- --------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------------
FORM 10-Q
---------------------------
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Quarterly Period Ended June 30, 2009
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Transition Period From to
COMMISSION FILE NUMBER 33-11096
---------------------------
CRI HOTEL INCOME PARTNERS, L.P.
Delaware 52-1500621
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
11200 Rockville Pike, Rockville, Maryland 20852
(Address of principal executive offices) (Zip Code)
(301) 468-9200
(Registrant's telephone number, including area code)
None
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 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 |_|
Indicate by check mark whether the Registrant is a large accelerated filer,
an accelerated filer, a non-accelerated filer, or a smaller reporting company.
See definition of "large accelerated filer," "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer |_| Accelerated filer |_|
Non-accelerated filer |_| Smaller reporting company |X|
Indicate by check mark whether the Registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act).
Yes |_| No |X|
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CRI HOTEL INCOME PARTNERS, L.P.
INDEX TO FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 2009
Page
-----
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets
- June 30, 2009 and December 31, 2008............................ 1
Statements of Operations
- for the three and six months ended June 30, 2009 and 2008...... 2
Statement of Changes in Partners' (Deficit) Capital
- for the six months ended June 30, 2009......................... 3
Statements of Cash Flows
- for the six months ended June 30, 2009 and 2008................ 4
Notes to Financial Statements
- June 30, 2009 and 2008......................................... 5
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations........................................ 12
Item 4. Controls and Procedures........................................... 18
Part II. OTHER INFORMATION
Item 5. Other Information................................................. 19
Item 6. Exhibits.......................................................... 19
Signature.................................................................. 20
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
CRI HOTEL INCOME PARTNERS, L.P.
BALANCE SHEETS
ASSETS
June 30, December 31,
2009 2008
------------ ------------
(Unaudited)
Property and equipment - at cost:
Land ............................................................................ $ 1,574,490 $ 1,574,490
Buildings and site improvements ................................................. 14,387,744 14,382,485
Furniture, fixtures and equipment ............................................... 4,322,586 4,214,546
Leasehold improvements .......................................................... 1,431,234 1,431,234
------------ ------------
21,716,054 21,602,755
Less: accumulated depreciation and amortization ................................. (14,965,475) (14,542,003)
------------ ------------
6,750,579 7,060,752
Hotel operating cash .............................................................. 482,333 156,805
Working capital reserve ........................................................... 1,759,444 2,333,266
Receivables and other assets, net of allowance for doubtful accounts
of $40,433 and $37,215,respectively ............................................. 320,744 406,899
Acquisition fees, principally paid to related parties,
net of accumulated amortization of $758,489 and $740,175, respectively .......... 261,614 279,928
Property purchase costs,
net of accumulated amortization of $138,280 and $134,870, respectively .......... 43,987 47,397
Loan refinancing costs,
net of accumulated amortization of $153,670 and $97,148, respectively ........... 131,130 173,152
------------ ------------
Total assets .................................................................. $ 9,749,831 $ 10,458,199
============ ============
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable and accrued expenses ............................................. $ 460,185 $ 524,350
Hotel trade payables .............................................................. 233,949 274,258
Mortgage payable .................................................................. 7,279,461 7,341,231
------------ ------------
Total liabilities ............................................................. 7,973,595 8,139,839
------------ ------------
Partners' (deficit) capital:
General Partner ................................................................. (353,260) (342,418)
Beneficial Assignee Certificates (BACs) Series A;
868,662 BACs issued and outstanding ........................................... 2,129,496 2,660,778
------------ ------------
Total partners' capital ....................................................... 1,776,236 2,318,360
------------ ------------
Total liabilities and partners' capital ....................................... $ 9,749,831 $ 10,458,199
============ ============
The accompanying notes are an integral part
of these financial statements.
-1-
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
CRI HOTEL INCOME PARTNERS, L.P.
STATEMENTS OF OPERATIONS
(Unaudited)
For the three months ended For the six months ended
June 30, June 30,
---------------------------- ----------------------------
2009 2008 2009 2008
------------ ------------ ------------ ------------
Revenue:
Rooms ................................ $ 1,833,272 $ 2,415,396 $ 4,036,315 $ 5,305,873
Rental and other ..................... 41,644 62,058 90,127 131,886
Telephone ............................ 4,944 10,435 11,478 21,952
Food and beverage .................... 5,467 9,196 11,277 21,448
------------ ------------ ------------ ------------
1,885,327 2,497,085 4,149,197 5,481,159
------------ ------------ ------------ ------------
Departmental expenses:
Rooms ................................ (598,159) (702,073) (1,201,341) (1,413,830)
Telephone ............................ (14,032) (18,342) (29,329) (35,946)
Rental and other ..................... (11,456) (17,419) (22,567) (37,123)
Food and beverage .................... (5,258) (8,626) (9,540) (14,922)
------------ ------------ ------------ ------------
(628,905) (746,460) (1,262,777) (1,501,821)
------------ ------------ ------------ ------------
Gross operating income ................. 1,256,422 1,750,625 2,886,420 3,979,338
------------ ------------ ------------ ------------
Unallocated operating income (expenses):
Interest and other income ............ 9,105 16,308 20,450 50,647
General and administrative ........... (314,850) (388,254) (639,640) (833,135)
Depreciation and amortization ........ (248,326) (263,292) (501,718) (502,001)
Marketing ............................ (184,331) (223,330) (375,117) (456,902)
Energy ............................... (156,305) (161,103) (342,521) (355,263)
Building lease ....................... (105,270) (137,610) (304,241) (420,008)
Property operations and maintenance .. (153,301) (183,113) (310,339) (365,103)
Property taxes ....................... (151,976) (135,372) (284,753) (270,744)
Management fees ...................... (71,043) (87,660) (159,565) (192,325)
Professional fees .................... (19,025) (104,745) (111,335) (162,076)
Base asset management fee ............ (23,438) (23,438) (46,875) (46,875)
------------ ------------ ------------ ------------
(1,418,760) (1,691,609) (3,055,654) (3,553,785)
------------ ------------ ------------ ------------
Operating (loss) income ................ (162,338) 59,016 (169,234) 425,553
Interest expense ....................... (186,727) (142,212) (372,890) (283,762)
------------ ------------ ------------ ------------
Net (loss) income ...................... $ (349,065) $ (83,196) $ (542,124) $ 141,791
============ ============ ============ ============
Net (loss) income allocated to
General Partner (2%) ................. $ (6,981) $ (1,664) $ (10,842) $ 2,836
============ ============ ============ ============
Net (loss) income allocated to
BAC Holders (98%) .................... $ (342,084) $ (81,532) $ (531,282) $ 138,955
============ ============ ============ ============
Net (loss) income per BAC,
based on 868,662 BACs outstanding .... $ (.39) $ (.09) $ (.61) $ .16
============ ============ ============ ============
The accompanying notes are an integral part
of these financial statements.
