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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, 1997
OR
[ ] 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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(Name of small business issuer in its charter)
Delaware 36-3644609
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(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
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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
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(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
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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, 1997 were $1,229,692. The aggregate sales price of the limited
partnership interests (the "Units") held by non-affiliates was $5,764,500 (based
on the price at which Units were offered to the public) at December 31, 1997 and
March 15, 1998. 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 Registr ant dated September 8, 1989, as
supplemented and filed pursuant to Rule 424(b) under the Securities Act of 1933,
as amended, S.E.C. File No. 33-28893, are incorporated by reference in Part III
of this Annual Report on Form 10-KSB.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I
Page
----
<S> <C> <C>
Item 1. Description of Business.............................................................. 1
Item 2. Description of Properties............................................................ 2
Item 3. Legal Proceedings..................................................................... 4
Item 4. Submission of Matters to a Vote of Security Holders................................... 5
PART II
Item 5. Market for Registrant's Limited Partnership Interests and Related
Security Holder Matters.............................................................. 6
Item 6. Management's Discussion and Analysis or Plan of Operation............................. 6
Item 7. Financial Statements.................................................................. 9
Item 8. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.............................................................. 9
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act .................................. 10
Item 10. Executive Compensation ............................................................. 11
Item 11. Security Ownership of Certain Beneficial Owners and
Management.......................................................................... 11
Item 12. Certain Relationships and Related Transactions....................................... 11
Item 13. Exhibits and Reports on Form 8-K..................................................... 13
SIGNATURES...................................................................................................... 14
INDEX TO FINANCIAL STATEMENTS...................................................................................F-1
</TABLE>
(i)
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PART I
Item 1. Description of Business.
ChrisKen Growth & Income L.P. II (the "Partnership") is a Delaware limited
partnership formed in 1989 for the purpose of acquiring, operating, holding for
investment and disposing of one or more existing income-producing apartment
complexes and/or commercial properties located primarily in the Midwestern
United States. The general partners of the Partnership are ChrisKen Income
Properties, Inc. II (the "Managing General Partner") and ChrisKen Limited
Partnership II (the "Associate General Partner") (collectively, the "General
Partners"). The Managing General Partner is an Illinois corporation, the shares
of which are owned by Messrs. Robert W. Christoph and John F. Kennedy. As of
January 1, 1994 and pursuant to written agreement, Mr. Christoph resigned as an
officer and director of the Managing General Partner and transferred his shares
into a voting trust of which Mr. Kennedy is the voting trustee. The Associate
General Partner is an Illinois limited partnership of which Mr. Kennedy and
ChrisKen Equities Corp., an Affiliate, are general partners. As of January 1,
1994 and pursuant to written agreement, Mr. Christoph converted his general
partner interest in the Associate General Partner into a special limited partner
interest without any management rights.
The principal investment objectives of the Partnership are: (i)
preservation and protection of capital; (ii) distribution of current cash flow,
a portion of which will not be subject to federal income taxes in the
Partnership's initial years of operation; and (iii) capital appreciation.
The Partnership originally intended to acquire one or more properties: (i)
directly through the acquisition of fee title; (ii) indirectly through the
acquisition of substantially all of the interest in an entity which, in turn,
owned the real property; or (iii) by way of other forms of acquisition deemed to
be advantageous to the Partnership. However, since sales of Units progressed
more slowly than originally anticipated by the General Partners, the Partnership
owns and operates only one property, known as Barrington Estates (the
"Property").
Discussion regarding apartment complexes which may compete with the
Property is set forth below in Item 2. Property - Analysis. The General Partners
believe that the Property remains competitive in its market.
The General Partners do not intend to reinvest the net proceeds from a sale
of the Property in additional properties. The General Partners expect to begin
an orderly liquidation of the Partnership's holdings after a period of
operations of from five to eight years. To date, the Partnership has been
operating for approximately eight years. In determining whether to sell or
refinance, the Partnership would 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. During
1997 the Partnership began marketing the Property to potential buyers and plans
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" two significant accounting events took place: a) the Property was
reclassified to "Assets Held for Sale", and b) in the fourth quarter of 1997 the
recognition of depreciation expense was discontinued.
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After extensive negotiations with the intended buyer regarding the sale of the
Property the transaction was terminated in January 1998 (see discussion in Item
3 below). In connection with these negotiations, the Partnership incurred
disposition costs of $29,288 which have been expensed in the current period.
Pursuant to the Partnership Agreement, the Partnership will terminate December
31, 2028, unless terminated earlier at the sole discretion of the Managing
General Partner.
The Partnership has no employees. The General Partners believe that
ChrisKen Real Estate Management Company, Inc., the manager of the Property, 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 Property.
The Property is an apartment complex commonly known as Barrington Estates,
located at 8717 Old Town West Drive, Indianapolis, Indiana and was built in
1968. The purchase price of the Property was approximately $3,775,000. In 1990,
the Partnership undertook a substantial repair and improvement program (the
"Renovations") with respect to the Property. Renovations were completed in 1993
with the complete renovation of apartment interiors, the addition of 17
carports, enhanced exterior lighting and the remodeling of both the exterior and
interior of the clubhouse for a total cost of $3,353,906. The Property is
situated on approximately 11 acres and is comprised of 144 units of which 112
units are townhouses located in 13 separate buildings, with 65 carports and 18
garages, an 1,800 square foot clubhouse and a swimming pool. All buildings are
either two or three stories. No additional renovations are presently scheduled
for 1998.
