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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
[ ] TRANSITION REPORT UNDER SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to _______________
Commission File Number 0-17602
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ChrisKen Partners Cash Income Fund L.P.
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(Exact name of small business issuer as Specified in its
certificate of Limited partnership)
Delaware 36-3521124
- ------------------------------- ----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
345 North Canal Street, Chicago, Illinois 60606
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(Address of principal executive offices) (Zip Code)
(312) 454-1626
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(Issuer's telephone number)
- -------------------------------------------------------------------------------
(Former name, former address and formal fiscal year, if changed since last
report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act during the past 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
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CHRISKEN PARTNERS CASH INCOME FUND L.P.
INDEX
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<CAPTION> Page
<S> <C>
PART I FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
(UNAUDITED)
Consolidated Balance Sheet at
March 31, 1999 2
Consolidated Statements of Income
for the Three Months Ended
March 31, 1999 and 1998 3
Consolidated Statement of Partners'
Capital for the Three Months Ended
March 31, 1999 4
Consolidated Statements of Cash Flows for
the Three Months Ended March 31, 1999
and 1998 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis or
Plan of Operation 7
PART II OTHER INFORMATION
Item 1. Legal Proceedings 11
Item 2. Changes in Securities and Use of Proceeds 11
Item 3. Defaults Upon Senior Securities 11
Item 4. Submissions of Matters to a Vote of
Security Holders 11
Item 5. Other Information 11
Item 6. Exhibits and Reports on Form 8-K 11
SIGNATURE 12
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1
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Chrisken Partners Cash Income Fund L.P.
(A DELAWARE LIMITED PARTNERSHIP)
Consolidated Balance Sheet
March 31, 1999
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Cash and cash equivalents $ 677,222
Restricted cash 377,320
Accounts receivable 28,013
Other 3,414
-----------
1,085,969
Investment in real estate, at cost:
Land 2,241,388
Buildings and improvements 10,847,062
Equipment 261,024
-----------
13,349,474
Accumulated depreciation (2,179,296)
-----------
11,170,178
-----------
Total assets $12,256,147
-----------
-----------
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 48,051
Tenants' security deposits 93,627
Deferred income and prepaid rent 86,882
Accrued real estate taxes 195,904
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Total liabilities 424,464
Partners' capital, 36,948 limited partnership
units issued and outstanding 11,831,683
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Total liabilities and partners' capital $12,256,147
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</TABLE>
SEE ACCOMPANYING NOTES.
2
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Chrisken Partners Cash Income Fund L.P.
(A DELAWARE LIMITED PARTNERSHIP)
Consolidated Statements of Income
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
1999 1998
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<S> <C> <C>
REVENUE
Rental $677,754 $636,053
Interest 11,942 11,426
Other 33,926 31,696
---------------------------
Total revenue 723,622 679,175
EXPENSES
Property operations and maintenance 137,615 155,755
Depreciation 132,443 50,297
General and administrative 203,349 217,347
Management fees - Affiliate 38,140 35,410
---------------------------
Total expenses 511,547 458,809
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Net income $212,075 $220,366
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---------------------------
Net income allocated to general partners $ 21,208 $ 22,037
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---------------------------
Net income allocated to limited partners $190,867 $198,329
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Net income allocated to limited partners
per limited partnership units
outstanding $ 5.15 $ 5.37
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---------------------------
Limited partnership units outstanding 36,948 36,948
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SEE ACCOMPANYING NOTES.
3
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Chrisken Partners Cash Income Fund L.P.
(A DELAWARE LIMITED PARTNERSHIP)
Consolidated Statement of Partners' Capital
Three months ended March 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
PARTNERS' CAPITAL ACCOUNTS
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GENERAL LIMITED
PARTNERS PARTNERS TOTAL
--------------------------------------------
<S> <C> <C> <C>
Balance at January 1, 1999 $428,255 $11,470,886 $11,899,141
Distributions (A) - (279,533) (279,533)
Net income 21,208 190,867 212,075
--------------------------------------------
Balance at March 31, 1999 $449,463 $11,382,220 $11,831,683
--------------------------------------------
--------------------------------------------
</TABLE>
(A) Cash distributions paid per limited partnership unit were $7.57.