-2-
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
CRI HOTEL INCOME PARTNERS, L.P.
STATEMENT OF CHANGES IN PARTNERS' (DEFICIT) CAPITAL
(Unaudited)
Beneficial
Assignee
General Certificate
Partner Holders Total
----------- ----------- ----------
Partners' (deficit) capital, January 1, 2009 $ (342,418) $ 2,660,778 $ 2,318,360
Net loss ................................. (10,842) (531,282) (542,124)
----------- ----------- -----------
Partners' (deficit) capital, June 30, 2009 . $ (353,260) $ 2,129,496 $ 1,776,236
=========== =========== ===========
The accompanying notes are an integral part
of these financial statements.
-3-
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
CRI HOTEL INCOME PARTNERS, L.P.
STATEMENTS OF CASH FLOWS
(Unaudited)
For the six months ended
June 30,
------------------------
2009 2008
--------- ---------
Cash flows from operating activities:
Net (loss) income .......................................................... $(542,124) $ 141,791
Adjustments to reconcile net (loss) income to net cash provided by operating
activities:
Depreciation and amortization ............................................ 501,718 502,002
Changes in assets and liabilities:
Increase (decrease) in receivables and other assets, net ............... 86,155 (147,228)
Decrease in accounts payable and accrued expenses ...................... (64,165) (95,074)
Decrease in hotel trade payables ....................................... (40,309) (90,469)
--------- ---------
Net cash (used in) provided by operating activities .................. (58,725) 311,022
--------- ---------
Cash flows from investing activities:
Additions to property and equipment ........................................ (113,299) (436,072)
Net deposits to working capital reserve .................................... 573,822 (334,016)
Net withdrawals from (deposits to) capital improvements
and real estate tax reserves held by servicer ............................ -- 315,585
--------- ---------
Net cash provided by (used in) investing activities .................. 460,523 (454,503)
--------- ---------
Cash flows from financing activities:
Payment of principal on mortgage payable ................................... (61,770) 126,559
Decrease in deposits ....................................................... -- 18,000
Loan refinancing cost ...................................................... (14,500) (245,300)
--------- ---------
Net cash used in financing activities ................................ (76,270) (100,741)
--------- ---------
Net increase (decrease) in hotel operating cash and cash and cash equivalents 325,528 (244,222)
Hotel operating cash and cash and cash equivalents, beginning of period ...... 156,805 576,809
--------- ---------
Hotel operating cash and cash and cash equivalents, end of period ............ $ 482,333 $ 332,587
========= =========
Supplemental disclosure of cash flow information:
Cash paid during the period for interest ................................... $ 372,890 $ 283,762
========= =========
The accompanying notes are an integral part
of these financial statements.
-4-
CRI HOTEL INCOME PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS
June 30, 2009 and 2008
(Unaudited)
1. BASIS OF PRESENTATION
In the opinion of CRICO Hotel Associates I, L.P. (the General Partner), the
accompanying unaudited financial statements reflect all adjustments, consisting
of normal recurring accruals, necessary for a fair presentation of the financial
position of CRI Hotel Income Partners, L. P. (the Partnership) as of June 30,
2009, and the results of its operations for the three and six month periods
ended June 30, 2009 and 2008 and its cash flows for the six month periods ended
June 30, 2009 and 2008. The results of operations for the interim periods ended
June 30, 2009, are not necessarily indicative of the results to be expected for
the full year.
The accompanying unaudited financial statements have been prepared in
conformity with accounting principles generally accepted in the United States of
America (US GAAP) and with the instructions to Form10-Q. Certain information and
accounting policies and footnote disclosures normally included in financial
statements prepared in conformity with US GAAP have been condensed or omitted
pursuant to such instructions. These condensed financial statements should be
read in conjunction with the financial statements and notes thereto included in
the Partnership's annual report on Form 10-K at December 31, 2008.
The Partnership and the chief operating decision maker consider the hotels'
operations as a single homogeneous business activity as it relates to achieving
their objectives of cash flow growth and capital appreciation. The chief
operating decision maker reviews cash flow and operating results in the
aggregate in order to determine the appropriate level of cash available, if any,
for distribution to the investors in the Partnership. Accordingly, the
Partnership considers itself to operate in a single reportable segment in
accordance with Statement of Financial Accounting Standards No. 131.
2. NEW ACCOUNTING PRONOUNCEMENTS
FASB Statement No. 165 Subsequent Events establishes general standards of
accounting for and disclosure of events that occur after the balance sheet date
but before the company issues financial statements or has them available to
issue. SFAS 165 defines (i) the period after the balance sheet date during which
a reporting entity's management should evaluate events or transactions that may
occur for potential recognition or disclosure in the financial statements, (ii)
the circumstances under which an entity should recognize events or transactions
occurring after the balance sheet date in its financial statements, and (iii)
the disclosures an entity should make about events or transactions that occurred
after the balance sheet date. SFAS 165 became effective for periods ending after
June 15, 2009. Subsequent events have been evaluated through August 13, 2009,
which is the issue date of the financial statements. The adoption of SFAS 165
did not have a material impact on the results of operations or financial
position.
In April 2009, FSP No. FAS 107-1 and APB 28-1, "Interim Disclosures about
Fair Value of Financial Instruments" was issued which requires disclosure
regarding the fair value of financial instruments for interim reporting periods
as well as in annual financial statements. We adopted the FSP during the quarter
ended June 30, 2009.