At December 31, 1997, 138 of the Property's units were occupied while 6
units were vacant (96% occupancy). The chart below details the occupancy status
and rent structure of the Property's units as of December 31, 1997. All tenant
leases are for periods of six months to one year and no tenants lease more than
one unit. See table on following page.
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<TABLE>
<CAPTION>
Apartment Type Approximate Average
- ---------------- Number of Occupied Rent Per Apartment Rent/Sq. Ft.
# Bed #Baths Apartments 12/31/97 Month Size /Mo.
- ----- ------ ---------- -------- --------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
1 1 1/2TH 6 6 $660 855 SF $.77
1 1 18 18 $540-550 628 SF $.87
2 1 14 14 $630-640 907 SF $.70
2 2 1/2TH 24 24 $720-755 1,153 SF $.64
2 1 1/2TH 36 35 $720 1,069 SF $.67
3 2 TH 6 6 $875 1,295 SF $.68
3 2 1/2TH 40 35 $945 1,456 SF $.65
TH = Townhouse
</TABLE>
The Property is managed by ChrisKen Real Estate Management Company, Inc.
("ChrisKen Management"), an Affiliate of the General Partners. ChrisKen
Management receives a property management fee equal to 5% of gross rental
receipts. The property management agreement is terminable by the Partnership
upon sixty days prior written notice to ChrisKen Management. The General
Partners believe that the property management fee is competitive with fees which
would be paid in the area in which the Property is located for comparable
services to an unaffiliated party. The General Partners believe that the
property is adequately covered by insurance.
Analysis. The General Partners believe that the following information reflects
the current market conditions for apartment complexes which may compete with the
Property:
Competitive Projects
<TABLE>
<CAPTION>
Rent Per Approximate Apt. Rent/Sq.
Project Apartment Type Month Size in Sq. Ft. Ft./Mo.
- ------- -------------- -------- ---------------- --------
<S> <C> <C> <C> <C>
Willow Lake 1 Bdrm 1 Bath $795 1,121 $.71
2 Bdrm 2 Bath $1,005 1,450 $.69
The Springs 1 Bdrm 1 Bath $625 550 $1.14
2 Bdrm 2 Bath $940 1,150 $.82
2 Bdrm 2 Bath $1,100 1,200 $.92
Arbors of Willow 1 Bdrm 1 Bath $590 750 $.79
Lake 1 Bdrm 1 Bath $600 875 $.69
2 Bdrm 1 1/2Bath $665 930 $.72
2 Bdrm 2 Bath $725 1,078 $.67
3 Bdrm 2 Bath $860 1,258 $.68
</TABLE>
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Item 3. Legal Proceedings.
In October 1997, four affiliated limited partnerships, including the
Partnership, executed a non-binding letter of intent pursuant to which they
were exploring a possible sale of their properties to Vinings Investment
Properties, L.P. ("Vinings"). The letter of intent was allowed to expire. On
December 5, 1997, the Partnership and 15 other affiliated limited partnerships
(collectively with the Partnership, the "ChrisKen Partnerships") executed a
second, non-binding letter of intent (the "LOI") pursuant to which the ChrisKen
Partnerships were exploring a possible sale of their properties to Vinings. A
seperate purchase price was negotiated for each property, with the aggregate
purchase price to be $87,770,000, payable in a combination of cash and units of
limited partnership interest to be issued by Vinings ("Vinings Units"), with
the balance to paid through Vinings' assumption or repayment of all outstanding
mortgage indebtedness and costs relating thereto. The Vinings Units were to be
issued to electing limited partners in certain of the ChrisKen Partnerships who
were accredited investors (as such term is defined in Rule 501(a) of Regulation
D promulgated under the Securities Act of 1933, as amended). The Vinings Units
were convertible, upon satisfaction of certain conditions, into shares of
common stock of the Vinings general partner, Vinings Investment Trust (the
"Vinings REIT"). Shares of the Vinings REIT trade on the NASDAQ Small Cap
market. The quarterly report on Form 10-Q file by the Vinings REIT as of and
for the quarter ended September 30, 1997 (the last available public filing),
stated that there were 1,080,512 shares outstanding, with reported high and low
bid and asked prices of $4.25 and $4.25.
In the LOI, Vinings conditioned its purchase of the Property on approval
by the limited partners, of the sale, to Vinings, of properties owned by
certain of the other ChrisKen Partnerships as well as completion of due
diligence regarding operations and conditions of the properties, approval of
the sale transaction by the Vinings REIT's board of directors, securing
financing to complete the transaction and, if Vinings could not complete the
transaction on or before February 23, 1998, approval by the Vinings REIT's
shareholders, which could have extended the closing to August 1998 or later.
