<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
(Mark One)
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998
OR
[ ] 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.
- -------------------------------------------------------------------------------
(Name of small business issuer in its charter)
Delaware 36-3521124
(State or other jurisdiction of ----------
- ------------------------------- (I.R.S. Employer
incorporation or organization) Identification No.)
345 North Canal Street, Chicago, Illinois 60606
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number (312) 454-1626
---------------
Securities registered under to Section 12(b) of the Exchange Act:
None
Securities registered under Section 12(g) of the Exchange Act:
Limited Partnership Interests
- -------------------------------------------------------------------------------
(Title of Class)
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 (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 .
------- ------
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained in this form and no disclosure will be
contained to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-KSB or any amendment to this Form 10-KSB. [x]
Issuer's total gross rental revenues for its most recent fiscal year
ended December 31, 1998 was $2,635,326. The aggregate sales price of the
limited partnership interests (the "Units") held by non-affiliates was
$18,866,000 (based on the price at which Units were offered to the public) at
December 31, 1998 and March 15, 1999. The aggregate sales price does not
reflect market value; it reflects only the price at which the Units were sold
to the public. Currently, there is no market for the Units and no market is
expected to develop.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Prospectus of the Registrant dated August 28, 1987, as
supplemented and filed pursuant to Rule 424(b) under the Securities Act of
1933, as amended, S.E.C. File No. 33-14921, are incorporated by reference in
Part III of this Annual Report on Form 10-KSB.
<PAGE>
TABLE OF CONTENTS
PAGE
PART I
Item 1. Description of Business....................................... 1
Item 2. Description of Properties..................................... 2
Item 3. Legal Proceedings............................................. 6
Item 4. Submission of Matters to a Vote of Security Holders .......... 6
PART II
Item 5. Market for Registrant's Limited Partnership Interests
and Related Security Holder Matters........................ 7
Item 6. Management's Discussion and Analysis or Plan of Organization.. 7
Item 7. Financial Statements.......................................... 10
Item 8. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure................................... 10
PART III
Item 9. Directors' Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act ........ 11
Item 10. Executive Compensation........................................ 11
Item 11. Security Ownership of Certain Beneficial Owners and Management 12
Item 12. Certain Relationships and Related Transactions................ 12
Item 13. Exhibits and Reports on Form 8-K.............................. 13
SIGNATURES .............................................................. 14
INDEX TO FINANCIAL STATEMENTS............................................F-1
(i)
<PAGE>
PART I
Item 1. DESCRIPTION OF BUSINESS.
ChrisKen Partners Cash Income Fund L.P. (the "Partnership") is a
Delaware limited partnership formed in 1987 for the purpose of acquiring,
operating, holding for investment and disposing of one or more existing
income-producing apartment complexes and/or self-storage facilities. The
general partners of the Partnership are ChrisKen Income Properties, Inc. (the
"Managing General Partner") and ChrisKen Limited Partnership I (the
"Associate General Partner") (collectively, the "General Partners"). The
Managing General Partner is an Illinois corporation, the shares of which are
owned or controlled by John F. Kennedy and Mr. John S. Marten. Mr. Marten is
the President and a Director of ChrisKen Real Estate Management Company,
Inc., which is the management agent of the Specified Properties. The
Associate General Partner is an Illinois limited partnership of which Mr.
Kennedy and ChrisKen Equities, Inc., an Affiliate of the Partnership, are the
general partners.
The Partnership offered its units of limited partnership (the "Units")
in a public offering pursuant to which it sold a total of 37,732 Units
($18,866,000) when the Offering terminated on August 28, 1989. From
time-to-time the Partnership repurchased ant retired Units. In 1996 and 1997
the Partnership purchased and retired 423 and 360.858 Units, respectively. At
December 31, 1997, 37,309.1316 Units were outstanding. At December 31, 1998
36,948.2736 Units were outstanding. The cost of the Units repurchased by the
Partnership was $135,236.
Capitalized terms not defined herein shall have the meaning ascribed to
them in the Partnership's Prospectus dated August 28, 1987.
The principal investment objectives of the Partnership are: (i)
preservation and protection of capital; (ii) dis tribution of current cash
flow, a significant portion of which should not be subject to federal income
taxes in the initial years of the Partnership's operation; and (iii) capital
appreciation.
The Partnership used the net proceeds of the Offering (the "Net
Proceeds") to purchase a 99.9% interest in the partnerships which own the
Springdale Apartments, a 199-unit apartment complex located in Waukesha,
Wisconsin (the "Springdale Apartments"), and Gold Coast Self Storage, a
155,997 gross square foot, seven story self-storage facility located in
Chicago, Illinois ("Gold Coast Storage") (collectively, the "Specified
Properties" or individually a "Property"). Further information concerning
each of the Specified Properties is provided below in Item 2. Properties.
Discussion regarding apartment complexes which may compete with the
Springdale Apartments is set forth below in Item 2. Properties - The
Springdale Apartments -- Analysis. Similarly, discussion regarding storage
facilities which may compete with Gold Coast Storage is set forth below in
Item 2. Properties - Gold Coast Storage --Analysis. The General Partners of
the Partnership believe that both Specified Properties remain competitive in
their respective markets.
The Partnership has no employees. The General Partners believe that
ChrisKen Real Estate Management Company, Inc., ("ChrisKen Management") the
manager of the Specified Properties, has sufficient personnel and other
required resources to discharge all of its responsibilities to the
Partnership. The General Partners and their Affiliates are permitted to
perform services for the Partnership. The business of the Partnership is not
seasonal and the Partnership does no foreign or export business.
A presentation of information about industry segments is not applicable
because the Partnership operates solely in the real estate industry. The
Partnership, by virtue of its ownership in real estate, is subject to federal
and state laws and regulations covering various environmental issues. The
Managing General Partner is not aware of any potential liability related to
environmental issues or conditions that would be material to the Partnership.
Item 2. DESCRIPTION OF PROPERTIES.
The Partnership holds the Specified Properties described below on an
unencumbered or all cash basis. In identifying the Specified Properties, the
General Partners considered various real property and financial factors,
including the condition and use of such Properties, the prospects for
long-range liquidity, income-producing capacity, possible long-term
appreciation prospects and income tax considerations. The Partnership will
not acquire additional
1
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properties. The Partnership originally expected to begin an orderly
liquidation of the Specified Properties after a period of operations of five
to ten years. The Partnership has been operating for more than ten years.
During 1997 the Partnership began marketing the Springdale Apartments to
potential buyers and planned to sell it during 1998. Pursuant to Statement of
Financial Accounting Standards No. 121 "IMPAIRMENT OF LONG-LIVED ASSETS AND
LONG-LIVED ASSETS TO BE DISPOSED OF" (SFAS No. 121), three significant
accounting events took place in 1997: A) the Springdale Apartments was
reclassified to "Assets Held for Sale", B) in the fourth quarter of 1997 the
recognition of depreciation expense of the Springdale Apartments was
discontinued, and C) a review of the Partnership's carrying value of the
Springdale Apartments required the Partnership to recognize a provision for
impairment of $644,066 in 1997. After extensive negotiations with the
intended buyer regarding the sale of the Property the transaction was
terminated in January 1998. The aforementioned SFAS No. 121 sets forth strict
guidelines regarding the classification of assets. Because the Partnership
did not meet those guidelines the Springdale Apartments has been reclassified
to Assets Held for Investment and depreciation expense has been recognized
effective June 1998. In connection with these negotiations, the Partnership
incurred costs of $23,302 which were expensed in 1997, and in 1998 the
Partnership incurred disposition and litigation costs of $77,142 which were
expensed in the current period. The Partnership intends to hold the Specified
Properties until such time as a sale or other disposition appears to be
advantageous to achieving the Partnership's investment objectives or it
appears that such objectives will not be met. In deciding whether to sell or
refinance a Property, the Partnership will consider factors such as potential
capital appreciation, cash flow and federal income tax considerations,
including possible adverse federal income tax consequences to the Limited
Partners. The net proceeds of any such sale or refinancing would be
distributed to the Partners in accordance with the terms of the Partnership
Agreement.
