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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 June 30, 1997
[ ] TRANSITION REPORT UNDER SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number 0-20129
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Chrisken Growth & Income L.P. II
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(Exact name of small business issuer as Specified in its
certificate of Limited partnership)
Delaware 36-3644609
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(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)
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(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 GROWTH & INCOME L.P. II
INDEX
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<S> <C> <C>
PART I Financial Information PAGE
Item 1. Financial Statements
Balance Sheet at June 30, 1997 2
Statements of Operations for the
Three Months and Six Months Ended
June 30, 1997 and 1996 3
Statement of Partners' Capital for
the Six Months Ended June 30, 1997 4
Statements of Cash Flows for
the Six Months Ended
June 30, 1997 and 1996 5
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis
or Plan of Operation 7
PART II. Other Information
Item 1. Legal Proceedings 9
Item 2. Changes in Securities 9
Item 3. Defaults Upon Senior Securities 9
Item 4. Submissions of Matters to a Vote of
Security Holders 9
Item 5. Other Information 9
Item 6. Exhibits and Reports on Form 8-K 9
SIGNATURE
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1
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Chrisken Growth & Income Fund L.P. II
(A Delaware Limited Partnership)
Balance Sheet
June 30, 1997
(Unaudited)
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<S> <C>
ASSETS
Cash and cash equivalents $ 121,423
Restricted cash 57,645
Real estate taxes and other escrows 39,929
Deferred financing fees, net of accumulated amortization of $77,695 4,376
Other 762
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224,135
Investment in real estate, at cost:
Land 315,334
Land improvements 372,881
Buildings and improvements 6,461,025
Equipment 418,375
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7,567,615
Accumulated depreciation (2,016,047)
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5,551,568
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Total assets $ 5,775,703
============
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 46,624
Accrued real estate taxes 100,548
Tenants' security deposits 21,611
Mortgage loan payable 3,000,000
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Total liabilities 3,168,843
Partners' capital, 11,529 limited partnership units issued and outstanding 2,606,860
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Total liabilities and partners' capital $ 5,775,703
============
</TABLE>
See accompanying notes.
2
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Chrisken Growth & Income Fund L.P. II
(A Delaware Limited Partnership)
Statements of Income
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
1997 1996 1997 1996
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<S> <C> <C> <C> <C>
REVENUE
Rental $302,762 $296,208 $601,402 $ 594,451
Interest 1,592 1,698 2,513 2,880
Other 23,401 18,321 39,968 35,734
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Total revenue 327,755 316,227 643,883 633,065
EXPENSES
Property operations 84,335 68,793 142,596 127,869
Depreciation 76,742 76,276 153,484 152,552
General and administrative 61,358 52,653 137,157 130,510
Interest 62,229 62,229 124,458 124,458
Management fees - Affiliate 16,304 15,830 32,191 31,430
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Total expenses 300,968 275,781 589,886 566,819
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Net income $ 26,787 $ 40,446 $ 53,997 $ 66,246
============================================
Net income allocated to general partners $ 2,679 $ 4,045 $ 5,400 $ 6,625
============================================
Net income allocated to limited partners $ 24,108 $ 36,401 $ 48,597 $ 59,621
============================================
Net income allocated to limited
partners per limited partnership unit
outstanding $ 2.09 $ 3.16 $ 4.22 $ 5.17
============================================
Limited partnership units outstanding 11,529 11,529 11,529 11,529
============================================
</TABLE>
See accompanying notes.
3
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Chrisken Growth & Income Fund L.P. II
(A Delaware Limited Partnership)
Statement of Partners' Capital (Deficit)
Six months ended June 30, 1997
(Unaudited)
<TABLE>
<Capital>
PARTNER CAPITAL (DEFICIT) ACCOUNTS
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GENERAL LIMITED
PARTNERS PARTNERS TOTAL
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<S> <C> <C> <C>
Balance at January 1, 1997 $ (13,897) $2,789,445 $2,775,548
Distributions (A) -- (222,683) (222,683)
Net income 5,400 48,597 53,997
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Balance at June 30, 1997 $ (8,497) $2,615,359 $2,606,862
=====================================
</TABLE>
(A) Summary of 1997 quarterly cash distributions paid per limited partnership
unit:
<TABLE>
<S> <C>
First quarter $9.45
Second quarter $9.86
</TABLE>
See accompanying notes.