Additionally, as Vinings owned only two properties, a condition of the
transaction requested by the General Partners and required by the financing
source last proposed by Vinings, was that CREMCO be merged into Vinings, either
directly or through a merger with the existing property manager for Vinings, to
ensure continuity and depth of property management on a going forward basis.
Because the time frame for completion and certain of the other conditions
imposed by Vinings were unattractive, the ChrisKen Partnerships requested
additional protections, including the right to solicit other potential
purchasers if Vinings were unable to close by March 31, 1998. After Vinings
rejected those protections and declined to discuss the terms on which the
merger would occur or meet with the Partnerships' lenders, all ChrisKen
Partnerships ceased negotiations on or about January 25, 1998.
On January 30, 1998, after being threatened with litigation, the
Partnerships filed an action (Springdale Associates, Ltd. et. al. v. Vinings
Investment Properties, L.P., Case No. 98 CH 1193, pending in the Circuit Court
of Cook County) seeking a declaratory judgment that there is no binding or
enforceable contract with the Vinings. Vinings has counterclaimed, alleging,
inter alia, that there was an enforceable contract.
On February 3, 1998, Vinings filed a complaint (Vinings Investment
Properties, L.P. v. Kennedy et. al., Case No. 98 CH 1421, pending in the
Circuit Court of Cook County) seeking specific performance, and other relief,
arising out of a claim by Vinings that it entered into an enforceable and
binding contract to purchase the properties owned by the ChrisKen Partnership.
The ChrisKen Partnerships deny that there is any binding and enforceable
contract with Vinings, and deny that Vinings has any right to purchase the real
estate and property of any of the Partnerships. A motion to dismiss the
Complaint has been filed on behalf of the ChrisKen Partnerships, the General
Partners and CREMCO. No discovery has been taken to date. Counsel to the
ChrisKen Partnerships has only just begun its investigation and is presently
unable to determine whether an outcome unfavorable to the Company is probable
or remote.
On March 27, 1998, the general partners of the Partnerships, in their
representative capacities as general partners of the Partnerships, brought an
action (ChrisKen Income Properties, Inc. II et. al. v. Vinings Investment
Properties Trust, Peter D. Anzo, Stephanie A. Reed et. al., Civil Action No. 1
98-CV-0934, pending in the United States District Court for the Northern
District of Georgia) seeking injunctive and other relief for an alleged breach
of the confidentiality agreement between the parties and other misconduct,
including misrepresentation of availability of financing and intent with
respect to providing property management expertise.
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.
(Balance of page intentionally left blank.)
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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 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 unre
lated 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."
At December 31, 1997 and 1996, 11,529 Units were outstanding. Cash
distributions paid to Unit holders for 1997 and 1996 totaled $453,895 and
$415,440, respectively.
Item 6. Management's Discussion and Analysis or Plan of
Operation.
Liquidity and Capital Resources.
In October 1992, the Partnership refinanced its original acquisition loan
with a new mortgage loan (the "Loan") from Peoples Security Life Insurance
Company, a North Carolina corporation (the "Lender"), in the principal sum of
$3,000,000. The Loan is payable in monthly payments of interest only with the
outstanding principal originally due on November 1, 1997. The due date of the
outstanding principal was first extended to February 1, 1998 and then to June 1,
1998. Both extensions were provided by the Lender without cost to the
Partnership. The Loan bears interest at a rate of 7.75%. Principal prepayments
of the Loan are permitted beginning November 1, 1994 provided that: (i) the
Partnership pay a prepayment penalty of 3% of the outstanding principal amount;
(ii) notice of prepayment is given to the Lender 90 days prior to remittance;
and (iii) prepayments are in multiples of $10,000. No prepayments of principal
have been made and the principal amount of the Loan outstanding remains at
$3,000,000. The General Partners are currently exploring refinancing
alternatives and anticipate replacing the current Loan with equally favorable
terms.
At December 31, 1997, the Partnership had cash and cash equivalents of
$70,099 compared to $142,419 at December 31, 1996. The decrease in cash and cash
equivalents is primarily the result of several factors, including: a decrease in
net income before depreciation and amortization of deferred financing fees, an
increase in distributions to partners, an increase in investment in real estate,
offset by an increase in accounts payable and other liabilities. The Partnership
has established working capital reserves equal to approximately 1% of the gross
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proceeds of the Offering ($57,645 at December 31, 1997) which the General
Partners believe is adequate to satisfy cash requirements. The Managing General
Partner will periodically review the level of working capital reserves being
maintained by the Partnership and will make adjustments as and if deemed
necessary and in the best interest of the Partnership. In connection therewith,
the Managing General Partner may, in its sole discretion, determine from time to
time to distribute amounts set aside for working capital reserves to Limited
Partners, but in no event will the Managing General Partner reduce working
capital reserves to less than 1% of the gross proceeds of the Offering by such
distributions. To the extent the Partnership's working capital reserves are
depleted to less than 1% as a result of the application of such reserves for
working capital purposes, the Managing General Partner anticipates that
subsequent Operating Cash Flow will be utilized to replenish its working capital
reserves to the level deemed necessary for continued operation of the
Partnership prior to the distribution of Operating Cash Flow to the Partners. In
the event such reserves are insufficient to satisfy unanticipated costs, the
Partnership would be required to borrow additional funds to meet such costs. 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 December 31,
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.