OCCUPANCY/LEASED SPACE
<TABLE>
<CAPTION>
NAME AND LOCATION DESCRIPTION OF 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98
PROPERTY
- ----------------- -------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Springdale 199 unit residential 95% 96% 88% 91% 97%
Apartments apartment complex
Waukesha, located on 13.9 acres
Wisconsin of land.
Gold Coast 155,997 square foot 83% 81% 89% 90% 88%
Storage (145,000 until 6/88)
Chicago, self-storage facility
Illinois with 99,040 leasable
square feet (78,023
before 6/88) of space.
</TABLE>
(BALANCE OF PAGE INTENTIONALLY LEFT BLANK.)
2
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THE SPRINGDALE APARTMENTS.
GENERAL. The Partnership holds a 99.9% interest, as sole general
partner, in Springdale Associates Ltd., a Delaware limited partnership
affiliated with the Partnership (hereinafter "Springdale Associates").
ChrisKen Limited Partnership I, the Partnership's Associate General Partner
holds the remaining .1% interest as the sole limited partner of Springdale
Associates. Springdale Associates owns the land and buildings located at
2407-17 Springdale Road, Waukesha (Waukesha County), Wisconsin (the
"Springdale Apartments").
PROPERTY. The Springdale Apartments comprise a multi-family rental
complex built in 1972, consisting of 199 rental units located in eight
separate buildings on 13.9 acres of land. Each building is a two-story
structure, with some buildings having exposed basements which allow for
another level of apartments on the exposed sides.
The Springdale Apartments offer one, two and three bedroom
models, with rents at December 31, 1998 as follows:
<TABLE>
<CAPTION>
Average
No. of Rent Approximate Rent/Sq.Ft.
Apart- Per Apartment (Includes
Apartment Type ments Month Size Heat)
-------------- ------- ----- ----------- -----------
<S> <C> <C> <C> <C>
1BR, 1 Bath 73 $620-650 677-733 SF $.92 -.89
*1BR, 1 Bath 6 $650-665 677-733 SF $.96 -.91
2BR, 2 Baths 91 $715-745 936-966 SF $.76 -.77
*2BR, 2 Baths 9 $745-760 936-966 SF $.80 -.79
3BR, 2 Baths 19 $890-920 1,150-1,200 SF $.77 -.77
*3BR, 2 Baths 1 $920 1,150 SF $.80
</TABLE>
*Fully Renovated
Although the current rental rates in the table above reflect an average
increase of 1.9% over December 31, 1997 rental rates, recognized lease rates
increased slightly below 1% during 1998. However, the average economic
occupancy of the Springdale Apartments increased in 1998 to 94% as compared
to 91% for 1997. Additionally, occupancy as of December 31, 1998 was 97% (see
discussion in Item 6 below). All tenant leases are for periods of from six
months to one year and no tenants lease more than one unit.
ANALYSIS. The General Partners believe that the following information
reflected market conditions as of December 31, 1998 for apartment complexes
which may compete with the Springdale Apartments.
COMPETITIVE PROJECTS
<TABLE>
<CAPTION>
Apartment Average
Rent Size Rent/Sq.Ft.
Rent Per (Average (Includes
Project Apartment Type Month in SF) Heat)
- ------- -------------- ----- --------- -----------
<S> <C> <C> <C> <C>
Meadows A) 1BR/1 Bath $610 685 $.89
B) 1BR/1 Bath $700 708 $.99
A) 2BR/2 Bath $705 943 $.75
B) 2BR/2 Bath $780 1,115 $.70
Monterey * 1BR/1 Bath $645-685 730-860 $.88-.80
(Waukesha) 2BR/2 Bath $755-780 965-1,010 $.78-.77
Willow * 1BR/1 Bath $600-625 630-912 $.95-.69
Creek 2BR/1-1/2 Bath $730-750 940-1,050 $.78-.71
(Waukesha)
</TABLE>
*Does not include heat.
A = Not Remodeled
B = Remodeled
3
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The Meadows, which is directly across the street from Springdale
Apartments, completed remodeling its clubhouse, leasing center, fitness
center and game room in 1996, and continues to remodel apartment interiors,
for which higher rents are charged. Monterey is a thirteen-year-old complex
and rental rates do not include heat. Willow Creek is a ten-to-eleven year
old complex located next to Springdale Apartments. Willow Creek, whose rental
rates do not include heat, comprises 168 units.
The Springdale Apartments are being depreciated using 27.5 year
straight-line depreciation for the portion of its federal income tax basis
allocable to non-tax-exempt Limited Partners and using a 40-year
straight-line depre ciation for the portion allocable to tax-exempt Limited
Partners. However, pursuant to SFAS No. 121, in the fourth quarter of 1997
the recognition of depreciation was discontinued as the result of the
reclassification of the Springdale Apartments to Assets Held for Sale.
Because the Property did not meet the strict guidelines set forth by SFAS No.
121 the Property was reclassified to Assets Held for Investment and
depreciation expense has been recognized effective June 1998. The General
Partners believe that the Springdale Apartments are adequately covered by
insurance. Material improvements in 1998 primarily consisted of the
replacement of appliances, fitness room equipment, and kitchen countertops in
certain apartments (see discussion in Item 6. below). Major improvements
anticipated in 1999 include: the renovation of approximately ten apartments,
apartment carpet and appliance replacement, re-carpet certain apartments and
common halls, replace exterior signage and playground equipment, and replace
approximately 84 apartment entry doors.
GOLD COAST STORAGE.
GENERAL. The Partnership has a 99.9% interest, as the sole general
partner, in Chicago I Self-Storage, Ltd., an Illinois limited partnership
affiliated with the Partnership (the "Halsted Partnership"). ChrisKen Limited
Partnership I, the Associate General Partner, holds the remaining .1%
interest as the sole limited partner of the Halsted Partnership. The Halsted
Partnership owns the land and buildings located at 1015 North Halsted,
Chicago, Illinois ("Gold Coast Storage").
PROPERTY. Gold Coast Storage is a seven-story, loft-type industrial
building constructed in approximately 1930 for use as a light manufacturing
facility and warehouse. In 1982, the building was converted to a self-storage
facility by a prior owner. When acquired, the building contained a total
gross floor area of approximately 145,000 square feet, in addition to a full
basement area, and was constructed with load-bearing exterior masonry walls
and wood floors and joists. The foundation walls are masonry with exterior
elevations of common brick and face brick. The office areas in the front of
the building are provided with heating, ventilation and air conditioning
systems which the General Partners believe to be in satisfactory condition.
The storage areas of the building are heated to tempera tures held in the 50
degree Fahrenheit range by ceiling-mounted space heaters with fans. The
building is serviced by two freight elevators and has a TV security system,
fire escape and sprinkler system. The Gold Coast Storage parking lot has 40
spaces for automobiles.
Lessees of rental units in self-storage facilities include individuals,
small businesses, professionals and to some extent, large businesses.
Individuals usually rent space for the storage of furniture, household
appliances, personal belongings, motor vehicles, boats, campers, motorcycles
and household goods. Businesses normally rent space for storage of excess
inventory, records and equipment. Such usage may be on a long-term or
short-term basis. Substantially all leases for storage space in 1998, with
the exception of approximately 9,526 square feet, were on a month-to-month
basis. The average optimum lease rate for self-storage space is $14.63 per
square foot, although rates on individual storage areas vary, based upon the
number of square feet in the specific storage area. At December 31, 1998,
approximately 88% of the space was leased compared to 90% at December 31,
1997. On an economic basis, the average occupancy during 1998 and 1997 was
89%.
