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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, 1998
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Transition period from _______________ to _______________
Commission file number 0-20129
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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
- ------------------------------------ ------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
345 North Canal Street, Chicago, Illinois 60606
- ----------------------------------------- ------------------------------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (312) 454-1626
------------------------------
Securities registered under to Section 12(b) of the Exchange Act:
None
Securities registered under Section 12(g) of the Exchange Act:
Limited Partnership Interests
- --------------------------------------------------------------------------------
(Title of Class)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports) and (2)
has been subject to such filing requirements for the past 90 days.
YES X NO
---- ----
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B contained in this form and no disclosure will be
contained to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-KSB or any amendment to this Form 10-KSB. [x]
Issuer's total gross rental revenues for its most recent fiscal year
ended December 31, 1998 were $1,268,009. 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, 1998 and March 15, 1999. The aggregate sales price does not
reflect market value, it reflects only the price at which the Units were sold
to the public. Currently, there is no market for the Units and no market is
expected to develop.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Prospectus of the Registrant dated 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.
<PAGE>
TABLE OF CONTENTS
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PAGE
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PART I
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................. 4
PART II
Item 5. Market for Registrant's Limited Partnership Interests and Related
Security Holder Matters............................................ 5
Item 6. Management's Discussion and Analysis or Plan of Operation........... 5
Item 7. Financial Statements................................................ 8
Item 8. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure............................................ 8
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act .................. 9
Item 10. Executive Compensation ............................................. 9
Item 11. Security Ownership of Certain Beneficial Owners and
Management..........................................................10
Item 12. Certain Relationships and Related Transactions......................10
Item 13. Exhibits and Reports on Form 8-K....................................12
SIGNATURES.................................................................. 13
INDEX TO FINANCIAL STATEMENTS...............................................F-1
(i)
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PART I
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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 or controlled by Mr. John F. Kennedy and Mr. John S. Marten.
Mr. Marten is the President and a Director of ChrisKen Real Estate Management
Company, Inc. which manages the Property. The Associate General Partner is an
Illinois limited partnership of which Mr. Kennedy and ChrisKen Equities, Inc.,
an Affiliate of the Partnership, are the general partners.
The 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 expected 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 nine 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
planned to sell it during 1998. Pursuant to Statement of Financial Accounting
Standards No. 121 "IMPAIRMENT OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE
DISPOSED OF" (SFAS No. 121) 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. After
extensive negotiations with the intended buyer regarding the sale of the
Property the transaction was terminated in early 1998. The aforementioned SFAS
No. 121 sets forth strict guidelines regarding the classification of assets.
Because the Partnership did not meet those guidelines, the Property has been
reclassified to Assets Held for Investment and depreciation expense has been
recognized effective June 1998. In connection with these
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negotiations, the Partnership incurred disposition costs of $29,288 which were
expensed in 1997 and in 1998 the Partnership incurred disposition and litigation
costs of $88,921 which were 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., (" ChrisKen Management") 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 were completed in 1998
and none are presently scheduled for 1999.
At December 31, 1998, 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, 1998. 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 12/31/98 MONTH SIZE /MO.
- ----- ------ ---------- -------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
1 1-1/2TH 6 6 $685 855 SF $.80
1 1 18 18 $565-575 628 SF $.90-.92
2 1 14 14 $650-660 907 SF $.72-.73
2 2-1/2TH 24 21 $800 1,153 SF $.69
2 1-1/2TH 36 36 $760 1,069 SF $.71
3 2 TH 6 6 $915 1,295 SF $.71
3 2-1/2TH 40 37 $985 1,456 SF $.68
</TABLE>
TH = Townhouse
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:
<TABLE>
<CAPTION>
Competitive Projects
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 $835 1,121 $.74
2 Bdrm 2 Bath $1,065 1,450 $.73
The Springs 1 Bdrm 1 Bath $695 550 $1.26
2 Bdrm 2 Bath $960 1,150 $.83
2 Bdrm 2 Bath $1,175 1,200 $.98
Avalon of Willow 1 Bdrm 1 Bath $615 750 $.82
Lake 1 Bdrm 1 Bath $625 875 $.71
2 Bdrm 1 1/2Bath $685 930 $.74
2 Bdrm 2 Bath $725 1,078 $.67
3 Bdrm 2 Bath $850 1,258 $.68
</TABLE>
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Item 3. LEGAL PROCEEDINGS.
