolio.
Real Estate and Capital Improvements Reserve Escrows
- ----------------------------------------------------
In addition to the monthly loan installments payable to Citicorp, as
discussed above, the Partnership must also make monthly payments to Citicorp to
be escrowed for estimated annual real estate taxes and capital improvements and
furniture, fixtures and equipment reserves (CIR). The monthly real estate tax
payments should equal one-twelfth of the estimated yearly taxes and assessments
to be levied on the hotels, currently estimated as $37,761 per month. Citicorp
will pay such taxes and assessments when due from these escrows. The monthly
CIR payment totaling $19,364 shall be held in escrow by Citicorp and may be
drawn on by the Partnership for deferred maintenance and/or ongoing capital
improvement expenditures and for the replacement of furniture, fixture and
equipment at the hotels. Both the real estate tax and CIR payments are due to
II-7
<PAGE>
PART II
-------
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS - Continued
-----------------------------------
Citicorp on the same day as the monthly principal and interest installments,
commencing February 1, 1998 until the new loan is paid in full.
As of December 31, 1997, Citicorp held $75,522, $286,725 and $3,522 in
escrow for real estate taxes, capital improvements reserves, and insurance
reserves, respectively. Such amounts were determined and funded in connection
with the refinancing of the Partnership's debt on December 19, 1997.
Working Capital Reserve
- -----------------------
The working capital reserve of $925,000 and $225,000 as of December 31,
1997 and 1996, 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 reserve may be increased or reduced by the General Partner as it
deems appropriate. During 1997, the Partnership funded $361,584 from the
working capital reserve for Phase I of renovation work at the hotels to increase
their value in connection with the refinancing of the Partnership's debt, as
discussed above. The working capital reserve of $925,000 as of December 31,
1997 consists of $800,000 set aside for Phase II of renovations to be performed
at the hotels during 1998, and $125,000 set aside for contingencies.
Distributions
- -------------
Distributions were paid or accrued to BAC Holders of record during 1997,
1996 and 1995, as follows.
II-8
<PAGE>
PART II
-------
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS - Continued
-----------------------------------
<TABLE>
<CAPTION>
1997 1996 1995
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 $ 382,211 $ 0.44 $ 486,450 $ 0.56 $ 443,018 $ 0.51
June 30 382,211 0.44 486,450 0.56 469,077 0.54
September 30 382,211 0.44 416,957 0.48 582,362* 0.67*
December 31 191,106 0.22 390,898 0.45 538,571 0.62
----------- ------- ----------- ------- ----------- -------
Total $ 1,337,739 $ 1.54 $ 1,780,755 $ 2.05 $ 2,033,028 $ 2.34
=========== ======= =========== ======= =========== =======
</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.
As a result of the refinancing and the increase in working capital reserves
during 1997, as discussed above, the distribution levels for 1997 decreased from
1996. Furthermore, the General Partner anticipates a decrease in the 1998
distribution levels due to debt service payments to be made in connection with
terms of the new financing. Distributions are also 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.
Partnership's Results of Operations
-----------------------------------
1997 versus 1996
- ----------------
The Partnership's net income, which consists principally of revenues from
hotel operations, decreased approximately $256,000 in 1997 from 1996 primarily
due to an approximate $219,000 increase in unallocated operating expenses.
These expenses increased approximately $62,000 due to increased depreciation and
amortization expense related to capital improvements. Contributing to the
increase in unallocated operating expenses was a $59,000 increase in general and
administrative expenses due to liability insurance premium increases at the
hotels and increased payroll costs at the Partnership level due to the
refinancing of the Notes. Also contributing to the increase in unallocated
operating expenses was an approximate $57,000 increase in property taxes due to
an increase in the market value of the Plymouth and Scottsdale hotels and an
approximate $41,000 increase in building lease expense at the Scottsdale hotel.
Contributing to the decrease in the Partnership's net income was $52,000
increase in rental and other expense due to increased Lodgenet movie usage and
an approximate $51,000 decrease in telephone revenue due to decreased occupancy
II-9
<PAGE>
PART II
-------
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS - Continued
-----------------------------------
and telephone usage. Partially offsetting the decrease in the Partnership's net
income was an approximate $47,000 increase in rooms revenue primarily due to
increased room rates and an approximate $39,000 decrease in rooms expense due to
cost control measures implemented during 1997 at the Minnesota hotels.
