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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-QSB
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|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2000
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
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Commission file number 33-11096
CRI HOTEL INCOME PARTNERS, L.P.
Organized pursuant to the Laws of the State of Delaware
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Internal Revenue Service - Employer Identification No. 52-1500621
11200 Rockville Pike, Rockville, Maryland 20852
(301) 468-9200
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Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports) and (2) has been subject to such filing requirements for
the past 90 days.
Yes |X| No |_|
The total number of shares of the registrant's Common Stock, outstanding on
September 30, 2000, is not applicable.
--------------------------------------------------------------------------------
<PAGE>
CRI HOTEL INCOME PARTNERS, L.P.
INDEX TO FORM 10-QSB
FOR THE QUARTER ENDED SEPTEMBER 30, 2000
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets
- September 30, 2000 and December 31, 1999................. 1
Statements of Income
- for the three and nine months ended
September 30, 2000 and 1999.............................. 2
Statement of Changes in Partners' (Deficit) Capital
- for the nine months ended September 30, 2000............. 3
Statements of Cash Flows
- for the nine months ended September 30, 2000 and 1999.... 4
Notes to Financial Statements
- September 30, 2000 and 1999.............................. 5
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations........... 10
PART II. OTHER INFORMATION
Item 5. Other Information.............................................. 15
Item 6. Exhibits and Reports on Form 8-K............................... 15
Signature ....................................................... 16
Exhibit Index ....................................................... 17
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
CRI HOTEL INCOME PARTNERS, L.P.
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
------------ ------------
(Unaudited)
<S> <C> <C>
Property and equipment - at cost:
Land ................................................................................. $ 1,574,490 $ 1,574,490
Buildings and site improvements ...................................................... 13,937,210 13,990,707
Furniture, fixtures and equipment .................................................... 2,003,217 1,768,678
Leasehold improvements ............................................................... 2,036,212 1,738,913
------------ ------------
19,551,129 19,072,788
Less: accumulated depreciation and amortization ...................................... (7,644,200) (7,160,891)
------------ ------------
11,906,929 11,911,897
Hotel operating cash ................................................................... 299,857 230,426
Cash and cash equivalents .............................................................. 150,687 --
Working capital reserve ................................................................ -- 172,381
Receivables, capital improvements reserves and other assets ............................ 841,013 820,708
Acquisition fees, principally paid to related parties,
net of accumulated amortization of $431,443 and $405,940, respectively ............... 588,661 614,164
Property purchase costs, net of accumulated amortization
of $76,738 and $72,182, respectively ................................................. 105,528 110,084
------------ ------------
Total assets ....................................................................... $ 13,892,675 $ 13,859,660
============ ============
LIABILITIES AND PARTNERS' (DEFICIT) CAPITAL
Current liabilities:
Accounts payable and accrued expenses ................................................ $ 598,919 $ 521,321
Distributions payable ................................................................ 150,687 --
Hotel trade payables ................................................................. 189,159 295,044
Short-term portion of mortgage payable ............................................... 138,707 129,011
------------ ------------
Total current liabilities .............................................................. 1,077,472 945,376
------------ ------------
Long term debt:
Mortgage payable ..................................................................... 8,431,333 8,537,759
------------ ------------
Total liabilities .................................................................. 9,508,805 9,483,135
------------ ------------
Commitments and contingencies
Partners' (deficit) capital:
General Partner ...................................................................... (301,106) (301,252)
Beneficial Assignee Certificates (BACs) Series A;
868,662 BACs issued and outstanding ................................................ 4,684,976 4,677,777
------------ ------------
Total partners' capital ............................................................ 4,383,870 4,376,525
------------ ------------
Total liabilities and partners' capital ............................................ $ 13,892,675 $ 13,859,660
============ ============
</TABLE>
The accompanying notes are an
integral part of these
financial statements.
-1-
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
CRI HOTEL INCOME PARTNERS, L.P.
STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
For the three months ended For the nine months ended
September 30, September 30,
-------------------------- --------------------------
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenue:
Rooms ............................................. $ 2,217,736 $ 2,268,158 $ 7,088,465 $ 6,985,599
Telephone ......................................... 48,629 55,381 175,836 188,147
Rental and other .................................. 86,439 87,503 261,891 246,414
Food and beverage ................................. 17,817 15,688 60,477 58,910
----------- ----------- ----------- -----------
2,370,621 2,426,730 7,586,669 7,479,070
----------- ----------- ----------- -----------
Departmental expenses:
Rooms ............................................. (692,683) (703,345) (2,053,516) (2,004,617)
Telephone ......................................... (12,736) (33,022) (77,080) (93,825)
Rental and other .................................. (33,740) (38,169) (104,963) (110,830)
Food and beverage ................................. (16,088) (12,055) (49,292) (44,525)
----------- ----------- ----------- -----------
(755,247) (786,591) (2,284,851) (2,253,797)
----------- ----------- ----------- -----------
Gross operating income .............................. 1,615,374 1,640,139 5,301,818 5,225,273
----------- ----------- ----------- -----------
Unallocated operating income (expenses):
Interest and other income ......................... 26,912 24,421 78,581 82,526
General and administrative ........................ (287,403) (272,141) (913,843) (870,243)
Building lease .................................... (91,585) (97,765) (456,995) (481,090)
Marketing ......................................... (208,180) (217,527) (699,849) (671,039)
Depreciation and amortization ..................... (243,022) (247,269) (751,645) (731,586)
Energy ............................................ (136,893) (140,220) (379,295) (378,072)
Property taxes .................................... (150,477) (152,556) (435,051) (457,578)
Property operations and maintenance ............... (147,428) (151,726) (465,508) (470,525)
Management fees ................................... (83,211) (85,193) (266,312) (262,487)
Base asset management fee, paid to related parties (23,438) (23,438) (70,313) (70,313)
Professional fees ................................. (14,052) (11,309) (42,157) (34,396)
Loss on disposal of fixed assets .................. (50,000) -- (84,000) --
----------- ----------- ----------- -----------
(1,408,777) (1,374,723) (4,486,387) (4,344,803)
----------- ----------- ----------- -----------
Operating income .................................... 206,597 265,416 815,431 880,470
Other expense:
Interest expense .................................. (169,509) (171,972) (506,712) (521,738)
----------- ----------- ----------- -----------
Net income .......................................... $ 37,088 $ 93,444 $ 308,719 $ 358,732
=========== =========== =========== ===========
Net income allocated to General Partner (2%) ........ $ 742 $ 1,869 $ 6,174 $ 7,175
=========== =========== =========== ===========
Net income allocated to BAC Holders (98%) ........... $ 36,346 $ 91,575 $ 302,545 $ 351,557
=========== =========== =========== ===========
Net income per BAC, based on 868,662 BACs outstanding $ 0.04 $ 0.11 $ 0.35 $ 0.40
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an
integral part of these
financial statements.
-2-
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
CRI HOTEL INCOME PARTNERS, L.P.
STATEMENT OF CHANGES IN PARTNERS' (DEFICIT) CAPITAL
(Unaudited)
<TABLE>
<CAPTION>
Beneficial
Assignee
General Certificate
Partner Holders Total
------------ ----------- -----------
<S> <C> <C> <C>
Partners' (deficit) capital, January 1, 2000 .. $ (301,252) $ 4,677,777 $ 4,376,525
Net income .................................. 6,174 302,545 308,719
Distributions of $0.34 per BAC (none of
which is return of capital) ............... (6,028) (295,346) (301,374)
----------- ----------- -----------
Partners' (deficit) capital, September 30, 2000 $ (301,106) $ 4,684,976 $ 4,383,870
=========== =========== ===========
</TABLE>
The accompanying notes are an
integral part of these
financial statements.
-3-
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
CRI HOTEL INCOME PARTNERS, L.P.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For the nine months ended
September 30,
----------------------
2000 1999
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income ................................................................... $ 308,719 $ 358,732
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization .............................................. 751,645 731,586
Loss on disposal of fixed assets ........................................... 84,000 --
Changes in assets and liabilities:
Increase in receivables and other assets, net ............................ (128,177) (672,297)
Increase in accounts payable and accrued expenses ........................ 77,598 528,087
(Decrease) increase in hotel trade payables .............................. (105,885) 26,641
--------- ---------
Net cash provided by operating activities .............................. 987,900 972,749
--------- ---------
Cash flows from investing activities:
Net additions to property and equipment ...................................... (788,400) (388,542)
Net withdrawals from working capital reserve ................................. 172,381 --
Net withdrawals from capital improvements reserve ............................ 95,654 239,001
--------- ---------
Net cash used in investing activities .................................. (520,365) (149,541)
--------- ---------
Cash flows from financing activities:
Distributions paid to BAC Holders and General Partner ........................ (150,687) (700,248)
Payment of principal on mortgage payable ..................................... (96,730) (81,704)
--------- ---------
Net cash used in financing activities .................................. (247,417) (781,952)
--------- ---------
Net increase in hotel operating cash and cash and cash equivalents ............. 220,118 41,256
Hotel operating cash and cash and cash equivalents, beginning of period ........ 230,426 353,476
--------- ---------
Hotel operating cash and cash and cash equivalents, end of period .............. $ 450,544 $ 394,732
========= =========
Supplemental disclosure of cash flow information:
Cash paid during the period for interest ..................................... $ 506,712 $ 521,738
========= =========
</TABLE>
The accompanying notes are an
integral part of these
financial statements.
