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 ~~March~~June 3130, 2013

o 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.

(Exact Name of Issuer as Specified in its Charter)



Delaware	52-1500621
(State of Incorporation)	(I.R.S. Employer Identification No.)
11200 Rockville Pike
Rockville, MD	20852
(Address of Principal Executive Offices)	(ZIP Code)

(301) 468-9200

(Issuer’s Telephone Number, Including Area Code)

_____________________

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 þ No o

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of accelerated filer and large accelerated filer@ in Rule 12b-2 of the Exchange Act.

Large accelerated filer o Accelerated filer o Non-accelerated filer o Smaller reporting company þ

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o No þ

The units of limited partner interest of the Registrant are not traded in any market. Therefore, the units of limited partner interest had neither a market selling price nor an average bid or asked price.

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Date File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes o No þ

As of ~~July~~October 2523, 2013, the issuer had 868,662 outstanding beneficial assignee certificates.

CRI HOTEL INCOME PARTNERS, L.P.

INDEX TO FORM 10-Q

FOR THE QUARTER ENDED ~~MARCH~~JUNE 3130, 2013

	Page
Part I FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets - March 31, 2013 and December 31, 2012	1
Condensed Consolidated Balance Sheets - June 30, 2013 and December 31, 2012	1
Condensed Consolidated Statements of Operations for the three months ended March 31, 2013 and 2012	2
Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2013 and 2012	2
Condensed Consolidated Statement of Changes in Partners' Deficit for the three months ended
Condensed Consolidated Statement of Changes in Partners' Deficit for the six months ended
March 31, 2013 and 2012	3
June 30, 2013	3
Condensed Consolidated Statements of Cash Flows for the three months ended
Condensed Consolidated Statements of Cash Flows for the six months ended
March 31, 2013 and 2012	4
June 30, 2013 and 2012	4
Notes to Condensed Consolidated Financial Statements	5
Item 2. Management's Discussion and Analysis of Financial condition and Results of Operations	11
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	11
Item 3. Quantitative and Qualitative Disclosures about Market Risk	15
Item 4. Controls and Procedures	1516
Part II OTHER INFORMATION
Item 5. Other Information	1617
Item 6. Exhibits	1718
Signature	18
Signatures	19

CRI HOTEL INCOME PARTNERS, L.P.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

ASSETS

	March 31,			December 31,
	June 30,			December 31,
	2013			2012
				(Note 1)
Assets related to discontinued operations	$	139,~~097~~698		$	71,273
Property and equipment - at cost
Land	1,191,990			1,191,990
Buildings and site improvements	11,105,244			11,051,370
Furniture, fixtures and equipment	2,~~457~~510,~~230~~145			2,383,286
Leasehold improvements	1,521,020			1,521,020
	16,275,484			16,147,666
	16,328,399			16,147,666
Less: accumulated depreciation and amortization	(12,~~573~~710,~~033~~321		)	(12,436,992		)
	3,702,451			3,710,674
	3,618,078			3,710,674
Hotel operating cash	~~125~~207,~~143~~571			100,370
Working capital reserves	~~951~~653,~~074~~267			1,353,505
Restricted cash	1,~~072~~030,~~307~~507			993,220
Receivables and other assets, net of allowance for doubtful accounts of $24,516 and $23,415, respectively	~~422~~535,~~911~~173			430,388
Acquisition fees, principally paid to related parties, net of
accumulated amortization of $705,330 and $699,436, respectively	110,752			116,646
accumulated amortization of $711,225 and $699,436, respectively	104,858			116,646
Property purchase costs, net of
accumulated amortization of $147,559 and $146,403, respectively	22,056			23,212
accumulated amortization of $148,715 and $146,403, respectively	20,900			23,212
Loan refinancing costs, net of
accumulated amortization of $231,684 and $221,429, respectively	57,101			67,356
accumulated amortization of $241,939 and $221,429, respectively	46,846			67,356
Total assets	$	6,~~476~~226,~~892~~898		$	6,866,644

LIABILITIES AND PARTNERS' DEFICIT

Accounts payable and accrued expenses	$	~~461~~279,~~049~~451		$	404,843
Hotel trade payables	~~107~~148,~~637~~566			122,245
Mortgages payable	6,~~665~~609,~~403~~319			6,718,617
Liabilities related to discontinued operations	1413,~~113~~415			140,512
Total liabilities	7,~~248~~050,~~202~~751			7,386,217
General Partner	(~~404~~405,~~211~~262		)	(399,176		)
Beneficial Assignee Certificates (BACs) Series A; 868,662
Issued and outstanding	(367,099		)	(120,397		)
issued and outstanding	(418,591		)	(120,397		)
Total partners' deficit	(~~771~~823,~~310~~853		)	(519,573		)
Total liabilities and partners' deficit	$	6,~~476~~226,~~892~~898		$	6,866,644

The accompanying notes are an integral part of these condensed consolidated financial statements.

CRI HOTEL INCOME PARTNERS, L.P.

CONDENSED CONSOLIDATED ~~STATEMENTS~~STATEMENT OF OPERATIONS

(Unaudited)