1996 versus 1995
- ----------------
The Partnership's net income, which consists principally of revenues from
hotel operations, increased approximately $14,000 in 1996 from 1995 primarily
due to an approximate $156,000 decrease in unallocated operating expenses and
departmental expenses. These expenses decreased approximately $365,000 due to
the sale of the Kankakee hotel in July 1995, partially offset by an approximate
$209,000 increase in these expenses at the remaining hotels primarily due to an
increase in room expense due to higher than usual employee turnover in 1996, an
increase in energy expense due to extreme weather conditions in 1996 compared to
a relatively mild winter during 1995, and an increase in depreciation expense
resulting from increased furniture, fixture and equipment expenditures during
1996 primarily due to the purchase of door locks at all hotels in connection
with a franchise requirement imposed by Days Inn. Partially offsetting the
increase in net income was an approximate $137,000 decrease in room revenue.
Room revenue decreased approximately $219,000 due to the sale of the Kankakee
hotel and approximately $146,000 due to decreased occupancy at the Plymouth and
Minneapolis hotels, partially offset by an approximate $228,000 increase in room
revenue at the remaining hotels resulting from an increase in room rates.
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 Partnership's Statements of Operations include operating results for
each of the hotels as outlined below. Gross Operating Income represents total
revenue from rooms, telephone, food and beverage and rental and other, less the
related departmental expenses. Operating Income (Loss) represents Gross
Operating Income less unallocated operating income (expenses). The operating
results and average occupancy for the hotels for the years ended December 31,
1997, 1996 and 1995 were 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 1997 1996 1995
- -------------- ------------ ------------ ------------
<S> <C> <C> <C>
Clearwater, FL $ 1,171,200 $ 1,100,850 $ 1,076,290
Minneapolis, MN 1,473,267 1,514,431 1,601,091
Plymouth, MN 774,275 793,716 856,083
Roseville, MN 987,912 957,451 920,388
Scottsdale, AZ 2,638,550 2,661,055 2,531,176
------------ ------------ ------------
Total from continuing operations 7,045,204 7,027,503 6,985,028
Kankakee, IL (1) -- -- 125,853
------------ ------------ ------------
Total $ 7,045,204 $ 7,027,503 $ 7,110,881
============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
Operating Income (Loss)
-----------------------------------------------------------------
Hotel Location 1997 1996 1995
- -------------- ------------ ------------ ------------
<S> <C> <C> <C>
Clearwater, FL $ 484,617 $ 450,501 $ 462,751
Minneapolis, MN 678,589 685,570 779,991
Plymouth, MN 180,627 226,430 278,097
Roseville, MN 332,571 347,898 326,079
Scottsdale, AZ 670,835 740,016 665,605
Depreciation and net Partnership
operating expenses (1,151,418) (1,053,789) (1,027,909)
------------ ------------ ------------
Total from continuing operations 1,195,821 1,396,626 1,484,614
Kankakee, IL (1) -- -- (112,939)
------------ ------------ ------------
Total $ 1,195,821 $ 1,396,626 $ 1,371,675
============ ============ ============
</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 1997 1996 1995
- -------------- ------------ ------------ ------------
<S> <C> <C> <C>
Clearwater, FL 70% 71% 74%
Minneapolis, MN 81% 84% 88%
Plymouth, MN 69% 77% 79%
Roseville, MN 92% 90% 90%
Scottsdale, AZ 91% 94% 93%
------------ ------------ ------------
Total from continuing operations (2) 81% 84% 85%
Kankakee, IL (1) -- -- 30%
------------ ------------ ------------
Total (2) 81% 84% 81%
============ ============ ============
</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.
1997 versus 1996
- ----------------
Gross operating income and operating income for the Clearwater hotel
increased in 1997 from 1996 primarily due to the replacement of lower-rated
contract business with more profitable clientele. Gross operating income and
operating income for the Minneapolis hotel decreased in 1997 from 1996 primarily
due to decreased room rates and decreased occupancy. Gross operating income and
operating income for the Plymouth hotel decreased in 1997 from 1996 primarily
due to poor performance before and during renovation work at the hotel during
1997 and due to the loss of a major client during 1997. Gross operating income
at the Roseville hotel increased in 1997 from 1996 primarily due to a new
trucking contract and increased occupancy. Operating income for the Roseville
hotel decreased in 1997 from 1996 primarily due to increases in the minimum wage
and increased maintenance to upgrade the hotel. Gross operating income and
operating income from the Scottsdale hotel decreased during 1997 from 1996
primarily due to decreased room demand in the area as a result of Super Bowl XXX
which was hosted in Phoenix, Arizona in 1996 and overall competition in the
Scottsdale area.
