UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
(Mark One)
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1995
---------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-15666
CNL INCOME FUND, LTD.
(Exact name of registrant as specified in its charter)
Florida 59-2666264
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation of organization)
400 East South Street, Suite 500
Orlando, Florida 32801
(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code: (407) 422-1574
Securities registered pursuant to Section 12(b) of the Act:
Title of each class: Name of exchange on which registered:
None Not Applicable
Securities registered pursuant to section 12(g) of the Act:
Units of limited partnership interest ($500 per Unit)
(Title of class)
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 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 if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [x]
Aggregate market value of the voting stock held by nonaffiliates of the
registrant: The registrant registered an offering of units of limited
partnership interest (the "Units") on Form S-11 under the Securities Act of
1933, as amended. Since no established market for such Units exists, there is
no market for such Units. Each Unit was originally sold at $500 per Unit.
DOCUMENTS INCORPORATED BY REFERENCE:
None
PART I
ITEM 1. BUSINESS
CNL Income Fund, Ltd. (the "Registrant" or the "Partnership") is a
limited partnership which was organized pursuant to the laws of the State of
Florida on November 26, 1985. The general partners of the Partnership are
Robert A. Bourne, James M. Seneff, Jr. and CNL Realty Corporation, a Florida
corporation (the "General Partners"). Beginning on April 16, 1986, the
Partnership offered for sale up to $15,000,000 in limited partnership
interests (the "Units") (30,000 Units at $500 per Unit) pursuant to a
registration statement on Form S-11 under the Securities Act of 1933, as
amended. The offering terminated on December 31, 1986, as of which date the
maximum offering proceeds of $15,000,000 had been received from investors who
were admitted to the Partnership as limited partners (the "Limited Partners").
The Partnership was organized to acquire both newly constructed and
existing restaurant properties, as well as properties upon which restaurants
were to be constructed (the "Properties"), which are leased primarily to
operators of selected national and regional fast-food restaurant chains (the
"Restaurant Chains"). Net proceeds to the Partnership from its offering of
Units, after deduction of organizational and offering expenses, totalled
$13,284,970, and were used to acquire 20 Properties, including interests in
three Properties owned by joint ventures in which the Partnership is a co-
venturer. During 1992 and 1994, the Partnership sold a Property in San Dimas,
California, and a Property in Fairfield, California, respectively. The sale
of the Property in Fairfield, California, was made pursuant to the tenant's
exercise of its option to purchase the Property in accordance with the terms
of its lease. As a result of the above transactions, the Partnership
currently owns 18 Properties, including interests in three Properties owned by
joint ventures in which the Partnership is a co-venturer. Generally, the
Properties are leased on a triple-net basis with the lessee responsible for
all repairs and maintenance, property taxes, insurance and utilities.
The Partnership will hold its Properties until the General Partners
determine that the sale or other disposition of the Properties is advantageous
in view of the Partnership's investment objectives. In deciding whether to
sell Properties, the General Partners will consider factors such as potential
capital appreciation, net cash flow and federal income tax considerations.
Certain lessees also have been granted options to repurchase Properties,
generally at the Property's then fair market value after a specified portion
of the lease term has elapsed. In general, the General Partners plan to seek
the sale of the remaining Properties commencing seven to 15 years after their
acquisition. The Partnership has no obligation to sell all or any portion of
a Property at any particular time, except as may be required under property or
joint venture purchase options granted to certain lessees.
Leases
Although there are variations in the specific terms of the leases, the
following is a summarized description of the general structure of the
Partnership's leases. The leases of the Properties owned by the Partnership
and joint ventures in which the Partnership is a co-venturer provide for
initial lease terms, ranging from five to 20 years (the average being 17
years), and expire between 1999 and 2010. Generally, the leases are on a
triple-net basis, with the lessee responsible for all repairs and maintenance,
property taxes, insurance and utilities. The leases of the Properties provide
for minimum base annual rental payments (payable in monthly installments)
ranging from approximately $16,000 to $117,000. Generally, the leases provide
for percentage rent, based on sales in excess of a specified amount, to be
paid annually. In addition, certain leases provide for increases in the
annual base rent during the lease term.