4
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Chrisken Growth & Income Fund L.P. II
(A Delaware Limited Partnership)
Statements of Cash Flows
(Unaudited)
<TABLE>
SIX MONTHS ENDED
JUNE 30
1997 1996
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 53,997 $ 66,246
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 153,484 152,552
Amortization of deferred financing fees 8,208 8,208
Net changes in operating assets and liabilities:
Increase in real estate taxes and other escrows (10,055) (9,366)
Decrease in other assets 8,061 3,039
Decrease in accounts payable and accrued expenses (2,824) (12,830)
(Decrease) increase in tenants' security deposits (21) 576
Decrease in due to affiliates -- (26,303)
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Net cash provided by operating activities 210,850 182,122
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (9,163) (3,809)
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Cash used in investing activities (9,163) (3,809)
CASH FLOWS FROM FINANCING ACTIVITIES
Distributions to partners (222,683) (205,904)
Received from affiliates -- 47,625
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Net cash used in financing activities (222,683) (158,279)
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Net (decrease) increase in cash and cash equivalents (20,996) 20,034
Cash and cash equivalents, beginning of period 142,419 137,759
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Cash and cash equivalents, end of period $ 121,423 $ 157,793
====================
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 116,250 $ 116,250
====================
</TABLE>
See accompanying notes.
5
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Chrisken Growth & Income Fund L.P. II
(A Delaware Limited Partnership)
Notes to Financial Statements
1. INTERIM ACCOUNTING POLICIES
The accompanying unaudited 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 Regulation
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 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 financial statements and notes thereto included in the Partnership's
Annual Report on Form 10-KSB for the year ended December 31, 1996.
2. MORTGAGE LOAN PAYABLE
The Partnership has a first mortgage loan payable of $3,000,000 to an insurance
company, which is collateralized by the Partnership's real estate. The loan is
payable in monthly installments of interest only at a rate of 7.75% per annum.
Principal and unpaid interest are due November 1, 1997. Principal prepayments
are permitted, provided that: (a) the Partnership pay a prepayment penalty of
3% of the outstanding principal amount; (b) notice of prepayment be given to
the lender 90 days prior to remittance; and (c) prepayments be in multiples of
$10,000. The Partnership, in the normal course of business, expects to obtain
an extension on the mortgage loan with another lender. No provision for any
gain or loss that may result from the outcome of this uncertainty has been
reflected in the accompanying financial statements.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Chrisken Growth & Income L.P. II (the "Partnership") is a Delaware limited
partnership formed in 1989, with Chrisken Income Properties, Inc. II (Managing
General Partner) and Chrisken Limited Partnership II as the General Partners.
The Partnership owns and operates a 144 unit residential rental complex known
as Barrington Estates (the "Property") located in Indianapolis, Indiana.
Pursuant to a public offering (the "Offering") the Partnership sold 11,529
limited partnership units at $500 for each unit. The proceeds of the Offering
were used to acquire the Property.
Liquidity and Capital Resources
At June 30, 1997, the Partnership had cash and cash equivalents of
$121,423 compared to $142,419 at December 31, 1996. The decrease in cash and
cash equivalents during the six months ended June 30, 1997 is the result of
additions to investment in real estate, a reduction in accounts payable and
distributions to limited partners in excess of net cash flows provided by
operating activities. Restricted cash represents operating and contingency
reserves equal to 1% of the gross proceeds of the Offering ($57,645 as of June
30, 1997 and December 31, 1996) which the General Partners believe is adequate
to satisfy cash requirement needs. Management has not budgeted any significant
major repairs or improvements to the property during 1997.
The General Partners are currently exploring refinancing alternatives and
anticipate replacing the current loan prior to or by November 1, 1997. There
can be no assurance that the terms of such loan will be on terms as favorable
as those of the existing mortgage indebtedness. The General Partners believe
that because the Partnership currently has mortgage indebtedness of only
$3,000,000 after substantial renovation of the Property, the Property could be
refinanced or secondary financing could be obtained if necessary to provide
additional funds.