1996 versus 1995
- ----------------
Gross operating income for the Clearwater hotel increased in 1996 from 1995
primarily due to increased room rates partially offset by the lost room nights
previously generated by a major client that was lost during the fourth quarter
of 1995. Operating income for the Clearwater hotel decreased in 1996 from 1995
II-12
<PAGE>
PART II
-------
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS - Continued
-----------------------------------
primarily due to increased marketing and advertising expenses incurred as a
result of increased sales efforts to compensate for the major client lost during
1995. Gross operating income and operating income for the Minneapolis hotel
decreased in 1996 from 1995 primarily due to unusually harsh weather conditions
and a temporary quarantine of Shriner's Hospital, which indirectly provides a
significant amount of business to the hotel. Gross operating income and
operating income for the Plymouth hotel decreased in 1996 from 1995 primarily
due to unusually harsh weather conditions and increased competition for local
advertising space. Gross operating income and operating income for the
Roseville hotel increased in 1996 from 1995 primarily due to increased
interstate trucking business and expanded trucking contract rooms during 1996.
Gross operating income and operating income for the Scottsdale hotel increased
in 1996 from 1995 primarily due to increased room demand in the area as a result
of Super Bowl XXX being hosted by the City of Phoenix, an increase in room rates
and unexpected increases in the tour and travel segment of the market. The
Kankakee hotel was sold on July 19, 1995, as previously discussed.
Year 2000 Computer Issue
------------------------
Many computer systems in use today were designed and developed using two
digits, rather than four, to specify the year. As a result, such systems will
recognize the year 2000 as "00". In the opinion of computer experts, this could
cause many computer applications to create erroneous results, or to fail
completely, unless corrective measures are taken.
The Partnership utilizes software and related computer technologies
essential to its operations that will be affected by the Year 2000 issue. The
Managing General Partner is studying what actions will be necessary to make its
computer systems Year 2000 compliant; certain upgrades are already scheduled.
The expense associated with these actions cannot presently be determined, but
the Managing General Partner does not expect it to be material.
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 The Partnership has no directors, executive officers or
(c) significant employees of its own.
(a), (b), (c) The names, ages and business experience of the directors
and (e) and executive officers of C.R.I., Inc. (CRI), the Managing
General Partner of the Partnership, are as follows:
William B. Dockser, 61, 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 properties. 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 and a Director of CRIIMI MAE Inc., CRIIMI, Inc. and CRI Liquidating REIT,
Inc.
H. William Willoughby, 51, has been 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 & Co. He holds a Juris Doctor 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.
Ronald W. Thompson, 51, is 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, he 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, 39, is Executive Vice President and Chief Operating Officer.
Prior to joining CRI in March 1985, she was a budget analyst for the B. F. Saul
Advisory Company. She holds a Bachelor of Science degree in General Business
from the University of Maryland.
Melissa Cecil Lackey, 42, is 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 Doctor degree 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 8 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
27, 1998.
(b) Security ownership of management.
The following table sets forth certain information concerning all BACs
beneficially owned, as of February 27, 1998, by each director and by all
directors and officers as a group of the managing general partner of the
Partnership's General Partner.
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 (5 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 interest in the
General Partner or their stock ownership in CRI. 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. Note 8 of the notes to the financial statements, which contains
disclosure of related party transactions, is also 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 is an officer, director or equity owner other than as set forth in
the Partnership's response to Item 13(a).
III-3
<PAGE>
PART III
--------
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS - Continued
----------------------------------------------
(c) Indebtedness of management.
None.
(d) Transactions with promoters.
Not applicable.
III-4
<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, 1997 and
1996 IV-6
Statements of Income for the years
ended December 31, 1997, 1996 and 1995 IV-7
Statements of Changes in Partners' Capital
(Deficit) for the years ended December 31,
1997, 1996 and 1995 IV-8
Statements of Cash Flows for the years ended
December 31, 1997, 1996 and 1995 IV-9
Notes to Financial Statements IV-10
(a) 2. Financial Statement Schedules
-----------------------------
Report of Independent Certified Public Accountants
on Financial Statement Schedule IV-21
Schedule III - Real Estate and Accumulated
Depreciation IV-22
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
IV-2
<PAGE>
PART IV
-------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
-------------------------------------------------------
FORM 8-K - Continued
--------
(b) Reports on Form 8-K
-------------------
A report on Form 8-K dated December 19, 1997, related to the
refinancing of CRI Hotel Income Partners, L.P.'s mortgage-related
indebtedness, was filed during the quarter ended December 31,
1997.
(c) Exhibits
--------
The 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.