SEE ACCOMPANYING NOTES.
4
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Chrisken Partners Cash Income Fund L.P.
(A DELAWARE LIMITED PARTNERSHIP)
Consolidated Statements of Cash Flows
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
1999 1998
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 212,075 $ 220,366
Adjustments to reconcile net income
to net cash flows provided by
operating activities:
Depreciation 132,443 50,297
Net changes in operating assets
and liabilities:
Decrease (increase) in accounts
receivable 10,639 (4,583)
(Increase) in other assets (823) (7,588)
(Decrease) in accounts payable
and accrued expenses (169,014) (137,927)
(Decrease) increase in deferred
income and prepaid rent (7,839) 4,284
Increase in tenants' security
deposits 1,669 3,155
--------------------------
Net cash flows provided by operating
activities 179,150 128,004
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to investment in real estate (15,211) (37,590)
--------------------------
Cash flows used in investing activities (15,211) (37,590)
CASH FLOWS FROM FINANCING ACTIVITIES
Distributions (279,533) (244,572)
--------------------------
Cash flows used in financing activities (279,533) (244,572)
--------------------------
Net decrease in cash and cash
equivalents (115,594) (154,158)
Cash and cash equivalents,
beginning of period 792,816 594,370
--------------------------
Cash and cash equivalents, end of period $ 677,222 $ 440,212
--------------------------
--------------------------
</TABLE>
SEE ACCOMPANYING NOTES.
5
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Chrisken Partners Cash Income Fund L.P.
(A DELAWARE LIMITED PARTNERSHIP)
Notes to Consolidated Financial Statements
(UNAUDITED)
1. INTERIM ACCOUNTING POLICIES
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-QSB and
310(b) of Regulations of S-B. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. The consolidated financial
statements are the representation of the General Partners and reflect all
adjustments which are, in the opinion of the General Partners, necessary for
a fair presentation of the financial position and results of operations of
the Partnership. The General Partners believe that all such adjustments are
normal and recurring. For further information, refer to the consolidated
financial statements and notes thereto included in the Chrisken Partners Cash
Income Fund L.P.'s (the "Partnership") Annual Report on Form 10-KSB for the
year ended December 31, 1998.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
ChrisKen Partners Cash Income Fund L.P. ("CPCIF" or the "Partnership")
is a Delaware limited partnership organized on May 4, 1987, with ChrisKen
Income Properties, Inc. ("Managing General Partner") and ChrisKen Limited
Partnership I as General Partners. Pursuant to a public offering (the
"Offering"), CPCIF sold 37,732 limited partnership units. CPCIF has 99.99%
ownership interests in Springdale Associates Limited Partnership and Chicago
I Self-Storage Limited Partnership. Springdale Associates Limited Partnership
owns a 199-unit residential complex located in Waukesha, Wisconsin
("Springdale Apartments"), and Chicago I Self-Storage Limited Partnership
owns a 155,997 square foot self-storage facility located in Chicago, Illinois
("Gold Coast Storage").
LIQUIDITY AND CAPITAL RESOURCES
The Partnership had cash and cash equivalents of $677,222 and $792,816
as of March 31, 1999 and December 31, 1998, respectively. The reduction in
cash and cash equivalents is primarily due to additions to investment in real
estate, reductions in accounts payable and accrued liabilities, and
distributions in excess of net cash provided by operating activities.
Restricted cash represents operating and contingency reserves (the "Reserve")
equal to approximately 2% of the gross proceeds of the Offering ($377,320 at
March 31, 1999 and December 31, 1998) as required by the Limited Partnership
Agreement. The Reserve is available for unanticipated contingencies and
repairs at Springdale Apartments and Gold Coast Storage (collectively the
"Specified Properties"). The General Partners believe the current amount of
the Reserve is adequate to satisfy cash requirement needs. The Partnership
holds the Specified Properties described above on an unencumbered or all cash
basis.