	For the three months ended						For the six months ended
	March 31,
	June 30,						June 30,
	2013			2012			2013			2012
				~~(Note 1)~~						(Note 1)
Revenue:
Rooms	$	1,~~048~~509,~~210~~954		$	1,~~109~~397,~~190~~615		$	2,558,164		$	2,511,014
Rental and other	7275,~~163~~936			7380,~~365~~208			147,836			149,386
Telephone	~~508~~701			~~336~~973			1,209			1,309
Food and Beverage	—			—
	1,586,591			1,478,796			2,707,209			2,661,709
	1,120,881			1,182,891
Departmental expenses:
Departmental expenses:
Rooms	(448,256		)	(429,889		)	(839,632		)	(834,892		)
Rooms	(391,376		)	(405,003		)
Rental and other	(5,019		)	(8,672		)	(11,221		)	(16,003		)
Rental and other	(6,202		)	(7,331		)
Telephone	(7,073		)	(6,527		)	(13,884		)	(14,320		)
Telephone	(6,811		)	(7,793		)
	(460,348		)	(445,088		)	(864,737		)	(865,215		)
Food and Beverage	—			—
Gross operating income	1,126,243			1,033,708			1,842,472			1,796,494
	(404,389		)	(420,127		)
Unallocated operating income (expenses):
Gross operating income	716,492			762,764
Interest and other income	155			358			362			946
Unallocated operating income (expenses):
General and administrative	(331,764		)	(203,593		)	(535,236		)	(459,489		)
Interest and other income	207			588
Building lease expense	(4,946		)	(5,814		)	(10,760		)	(11,628		)
General and administrative	(204,480		)	(255,059		)
Marketing	(106,951		)	(95,311		)	(194,718		)	(181,065		)
Building lease expense	(5,814		)	(5,814		)
Depreciation and amortization	(157,507		)	(154,657		)	(312,301		)	(313,947		)
Marketing	(86,564		)	(85,754		)
Energy	(84,297		)	(64,591		)	(199,839		)	(165,759		)
Depreciation and amortization	(155,528		)	(156,047		)
Property taxes	(106,246		)	(98,023		)	(212,111		)	(198,286		)
Energy	(115,542		)	(101,168		)
Property operations and maintenance	(112,110		)	(103,218		)	(216,675		)	(208,102		)
Property taxes	(105,865		)	(99,142		)
Management fees	(55,529		)	(51,753		)	(94,746		)	(93,147		)
Property operations and maintenance	(104,796		)	(104,882		)
Base asset management fee	(16,250		)	(23,437		)	(32,500		)	(46,875		)
Management fees	(39,229		)	(41,394		)
Professional fees	(57,130		)	(50,646		)	(72,130		)	(227,870		)
Base asset management fee	(16,250		)	(23,438		)
Total operating costs and expenses	(1,032,575		)	(850,685		)	(1,880,654		)	(1,905,222		)
Professional fees	(15,000		)	(177,224		)
Operating income (loss) from continuing operations	93,668			183,023			(38,182		)	(108,728		)
Total operating costs and expenses	(848,861		)	(1,049,334		)
Interest expense	(114,722		)	(120,122		)	(232,313		)	(239,039		)
Operating loss from continuing operations	(132,369		)	(286,570		)
(Loss) income from continuing operations	(21,054		)	62,901			(270,495		)	(347,767		)
Interest expense	(117,591		)	(118,917		)
Gain on sale of hotel property	—			—			—			417,303
Loss from continuing operations	(249,960		)	(405,487		)
(Loss) income from operations related to discontinued operations	(32,008		)	(113,567		)	(33,785		)	230,511
Gain on sale of hotel property	—			317,303
Net (loss) income from discontinued operations	(32,008		)	(113,567		)	(33,785		)	647,814
(Loss) income from operations related to discontinued operations	(1,777		)	338,897
Net (loss) income	$	(53,062	)	$	(50,666	)	$	(304,280	)	$	300,047
Net (loss) income from discontinued operations	(1,777		)	656,200
Net (loss) income allocated to GP (2%)	$	(1,061	)	$	(1,013	)	$	(6,086	)	$	6,001
Net (loss) income	$	(251,737	)	$	250,713
Net (loss) income allocated to LPs (98%)	$	(52,001	)	$	(49,653	)	$	(298,194	)	$	294,046
Net (loss) income allocated to GP (2%)	$	(5,035	)	$	5,014
(Loss) income from continuing operations per BAC, based on 868,662 BACs outstanding	$	(0.02	)	$	0.07		$	(0.31	)	$	(0.40	)
Net (loss) income allocated to LPs (98%)	$	(246,702	)	$	245,699
(Loss) income from discontinued operations per BAC, based on 868,662 BAC's outstanding	$	(0.04	)	$	(0.13	)	$	(0.04	)	$	0.75
Loss from continuing operations per BAC, based on 868,662 BACs outstanding	$	(0.29	)	$	(0.48	)
Net (loss) income per BAC, based on 868,662 BACs outstanding	$	(0.06	)	$	(0.06	)	$	(0.35	)	$	0.35
Income (loss) from discontinued operations per BAC, based on 868,662 BAC's outstanding	$	—		$	0.76
Net (loss) income per BAC, based on 868,662 BACs outstanding	$	(0.29	)	$	0.28

The accompanying notes are an integral part of these condensed consolidated financial statements.

CRI HOTEL INCOME PARTNERS, L.P.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS’ DEFICIT

For the ~~three~~six months ended ~~March~~June 3130, 2013 ~~and 2012~~

(Unaudited)

	GeneralPartner			BeneficialAssigneeCertificateHolders			Total
Partners' deficit, January 1, 2013	$	(399,176	)	$	(120,397	)	$	(519,573	)
Net loss, March 31, 2013	(5,035		)	(246,702		)	(251,737		)
Net loss for the six months ended June 30, 2013	(6,086		)	(298,194		)	(304,280		)
Partners' deficit, March 31, 2013	$	(404,211	)	$	(367,099	)	$	(771,310	)
Partners' deficit, June 30, 2013	$	(405,262	)	$	(418,591	)	$	(823,853	)

The accompanying notes are an integral part of these consolidated financial statements.

CRI HOTEL INCOME PARTNERS, L.P.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	For the three months ended March 31,
	For the six months ended June 30,
	2013			2012
				(Note 1)
Cash flows from operating activities:
Net (loss) income	$	(~~251~~304,~~737~~280	)	$	~~250~~300,~~713~~047
Adjustments to reconcile net (loss) income to net cash (used in) provided by
operating activities:
Depreciation and amortization	~~155~~312,~~528~~301			~~156~~313,~~047~~947
Gain on sale of hotel property	—			(~~317~~417,303		)
Changes in assets and liabilities:
Decrease in assets related to discontinued operations	5861,~~176~~575			83196,~~926~~848
Decrease (increase) in receivables and other assets, net	5,295			(123,422		)
Increase in receivables and other assets, net	(109,147		)	(79,322		)
Increase in accounts payable and accrued expenses	56,206			250,990
Decrease in accounts payable and accrued expenses	(125,392		)	(130,765		)
Decrease in hotel trade payables	(14,608		)	(45,817		)
Increase (decrease) in hotel trade payables	26,321			(1,632		)
Decrease in liabilities related to discontinued operations	(~~126~~127,~~399~~097		)	(94143,~~581~~719		)
Net cash (used in) provided by operating activities	(~~117~~265,~~539~~719		)	~~160~~38,~~553~~101
Cash flows from investing activities:
Proceeds from sale of hotel property	—			1,744,775
Additions to property and equipment	(~~127~~180,~~818~~733		)	(6399,~~485~~575		)
Change in working capital reserve	402,431			(674,942		)
Additions to property and equipment related to discontinued operations	—			(51,377		)
Change in restricted cash	(79,087		)	26,456
Change in working capital reserve	700,238			(323,081		)
Net cash provided by investing activities	195,526			1,032,804
Change in restricted cash	(37,287		)	(30,862		)
Net cash provided by investing activities	482,218			1,239,880
Cash flows from financing activities:
Repayment of principal on mortgage loan	(53109,~~214~~298		)	(1,~~094~~145,~~499~~183		)
Net cash used in financing activities	(53109,~~214~~298		)	(1,~~094~~145,~~499~~183		)
Net increase in hotel operation cash and cash equivalents	24,773			98,858
Net increase in hotel operating cash and cash equivalents	107,201			132,798
Hotel operating cash and cash equivalents, beginning of period	100,370			7963,~~639~~202
Hotel operating cash and cash equivalents, end of period	$	~~125~~207,~~143~~571		$	~~178~~196,~~497~~000
Supplemental disclosure of cash flow information:
Cash paid during the period for interest	$	~~117~~232,~~591~~313		$	~~118~~184,~~917~~710
Supplemental disclosure of non-cash investing activities:
Supplemental disclosure of noncash investing activities:
Fixed asset reduction	$	—		$	1,354,368
Write-off of financing costs	$	—		$	73,104

