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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 September 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
<TABLE>
<CAPTION>
PART I Financial Information PAGE
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<S> <C>
Item 1. Financial Statements
Balance Sheet at September 30, 1997 2
Statements of Income for the
Three Months and Nine Months Ended
September 30, 1997 and 1996 3
Statement of Partners' Capital for the
Nine Months Ended September 30, 1997 4
Statements of Cash Flows for
the Nine Months Ended
September 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
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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
</TABLE>
1
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Chrisken Growth & Income L.P. II
(A Delaware Limited Partnership)
Balance Sheet
September 30, 1997
(Unaudited)
<TABLE>
<S> <C>
ASSETS
Cash and cash equivalents $ 93,437
Restricted cash 57,645
Real estate and other escrows 70,334
Deferred financing fees, net of accumulated amortization of $81,799 272
Other 4,687
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226,375
Investment in real estate, at cost:
Land 315,334
Land improvements 372,881
Buildings and improvements 6,461,025
Equipment 423,988
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7,573,228
Less: Accumulated depreciation (2,092,789)
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5,480,439
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Total assets $5,706,814
==========
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 51,421
Accrued real estate taxes 129,939
Tenants' security deposits 19,948
Mortgage loan payable 3,000,000
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Total liabilities 3,201,308
Partners' capital, 11,529 limited partnership units issued and
outstanding 2,505,506
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Total liabilities and partners' capital $5,706,814
==========
</TABLE>
See accompanying notes.
2
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Chrisken Growth & Income L.P. II
(A Delaware Limited Partnership)
Statements of Income
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
1997 1996 1997 1996
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<S> <C> <C> <C> <C>
REVENUE
Rental $301,461 $296,304 $902,863 $890,755
Interest 1,928 1,832 4,441 4,712
Other 21,859 22,870 61,827 58,604
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Total revenue 325,248 321,006 969,131 954,071
EXPENSES
Property operations 90,147 88,262 232,743 216,131
Depreciation 76,742 76,276 230,226 228,828
General and administrative 66,193 77,393 203,350 207,903
Interest 62,229 62,229 186,687 186,687
Management fees - Affiliate 16,316 15,963 48,507 47,393
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Total expenses 311,627 320,123 901,513 886,942
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Net income $ 13,621 $ 883 $ 67,618 $ 67,129
=================================================
Net income allocated to general partners $ 1,362 $ 88 $ 6,762 $ 6,713
=================================================
Net income allocated to limited partners $ 12,259 $ 795 $ 60,856 $ 60,416
=================================================
Net income allocated to limited
partners per limited partnership unit
outstanding $ 1.06 $ .07 $ 5.28 $ 5.24
=================================================
Limited partnership units outstanding 11,529 11,529 11,529 11,529
=================================================
</TABLE>
See accompanying notes.
3
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Chrisken Growth & Income L.P. II
(A Delaware Limited Partnership)
Statement of Partners' Capital
Nine months ended September 30, 1997
(Unaudited)
<TABLE>
PARTNERS' 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) - (337,660) (337,660)
Net income 6,762 60,856 67,618
--------------------------------------------
Balance at September 30, 1997 $ (7,135) $2,512,641 $2,505,506
============================================
</TABLE>
(A) Summary of 1997 quarterly cash distributions paid per limited partnership
unit:
First quarter $9.45
Second quarter 9.86
Third quarter 9.97
See accompanying notes.
4
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Chrisken Growth & Income L.P. II
(A Delaware Limited Partnership)
Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30
1997 1996
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 67,618 $ 67,129
Adjustments to reconcile net income to net cash
flows provided by operating activities:
Depreciation 230,226 228,828
Amortization of deferred financing fees 12,312 12,312
Net changes in operating assets and liabilities:
Increase in real estate and other escrows (40,460) (39,771)
Decrease in other assets 4,138 7,201
Increase in accounts payable and accrued expenses 31,364 20,624
Decrease in tenants' security deposits (1,744) (1,124)
Decrease in due to affiliates - (26,303)
-----------------------
Net cash flows provided by operating activities 303,454 268,896
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to investment in real estate (14,776) (8,141)
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Cash flows used in investing activities (14,776) (8,141)
CASH FLOWS FROM FINANCING ACTIVITIES
Distributions (337,660) (310,100)
Reimbursement from affiliates - 47,625
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Net cash flows used in financing activities (337,660) (262,475)
-----------------------
Net decrease in cash and cash equivalents (48,982) (1,720)
Cash and cash equivalents, beginning of period 142,419 137,759
-----------------------
Cash and cash equivalents, end of period $ 93,437 $ 136,039
=======================
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 174,375 $ 174,375
=======================
</TABLE>
See accompanying notes.