Managing General Partner
March 10, 1998 by: /s/ William B. Dockser
- ----------------- ---------------------------------
DATE William B. Dockser, Director,
Chairman of the Board,
and Treasurer
(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 10, 1998 by: /s/ H. William Willoughby
- ----------------- ---------------------------------
DATE H. William Willoughby,
Director, President
and Secretary
March 10, 1998 by: /s/ Michael J. Tuszka
- ----------------- ---------------------------------
DATE Michael J. Tuszka
Vice President
and Chief Accounting Officer
(Principal Financial Officer
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. (a Delaware limited partnership) as of December 31, 1997 and
1996, and the related statements of income, changes in partners' capital
(deficit), and cash flows for the years ended December 31, 1997, 1996 and 1995.
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 audit.
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, 1997 and 1996, and the results of its operations,
changes in partners' capital (deficit) and cash flows for the years ended
December 31, 1997, 1996 and 1995, in conformity with generally accepted
accounting principles.
Grant Thornton LLP
Vienna, VA
February 27, 1998
IV-5
<PAGE>
CRI HOTEL INCOME PARTNERS, L.P.
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
December 31,
-------------------------------
1997 1996
------------ ------------
<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 5,665,358 5,009,400
Leasehold improvements 1,382,000 1,382,000
------------ ------------
21,734,816 21,078,858
Less accumulated depreciation and amortization (9,453,974) (8,546,840)
------------ ------------
12,280,842 12,532,018
Cash and cash equivalents 380,294 504,423
Working capital reserve 925,000 225,000
Receivables, reserve for replacements and other assets 1,139,454 596,828
Acquisition fees, principally paid to related parties, net of
accumulated amortization of $337,933 and $303,930,
respectively 682,171 716,174
Property purchase costs, net of accumulated amortization of
$60,031 and $53,956, respectively 122,236 128,311
------------ ------------
Total assets $ 15,529,997 $ 14,702,754
============ ============
</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,
-------------------------------
1997 1996
------------ ------------
<S> <C> <C>
Current liabilities
Distributions payable $ 195,006 $ 398,875
Accounts payable and accrued expenses 616,989 617,698
Hotel trade payables 454,945 254,723
Short term portion of notes payable 121,757 3,843,549
------------ ------------
Total current liabilities 1,388,697 5,114,845
------------ ------------
Long term debt
Notes payable 8,778,243 3,381,018
------------ ------------
Total liabilities 10,166,940 8,495,863
------------ ------------
Commitments and contingencies
Partners' capital (deficit)
General Partner (281,520) (264,641)
Beneficial Assignee Certificates (BACs) Series A; 868,662 BACs
issued and outstanding 5,644,577 6,471,532
------------ ------------
Total partners' capital 5,363,057 6,206,891
------------ ------------
Total liabilities and partners' capital $ 15,529,997 $ 14,702,754
============ ============
</TABLE>
The accompanying notes are an integral part of these
financial statements.
IV-7
<PAGE>
CRI HOTEL INCOME PARTNERS, L.P.
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
For the year ended December 31,
---------------------------------------------
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Revenue:
Rooms $ 9,338,524 $ 9,291,783 $ 9,428,934
Telephone 295,327 346,075 384,162
Rental and other 386,017 369,170 347,191
Food and beverage 102,761 80,702 58,629
------------ ------------ ------------
10,122,629 10,087,730 10,218,916
------------ ------------ ------------
Departmental expenses:
Rooms (2,727,553) (2,766,924) (2,772,864)
Telephone (103,851) (112,568) (150,539)
Rental and other (163,924) (111,965) (120,610)
Food and beverage (82,097) (68,770) (64,022)
------------ ------------ ------------
(3,077,425) (3,060,227) (3,108,035)
------------ ------------ ------------
Gross operating income 7,045,204 7,027,503 7,110,881
------------ ------------ ------------
Unallocated operating income (expenses):
Interest and other income 70,310 79,190 80,978
General and administrative (1,025,911) (967,293) (1,032,033)
Building lease expense (734,214) (693,110) (661,179)
Marketing (899,317) (920,747) (930,861)
Depreciation and amortization (963,724) (901,740) (865,363)
Energy (530,876) (527,093) (514,904)
Property taxes (568,092) (511,447) (569,016)
Property operations and maintenance (564,503) (546,957) (618,159)
Management fees (432,462) (448,664) (436,241)
Base asset management fee, paid to related parties (93,750) (93,750) (99,956)
Professional fees (106,844) (99,266) (92,472)
------------ ------------ ------------
(5,849,383) (5,630,877) (5,739,206)
------------ ------------ ------------
Operating income 1,195,821 1,396,626 1,371,675
------------ ------------ ------------
Other income (expenses):
Cash flow guarantees -- -- 13,369
Interest expense (674,613) (619,593) (615,159)
Loss on disposition of hotel -- -- (7,305)
------------ ------------ ------------
(674,613) (619,593) (609,095)
------------ ------------ ------------
Net income $ 521,208 $ 777,033 $ 762,580
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these
financial statements.