The Partnership has obtained insurance covering the contents of rented
storage units where damage is due to negligence or malfeasance. However, the
scope of this type of insurance is limited and will not cover wrongful action
deemed to be willful. The expense of defending and, where appropriate,
settling or paying such claims is an added cost of business to be borne by
the Partnership. Although the past experience of ChrisKen Management would
indicate that such claims should not materially affect the Partnership's
financial condition or its results of operations, no assurance can be given
regarding the number or amount of such claims or the cost of defending or
disposing of them, which the Partnership may have to bear.
4
<PAGE>
The size and type of self-storage units which are available are set
forth in the chart below:
(1) Gold Coast Storage - Interior
<TABLE>
<CAPTION>
Annual
Cost Cost Cost per
Sq. Ft. Size Per Month Annually Sq. Ft.
------- ---- --------- -------- --------
<S> <C> <C> <C> <C>
16 4x4x4 $ 28.00 $ 336.00 $21.00
32 8x4x5 51.00 612.00 19.13
40 5x8x9 64.00 768.00 19.20
50 5x10x9 80.00 960.00 19.20
64 8x8x9 102.00 1,224.00 19.13
80 8x10x9 105.00 1,260.00 15.75
104 8x13x9 129.00 1,548.00 14.88
144 8x18x9 171.00 2,052.00 14.25
192 12x16x9 192.00 2,304.00 12.00
352 22x16x9 352.00 4,224.00 12.00
</TABLE>
(2) Gold Coast Storage - Exterior
<TABLE>
<CAPTION>
Annual
Cost Cost Cost per
Sq. Ft. Size Per Month Annually Sq. Ft.
------- ---- --------- -------- --------
<S> <C> <C> <C> <C>
200 10x20 $206.00 $2,472.00 $12.36
250 10x25 257.00 3,084.00 12.34
264 12x22 264.00 3,168.00 12.00
300 10x30 309.00 3,708.00 12.36
403 13x31 403.00 4,836.00 12.00
</TABLE>
ANALYSIS. The General Partners believe that the following information
reflects the current market conditions for self-storage space for those
facilities which may compete with Gold Coast Storage.
(1) East Bank Storage (One) (This location now offers sales
429 West Ohio Street representatives a business center which
includes private offices and free local
telephone use and copier service.)
<TABLE>
<CAPTION>
Annual
Cost Cost Cost per
Sq. Ft. Size Per Month Annually Sq. Ft.
------- ---- --------- -------- --------
<S> <C> <C> <C> <C>
25 5x5x4 $ 45.00 $ 540.00 $ 21.60
50 5x10x8 60.00 720.00 14.40
64 8x8x8 75.00 900.00 14.06
80 8x10x8 85.00 1,020.00 12.75
100 10x10x8 110.00 1,320.00 13.20
</TABLE>
(2) East Bank Storage (Two)
<TABLE>
<CAPTION>
Annual
Cost Cost Cost per
Sq. Ft. Size Per Month Annually Sq. Ft.
------- ---- --------- -------- --------
<S> <C> <C> <C> <C>
25 5x5x8 $ 45.00 $ 540.00 $ 21.60
50 5x10x8 65.00 780.00 15.60
80 8x10x8 95.00 1,140.00 14.25
100 10x10x8 115.00 1,380.00 13.80
150 10x15x8 190.00 2,280.00 15.20
200 10x20x8 245.00 2,940.00 14.70
</TABLE>
5
<PAGE>
(3) Public Storage (This location opened for business in early 1996.)
1129 N. Wells
<TABLE>
<CAPTION>
Annual
Cost Cost Cost per
Sq. Ft. Size Per Month Annually Sq. Ft.
------- ---- --------- -------- --------
<S> <C> <C> <C> <C>
25 5x5x8 $ 49.00 $ 588.00 $ 23.52
50 5x10x8 76.00 912.00 18.24
80 8x10x8 113.00 1,356.00 16.95
100 10x10x8 130.00 1,560.00 15.60
200 10x20x8 237.00 2,844.00 14.22
</TABLE>
(4) Strong Box (This property has modified some space into a
1516 N. Orleans temperature controlled wine cellar.)
<TABLE>
<CAPTION>
Annual
Cost Cost Cost per
Sq. Ft. Size Per Month Annually Sq. Ft.
------- ---- --------- -------- --------
<S> <C> <C> <C> <C>
16 4x4x4 $ 26.00 $ 312.00 $ 19.50
25 5x5x8 52.00 624.00 24.96
50 5x10x8 65.00 780.00 15.60
64 8x8x8 116.00 1,392.00 21.75
80 8x10x8 100.00 1,200.00 15.00
100 10x10x8 125.00 1,500.00 15.00
144 8x18x8 180.00 2,160.00 15.00
</TABLE>
Parking lot spaces are leased to an Affiliate of Gold Coast Storage
which operates a rental truck service. Rent is paid on a month-to-month basis
and is based on volume of rentals as an indication of use of the space. Rent
of the parking lot space is expected to average approximately $2,300 per
month.
Gold Coast Storage is being depreciated using a part 31.5-year and part
19-year straight-line depreciation method for the portion of its federal
income tax basis allocable to non-tax-exempt Limited Partners and using a 40-
year straight-line depreciation method for the portion allocable to
tax-exempt Limited Partners. Major improvements during 1998 included the
addition of a new property sign, repairs to and painting of the exterior fire
escapes, partial roof repairs, and exterior door replacements (see Item 6.
below for further discussion). Major improvements anticipated for 1999
include new fencing around a portion of the perimeter of the Property,
loading dock and concrete repairs, brick and exterior door replacement,
replace the office furnace/air conditioning system, and completion of the
burglar/security camera system replacement.
Item 3. LEGAL PROCEEDINGS.
The Partnership is not a party to any litigation that would have a
material adverse impact upon its business or operations.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of security holders during the
fourth quarter of the Partnership's fiscal year covered by this report.
6
<PAGE>
PART II
Item 5. MARKET FOR REGISTRANT'S LIMITED PARTNERSHIP INTERESTS AND
RELATED SECURITY HOLDER MATTERS.
The Units are not readily transferable. There is no public market for
the Units and it is not currently expected that any will develop. There are
restrictions upon the transferability of the Units, including the requirement
that the General Partners consent to any transferee becoming a substituted
Limited Partner (which consent may be granted or withheld at the sole
discretion of the General Partners). In addition, restrictions on transfer
may be imposed under federal and state securities laws.
The Revenue Act of 1987 contains provisions which may have an adverse
impact on investors in certain "publicly traded partnerships". If the
Partnership were to be classified as a "publicly traded partnership", income
attributable to the Units would be characterized as portfolio income and the
gross income attributable to Units acquired by tax-exempt entities would be
unrelated business income, with the result that the Units could be less
marketable. The General Partners will, if necessary, take appropriate steps
to ensure that the Partnership will not be deemed a "publicly traded
partnership."
In 1996, 423 Units were repurchased and retired by the Partnership. At
December 31, 1996, 37,309 Units were outstanding. During 1997 an additional
360.858 Units were repurchased and retired by the Partnership. At December
31, 1997 and 1998, and at March 15, 1999, there were 36,948.2736 Units issued
and outstanding which were held by a total of 1701 Unit holders.
The Limited Partners were paid four cash distributions totaling $26.23
per Unit in 1998 and $26.30 per Unit in 1997.
Item 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF ORGANIZATION
LIQUIDITY AND CAPITAL RESERVES.