In September 2006, the Financial Accounts Standards Board (FASB) issued
SFAS No. 157, Fair Value Measurements ("SFAS No. 157"). SFAS No. 157 establishes
a formal framework for measuring fair value under US GAAP. Although SFAS No. 157
-5-
CRI HOTEL INCOME PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS
June 30, 2009 and 2008
(Unaudited)
2. NEW ACCOUNTING PRONOUNCEMENTS - Continued
applies (amends) the provisions of existing FASB and AICPA pronouncements, it
does not require any new fair value measurements, nor does it establish
valuation standards. SFAS No. 157 is effective for fiscal years beginning after
November 15, 2007. We adopted the recognition and disclosure provisions of SFAS
No. 157 for financial assets and financial liabilities and for nonfinancial
assets and nonfinancial liabilities that are re-measured at least annually
effective January 1, 2008. The adoption did not have a material impact on our
financial position, results of operations or cash flows. In accordance with FSP
SFAS No. 157-2, "Effective Date of FASB Statement No. 157", we adopted the
provisions of SFAS No. 157 for all other nonfinancial assets and nonfinancial
liabilities effective January 1, 2009 and the adoption did not have a material
impact on our financial position, results of operations or cash flows.
SFAS No. 157 establishes a hierarchy for inputs used in measuring fair
value as follows:
1. Level 1 Inputs -- quoted prices in active markets for identical assets
of liabilities.
2. Level 2 Inputs -- observe inputs other than quoted prices in active
markets for identical assets and liabilities.
3. Level 3 Inputs -- unobservable inputs.
In certain cases, the inputs used to measure fair value may fall into
different levels of the fair value hierarchy. In such cases, for disclosure
purposes, the level within which the fair value measurement is categorized is
based on the lowest level input that is significant to the fair value
measurement.
Except as disclosed in Note 6, the carrying amount of our financial
instruments approximates their fair value.
3. LONG-LIVED ASSETS
The Partnership reviews long-lived assets for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be fully recoverable. Recoverability is measured by a comparison of the carrying
amount of an asset to the estimated future undiscounted net cash flows expected
to be generated by the asset. If an asset were determined to be impaired, its
basis would be adjusted to fair value through the recognition of an impairment
loss.
4. WORKING CAPITAL RESERVE
The working capital reserve of $1,759,444 and $2,333,266 as of June 30,
2009 and December 31, 2008, respectively, represents all cash and cash
equivalents maintained as working capital for the Partnership. In accordance
with the terms of the Partnership Agreement, the working capital reserve may be
increased or reduced by the General Partner as it deems appropriate.
-6-
CRI HOTEL INCOME PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS
June 30, 2009 and 2008
(Unaudited)
5. CAPITAL IMPROVEMENTS AND REAL ESTATE TAX RESERVES HELD BY
SERVICER
In addition to the monthly loan installments under its former mortgage
loan, as discussed below, the Partnership also made monthly payments which were
escrowed for capital improvements and estimated annual real estate taxes. This
loan was refinanced on May 6, 2008. The Partnership was reimbursed by the former
servicer in June 2008 for the remaining balances in the escrowed capital
improvement and real estate tax accounts. Under the new mortgages, the
Partnership will pay directly for real estate taxes and capital improvements.
During the six month period ended June 30, 2008, the Partnership made
escrow deposits aggregating $77,458 for capital improvements, and $130,622 for
estimated annual real estate taxes. The Partnership was reimbursed by the former
servicer in June 2008 for the remaining balances in the escrowed capital
improvement reserve and real estate tax reserve.
6. MORTGAGES PAYABLE
On December 19, 1997, the Partnership refinanced with Citicorp Real Estate,
Inc. (Citicorp) the Zero Coupon Notes which were originally issued in connection
with the Partnership's acquisition of the hotels. The loan matured January 1,
2008. On that date, a balloon payment in the amount of $7,273,441 became due.
The General Partner was unable to refinance the Partnership's mortgage debt
prior to its maturity. Although the loan was in default, the special servicer
agreed to a forbearance agreement for a period of 180 days for payment of a fee
in the amount of $72,734, plus continued monthly payments of principal, interest
(at the pre-default rate) and tax and capital improvements escrows.
On May 6, 2008, the Partnership closed three loans from General Electric
Credit Corporation ("GE") in the aggregate amount of $5,000,000 to refinance the
Plymouth and Roseville hotels in Minnesota and the Clearwater hotel in Florida.
The three loans are cross-collateralized by the three hotels. The Partnership
used the loan proceeds together with the proceeds of a loan from Remediation
Capital Funding, LLC in the amount of $2,900,000, of which $500,000 is held by
the Lender pending resolution of the environmental matter further discussed
below, secured by the University hotel in Minnesota, to pay off the existing
debt in full.
The Phase I environmental study of the University hotel required by GE
revealed excess levels of three chemicals deemed hazardous in the groundwater on
the property. The contamination is not due to acts or omissions of the hotel.
Simultaneously with its refinancing efforts, the Partnership engaged a
consultant to enroll the University property in the Minnesota Pollution Control
Agency's ("MCPA") Voluntary Investigation and Cleanup ("VIC") Program and deal
with the contamination at the site. The Partnership's goal is to obtain a No
Action Letter with a Covenant Not to Sue, at which point it should be able to
obtain financing on the property again. NOVA, the Partnership's consultant has
prepared and submitted an additional Phase I study in accordance with the
guidelines established by the MPCA-VIC Program along with the application and
proposed scope of work for the required Phase II study. On July 16, 2008, the
MPCA approved the work plan for the Phase II study with samples of soil and
ground water scheduled to begin collection for analysis August 11, 2008. On
January 28, 2009, NOVA completed the Phase II study. Based on the results of the
solvent, petroleum, and RCRA metal impacts above action or guidance levels that
-7-
CRI HOTEL INCOME PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS
June 30, 2009 and 2008
(Unaudited)
6. MORTGAGES PAYABLE - Continued
were detected in the soil, soil vapor and groundwater samples collected at the
site, with the exception of the petroleum impacts, the compounds detected at the
site appear to be associated with regional up gradient off-site areas of
contamination located to the northeast and possibly to the north of the site. It
does not appear that the historical uses of the site are the source of the
solvent, soil vapor and groundwater impacts detected at the site. NOVA has
submitted these results and requests that the MPCA issue an Off-Site
Determination letter and No Further Action letter for the site. The Partnership
has been advised that the VIC Program process will likely take from nine months
to eighteen months.