The Year 2000 Issue is the result of computer programs being written using
two digits rather than four to define the applicable year. Any of the
Partnership's computer programs that have time-sensitive software may recognize
a date using "00" as the year 1900 rather than the year 2000. This could result
in a system failure or miscalculations causing disruptions of operations,
including, among other things, a temporary inability to process transactions,
send invoices, or engage in similar normal business activities.
Based on recent assessments, the Partnership determined that it will not be
required to modify or replace significant portions of its financial software so
that its computer systems will function properly with respect to dates in the
year 2000 and thereafter.
The Partnership has initiated formal communications with all of its
significant suppliers (including operators of heating and air conditioning
control systems, building security systems, elevator operations software, and
alarm monitoring systems) to determine the extent to which the Partnership's
interface systems are vulnerable to those third parties' failure to solve their
own Year 2000 Issues. However, there can be no guarantee that the systems of
other companies on which the Partnership's systems rely will be converted on a
timely basis and would not have an adverse affect on the Partnership's systems.
Based on information received to date, the Partnership estimates that material
costs will not be incurred related to Year 2000 Issues. However, there can be no
guarantee that these estimates will be achieved and actual results could differ
materially from those anticipated. Specific factors that might cause such
material differences include, but are not limited to, the availability and cost
of personnel trained in this area, the ability to locate and correct all
relevant computer codes, and similar uncertainties.
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Results of Operations.
Comparison of 1997 to 1996. The Property was 96% and 97% occupied as of
December 31, 1997 and 1996, respectively. See the chart on page 3 detailing
occupancy as of December 31, 1997. For the year ended December 31, 1997, the
Partnership had rental revenues of $1,229,692 compared to $1,209,602 for the
year ended December 31, 1996. Revenues increased in 1997 as a result of a 2.8%
increase in rental rates offset by a 29.0% increase in vacancy loss due to a
more competitive market for comparable apartments during 1997. For the year
ended December 31, 1997, the Partnership had incurred expenses, exclusive of
interest expense, of $887,924, a 2.5% decrease from expenses for the year ended
December 31, 1996 of $910,805. Property operations increased 11.3% from $248,515
in 1996 to $276,633 in 1997, primarily as the result of increased janitorial
services, rubbish removal, structural repairs, apartment carpet replacement,
apartment painting, and grounds maintenance offset by decreased water/sewer
utilities. Real estate tax expense for the Property increased from $91,384 for
1996 to $100,863 for 1997 primarily due to a 1.4% increase in tax rates and an
understated estimate at December 31, 1996 of the 1996 taxes payable in 1997.
Repairs and maintenance expenses decreased 25.3% from $29,697 in 1996 to $22,171
in 1997 due to reduced appliance, heating and ventilating, and swimming pool
repairs offset by increased carpet cleaning costs. Advertising expenses
decreased 4.4% from $28,896 in 1996 to $27,636 in 1997 primarily due to the
absence in 1997 of the 1996 acquisition of property brochures and related
marketing materials. Depreciation expense decreased from $306,964 in 1996 to
$217,433 in 1997 because the recognition of depreciation expense was
discontinued in the fourth quarter of 1997 because the property was reclassified
as held for sale in accordance with FAS No. 121. General and administrative
expenses increased 25.8% from $141,860 in 1996 to $178,467 in 1997 primarily due
to increased administrative salaries, audit and accounting fees, corporate suite
operations, property insurance, employer related payroll costs, and costs
incurred by the Partnership while preparing for the sale of the Property.
Administrative salaries increased due to salary increases. Employer related
payroll costs increased due to generally increased base salaries. Management fee
expense increased from $63,489 in 1996 to $64,721 in 1997 as the result of
increased total revenue in 1997.
Interest income for the year ended December 31, 1997 was $5,968 compared to
$6,521 for the year ended December 31, 1996. Interest expense for the years
ended December 31, 1997 and 1996 was $245,084 and $248,914, respectively.
Interest expense is lower in 1997 because mortgage loan costs were fully
amortized as of October 31, 1997. The General Partners anticipate interest
expense to be $96,875 through June 1, 1998, when the current mortgage loan
expires. The General Partners are currently exploring refinancing alternatives
and anticipate replacing the current loan with equally favorable terms.
The Partnership earned net income of $165,665 for the year ended December
31, 1997 as compared to net income of $115,172 for the year ended December 31,
1996. Net cash provided by operating activities in 1997 and 1996 was $397,689
and $386,843, respectively. For the years ended 1997 and 1996, the Partnership
paid distributions to Limited Partners of $39.36 and $36.04 per unit,
respectively, of which $5.68 and $21.42 per unit, respectively represents a
return of capital on a federal income tax basis. The General Partners intend to
continue making distributions to Limited Partners in 1998, at or about the same
level as in 1997. The General Partners believe that during 1997 occupancy at the
Property will remain at or above 95% as a result of stable economic conditions.