The Partnership had cash and cash equivalents of approximately $792,816
as of December 31, 1998 and $594,370 as of December 31, 1997. The increase in
cash and cash equivalents on hand is the result of several primary factors:
an increase in revenues generated by the Specified Properties, an increase in
tenant security deposits held by the Specified Properties, and a decrease in
prepaid expenses and additions to investment in real estate. The Part
nership's restricted cash, representing operating and contingency reserves
(the "Reserve"), was funded by proceeds from the Offering and had a balance
of $377,320 on December 31, 1998 and December 31, 1997 (amount represents 2%
of the gross proceeds of the Offering as required by the Limited Partnership
Agreement). The Reserve is available for unanticipated contingencies and
capital improvements and repairs at the Specified Properties (see additional
discussion below).
The source of future liquidity and cash distributions to the Partners is
dependent primarily upon cash generated by the Specified Properties and
secondarily through the sale or financing of these properties.
The Partnership's Reserve is intended to assist the Partnership in
maintaining liquidity to meet cash requirements. Based upon a review of the
existing leases and occupancy levels at the Springdale Apartments and Gold
Coast Storage and further based upon the Partnership's investment objectives
and the fact that the Specified Properties are held on an all-cash basis in
connection with such acquisitions, the General Partners do not anticipate a
lack of liquidity. In the event the Reserve is insufficient to meet cash or
liquidity needs, the Partnership would be required to borrow funds to meet
such costs. Nonetheless, in addition to the Reserve discussed above, the
General Partners believe that the equity in the Partnership's Specified
Properties which are now held on an all-cash basis, will provide additional
sources of liquidity, if required. The General Partners therefore believe
that, if required, the Partnership would be able to obtain financing
collateralized by the Properties in order to provide funds to meet working
capital needs.
7
<PAGE>
RESULTS OF OPERATIONS.
COMPARISON OF 1998 TO 1997. Occupancy at the Springdale Apartments was
97% at December 31, 1998, compared to 91% at December 31, 1997. Economic
occupancy at Springdale Apartments averaged approximately 94% during 1998.
Management anticipates that occupancy will average 95 - 97% during 1999.
Leased space at Gold Coast Storage was 88% at December 31, 1998, compared to
90% at December 31, 1997. On an economic basis, the average occupancy at Gold
Coast Storage during 1998 and 1997 was 89%. At December 31, 1998, the average
optimum annual lease rate for self-storage space was $14.63 as compared to
$14.44 one year earlier. The General Partners believe that occupancy, on a
square footage basis, at Gold Coast Storage during 1999 will remain at
approximately 90%. Management continues to aggressively market both apartment
units at the Springdale Apartments and lease space at Gold Coast Storage in
order to increase occupancy percentages at both locations.
Overall rental revenue in 1998 attributable to the Specified Properties
($2,635,326) increased by approximately 5.5% from 1997 ($2,499,046). Rental
revenue increased for Springdale Apartments (approximately 3.3%) from
$1,450,523 for the year ended December 31, 1997 to $1,498,122 for the year
ended December 31, 1998 due primarily to increased rental rates and lower
vacancy loss in 1998, partially offset by higher employee unit costs. The
General Partners anticipate that rental revenue at Springdale Apartments will
improve from 1998 levels during 1999 due to improved occupancy levels. Rental
revenue increased at Gold Coast Storage (approximately 8.5%) from $1,048,523
for the year ended December 31, 1997 to $1,137,204 for the year ended
December 31, 1998. Rental income at Gold Coast increased in 1998 due to a
8.5% increase in effective rental rates. Larger storage units rent at lower
per square foot rates as compared to smaller storage units. The General
Partners believe that rental revenue at Gold Coast Storage should continue to
improve during 1999.
Material improvements at Springdale Apartments in 1998 primarily
consisted of replacing the fitness center equipment($9,870), replacement of
appliances ($42,797), and carpeting replacement ($38,357). Major improvements
at Gold Coast included new signage ($35,391), fire escape repairs and
painting ($23,400), and roof repairs and door replacement ($9,730).
Overall expenses in 1998 attributable to the Specified Properties
($1,875,597) decreased by approximately 24% from 1997 ($2,477,061). Expenses
in 1998 attributable to Springdale Apartments ($1,021,204) decreased by
approximately 40% from 1997 ($1,694,581). Property operation expenses at
Springdale Apartments decreased during the year ended December 31, 1998 as
compared to one year earlier primarily due to decreased heating fuel, rubbish
removal, and carpet replacement, partially offset by increased grounds
maintenance and water/sewer costs. Heating fuel costs decreased due to mild
temperatures during the early winter months of 1998 and overstated fourth
quarter 1997 accrual estimates. A new rubbish removal contract reduced costs
in 1998. In 1997, pursuant to SFAS No. 121, carpet replacement costs were
expensed in the fourth quarter because the Property was reclassified to
Assets Held for Sale, however with the reclassification of the Property to
Assets Held for Investment a portion of the carpet replacement expenditures
were capitalized in 1998. Grounds maintenance increased due to one-time
re-mulching of tree and flower beds in 1998. Water/sewer costs increased due
to higher occupancy during 1998 and understated fourth quarter 1997 accrual
estimates. Real estate taxes at the Springdale Apartments were higher in 1998
as compared to 1997 due to reduced state credits to the local school
district. Advertising expense remained consistent at the Property during 1998
as compared to 1997. Due to the asset classification changes in 1997 and
1998, depreciation expense at the Property was discontinued effective the
fourth quarter of 1997 and resumed effective June 1998 resulting in reduced
depreciation expense in the current period. Had depreciation been continued
while the Property was classified as an asset held for sale, depreciation
expense would have been $132,591 higher in 1998 and $104,388 higher in 1997,
with corresponding decreases in net income. General and administrative
expenses at the Springdale Apartments increased during 1998 as compared to
1997 due to the recognition of disposition and litigation costs related to
the failed sale of the Property, increased office administrative salaries,
and workers compensation insurance premiums, partially offset by reduced
administrative office costs, and bad debt expense. Additionally, absent in
1998 is the one-time refund of Wisconsin surcharge taxes the Property enjoyed
in 1997. Repairs and maintenance expense at Springdale Apartments decreased
in 1998 as compared to 1997 due to lower janitorial costs, groundskeeper
payroll, and apartment painting and decorating costs. Management fees at
Springdale Apartments increased during 1998 as compared to 1997 due to higher
total revenue in 1998.
During 1997 the Partnership began marketing the Springdale Apartments to
potential buyers and planned to sell it during 1998. Pursuant to SFAS No.
121, the Springdale Apartments was reclassified to Assets Held for Sale. Also
pursuant to SFAS No. 121, a review of the Partnership's carrying value of the
Springdale Apartments revealed
8
<PAGE>
that the Partnership was required to recognize a provision for impairment
expense of $644,066, as the net book value of the Property was greater than
the agreed to gross sales price less assumed selling costs.
Expenses attributable to Gold Coast Storage in 1998 ($854,392) increased
by approximately 9.2% from 1997 ($782,480). Property operation expense at
Gold Coast Storage decreased for the year ended December 31, 1998 as compared
to the same period one year earlier due to reduced electricity and heating
fuel costs, and the absence of a one-time grounds maintenance expense that
occurred in 1997, partially offset by increased water/sewer costs due to a
water main leak. Real estate taxes at Gold Coast Storage increased
approximately 12% in 1998 as compared to 1997 due to an increased assessed
value by the county. Repairs and maintenance expense at Gold Coast Storage
increased in 1998 as compared to 1997 primarily due to repairs to and the
painting of the fire escape structure. Advertising expense at Gold Coast
Storage increased during 1998 as compared to 1997 due to increased third
party costs and fees and enhanced marketing efforts. Depreciation and
amortization expense at Gold Coast Storage increased in 1998 as to comparable
to 1997 due to capitalized personal expenditures in 1998. Overall general and
administrative expenses at Gold Coast Storage increased in 1998 as compared
to 1997 due to increased leasing commissions paid to Property staff, general
administrative costs, bad debt expense, and workers compensation insurance
premiums. Management fee expense at Gold Coast Storage is higher in 1998 as
compared to 1997 due to higher total revenue in 1998.