The accompanying notes are an integral part of these condensed consolidated financial statements.

CRI HOTEL INCOME PARTNERS, L.P.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~MARCH~~JUNE 3130, 2013 AND 2012

(Unaudited)

1. BASIS OF PRESENTATION

In the opinion of CRICO Hotel Associates I, L.P. (the “General Partner”), the accompanying unaudited condensed consolidated 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. and CRI Hotel Income of Minnesota, LLC (the “Partnership”) as of June ~~March 31~~30, 2013, and the results of their operations and their cash flows for the three and six month periods ended ~~March 31~~June 30, 2013 and 2012. The results of operations for the interim period ended ~~March 31~~June 30, 2013 are not necessarily indicative of the results to be expected for the full year.

The accompanying unaudited condensed consolidated 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, 2012.

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.

During the three and six month periods ended ~~March 31~~June 30, 2013 and 2012, the Scottsdale Inn was classified as held for sale on the condensed consolidated balance sheets and its operations were reported separately on the condensed consolidated statements of operations as (loss) income from operations related to discontinued operations ( see Note 2).

2. LONG-LIVED ASSETS AND ASSETS HELD FOR SALE

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. During the ~~three~~six month periods ended ~~March 31~~June 30, 2013 and 2012, no impairment loss was recognized.

Assets to be disposed of are separately presented on the condensed consolidated balance ~~sheet~~sheets and reported at the lower of the carrying amount or fair value less costs to sell, and are no longer depreciated. Real estate assets are only classified as held for sale when all of the specific criteria under accounting principles generally accepted in the United States are met. Criteria include the commitment to sell the asset and the active marketing of the asset at a price that is reasonable in relation to its current fair value.

The assets and liabilities of a group classified as held for sale are presented separately in the appropriate asset and liability sections of the condensed consolidated balance ~~sheet~~sheets. Operations from a group classified as held for sale are reported in ~~operations~~discontinued ~~of asset held for sale~~operations.

As of December 31, 2011, Clearwater was classified as held for sale. On January 6, 2012, the Clearwater hotel was sold. As of September 30, 2012, Scottsdale is classified as held for sale. Operations were terminated at the Scottsdale hotel on December 31, 2012. During the three and six months ended March 31, 2013 and June 30, 2013, management was winding up the affairs of the Scottsdale hotel. Assets related to discontinued operations for Clearwater and Scottsdale as of June ~~March 31~~30, 2013 were $0 and $139,~~097~~698, respectively. Liabilities related to discontinued operations as of ~~March 31~~June 30, 2013 were $0 and $1413,~~113~~415 for Clearwater and Scottsdale, respectively.

CRI HOTEL INCOME PARTNERS, L.P.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

~~MARCH~~June 3130, 2013 AND 2012

(Unaudited)

3. HOTEL OPERATING CASH; CASH AND CASH EQUIVALENTS

Hotel operating cash and cash and cash equivalents consist of demand deposits, repurchase agreements and money market funds with original maturities when purchased of three months or less, which have not been designated as a working capital reserve by the General Partner. Hotel operating cash represents funds maintained at the hotels and by the hotels’ unaffiliated manager, while cash and cash equivalents represents funds maintained at the Partnership. The Partnership has determined that the carrying amounts for these items approximate fair value.

4. WORKING CAPITAL RESERVE

The working capital reserve represents all cash and cash equivalents, as defined above, maintained as working capital for the Partnership. The General Partner has determined that all cash and cash equivalents maintained at the Partnership which are not currently distributable to the BAC holders and General Partner of the Partnership shall be deemed as a working capital reserve. The working capital reserve may be increased or reduced by the General Partner as it deems appropriate. The General Partner at its own discretion may use the working capital reserve for operations or to reduce the amount of the existing debt.

5. RESTRICTED CASH

Restricted cash is cash that has been escrowed in order to pay for real estate taxes, environmental matters and property maintenance. These escrow accounts were required as part of the mortgage loan covenants for the loan entered into by CRI Hotel of Minnesota, LLC (discussed further in Note 6). As of ~~March 31~~June 30, 2013, $1,~~072~~030,~~307~~507 of restricted cash is being held at Franklin Bank. Of this amount, $336,~~602~~647 is in an environmental escrow which will be released upon resolution of the environmental matter further discussed below.

6. MORTGAGE PAYABLE

On May 6, 2008, the Partnership refinanced the mortgage loans associated with the Plymouth, Roseville and Clearwater hotels with General Electric Credit Corporation (GE). A separate mortgage loan was issued with respect to each property, each collateralized by a property. An event of default under each mortgage loan constitutes an event of default under the other mortgage loans. The mortgage loans had original principal balances of $1,150,000, $2,700,000 and $1,150,000 for the Plymouth, Roseville and Clearwater hotels, respectively. The mortgage loans each bear interest rates of 6.79% and require monthly payments of principal and interest in the amounts of $8,837, $20,748 and $8,837 for the Plymouth, Roseville and Clearwater hotels, respectively, through December 31, 2013 at which time the interest rates of the mortgage loans shall be adjusted based upon an Index of the then prevailing five (5) year Interest Rate Swap plus 366 basis points. The monthly principal and interest payments will be adjusted as of July 1, 2013 to a monthly payment of principal and interest based upon the adjusted interest rate that will amortize the remaining balances over the remaining term of the mortgages. The mortgage loans have a maturity date of January 1, 2016, at which time the entire outstanding principal balances are due.