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"Safe Harbor" statement under the U.S. Private Securities Litigation Reform
Act of 1995: 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 Barrington Estates competes 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.)
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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. II, an Illinois
corporation, as Managing General Partner, and ChrisKen Limited Partnership II,
an Illinois limited partnership, as Associate General Partner.
All issued and outstanding shares of the Managing General Partner are owned
by Messrs. Robert W. Christoph and John F. Kennedy. As of January 1, 1994 and
pursuant to written agreement, Mr. Christoph resigned as an officer and director
of the Managing General Partner and transferred his shares into a voting trust
which terminates on December 31, 2003. Mr. Kennedy is the voting trustee of this
voting trust and has the power to exercise all voting rights with respect to Mr.
Christoph's shares; Mr. Christoph retains the economic and beneficial interest
in such shares. 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. As of January 1, 1994 and pursuant to written
agreement, Mr. Christoph converted his general partner interest in the Associate
General Partner into a special limited partner interest without any management
rights.
The following is a list of the executive officers and directors of the
Managing General Partner as of March 15, 1997:
Name Age Position
John F. Kennedy 47 Director, President and Secretary
John F. Kennedy holds a Bachelor of Arts degree in Psychology from DePaul
University. Mr. Kennedy co-founded The ChrisKen Group with Mr. Christoph in June
of 1982 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 1989, 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 26 privately offered real estate partnerships located
primarily in the Midwest. He also serves as a principal of the General Partners
of ChrisKen Partners Cash Income Fund L.P., a public real estate limited
partnership.
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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 or any proposed com pensation in their capacities as
officers and directors of the General Partners. The Partnership is, however,
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 10 through 15 of the
Partnership's Prospectus, which description is incorporated herein by reference.
The following is a schedule of the compensation paid or to be paid by the
Partnership to the General Partners or their Affiliates for the year ended
December 31, 1997 and a description of the transactions giving rise to such
compensation:
Description of Transaction
and Entity Receiving Amount of
Compensation Compensation
Reimbursement of property operating
payroll costs to Affiliate of the
General Partners $106,559
Property Management Fee to Affiliate
of the General Partners 64,721
--------
Total $171,280
========
Item 11. Security Ownership of Certain Beneficial Owners and Management.
(a) To the best knowledge of the Partnership, as of December 31, 1997 and
March 15, 1997, no person owned more than 5% of the Units.
(b) The Partnership, as an entity, does not have any directors or officers.
As of December 31, 1997 and March 15, 1997, 11,529 Units were beneficially owned
by 637 Limited Partners. No Units were owned by any directors or executive
officers of the General Partners. See Item 9., above.
Item 12. Certain Relationships and Related Transactions.
ChrisKen Management, an Affiliate of the General Partners, will provide
property management services for the Property. The property manager's duties and
responsibilities include supervision of the day-to-day management of the
operations of the Property, 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 Property. Any fees for management services will be in addition to the
General Partners' distributive share of cash flow. ChrisKen Management earned
$64,721 and $63,489, in 1997 and 1996, respectively for such management
services. In addition, the Partnership reimbursed
11
<PAGE> 13
ChrisKen Management for payroll expenses for personnel directly related to
property operations totaling $106,559 and $90,508 in 1997 and 1996,
respectively.
There may be conflicts of interest on the part of ChrisKen Management since
ChrisKen Management may be rendering similar services to other partnerships
owning properties in competition with the Partnership's Property. However, the
General Partners believe that ChrisKen Management has sufficient personnel and
other required resources to discharge all of its responsibilities with respect
to the Property that it currently manages and any properties which it shall
manage for the Partnership in the future.
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 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 contract 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.
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 their Preferential Distribution.
12
<PAGE> 14
Item 13. Exhibits and Reports on Form 8-K.
(a) The following exhibits are included herein or incorporated by
reference:
Number Exhibit
(3) Certificate of Limited Partnership, as amended (incorporated
by reference from Exhibit 3(e) of Registrant's Form S-11
Registration Statement filed August 25, 1989, SEC File No.
33-28893).
(4) Amended and Restated Limited Partnership Agreement of
Registrant dated as of September 8, 1989 (incorporated by
reference from Exhibit 3.1, included in Amendment No. 4 to the
Registrant's Form S-11 Registration Statement filed August 25,
1989, S.E.C. File No. 33-28893).
(10)(1) Property Management Agreement between the Registrant and
ChrisKen Real Estate Management Company, Inc. (incorporated by
reference from Exhibit 19.1, included in Amendment No. 4 to
the Registrant's Form S-11 Registration State ment filed
August 25, 1989, S.E.C. File No. 33-28893).
(F-1) Index to Financial Statements.
Report of Independent Auditors F-2
Financial Statements:
Balance Sheet - December 31, 1997 F-3
Statements of Income for the Years Ended
December 31, 1997 and 1996 F-4
Statements of Partners' Capital (Deficit) for
the Years Ended December 31, 1997 and 1996 F-5
Statements of Cash Flows for the Years Ended
December 31, 1997 and 1996 F-6
Notes to Financial Statements F-7
(28)(1) Pages 10-15 of the Registrant's final Prospectus dated
September 8, 1989 as filed with the Securities and Exchange
Commission pursuant to Rule 424(b) 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, 1997.