For the year ended December 31, 1998 the Springdale Apartments had net
income of $543,295 as compared to a net loss of $169,027 for the year ended
December 31, 1997 due to a increase in rental revenues and decreased
expenses, primarily the aforementioned provision for impairment expense in
1997 as discussed above. Net income for 1998 ($349,701) from Gold Coast
Storage increased by approximately 7.4% from 1997 ($325,611) as a result of
the factors affecting rental revenue and expenses as detailed above.
Partnership interest income during 1998 decreased to $39,575 from
$43,919 during 1997 because during part of 1998 funds were held by the
Springdale Apartments in interest bearing accounts which generated offsetting
interest income at the Property. Partnership administrative expenses for 1998
increased to $36,013 from $25,291 in 1997 due to increased bank fees and
software expenditures due to the Year 2000 issue. Partnership professional
fees for 1998 are comparable to those incurred in 1997. In 1997 the
Partnership received a one-time refund of $6,684 from the State of Wisconsin
for surcharge taxes paid in prior years. Audit and accounting fees in 1998
decreased to $40,500 from $44,225 in 1997 primarily due a timing difference
in payments for services received.
The combined net income of the Specified Properties and Partnership for
1998 ($853,665) increased significantly from 1997 ($135,467) as the result of
the factors discussed above.
Distributions to Limited Partners in 1998 totaled $969,556, compared to
1997 distributions of $976,683. Distributions on a per unit basis to Limited
Partners in 1998 ($26.23) compared to 1997 ($26.30), of which $5.60 and $5.65
per unit, respectively, was a return of capital on a federal income tax
basis. Net income per Unit in 1998 ($20.79) increased from 1997 ($3.28)
primarily as the result of the factors detailed above affecting the Specified
Properties. The General Partners anticipate distributions and net income per
Unit to increase in the future due to a projected increase in occupancy and
rental rates, and controlled expenses at the Specified Properties.
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 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
9
<PAGE>
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-KSB 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.
INFLATION.
Inflation has several types of potentially conflicting impacts on real
estate investments. Short-term inflation can increase real estate operating
costs which may or may not be recovered through increased rents and/or sales
prices, depending on general or local economic conditions. In the long-term,
inflation can be expected to increase operating costs and replacement costs
and may lead to increased rental revenues and real estate values.
Item 7. FINANCIAL STATEMENTS.
See Index to Financial Statements on Page F-1 of this Form 10-KSB for
Financial Statements.
Item 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
(BALANCE OF PAGE INTENTIONALLY LEFT BLANK.)
10
<PAGE>
PART III
Item 9. DIRECTORS' EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.
The Partnership does not have directors or officers. The General
Partners of the Partnership are ChrisKen Income Properties, Inc., an Illinois
corporation, as Managing General Partner, and ChrisKen Limited Partnership I,
an Illinois limited partnership, as Associate General Partner.
Issued and outstanding shares of the Managing General Partner are owned
or controlled by John F. Kennedy and Mr. John S. Marten. Mr. Marten is the
President and a Director of ChrisKen Real Estate Management Company, Inc.,
which is the management agent of the Specified Properties. The sole officer
of the Managing General Partner is John F. Kennedy, who is President and
Secretary. Mr. Kennedy is its sole director. The general partners of the
Associate General Partner are Mr. Kennedy and ChrisKen Equities, Inc., an
Affiliate.
The following is a list of the executive officers and directors of the
Managing General Partner as of March 15, 1999:
<TABLE>
<CAPTION>
NAME AGE POSITION
<S> <C> <C>
John F. Kennedy 48 Director, President and Secretary
</TABLE>
John F. Kennedy holds a Bachelor of Arts degree in Psychology from
DePaul University. Mr. Kennedy co-founded The ChrisKen Group with Mr.
Christoph and has been an officer, director, and shareholder of its
affiliated companies as they have been formed or incorporated. Mr. Kennedy
has been a Director, President (Vice President until 1994) and Secretary of
the Managing General Partner since 1986, Secretary of ChrisKen Real Estate
Management Company, Inc. and is a general partner of the Associate General
Partner. Prior to co-founding The ChrisKen Group, he was involved from 1977
to 1978 with marketing various properties for American Invesco, a condominium
conversion firm headquartered in Chicago. Mr. Kennedy served as Vice
President of marketing for a privately held real estate securities firm based
in Hawaii from 1978 to 1980.
Mr. Kennedy has been a licensed real estate broker since 1981 and is
currently a general partner in 29 privately-offered real estate partnerships
located primarily in the Midwest. He also serves as a principal of the
general partners of ChrisKen Growth & Income L.P. II, a public real estate
limited partnership.
Item 10. EXECUTIVE COMPENSATION.
The Partnership does not have directors or officers. Furthermore, the
Partnership is not required to pay the officers and directors of its General
Partners any current nor any proposed compensation in such capacities.
However, the Partnership is required to pay certain fees, make distributions
and allocate a share of the profits or losses of the Partnership to the
General Partners as described under the caption "Management Compensation" on
pages 16 through 19 of the Partnership's Prospectus, which description is
incorporated herein by reference.
The following is a schedule of the compensation paid for the period
ended December 31, 1998 by the Partnership to the General Partners or their
Affiliates and a description of the transactions giving rise to such
compensation:
<TABLE>
<CAPTION>
Description of Transaction and Amount of
Entity Receiving Compensation Compensation
- ------------------------------ ------------
<S> <C>
Reimbursement of property operating payroll costs to
Affiliate of General Partners $ 262,219
Property Management Fee to Affiliate of
the General Partners $ 146,360
---------
Total $ 408,579
---------
---------
</TABLE>
11
<PAGE>
Item 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
(a) To the best knowledge of the Partnership, as of December 31, 1998
and March 15, 1999, no person held more than five percent (5%) of the Units.
(b) The Partnership, as an entity, does not have any directors or
officers. As of December 31, 1998 and March 15, 1999, 36,948 Units were
beneficially owned by 1701 Limited Partners.
Item 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
ChrisKen Real Estate Management Company, Inc. ("ChrisKen Management"),
an Affiliate of the General Partners, provides management services for the
properties owned by the Partnership. The manager's duties and
responsibilities include supervision of the day-to-day management of the
operations of the Properties, the rendition of long-range planning services
and rendering such assistance and consultation to the Managing General
Partner as may be necessary to provide for the efficient administration and
the protection of the Properties. Any fees for management services will be in
addition to the General Partners' distributive share of cash flow. ChrisKen
Management earned $146,360 and $139,710 in 1998 and 1997, respectively, for
such management services. In addition, the Partnership reimbursed ChrisKen
Management for payroll expenses for personnel directly related to property
operations totaling $262,219 and $265,496 in 1998 and 1997, respectively.
There may be conflicts of interest on the part of ChrisKen Management
since ChrisKen Management may be rendering similar services to other
partnerships. However, the General Partners believe that ChrisKen Management
has sufficient personnel and other required resources to discharge all of its
responsibilities to the various properties that it manages and will manage in
the future on behalf of the Partnership.
Neither the General Partners nor their Affiliates are prohibited from
providing services to, and otherwise dealing or doing business with, persons
who deal with the Partnership. However, no rebates or "give ups" may be
received by the General Partners or any such Affiliates of the General
Partners, nor may the General Partners or any such Affiliates participate in
any reciprocal business arrangements which would have the effect of
circumventing any of the provisions of the Limited Partnership Agreement.