On January 6, 2012, the Clearwater loan and related interest was paid in full at closing of the sale of the Clearwater hotel.

On ~~November~~August 98, ~~2010~~2013, ~~CRI Hotel Income of Minnesota, LLC was formed for~~ the ~~purpose~~Roseville ofand ~~creating~~Plymouth aloans ~~single~~and ~~purpose~~related entity to own the University hotel for refinancing purposes with Franklin Bank. On December 17, 2010, CRI Hotel of Minnesota, LLC refinance the mortgage loan associated with the University hotel with Franklin Bank. Franklin Bank issued a loan secured by the University hotel to CRI Hotel of Minnesota, LLC in the principal amount of $3,500,000 for a term of three (3) years with an interest ~~rate~~were ofpaid ~~seven percent (7%) per year. The mortgage loan requires monthly payments of principal and interest~~ in ~~the~~full ~~amount of $27,350 through December 31, 2013~~ at ~~which time~~ the ~~entire~~closing ~~outstanding~~of ~~principal balance is due. An environmental escrow reserve in~~ the ~~amount~~sale of ~~$350,000~~ ~~was established which will be released upon resolution of~~ the ~~environmental~~Roseville ~~matter further discussed below~~hotel. ~~Please~~ ~~see Note 14 for additional information on this mortgage loan.~~

~~The~~ ~~Partnership~~On ~~made~~November ~~installments~~9, 2010, CRI Hotel Income of ~~principal~~Minnesota, ~~and~~LLC ~~interest~~was formed for ~~all~~the ~~mortgage~~purpose ~~loans~~of ~~aggregating~~creating ~~$170,805~~a ~~for~~single purpose entity to own the ~~period~~University ~~ending~~hotel ~~March 31,~~for ~~2013~~refinancing purposes with Franklin Bank. ~~Additionally,~~ ~~the~~On $1December 17,~~044~~ 2010,~~076~~ ~~promissory~~CRI ~~note~~Hotel ~~balance~~of ~~related~~Minnesota, toLLC ~~Clearwater~~refinanced ~~was~~the ~~paid~~mortgage atloan associated with the ~~January~~University 6,hotel ~~2012~~with ~~sale~~Franklin ~~closing~~Bank. Franklin ~~The~~Bank ~~Partnership's~~issued ~~aggregate~~a ~~balance~~loan onsecured by the ~~loans~~University ~~was~~hotel $6to CRI Hotel of Minnesota,~~665,403~~ ~~and~~LLC in the principal amount of $63,~~718~~500,~~617~~000 asfor a term of ~~March~~three (3) years with an interest rate of seven percent (7%) ~~31,~~per year. ~~2013~~The mortgage loan requires monthly payments of principal and interest in the amount of $27,350 through December 31, ~~2012~~2013 at which time the entire outstanding principal balance is due. An environmental escrow reserve in the amount of $350,000 ~~respectively~~was established which will be released upon resolution of the environmental matter further discussed below. Please see Note 15 for additional information on this mortgage loan.

The Partnership made installments of principal and interest for all mortgage loans aggregating $170,807 and $341,613 for the three and six month periods ending June 30, 2013, respectively. Additionally, the $1,044,076 promissory note balance related to

CRI HOTEL INCOME PARTNERS, L.P.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

~~MARCH~~June 3130, 2013 AND 2012

(Unaudited)

Clearwater was paid at the January 6, 2012 sale closing. The Partnership's aggregate balance on the loans was $6,609,319 and $6,718,617 as of June 30, 2013 and December 31, 2012, respectively.

The approximate aggregate scheduled principal maturities are as follows:

December 31, 2013	$	3,~~402~~346,~~843~~759
2014	135,384
2015	145,004
2016	2,982,172
Total	$	6,~~665~~609,~~403~~319

7. ENVIRONMENTAL MATTERS

In 2008, a Phase I environmental study and subsequent Phase II environmental study of the University hotel revealed excess levels of certain chemicals in the groundwater on the hotel property that are deemed hazardous. The Partnership engaged a consultant with respect to the environmental contamination of the University hotel property and to enroll the University hotel property in the Voluntary Investigation and Cleanup (“VIC”) Program of the Minnesota Pollution Control Agency (“MPCA”). The Partnership's ultimate goal is to obtain a No Further Action Letter determination with a Covenant Not to Sue from MPCA with respect to this environmental issue which will enable the University hotel to be refinanced at better rates and/or ultimately sold without an ongoing environmental problem. Extensive testing was conducted of all aspects of the University hotel property from 2008 through early 2011 to determine the source of the observed contamination. It has determined that the source of the solvent contamination appears to be on the northeast corner of the University hotel property. Active remediation of the northeast corner of the property was recommended to mitigate the vapors and the potential for a continued intrusion condition. To facilitate a reduction in contaminant concentrations and the receipt of a subsequent No Further Action determination, a Corrective Action Design (CAD) plan was submitted to and approved by the MPCA. In December 2011, the installation of a remediation system which incorporates soil vapor extraction, groundwater sparging and air stripping technologies was completed. The remediation system is monitored and ground water and air samples are tested monthly to determine if risks associated with the contaminants are reduced to an acceptable level. The Partnership has been informed that the remediation system continues to operate as designed and that significant contaminants have been removed from the site, however, the effect on the groundwater will need to be monitored over a longer period of time. The remediation system will be operated until groundwater concentrations, sub-slab vapor concentrations, and other contaminants concentrations warrant a system shut-down test. At this time, it is unknown as to how long the Partnership will be required to continue the operations of the remediation system. During 2011, the Partnership incurred costs totaling $228,965 for remediation related services. As of ~~March~~June 3130, 2013 and December 31, 2012, $1913,~~765~~894 and $25,515, respectively, remained payable relating to these costs.

8. DISTRIBUTIONS TO BAC HOLDERS

The Partnership did not make a distribution in the first or second quarter of 2013 or in 2012.

9. COMMITMENTS

a. Hotel Management Agreements

The Partnership entered into management contracts with Oak Hotels, Inc., for the management of the hotels. The management contracts expire December 31, 2016, with the exception of Scottsdale which was coterminous with the land lease on which the hotel is located. The land lease expired on December 31, 2012. The agreements provide for a base management fee of 3.5% of gross revenues from operations with the exception of Scottsdale which provided for a base management fee of 4.5% of gross revenues from operations.