-4-
<PAGE>
CRI HOTEL INCOME PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS
September 30, 2000 and 1999
(Unaudited)
1. BASIS OF PRESENTATION
In the opinion of CRICO Hotel Associates I, L.P. (the General Partner),
the accompanying unaudited financial statements of CRI Hotel Income Partners, L.
P. (the Partnership) reflect all adjustments, consisting of normal recurring
accruals, necessary for a fair presentation of the Partnership's financial
position as of September 30, 2000, and the results of its operations for the
three and nine months ended September 30, 2000 and 1999, and its cash flows for
the nine months ended September 30, 2000 and 1999. The results of operations for
the interim periods ended September 30, 2000, are not necessarily indicative of
the results to be expected for the full year.
The accompanying unaudited financial statements have been prepared in
conformity with accounting principles generally accepted in the United States
and with the instructions to Form10-QSB. Certain information and accounting
policies and footnote disclosures normally included in financial statements
prepared in conformity with accounting principles generally accepted in the
United States have been condensed or omitted pursuant to such instructions.
These condensed financial statements should be read in conjunction with the
financial statements and notes thereto included in the Partnership's annual
report on Form 10-KSB at December 31, 1999.
Certain amounts in the 1999 financial statements have been reclassified
to conform to the 2000 presentation.
2. MORTGAGE PAYABLE
On December 19, 1997, the Partnership refinanced with Citicorp Real
Estate, Inc. (Citicorp) the Zero Coupon Notes (Former Notes) which were
originally issued in connection with the Partnership's acquisition of the
hotels. 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 $7,273,441 will be due. In accordance with the terms of the new loan, the
Partnership began paying monthly installments of principal and interest in the
amount of $67,049 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 the holder. Subject to prepayment terms, as discussed below,
the refinancing of the Former Notes does not preclude the future sale of the
hotels, either individually or as a portfolio.
Under the terms of the new loan, such loan may be prepaid, subject to
terms and prepayment penalties as set forth in the note. The new loan has been
securitized in a "no lock" program, which permits the prepayment of the new loan
with a 3% premium during the first three years, a 2% premium during the next
three years, a 1% premium during the next three years, and no penalty during the
final year. Additionally, see Note 7 for further information concerning the
acquisition and servicing of this loan.
-5-
<PAGE>
CRI HOTEL INCOME PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS
September 30, 2000 and 1999
(Unaudited)
2. MORTGAGE PAYABLE - Continued
The Partnership made installments of principal and interest aggregating
$603,442 during the nine months ended both September 30, 2000 and 1999. The
Partnership's balance on this loan was $8,570,040 and $8,666,770 as of September
30, 2000 and December 31, 1999, respectively.
3. REAL ESTATE TAX AND CAPITAL IMPROVEMENTS RESERVE ESCROWS
In addition to the monthly loan installments, as discussed above, the
Partnership also makes monthly payments which are escrowed for estimated annual
real estate taxes and capital improvements reserves (CIR). The monthly real
estate tax payments equal one-twelfth of the estimated yearly taxes and
assessments to be levied on the hotels, currently estimated as $38,750 per
month. The servicer of the loan pays such taxes and assessments when due from
these escrows. The monthly CIR payment totaling $19,365 is held in escrow and
may be drawn on by the Partnership for ongoing capital improvement expenditures
and for the replacement of furniture, fixtures and equipment at the hotels. Both
the real estate tax and CIR payments are due 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 September 30, 2000 and December 31, 1999, the servicer held
$67,498 and $82,400, respectively, for real estate taxes, and $82,356 and
$178,010, respectively, for capital improvements reserves. These amounts are
included in receivables, capital improvements reserves and other assets in the
accompanying financial statements.