The Partnership is not a party to any litigation that would have a
material adverse impact upon its business or operations.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of security holders during the
fourth quarter of the Partnership's fiscal year covered by this report.
(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, 1998 and 1997, 11,529 Units were outstanding. Cash
distributions paid to Unit holders for 1998 and 1997 totaled $288,225 and
$453,895, 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 Monumental Life Insurance
Company, successor by merger to 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 extended, as the result of several extensions, to June 1, 1999.
All 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, 1998, the Partnership had cash and cash equivalents of
$111,170 compared to $70,099 at December 31, 1997. The increase in cash and cash
equivalents is primarily the result of several factors, including: a decrease in
real estate tax escrows and other assets, a decrease in distributions to
partners, offset by a decrease in net income before depreciation and
amortization of deferred financing fees, a decrease in accounts payable and
accrued expenses, and additions to investment in real estate. The Partnership
has established
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working capital reserves equal to approximately 1% of the gross proceeds of the
Offering ($57,645 at December 31, 1998) 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,
1998 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.
COMPARISON OF 1998 TO 1997. The Property was 96% occupied as of
December 31, 1998 and December 31, 1997. See the chart on page 3 detailing
occupancy as of December 31, 1998. For the year ended December 31, 1998, the
Partnership had rental revenues of $1,268,009 compared to $1,229,692 for the
year ended December 31, 1997. Revenues increased in 1998 as a result of a 2.4%
increase in rental rates and a 32% decrease in vacancy loss offset by a 34%
reduction in corporate suite revenue. For the year ended December 31, 1998, the
Partnership had incurred expenses, exclusive of interest expense, of $923,531, a
4% increase from expenses for the year ended December 31, 1997 of $887,924.
Property operations increased 2% from $276,633 in 1997 to $282,413 in 1998,
primarily as the result of increased janitorial services, water/sewer utilities,
grounds maintenance, apartment appliance replacement, and structural repairs,
offset by decreased carpet replacement and apartment painting costs. Real estate
tax expense for the Property increased from $100,863 for 1997 to $105,425 for
1998 due to a 3.2% increase in tax rates. Repairs and maintenance expenses
increased slightly from $22,171 in 1997 to $23,287 in 1998 due to reduced
appliance, heating and ventilating, and swimming pool repairs offset by
increased carpet cleaning costs. Advertising expenses remained unchanged in 1998
at $27,409 compared to $27,636 in 1997. Depreciation expense decreased from
$217,433 in 1997 to $160,323 in 1998 because depreciation expense was recognized
during the first three quarters of 1997, but only the latter seven months of
1998 because the property was reclassified as held for sale in 1997 and then
reclassified as held for investment in June 1998 in accordance with SFAS No.
121. Had depreciation been continued while the Property was classified as an
asset held for sale, depreciation expense would have been $112,959 higher in
1998 and $89,530 higher in 1997,
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with corresponding decreases in net income. General and administrative
expenses increased 44% from $178,467 in 1997 to $257,148 in 1998 primarily
due to increased administrative costs, audit and accounting fees, employer
related payroll costs, and Property disposition, litigation, and settlement
costs incurred by the Partnership related to the failed negotiations with a
potential buyer of the Property partially offset by reduced corporate suite
operating expenses. Management fee expense increased from $64,721 in 1997 to
$67,526 in 1998 as the result of increased total revenue in 1998.
Interest income for the year ended December 31, 1998 was $5,405
compared to $5,968 for the year ended December 31, 1997. Interest expense for
the years ended December 31, 1998 and 1997 was $232,500 and $245,084,
respectively. Interest expense is lower in 1998 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, 1999, 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 $185,416 for the year ended
December 31, 1998 as compared to net income of $165,665 for the year ended
December 31, 1997. Net cash provided by operating activities in 1998 and 1997
was $359,820 and $397,689, respectively. For the years ended 1998 and 1997,
the Partnership paid distributions to Limited Partners of $25.00 and $39.36
per unit, respectively, of which $12.37 and $29.84 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 1999,
at or about the same level as in 1998. The General Partners believe that
during 1999 occupancy at the Property will remain at or above 95% as a result
of stable economic conditions.