For the the three and six month periods ending June 30, 2013, management fee expenses was $55,529 and $94,746, respectively, and $51,753 and $93,147 for the three and six month periods ending June 30, 2012, respectively.

CRI HOTEL INCOME PARTNERS, L.P.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

~~MARCH~~June 3130, 2013 AND 2012

(Unaudited)

9. COMMITMENTS

a. Hotel Management Agreements

The Partnership entered into management contracts with Oak Hotels, Inc., for the management of the hotels. The management contracts expire December 31, 2016, with the exception of Scottsdale which was coterminous with the land lease on which the hotel is located. The land lease expired on December 31, 2012. The agreements provide for a base management fee of 3.5% of gross revenues from operations with the exception of Scottsdale which provides for a base management fee of 4.5% of gross revenues from operations.

For the periods ending March 31, 2013 and 2012, management fee expense was $39,229 and $41,394, respectively.

b. Lease Agreements

The Partnership owned a leasehold interest in the Scottsdale Days Inn. The Partnership had entered into various amendments to the lease extending its term and required lease payments. For the year 2011, lease payments were based upon a percentage rent equal to (i) 22% of gross room revenue up to $3,300,000 and 30% of gross room revenue in excess of $3,300,000, and (ii) 2.5% of restaurant sales, with a minimum base rent of $500,000. On December 1, 2011, the Partnership executed a restated Seventh Addendum to Lease and Fifth Extension Term which among other things extended the lease term to December 31, 2012 and fixed the annual lease payment toat $350,000 paid in equal monthly installments. On September 30, 2012, management decided not to renew the lease upon its expiration on December 31, 2012. Consequently, operations of the hotel ceased on November 30, 2012. During December 2012, all personal property at the hotel was sold for a sum of $82,500. These assets were written down to the sale amount at September 30, 2012, resulting in an impairment loss of $87,104, which was recognized during the fourth quarter of 2012. Net costs incurred to cease operations of the hotel totaled $35,000 which was accrued for at December 31, 2012 and paid in first quarter of 2013. For the three and six month periods ended ~~March~~June 3130, 2013, the annual lease payments were $0. For the three and six month periods ended June 30, 2012, the annual lease payments were $089,382 and $89178,~~381,~~764 respectively.

c. License Agreements

Each of the hotels are operated as a Days Inn under separate License Agreements between the Partnership and Days Inn Worldwide, Inc.. The License Agreement for the Scottsdale hotel expired on December 31, 2012. The License Agreements for the remaining three hotels, University, Roseville and Plymouth, expire on June 30, 2018.

d. Legal Proceedings

There are no material pending legal proceedings to which the Partnership is a party.

10. LEASE AGREEMENTS

On June 22, 2009, the Partnership executed a ten year lease with Asian Mill, Inc., doing business as the Tea House Restaurant. The lease has two options to renew for five years each. The base rent for years one through five is $100,700. In addition to base rent, the tenant is responsible for their share of operating expenses. Rent commenced on April 19, 2010 upon the opening of the premises for business to the general public. Revenue for the Tea House Restaurant is being recognized using the straight-line method as of possession date. Gross rental income, including operating expense reimbursement, pursuant to the lease agreement with Tea House, which is included in rental and other in the accompanying condensed consolidated statements of operations, was $2477,~~462~~574 ~~for~~and ~~each~~$77,196 offor the ~~three~~six month periods ended ~~March~~June 3130, 2013 and 2012., respectively.

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 originally was scheduled to expire on September 30, 2010 and the tenant exercised its option to extend for an additional five years to expire on September 30, 2015. Gross base rental income pursuant to the lease agreement with India Palace, which is included in rental and other income in the accompanying condensed consolidated statements of operations, was $715,~~500~~000 for each of the ~~three~~six month periods ended ~~March~~June 3130, 2013 and 2012.

CRI HOTEL INCOME PARTNERS, L.P.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

~~MARCH~~June 3130, 2013 AND 2012

(Unaudited)

11. RELATED-PARTY TRANSACTIONS

In accordance with the terms of the Partnership Agreement, the Partnership paid the General Partner a fee for services in connection with the review, selection, evaluation, negotiation and acquisition of the hotels. The Partnership paid $1,142,516 in acquisition fees. The acquisition fees were capitalized and are being amortized over a thirty-year period using the straight-line method. When the Partnership sells a hotel, the associated acquisition fees are written off.

In accordance with the terms of the Partnership Agreement, the Partnership reimbursed the General Partner or its affiliates for costs incurred on behalf of the Partnership for real estate appraisals and market studies, engineering studies, legal consultation and accounting fees, as well as travel and communication expenses related to the acquisition of the hotels. The Partnership paid $233,474 in such costs. The costs were capitalized and are being amortized over a thirty-year period using the straight-line method. When the Partnership sells a hotel, the associated property purchase costs are written off.

In accordance with the terms of the Partnership Agreement, the Partnership is obligated to reimburse the General Partner or its affiliates for certain direct expenses and payroll expenses in connection with managing the Partnership. Payroll expenses are reimbursed at a factor of 1.75 times base salary. For the three and six month periods ended ~~March 31~~June 30, 2013 ~~and 2012~~, the ~~Parthership~~Partnership paid $58,~~718~~713 and $2514,~~022~~431, respectively, and $13,791 and $38,813, respectively for the three and six month periods ended June 30, 2012, to the Managing General Partner or its affiliates as direct reimbursement of expenses incurred on behalf of the Partnership. In addition, certain employees of the Managing General partner provided legal and tax accounting services to the Partnership, which are reimbursed comparable to third party service charges. For the three and six month periods ended ended ~~March 31~~June 30, 2013 ~~and 2012~~, the Partnership paid $~~113~~49,~~995~~498 and $55163,~~840~~493, respectively, and $34,140 and $89,980 , respectively for the three and six month periods ended June 30, 2012, to the Managing General Partner or its affiliates for these services. Such reimbursed expenses are included in the accompanying condensed consolidated statements of operations as general and administrative expenses.

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~~incurred a Management Fee of $16,250 and $23,~~438~~437 for the three month periods ended ~~March 31~~June 30, 2013 and 2012, respectively, and $32,500 and $46,875 for the six month periods ended June 30, 2013 and 2012, respectively.

12. 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 is as follows:



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 costs and acquisition fees are being amortized over a thirty-year period using the straight-line method, except for the Scottsdale hotel which was 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.