4. WORKING CAPITAL RESERVE; ADVANCES
The working capital reserve of $0 and $172,381 as of September 30, 2000
and December 31, 1999, 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.
On January 6, 2000, the Partnership advanced $100,000 to the Scottsdale
hotel in the form of a non-interest bearing loan. On February 4, 2000, the
Scottsdale hotel repaid $70,000 of this loan; the remaining $30,000 balance was
repaid on March 1, 2000.
On June 28, 2000, the Partnership advanced $150,000 to the Scottsdale
hotel in the form of a non-interest bearing loan, which is scheduled to be
repaid during the first quarter of 2001.
-6-
<PAGE>
CRI HOTEL INCOME PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS
September 30, 2000 and 1999
(Unaudited)
5. DISTRIBUTIONS TO BAC HOLDERS
Distributions declared and payable to BAC holders of record during the
first three quarters of 2000 and 1999 follow.
2000 1999
Distributions to Distributions to
BAC Holders BAC Holders
------------------------- ------------------------
Quarter Ended Total Per BAC Total Per BAC
------------- ---------- ------- ---------- -------
March 31 $ -- $ -- $ 251,912 $ 0.29
June 30 147,673 0.17 251,912 0.29
September 30 147,673 0.17 251,912 0.29
---------- ------- ---------- -------
$ 295,346 $ 0.34 $ 755,736 $ 0.87
========== ======= ========== =======
6. COMMITMENTS
a. Hotel operations management agreements
--------------------------------------
The Partnership entered into management agreements with
Bryanston Group d/b/a Buckhead Hotel Management Company, Inc.
(Buckhead) in connection with operation of the hotels. The management
agreements expire between November 2002 and July 2003, and provide for
a base asset management fee of 3.5% of gross revenues from operations.
The management agreements also call for a marketing fee of 1.5% of net
room revenues, a reservation fee of 2.3% of gross revenues from rental
of hotel guest rooms, and an incentive management fee 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. No incentive
management fees were earned for the first three quarters of 2000 or
1999.
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 December 31, 2003.
The lease may be renewed at the option of the lessee for an additional
five 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. For the three months ended September
30, 2000 and 1999, lease payments were $91,585 and $97,765,
respectively; for the nine months ended September 30, 2000 and 1999,
lease payments were $456,995 and $481,090, respectively.
-7-
<PAGE>
CRI HOTEL INCOME PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS
September 30, 2000 and 1999
(Unaudited)
6. COMMITMENTS - Continued
c. Scottsdale and Roseville capital improvements
---------------------------------------------
In May 2000, the Partnership approved a two-year, $930,000
renovation and capital improvement project for the Scottsdale hotel.
The cost will be funded from the working capital reserve of the
Partnership in the amounts of $488,000 and $292,000 in 2000 and 2001,
respectively, and from the Scottsdale replacements reserve in the
amounts of $90,000 and $60,000 in 2000 and 2001, respectively. During
the nine months ended September 30, 2000, $481,955 was funded by the
Partnership for the Scottsdale renovation project. Additionally, the
Partnership has approved a $70,000 project to renovate a portion of the
guest rooms at the Roseville hotel, to be funded from the working
capital reserve of the Partnership. During the nine months ended
September 30, 2000, $9,529 was funded by the Partnership for the
Roseville renovation project.
d. Ground lease agreements
-----------------------
The Partnership leases a portion of the Minneapolis Days Inn
property to Vicorp Restaurants, Inc. (Vicorp), which is operating a
Baker's Square restaurant on the property. Gross rental income pursuant
to the lease agreement with Vicorp, which is included in interest and
other income in the accompanying statements of income, was $14,481 and
$13,991 for the three months ended September 30, 2000 and 1999,
respectively; for the nine months ended September 30, 2000 and 1999,
such gross rental income was $43,443 and $41,973, respectively.
