<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 June 30, 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 June 30, 2000)
<PAGE>
CRI HOTEL INCOME PARTNERS, L.P.
INDEX TO FORM 10-QSB
FOR THE QUARTER ENDED JUNE 30, 2000
Page
----
PART I. Financial Information
Item 1. Financial Statements
Balance Sheets - June 30, 2000
and December 31, 1999............................... 1
Statements of Income - for the three and six months
ended June 30, 2000 and 1999......................... 2
Statement of Changes in Partners' (Deficit) Capital
- for the six months ended June 30, 2000............. 3
Statements of Cash Flows - for the six months
ended June 30, 2000 and 1999........................ 4
Notes to Financial Statements - June 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...................... 16
Signature ...................................................... 17
Exhibit Index ....................................................... 18
<PAGE>
PART I. FINANCIAL INFORMATION
---------------------
ITEM 1. FINANCIAL STATEMENTS
---------------------
CRI HOTEL INCOME PARTNERS, L.P.
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
June 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 14,001,631 13,990,707
Furniture, fixtures and equipment 1,878,776 1,768,678
Leasehold improvements 1,813,868 1,738,913
------------ ------------
19,268,765 19,072,788
Less: accumulated depreciation and amortization (7,546,702) (7,160,891)
------------ ------------
11,722,063 11,911,897
Hotel operating cash 671,563 230,426
Cash and cash equivalents 150,687 --
Working capital reserve 99,620 172,381
Receivables, capital improvements reserves and other assets 842,274 820,708
Acquisition fees, principally paid to related parties, net of
accumulated amortization of $422,942 and $405,940, respectively 597,162 614,164
Property purchase costs, net of accumulated amortization of
$75,219 and $72,182, respectively 107,047 110,084
------------ ------------
Total assets $ 14,190,416 $ 13,859,660
============ ============
LIABILITIES AND PARTNERS' (DEFICIT) CAPITAL
Current liabilities:
Accounts payable and accrued expenses $ 808,081 $ 521,321
Distributions payable 150,687 --
Hotel trade payables 132,500 295,044
Short-term portion of mortgage payable 136,006 129,011
------------ ------------
Total current liabilities 1,227,274 945,376
------------ ------------
Long term debt:
Mortgage payable 8,465,673 8,537,759
------------ ------------
Total liabilities 9,692,947 9,483,135
------------ ------------
Commitments and contingencies
Partners' (deficit) capital:
General Partner (298,833) (301,252)
Beneficial Assignee Certificates (BACs) Series A;
868,662 BACs issued and outstanding 4,796,302 4,677,777
------------ ------------
Total partners' capital 4,497,469 4,376,525
------------ ------------
Total liabilities and partners' capital $ 14,190,416 $ 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 six months ended
June 30, June 30,
---------------------------- -----------------------------
2000 1999 2000 1999
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Revenue:
Rooms $ 2,352,216 $ 2,224,576 $ 4,870,729 $ 4,717,441
Telephone 61,615 65,181 127,207 132,766
Rental and other 88,246 75,534 175,452 158,911
Food and beverage 22,018 22,143 42,660 43,222
----------- ----------- ----------- -----------
2,524,095 2,387,434 5,216,048 5,052,340
----------- ----------- ----------- -----------
Departmental expenses:
Rooms (700,341) (666,215) (1,360,833) (1,301,272)
Telephone (36,062) (30,415) (64,344) (60,803)
Rental and other (35,217) (37,522) (71,223) (72,661)
Food and beverage (16,009) (15,991) (33,204) (32,470)
----------- ----------- ----------- -----------
(787,629) (750,143) (1,529,604) (1,467,206)
----------- ----------- ----------- -----------
Gross operating income 1,736,466 1,637,291 3,686,444 3,585,134
----------- ----------- ----------- -----------
Unallocated operating income (expenses):
Interest and other income 27,525 34,770 51,669 58,105
General and administrative (272,028) (271,908) (626,440) (598,102)
Building lease (137,807) (147,951) (365,410) (383,325)
Marketing (253,137) (233,491) (491,669) (453,512)
Depreciation and amortization (257,181) (244,836) (508,623) (484,317)
Energy (114,641) (111,608) (242,402) (237,852)
Property taxes (134,097) (152,511) (284,574) (305,022)
Property operations and maintenance (159,397) (162,989) (318,080) (318,799)
Management fees (88,632) (83,787) (183,101) (177,294)
Base asset management fee, paid to related
parties (23,437) (23,437) (46,875) (46,875)
Professional fees (13,164) (10,527) (28,105) (23,087)
Loss on disposal of fixed assets (24,000) -- (34,000) --
----------- ----------- ----------- -----------
(1,449,996) (1,408,275) (3,077,610) (2,970,080)
----------- ----------- ----------- -----------
Operating income 286,470 229,016 608,834 615,054
Other expense:
Interest expense (168,285) (172,611) (337,203) (349,766)
----------- ----------- ----------- -----------
Net income $ 118,185 $ 56,405 $ 271,631 $ 265,288
=========== =========== =========== ===========
Net income allocated to General Partner (2%) $ 2,364 $ 1,128 $ 5,433 $ 5,306
=========== =========== =========== ===========
Net income allocated to BAC Holders (98%) $ 115,821 $ 55,277 $ 266,198 $ 259,982
=========== =========== =========== ===========