The three new GE loans bear interest at the rate of 6.79% per annum and
mature on January 1, 2016 with balloon payments due as set forth below:
Plymouth $887,269
Roseville $2,083,122
Clearwater $887,269
The new loan with Remediation Capital bears interest at the rate of 14% per
annum and matured on May 6, 2009. On May 5, 2009, the loan was extended to
mature November 5, 2009. The Partnership has one option, at its sole discretion,
to extend the loan for six months. It is contemplated that this loan will be
refinanced after the environmental issues at the University hotel have been
resolved.
The Partnership made installments of principal and interest aggregating
$434,660 and $363,999 for the six month periods ended June 30, 2009 and 2008.
The Partnership's balance on the loan was $7,279,461 and $7,341,231 as of June
30, 2009 and December 31, 2008, respectively.
Considerable judgment is necessary to estimate the fair value of financial
instruments. Due to current limitations on credit availability and market
conditions, the estimates of fair value presented herein are not necessarily
indicative of the amounts that could be realized upon disposition of the
financial instruments. We estimate the fair value of our mortgages payable using
discounted cash flow analysis, unobservable inputs, and other internally
developed estimates that incorporate market-based assumptions to range from
$3,500,000 to $4,000,000 for the Plymouth hotel, Roseville hotel and Clearwater
hotel; and approximately $2,400,000 for the University hotel loan based on
unobservable inputs.
-8-
CRI HOTEL INCOME PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS
June 30, 2009 and 2008
(Unaudited)
7. DISTRIBUTIONS TO BAC HOLDERS
The Partnership did not declare a distribution in 2008 or the first and
second quarters of 2009.
8. COMMITMENTS
a. Hotel Management Agreements
---------------------------
The hotels had been operated by Bryanston Group, Inc. d/b/a Buckhead
Hotel Management Company, Inc. (Buckhead), formerly known as Days Inns
Management Company, Inc., under the nationally recognized franchise name of
Days Inns. The Partnership entered into new management contracts with Oak
Hotels, Inc., which will continue to be operated as Days Inns. The new
contracts will expire December 31, 2016, with the exception of Scottsdale,
which is coterminous with the land lease on which that hotel is located.
The agreements provide for a base management fee of 3.5% of gross revenues
from operations for the University hotel, Plymouth hotel, Rosewater hotel
and Clearwater hotel and 4.5% for the Scottsdale hotel.
b. Lease Agreements
----------------
The Partnership assumed an existing lease agreement from Days Inns of
America, Inc. in connection with the acquisition of the leasehold interest
in the Scottsdale Days Inn. The assumption transfers the rights to operate
the property on the lease's existing terms over the remaining life of the
lease. In October 2002, the lease was extended to expire on December 31,
2008. The Partnership negotiated and executed a short term extension
through December 31, 2010 until the ground lessor decides to re-develop the
property. As of February 1, 2009, annual lease payments are equal to the
greater of $480,000 or 22% of total room revenue and 2.5% of food and
beverage revenue. Minimum lease payments of $40,000 are payable monthly
with a quarterly analysis of the actual amount due. For the three month
periods ended June 30, 2009 and 2008, lease payments were $105,270 and
$137,610, respectively. For the six month periods ended June 30, 2009 and
2008, lease payments were $304,241 and $420,008, respectively.
c. License Agreements
------------------
The five License Agreements pursuant to which the hotels are operated
as Days Inns have recently been assigned from the current licensee (and
former management agent), Buckhead to the Partnership as Licensee.
d. Legal Proceedings
-----------------
On September 2, 2008, a complaint was filed against CRI Hotel Income
Partners, L.P., in the Circuit Court of the Sixth Judicial Circuit, in and
for Pinellas County, Florida. The Plaintiffs claimed damages of $15,000,
exclusive of interest and cost as a result of being bitten by bed bugs
while staying at the Days Inn Clearwater on or about July 16, 2008. The
complaint was submitted to Wausau Insurance Company, Claim
-9-
CRI HOTEL INCOME PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS
June 30, 2009 and 2008
(Unaudited)
8. COMMITMENTS - Continued
#PX415-008254-01. On January 21, 2009, the defense counsel retained by
Wausau requested that the plaintiff make a demand for settlement of this
lawsuit so as to avoid protracted litigation. A response is expected in
2009 to the request. Discovery continues and the defense counsel is
handling the matter. Any damages will be covered by Wausau under the
hotel's insurance policy.
9. GROUND LEASE AGREEMENTS
The Partnership had leased a portion of the Minneapolis Days Inn property
to Vicorp Restaurants, Inc. (Vicorp), which operated a Baker's Square restaurant
on the property. Gross rental income pursuant to the lease agreement with
Vicorp, which is included in interest and other income in the accompanying
statement of operations, was $12,712 for 2008. As of March 2008, Vicorp failed
to pay the monthly rent due. On April 3, 2008, Vicorp declared bankruptcy. It
rejected the lease as an executory contract as of that date. It has filed a
proof of claim for its permitted damages in Vicorp's bankruptcy case.
On June 22, 2009, the Partnership executed a ten year lease with the Tea
House Restaurant to replace the old tenant at Baker's Square. The lease has two
options to renew for five years each. The base rent for years one through five
is $100,700. Rent commences on the first to occur of (i) 180 days subsequent to
the possession date which occurred on June 22, 2009 or (ii) the opening of the
premises for business to the general public.
The Partnership leases an adjacent building on the Roseville Days Inn
property to India Palace, Inc., which operates a restaurant on the property. The
lease expires on September 30, 2010. The lease provides one option to extend the
lease for an additional period of five years. Gross base rental income pursuant
to the lease agreement with India Palace and the former lease with Happy Chef,
which is included in interest and other income in the accompanying statements of
operations, was $7,500 and $15,000 for each of the three and six month periods
ended June 30, 2009 and 2008, respectively.
10. RELATED PARTY TRANSACTIONS
In accordance with the terms of the Partnership Agreement, the Partnership
is obligated to reimburse the General Partner or its affiliates for their direct
expenses in connection with managing the Partnership. The Partnership paid
$59,334 and $99,051 for the three and six month periods ended June 30, 2009,
respectively and $126,215 and $168,957 for the three and six month periods ended
June 30, 2008, respectively. Such reimbursed expenses are included in general
and administrative expenses in the accompanying statements of operations.