The Partnership leases an adjacent building on the Roseville
Days Inn property to Happy Chef Systems, Inc. (Happy Chef). Happy Chef,
in turn, subleases this space to the India Palace, which operates a
restaurant on the property. During the third quarter 2000, Happy Chef
exercised the third and final option on this lease, thereby extending
the term for five additional years through September 30, 2005. Happy
Chef continues to sublease this space to India Palace. Gross rental
income pursuant to the lease agreement with Happy Chef, which is
included in interest and other income in the accompanying statements of
income, was $7,500 and $22,500 for each of the three and nine month
periods ended September 30, 2000 and 1999, respectively.
-8-
<PAGE>
CRI HOTEL INCOME PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS
September 30, 2000 and 1999
(Unaudited)
7. RELATED PARTY TRANSACTIONS
In accordance with the terms of the Partnership Agreement, the
Partnership is obligated to reimburse the General Partner or its affiliates for
their direct expenses in connection with managing the Partnership. The
Partnership paid $10,837 and $36,866 for the three and nine months ended
September 30, 2000, respectively, and $7,104 and $31,355 for the three and nine
months ended September 30, 1999, respectively, to the General Partner or its
affiliates as direct reimbursement of expenses incurred on behalf of the
Partnership. Such reimbursed expenses are included in the accompanying
statements of income as general and administrative expenses.
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. The Partnership paid a base asset management fee of
$23,438 and $70,313 for each of the three and nine month periods ended September
30, 2000 and 1999, respectively.
The $8.9 million loan originated and underwritten by Citicorp (see Note 2)
was acquired by CRIIMI MAE Inc., and was included in a securitization by it in
June 1998. As master and special servicer for the loan pool, CRIIMI MAE Services
Limited Partnership, a CRIIMI MAE Inc. affiliate, will retain a portion of the
cash flow, as well as any prepayment penalties. The Chairman and President of
CRIIMI MAE Inc. are the Chairman and President, respectively, of, and holders of
100% of the equity interest in, C.R.I., Inc., which is the general partner of
CRICO Hotel Associates I, L.P., which, in turn, is the General Partner of the
Partnership.
C.R.I., Inc., the general partner of the General Partner, has contracted
with Capitol Hotel Group, Inc. (CHG), to perform certain asset management
services related to the oversight of the operations and management of the
hotels. The Chairman and President of C.R.I., Inc. are the Chairman and
President, respectively, of, and (effective as of January 1, 2000) holders of
100% of the equity interest in, CHG.
-9-
<PAGE>
PART I. FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations
CRI Hotel Income Partners, L.P.'s (the Partnership) Management's
Discussion and Analysis of Financial Condition and Results of Operations section
contains information that may be considered forward looking, including
statements regarding the effect of governmental regulations. Actual results may
differ materially from those described in the forward looking statements and
will be affected by a variety of factors including seasonality with respect to
the hotel industry, national and local economic conditions, the general level of
interest rates, governmental regulations affecting the Partnership and
interpretations of those regulations, the competitive environment in which the
Partnership operates, and the availability of working capital.
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 primarily
funded from the capital improvements reserve, the General Partner determined
that certain capital improvements were needed to enhance the marketability of
the hotels. During 1999, 1998 and 1997, the Partnership funded a total of
approximately $1.4 million from the working capital reserve to the hotels for
such capital improvements, and the General Partner intends to fund additional
Partnership monies to the hotels during 2000 and 2001 for further needed capital
improvements. The General Partner has approved the expenditure of $70,000 for
the renovation of a portion of the guest rooms at the Roseville hotel. During
the nine months ended September 30, 2000, $9,529 was funded by the Partnership
for the Roseville renovation project. Further, in May 2000, the General Partner
approved a two-year, $930,000 renovation and capital improvement project for the
Scottsdale hotel. The cost will be funded from the working capital reserve of
the Partnership in the amounts of $488,000 and $292,000 in 2000 and 2001,
respectively, and from the Scottsdale replacements reserve in the amounts of
$90,000 and $60,000 in 2000 and 2001, respectively. During the nine months ended
September 30, 2000, $481,955 was funded by the Partnership for the Scottsdale
renovation project.
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 liquidity and cash flow in an effort to ensure
that sufficient cash is available for operating and financing requirements, and
for possible distributions to BAC holders. The Partnership's net cash provided
by operating activities for the nine months ended September 30, 2000 and 1999,
was adequate to support investing and financing requirements. The General
Partner expects that existing cash resources along with future cash flows from
the hotels' operations, in the aggregate, will be sufficient to pay operating
expenses and short term commitments, to fund the working capital and capital
improvements reserves, and to fund the renovations at the Roseville and
Scottsdale hotels as discussed above. Current liabilities at September 30, 2000
were $1,077,472, which represented a $132,096 increase from the balance at
December 31, 1999. This increase primarily resulted from an increase in accrued
expenses at two of the hotels and a distribution payable to the BAC holders and
General Partner, partially offset by a decrease in trade payables at three of
the hotels.