Net income per BAC, based on 868,662 BACs outstanding $ 0.13 $ 0.06 $ 0.31 $ 0.30
=========== =========== =========== ===========
</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 5,433 266,198 271,631
Distributions of $0.17 per BAC (none of
which is return of capital) (3,014) (147,673) (150,687)
--------- ----------- -----------
Partners' (deficit) capital, June 30, 2000 $(298,833) $ 4,796,302 $ 4,497,469
========= =========== ===========
</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 six months ended
June 30,
------------------------------
2000 1999
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 271,631 $ 265,288
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 508,623 484,317
Loss on disposal of fixed assets 34,000 --
Changes in assets and liabilities:
Increase in receivables and other assets, net (112,666) (221,218)
Increase in accounts payable and accrued expenses 286,760 346,569
Decrease in hotel trade payables (162,544) (50,456)
------------ ------------
Net cash provided by operating activities 825,804 824,500
------------ ------------
Cash flows from investing activities:
Net additions to property and equipment (324,604) (329,687)
Net withdrawals from working capital reserve 72,761 --
Net withdrawals from capital improvements reserve 82,954 173,589
------------ ------------
Net cash used in investing activities (168,889) (156,098)
------------ ------------
Cash flows from financing activities:
Distributions paid to BAC Holders and General Partner -- (443,195)
Payment of principal on mortgage payable (65,091) (52,528)
------------ ------------
Net cash used in financing activities (65,091) (495,723)
------------ ------------
Net increase in hotel operating cash and cash and cash equivalents 591,824 172,679
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 $ 822,250 $ 526,155
============ ============
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 337,203 $ 349,766
============ ============
</TABLE>
The accompanying notes are an
integral part of these
financial statements.
-4-
<PAGE>
CRI HOTEL INCOME PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS
June 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 June 30, 2000, and the results of its operations for the three
and six months ended June 30, 2000 and 1999, and its cash flows for the six
months ended June 30, 2000 and 1999. The results of operations for the interim
periods ended June 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 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 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
June 30, 2000 and 1999
(Unaudited)
2. MORTGAGE PAYABLE - Continued
The Partnership made installments of principal and interest aggregating
$402,294 during the six months ended both June 30, 2000 and 1999. The
Partnership's balance on this loan was $8,601,679 and $8,666,770 as of June 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 June 30, 2000 and December 31, 1999, the servicer held $136,067
and $82,400, respectively, for real estate taxes, and $95,056 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 $99,620 and $172,381 as of June 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
June 30, 2000 and 1999
(Unaudited)
5. DISTRIBUTIONS TO BAC HOLDERS
Distributions declared and payable to BAC holders of record during the
first two 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
June 30 147,673 0.17 251,912 0.29
---------- ------- ---------- -------
$ 147,673 $ 0.17 $ 503,824 $ 0.58
========== ======= ========== =======
</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 two 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.
-7-
<PAGE>
CRI HOTEL INCOME PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS
June 30, 2000 and 1999
(Unaudited)
6. COMMITMENTS - Continued
Minimum lease payments of $11,704 are payable monthly with a quarterly
analysis of the actual amount due. For the three months ended June 30,
2000 and 1999, lease payments were $137,807 and $147,951, respectively;
for the six months ended June 30, 2000 and 1999, lease payments were
$365,410 and $383,325, respectively.
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 six months ended June 30, 2000, $90,334 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 during 2000, to be funded from the
working capital reserve of the Partnership. During the six months ended
June 30, 2000, $0 was funded by the Partnership for the Roseville
renovation project.
d. Ground lease agreements
-----------------------
The Partnership has a ground lease with Vicorp Restaurants,
Inc. (Vicorp), 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 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 June 30, 2000 and 1999,
respectively; for the six months ended June 30, 2000 and 1999, such
gross rental income was $28,962 and $27,982, respectively.
The Partnership has a ground lease with Happy Chef Systems,
Inc. (Happy Chef), pursuant to which the Partnership is leasing an
adjacent building on the Roseville Days Inn property to Happy Chef. The
ground lease expires in the third quarter of 2000. Happy Chef, in turn,
is subleasing this space to the India Palace, which is operating a
restaurant on the property. 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 $15,000
for the three and six month periods, respectively, ended both June 30,
2000 and 1999.