YEAR 2000 READINESS.
Information provided within this note constitutes a year 2000
readiness disclosure pursuant to the provisions of the Year 2000 Information
Readiness and Disclosure Act.
The Year 2000 issue is the result of computer programs being written
and microchips being programmed using two digits rather than four to define
the applicable year. If not corrected, any program having time-sensitive
software or equipment incorporating embedded microchips may recognize a date
using "00" as the year 1900 rather than the year 2000 or may not recognize
the year 2000 as a leap year. This could result in a variety of problems
including miscalculations, loss of data and failure of entire systems.
Critical areas that could be affected are accounts receivable, accounts
payable, general ledger, cash management, computer hardware,
telecommunications and property operating systems.
The Partnership receives certain ancillary and management services
from ChrisKen Management. The services provided include all of the
Partnership's critical functions that utilize software that may have
time-sensitive applications. ChrisKen Management is in the process of testing
all mission critical software and it is anticipated that this testing will be
completed by June 30, 1999. ChrisKen Management is in the process of
obtaining documentation related to year 2000 readiness from its banking and
other outside vendors and it is anticipated that this phase will be competed
by June 30, 1999. In addition, ChrisKen Management has developed a methodology
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to determine that all property operating mission critical systems are year 2000
ready. The evaluation, testing and remediation activities related to property
operating systems are expected to be completed by June 30, 1999. Costs relating
to ChrisKen Management's systems are the responsibility of ChrisKen Management;
therefore, the Partnership will incur no costs relating to these systems. Costs
relating to property level systems and equipment will be charged to the
Property.
ChrisKen Management expects to complete a contingency plan by
September 30, 1999. ChrisKen Management believes that based on the status of
the Partnership's real estate portfolio and its limited number of
transactions, aside from catastrophic failures of banks, governmental
agencies, etc., it could carry out substantially all of its critical
administrative and accounting operations on a manual basis or easily convert
to systems that are year 2000 ready. ChrisKen Management has targeted
September 30, 1999, for the completion of contingency plans relating to
property operating systems.
Some statements in this Form 10-KSB are forward looking and actual
results may differ materially from those stated. As discussed herein, among
the factors that may affect actual results are changes in rental rates,
occupancy levels in the market place in which 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.
Issued and outstanding shares of the Managing General Partner are
owned by Mr. John F. Kennedy and Mr. John S. Marten. Mr. Marten is the
President and a Director of ChrisKen Real Estate Management Company, Inc.
which manages the Property. The sole officer of the Managing General
Partner is John F. Kennedy, who is President and Secretary. Mr. Kennedy is
its sole director. The general partners of the Associate General Partner are
Mr. Kennedy and ChrisKen Equities, Inc., an Affiliate.
The following is a list of the executive officers and directors of
the Managing General Partner as of March 15, 1999:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ----- ---- --------
<S> <C> <C>
John F. Kennedy 48 Director, President and Secretary
</TABLE>
John F. Kennedy holds a Bachelor of Arts degree in Psychology from
DePaul University. Mr. Kennedy co-founded The ChrisKen Group with Mr.
Christoph 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.
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 compensation 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.
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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, 1998 and a description of the transactions giving rise to
such compensation:
<TABLE>
<CAPTION>
DESCRIPTION OF TRANSACTION
AND ENTITY RECEIVING AMOUNT OF
COMPENSATION COMPENSATION
- ------------ ---------------
<S> <C>
Reimbursement of property operating
payroll costs to Affiliate of the
General Partners $110,744
Property Management Fee to Affiliate
of the General Partners 67,526
------------
Total $178,270
------------
------------
</TABLE>
Item 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
(a) To the best knowledge of the Partnership, as of December 31,
1998 and March 15, 1999, no person owned more than 5% of the Units.
(b) The Partnership, as an entity, does not have any directors or
officers. As of December 31, 1998 and March 15, 1999, 11,529 Units were
beneficially owned by 590 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, provides
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 $67,526 and $64,721, in 1998 and 1997, respectively for
such management services. In addition, the Partnership reimbursed ChrisKen
Management for payroll expenses for personnel directly related to property
operations totaling $110,744 and $106,559 in 1998 and 1997, respectively.