IV-8
<PAGE>
CRI HOTEL INCOME PARTNERS, L.P.
STATEMENTS OF INCOME - Continued
<TABLE>
<CAPTION>
For the year ended December 31,
---------------------------------------------
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Net income allocated to General Partner (2%) $ 10,424 $ 15,541 $ 15,252
============ ============ ============
Net income allocated to BAC Holders (98%) $ 510,784 $ 761,492 $ 747,328
============ ============ ============
Net income per BAC based on 868,662 BACs outstanding $ 0.59 $ 0.88 $ 0.86
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these
financial statements.
IV-9
<PAGE>
CRI HOTEL INCOME PARTNERS, L.P.
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
<TABLE>
<CAPTION>
Beneficial
Assignee
Certificate General
Holders Partner Total
------------ ---------- ------------
<S> <C> <C> <C>
Partners' capital (deficit),
January 1, 1995 $ 8,776,495 $ (218,674) $ 8,557,821
Distributions of $2.34 per BAC (including
return of capital of $1.48 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
Distributions of $2.05 per BAC (including
return of capital of $1.17 per BAC) (1,780,755) (36,341) (1,817,096)
Net income 761,492 15,541 777,033
------------ ---------- ------------
Partners' capital (deficit),
December 31, 1996 6,471,532 (264,641) 6,206,891
Distributions of $1.54 per BAC (including
return of capital of $0.95 per BAC) (1,337,739) (27,303) (1,365,042)
Net income 510,784 10,424 521,208
------------ ---------- ------------
Partners' capital (deficit),
December 31, 1997 $ 5,644,577 $ (281,520) $ 5,363,057
============ ========== ============
</TABLE>
The accompanying notes are an integral part of these
financial statements.
IV-10
<PAGE>
CRI HOTEL INCOME PARTNERS, L.P.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the year ended December 31,
---------------------------------------------
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 521,208 $ 777,033 $ 762,580
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 963,724 901,740 865,363
Accrued interest on notes payable 649,802 619,593 615,159
Loss on disposition of hotel -- -- 7,305
Changes in assets and liabilities:
(Increase) decrease in receivables and other
assets, net (547,399) 22,889 29,818
(Decrease) increase in accounts payable and
accrued expenses (709) (33,512) 69,932
Increase (decrease) in hotel trade payables 200,222 (50,750) (85,068)
------------ ------------ ------------
Net cash provided by operating activities 1,786,848 2,236,993 2,265,089
------------ ------------ ------------
Cash flows from investing activities:
Purchase of property and equipment (655,958) (507,429) (307,745)
Net deposits to working capital reserve (700,000) -- (75,000)
Net (deposits to) withdrawals from reserve
for replacements (11,739) 65,188 (18,878)
Net proceeds from disposition of hotel -- -- 1,128,251
------------ ------------ ------------
Net cash (used in) provided by investing activities (1,367,697) (442,241) 726,628
------------ ------------ ------------
Cash flows from financing activities:
Distributions paid to BAC Holders and General Partner (1,568,911) (1,967,783) (1,975,944)
Retirement of notes payable (7,874,369) -- (875,671)
Gross proceeds from refinancing 8,900,000 -- --
------------ ------------ ------------
Net cash used in financing activities (543,280) (1,967,783) (2,851,615)
------------ ------------ ------------
Net (decrease) increase in cash and cash equivalents (124,129) (173,031) 140,102
Cash and cash equivalents, beginning of year 504,423 677,454 537,352
------------ ------------ ------------
Cash and cash equivalents, end of year $ 380,294 $ 504,423 $ 677,454
============ ============ ============
Supplemental disclosure of cash flow information:
Cash paid during the year for interest $ 24,811 $ -- $ --
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these
financial statements.
IV-11
<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 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 authority in the overall management and control of the
Partnership. The Assignor Limited Partner of the Partnership is CRICO
Hotel Fund, Inc. (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.
The Registration Statement of the Partnership was declared effective
by the Securities and Exchange Commission (SEC) on April 17, 1987, and 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 partner
interests which are held by 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 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.