13
<PAGE> 15
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, there unto duly authorized.
CHRISKEN GROWTH & INCOME L.P. II
By: ChrisKen Income Properties, Inc. II,
Managing General Partner
Date: March 30, 1998 By: /s/ John F. Kennedy
-----------------------------------
Director and President
In accordance with the Securities Exchange Act of 1934, as amended, 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 30, 1998 By: /s/ John F. Kennedy
------------------------------------
Director and President
of the Managing General
Partner
14
<PAGE> 16
Financial Statements
Chrisken Growth & Income L.P. II
(A Delaware Limited Partnership)
Years ended December 31, 1997 and 1996
with Report of Independent Auditors
<PAGE> 17
Chrisken Growth & Income L.P. II
(A Delaware Limited Partnership)
Index to Financial Statements
Report of Independent Auditors............................................F-2
Financial Statements
Balance Sheet - December 31, 1997 ........................................F-3
Statements of Income for the Years Ended
December 31, 1997 and 1996.............................................F-4
Statements of Partners' Capital (Deficit) for the Years
Ended December 31, 1997 and 1996.......................................F-5
Statements of Cash Flows for the Years Ended
December 31, 1997 and 1996.............................................F-6
Notes to Financial Statements.............................................F-7
F-1
<PAGE> 18
Report of Independent Auditors
To the Partners
Chrisken Growth & Income L.P. II
We have audited the accompanying balance sheet of Chrisken Growth & Income L.P.
II (a Delaware Limited Partnership), as of December 31, 1997, and the related
statements of income, partners' capital (deficit), and cash flows for the two
years in the period ended December 31, 1997. 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 financial position of Chrisken Growth & Income L.P.
II at December 31, 1997, and the results of its operations and its cash flows
for each of the two years in the period ended December 31, 1997, in conformity
with generally accepted accounting principles.
Chicago, Illinois
March 16, 1998
F-2
<PAGE> 19
Chrisken Growth & Income L.P. II
(A Delaware Limited Partnership)
Balance Sheet
December 31, 1997
<TABLE>
<S> <C>
ASSETS
Cash and cash equivalents $ 70,099
Restricted cash 57,645
Real estate taxes and other escrows 49,985
Other 12,391
------------
190,120
Assets held for sale 5,494,570
------------
Total assets $5,684,690
============
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 72,338
Accrued real estate taxes 105,176
Tenants' security deposits 19,858
Mortgage loan payable 3,000,000
------------
Total liabilities 3,197,372
Partners' capital, 11,529 limited partnership units issued and
outstanding 2,487,318
============
Total liabilities and partners' capital $5,684,690
============
</TABLE>
See accompanying notes.
F-3
<PAGE> 20
Chrisken Growth & Income L.P. II
(A Delaware Limited Partnership)
Statements of Income
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1997 1996
------------------------------------
<S> <C> <C>
REVENUE
Rental $ 1,229,692 $ 1,209,602
Interest 5,968 6,521
Other 63,013 58,768
------------------------------------
Total revenue 1,298,673 1,274,891
EXPENSES
Property operations 276,633 248,515
Interest 245,084 248,914
Real estate taxes 100,863 91,384
Repairs and maintenance 22,171 29,697
Advertising 27,636 28,896
Depreciation 217,433 306,964
General and administrative 178,467 141,860
Management fees - Affiliate 64,721 63,489
------------------------------------
1,133,008 1,159,719
====================================
Net income $ 165,665 $ 115,172
====================================
Net income allocated to general partners $ 16,567 $ 11,517
====================================
Net income allocated to limited partners $ 149,098 $ 103,655
====================================
Net income allocated to limited partners per weighted-average limited
partnership units outstanding $ 12.93 $ 8.99
====================================
Weighted-average limited partnership units outstanding 11,529 11,529
====================================
</TABLE>
See accompanying notes.
F-4
<PAGE> 21
Chrisken Growth and Income L.P. II
(A Delaware Limited Partnership)
Statements of Partners' Capital (Deficit)
Years ended December 31, 1997 and 1996
<TABLE>
<CAPTION>
PARTNERS' CAPITAL (DEFICIT) ACCOUNTS
-----------------------------------------------------------------------
GENERAL LIMITED DUE FROM
PARTNERS PARTNERS AFFILIATES TOTAL
-----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance at January 1, 1996 $(25,414) $3,101,230 $(47,625) $3,028,191
Distributions (A) - (415,440) - (415,440)
Net income 11,517 103,655 - 115,172
Reimbursement from Affiliates - - 47,625 47,625
-----------------------------------------------------------------------
Balance at December 31, 1996 (13,897) 2,789,445 - 2,775,548
Distributions (A) - (453,895) - (453,895)
Net income 16,567 149,098 - 165,665
=======================================================================
Balance at December 31, 1997 $ 2,670 $2,484,648 $ - $2,487,318
=======================================================================
</TABLE>
Note (A): Summary of quarterly cash distributions paid per limited partnership
unit:
<TABLE>
<CAPTION>
1997 1996
------------------------------------
<S> <C> <C>
First quarter $ 9.86 $8.82
Second quarter 9.97 9.04
Third quarter 10.08 9.04
Fourth quarter 9.45 9.14
</TABLE>
See accompanying notes.