For Springdale Apartments management has budgeted the following major
repairs or improvements to the property to be completed during 1999: grounds
and signage enhancements ($18,000), exterior painting ($10,000), renovation
of ten apartment units ($34,000), apartment entry door replacement
($35,000),and continued carpet ($72,000) and appliance replacement ($42,000)
as needed due to obsolescence. For Gold Coast Storage management has budgeted
the following major repairs or improvements to the property to be completed
during 1999: elevator repairs ($13,000), roof and exterior brick repairs
($14,000), paving and concrete repairs ($12,000), fence replacement ($6,500),
phase two of security monitoring system ($38,000), and the addition of 5,850
rentable square feet of garage style storage space ($300,000). This
additional rental space is estimated to generate annual gross revenues of
approximately $104,000.
RESULTS OF OPERATIONS
Occupancy at the Springdale Apartments was 98% at March 31, 1999, 97% at
December 31, 1998, and 95% at March 31, 1998. Rental revenue increased during
the three months ended March 31, 1999 as compared to the same period one year
earlier, primarily due to a moderate increase in rental rates and a
significant reduction in vacancy loss. The General Partners believe that
occupancy at Springdale Apartments will remain between 95 - 98% for the
remainder of 1999.
Occupancy at Gold Coast Storage was 88% at March 31, 1999, 88% at
December 31, 1998, and 93% at March 31, 1998. Rental revenue increased during
the three months ended March 31, 1999 as compared to the same period one year
earlier, primarily due to a 2.7% net effective increase in rental rates. The
General Partners believe that occupancy at Gold Coast will remain between 85
- - 90% for the remainder of 1999.
Management continues to aggressively market both apartment units at
Springdale Apartments and space at Gold Coast Storage in order to increase
occupancy percentages, and rental rates, at both locations.
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Management anticipates occupancy at both Properties to remain at present
levels during the remainder of 1999.
Rental and other revenue of $422,668 for Springdale Apartments for the
three months ended March 31, 1999 increased 11.5% from rental revenue of
$379,173 for the three months ended March 31, 1998. The increase in rental
revenue primarily resulted from moderately increased rental rates and a
significant reduction in vacancy loss in 1999. Rental and other revenue at
Gold Coast Storage increased by approximately 2% from $288,576 for the three
months ended March 31, 1998 to $294,393 for the three months ended March 31,
1999, due to a 2.7% net effective increase in rental rates partially offset
by a reduction in sundry income. The General Partners believe that rental
revenue at Gold Coast Storage will remain relatively stable over the next few
years. Overall rental and other revenue for the three months ended March 31,
1999 of $717,061 increased by 7.4% from the three months ended March 31, 1998
of $667,749 due to the factors detailed above affecting the Specified
Properties.
Expenses for the three months ended March 31, 1999, attributable to
Springdale Apartments of $267,924 were approximately 22% higher than expenses
for the three months ended March 31, 1998 of $219,514, due primarily to the
reinstatement of depreciation expense, partially offset by lower property
operating and maintenance, and general and administrative expenses. Before
depreciation expense, the Springdale Apartments had total expenses of
$185,828 for the three months ended March 31, 1999, compared to $219,514. for
the three months ended March 31, 1998. In the latter part of 1997, Springdale
Apartments was reclassified to "Assets Held for Sale" which resulted in the
suspension of the recognition of depreciation expense pursuant to Statement
of Financial Accounting Standards No. 121(SFAS 121) "IMPAIRMENT OF LONG-LIVED
ASSETS AND LONG-LIVED ASSETS TO BE DISPOSED OF". However, negotiations with a
potential buyer of the property were terminated June 1, 1998. Also pursuant
to SFAS 121, the Property was reclassified as "Held for Investment" and
depreciation expense was resumed June 1, 1998. The Partnership is not
currently marketing the Springdale Apartments. Property operating and
maintenance expenses were lower primarily due to the resumption of treating
appliance replacement, carpet replacement, and certain electrical and grounds
expenses as additions to investment in real estate. In the first quarter of
1998 these expenditures were treated as current period costs as set forth in
SFAS 121. Property operating expenses also decreased due to lower painting
and decoration, grounds maintenance, and water and sewer expenses, partially
offset by increased heating fuel and heating system repair costs. Water and
sewer expenses are lower in the current period due to overstated first
quarter 1998 accrual estimates caused by billing errors by the utility
company. Heating fuel costs are higher compared to the first quarter of 1998
due to mild temperatures during that period and overstated fourth quarter
1997 accrual estimates. General and administrative expenses are lower for the
quarter ended March 31, 1999 as compared to the same period one year earlier
due primarily to legal fees and property disposition costs incurred in 1998
for which there are no comparable expenses in 1999. General and
administrative expenses are also lower due to decreased advertising and
insurance expense, partially offset by higher office administrative costs,
real estate taxes, and pager and answer service expense. Administrative
salaries are higher due to increased salary levels. Management fee expense is
higher due to increased revenue.