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
-8-
<PAGE>
CRI HOTEL INCOME PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS
June 30, 2000 and 1999
(Unaudited)
7. RELATED PARTY TRANSACTIONS - Continued
direct expenses in connection with managing the Partnership. The Partnership
paid $17,989 and $26,029 for the three and six months ended June 30, 2000,
respectively, and $16,528 and $24,251 for the three and six months ended June
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
$23,437 and $46,875 for the three and six month periods, respectively, ended
both June 30, 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 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 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.
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 a
100% 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 for further needed capital
improvements. 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. Further, 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.
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 six months ended June 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, and to fund the working capital and capital
improvements reserves. Current liabilities at June 30, 2000 were $1,227,274,
which represented a $281,898 increase from the balance at December 31, 1999.
This increase primarily resulted from an increase in accrued expenses at four 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.
-10-
<PAGE>
PART I. FINANCIAL INFORMATION
---------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS - Continued
-----------------------------------
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 $402,294 during the six
months ended both June 30, 2000 and 1999. The Partnership's balance on this loan
was $8,601,679 and $8,666,770 as of June 30, 2000 and December 31, 1999,
respectively.
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 six months ended
June 30, 2000 and 1999, the Partnership made escrow deposits aggregating
$238,488 and $226,567, respectively, for estimated annual real estate taxes, and
$116,188 and $116,188, respectively, for capital improvements. As of June 30,
2000 and December 31, 1999, the servicer held $136,067 and $82,400,
respectively, for real estate taxes, and $95,056 and $178,010, respectively, for
capital improvements reserves.
Working Capital Reserve
-----------------------
The working capital reserve of $99,620 and $172,381 as of June 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.
Distributions to BAC Holders
----------------------------
Distributions declared and payable to BAC holders of record during the
first two 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
June 30 147,673 0.17 251,912 0.29
---------- ------- ---------- -------
$ 147,673 $ 0.17 $ 503,824 $ 0.58
========== ======= ========== =======
</TABLE>
-11-
<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, increased $61,780 during the three month period ended
June 30, 2000 from the comparable period in 1999, primarily due to a $99,175
increase in gross operating income, partially offset by a $41,721 increase in
unallocated operating expenses. The increase in gross operating income was
mainly due to increases in rooms revenue and rental and other revenue, offset by
an increase in rooms expense. The increase in unallocated operating expenses was
due to a loss on assets disposed of during 2000, an increase in marketing
expense at the Scottsdale hotel, as discussed below, and an increase in
depreciation and amortization expense. These increases were partially offset by
a decrease in property tax expense due to a refund received in 2000 and a
decrease in building lease expense due to decreased revenues at the Scottsdale
hotel (the building lease payments are based on a percentage of rental
revenues).
The Partnership's net income increased $6,343 during the six months
ended June 30, 2000 from the comparable period in 1999, primarily due to a
$101,310 increase in gross operating income, as discussed above, and a $12,563
decrease in interest expense due to a decreasing mortgage payable balance,
substantially offset by a $107,530 increase in unallocated operating expenses,
also as discussed above, and an increase in general and administrative expenses
due to higher reimbursed payroll costs.
See the following discussion for an analysis of each hotel's operating
results for the three and six months ended June 30, 2000 versus 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
-12-
<PAGE>
PART I. FINANCIAL INFORMATION
---------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS - Continued
-----------------------------------
Income less unallocated operating expenses. The operating results and average
occupancy for the hotels for the three and six months ended June 30, 2000 and
1999, follow.