The Partnership may enter into other transactions with an Affiliate,
provided that such transactions will be conducted by the General Partners on
terms which are not less favorable to the Partnership than those available
from others, the fees and other terms of the contact are fully disclosed and
such party must have been previously engaged in such business independently
of the Partnership and as an ordinary and ongoing business.
An affiliate of the General Partners leases space at Gold Coast Storage.
During 1998 and 1997 the Partnership recognized rental revenue of $27,000 and
$26,500, respectively, from this lease. On July 1, 1997 Mr. Kennedy and Mr.
John S. Marten, President of ChrisKen Management, each purchased 140 Units at
$240 per Unit from Limited Partners as the result of the offer made by the
Partnership as further discussed on page 1.
Upon the sale or refinancing of a real estate investment purchased by
the Partnership, the General Partners will receive real estate brokerage
commissions in an amount equal to the lesser of: (a) 3% of the gross sales
price of the property; or (b) 1/2 of the competitive real estate commission
if they have rendered such services; provided, however, that payment of such
commissions to the General Partners shall be subordinated to receipt by the
Limited Partners of their Adjusted Investment and Preferential Distribution.
Reference is made to Note 5 of the Notes to the Consolidated Financial
Statements for amounts paid to related parties.
(BALANCE OF PAGE INTENTIONALLY LEFT BLANK.)
12
<PAGE>
Item 13. EXHIBITS AND REPORTS ON FORM 8-K.
(a) The following exhibits are included herein or incorporated by
reference:
<TABLE>
<CAPTION>
NUMBER EXHIBIT
- ------ -------
<S> <C>
(3) Certificate of Limited Partnership (incorporated by reference from Exhibit 3
of the Registrant's Form S-11 Registration Statement filed June 9, 1987,
S.E.C. File No. 33-14921).
(4) Limited Partnership Agreement of Registrant dated as of August 3, 1987
(incorporated by reference from Exhibit 3.1, Registrant's Form S-11
Registration Statement filed June 9, 1987, S.E.C. File No. 33-14921).
(10)(1) Property Management Agreement between Registrant and ChrisKen Real Estate
Management Company (incorporated by reference from Exhibit 19.1 to the
Registrant's Form S-11 Registration Statement filed June 9, 1987, S.E.C.
File No. 33-14921).
(F-1) Index to Financial Statements.
Report of Independent Auditors F-2
Financial Statements:
Consolidated Balance Sheet - December 31, 1998 F-3
Consolidated Statements of Income for the Years Ended
December 31, 1998 and 1997 F-4
Consolidated Statements of Partners' Capital (Deficit) for
the Years Ended December 31, 1998 and 1997 F-5
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1998 and 1997 F-6
Notes to Consolidated Financial Statements F-7
(28)(1) Pages 16-19 of final Prospectus dated August 28, 1987 as filed
with the Securities and Exchange Commission pursuant to
Rule 424(b) promulgated under the Securities Act of 1933,
as amended.
(b) Reports on Form 8-K.
The Partnership did not file any reports on Form 8-K during
the quarter ended December 31, 1998.
</TABLE>
13
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act of
1934, as amended, the registrant has caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
CHRISKEN PARTNERS CASH INCOME FUND L.P.
By: ChrisKen Income Properties, Inc.,
Managing General Partner
Date: March 25, 1999 By: /s/ John F. Kennedy
-------------------
John F. Kennedy
Director and President
In accordance with the Securities Exchange Act of 1934, this report has
been signed below by the following persons on behalf of the registrant and in
the capacities and on the dates indicated.
Date: March 25, 1999 By: /s/ John F. Kennedy
-------------------
John F. Kennedy, Director
and President of the Managing General
Partner
14
<PAGE>
Consolidated Financial Statements
Chrisken Partners Cash Income Fund L.P.
(A DELAWARE LIMITED PARTNERSHIP)
YEARS ENDED DECEMBER 31, 1998 AND 1997
WITH REPORT OF INDEPENDENT AUDITORS
<PAGE>
Chrisken Partners Cash Income Fund L.P.
(A DELAWARE LIMITED PARTNERSHIP)
Index to Consolidated Financial Statements
<TABLE>
<S> <C>
Report of Independent Auditors...................................................F-2
Consolidated Financial Statements
Consolidated Balance Sheet - December 31, 1998...................................F-3
Consolidated Statements of Income for the Years Ended
December 31, 1998 and 1997....................................................F-4
Consolidated Statements of Partners' Capital for the Years
Ended December 31, 1998 and 1997..............................................F-5
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1998 and 1997....................................................F-6
Notes to Consolidated Financial Statements.......................................F-7
</TABLE>
F-1
<PAGE>
Report of Independent Auditors
To the Partners
Chrisken Partners Cash Income Fund L.P.
We have audited the accompanying consolidated balance sheet of Chrisken Partners
Cash Income Fund L.P. (a Delaware Limited Partnership) as of December 31, 1998,
and the related consolidated statements of income, partners' capital, and cash
flows for each of the two years in the period ended December 31, 1998. These
financial statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Chrisken Partners
Cash Income Fund L.P. at December 31, 1998, and the consolidated results of its
operations and its cash flows for each of the two years in the period ended
December 31, 1998, in conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
Chicago, Illinois
March 12, 1999
F-2
<PAGE>
Chrisken Partners Cash Income Fund L.P.
(A DELAWARE LIMITED PARTNERSHIP)
Consolidated Balance Sheet
December 31, 1998
<TABLE>
<S> <C>
ASSETS
Cash and cash equivalents $ 792,816
Restricted cash 377,320
Accounts receivable 38,652
Prepaid expenses 2,591
-------------------
1,211,379
Investment in real estate, at cost:
Land 2,241,388
Buildings and improvements 10,846,961
Equipment 245,914
-------------------
13,334,263
Accumulated depreciation (2,046,853)
-------------------
11,287,410
-------------------
Total assets $12,498,789
-------------------
-------------------
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 113,970
Tenants' security deposits 91,958
Deferred rental income 94,721
Accrued real estate taxes 298,999
-------------------
Total liabilities 599,648
Partners' capital, 36,948 limited partnership units issued
and outstanding 11,899,141
-------------------
Total liabilities and partners' capital $12,498,789
-------------------
-------------------
</TABLE>
SEE ACCOMPANYING NOTES.
F-3
<PAGE>
Chrisken Partners Cash Income Fund L.P.
(A DELAWARE LIMITED PARTNERSHIP)
Consolidated Statements of Income
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1998 1997
------------------------------------
<S> <C> <C>
REVENUE
Rental $2,635,326 $ 2,499,046
Interest 43,392 45,988
Other 129,449 132,530
------------------------------------
Total revenue 2,808,167 2,677,564
EXPENSES
Property operations 223,069 264,762
Provision for impairment loss on assets held for sale - 644,066
Real estate taxes 304,892 281,107
Repairs and maintenance 296,481 288,547
Advertising 83,975 76,815
Depreciation 391,866 446,261
General and administrative 507,859 400,829
Management fees - Affiliate 146,360 139,710
------------------------------------
Total expenses 1,954,502 2,542,097
------------------------------------
Net income $ 853,665 $ 135,467
------------------------------------
Net income allocated to general partners $ 85,367 $ 13,547
------------------------------------
------------------------------------
Net income allocated to limited partners $ 768,298 $ 121,920
------------------------------------
------------------------------------
Net income allocated to limited partners per weighted-average limited
partnership units outstanding $ 20.79 $ 3.28
------------------------------------
------------------------------------
Weighted-average limited partnership units outstanding 36,948 37,129
------------------------------------
------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES.
F-4
<PAGE>
Chrisken Partners Cash Income Fund L.P.