Overall expenses attributable to Gold Coast Storage for the three months
ended March 31, 1999 of $217,151 increased 9% compared to overall expenses
for the three months ended March 31, 1998 of $199,031. Property operating and
maintenance expenses are higher in 1999 as compared to the first quarter of
1998 due to higher electric, plumbing repairs, elevator maintenance, grounds
maintenance, and heating and ventilation repairs, offset by decreased water
and sewer, heating fuel, and maintenance payroll. Grounds maintenance expense
increased primarily due to higher snow plowing costs resulting from heavy
snow fall in early 1999. Depreciation expense is slightly higher during the
current period due to additions to investment in real estate during 1998.
General and administrative expenses during 1999 are higher than 1998 with
increases in advertising, training and administrative expenses, and
administrative salaries offset by lower property insurance and professional
fees. Management fees are higher due to increased revenue.
8
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Overall expenses incurred by the Specified Properties for the three
months ended March 31, 1999 of $485,075 increased by approximately 15.9% from
the three months ended March 31, 1998 of $418,545, primarily as a result of a
combination of the foregoing factors affecting the Specified Properties.
Management anticipates that operational expenses in 1999 will be similar to
those experienced in 1998. The reinstatement of depreciation expense, as
discussed above, will result in increased aggregate expenses in 1999 as
compared to 1998.
Net income for the three months ended March 31, 1999 of $154,744 from
Springdale Apartments decreased from the three months ended March 31, 1998 of
$159,659 due primarily to the restatement of depreciation expense, offset by
increased rental revenue, lower property operating, and maintenance, and
general, and administrative expenses. Net income for the three months ended
March 31, 1999 of $77,242 from Gold Coast Storage decreased 13.7% as compared
to net income for the three months ended March 31, 1998 of $89,545, due to
increased property operating, and general and administrative expenses, and
lower sundry income partially offset by increased rental revenue.
Interest income earned by the Partnership for the three months ended
March 31, 1999 of $6,561 is lower than the $11,426 earned during the three
months ended one year earlier because excess cash was held the Springdale
Apartments earning $5,381 in interest. Administrative expenses incurred by
the Partnership for the three months ended March 31, 1999 of $26,472
decreased by approximately 34.3% from the three months ended one year earlier
of $40,264 due to a bookkeeping error which overstated the 1998 accounting
and tax service fees by $10,000.
Overall net income for the three months ended March 31, 1999 of $212,075
decreased from the three months ended March 31, 1998 of $220,366 due to
increased rental revenue offset by increased expenses at the Specified
Properties as discussed above.
Net cash flows provided by operations for the three months ended March
31, 1999 was $179,150 compared to net cash flows provided by operations of
$128,004 for the three months ended March 31, 1998. The change was primarily
the result of an increase in tenants' security liabilities and an increase in
deferred income and prepaid rent offset by a decrease in accounts payable and
accrued expenses, an increase in accounts receivable, and an increase in
other assets. Additions to investment in real estate at the Specified
Properties decreased to $15,211 for the three months ended March, 31, 1999,
compared to $37,590 for the same period one year ago. Additions to investment
in real estate during 1999 at Springdale Apartments during the first quarter
of 1999 included continued carpet and appliance replacement, and grounds
maintenance equipment replacement. There were no significant additions to
investment in real estate at Gold Coast Storage during the first quarter of
1999. Distributions to Limited Partners during the three months ended March
31, 1999 totaled $279,533 compared to distributions of $244,572 during the
three months ended March 31, 1998. The General Partners anticipate that
distributions to Limited Partners will remain at the current level throughout
1999, provided that revenues and expenses also remain stable during the
remainder of the year.
