<PAGE>
FORM 10-QSB
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
--------------
Commission file number 33-11096
--------------
CRI HOTEL INCOME PARTNERS, L.P.
- -------------------------------------------------------------------------
(Exact name of small business issuer 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 offices) (Zip Code)
(301) 468-9200
- -------------------------------------------------------------------------
(Issuer's telephone number, including area code)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months, and (2) has
been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date:
Not applicable Not applicable
- -------------------------- ---------------------------------------
(Class) (Outstanding at March 31, 2000)
<PAGE>
CRI HOTEL INCOME PARTNERS, L.P.
INDEX TO FORM 10-QSB
FOR THE QUARTER ENDED MARCH 31, 2000
Page
----
PART I. Financial Information
Item 1. Financial Statements
Balance Sheets - March 31, 2000
and December 31, 1999 . . . . . . . . . . . . . . . . 1
Statements of Income - for the three months
ended March 31, 2000 and 1999 . . . . . . . . . . . . 2
Statement of Changes in Partners' (Deficit) Capital
- for the three months ended March 31, 2000 . . . . . 3
Statements of Cash Flows - for the three months
ended March 31, 2000 and 1999 . . . . . . . . . . . . 4
Notes to Financial Statements - March 31, 2000
and 1999 . . . . . . . . . . . . . . . . . . . . . . 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . 9
PART II. Other Information
Item 5. Other Information . . . . . . . . . . . . . . . . . . . 14
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . 14
Signature . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Exhibit Index . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
<PAGE>
PART I. FINANCIAL INFORMATION
---------------------
ITEM 1. FINANCIAL STATEMENTS
---------------------
CRI HOTEL INCOME PARTNERS, L.P.
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
------------ ------------
(Unaudited)
<S> <C> <C>
Property and equipment - at cost:
Land $ 1,574,490 $ 1,574,490
Buildings and site improvements 13,991,692 13,990,707
Furniture, fixtures and equipment 1,832,233 1,768,678
Leasehold improvements 1,738,913 1,738,913
------------ ------------
19,137,328 19,072,788
Less: accumulated depreciation and amortization (7,363,563) (7,160,891)
------------ ------------
11,773,765 11,911,897
Cash and cash equivalents 330,562 295,559
Working capital reserve 107,248 107,248
Receivables, capital improvements reserves and other assets 1,158,250 820,708
Acquisition fees, principally paid to related parties, net of
accumulated amortization of $414,441 and $405,940, respectively 605,663 614,164
Property purchase costs, net of accumulated amortization of
$73,700 and $72,182, respectively 108,566 110,084
------------ ------------
Total assets $ 14,084,054 $ 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.
BALANCE SHEETS - Continued
LIABILITIES AND PARTNERS' (DEFICIT) CAPITAL
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
------------ ------------
(Unaudited)
<S> <C> <C>
Current liabilities:
Accounts payable and accrued expenses $ 773,182 $ 521,321
Hotel trade payables 146,360 295,044
Short-term portion of mortgage payable 133,386 129,011
------------ ------------
Total current liabilities 1,052,928 945,376
------------ ------------
Long term debt:
Mortgage payable 8,501,155 8,537,759
------------ ------------
Total liabilities 9,554,083 9,483,135
------------ ------------
Commitments and contingencies
Partners' (deficit) capital:
General Partner (298,183) (301,252)
Beneficial Assignee Certificates (BACs) Series A;
868,662 BACs issued and outstanding 4,828,154 4,677,777
------------ ------------
Total partners' capital 4,529,971 4,376,525
------------ ------------
Total liabilities and partners' capital $ 14,084,054 $ 13,859,660
============ ============
</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.
STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
For the three months ended
March 31,
----------------------------
2000 1999
------------ ------------
<S> <C> <C>
Revenue:
Rooms $ 2,518,513 $ 2,492,865
Telephone 65,592 67,585
Rental and other 94,706 90,877
Food and beverage 20,642 21,079
------------ ------------
2,699,453 2,672,406
------------ ------------
Departmental expenses:
Rooms (660,492) (635,057)
Telephone (28,282) (30,388)
Rental and other (36,006) (35,139)
Food and beverage (17,195) (16,479)
------------ ------------
(741,975) (717,063)
------------ ------------
Gross operating income 1,957,478 1,955,343
------------ ------------
Unallocated operating income (expenses):
Interest and other income 16,644 15,835
General and administrative (354,412) (326,194)
Building lease (227,603) (235,374)
Marketing (238,532) (220,021)
Depreciation and amortization (251,442) (239,481)
Energy (127,761) (126,244)
Property taxes (150,477) (152,511)
Property operations and maintenance (158,683) (155,810)
Management fees (94,469) (93,507)
Base asset management fee, paid to related parties (23,438) (23,438)
Professional fees (14,941) (12,560)
Loss on disposal of fixed assets (10,000) --
------------ ------------
(1,635,114) (1,569,305)
------------ ------------
Operating income 322,364 386,038
Other expense:
Interest expense (168,918) (177,155)
------------ ------------
Net income $ 153,446 $ 208,883
============ ============
</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 INCOME - Continued
(Unaudited)
<TABLE>
<CAPTION>
For the three months ended
March 31,
----------------------------
2000 1999
------------ ------------
<S> <C> <C>
Net income allocated to General Partner (2%) $ 3,069 $ 4,178
============ ============
Net income allocated to BAC Holders (98%) $ 150,377 $ 204,705
============ ============
Net income per BAC, based on 868,662 BACs outstanding $ 0.17 $ 0.24
============ ============
</TABLE>
The accompanying notes are an integral part
of these financial statements.