The source of future liquidity and cash distributions to the Partners is
dependent primarily upon the cash generated by the Property. At June 30, 1997
the Property was generating, and the General Partners believe that the Property
will continue to generate, sufficient cash flow from operations to service
existing indebtedness.
Results of Operations
The Property was 94% occupied as of June 30, 1997, 97% as of December 31,
1996, and 99% as of June 30, 1996. Management believes that occupancy at the
Property will be approximately 95 - 98% for the remainder of 1997, as a result
of stabilization in the market. The Partnership had total revenues of $643,883
for the six months ended June 30, 1997, compared to total revenues of $633,065
for the six months ended June 30, 1996. Revenues increased in 1997 primarily
as a result of a 3% increase in apartment rental rates partially offset by an
increase in vacancy loss during the six months ended June 30, 1997 as compared
to the six months ended June 30, 1996. Management believes revenues will
remain relatively constant provided that occupancy remains stable. The
Partnership had total expenses of $589,886 for the six months ended June 30,
1997, compared to $566,819 for the six months ended June 30, 1996. Total
expenses increased primarily due to increased property operations,
depreciation, general and administrative, and management fee expenses.
Property operations are higher in 1997 as compared to 1996 due to lower grounds
7
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maintenance expenditures as the result of delayed in landscape services in 1997
as compared to 1996 offset by increased maintenance staff payroll, utilities,
general maintenance expenditures, painting and decorating costs and higher
carpet replacement primarily due to increased vacancy during the six months
ended June 30, 1997. Depreciation expense is slightly higher due to additions
to investment in real estate during 1996. General and administrative expenses
are higher in 1997 as compared to 1996 due to increased office staff payroll,
also due to increased vacancy during the current period, and increased real
estate tax expenses. Real estate tax expense is higher in 1997 as compared to
1996 due to an overstated estimate at December 31, 1995 of 1995 taxes payable
in 1996 which reduced 1996 real estate tax expense. Management fees increased
due to increased revenue (5% of gross revenue).
For the six months ended June 30, 1997, the Partnership had net income of
$53,997 compared to net income of $66,246 for the six months ended June 30,
1996, due to increased revenue and offset by increased expenses for the six
months ended June 30, 1997 compared to the same period in 1996 as described
more fully above.
Net cash provided by operating activities for the six months ended June
30, 1997 was $210,850 compared to net cash provided by operating activities of
$182,122 for the six months ended June 30, 1996. The increase in net cash
provided by operating activities was attributable primarily to a decrease in
other assets offset by a decrease in net income, an increase in real estate tax
escrows and a decrease in accounts payable. The Partnership paid distributions
of $222,683 during the six months ended June 30, 1997, as compared to $205,904
during the six months ended June 30, 1996. The increase in distributions in
1997 as compared to the same period one year ago is the result of the General
Partners anticipation that revenues will increase and expenditures remain
stable during the remainder of 1997 as compared to 1996.
"Safe Harbor" statement under the U.S. Private Securities Litigation
Reform Act of 1995: 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 Barrington Estates competes
and/or unanticipated changes in expenses or capital expenditures.
8
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PART II
CHRISKEN GROWTH AND INCOME L.P. II
(A DELAWARE LIMITED PARTNERSHIP)
Items 1 through 6.b are omitted because of the absence of conditions under
which they are required.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) No exhibits are being filed with this Report.
9
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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 Growth & Income L.P. II
(Registrant)
By: Chrisken Income Properties
Inc., II Managing General Partner
Date: August 12, 1997 By:/s/John F. Kennedy
----------------------
John F. Kennedy
Director and President
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 179,068
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 224,135
<PP&E> 7,567,615
<DEPRECIATION> 2,016,047
<TOTAL-ASSETS> 5,775,703
<CURRENT-LIABILITIES> 168,843
<BONDS> 3,000,000
0
0
<COMMON> 0
<OTHER-SE> 2,606,860
<TOTAL-LIABILITY-AND-EQUITY> 5,775,703
<SALES> 601,402
<TOTAL-REVENUES> 643,883
<CGS> 0
<TOTAL-COSTS> 465,428
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 124,458
<INCOME-PRETAX> 53,997
<INCOME-TAX> 0
<INCOME-CONTINUING> 53,997
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 53,997
<EPS-PRIMARY> 4.22
<EPS-DILUTED> 4.22
</TABLE>