In accordance with the terms of the Partnership Agreement, the Partnership
is obligated to pay the General Partner or its affiliates an annual base asset
management fee (Management Fee), equal to 0.50% of the weighted average balance
of the adjusted partnership investment during the period, as defined in the
Partnership Agreement. The Partnership paid a Management Fee of $23,438 and
$46,875 for each of the three and six month periods ended June 30, 2009 and
2008.
-10-
CRI HOTEL INCOME PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS
June 30, 2009 and 2008
(Unaudited)
10. RELATED PARTY TRANSACTIONS - Continued
C.R.I., Inc., the general partner of the General Partner, has contracted
with Capitol Hotel Group, Inc. (CHG), to perform certain asset management
services related to the oversight of the operations and management of the
hotels. The Chairman and President of C.R.I., Inc., are the Chairman and
President, respectively, of, and holders of 100% of the equity interest in, CHG.
11. DEPRECIATION AND AMORTIZATION
Depreciation is based on the estimated useful lives of depreciable assets
using the straight-line method. Salvage value has been incorporated relating to
the Scottsdale hotel. The estimated lives used in determining depreciation
follow.
Type of asset Estimated life
------------- --------------
Building and site improvements 10-30 years
Furniture, fixtures and equipment 7 years
Leasehold improvements Shorter of estimated life
(usually 7 years) or
remaining lease term
Property purchase cost and acquisition fees are being amortized over a
thirty-year period using the straight-line method, except for the Scottsdale
hotel which is being amortized over the remaining lease term. Loan refinancing
costs are being amortized over the life of the loans using the straight-line
method, which approximates the effective interest method.
12. CASH CONCENTRATION RISK
Financial instruments that potentially subject the Partnership to
concentrations of risk consist primarily of cash. The Partnership maintains
sixteen cash accounts. As of June 30, 2009, the uninsured portion of the cash
balance was $1,637,000.
Number of Bank Balance Insured Uninsured
Bank Accounts 06/30/09 06/30/09 06/30/09
- ---------------------- -------- ------------ -------- ----------
Dreyfus Inst Preferred
Money Market Fund 2 $1,637,000 $0 $1,637,000
Bank of America, N.A. 7 $407,446 $407,446 $0
SunTrust Bank 2 $122,969 $122,969 $0
Wells Fargo 5 $13,709 $13,709 $0
# # #
-11-
Part I. FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations
CRI Hotel Income Partners, L.P.'s (the Partnership) Management's Discussion
and Analysis of Financial Condition and Results of Operations section is based
on the financial statements, and contains information that may be considered
forward looking, including statements regarding the effect of governmental
regulations. Actual results may differ materially from those described in the
forward looking statements and will be affected by a variety of factors
including seasonality with respect to the hotel industry, national and local
economic conditions, the general level of interest rates, governmental
regulations affecting the Partnership and interpretations of those regulations,
the competitive environment in which the Partnership operates, and the
availability of working capital.
Travel and the Economy
----------------------
The hotel industry is continuing to feel the effects of a sagging economy
with decreased demand and lower occupancies, which had a negative impact at all
of the five hotels owned by the Partnership. The Partnership's ability to pay
operating expenses and current liabilities, and to pay distributions to BAC
holders, is primarily dependent upon the performance of the underlying hotels.
The General Partner is currently unable to estimate the impact the future state
of the economy could have on the Partnership's operations, liquidity, or capital
resources.
New Accounting Pronouncements
-----------------------------
FASB Statement No. 165 Subsequent Events establishes general standards of
accounting for and disclosure of events that occur after the balance sheet date
but before the company issues financial statements or has them available to
issue. SFAS 165 defines (i) the period after the balance sheet date during which
a reporting entity's management should evaluate events or transactions that may
occur for potential recognition or disclosure in the financial statements, (ii)
the circumstances under which an entity should recognize events or transactions
occurring after the balance sheet date in its financial statements, and (iii)
the disclosures an entity should make about events or transactions that occurred
after the balance sheet date. SFAS 165 became effective for periods ending after
June 15, 2009. Subsequent events have been evaluated through August 13, 2009,
which is the issue date of the financial statements. The adoption of SFAS 165
did not have a material impact on the results of operations or financial
position.
In April 2009, FSP No. FAS 107-1 and APB 28-1, "Interim Disclosures about
Fair Value of Financial Instruments" was issued which requires disclosure
regarding the fair value of financial instruments for interim reporting periods
as well as in annual financial statements. We adopted the FSP during the quarter
ended June 30, 2009, and have included the additional disclosures in Note 6 to
the financial statements.
Distributions
-------------
The Partnership did not declare a distribution in 2008 or the first and
second quarters of 2009.
Financial Condition/Liquidity
-----------------------------
The Partnership expects that the hotels in the aggregate will generate
sufficient cash flow to achieve a positive cash flow after operating expenses.
In addition to the periodic replacement of fixed assets, the General Partner
determined several years ago that certain capital improvements were needed to
enhance the marketability of the hotels. Since 1997, the Partnership funded a
total of approximately $2.5 million from the working capital reserve to the
hotels for such capital improvements.
-12-
Part I. FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations - Continued
The Partnership's liquidity and future results of operations are primarily
dependent upon the performance of the underlying hotels. Hotel operations may be
materially affected by changing market conditions and by seasonality caused by
variables such as vacations, holidays and climate. The General Partner continues
to work closely with the hotels' manager to institute an aggressive marketing
campaign and stricter cost-cutting and cost-control measures in an effort to
maintain liquidity at the hotels.
For the six month period ended June 30, 2009, existing cash resources were
adequate to support operating and financing requirements. The Partnership
anticipates that future cash flows from the hotels' operations and existing cash
resources, in the aggregate, will be sufficient to pay operating expenses,
accounts payable and accrued expenses, and hotel trade payables. Accounts
payable and accrued expenses and hotel trade payables at June 30, 2009 totaled
$694,134, which represents a $104,474 decrease from December 31, 2008. Accounts
payable and accrued expenses decreased primarily due to lower accrued audit fees
and lower accrued environmental study costs, partially offset by increased real
estate taxes payable . Hotel trade payables decreased primarily due to timing of
payment compared to fourth quarter 2008.