(A DELAWARE LIMITED PARTNERSHIP)
Consolidated Statements of Partners' Capital
Years ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
PARTNERS' CAPITAL ACCOUNTS
GENERAL PARTNERS LIMITED PARTNERS
TOTAL
-----------------------------------------------------------
<S> <C> <C> <C>
Balance at January 1, 1997 $ 329,341 $12,613,513 $12,942,854
Distributions (A) - (976,683) (976,683)
Net income 13,547 121,920 135,467
Repurchase of limited partnership units - (86,606) (86,606)
-----------------------------------------------------------
Balance at December 31, 1997 $ 342,888 $11,672,144 $12,015,032
Distributions (A) - (969,556) (969,556)
Net income 85,367 768,298 853,665
-----------------------------------------------------------
-----------------------------------------------------------
Balance at December 31, 1998 $ 428,255 $11,470,886 $11,899,141
-----------------------------------------------------------
-----------------------------------------------------------
</TABLE>
Note (A): Summary of quarterly cash distributions paid per limited partnership
unit:
<TABLE>
<CAPTION>
1998 1997
------------------------------------
<S> <C> <C>
First quarter $6.61 $6.61
Second quarter 6.47 6.47
Third quarter 6.54 6.61
Fourth quarter 6.61 6.61
</TABLE>
SEE ACCOMPANYING NOTES.
F-5
<PAGE>
Chrisken Partners Cash Income Fund L.P.
(A DELAWARE LIMITED PARTNERSHIP)
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1998 1997
------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 853,665 $ 135,467
Adjustments to reconcile net income to net cash flows
provided by operating activities:
Depreciation 391,866 446,261
Provision for impairment loss on assets held for sale - 644,066
Net changes in operating assets and liabilities:
Increase in accounts receivable (1,253) (10,465)
Decrease in prepaid expenses 19,548 9,997
Increase (decrease) in accounts payable and accrued real
estate taxes (8,703) 15,313
Increase in deferred income and prepaid rent 7,304 14,625
Increase in tenants' security deposits 15,808 8,710
------------------------------------
Net cash flows provided by operating activities 1,278,235 1,263,974
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to investment in real estate (110,233) (256,574)
------------------------------------
Cash flows used in investing activities (110,233) (256,574)
CASH FLOWS FROM FINANCING ACTIVITIES
Repurchase of limited partnership units - (86,606)
Distributions (969,556) (976,683)
------------------------------------
Cash flows used in financing activities (969,556) (1,063,289)
------------------------------------
Net increase (decrease) in cash and cash equivalents 198,446 (55,889)
Cash and cash equivalents, beginning of year 594,370 650,259
------------------------------------
Cash and cash equivalents, end of year $ 792,816 $ 594,370
------------------------------------
------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES.
F-6
<PAGE>
Chrisken Partners Cash Income Fund L.P.
(A DELAWARE LIMITED PARTNERSHIP)
Notes to Consolidated Financial Statements
Years ended December 31, 1998 and 1997
1. NATURE OF BUSINESS
ORGANIZATIONAL DATA
Chrisken Partners Cash Income Fund L.P. (CPCIF) is a Delaware Limited
Partnership, organized on May 4, 1987, with Chrisken Income Properties, Inc.
(Managing General Partner) and Chrisken Limited Partnership I as the General
Partners. Pursuant to a public offering (the Offering), CPCIF sold 37,732
limited partnership units at $500 for each unit. CPCIF has 99.9% ownership
interests in Springdale Associates, Ltd. (Springdale) and Chicago I
Self-Storage, Ltd. (Self-Storage). Springdale owns a 199-unit residential
complex located in Waukesha, Wisconsin, and Self-Storage owns a
155,997-square-foot self-storage facility located in Chicago, Illinois.
SEGMENTS OF BUSINESS
In 1998, the Partnership adopted Statement of Financial Accounting Standards
(SFAS) No. 131, DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED
INFORMATION ("SFAS No. 131") which was effective for fiscal years beginning
after December 15, 1997. SFAS No. 131 superseded Statement of Financial
Accounting Standards No. 14, "Financial Reporting for Segments of an
Enterprise". SFAS No. 131 establishes standards for the way that public business
enterprises report information about operating segments in annual financial
statements and requires that those enterprises report selected information about
operating segments in financial reports. SFAS No. 131 also establishes standards
for related disclosure about products and services, geographic areas, and major
customers. The adoption of SFAS No. 131 did not affect results of operations or
financial position of the Partnership.
The Partnership owns and operates rental real estate located in the Midwest
United States. It has two segments of business, a residential apartment complex
and a self-storage facility, neither of which utilizes long term leases. No
single tenant is significant to the Partnership's business.
F-7
<PAGE>
Chrisken Partners Cash Income Fund L.P.
(A DELAWARE LIMITED PARTNERSHIP)
Notes to Consolidated Financial Statements (continued)
1. NATURE OF BUSINESS (CONTINUED)
Information related to these segments for the years ended December 31, 1998
and1997 is as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1998
------------------------------------------------------------------
RESIDENTIAL SELF
APARTMENT STORAGE
COMPLEX FACILITY PARTNERSHIP CONSOLIDATED
------------------------------------------------------------------
<S> <C> <C> <C> <C>
Property operating revenues $ 1,560,682 $ 1,204,093 $ -- $ 2,764,775
Property operating expenses (598,976) (371,826) -- (970,802)
-------------------------------------------------------------
Operating income 961,706 832,267 -- 1,793,973
Reconciliation to net income
General and administrative
expense (231,550) (281,379) (78,905) (591,834)
Depreciation expense (190,678) (201,188) -- (391,866)
Interest income 3,817 -- 39,575 43,392
-------------------------------------------------------------
Net income (loss) $ 543,295 $ 349,700 $ (39,330) $ 853,665
-------------------------------------------------------------
-------------------------------------------------------------
Capital improvements $ 71,089 $ 39,144 $ -- $ 110,233
-------------------------------------------------------------
-------------------------------------------------------------
Total assets $ 7,041,309 $ 4,903,621 $ 553,859 $ 12,498,789
-------------------------------------------------------------
-------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
---------------------------------------------------------------------
RESIDENTIAL SELF
APARTMENT STORAGE
COMPLEX FACILITY PARTNERSHIP CONSOLIDATED
---------------------------------------------------------------------
<S> <C> <C> <C> <C>
Property operating revenues $ 1,523,485 $ 1,108,091 $ -- $ 2,631,576
Property operating expenses (632,886) (341,240) -- (974,126)
---------------------------------------------------------
Operating income 890,599 766,851 -- 1,657,450
Reconciliation to net income
General and administrative
expenses (164,119) (248,487) (65,038) (477,644)
Depreciation expense (253,510) (192,751) -- (446,261)
Provision for
impairment
loss (NOTE 2) (644,066) -- -- (644,066)
Interest income 2,069 -- 43,919 45,988
---------------------------------------------------------
Net income (loss) $ (169,027) $ 325,613 $ (21,119) $ 135,467
---------------------------------------------------------
---------------------------------------------------------
Capital improvements $ 233,060 $ 23,514 $ -- $ 256,574
---------------------------------------------------------
---------------------------------------------------------
</TABLE>
F-8
<PAGE>
Chrisken Partners Cash Income Fund L.P.
(A DELAWARE LIMITED PARTNERSHIP)
Notes to Consolidated Financial Statements (continued)
2. SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of
CPCIF, Springdale, and Self-Storage (collectively, the Partnership).
Intercompany balances and transactions have been eliminated. Amounts
attributable to the minority interests in Springdale and Self-Storage have not
been reflected as those amounts are not material.
CASH EQUIVALENTS
The Partnership considers all highly liquid investments with an original
maturity of three months or less when purchased to be cash equivalents.