There may be conflicts of interest on the part of ChrisKen
Management since ChrisKen Management may be rendering similar services to
other partnerships 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.
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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.
(BALANCE OF PAGE INTENTIONALLY LEFT BLANK.)
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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 Statement 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, 1998 F-3
Statements of Income for the Years Ended
December 31, 1998 and 1997 F-4
Statements of Partners' Capital (Deficit) for
the Years Ended December 31, 1998 and 1997 F-5
Statements of Cash Flows for the Years Ended
December 31, 1998 and 1997 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, 1998.
12
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange
Act of 1934, as amended, the registrant has caused this report to be signed
on its behalf by the undersigned, there unto duly authorized.
CHRISKEN GROWTH & INCOME L.P. II
By: ChrisKen Income Properties, Inc. II,
Managing General Partner
Date: March 25, 1999 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 25, 1999 By: /s/ John F. Kennedy
-------------------------------
Director and President
of the Managing General
Partner
13
<PAGE>
Financial Statements
Chrisken Growth & Income L.P. II
(A DELAWARE LIMITED PARTNERSHIP)
YEARS ENDED DECEMBER 31, 1998 AND 1997
WITH REPORT OF INDEPENDENT AUDITORS
<PAGE>
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, 1998 ........................................F-3
Statements of Income for the Years Ended
December 31, 1998 and 1997.............................................F-4
Statements of Partners' Capital (Deficit) for the Years
Ended December 31, 1998 and 1997.......................................F-5
Statements of Cash Flows for the Years Ended
December 31, 1998 and 1997.............................................F-6
Notes to Financial Statements.............................................F-7
F-1
<PAGE>
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, 1998, and the
related statements of income, partners' capital (deficit), and cash flows for
the two years in the period ended December 31, 1998. These financial
statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Chrisken Growth & Income
L.P. II at December 31, 1998, and the results of its operations and its cash
flows for each of the two years in the period ended December 31, 1998, in
conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
Chicago, Illinois
March 12, 1999
F-2
<PAGE>
Chrisken Growth & Income L.P. II
(A DELAWARE LIMITED PARTNERSHIP)
Balance Sheet
December 31, 1998
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Cash and cash equivalents $ 111,170
Restricted cash 57,645
Real estate taxes and other escrows 38,031
Other 2,343
-------------------
209,189
Investment in real estate, at cost:
Land 598,548
Building and improvements 4,844,517
Equipment 82,029
-------------------
5,525,094
Accumulated depreciation (160,323)
-------------------
5,364,771
-------------------
Total assets $5,573,960
-------------------
-------------------
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 57,453
Accrued real estate taxes 109,189
Tenants' security deposits 19,268
Due to affiliates 3,541
Mortgage loan payable 3,000,000
-------------------
Total liabilities 3,189,451
Partners' capital, 11,529 limited partnership units issued and
outstanding 2,384,509
-------------------
Total liabilities and partners' capital $5,573,960
-------------------
-------------------
</TABLE>
SEE ACCOMPANYING NOTES.
F-3
<PAGE>
Chrisken Growth & Income L.P. II
(A DELAWARE LIMITED PARTNERSHIP)
Statements of Income
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1998 1997
------------------------------------
<S> <C> <C>
REVENUE
Rental $1,268,009 $1,229,692
Interest 5,405 5,968
Other 68,033 63,013
------------------------------------
Total revenue 1,341,447 1,298,673
EXPENSES
Property operations 282,413 276,633
Interest 232,500 245,084
Real estate taxes 105,425 100,863
Repairs and maintenance 23,287 22,171
Advertising 27,409 27,636
Depreciation 160,323 217,433
General and administrative 257,148 178,467
Management fees - Affiliate 67,526 64,721
------------------------------------
1,156,031 1,133,008
------------------------------------
Net income $ 185,416 $ 165,665
------------------------------------
------------------------------------
Net income allocated to general partners $ 18,542 $ 16,567
------------------------------------
------------------------------------
Net income allocated to limited partners $ 166,874 $ 149,098
------------------------------------
------------------------------------
Net income allocated to limited partners per weighted-average limited
partnership units outstanding $ 14.47 $ 12.93
------------------------------------
------------------------------------
Weighted-average limited partnership units outstanding 11,529 11,529
------------------------------------
------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES.