The Partnership assumed an existing lease agreement from Days Inns of
America, Inc. in connection with the acquisition of the leasehold interest in
the Scottsdale Days Inn. The assumption transfers the rights to operate the
property on the lease's existing terms over the remaining life of the lease. In
October 2002, the lease was extended to expire on December 31, 2008. The
Partnership negotiated and executed a short term extension through December 31,
2010 until the ground lessor decides to re-develop the property. There is no
assurance that the lease will be renewed. Operating (loss) income for the
Scottsdale hotel was $(66,944) and $150,266 for the three and six month periods
ended June 30, 2009.
Financing
- ---------
On December 19, 1997, the Partnership refinanced with Citicorp Real Estate,
Inc. (Citicorp) the Zero Coupon Notes which were originally issued in connection
with the Partnership's acquisition of the hotels. The loan matured January 1,
2008. On that date, a balloon payment in the amount of $7,273,441 became due.
The General Partner was unable to refinance the Partnership's mortgage debt
prior to its maturity. Although the loan was in default, the special servicer
agreed to a forbearance agreement for a period of 180 days for payment of a fee
in the amount of $72,734, plus continued monthly payments of principal, interest
(at the pre-default rate) and tax and capital improvements escrows.
On May 6, 2008, the Partnership closed three loans from General Electric
Credit Corporation ("GE") in the aggregate amount of $5,000,000 to refinance the
Plymouth and Roseville hotels in Minnesota and the Clearwater hotel in Florida.
The three loans are cross-collateralized by the three hotels. The Partnership
used the loan proceeds together with the proceeds of a loan from Remediation
Capital Funding, LLC in the amount of $2,900,000, of which $500,000 is held by
the Lender pending resolution of the environmental matter further discussed
below, secured by the University hotel in Minnesota, to pay off the existing
debt in full.
The Phase I environmental study of the University hotel required by GE
revealed excess levels of three chemicals deemed hazardous in the groundwater on
the property. The contamination is not due to acts or omissions of the hotel.
Simultaneously with its refinancing efforts, the Partnership engaged a
consultant to enroll the University property in the Minnesota Pollution Control
Agency's ("MCPA") Voluntary Investigation and Cleanup ("VIC") Program and deal
with the contamination at the site. The Partnership's goal is to obtain a No
Action Letter with a Covenant Not to Sue, at which point it should be able to
-13-
Part I. FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations - Continued
obtain financing on the property again. NOVA, the Partnership's consultant has
prepared and submitted an additional Phase I study in accordance with the
guidelines established by the MPCA-VIC Program along with the application and
proposed scope of work for the required Phase II study. On July 16, 2008, the
MPCA approved the work plan for the Phase II study with samples of soil and
ground water scheduled to begin collection for analysis August 11, 2008. On
January 28, 2009, NOVA completed the Phase II study. Based on the results of the
solvent, petroleum, and RCRA metal impacts above action or guidance levels that
were detected in the soil, soil vapor and groundwater samples collected at the
site, with the exception of the petroleum impacts, the compounds detected at the
site appear to be associated with regional up gradient off-site areas of
contamination located to the northeast and possibly to the north of the site. It
does not appear that the historical uses of the site are the source of the
solvent, soil vapor and groundwater impacts detected at the site. NOVA has
submitted these results and requests that the MPCA issue an Off-Site
Determination letter and No Further Action letter for the site. The Partnership
has been advised that the VIC Program process will likely take from nine months
to eighteen months.
The three new GE loans bear interest at the rate of 6.79% per annum and
mature on January 1, 2016 with balloon payments due as set forth below:
Plymouth $887,269
Roseville $2,083,122
Clearwater $887,269
The new loan with Remediation Capital bears interest at the rate of 14% per
annum and matured on May 6, 2009. On May 5, 2009, the loan was extended to
mature November 5, 2009. The Partnership has one option, at its sole discretion,
to extend the loan for six months. It is contemplated that this loan will be
refinanced after the environmental issues at the University hotel have been
resolved.
The Partnership made installments of principal and interest aggregating
$434,660 and $363,999 for the six month periods ended June 30, 2009 and 2008.
The Partnership's balance on the loan was $7,279,461 and $7,341,231 as of June
30, 2009 and December 31, 2008, respectively.
Considerable judgment is necessary to estimate the fair value of financial
instruments. Due to current limitations on credit availability and market
conditions, the estimates of fair value presented herein are not necessarily
indicative of the amounts that could be realized upon disposition of the
financial instruments. We estimate the fair value of our mortgages payable using
discounted cash flow analysis, unobservable inputs, and other internally
developed estimates that incorporate market-based assumptions to range from
$3,500,000 to $4,000,000 for the Plymouth hotel, Roseville hotel and Clearwater
hotel; and approximately $2,400,000 for the University hotel loan based on
unobservable inputs.
Capital Improvements and Real Estate Tax Reserves Held by Servicer
- ------------------------------------------------------------------
In addition to the monthly loan installments under its former mortgage
loan, as discussed below, the Partnership also made monthly payments which were
escrowed for capital improvements and estimated annual real estate taxes. This
loan was refinanced on May 6, 2008. The Partnership was reimbursed by the former
servicer in June 2008 for the remaining balances in the escrowed capital
improvement and real estate tax accounts. Under the new mortgages, the
Partnership will pay directly for real estate taxes and capital improvements.
-14-
Part I. FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations - Continued
During the six month period ended June 30, 2008, the Partnership made
escrow deposits aggregating $77,458 for capital improvements, and $130,622 for
estimated annual real estate taxes. The Partnership was reimbursed by the former
servicer in June 2008 for the remaining balances in the escrowed capital
improvement reserve and real estate tax reserve.
Working Capital Reserve
- -----------------------
The working capital reserve of $1,759,444 and $2,333,266 as of June 30,
2009 and December 31, 2008, respectively, represents all cash and cash
equivalents maintained as working capital for the Partnership. In accordance
with the terms of the Partnership Agreement, the working capital reserve may be
increased or reduced by the General Partner as it deems appropriate.
Results of Operations - Partnership
-----------------------------------
The Partnership's net loss for the three month period ended June 30, 2009,
increased compared to June 30, 2008 primarily due to decreased rooms revenue, as
a result of lower occupancy, partially offset by decreases in rooms expense,
general and administrative expenses and professional fees. Rooms expense
decreased due to lower occupancy. General and administrative expenses decreased
primarily due to lower reimbursed payroll costs. Professional fees decreased
primarily due to lower costs related to the mortgage loan refinancing in 2008.