Financing
---------
On December 19, 1997, the Partnership refinanced the Zero Coupon Notes
which were originally issued in connection with the Partnership's acquisition of
the hotels. In accordance with the terms of the new loan, the Partnership made
installments of principal and interest aggregating $603,442 during the nine
months ended both September 30, 2000 and 1999. The Partnership's balance on this
loan was $8,570,040 and $8,666,770 as of September 30, 2000 and December 31,
1999, respectively.
-10-
<PAGE>
PART I. FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations - Continued
Real Estate Tax And Capital Improvements Reserve Escrows
--------------------------------------------------------
In addition to the monthly loan installments, as discussed above, the
Partnership also makes monthly payments which are escrowed for estimated annual
real estate taxes and capital improvements reserves. During the nine months
ended September 30, 2000 and 1999, the Partnership made escrow deposits
aggregating $354,739 and $339,851, respectively, for estimated annual real
estate taxes, and $174,281 and $174,281, respectively, for capital improvements.
As of September 30, 2000 and December 31, 1999, the servicer held $67,498 and
$82,400, respectively, for real estate taxes, and $82,356 and $178,010,
respectively, for capital improvements reserves.
Working Capital Reserve; Advances
---------------------------------
The working capital reserve of $0 and $172,381 as of September 30, 2000
and December 31, 1999, 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.
On January 6, 2000, the Partnership advanced $100,000 to the Scottsdale
hotel in the form of a non-interest bearing loan. On February 4, 2000, the
Scottsdale hotel repaid $70,000 of this loan; the remaining $30,000 balance was
repaid on March 1, 2000.
On June 28, 2000, the Partnership advanced $150,000 to the Scottsdale
hotel in the form of a non-interest bearing loan, which is scheduled to be
repaid during the first quarter of 2001.
Distributions to BAC Holders
----------------------------
Distributions declared and payable to BAC holders of record during the
first three quarters of 2000 and 1999 follow.
2000 1999
Distributions to Distributions to
BAC Holders BAC Holders
------------------------ -----------------------
Quarter Ended Total Per BAC Total Per BAC
------------- --------- ------- --------- -------
March 31 $ -- $ -- $ 251,912 $ 0.29
June 30 147,673 0.17 251,912 0.29
September 30 147,673 0.17 251,912 0.29
---------- ------- --------- -------
$ 295,346 $ 0.34 $ 755,736 $ 0.87
========== ======= ========= =======
Results of Operations -- Partnership
------------------------------------
The Partnership's net income, which consists principally of revenues
from hotel operations, decreased $56,356 during the three month period ended
September 30, 2000 from the comparable period in 1999, primarily due to a
$34,054 increase in unallocated operating income and expenses, coupled with a
$24,765 decrease in gross operating income. The increase in unallocated
operating expenses was primarily due to a loss on assets disposed of during
2000, and an increase in general and administrative expenses due to higher
reimbursed payroll costs. The decrease in gross operating income was primarily
due to decreases in rooms revenue and telephone revenue, partially offset by
decreases in rooms expense and telephone expense.
-11-
<PAGE>
PART I. FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations - Continued
The Partnership's net income decreased $50,013 during the nine month
period ended September 30, 2000 from the comparable period in 1999, primarily
due to a $141,584 increase in unallocated operating income and expenses,
partially offset by a $76,545 increase in gross operating income and a $15,026
decrease in interest expense. The increase in unallocated operating expenses was
primarily due to a loss on assets disposed of during 2000, an increase in
general and administrative expenses due to higher reimbursed payroll costs as
well as a new operating lease for televisions and micro-refrigerators at the
Scottsdale hotel, and an increase in depreciation and amortization expense.
Contributing to the increase in unallocated operating expenses was an increase
in marketing expense at the Scottsdale hotel, offset by a decrease in building
lease expense, both as discussed below, and a decrease in property taxes due to
a refund received in 2000. The increase in gross operating income was primarily
due to an increase in rooms revenue, partially offset by a corresponding
increase in rooms expense. Contributing to the increase in gross operating
income were an increase in rental and other revenue and an increase in telephone
revenue net of telephone expenses.