In addition to the capital provided by the sale of BACs, the
Partnership issued Zero Coupon Notes (the Notes) to finance its acquisition
of the hotels. The Partnership's original prospectus indicated that the
hotels would need to be sold or the debt would need to be refinanced at the
time the Notes mature. The prospectus also indicated that the Partnership
intended to sell the hotels (after a period of time not likely to be longer
than twelve years after the date of acquisition) if financial conditions in
the future make such sales desirable. During 1997, the General Partner
solicited and reviewed offers for both sale and refinancing opportunities
for the hotels. The solicitation, however, did not result in a purchase
offer which would provide an adequate return to the BAC holders. As a
result, the General Partner chose to refinance the loans on the four
hotels. Proceeds of the refinancing were adequate to pay the maturing
Notes and to set aside reserves for capital improvements, which may enhance
the potential for a higher sale price in the future. The General Partner
is not currently soliciting sale offers due to the conditions discussed
above.
IV-12
<PAGE>
CRI HOTEL INCOME PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
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.
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 of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
d. Cash and cash equivalents
-------------------------
Cash and cash equivalents consist of all time and demand deposits and
repurchase agreements with original maturities of three months or less.
The Partnership has determined that the carrying amounts of its cash and
cash equivalents approximate fair value.
e. Reserve for replacements
------------------------
Since inception of the Partnership's management agreement with
Buckhead, as discussed below, through December 31, 1997, the hotels
retained 3% of gross hotel revenues as a reserve for replacement of fixed
assets. Beginning January 1, 1998, the hotels will no longer retain
amounts from gross hotel revenues as such replacement reserves will be paid
directly by the Partnership and held in escrow in accordance with the terms
of the new financing, as discussed below.
f. 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
Property purchase costs and acquisition fees are amortized over a
30-year period using the straight-line method.
IV-13
<PAGE>
CRI HOTEL INCOME PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
g. 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.
h. Fair value of financial instruments
-----------------------------------
In accordance with Statement of Financial Accounting Standards No.
107, "Disclosure About Fair Value of Financial Instruments," the
Partnership has disclosed the fair value information about financial
instruments for which it is practicable to estimate that value. Where
applicable, such information has been disclosed elsewhere in the notes to
the financial statements.
i. Reclassifications
-----------------
Certain amounts in the 1996 and 1995 financial statements have been
reclassified to conform to the 1997 presentation.
2. HOTELS AND LEASEHOLD INTEREST OWNED BY THE PARTNERSHIP
The number of BACs sold along with debt instruments issued by the
Partnership, as discussed below, generated sufficient proceeds to purchase five
hotels and one leasehold interest, as follows.
<TABLE>
<CAPTION>
Hotels Date of Purchase Amount of Purchase
- -------------------- ---------------- ------------------
<S> <C> <C>
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
</TABLE>
(A) The Kankakee hotel was sold on July 19, 1995.
(B) Included in the purchase of the Scottsdale leasehold interest was $618,000
allocated to furniture, fixtures and equipment.
IV-14
<PAGE>
CRI HOTEL INCOME PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS
3. NOTES PAYABLE
In addition to the capital provided by the sale of BACs, the Partnership
issued Zero Coupon Notes (the Notes) to finance its acquisition of the hotels.
The Notes were nonrecourse notes collateralized by the various properties. Each
Note provided 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, equaling 47.4% of the original purchase price of each
hotel, was due to BancBoston Mortgage Corporation (BancBoston) upon maturity of
each Note.
As of December 31, 1996, the balances of the Notes, including accrued
interest, were as follows.
<TABLE>
<CAPTION>
Original Balance Due
Note Maturity Date as of 12/31/96
---------------------- ------------- --------------
<S> <C> <C>
Minneapolis Days Inn 10/31/97 $ 2,110,713
Plymouth Days Inn 12/29/97 1,732,836
Roseville Days Inn 2/28/98 1,792,492
Clearwater Days Inn 3/31/98 1,588,526
-----------
$ 7,224,567
===========
</TABLE>
On November 3, 1997, the Partnership refinanced with Citicorp Real Estate,
Inc. ("Citicorp") the Note secured by the Minneapolis Days Inn which matured
October 31, 1997. The new note, which was nonrecourse, was payable on demand
and its interest rate floated at one-month LIBOR plus 165 basis points (LIBOR
plus 1.65%). On December 19, 1997, the Partnership refinanced the remaining
three Notes as well as the demand note with Citicorp. The amounts due on these
Notes as of December 19, 1997, were as follows.