Generally, the leases of the Properties provide for two or three five-
year renewal options subject to the same terms and conditions as the initial
lease. Certain lessees also have been granted options to purchase Properties
at the Property's then fair market value, or pursuant to a formula based on
the original cost of the Property, after a specified portion of the lease term
has elapsed. Additionally, certain leases provide the lessee the option to
purchase up to a 49 percent joint venture interest in the Property, after a
specified portion of the lease term has elapsed, at an option purchase price
similar to those described above multiplied by the percentage interest in the
Property with respect to which the option is being exercised.
The leases also provide that, in the event the Partnership wishes to
sell the Property subject to that lease, the Partnership first must offer the
lessee the right to purchase the Property on the same terms and conditions,
and for the same price, as any offer which the Partnership has received for
the sale of the Property.
In January 1994, the Partnership terminated the lease for the Property
in Angleton, Texas, as a result of the former tenant's default under the terms
of the lease and entered into a new lease agreement with the operator of a
local, independent restaurant. Rent under the new lease commenced in February
1994. The initial term of the new lease is five years with one five-year
renewal option. The new lease provides for reduced base rent with annual
increases over the term of the lease; however, no percentage rent is required
under this lease agreement.
Effective September 1, 1995, the lease relating to the Wendy's Property
in Payson, Arizona, was amended to reduce annual base rent by $12,000 and to
provide for a change in the percentage rent calculation, which based on the
past sales history of the restaurant, will result in less percentage rent
payable to the Partnership in future years.
Major Tenants
During 1995, two lessees of the Partnership, Golden Corral Corporation
and Wendy's International, Inc., each contributed more than ten percent of the
Partnership's total rental income (including the Partnership's share of the
rental income from three Properties owned by joint ventures). As of December
31, 1995, Golden Corral Corporation was the lessee under leases relating to
five restaurants and Wendy's International, Inc. was the lessee under leases
relating to three restaurants. It is anticipated that Golden Corral
Corporation and Wendy's International, Inc. each will continue to contribute
ten percent or more of the Partnership's total rental income in 1996 and
subsequent years. In addition, two Restaurant Chains, Golden Corral Family
Steakhouse Restaurants ("Golden Corral") and Wendy's Old Fashioned Hamburger
Restaurants ("Wendy's"), each accounted for more than ten percent of the
Partnership's total rental income in 1995 (including the Partnership's share
of the rental income from three Properties owned by joint ventures). In
subsequent years, it is anticipated that Golden Corral and Wendy's each will
continue to account for more than ten percent of the total rental income to
which the Partnership is entitled under the terms of its leases. Any failure
of these lessees or Restaurant Chains could materially affect the
Partnership's income.
Joint Venture Arrangements
The Partnership has entered into three separate joint venture
arrangements, Sand Lake Road Joint Venture, Orange Avenue Joint Venture and
Seventh Avenue Joint Venture, with various unaffiliated entities to purchase
and hold three of the Properties through such joint ventures. The joint
venture arrangements provide for the Partnership and its joint venture partner
to share equally in all costs and benefits associated with the joint venture.
The Partnership and its joint venture partner are jointly and severally liable
for all debts, obligations and other liabilities of the joint venture.
Each joint venture has an initial term of 15 to 20 years, and, after the
expiration of the initial term, continues in existence from year to year
unless terminated at the option of either joint venturer or by an event of
dissolution. Events of dissolution include the bankruptcy, insolvency or
termination of any joint venturer, sale of the Property owned by the joint
venture and mutual agreement of the Partnership and its joint venture partner
to dissolve the joint venture.
The Partnership has management control of each joint venture in which it
participates. The joint venture agreements restrict each venturer's ability
to sell, transfer or assign its joint venture interest without first offering
it for sale to the joint venture partner, either upon such terms and
conditions as to which the venturers may agree or, in the event the venturers
cannot agree, on the same terms and conditions as any offer from a third party
to purchase such joint venture interest.
Net cash flow from operations of each joint venture is distributed 50
percent to each joint venture partner. Any liquidation proceeds, after paying
joint venture debts and liabilities and funding reserves for contingent
liabilities, will be distributed first to the joint venture partners with
positive capital account balances in proportion to such balances until such
balances equal zero, and thereafter in proportion to each partner's percentage
interest in the joint venture.