See the following discussion for an analysis of each hotel's operating
results for the three and nine months ended September 30, 2000 and 1999.
Results of Operations -- Hotels
-------------------------------
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 income include operating results for
each of the hotels as summarized below. Gross Operating Income represents total
revenue from rooms, telephone, food and beverage, and rental and other, less the
related departmental expenses. Operating Income represents Gross Operating
Income less unallocated operating expenses. The operating results and average
occupancy for the hotels for the three and nine months ended September 30, 2000
and 1999, follow.
Gross Operating Income Gross Operating Income
for the three months ended for the nine months ended
September 30, September 30,
------------------------- -------------------------
Hotel Location 2000 1999 2000 1999
-------------- ----------- ----------- ----------- -----------
Clearwater, FL $ 174,695 $ 158,751 $ 742,461 $ 764,768
Minneapolis, MN 529,436 523,708 1,409,658 1,292,008
Plymouth, MN 307,861 278,630 733,359 626,986
Roseville, MN 319,751 328,082 780,126 757,063
Scottsdale, AZ 283,631 350,968 1,636,214 1,784,448
----------- ----------- ----------- -----------
Total $ 1,615,374 $ 1,640,139 $ 5,301,818 $ 5,225,273
=========== =========== =========== ===========
-12-
<PAGE>
PART I. FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations - Continued
Operating Income Operating Income
for the three months ended for the nine months ended
September 30, September 30,
--------------------------- ------------------------
Hotel Location 2000 1999 2000 1999
-------------- ----------- ----------- ---------- -----------
Clearwater, FL $ 30,540 $ 10,501 $ 244,048 $ 248,480
Minneapolis, MN 304,757 293,551 721,863 621,611
Plymouth, MN 151,757 116,378 276,742 166,685
Roseville, MN 164,144 165,014 310,962 273,319
Scottsdale, AZ (100,738) (29,249) 225,250 427,305
Depreciation and
Partnership operating
expenses (343,863) (290,779) (963,434) (856,930)
----------- ----------- ---------- -----------
Total $ 206,597 $ 265,416 $ 815,431 $ 880,470
=========== =========== ========== ===========
Average Occupancy Average Occupancy
for the three months ended for the nine months ended
September 30, September 30,
---------------------------- ----------------------------
Hotel Location 2000 1999 2000 1999
-------------- ---------- ----------- ---------- -----------
Clearwater, FL 50% 51% 58% 60%
Minneapolis, MN 90% 90% 86% 82%
Plymouth, MN 84% 74% 74% 64%
Roseville, MN 81% 89% 77% 80%
Scottsdale, AZ 72% 76% 80% 81%
------ ------ ------ ------
Weighted Average
Occupancy (1) 75% 76% 76% 74%
====== ====== ====== ======
(1) Weighted average occupancy is based on the number of rooms at each
location.
Three Months Ended September 30, 2000
-------------------------------------
Clearwater, Florida: Gross operating income and operating income for the three
month period ended September 30, 2000 increased from the same period in 1999 as
a result of a two percent increase in the average rate. Contributing to the
increase was a decrease in telephone expense due to a refund received from the
long distance carrier during the third quarter 2000.
Minneapolis, Minnesota: Gross operating income and operating income for the
three month period ended September 30, 2000 increased from the same period in
1999 despite a constant average rate and occupancy level at the hotel. The
increase in operating performance at the hotel during the period was due to
reduced expenses associated with a student housing contract with the University
of Minnesota.
Plymouth, Minnesota: Gross operating income and operating income for the three
month period ended September 30, 2000 increased from the same period in 1999 as
a result of a ten point increase in occupancy, partially offset by a six percent
decrease in the average rate. The increase in occupancy, which more than
compensated for the decrease in the average rate, was the result of a new
contract with a client which generates more occupied room nights but at a lower
rate. Additional savings were realized in lower telephone and other expense.
Roseville, Minnesota: Gross operating income and operating income for the three
month period ended September 30, 2000 decreased from the same period in 1999 as
a result of an eight point decrease in occupancy, partially offset by a seven
percent increase in the average rate. The decrease in occupancy and the increase
in the average rate were both the result of a decrease in lower-rated trucking
business.