F-4
<PAGE>
Chrisken Growth and Income L.P. II
(A DELAWARE LIMITED PARTNERSHIP)
Statements of Partners' Capital (Deficit)
Years ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
PARTNERS' CAPITAL (DEFICIT) ACCOUNTS
---------------------------------------------------------------
GENERAL LIMITED
PARTNERS PARTNERS TOTAL
---------------------------------------------------------------
<S> <C> <C> <C>
Balance at January 1, 1997 $ (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
Distributions (A) - (288,225) (288,225)
Net income 18,542 166,874 185,416
---------------------------------------------------------------
Balance at December 31, 1998 $ 21,212 $2,363,297 $2,384,509
---------------------------------------------------------------
---------------------------------------------------------------
</TABLE>
Note (A): Summary of quarterly cash distributions paid per limited
partnership unit:
<TABLE>
<CAPTION>
1998 1997
------------------------------------
<S> <C> <C>
First quarter $6.30 $ 9.86
Second quarter 6.16 9.97
Third quarter 6.24 10.08
Fourth quarter 6.30 9.45
</TABLE>
SEE ACCOMPANYING NOTES.
F-5
<PAGE>
Chrisken Growth & Income L.P. II
(A DELAWARE LIMITED PARTNERSHIP)
Statements of Cash Flows
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1998 1997
---------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $185,416 $165,665
Adjustments to reconcile net income to net cash flows
provided by operating activities:
Depreciation 160,323 217,433
Amortization of deferred financing fees - 12,584
Net changes in operating assets and liabilities:
(Increase) decrease in real estate taxes and other escrows 11,954 (20,111)
(Increase) decrease in other assets 10,048 (3,566)
Increase (decrease) in accounts payable and accrued expenses (10,872) 27,518
Decrease in tenants' security deposits (590) (1,834)
Increase in due to affiliates 3,541 -
---------------------------------
Net cash flows provided by operating activities 359,820 397,689
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to investment in real estate (30,524) (16,114)
---------------------------------
Cash flows used in investing activities (30,524) (16,114)
CASH FLOWS FROM FINANCING ACTIVITIES
Distributions (288,225) (453,895)
---------------------------------
Net cash flows used in financing activities (288,225) (453,895)
---------------------------------
Net increase (decrease) in cash and cash equivalents 41,071 (72,320)
Cash and cash equivalents, beginning of year 70,099 142,419
---------------------------------
---------------------------------
Cash and cash equivalents, end of year $111,170 $ 70,099
---------------------------------
---------------------------------
Supplemental disclosure of cash flow information:
Cash paid during the year for interest $232,500 $232,500
---------------------------------
---------------------------------
</TABLE>
SEE ACCOMPANYING NOTES.
F-6
<PAGE>
Chrisken Growth & Income L.P. II
(A DELAWARE LIMITED PARTNERSHIP)
Notes to Financial Statements
Years ended December 31, 1998 and 1997
1. NATURE OF BUSINESS
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.
SEGMENT OF BUSINESS
In 1998, the Partnership adopted Statement of Financial Accounting Standards
(SFAS) No. 131, DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED
INFORMATION ("SFAS No. 131") which was effective for fiscal years beginning
after December 15, 1997. SFAS No. 131 superseded Statement of Financial
Accounting Standards No. 14, "Financial Reporting for Segments of an
Enterprise". SFAS No. 131 establishes standards for the way that public
business enterprises report information about operating segments in annual
financial statements and requires that those enterprises report selected
information about operating segments in financial reports. SFAS No. 131 also
establishes standards for related disclosure about products and services,
geographic areas, and major customers. The adoption of SFAS No. 131 did not
affect results of operations or financial position of the Partnership.
The Partnership has one reportable segment which is the ownership and
operation of a residential apartment community located in Indianapolis,
Indiana, which provides 100% of the Partnership's revenue. Leases are
generally for one year or less and no single tenant is significant to the
Partnership's business.
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.