Property Management
CNL Investment Company, an affiliate of the General Partners, acted as
manager of the Partnership's Properties pursuant to a property management
agreement with the Partnership through December 31, 1994. Under this
agreement, CNL Investment Company was responsible for collecting rental
payments, inspecting the Properties and the tenants' books and records,
assisting the Partnership in responding to tenant inquiries and notices and
providing information to the Partnership about the status of the leases and
the Properties. CNL Investment Company also assisted the General Partners in
negotiating the leases. For these services, the Partnership had agreed to pay
CNL Investment Company an annual fee of one-half of one percent of Partnership
assets (valued at cost) under management, not to exceed the lesser of one
percent of gross rental revenues or competitive fees for comparable services.
Under the management agreement, the property management fee is subordinated
to receipt by the Limited Partners of an aggregate, ten percent,
noncumulative, noncompounded annual return on their adjusted capital
contributions (the "10% Preferred Return"), calculated in accordance with the
Partnership's limited partnership agreement (the "Partnership Agreement"). In
any year in which the Limited Partners do not receive a 10% Preferred Return,
no property management fee will be paid.
Effective January 1, 1995, certain officers and employees of CNL
Investment Company became officers and employees of CNL Income Fund Advisors,
Inc., an affiliate of the General Partners, and CNL Investment Company
assigned its rights in, and its obligations under, the property management
agreement with the Partnership to CNL Income Fund Advisors, Inc. In addition,
effective October 1, 1995, CNL Income Fund Advisors, Inc. assigned its rights
in, and its obligations under, the property management agreement with the
Partnership to CNL Fund Advisors, Inc. All of the terms and conditions of the
property management agreement, including the payment of fees, as described
above, remain unchanged.
The property management agreement continues until the Partnership no
longer owns an interest in any Properties unless terminated at an earlier date
upon 60 days' prior notice by either party.
Competition
The fast-food and family-style restaurant business is characterized by
intense competition. The restaurants on the Partnership's Properties compete
with independently owned restaurants, restaurants which are part of local or
regional chains, and restaurants in other well-known national chains,
including those offering different types of food and service.
At the time the Partnership elects to dispose of its Properties, other
than as a result of the exercise of tenant options to purchase Properties, the
Partnership will be in competition with other persons and entities to locate
purchasers for its Properties.
Employees
The Partnership has no employees. The officers of CNL Realty
Corporation and the officers and employees of CNL Fund Advisors, Inc. perform
certain services for the Partnership. In addition, the General Partners have
available to them the resources and expertise of the officers and employees of
CNL Group, Inc., a diversified real estate company, and its affiliates, who
may also perform certain services for the Partnership.
ITEM 2. PROPERTIES
As of December 31, 1995, the Partnership owned, either directly or
through joint venture arrangements, 18 Properties, located in nine states.
Reference is made to the Schedule of Real Estate and Accumulated Depreciation
filed with this report for a listing of the Properties and their respective
costs, including acquisition fees and certain acquisition expenses.
Description of Properties
Land. The Partnership's Property sites range from approximately 16,000
to 95,000 square feet depending upon building size and local demographic
factors. Sites purchased by the Partnership are in locations zoned for
commercial use which have been reviewed for traffic patterns and volume.
Buildings. Each of the Properties owned by the Partnership includes a
building that is one of a Restaurant Chain's approved designs. The buildings
generally are rectangular and are constructed from various combinations of
stucco, steel, wood, brick and tile. Building sizes range from approximately
1,900 to 5,500 square feet. All buildings on Properties acquired by the
Partnership are freestanding and surrounded by paved parking areas. Buildings
are suitable for conversion to various uses, although modifications may be
required prior to use for other than restaurant operations.
Generally, a lessee is required, under the terms of its lease agreement,
to make such capital expenditures as may be reasonably necessary to refurbish
buildings, premises, signs and equipment so as to comply with the lessee's
obligations, if applicable, under the franchise agreement to reflect the
current commercial image of its Restaurant Chain. These capital expenditures
are required to be paid by the lessee during the term of the lease.
Leases with Major Tenants. The terms of each of the leases with the
Partnership's major tenants as of December 31, 1995 (see Item 1. Business -
Major Tenants), are substantially the same as those described in Item 1.
Business - Leases.