5
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Chrisken Growth & Income L.P. II
(A Delaware Limited Partnership)
Notes to Financial Statements
(Unaudited)
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.
The Partnership recently executed an extension of the current mortgage note
from November 1, 1997 to February 1, 1998. All principal and unpaid interest
is now due on February 1, 1998. 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.
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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 September 30, 1997, the Partnership had cash and cash equivalents
of $93,437 compared to $142,419 at December 31, 1996. The decrease in cash and
cash equivalents during the nine months ended September 30, 1997 is the result
of additions to investment in real estate 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 September 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 for the remainder of 1997.
The Partnership recently executed an extension of the current
mortgage note from November 1, 1997 to February 1, 1998. The General Partners
continue exploring financing alternatives and anticipate replacing the current
loan prior to or by February 1, 1998. 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 September
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 97% occupied as of September 30, 1997, 97% as of
December 31, 1996, and 99% as of September 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 $969,131 for the nine months ended September 30, 1997, compared to
total revenues of $954,071 for the nine months ended September 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 nine
months ended September 30, 1997 as compared to the nine months ended September
30, 1996. Management believes revenues will remain relatively constant
provided that occupancy remains stable. The Partnership had total expenses of
$901,513 for the nine months ended September 30, 1997, compared to $886,942 for
the nine months ended September 30, 1996.
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Total expenses increased primarily due to increased property operations,
depreciation, and management fee expenses offset by lower general and
administrative expenses. Property operations are higher in 1997 as compared to
1996 due to increased utilities, painting and decorating costs and higher
carpet replacement primarily due to increased vacancy during the nine months
ended September 30, 1997 offset by lower general maintenance expenditures.
Depreciation expense is slightly higher due to additions to investment in real
estate during 1996 and 1997. General and administrative expenses are lower in
1997 as compared to 1996 primarily due to lower real estate tax and property
insurance expenses. Management fees increased due to increased revenue
(calculated as 5% of gross revenue).
For the nine months ended September 30, 1997, the Partnership had net
income of $67,618 compared to net income of $67,129 for the nine months ended
September 30, 1996, due to increased revenue offset by increased expenses for
the nine months ended September 30, 1997 compared to the same period in 1996 as
described more fully above.
Net cash flows provided by operating activities for the nine months
ended September 30, 1997 was $303,454 compared to net cash flows provided by
operating activities of $268,896 for the nine months ended September 30, 1996.
The increase in net cash flows provided by operating activities was
attributable primarily to the fact that there was a decrease in due to
affiliates for the nine months ended September 30, 1996 but there was no change
in due to affiliates for the nine months ended September 30, 1997 (as this
liability was paid off during 1996). The Partnership paid distributions of
$337,660 during the nine months ended September 30, 1997, as compared to
$310,100 during the nine months ended September 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 5 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: November 12, 1997 By: /s/John F. Kennedy
----------------------------
John F. Kennedy
Director and President
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 151,082
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 226,375
<PP&E> 7,573,228
<DEPRECIATION> 2,092,789
<TOTAL-ASSETS> 5,706,814
<CURRENT-LIABILITIES> 201,308
<BONDS> 3,000,000
0
0
<COMMON> 0
<OTHER-SE> 2,505,506
<TOTAL-LIABILITY-AND-EQUITY> 5,706,814
<SALES> 902,863
<TOTAL-REVENUES> 969,131
<CGS> 0
<TOTAL-COSTS> 714,826
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 186,687
<INCOME-PRETAX> 67,618
<INCOME-TAX> 0
<INCOME-CONTINUING> 67,618
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 67,618
<EPS-PRIMARY> 5.28
<EPS-DILUTED> 5.28
</TABLE>