F-7
<PAGE>
Chrisken Growth & Income L.P. II
(A DELAWARE LIMITED PARTNERSHIP)
Notes to Financial Statements (continued)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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
During 1997, the Partnership began marketing the Property to potential buyers
and planned 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 reclassified the investment in real estate with a net book value
of $5,494,570 to assets held for sale during 1997 and discontinued
recognition of depreciation expense. The estimated fair value less cost to
sell the Property exceeded the Partnership's carrying value.
In February 1998, a lawsuit was filed against the Partnership by a
prospective buyer of the Property. The lawsuit was settled as of June 1,
1998, and the Partnership has ceased marketing the property and has no
present plans to dispose of the Property. Accordingly, as of June 1, 1998,
the Property is no longer considered an asset held for sale and the net book
value of $5,494,570 has been reclassified as an investment in real estate.
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. As of June 1,
1998, depreciation is based on the net book value of the property and is
computed by the straight-line method over the remaining 20 year life of the
residential property and average remaining 3.5 year life for equipment.
RENTAL REVENUE
The Partnership recognizes rental revenues as they are due in accordance with
the terms of the respective tenant operating leases. This method of rental
recognition approximates a straight-line basis due to the short-term nature
(generally one year or less) of tenant leases.
F-8
<PAGE>
Chrisken Growth & Income L.P. II
(A DELAWARE LIMITED PARTNERSHIP)
Notes to Financial Statements (continued)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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.
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 1998 and 1997 is approximately $39,491
greater and $55,828 greater, 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, 1998, is $7,632,100.
F-9
<PAGE>
Chrisken Growth & Income L.P. II
(A DELAWARE LIMITED PARTNERSHIP)
Notes to Financial Statements (continued)
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 1998 and 1997 were not
sufficient to meet the Annual Preferred Return.
Net sale or refinancing proceeds, as defined, to the extent distributed, will
be allocated to the Limited Partners until the Limited Partners receive
distributions equal to their adjusted investment in the Partnership, together
with an amount, to the extent not previously paid, necessary to yield an
annual return on their adjusted investment of 10% per annum, which shall be
cumulative but noncompounded. Thereafter, 85% of any additional net sale or
refinancing proceeds will be allocated to the Limited Partners, and 15% will
be allocated to the General Partners. Net proceeds from a sale may not be
reinvested in new properties by the Partnership after the Partnership has
completed its second year of operations. Net proceeds from a refinancing will
be reinvested only to the extent necessary for improvements and repairs to
existing properties.
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, 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, 1998, cash restricted for working capital
reserve purposes was $57,645.
F-10
<PAGE>
Chrisken Growth & Income L.P. II
(A DELAWARE LIMITED PARTNERSHIP)
Notes to Financial Statements (continued)
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 1998 and
1997 were $67,526 and $64,721, respectively. The agreement is subject to
annual renewal. In addition, the Partnership reimbursed Chrisken for
personnel costs directly attributable to property operations totaling
$113,462 and $106,559 in 1998 and 1997, respectively. These costs are
included in property operation expenses in the accompanying statements of
income.
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, a security agreement, and an assignment of rents.
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 interest were originally due on November 1,
1997. The debt was first extended to February 1, 1998, and then to June 1,
1998 and again to June 1, 1999. All 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 is given to the lender
90 days prior to remittance; and (c) prepayments are 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. There can be no assurance that any refinancing will be consummated by
the Partnership. In the event that a refinancing 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,
the Partnership recorded amortization expense of $12,584.
7. LITIGATION
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 lawsuit was settled as of June 1, 1998. Settlement
costs and related legal fees charged to expense pertaining to this matter
amounted to $88,921 in 1998 and $29,288 in 1997.
F-11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 168,815
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 209,189
<PP&E> 5,525,094
<DEPRECIATION> 160,323
<TOTAL-ASSETS> 5,573,960
<CURRENT-LIABILITIES> 189,453
<BONDS> 3,000,000
0
0
<COMMON> 0
<OTHER-SE> 2,384,509
<TOTAL-LIABILITY-AND-EQUITY> 5,573,960
<SALES> 1,268,009
<TOTAL-REVENUES> 1,341,447
<CGS> 0
<TOTAL-COSTS> 923,531
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 232,500
<INCOME-PRETAX> 185,416
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 185,416
<EPS-PRIMARY> 14.47
<EPS-DILUTED> 14.47
</TABLE>