-4-
<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 3,069 150,377 153,446
--------- ----------- -----------
Partners' (deficit) capital, March 31, 2000 $(298,183) $ 4,828,154 $ 4,529,971
========= =========== ===========
</TABLE>
The accompanying notes are an integral part
of these financial statements.
-5-
<PAGE>
PART I. FINANCIAL INFORMATION
---------------------
ITEM 1. FINANCIAL STATEMENTS
---------------------
CRI HOTEL INCOME PARTNERS, L.P.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For the three months ended
March 31,
------------------------------
2000 1999
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 153,446 $ 208,883
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 251,442 239,481
Loss on disposal of assets 10,000 --
Changes in assets and liabilities:
Increase in receivables and other assets, net (311,076) (223,423)
Increase in accounts payable and accrued expenses 251,861 257,900
(Decrease) increase in hotel trade payables (148,684) 16,584
------------ ------------
Net cash provided by operating activities 206,989 499,425
------------ ------------
Cash flows from investing activities:
Net additions to property and equipment (109,218) (231,375)
Net deposits to working capital reserve -- (38,199)
Net (deposits to) withdrawals from capital improvements reserve (30,539) 236,826
------------ ------------
Net cash used in investing activities (139,757) (32,748)
------------ ------------
Cash flows from financing activities:
Distributions paid to BAC Holders and General Partner -- (186,142)
Payment of principal on mortgage payable (32,229) (23,992)
------------ ------------
Net cash used in financing activities (32,229) (210,134)
------------ ------------
Net increase in cash and cash equivalents 35,003 256,543
Cash and cash equivalents, beginning of period 295,559 230,935
------------ ------------
Cash and cash equivalents, end of period $ 330,562 $ 487,478
============ ============
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 168,918 $ 177,155
============ ============
</TABLE>
The accompanying notes are an integral part
of these financial statements.
-6-
<PAGE>
CRI HOTEL INCOME PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS
March 31, 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 March 31, 2000, and the results of its operations and its cash
flows for the three months ended March 31, 2000 and 1999. The results of
operations for the interim period ended March 31, 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 Form 10-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 filed on Form 10-KSB at December 31, 1999.
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.
-7-
<PAGE>
CRI HOTEL INCOME PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS
March 31, 2000 and 1999
(Unaudited)
2. MORTGAGE PAYABLE - Continued
The Partnership made installments of principal and interest aggregating
$201,147 during each of the three months ended March 31, 2000 and 1999. The
Partnership's balance on this loan was $8,634,541 and $8,666,770 as of March 31,
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 totalling $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 March 31, 2000 and December 31, 1999, the servicer held $204,636 and
$82,400, respectively, for real estate taxes, and $208,549 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
The working capital reserve of $107,248 as of both March 31, 2000 and
December 31, 1999, 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.
-8-
<PAGE>
CRI HOTEL INCOME PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS
March 31, 2000 and 1999
(Unaudited)
5. DISTRIBUTIONS TO BAC HOLDERS
Distributions declared and payable to BAC holders of record during the
first quarters of 2000 and 1999 follow.
<TABLE>
<CAPTION>
2000 1999
Distributions to Distributions to
BAC Holders BAC Holders
-------------------- --------------------
<S> <C> <C> <C> <C>
Quarter Ended Total Per BAC Total Per BAC
------------- ---------- ------- ---------- -------
<S> <C> <C> <C> <C>
March 31 $ -- $ -- $ 251,912 $ 0.29
========== ======= ========== =======
</TABLE>
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
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 January 31, 2004. 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 March 31, 2000 and 1999, lease payments
were $227,603 and $235,374, respectively.