Golden Corral Corporation leases five Golden Corral restaurants. The
initial term of each lease is 15 years (expiring between 2001 and 2002) and
the average minimum base annual rent is approximately $90,500 (ranging from
approximately $77,600 to $109,300).
In addition, Wendy's International leases three Wendy's restaurants.
The initial term of two of the leases is 20 years (expiring in 2006) and one
is 17 years (expiring in 2006) and the average minimum base annual rent for
all three is approximately $81,900 (ranging from $75,300 to $88,400).
The General Partners consider the Properties to be well-maintained and
sufficient for the Partnership's operations.
ITEM 3. LEGAL PROCEEDINGS
Neither the Partnership, nor its General Partners or any affiliate of
the General Partners, nor any of their respective properties, is a party to,
or subject to, any material pending legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
As of February 29, 1996, there were 1,076 holders of record of the
Units. There is no public trading market for the Units, and it is not
anticipated that a public market for the Units will develop. Limited Partners
who wish to sell their Units may offer the Units for sale pursuant to the
Partnership's distribution reinvestment plan (the "Plan"), and Limited
Partners who wish to have their distributions used to acquire additional Units
(to the extent Units are available for purchase), may do so pursuant to such
Plan. The General Partners have the right to prohibit transfers of Units.
The price paid for any Unit transferred pursuant to the Plan for the year
ended December 31, 1994, was $450 per Unit. As of January 1, 1995, due
primarily to the Partnership's sale of its Property in Fairfield, California,
the price paid for any Unit transferred pursuant to the Plan has been $422 per
Unit. The price to be paid for any Unit transferred other than pursuant to
the Plan is subject to negotiation by the purchaser and the selling Limited
Partner. The Partnership will not redeem or repurchase Units.
The following table reflects, for each calendar quarter, the high, low
and average sales prices for transfers of Units during 1995 and 1994 other
than pursuant to the Plan, net of commissions (which ranged from zero to
8.7%).
1995 (1) 1994 (1)
--------------------- ---------------------
High Low Average High Low Average
------ ----- ------- ------ ----- -------
First Quarter $444 $363 $404 (2) (2) (2)
Second Quarter 535 439 487 $450 $450 $450
Third Quarter 500 368 452 450 440 445
Fourth Quarter 444 422 429 (2) (2) (2)
(1) A total of 382 and 67 Units were transferred other than pursuant to the
Plan for the years ended December 31, 1995 and 1994, respectively.
(2) No transfer of Units other than pursuant to the Plan took place during
the quarter.
The capital contribution per Unit was $500. All cash available for
distribution will be distributed to the partners pursuant to the provisions of
the Partnership Agreement.
For the years ended December 31, 1995 and 1994, the Partnership
declared cash distributions of $1,264,883 and $2,279,123, respectively, to the
Limited Partners. The distributions declared for the year ended December 31,
1994, included $861,500 as a result of the distribution of a portion of net
sales proceeds from the sale of the Property in Fairfield, California. This
amount was treated as a return of capital for purposes of calculating the
Limited Partners' 10% Preferred Return. As a result of this return of capital
and the return of capital included in the distributions for the year ended
December 31, 1992, the amount of the Limited Partners' adjusted capital
contributions (which generally is the Limited Partners' capital contributions,
less distributions from the sale of a Property that are considered to be a
return of capital) was decreased; therefore, the amount of the Limited
Partners' adjusted capital contributions on which the 10% Preferred Return is
calculated was lowered to $13,314,525 as of December 31, 1994. No amounts
distributed to partners for the years ended December 31, 1995 and 1994, except
for $861,500 as described above, are required to be or have been treated by
the Partnership as a return of capital for purposes of calculating the Limited
Partners' return on their adjusted capital contributions. No distributions
have been made to the General Partners to date.
As indicated in the chart below, distributions in the following amounts
were declared to the Limited Partners at the close of each of the
Partnership's calendar quarters during 1995 and 1994.
Quarter Ended 1995 1994
------------- ---------- ----------
March 31 $ 316,220 $ 354,405
June 30 316,221 354,406
September 30 316,221 354,406
December 31 316,221 1,215,906
The Partnership intends to continue to make distributions of cash
available for distribution to the Limited Partners on a quarterly basis.