The Partnership recognized net loss for the six month period ended June 30,
2009, compared to net income in 2008 primarily due to decreased rooms revenue,
as a result of lower occupancy and increased interest expense, related to the
new mortgage loans, partially offset by decreases in rooms expense, also due to
lower occupancy, general and administrative expenses, building lease expense and
marketing expense. General and administrative expense decreased primarily due to
lower reimbursed payroll costs and the forbearance fee paid in 2008. Building
lease expense decreased due to lower revenues at the Scottsdale Days Inn.
Marketing expense decreased due to some positions reduced to part-time and lower
frequent guest program fee and to lower occupancy.
The General Partner is not able to predict the future trend of hotel gross
operating income, especially rooms revenue as it is affected by occupancy and
average daily rate. The General Partner continues to work closely with the
hotels' manager to contain any increase in unallocated operating expenses.
An analysis of each hotel's operating results for the three and six month
periods ended June 30, 2009 and 2008, follows.
Results of Operations -- Hotels
-------------------------------
Operating statistics
- --------------------
The hotels' results of operations are affected by changing market
conditions and by seasonality caused by variables such as vacations, holidays
and climate. Based on the hotels' operating budgets and historical trends, the
following months should provide the highest net cash flow to the Partnership
from each of the hotels.
-15-
Part I. FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations - Continued
Hotel Location Peak Months
-------------- -----------
Clearwater, FL January through April
Minneapolis, MN March through November
Plymouth, MN April through October
Roseville, MN April through October
Scottsdale, AZ January through April; and
October and November
The hotels' results of operations set forth below may not be consistent
with longer-term historical trends.
The Partnership's statements of operations include operating results for
each of the hotels as summarized below. Gross Operating Income represents total
revenue from rooms, rental and other, telephone, and food and beverage, less the
related departmental expenses. Operating Income represents Gross Operating
Income less unallocated operating income and expenses. The results of operations
and average occupancy for the hotels for the three and six month periods ended
June 30, 2009 and 2008, follow.
Gross Operating Income Gross Operating Income
for the three month periods for the six month periods
ended June 30, ended June 30,
----------------------------- ----------------------------
Hotel Location 2009 2008 2009 2008
-------------- ---------- ---------- ---------- ----------
Clearwater, FL $ 105,992 $ 154,344 $ 355,467 $ 494,024
Minneapolis, MN 465,720 601,274 869,961 1,049,594
Plymouth, MN 141,503 235,986 249,492 398,569
Roseville, MN 206,380 289,620 327,807 479,033
Scottsdale, AZ 336,827 469,401 1,083,693 1,558,118
---------- ---------- ---------- ----------
Total $1,256,422 $1,750,625 $2,886,420 $3,979,338
========== ========== ========== ==========
Operating (Loss) Income Operating (Loss) Income
for the three month periods for the six month periods
ended June 30, ended June 30,
----------------------------- ----------------------------
2009 2008 2009 2008
---------- ---------- ---------- ----------
Clearwater, Fl $ (64,916) $ (34,857) $ (4,821) $ 86,542
Minneapolis, MN 246,087 359,766 423,944 565,381
Plymouth, MN 20,091 94,963 (4,300) 116,102
Roseville, MN 69,494 141,611 47,653 182,055
Scottsdale, AZ (66,944) (7,405) 150,266 424,436
Depreciation and partnership
operating expenses (366,150) (495,062) (781,976) (948,963)
---------- ---------- ---------- ----------
$ (162,338) $ 59,016 $ (169,234) $ 425,553
========== ========== ========== ==========
Average Occupancy Average Occupancy
for the three month periods for the six month periods
ended June 30, ended June 30,
------------------------------ ----------------------------
2009 2008 2009 2008
---------- ---------- ---------- ----------
Clearwater, Fl 38% 48% 47% 60%
Minneapolis, MN 69% 87% 66% 80%
Plymouth, MN 52% 79% 47% 70%
Roseville, MN 54% 72% 48% 66%
Scottsdale, AZ 61% 72% 63% 76%
-16-
Part I. FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations - Continued
Three Month Period Ended June 30, 2009
--------------------------------------
Clearwater, Florida: Gross operating income decreased and operating loss
increased for the three month period ended June 30, 2009, compared to 2008
primarily due to decreases in rooms revenue, telephone revenue and rental and
other revenue and increases in general and administrative expenses and energy
expense, partially offset by decreases in rooms expense, telephone expense,
rental and other expenses, marketing expense, repair and maintenance expenses,
management fees, insurance expense and property tax expense. Occupancy decreased
due to the sluggish economy and a significant decrease in the housing and
construction markets.
Minneapolis, Minnesota: Gross operating income and operating income for the
three month period ended June 30, 2009, decreased from 2008 primarily due to
decreases in rooms revenue, telephone revenue and rental and other revenue and
increases in general and administrative expenses, energy expense and insurance
expense, partially offset by decreases in rooms expense, rental and other
expense, marketing expense, repair and maintenance expenses, management fees and
property tax expense. Occupancy decreased due to market demand with the largest
shortfall in the transient market, the University of Minnesota visitor rate.
Plymouth, Minnesota: Gross operating income and operating income for the three
month period ended June 30, 2009, decreased compared to 2008 primarily due to
decreases in rooms revenue, telephone revenue and rental and other revenue and
increases in general and administrative expenses, insurance expense and property
tax expense, partially offset by decreases in rooms expense, telephone expense,
rental and other expense, marketing expense, energy expense, repair and
maintenance expenses and management fees. Occupancy decreased due to the economy
and lack of production from some long term corporate groups.
Roseville, Minnesota: Gross operating income and operating income for the three
month period ended June 30, 2009, decreased compared to 2008 primarily due to
decreases in rooms revenue, telephone revenue and rental and other revenue and
increases in insurance expense and property tax expense, partially offset by
decreases in rooms expense, telephone expense, rental and other expense, general
and administrative expenses, marketing expense, energy expense, repair and
maintenance expenses and management fees. Occupancy decreased due to the
sluggish economy and sharp decline in walk in business.
Scottsdale, Arizona: Gross operating income decreased and operating loss
increased for the three month period ended June 30, 2009, compared to 2008
primarily due to decreases in rooms revenue, food and beverage revenue,
telephone revenue and rental and other revenue and increases in rental and other
expense, energy expense, insurance expense and property tax expense, partially
offset by decreases in rooms expense, food and beverage expense, telephone
expense, general and administrative expenses, marketing expense, repair and
maintenance expenses, management fees and land lease expense. Occupancy
decreased due to the sluggish economy and the absence of demand in the
Scottsdale market.