CRI HOTEL INCOME PARTNERS, L.P.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

~~MARCH~~June 3130, 2013 AND 2012

(Unaudited)

13. CASH CONCENTRATION RISK

Financial instruments that potentially subject the Partnership to concentrations of risk consist primarily of cash. The Partnership maintains 16 cash accounts. As of ~~March 31~~June 30, 2013, the portion of the cash balance in excess of FDIC limits was $1975,~~273,386~~844.

	Number of	Bank Balance		Insured		Uninsured
Bank	Accounts	36/3130/2013		36/3130/2013		36/3130/2013
Bank of America, N.A.	5	$	60104,~~451~~962	$	60104,~~451~~962	$	—
Wells Fargo	2	$	72,~~234~~614	$	72,~~234~~614	$	—
Franklin Bank	6	$	1,~~159~~162,~~517~~119	$	~~337~~381,~~205~~611	$	~~822~~780,~~312~~508
Eagle Bank	3	$	~~951~~695,~~074~~337	$	500,000	$	~~451~~195,~~074~~337

CRI HOTEL INCOME PARTNERS, L.P.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

~~MARCH~~June 3130, 2013 AND 2012

(Unaudited)

14. PLAN OF LIQUIDATION

On April 1, 2013 the General Partner of CRI Hotel Income Partners, L.P., a Delaware limited partnership (the “Partnership”), adopted, subject to partner approval, a Plan of Liquidation and Dissolution for the Partnership (the “Plan of Liquidation”). On June 14, 2013, the partners of the Partnership approved the Plan of Liquidation. Under the Plan of Liquidation, the General Partner of the Partnership will (1) seek to sell the assets of the Partnership and use the sales proceeds and/or other Partnership funds to pay all expenses in connection with such sales, (2) pay or make provision for payment of all Partnership obligations and liabilities, including accrued fees and unpaid loans to the General Partner and (3) distribute the remaining assets as set forth in the Partnership’s Agreement of Limited Partnership, dated as of September 23, 1986. Currently, the remaining hotels are under contract for sale. There can be no assurance as to when the liquidation and dissolution of the Partnership will be completed, but it is anticipated that the process will be completed prior to December 31, 2014. Liquidation is not imminent, and as such, we have not prepared these financial statements under the liquidation basis of accounting. Because the liquidation was not imminent as of June 30, 2013, the condensed consolidated financial statements are presented assuming the Partnership will continue as a going concern.

15. SUBSEQUENT EVENTS

~~CRI~~Events ~~Hotel~~that ~~Income~~occur ~~Partners,~~after ~~LP,~~the ~~entered~~balance ~~into~~sheet adate ~~Purchase~~but ~~and~~before ~~Sale~~the ~~Agreement~~financial ~~dated~~statements aswere ofavailable ~~July~~to ~~12,~~be ~~2013~~issued ~~with~~must ~~Mohammad~~be ~~Bashir~~evaluated for ~~the~~recognition ~~sale~~or ofdisclosure. ~~the~~The ~~real~~effects ~~and~~of ~~personal~~subsequent ~~property~~events ~~operated~~that asprovide ~~Plymouth~~evidence ~~Days~~about ~~Inn~~conditions ~~for~~that ~~the~~existed ~~sale~~at ~~price of $2,200,000. The sale of~~ the ~~property~~balance issheet ~~expected~~date toare ~~occur~~recognized onin orthe ~~before~~accompanying ~~September~~financial ~~30, 2013~~statements. ~~There~~ isSubsequent noevents ~~assurance~~which ~~that~~provide ~~the~~evidence ~~purchaser~~about ~~will~~conditions bethat ~~able~~existed toafter ~~purchase~~ the ~~property~~balance onsheet ~~the~~date ~~terms~~require ~~set~~disclosure ~~forth~~ in the ~~Purchase~~accompanying ~~and Sale Agreement or at all~~notes. ~~Closing~~The offollowing ~~the~~are ~~purchase~~subsequent ~~and~~events ~~sale~~that isrequired ~~subject~~disclosure toin ~~customary~~the ~~conditions.~~ footnotes:

CRI Hotel Income Partners, LP, entered into a purchase and sale agreement dated July 12, 2013 with Mohammad Bashir for the sale of the real and personal property operated as Plymouth Days Inn for the sale price of $2,200,000. The sale of the property is expected to occur in the fourth quarter of 2013. There is no assurance that the purchaser will be able to purchase the property on the terms set forth in the Purchase and Sale Agreement or at all. Closing of the purchase and sale is subject to customary conditions.

CRI Hotel Income Partners, L.P., entered into a purchase and sale agreement dated July 29, 2013 with Roseville Lodging LLC for the sale of the real and personal property operated as the Roseville Days Inn for the sale price of $3,550,000. The sale of the property occurred on August 8, 2013. In connection with the sale of the the property, the Roseville and Plymouth loans and related interest were paid in full.

CRI Hotel Income of Minnesota, LLC, entered into a purchase and sale agreement dated September 10, 2013 with United Properties Investment LLC for the sale of the real and personal property operated as University Days Inn Minneapolis for the sale price of $12,000,000. The sale of the property is expected to occur on or before December 31, 2013. There is no assurance that the purchaser will be able to purchase the property on the terms set forth in the purchase and sale agreement or at all. Closing of the purchase and sale is subject to customary conditions. The proceeds from the sale of the University property will be used to payoff the Franklin loan. Should the sale of the property not close by December 31, 2013, the Partnership will negotiate an extension with Franklin Bank.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

The Partnership's 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

Starting in the fourth quarter of 2008 and continuing throughout 2009, the weakened U.S. and global economies resulted in considerable negative pressure on both consumer and business spending. As a result, lodging demand and revenues weakened substantially during this period as compared to the lodging demand and revenues we experienced prior to the fourth quarter of 2008. After this extremely difficult recessionary period, the outlook for the U.S. and global economies began improving in 2010 and that improvement has continued through the first quarter of 2013. However, to date, the recovery has not been particularly robust, as spending by businesses and consumers remains restrained, and there are still several trends which make our performance difficult to forecast.

substantially during this period as compared to the lodging demand and revenues we experienced prior to the fourth quarter of 2008. After this extremely difficult recessionary period, the outlook for the U.S. and global economies began improving in 2010 and that improvement has continued through the second quarter of 2013. However, to date, the recovery has not been particularly robust, as spending by businesses and consumers remains restrained, and there are still several trends which make our performance difficult to forecast.