<TABLE>
<CAPTION>
Balance Due
at
12/19/97
-----------
<S> <C>
Minneapolis Days Inn $ 2,296,070
Plymouth Days Inn 1,890,216
Roseville Days Inn 1,955,287
Clearwater Days Inn 1,732,796
-----------
$ 7,874,369
===========
</TABLE>
The new loan proceeds of $8.9 million were in excess of the amount needed
to pay the former Notes of $7,874,369 due as of December 19, 1997. Such excess
IV-15
<PAGE>
CRI HOTEL INCOME PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS
3. NOTES PAYABLE - Continued
was used to pay the costs of refinancing and to fund needed capital improvements
at the hotels. The new loan bears interest at the rate of 7.72% per annum and
matures January 1, 2008. On that date, a balloon payment in the amount of
$7,136,233 will be due. In connection with the terms of the new loan, the
Partnership will pay monthly installments of principal and interest in the
amount of $67,049 to Citicorp on the first day of each month beginning February
1998. If any such monthly installment is not paid when due, the entire
principal amount outstanding and accrued interest thereon shall at once become
due and payable, at the option of Citicorp. Scheduled annual principal payments
due under the new loan are as follows.
1998 $ 121,757
1999 131,497
2000 142,015
2001 153,375
2002 165,644
Thereafter 8,185,712
------------
$ 8,900,000
============
Commencing January 1, 2002, the new loan may be prepaid, subject to terms
and prepayment penalties as set forth in the loan agreement. Subject to such
prepayment terms, such refinancing does not preclude the future sale of the
hotels, either individually or as a portfolio.
Cumulative accrued interest was $0 and $3,986,792 at December 31, 1997 and
1996, respectively. Interest expense during 1997, 1996 and 1995 was $674,613,
$619,593 and $615,159, respectively.
Based on the recent refinancing, the Partnership has determined that the
carrying value of the new loan approximates its fair value.
4. REAL ESTATE AND CAPITAL IMPROVEMENTS RESERVE ESCROWS
In addition to the monthly loan installments payable to Citicorp, as
discussed above, the Partnership must also make monthly payments to Citicorp to
be escrowed for estimated annual real estate taxes and capital improvements and
furniture, fixtures and equipment reserves (CIR). The monthly real estate tax
payments should equal one-twelfth of the estimated yearly taxes and assessments
to be levied on the hotels, currently estimated as $37,761 per month. Citicorp
will pay such taxes and assessments when due from these escrows. The monthly
CIR payment totaling $19,364 shall be held in escrow by Citicorp and may be
drawn on by the Partnership for deferred maintenance and/or ongoing capital
improvement expenditures and for the replacement of furniture, fixture and
equipment at the hotels. Both the real estate tax and CIR payments are due to
Citicorp on the same day as the monthly principal and interest installments,
commencing February 1, 1998 until the new loan is paid in full.
As of December 31, 1997, Citicorp held $75,522, $286,725 and $3,522 in
escrow for real estate taxes, capital improvements reserves, and insurance
reserves, respectively. Such amounts were determined and funded in connection
with the refinancing of the Partnership's debt on December 19, 1997. These
amounts are included in Receivables, reserve for replacements and other assets
in the accompanying financial statements.
IV-16
<PAGE>
CRI HOTEL INCOME PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS
5. WORKING CAPITAL RESERVE
The working capital reserve of $925,000 and $225,000 as of December 31,
1997 and 1996, 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 reserve may be increased or reduced by the General Partner as it
deems appropriate. During 1997, the Partnership funded $361,584 from the
working capital reserve for Phase I of renovation work at the hotels to increase
their value in connection with the refinancing of the Partnership's debt, as
discussed above. The working capital reserve of $925,000 as of December 31,
1997 consists of $800,000 set aside for Phase II of renovations to be performed
at the hotels during 1998, and $125,000 set aside for contingencies.
The Partnership has determined that the carrying amount of its working
capital reserve approximates fair value.
6. COMMITMENTS
a. 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
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. As amended, the management agreements expire between
November 2002 and July 2003. 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
$78,281, $95,959 and $78,408 were accrued or paid in 1997, 1996 and 1995,
respectively.
b. 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. The lease
has been extended to expire on January 31, 2004. The lease may be renewed
at the option of the lessee for an additional 5-year period. 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.
IV-17
<PAGE>
CRI HOTEL INCOME PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS
6. COMMITMENTS - Continued
For the years ended December 31, 1997, 1996 and 1995, annual lease payments
were $734,214, $693,110 and $661,179, respectively.
The Partnership also assumed various leases entered into by Days Inns
of America for equipment used by the operating hotels. These leases expire
through 2000. Minimum lease payments under the leases, including the two
renewal periods for the Scottsdale facility lease, are as follows.
1998 $ 162,797
1999 152,740
2000 146,594
2001 140,450
2002 140,450
Thereafter 280,900
----------
$1,023,931
==========
Total rental expense under the leases was $758,279, $751,917 and
$735,084 for the years ended December 31, 1997, 1996 and 1995,
respectively.
c. 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 Interest and
other income on the accompanying statements of operations, was $52,243,
$50,477 and $48,770 during 1997, 1996 and 1995, respectively.