-9-
<PAGE>
CRI HOTEL INCOME PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS
March 31, 2000 and 1999
(Unaudited)
6. COMMITMENTS - Continued
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 in the accompanying statements of income, was $14,481 and
$13,991 for the three months ended March 31, 2000 and 1999, respectively.
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
$8,040 and $7,723 for the three months ended March 31, 2000 and 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 during each of the three months ended March 31, 2000 and 1999.
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 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 a 100% 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.
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.
-10-
<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 for further needed capital
improvements. As of May 15, 2000, the General Partner has approved the
expenditure of $70,000 during the year 2000 for the renovation of a portion of
the guest rooms at the Roseville hotel.
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 three months ended March 31, 2000 and 1999, was adequate to
support investing and financing requirements. The General Partner expects 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 to fund the working capital and capital improvements
reserves. Current liabilities as of March 31, 2000 totalled $1,052,928, which
represents a $107,552 increase from the balance as of December 31, 1999. This
increase primarily resulted from an increase in accrued expenses at four of the
hotels, 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 $201,147 during each of the
three months ended March 31, 2000 and 1999. The Partnership's balance on this
loan was $8,634,541 and $8,666,770 as of March 31, 2000 and December 31, 1999,
respectively.
-11-
<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 three months
ended March 31, 2000 and 1999, the Partnership made escrow deposits aggregating
$122,236 and $113,284, respectively, for estimated annual real estate taxes, and
$58,094 and $58,094, respectively, for capital improvements. As of March 31,
2000 and December 31, 1999, the servicer held $204,636 and $82,400,
respectively, for real estate taxes, and $208,549 and $178,010, respectively,
for capital improvements reserves.
Working Capital Reserve
- -----------------------
The working capital reserve of $107,248 as of both March 31, 2000 and
December 31, 1999, 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.
Distributions to BAC Holders
- ----------------------------
Distributions declared and paybable to BAC holders of record during the
first quarters of 2000 and 1999 follow.
<TABLE>
<CAPTION>
2000 1999
Distributions to Distributions to
BAC Holders BAC Holders
-------------------- --------------------
Quarter Ended Total Per BAC Total Per BAC
------------- ---------- ------- ---------- -------
<S> <C> <C> <C> <C>
March 31 $ -- $ -- $ 251,912 $ 0.29
========== ======= ========== =======
</TABLE>
As a result of reduced cash flow from the hotels, there will be no
distribution to BAC holders for the quarter ended March 31, 2000. The General
Partner continues to monitor closely the operations and cash flow of the hotels,
with the goal of resuming distributions if and when improved cash flow so
permits. Distributions are dependent on the net cash flow produced from hotel
operations, net of Partnership expenses. The cash flow from certain hotels may
be materially affected by changing market conditions and by seasonality.
-12-
<PAGE>
PART I. FINANCIAL INFORMATION
---------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS - Continued
-----------------------------------
Results of Operations -- Partnership
------------------------------------
The Partnership's net income, which consists principally of revenues from
hotel operations, decreased $55,437 during the three month period ended March
31, 2000 from the comparable period in 1999, primarily due to an increase in
unallocated operating expenses. This increase was mainly due to an increase in
general and administrative expenses due to increased payroll costs, and an
increase in marketing expense at the Scottsdale hotel, as discussed below.
Revenue from hotel operations increased $27,047 during the three month period
ended March 31, 2000 from the comparable period in 1999, offset by a
corresponding increase in hotel departmental expenses of $24,912, resulting in a
$2,135 increase in gross operating income. See the following discussion for an
analysis of each hotel's operating results.
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.
<TABLE>
<CAPTION>
Hotel Location Peak Months
-------------- ---------------------
<C> <C>
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
</TABLE>
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 (Loss) represents Gross
Operating Income less unallocated operating income (expenses). The operating
results and average occupancy for the hotels for the three months ended March
31, 2000 and 1999, follow.