<TABLE>
<CAPTION>
Gross Operating Income Gross Operating Income
for the three months ended for the six months ended
June 30 June 30,
--------------------------- ---------------------------
Hotel Location 2000 1999 2000 1999
-------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Clearwater, FL $ 222,244 $ 208,628 $ 567,766 $ 606,017
Minneapolis, MN 504,434 436,789 880,222 768,300
Plymouth, MN 262,026 213,863 425,498 348,356
Roseville, MN 271,684 252,356 460,375 428,981
Scottsdale, AZ 476,078 525,655 1,352,583 1,433,480
---------- ---------- ---------- ----------
Total $1,736,466 $1,637,291 $3,686,444 $3,585,134
========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
Operating Income Operating Income
for the three months ended for the six months ended
June 30, June 30,
--------------------------- ---------------------------
Hotel Location 2000 1999 2000 1999
-------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Clearwater, FL $ 50,881 $ 33,539 $ 213,508 $ 237,979
Minneapolis, MN 281,044 221,601 417,106 328,060
Plymouth, MN 120,255 67,541 124,985 50,307
Roseville, MN 122,599 95,966 146,818 108,305
Scottsdale, AZ 19,644 90,958 325,988 456,554
Depreciation and Partnership operating expenses (307,953) (280,589) (619,571) (566,151)
---------- ---------- ---------- ----------
Total $ 286,470 $ 229,016 $ 608,834 $ 615,054
========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
Weighted Weighted
Average Occupancy Average Occupancy
for the three months ended for the six months ended
June 30, June 30,
--------------------------- ---------------------------
Hotel Location 2000 1999 2000 1999
-------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Clearwater, FL 56% 58% 62% 65%
Minneapolis, MN 91% 84% 84% 77%
Plymouth, MN 79% 67% 69% 59%
Roseville, MN 78% 86% 74% 75%
Scottsdale, AZ 82% 83% 84% 84%
------ ------ ------ ------
Total (1) 78% 76% 76% 73%
====== ====== ====== ======
</TABLE>
(1) Weighted average occupancy is computed by taking into consideration
the number of rooms at each location.
-13-
<PAGE>
PART I. FINANCIAL INFORMATION
---------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS - Continued
-----------------------------------
Three Months Ended June 30, 2000
--------------------------------
Clearwater, Florida: Gross operating income and operating income for the
------------------- three month period ended June 30, 2000 increased from the
same period in 1999 as a result of a three percent increase in the average rate,
partially offset by a two point decrease in occupancy. The decrease in occupancy
was the result of new competition in the area. The increase in the average rate
resulted in slightly higher revenue from hotel operations, while the decrease in
occupancy resulted in lower hotel departmental expenses.
Minneapolis, Minnesota: Gross operating income and operating income for the
---------------------- three month period ended June 30, 2000 increased from the
same period in 1999 as a result of a seven point increase in occupancy coupled
with a six 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 June 30, 2000 increased from the same
period in 1999 as a result of a twelve point 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 a change in the marketplace which resulted in
higher-rated corporate business.
Roseville, Minnesota: Gross operating income and operating income for the
-------------------- three month period ended June 30, 2000 increased from the
same period in 1999 as a result of a thirteen percent increase in the average
rate, partially offset by an eight point decrease in occupancy. The increase in
the average rate and the decrease in occupancy were both the result of a
decrease in lower-rated trucking business.
Scottsdale, Arizona: Gross operating income and operating income for the three
------------------- month period ended June 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. The decreases in the average
rate and occupancy were the result of competition from new and newly renovated
hotels in the area. 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 increases in general and
administrative expenses, and in property operations and maintenance expenses.
Six Months Ended June 30, 2000
------------------------------
Clearwater, Florida: Gross operating income and operating income for the
------------------- six month period ended June 30, 2000 decreased from the same
period in 1999 as a result of a three point decrease in occupancy, coupled with
a four percent decrease in the average rate. The decreases in occupancy and the
average rate 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.
-14-
<PAGE>
Minneapolis, Minnesota: Gross operating income and operating income for the
---------------------- six month period ended June 30, 2000 increased from the
same period in 1999 as a result of a seven point increase in occupancy coupled
with a five percent increase in the average rate, both as discussed above.
Plymouth, Minnesota: Gross operating income and operating income for the six
------------------- month period ended June 30, 2000 increased from the same
period in 1999 as a result of a ten point increase in occupancy, coupled with a
two percent increase in the average rate, both as discussed above.
Roseville, Minnesota: Gross operating income and operating income for the
-------------------- six month period ended June 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 one point decrease in occupancy, both as discussed above.
Scottsdale, Arizona: Gross operating income and operating income for the six
------------------- month period ended June 30, 2000 decreased from the same
period in 1999 as a result of a four percent decrease in the average rate while
occupancy remained constant at 84%. The decrease in the average rate was the
result of competition from new and newly renovated hotels in the area.
Contributing to the decrease in operating income were increases in marketing
expense, general and administrative expenses, and in property operations and
maintenance expenses, as discussed above. Partially offsetting the decrease in
operating income was a decrease in building lease expenses, also as discussed
above.
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.
-15-
<PAGE>
PART II. OTHER INFORMATION
-----------------
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 June 30, 2000.
All other items are not applicable.
-16-
<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
August 10, 2000 by: /s/ Michael J. Tuszka
--------------- -----------------------------------
DATE Michael J. Tuszka
Vice President
and Chief Accounting Officer
(Principal Financial Officer
and Principal Accounting Officer)
-17-
<PAGE>
EXHIBIT INDEX
-------------
Exhibit Method of Filing
------- -----------------------------
27 Financial Data Schedule Filed herewith electronically
-18-