Distributions

The Partnership did not make a distribution in the first or second quarter of 2013 or 2012.

Financial Condition/Liquidity

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 three month period ended ~~March~~June 3130, 2013, 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, hotel trade payables, accounts payable and accrued expenses. ~~Accrued expenses increased from December 31, 2012 primarily due to unpaid real estate taxes as of March 31, 2013.~~

The working capital reserve of $~~951~~653,~~074~~ 267 and $1,353,505 as of ~~March~~June 3130, 2013 and December 31, 2012, respectively, represents all cash and cash equivalents, as defined in Note 4 of the accompanying condensed consolidated financial statements, maintained as working capital for the Partnership. The working capital reserve may be increased or reduced by the General Partner as it deems appropriate. The General Partner at its own discretion may use the working capital reserve for operations or to reduce the amount of the existing debt.

Financing

On May 6, 2008, the Partnership refinanced the mortgage loans associated the Plymouth, Roseville and Clearwater hotels with General Electric Credit Corporation (GE). A separate mortgage loan was issued with respect to each property, each collateralized by a property. An event of default under each mortgage loan constitutes an event of default under the other mortgage loans. The mortgage loans had original principal balances of $1,150,000, $2,700,000 and $1,150,000 for the Plymouth, Roseville and Clearwater hotels, respectively. The mortgage loans each bear interest rates of 6.79% and require monthly payments of principal and interest in the amounts of $8,837, $20,748 and $8,837 for the Plymouth, Roseville and Clearwater hotels, respectively, through September 30, 2013 at which time the interest rates of the mortgage loans shall be adjusted based upon an Index of the then prevailing five (5) year Interest Rate Swap plus 366 basis points. The monthly principal and interest payments will be adjusted as of July 1, 2013 to a monthly payment of principal and interest based upon the adjusted interest rate that will amortize the remaining balances over the remaining term of the mortgages. The mortgage loans have a maturity date of January 1, 2016, at which time the entire outstanding principal balances are due.

On January 6, 2012, the Clearwater loan and related interest was paid in full at the closing of the sale of the Clearwater hotel.

11On November 9, 2010, the Partnership formed CRI Hotel Income of Minnesota, LLC for the purpose of creating a single purpose entity to own the University hotel for refinancing purposes with Franklin Bank. On December 17, 2010, CRI Hotel of Minnesota, LLC refinanced the mortgage loan associated with the University hotel with Franklin Bank. Franklin Bank issued a loan secured by the University hotel to CRI Hotel of Minnesota, LLC in the principal amount of $3,500,000 for a term of three (3) years with an interest rate of seven percent (7%) per year. The mortgage loan requires monthly payments of principal and interest in the amount of $27,350 through December 31, 2013 at which time the entire outstanding principal balance is due. It is anticipated that the funds to pay the outstanding principal will come from the proceeds from the sale of the University hotel. However, if the sale is not completed by the loan maturity date, the Partnership will negotiate an extension with Franklin Bank.

OnThe ~~November 9, 2010, the~~ Partnership ~~formed~~made ~~CRI~~installments ~~Hotel Income~~ of ~~Minnesota,~~principal ~~LLC~~and ~~for~~interest ~~the purpose of creating a single purpose entity to own the University hotel~~ for ~~refinancing~~all ~~purposes~~mortgage ~~with~~loans ~~Franklin~~aggregating ~~Bank. On December 17~~$170,807 ~~2010,~~for ~~CRI Hotel of Minnesota, LLC refinanced~~ the ~~mortgage~~three ~~loan~~month ~~associated~~period ~~with~~ending ~~the~~June ~~University~~30, ~~hotel with Franklin Bank~~2013. ~~Franklin~~The ~~Bank~~Partnership's ~~issued~~aggregate abalance ~~loan~~on ~~secured by~~ the ~~University~~loans ~~hotel~~was ~~to CRI Hotel of Minnesota~~$6,609,319 ~~LLC~~and ~~in the principal amount of~~ $36,~~500~~718,~~000~~617 ~~for~~as ~~a term~~ of ~~three~~June ~~(3)~~30, ~~years~~2013 ~~with an interest rate of seven percent (7%) per year. The mortgage loan requires monthly payments of principal~~ and ~~interest in the amount of $27,350 through~~ December 31, ~~2013~~2012, ~~at which time the entire outstanding principal balance is due~~respectively.

The Partnership made installments of principal and interest for all mortgage loans aggregating $170,805 for the period ending March 31, 2013. The Partnership's aggregate balance on the loans was $6,665,403 and $6,718,617 as of March 31, 2013 and December 31, 2012, respectively.12

Results of Operations - Partnership

The Partnership experienced a net loss for the ~~three~~six month period ended ~~March~~June 3130, 2013 compared to net income for the ~~three~~six month period ended ~~March~~June 3130, 2012 primarily due to a decrease in ~~gross~~income ~~operating~~from ~~income~~discontinued operations and the gain on the sale of the Clearwater hotel that was recorded in 2012.

The General Partner is not able to predict the future trend of hotel gross operating income, especially room 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 ~~March~~June 3130, 2013 and 2012 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:



	Hotel Location	Peak Months

	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 ~~March~~June 3130, 2013 and 2012 follow.



	Gross Operating Income					Gross Operating Income
	for the three months ended					for the six months ended
	June 30,					June 30,
Hotel Location	2013			2012		2013			2012

Minneapolis, MN	$	652,268		$	597,954	$	1,106,390		$	1,041,741
Plymouth, MN	198,064			177,451		280,674			304,084
Roseville, MN	275,911			258,303		455,408			450,669

Total continuing operations	1,126,243			1,033,708		1,842,472			1,796,494

Discontinued operations:
Clearwater, FL	—			—		—			(44,977		)
Scottsdale, AZ	(709		)	248,015		(446		)	1,016,822

Totals	$	1,125,534		$	1,281,723	$	1,842,026		$	2,768,339

	Gross Operating Income
	for the three months ended
	March 31,
Hotel Location	2013		2012
Minneapolis, MD	$	453,859	$	443,765
Plymouth, MN	83,136		126,633
Roseville, MN	179,497		192,366
Total continuing operations	716,492		762,764
Operations related to discontinued operations:
Clearwater, FL	—		(5,330		)
Scottsdale, AZ	263		768,807
Totals	$	716,755	$	1,526,241