-13-
<PAGE>
PART I. FINANCIAL INFORMATION
---------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS - Continued
-----------------------------------
<TABLE>
<CAPTION>
Gross Operating Income
For the three months ended
March 31,
---------------------------
Hotel Location 2000 1999
-------------- ---------- ----------
<S> <C> <C>
Clearwater, FL $ 345,522 $ 397,389
Minneapolis, MN 375,788 331,511
Plymouth, MN 163,472 134,493
Roseville, MN 196,191 184,125
Scottsdale, AZ 876,505 907,825
---------- ----------
Total $1,957,478 $1,955,343
========== ==========
</TABLE>
<TABLE>
<CAPTION>
Operating Income (Loss)
For the three months ended
March 31,
---------------------------
2000 1999
---------- ----------
<C> <C>
Clearwater, FL $ 162,627 $ 204,440
Minneapolis, MN 136,062 106,459
Plymouth, MN 4,730 (17,234)
Roseville, MN 24,219 12,339
Scottsdale, AZ 310,414 365,596
Depreciation and partnership
operating expenses (315,688) (285,562)
---------- ----------
Total $ 322,364 $ 386,038
========== ==========
</TABLE>
-14-
<PAGE>
PART I. FINANCIAL INFORMATION
---------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS - Continued
-----------------------------------
<TABLE>
<CAPTION>
Weighted
Average Occupancy
For the three months ended
March 31,
---------------------------
Hotel Location 2000 1999
-------------- ---------- ----------
<S> <C> <C>
Clearwater, FL 67% 71%
Minneapolis, MN 77% 71%
Plymouth, MN 58% 50%
Roseville, MN 70% 65%
Scottsdale, AZ 86% 85%
---- ----
Total (1) 73% 70%
==== ====
</TABLE>
(1) Weighted average occupancy is computed by taking into consideration the
number of rooms at each location.
Clearwater, Florida: Gross operating income and operating income for the
- ------------------- three month period ended March 31, 2000 decreased from the
same period in 1999 as a result of a nine percent decrease in the average rate
coupled with a five percent decrease in occupancy. The decreases in the average
rate and occupancy were the result of new competition in the area. The decrease
in gross operating income was partially offset by a decrease in marketing
expense (which is tied to revenue performance.)
Minneapolis, Minnesota: Gross operating income and operating income for the
- ---------------------- three month period ended March 31, 2000 increased from
the same period in 1999 as a result of a nine percent increase in occupancy
coupled with a four percent increase in the average rate. The increases in
occupancy and the average rate were the result of increased production within
the sales segments, driven primarily by growth in certain group markets.
Plymouth, Minnesota: Gross operating income and operating income for the three
- ------------------- month period ended March 31, 2000 increased from the same
period in 1999 as a result of a fifteen percent increase in occupancy, partially
offset by a one percent decrease in the average rate. The increase in occupancy
was the result of new contract business at a slightly lower room rate.
Roseville, Minnesota: Gross operating income and operating income for the
- -------------------- three month period ended March 31, 2000 increased from
the same period in 1999 as a result of an eight percent increase in occupancy,
partially offset by a two percent decrease in the average rate. The increase in
occupancy was the result of an overall change in occupancy mix with increases in
discount programs at lower rates.
Scottsdale, Arizona: Gross operating income and operating income for the three
- ------------------- month period ended March 31, 2000 decreased from the same
period in 1999 as a result of a five percent decrease in the average rate,
partially offset by a one percent increase in occupancy. The decrease in the
average rate was the result of competition from new and newly renovated hotels
-15-
<PAGE>
PART I. FINANCIAL INFORMATION
---------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS - Continued
-----------------------------------
in the area. Contributing to the decrease in gross operating income were an
increase in marketing expense due to full staffing in the sales department
compared to the same period last year, and increases in general and
administrative expenses, and in property operations and maintenance expenses.
-16-
<PAGE>
PART II. OTHER INFORMATION
-----------------
ITEM 5. OTHER INFORMATION
-----------------
During 1999, a number of investors sold 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.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
a. None.
b. On February 11, 2000, the Partnership filed a report on Form 8-K,
notifying BAC holders that, due to reduced cash flow caused by
decreasing occupancy and room rates, no cash distribution would be
made for the calendar quarter ended December 31, 1999.
All other items are not applicable.
-17-
<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
May 15, 2000 by: /s/ Michael J. Tuszka
- ----------------- -----------------------------------
DATE Michael J. Tuszka
Vice President
and Chief Accounting Officer
(Principal Financial Officer
and Principal Accounting Officer)
-18-
<PAGE>
EXHIBIT INDEX
-------------
Exhibit Method of Filing
- ------- -----------------------------
27 Financial Data Schedule Filed herewith electronically
-19-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE FIRST QUARTER 10-QSB AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH 10-QSB.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 330,562
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 19,137,328
<DEPRECIATION> (7,363,563)
<TOTAL-ASSETS> 14,084,054
<CURRENT-LIABILITIES> 1,052,928
<BONDS> 8,501,155
0
0
<COMMON> 0
<OTHER-SE> 4,529,971
<TOTAL-LIABILITY-AND-EQUITY> 14,084,054
<SALES> 0
<TOTAL-REVENUES> 2,716,097
<CGS> 0
<TOTAL-COSTS> 2,393,733
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 168,918
<INCOME-PRETAX> 153,446
<INCOME-TAX> 0
<INCOME-CONTINUING> 153,446
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 153,446
<EPS-BASIC> 0.17
<EPS-DILUTED> 0.17
</TABLE>