7. 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.
IV-18
<PAGE>
CRI HOTEL INCOME PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS
7. PARTNERS' CAPITAL - Continued
The following distributions were paid or accrued to BAC Holders of record
during 1997, 1996 and 1995:
<TABLE>
<CAPTION>
1997 1996 1995
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 $ 382,211 $ 0.44 $ 486,450 $ 0.56 $ 443,018 $ 0.51
June 30 382,211 0.44 486,450 0.56 469,077 0.54
September 30 382,211 0.44 416,957 0.48 582,362* 0.67*
December 31 191,106 0.22 390,898 0.45 538,571 0.62
----------- ------- ----------- ------- ----------- -------
Total $ 1,337,739 $ 1.54 $ 1,780,755 $ 2.05 $ 2,033,028 $ 2.34
=========== ======= =========== ======= =========== =======
</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.
8. RELATED-PARTY TRANSACTIONS
In accordance with the Partnership Agreement, in 1988, 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
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 $46,935,
$47,463 and $52,226, for the years ended December 31, 1997, 1996 and 1995,
IV-19
<PAGE>
CRI HOTEL INCOME PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS
8. RELATED-PARTY TRANSACTIONS - Continued
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 income.
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. During the years ended
December 31, 1997, 1996 and 1995, the Partnership paid or accrued a base asset
management fee of $93,750, $93,750 and $99,956, respectively.
IV-20
<PAGE>
CRI HOTEL INCOME PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS
9. RECONCILIATION OF NET INCOME PER FINANCIAL STATEMENTS TO NET INCOME
PER TAX RETURN
A reconciliation of net income per the financial statements to net
income per the tax return follows.
<TABLE>
<CAPTION>
For the year ended December 31,
-------------------------------------------------
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Net income per the financial statements $ 521,208 $ 777,033 $ 762,580
Adjustments for tax purposes:
Book/tax difference on sale of property-amounts
reserved on books in prior years -- -- (600,000)
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 242,685 75,400 10,548
------------ ------------ ------------
Net income per the tax return $ 763,893 $ 852,433 $ 187,357
============ ============ ============
</TABLE>
IV-21
<PAGE>
FINANCIAL STATEMENT SCHEDULE
IV-22
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
--------------------------------------------------
ON FINANCIAL STATEMENT SCHEDULE
-------------------------------
To the Partners
CRI Hotel Income Partners, L.P.
In connection with our audit of the consolidated financial statements of
CRI Hotel Income Partners, L.P. referred to in our report dated February 27,
1998, which is included in this Form 10-K, we have also audited Schedule III as
of December 31, 1997, 1996 and 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 27, 1998
IV-23
<PAGE>
CRI HOTEL INCOME PARTNERS, L.P.
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1997
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D
- -------------------- ------- ------------------------------- -------------------------------
Costs capitalized
subsequent
Initial Cost to acquisition
------------------------------- -------------------------------
Building
Description Encum- and Carrying
of Hotels 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 - Continued
December 31, 1997
<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 $ 968,906 1987 4/88 30 years
Minneapolis Days Inn 444,480 3,731,520 4,176,000 1,264,627 1983 11/87 30 years
Plymouth Days Inn 272,727 3,204,546 3,477,273 1,068,475 (B) 12/87 30 years
Roseville Days Inn 474,783 3,195,652 3,670,435 1,047,464 1973 3/88 30 years
----------- ----------- ------------ ------------
Subtotal 1,574,490 13,112,968 14,687,458 4,349,472
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 $ 5,731,472
=========== =========== ============ ============
</TABLE>
(A) Secures mortgage loans.
(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.
IV-25
<PAGE>
EXHIBIT INDEX
-------------
Exhibit Method of Filing
- ------- -----------------------------
27 Financial Data Schedule Filed herewith electronically
IV-26
<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 10-K.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 380,294
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 21,734,816
<DEPRECIATION> 9,453,974
<TOTAL-ASSETS> 15,529,997
<CURRENT-LIABILITIES> 1,388,697
<BONDS> 8,778,243
0
0
<COMMON> 0
<OTHER-SE> 5,363,057
<TOTAL-LIABILITY-AND-EQUITY> 15,529,997
<SALES> 0
<TOTAL-REVENUES> 10,192,939
<CGS> 0
<TOTAL-COSTS> 8,997,118
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 674,613
<INCOME-PRETAX> 521,208
<INCOME-TAX> 0
<INCOME-CONTINUING> 521,208
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 521,208
<EPS-PRIMARY> 0.59
<EPS-DILUTED> 0.59
</TABLE>