Six Month Periods Ended June 30, 2009
-------------------------------------
Clearwater, Florida: Gross operating income decreased and operating loss was
recognized for the six month period ended June 30, 2009, compared to 2008
primarily due to decreases in rooms revenue, telephone revenue and rental and
other revenue and increases in general and administrative expenses and energy
expense, partially offset by decreases in rooms expense, telephone expense,
rental and other expense, marketing expense, repair and maintenance expenses,
management fees, insurance expense and property tax expense. Occupancy decreased
due to the sluggish economy and a significant decrease in the housing and
construction markets.
-17-
Part I. FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations - Continued
Minneapolis, Minnesota: Gross operating income and operating income for the six
month period ended June 30, 2009, decreased compared to 2008 primarily due to
decreases in rooms revenue, telephone revenue and rental and other revenue and
increases in telephone expense and insurance expense, partially offset by
deceases in rooms expense, rental and other expense, general and administrative
expenses, marketing expense, energy expense, repair and maintenance expenses,
management fees and property tax expense. Occupancy decreased due to market
demand with the largest shortfall in the transient market, the University of
Minnesota visitor rate.
Plymouth, Minnesota: Gross operating income decreased and operating loss was
recognized for the six month period ended June 30, 2009, compared to 2008
primarily due to decreases in rooms revenue, telephone revenue and rental and
other revenue and increases in general and administrative expenses, insurance
expense and property tax expense, partially offset by decreases in rooms
expense, telephone expense, rental and other expense, market expense, repair and
maintenance expenses and management fees. Occupancy decreased due to the economy
and lack of production from some long term corporate groups.
Roseville, Minnesota: Gross operating income and operating income for the six
month period ended June 30, 2009, deceased from 2008 primarily due to deceases
in rooms revenue, telephone revenue and rental and other revenue and increased
insurance expense and property tax expenses, partially offset by decreases in
rooms expense, telephone expense, rental and other expense, general and
administrative expenses, marketing expense, repair and maintenance expenses and
management fees. Occupancy decreased due to the sluggish economy and sharp
decline in walk in business.
Scottsdale, Arizona: Gross operating income and operating income for the six
month period ended June 30, 2009, decreased from 2008 primarily due to decreases
in rooms revenue, food and beverage revenue, telephone revenue and rental and
other revenue and increases in insurance expense and property tax expense,
partially offset by decreased in rooms expense, food and beverage expense,
telephone expense, general and administrative expenses, marketing expense,
energy expense, repair and maintenance expenses, management fees and land lease
expense. Occupancy decreased due to the sluggish economy and the absence of
demand in the Scottsdale market.
Item 4. Controls and Procedures
In July 2009, representatives of the Managing General Partner of the
Partnership carried out an evaluation of the effectiveness of the design and
operation of the Partnership's disclosure controls and procedures, pursuant to
Exchange Act Rules 13a-15 and 15d-15. The Managing General Partner does not
expect that the Partnership's disclosure controls and procedures will prevent
all error and all fraud. A control system, no matter how well conceived and
operated, can provide only reasonable assurance that the objectives of the
control system are met. Further, the design of a control system must reflect the
fact that there are resource constraints, and the benefits of controls must be
considered relative to their costs. Because of the inherent limitations in all
control systems, no evaluation of controls can provide absolute assurance that
all control issues have been detected. These inherent limitations include the
realities that judgments in decision-making can be faulty, and that breakdowns
can occur because of simple error or mistake. The design of any system of
controls also is based in part upon certain assumptions about the likelihood of
future events, and there can be no assurance that any design will succeed in
achieving its stated goals under all potential future conditions. Over time,
controls may become inadequate because of changes in conditions, or the degree
of compliance with the policies or procedures may deteriorate. Because of the
inherent limitations in a cost-effective control system, misstatements due to
error or fraud may occur and not be detected. Based on such evaluation, our
-18-
Part I. FINANCIAL INFORMATION
Item 4. Controls and Procedures - Continued
principal executive officer and principal financial officer have concluded that
as of June 30, 2009, our disclosure controls and procedures were effective to
ensure that (i) the information required to be disclosed by us in the reports
filed or submitted by us under the Securities Exchange Act of 1934, as amended,
was recorded, processed, summarized or reported within the time periods
specified in the SEC's rules and forms and (ii) such information was accumulated
and communicated to management, including our principal executive officer and
principal financial officer, to allow timely decisions regarding required
disclosure. In addition, there have been no significant changes in the
Partnership's internal controls over financial reporting that occurred during
the Partnership's most recent fiscal quarter that has materially affected, or is
reasonably likely to materially affect, the Partnership's internal controls over
financial reporting.
Part II. OTHER INFORMATION
Item 5. Other Information
a. There has not been any information required to be disclosed in a report on
Form 8-K during the quarter ended June 30, 2009, but not reported, whether
or not otherwise required by this Form 10-Q at June 30, 2009.
b. There is no established market for the purchase and sale of BACs, although
various informal secondary market services exist. Due to the limited
markets, however, investors may be unable to sell or otherwise dispose of
their BACs.
Item 6. Exhibits
Exhibit No. Description
10.1 Form of Management Agreement dated March 1, 2008, between
Registrant and Oak Hotels, Inc. for the University, Plymouth and
Roseville hotels, April 1, 2008 for the Clearwater Hotel and July
1, 2008 for the Scottsdale Hotel.
31.1 Certification of Principal Executive Officer, pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
31.2 Certification of Principal Financial Officer, pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
32 Certification of Principal Executive Officer and Principal
Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
All other items are not applicable.
-19-
SIGNATURE
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
CRI HOTEL INCOME PARTNERS, L.P.
----------------------------------------------
(Registrant)
by: CRICO Hotel Associates I, L.P.
-----------------------------------------
General Partner
by: C.R.I., Inc.
------------------------------------
its General Partner
August 13, 2009 by: /s/ H. William Willoughby
- --------------- -------------------------------
DATE H. William Willoughby,
Director, President, Secretary,
Principal Financial Officer and
Principal Accounting Officer
-20-