F-5
<PAGE> 22
Chrisken Growth & Income L.P. II
(A Delaware Limited Partnership)
Statements of Cash Flows
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1997 1996
------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $165,665 $115,172
Adjustments to reconcile net income to net cash
flows provided by operating activities:
Depreciation 217,433 306,964
Amortization of deferred financing fees 12,584 16,414
Net changes in operating assets and liabilities:
Increase in real estate taxes and other escrows (20,111) (12,473)
(Increase) decrease in other assets (3,566) 2,294
Increase (decrease) in accounts payable and accrued expenses 27,518 (13,870)
Decrease in tenants' security deposits (1,834) (1,355)
Decrease in due to affiliates - (26,303)
------------------------------------
Net cash flows provided by operating activities 397,689 386,843
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to investment in real estate (16,114) (14,368)
------------------------------------
Cash flows used in investing activities (16,114) (14,368)
CASH FLOWS FROM FINANCING ACTIVITIES
Distributions (453,895) (415,440)
Reimbursement from affiliates - 47,625
------------------------------------
Net cash flows used in financing activities (453,895) (367,815)
------------------------------------
Net increase (decrease) in cash and cash equivalents (72,320) 4,660
Cash and cash equivalents, beginning of year 142,419 137,759
------------------------------------
Cash and cash equivalents, end of year $70,099 $142,419
====================================
Supplemental disclosure of cash flow information:
Cash paid during the year for interest $232,500 $232,500
====================================
</TABLE>
See accompanying notes.
F-6
<PAGE> 23
Chrisken Growth & Income L.P. II
(A Delaware Limited Partnership)
Notes to Financial Statements
Years ended December 31, 1997 and 1996
1. ORGANIZATIONAL DATA
Chrisken Growth & Income L.P. II (the Partnership) is a Delaware Limited
Partnership, organized on May 9, 1989, with Chrisken Income Properties, Inc. II
(Managing General Partner) and Chrisken Limited Partnership II as the General
Partners. 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 Barrington Estates (the Property), a 144-unit
residential rental complex located in Indianapolis, Indiana.
2. SIGNIFICANT ACCOUNTING POLICIES
CASH AND CASH EQUIVALENTS
The Partnership considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents.
DEFERRED FINANCING FEES
Deferred financing fees are amortized over the life of the related loan using
the straight-line method.
INVESTMENT IN REAL ESTATE AND ASSETS HELD FOR SALE
Prior to the decision to hold the Property for sale, depreciation of property
and improvements was computed using the straight-line method over the estimated
useful lives of the assets. Residential property was depreciated over 27.5 years
and equipment was depreciated over seven years.
During 1997, the Partnership began marketing the Property to potential buyers
and plans to sell it during 1998. In accordance with Statement of Financial
Accounting Standards (SFAS) No. 121, Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of, the Partnership has
reclassified the investment in real estate with a net book value of $5,494,570
to assets held for sale during the fourth quarter
F-7
<PAGE> 24
Chrisken Growth & Income L.P. II
(A Delaware Limited Partnership)
Notes to Financial Statements (continued)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
of 1997 and discontinued recognition of depreciation expense. The estimated fair
value less cost to sell the Property exceeded the Partnership's carrying value.
Upon sale of the Property, management will terminate the operations of the
Partnership.
RENTAL REVENUE
The Partnership recognizes rental revenues as they are due in accordance with
the terms of the respective tenant 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
Statement of Financial Accounting Standards 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 balance sheet, consisting of cash and
cash equivalents, restricted cash, escrow accounts, accounts payable, and
mortgage loan 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 financial statements of
the Partnership.
USE OF ESTIMATES
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
F-8
<PAGE> 25
Chrisken Growth & Income L.P. II
(A Delaware Limited Partnership)
Notes to 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 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 depreciation expense and prepaid rent. The
net effect of these accounting differences is that net income recognized in the
financial statements for 1997 and 1996 is approximately $55,828 greater and
$53,000 less, respectively, than the taxable income of the Partnership for the
same periods. The aggregate cost of real estate for federal income tax purposes
at December 31, 1997, is $7,565,006.
4. PARTNERSHIP AGREEMENT
The Limited Partners are entitled to receive 90% of, and the General Partners
10% of, any operating cash flow, as defined, provided, however, that the General
Partners' 10% shall be subordinated in each year to receipt by the Limited
Partners of a preferential, noncumulative, noncompounded return on their
adjusted investment, as defined, equal to 9% per annum (the Annual Preferred
Return). Distributions to partners in 1997 and 1996 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.