-13-
<PAGE>
PART I. FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations - Continued
Scottsdale, Arizona: Gross operating income and operating income for the three
month period ended September 30, 2000 decreased from the same period in 1999 as
a result of a nine percent decrease in the average rate, coupled with a four
point decrease in occupancy. The decreases in the average rate and occupancy
were the result of competition from new and newly renovated hotels in the area.
Nine months Ended September 30, 2000
Clearwater, Florida: Gross operating income and operating income for the nine
month period ended September 30, 2000 decreased from the same period in 1999 as
a result of a three percent decrease in the average rate, coupled with a two
point decrease in occupancy. The decreases in the average rate and occupancy
were the result of new competition in the area. The decrease in operating income
was partially offset by a decrease in property operations and maintenance
expense.
Minneapolis, Minnesota: Gross operating income and operating income for the nine
month period ended September 30, 2000 increased from the same period in 1999 as
a result of a four point increase in occupancy coupled with a three percent
increase in the average rate. The increases in occupancy and the average rate
were the result of reduced expenses associated with the University of Minnesota
student housing contract, as discussed above, as well as various higher-rated
conference contracts.
Plymouth, Minnesota: Gross operating income and operating income for the nine
month period ended September 30, 2000 increased from the same period in 1999 as
a result of a ten point increase in occupancy, partially offset by a two percent
decrease in the average rate, both as discussed above.
Roseville, Minnesota: Gross operating income and operating income for the nine
month period ended September 30, 2000 increased from the same period in 1999 as
a result of a six percent increase in the average rate, partially offset by a
three point decrease in occupancy, both as discussed above.
Scottsdale, Arizona: Gross operating income and operating income for the nine
month period ended September 30, 2000 decreased from the same period in 1999 as
a result of a five percent decrease in the average rate, coupled with a one
point decrease in occupancy, both as discussed above. Contributing to the
decrease in operating income were an increase in marketing expense due to full
staffing in the sales department compared to the same period last year, and an
increase in general and administrative expenses mainly due to a new operating
lease for televisions and micro-refrigerators. Partially offsetting the decrease
in operating income was a decrease in building lease expense (the building lease
payments are based on a percentage of rental revenues).
-14-
<PAGE>
PART II. OTHER INFORMATION
Item 5. Other Information
During 1999, a number of investors sold or otherwise transferred their
Beneficial Assignee Certificates (BACs) in the Partnership to other investors.
If more than 5% of the total outstanding BACs in the Partnership are transferred
in any one calendar year (not counting certain exempt transfers), the
Partnership could be taxed as a "publicly traded partnership," with potentially
severe implications for the Partnership and its investors. Specifically, the
Partnership would be taxed as a corporation and the income and losses from the
Partnership would no longer be considered a passive activity. From January 1,
1999 through February 15, 1999, approximately 4.9% of the outstanding BACs were
sold. Accordingly, to remain within the 5% safe harbor, effective February 22,
1999, the General Partner halted recognition of any transfers that exceed the
safe harbor limit through December 31, 1999. This halt was lifted effective
January 1, 2000.
During 2000, a number of investors sold or otherwise transferred their
BACs in the Partnership to other investors. From January 1, 2000 through August
4, 2000, approximately 4.9% of the outstanding BACs were sold. Accordingly, to
remain within the 5% safe harbor (as discussed above), effective August 7, 2000,
the General Partner halted recognition of any transfers that exceed the safe
harbor limit through December 31, 2000.
Item 6. Exhibits and Reports on Form 8-K
a. None.
b. No reports on Form 8-K were filed with the Commission during the
quarter ended September 30, 2000.
All other items are not applicable.
-15-
<PAGE>
SIGNATURE
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
CRI HOTEL INCOME PARTNERS, L.P.
-----------------------------------------------------
(Registrant)
by: CRICO Hotel Associates I, L.P.
-----------------------------------------------
General Partner
by: C.R.I., Inc.
------------------------------------------
its General Partner
November 14, 2000 by: /s/ Michael J. Tuszka
----------------- ------------------------------------
DATE Michael J. Tuszka
Vice President
and Chief Accounting Officer
(Principal Financial Officer
and Principal Accounting Officer)
-16-
<PAGE>
EXHIBIT INDEX
Exhibit Method of Filing
------- ------------------------------
27 Financial Data Schedule Filed herewith electronically
-17-