YEAR 2000 READINESS.
Information provided within this note constitutes a year 2000 readiness
disclosure pursuant to the provisions of the Year 2000 Information Readiness
and Disclosure Act.
The Year 2000 issue is the result of computer programs being written and
microchips being programmed using two digits rather than four to define the
applicable year. If not corrected, any program having time-sensitive software
or equipment incorporating embedded microchips may recognize a date using
"00" as the year 1900 rather than the year 2000 or may not recognize the year
2000 as a leap year. This could result in a variety of problems including
miscalculations, loss of data and failure of entire systems. Critical
9
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areas that could be affected are accounts receivable, accounts payable,
general ledger, cash management, computer hardware, telecommunications and
property operating systems.
The Partnership receives certain ancillary and management services from
ChrisKen Management. The services provided include all of the Partnership's
critical functions that utilize software that may have time-sensitive
applications. ChrisKen Management is in the process of testing all mission
critical software and it is anticipated that this testing will be completed
by June 30, 1999. ChrisKen Management is in the process of obtaining
documentation related to year 2000 readiness from its banking and other
outside vendors and it is anticipated that this phase will be competed by
June 30, 1999. In addition, ChrisKen Management has developed a methodology
to determine that all property operating mission critical systems are year
2000 ready. The evaluation, testing and remediation activities related to
property operating systems are expected to be completed by June 30, 1999.
Costs relating to ChrisKen Management's systems are the responsibility of
ChrisKen Management; therefore, the Partnership will incur no costs relating
to these systems. Costs relating to property level systems and equipment will
be charged to the Property.
ChrisKen Management expects to complete a contingency plan by September
30, 1999. ChrisKen Management believes that based on the status of the
Partnership's real estate portfolio and its limited number of transactions,
aside from catastrophic failures of banks, governmental agencies, etc., it
could carry out substantially all of its critical administrative and
accounting operations on a manual basis or easily convert to systems that are
year 2000 ready. ChrisKen Management has targeted September 30, 1999, for the
completion of contingency plans relating to property operating systems.
Some statements in this Form 10-Q are forward looking and actual results
may differ materially from those stated. As discussed herein, among the
factors that may affect actual results are changes in rental rates, occupancy
levels in the market place in which the Springdale Apartments and Gold Coast
Storage compete and/or unanticipated changes in expenses or capital
expenditures.
10
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PART II
CHRISKEN PARTNERS CASH INCOME FUND L.P.
(A DELAWARE LIMITED PARTNERSHIP)
Items 1 through 5 are omitted because of the absence of conditions under
which they are required.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
Exhibit 27, Financial Data Schedule
(B) Reports on Form 8-K.
No Reports on Form 8-K were filed during the quarter ended
March 31, 1999.
11
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereto duly authorized.
CHRISKEN PARTNERS CASH INCOME FUND L.P.
(Registrant)
By: ChrisKen Income Properties
Inc., Managing General
Partner
Date: May 12, 1999 By: /s/John F. Kennedy
--------------------------
John F. Kennedy
Director and President
12
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 1,054,542
<SECURITIES> 0
<RECEIVABLES> 28,013
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,085,969
<PP&E> 13,349,474
<DEPRECIATION> 2,179,296
<TOTAL-ASSETS> 12,256,147
<CURRENT-LIABILITIES> 424,464
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 11,831,683
<TOTAL-LIABILITY-AND-EQUITY> 12,256,147
<SALES> 677,754
<TOTAL-REVENUES> 723,622
<CGS> 0
<TOTAL-COSTS> 511,547
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 212,075
<INCOME-TAX> 0
<INCOME-CONTINUING> 212,075
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 212,075
<EPS-PRIMARY> 5.15
<EPS-DILUTED> 5.15
</TABLE>