INVESTMENT IN REAL ESTATE AND ASSETS HELD-FOR-SALE
During 1997, the Partnership began marketing the property owned by Springdale to
potential buyers and planned to sell it during 1998. In accordance SFAS No. 121,
ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO
BE DISPOSED OF, the Partnership reclassified the real estate property owned by
Springdale to assets held for sale during 1997 and discontinued recognition of
depreciation expense.
In February 1998, a lawsuit was filed against the Partnership by a prospective
buyer of the Springdale Property. The lawsuit was settled as of June 1, 1998,
and the Partnership has ceased marketing the Property and has no present plans
to dispose of the Property. Accordingly, as of June 1, 1998, the Springdale
Property is no longer considered as assets held for sale and the net book value
of $6,664,000 has been reclassified as an investment in real estate.
Depreciation of property and improvements held for investment is computed using
the straight-line method over the estimated useful lives of the assets.
Nonresidential properties are depreciated over 31.5 years, and related equipment
is depreciated over seven years. Prior to the decision to hold the Springdale
Property for sale, residential property was depreciated over 27.5 years and
related equipment was depreciated over 7 years. As of June 1, 1998, depreciation
for residential property is based on the net book value of the property and is
computed by the straight-line method over the remaining 16.75 year life of the
residential property and average remaining 3.5 year life for equipment.
F-9
<PAGE>
Chrisken Partners Cash Income Fund L.P.
(A DELAWARE LIMITED PARTNERSHIP)
Notes to Consolidated Financial Statements (continued)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
For assets held for sale, the Partnership records impairment losses when the net
book value is less than fair value, less costs to dispose. Fair value is based
on estimated cash flows discounted at a risk-adjusted rate of interest or a
value derived from comparable sales transactions in the marketplace. The
Partnership reclassified the real estate property owned by Springdale with a
fair value less cost to dispose totaling $6,664,000 to assets held for sale and
recognized a provision for impairment totaling $644,066 during 1997.
RENTAL REVENUE
The Partnership recognizes rental revenues as they are due in accordance with
the terms of the respective tenant operating leases. This method of rental
recognition approximates a straight-line basis due to the short-term nature
(generally one year or less) of tenant leases.
FAIR VALUE OF FINANCIAL INSTRUMENTS
SFAS No. 107, DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS, requires
disclosure of fair value information about financial instruments, whether or not
recognized in the balance sheet, for which it is practical to estimate that
value. Substantially all financial instruments reflected in the Partnership's
consolidated balance sheet, consisting of cash and cash equivalents, restricted
cash, accounts receivable, and accounts payable, are, by their terms, equivalent
with respect to carrying and fair values. Management is not aware of the
existence of any off-balance-sheet financial instruments.
INCOME TAXES
The Partnership is not liable for federal income taxes. Each partner includes
his proportionate share of partnership income or loss in his own tax return.
Therefore, no provision for income taxes is made in the consolidated financial
statements of the Partnership.
USE OF ESTIMATES
The preparation of the consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the consolidated financial
statements and accompanying notes. Actual results could differ from those
estimates.
F-10
<PAGE>
Chrisken Partners Cash Income Fund L.P.
(A DELAWARE LIMITED PARTNERSHIP)
Notes to Consolidated Financial Statements (continued)
3. BASIS OF PRESENTATION
The Partnership maintains its accounting books and records in accordance with
the Internal Revenue Code's rules and regulations. The accompanying consolidated
financial statements are prepared in accordance with generally accepted
accounting principles which will differ from the federal income tax basis method
of accounting due to the different treatment of various items as specified in
the Internal Revenue Code, principally impairment loss, depreciation expense,
and prepaid rent. The net effect of these accounting differences is that the net
income in the financial statements for 1998 and 1997 is approximately $6,076
greater and $631,485 less, respectively, than the taxable income of the
Partnership. The aggregate cost of real estate for federal income tax purposes
at December 31, 1998, is $12,989,107.
4. PARTNERSHIP AGREEMENT
The Partnership Agreement provides that profits, losses, and cash distributions
be allocated 10% to the General Partners and 90% to the Limited Partners, except
that: (a) cash distributions to the General Partners will be subordinated to the
Limited Partners' receiving their noncumulative, noncompounded annual preferred
return of 7% per annum on their aggregate contributed capital (the Annual
Preferred Return), as defined; and (b) the special allocation provisions, as
defined, in the event of a refinancing, sale, or other disposition of the
property of the Partnership. Distributions to partners in 1998 and 1997 were not
sufficient to meet the Annual Preferred Return.
Net sale or refinancing proceeds, as defined, to the extent distributed, will be
allocated to the Limited Partners until the Limited Partners receive
distributions equal to their adjusted investment in the Partnership, together
with an amount, to the extent not previously paid, necessary to yield an annual
return on their adjusted investment of 10% per annum, which shall be cumulative
but noncompounded. Thereafter, 85% of any additional net sale or refinancing
proceeds will be allocated to the Limited Partners, and 15% will be allocated to
the General Partners. Net proceeds from a sale may not be reinvested in new
properties by the Partnership after the Partnership has completed its second
year of operations. Net proceeds from a refinancing will be reinvested only to
the extent necessary for improvements and repairs to existing properties.
F-11
<PAGE>
Chrisken Partners Cash Income Fund L.P.
(A DELAWARE LIMITED PARTNERSHIP)
Notes to Consolidated Financial Statements (continued)
4. PARTNERSHIP AGREEMENT (CONTINUED)
The Partnership shall continue until December 31, 2027, unless sooner terminated
pursuant to the applicable provisions of the Partnership Agreement.
The Partnership Agreement provides that the Partnership is to maintain working
capital reserves in an amount not less than 2% of the proceeds of the Offering.
However, to the extent that these reserves are utilized to fund unanticipated
cash requirements, the reserves can be decreased. At December 31, 1998, cash
restricted for working capital reserve purposes was $377,320.
Effective July 1, 1997, the Partnership purchased and retired 361 Limited
Partnership units from the Limited Partners at a cost of $86,606.
5. RELATED PARTY TRANSACTIONS
On July 1, 1997, the President of the Managing General Partner and another
related party purchased 140 limited partnership units at a cost of $240 per
unit.
The Partnership pays management fees to Chrisken Real Estate Management Company,
Inc. (Chrisken), an affiliate of the General Partners. Management fees are
calculated at 5% of gross collections, as defined, for Springdale and 6% of
gross collections, as defined, for Self-Storage. Total management fees for 1998
and 1997 were $146,360 and $139,710, respectively. The agreements are subject to
annual renewal. In addition, the Partnership reimburses Chrisken for personnel
costs directly attributable to property operations, totaling $290,950 and
$265,496 in 1998 and 1997, respectively. These costs are included in property
operation expenses in the accompanying consolidated statements of income.
In 1998 and 1997, an affiliate of the General Partners rented space at
Self-Storage. Rent was based on a percentage of net income of the affiliate and
totaled $27,000 and $26,500, respectively.
6. LITIGATION
In February 1998, a lawsuit was filed against the Partnership by a prospective
buyer of the property owned by Springdale regarding termination of the contract
to sell the property. The lawsuit was settled as of June 1, 1998. Settlement
costs and related legal fees charged to expense pertaining to this matter
amounted to $77,142 in 1998 and $23,302 in 1997.
F-12
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 1,170,136
<SECURITIES> 0
<RECEIVABLES> 38,652
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,211,379
<PP&E> 13,334,263
<DEPRECIATION> 2,046,853
<TOTAL-ASSETS> 12,498,789
<CURRENT-LIABILITIES> 599,648
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 11,899,141
<TOTAL-LIABILITY-AND-EQUITY> 12,498,789
<SALES> 2,635,326
<TOTAL-REVENUES> 2,808,167
<CGS> 0
<TOTAL-COSTS> 1,954,502
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 853,665
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 853,665
<EPS-PRIMARY> 20.79
<EPS-DILUTED> 20.79
</TABLE>