	Operating (Loss) Income
	for the three months ended
	March 31,
Hotel Location	2013			2012
Minneapolis, MD	$	123,944		$	114,885
Plymouth, MN	(69,431		)	(33,830		)
Roseville, MN	4,216			17,937
Depreciation and net partnership operating expenses	(191,098		)	(386,399		)
Total continuing operations	(132,369		)	(287,407		)
Operations related to discontinued operations:
Clearwater, FL	—			(44,977		)
Scottsdale, AZ	(1,777		)	383,874
Totals	$	(134,146	)	$	51,490

	Average Occupancy
	Operating (Loss) Income							Operating (Loss) Income
	for the three months ended							for the six months ended
	March 31,
	June 30,							June 30,
Hotel Location	2013			~~2012~~	2012			2013			2012
Minneapolis, MN	68	%		72	%
Minneapolis, MD	$	310,131			$	280,115		$	434,065		$	395,000
Plymouth, MN	41,568	%		53	%34,275			(27,863		)	445
Roseville, MN	5690,097	%		62	%95,426			94,313			113,363
Operations of asset held for sale:
Depreciation and net partnership operating expenses	(348,128		)		(226,793		)	(538,697		)	(617,536		)
Scottsdale, AZ	—	%		69	%
Total continuing operations	93,668				183,023			(38,182		)	(108,728		)
Operations related to discontinued operations:
Clearwater, FL	—				—			—			(44,977		)
Scottsdale, AZ	(32,008		)		(113,567		)	(33,785		)	275,488
Totals	$	61,660			$	69,456		(71,967		)	121,783

Minneapolis, Minnesota: Gross operating income for the three month period ended March 31, 2013 increased from 2012 primarily due to an increase in average room rates as well as a decrease in departmental expenses.



	Average Occupancy			Average Occupancy
	for the three months ended			for the six months ended
	June 30,			June 30,
Hotel Location	2013	2012	Hotel Location		2013	2012

Minneapolis, MN	83%	81%	Minneapolis, MN		75%	77%
Plymouth, MN	65%	64%	Plymouth, MN		58%	58%
Roseville, MN	72%	68%	Roseville, MN		65%	65%

Operations of asset held for sale:			Operations of asset held for sale:
Scottsdale, AZ	—%	47%	Scottsdale, AZ		—%	58%

~~Plymouth~~Minneapolis, Minnesota: Gross operating income ~~decreased~~ for the three month period ended ~~March~~June 3130, 2013 ~~compared~~increased tofrom 2012 primarily due to aan ~~decrease~~increase in ~~occupancy~~average room rates.

~~Roseville~~Plymouth, Minnesota: Gross operating income ~~decreased~~increased for the three month period ended ~~March~~June 3130, 2013 compared to 2012 primarily due to aan ~~decrease~~increase in ~~occupancy~~the average room rates.

Roseville, Minnesota: Gross operating income increased for the three month period ended June 30, 2013 compared to 2012 primarily due to an increase in occupancy.

Plan of Liquidation and Dissolution

On April 1, 2013, the General Partner of CRI Hotel Income Partners, L.P., a Delaware limited partnership (the “Partnership”), adopted, subject to partner approval, a Plan of Liquidation and Dissolution for the Partnership (the “Plan of Liquidation”). On June 14, 2013, the partners of the Partnership approved the Plan of Liquidation. Under the Plan of Liquidation, the General Partner of the Partnership will (1) seek to sell the assets of the Partnership and use the sales proceeds and/or other Partnership funds to pay all expenses in connection with such sales, (2) pay or make provision for payment of all Partnership obligations and liabilities, including accrued fees and unpaid loans to the General Partner and (3) distribute the remaining assets as set forth in the Partnership’s Agreement of Limited Partnership, dated as of September 23, 1986, as the same may be amended. Currently, the remaining hotels are under contract for sale. There can be no assurance as to when the liquidation and dissolution of the Partnership will be completed, but it is anticipated that the process will be completed prior to December 31, 2014. Liquidation is not imminent, and as such, we have not prepared these financial statements under the liquidation basis of accounting. Because the liquidation was not imminent as of June 30, 2013, the condensed consolidated financial statements are presented assuming the Partnership will continue as a going concern.

Item 3. Quantitative and Qualitative Disclosures ~~About~~about Market Risk

Not applicable.

Item 4. Controls and Procedures

Disclosure controls and procedures

As of the end of the period covered by this report, our principal executive officer and principal financial officer carried out an evaluation of the effectiveness of the Partnership's “disclosure controls and procedures” as defined in Securities Exchange Act of 1934 Rule 13a-15 and 15d-15. Based on that evaluation, the principal executive officer and chief financial officer have concluded that, as the end of the period covered by this report, the Partnership's disclosure controls and procedures were not effective to ensure that material information required to be disclosed in the Partnership's periodic report filings with SEC is recorded, processed, summarized and reported within the time period specified by the SEC's rules and forms, consistent with the definition of “disclosure controls and procedures” under the Securities Exchange Act of 1934.

We are currently in the process of the remediation of the weakness in our internal control over financial reporting by the employment of a consultant with the requisite accounting expertise to resolve the above issue and expect to implement changes in the near term.

Changes in internal controls

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 ended ~~March~~June 3130, 2013 that has materially affected, or is reasonably likely to materially affect, the Partnership's internal controls over financial reporting.

1516

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 ~~March~~June 3130, 2013, but not reported, whether or not otherwise required by this Form 10-Q at ~~March~~June 3130, 2013.


b.	There is no established market for the purchase and sale of BACs, although various informal secondary market services may exist. Due to the limited markets, investors may be unable to sell or otherwise dispose of their BACs.


c.	In addition, certain transfers of BACs in the Partnership may not exceed two percent of the total interests in the Partnership's capital or profits during any one taxable year to avoid the Partnership being deemed a publicly traded partnership.

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Item 6. Exhibits



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.

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SIGNATURES

In accordance with Section 13 or 15(d) 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
	by:	C.R.I., Inc.
July 25, 2013	by:	/s/ William B. Dockser
October 23, 2013	by:	/s/ William B. Dockser
DATE	William B. Dockser
	Director, Chairman of the Board,
	and Treasurer
	Principal Executive Officer

In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

July 25, 2013	by:	/s/ H. William Willoughby
October 23, 2013	by:	/s/ H. William Willoughby
DATE		H. William Willoughby
		Director, President, Secretary,
		Principal Financial Officer and
		Principal Accounting Officer

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