Profits and losses from operations are allocated between the General Partners
and the Limited Partners in the same proportion as distributions of operating
cash flow attributable to such year, although if no such distributions are made
in such year, profit and loss shall be allocated 99% to the Limited Partners and
1% to the General Partners. Profits resulting from the sale or other disposition
of Partnership real estate assets shall be allocated first to the Limited
Partners until they have received an amount so that their capital account
balances equal their adjusted investment, then to the Limited Partners until
their capital account balances equal their unpaid preferential distribution, as
defined,
F-9
<PAGE> 26
Chrisken Growth & Income L.P. II
(A Delaware Limited Partnership)
Notes to Financial Statements (continued)
4. PARTNERSHIP AGREEMENT (CONTINUED)
plus their adjusted investment, and thereafter, the remainder will be allocated
85% to the Limited Partners and 15% to the General Partners.
The Partnership shall continue until December 31, 2028, unless sooner terminated
pursuant to the applicable provisions of the Partnership Agreement.
The Partnership maintains working capital reserves between 1% and 5% of the
proceeds of the limited partnership units sold as provided in the Partnership
Agreement. To the extent necessary and in accordance with the Partnership
Agreement, the Managing General Partner, at its discretion, may adjust the level
of working capital reserves to meet cash requirement needs of the Partnership.
At December 31, 1997, cash restricted for working capital reserve purposes was
$57,645.
5. RELATED PARTY TRANSACTIONS
The Partnership pays management fees to Chrisken Real Estate Management Company,
Inc. (Chrisken), an affiliate of the General Partners, equal to 5% of property
gross collections, as defined. Total management fees for 1997 and 1996 were
$64,721 and $63,489, respectively. The agreement is subject to annual renewal.
In addition, the Partnership reimburses Chrisken for personnel costs directly
attributable to property operations totaling $106,559 and $90,508 in 1997 and
1996, respectively. These costs are included in property operation expenses in
the accompanying statements of income.
The Partnership incurred organization and offering expenses of $188,775 in
excess of the limitations set forth in the Partnership Agreement. This amount
was due from the General Partners and was recorded as due from affiliates and
classified as a reduction of Partners' Capital. Included in the excess offering
costs were $141,150 of printing costs for which the Partnership's obligation was
terminated in 1995. Accordingly, the Partnership recorded a reduction to
accounts payable and due from affiliates for the above amount in 1995. The
Partnership received the remaining $47,625 from the General Partners in 1996.
Accordingly, the Partnership recorded a reduction in due from affiliates for the
above amount in 1996.
6. MORTGAGE LOAN PAYABLE
The Partnership has a nonrecourse first mortgage loan payable of $3,000,000 to
an unaffiliated 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, which approximates current market rates for similar
instruments. Principal and unpaid
F-10
<PAGE> 27
Chrisken Growth & Income L.P. II
(A Delaware Limited Partnership)
Notes to Financial Statements (continued)
6. MORTGAGE LOAN PAYABLE (CONTINUED)
interest were originally due on November 1, 1997. The debt was first extended to
February 1, 1998, and then to June 1, 1998. Both extensions were provided by the
lender without cost, to the Partnership. Principal prepayments are permitted,
provided that: (a) the Partnership pays 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 or to refinance the mortgage loan with another lender or repay
the obligations from proceeds from sale of the Property. There can be no
assurance that any refinancing or sale transaction will be consummated by the
Partnership, In the event that a refinancing or sale is not consummated, the
mortgage lender could exercise its remedies which include the realization upon
its security interest in the Property in which case the Partnership would
sustain a loss. No provision for any gain or loss that may result from the
outcome of this uncertainty has been reflected in the accompanying financial
statements.
The Partnership incurred origination costs of $82,062 related to the mortgage
loan, which were amortized over the original life of the loan. During 1997 and
1996, the Partnership recorded amortization expense of $12,584 and $16,414,
respectively, related to the origination costs. During 1997, the Partnership
wrote off the fully amortized origination costs.
7. CONTINGENCIES
In February 1998, a lawsuit was filed against the Partnership by a prospective
buyer of the Property regarding termination of the contract to sell the
Property. The buyer seeks specific performance by virtue of the Property
transfer from the terminated sales contract. In the opinion of management of the
Partnership, such litigation and resultant effects will not have a material
adverse effect on the Partnership's financial statements. The ultimate outcome
of this matter cannot be determined and, accordingly, no provision for any loss
that may result has been made in the accompanying financial statements.
F-11
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 127,744
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 190,120
<PP&E> 5,494,570
<DEPRECIATION> 0
<TOTAL-ASSETS> 5,684,690
<CURRENT-LIABILITIES> 197,372
<BONDS> 3,000,000
0
0
<COMMON> 0
<OTHER-SE> 2,487,318
<TOTAL-LIABILITY-AND-EQUITY> 5,684,690
<SALES> 1,229,692
<TOTAL-REVENUES> 1,298,673
<CGS> 0
<TOTAL-COSTS> 887,924
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 245,084
<INCOME-PRETAX> 165,665
<INCOME-TAX> 0
<INCOME-CONTINUING> 165,665
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 165,665
<EPS-PRIMARY> 12.93
<EPS-DILUTED> 12.93
</TABLE>