ITEM 6. SELECTED FINANCIAL DATA
1995 1994 1993 1992 1991
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Year ended
December 31:
Revenues(1) $ 1,290,567 $ 1,358,871 $ 1,412,327 $ 1,452,761 $ 1,529,467
Net income (2) 962,102 1,208,576 1,039,545 1,306,021 1,148,128
Cash distri-
butions
declared (3) 1,264,883 2,279,123 1,417,622 2,413,812 1,500,000
Net income per
Unit (2) 31.75 39.91 34.31 43.14 37.89
Cash distri-
butions
declared
per Unit (3) 42.16 75.97 47.25 80.46 50.00
At December 31:
Total assets $ 9,668,878 $10,857,414 $10,930,600 $10,949,223 $12,054,230
Long-term
obligations - - - - -
(1) Revenues include equity in earnings of joint ventures.
(2) Net income for the years ended December 31, 1994 and 1992,
includes $182,384 and $214,488, respectively, from gains on sale
of land and buildings.
(3) Distributions for the years ended December 31, 1994 and 1992,
include $861,500 and $955,000, respectively, as a result of the
distribution of a portion of the net sales proceeds from the sale
of a Property in each of these years.
The above selected financial data should be read in conjunction with
the financial statements and related notes contained in Item 8 hereof.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The Partnership was organized on November 26, 1985, to acquire for cash,
either directly or through joint venture arrangements, both newly constructed
and existing restaurant Properties, as well as land upon which restaurant
Properties were to be constructed, which are leased primarily to operators of
selected national and regional fast-food Restaurant Chains. The leases are
triple-net leases, with the lessee generally responsible for all repairs and
maintenance, property taxes, insurance and utilities. As of December 31,
1995, the Partnership owned 18 Properties, either directly or indirectly
through joint venture arrangements.
Liquidity and Capital Resources
The Partnership's primary source of capital for the years ended December
31, 1995, 1994 and 1993, was cash from operations (which includes cash
received from tenants, distributions from joint ventures and interest
received, less cash paid for expenses). Cash from operations was $1,182,514,
$1,279,201 and $1,285,733 for the years ended December 31, 1995, 1994 and
1993, respectively. The decrease in cash from operations during 1995 and
1994, as compared to the previous year, is primarily a result of changes in
income and expenses as discussed in "Results of Operations" below, and as a
result of changes in the Partnership's working capital during each of the
respective years. Cash from operations was also affected by the following
during the years ended December 31, 1995, 1994 and 1993.
In July 1993, the individual General Partners loaned $69,500 to the
tenant of the Property in Mesquite, Texas. The proceeds of the loan were used
by the tenant to pay amounts to the Partnership for current and past due rents
and the unpaid principal balance on the $50,000 loan the tenant had received
in 1992 from the Partnership to cover the portion of the structural repairs to
the Property that the tenant was to pay. The loan, which was non-interest
bearing, was payable in monthly installments over 12 months commencing July 1,
1992. In addition, although not required under the terms of the lease, the
Partnership paid the remaining $30,000 of the repairs, which totalled $80,000.
Repayment of the loan from the individual General Partners by the tenant is
subordinated to the payment of any and all amounts due to the Partnership by
the tenant.
Other sources and uses of capital included the following during the
years ended December 31, 1995, 1994 and 1993.
During 1994, the Partnership also received cash from the sale of its
Property in Fairfield, California, of $1,018,490, net of closing costs and
excluding a deferred, subordinated, real estate disposition fee payable to an
affiliate of the General Partners of $31,500. In connection with the sale of
this Property, the Partnership declared distributions in 1994 of $861,500 of
the net sales proceeds which were paid to the Limited Partners during 1995.
The balance of the funds was retained by the Partnership and used to meet the
Partnership's working capital and other needs.
The General Partners have the right, but not the obligation, to make
additional capital contributions if they deem it appropriate in connection
with the operations of the Partnership, in which event such contributions will
be returned to the General Partners from distributions of net sales proceeds
at the same time that their initial capital contributions of $1,000 are
returned. During the year ended December 31, 1994, the corporate General
Partner contributed $120,000 in connection with the operations of the
Partnership. No such contributions were made during the years ended December
31, 1995 and 1993.
Currently, rental income from the Partnership's Properties is invested
in money market accounts or other short-term, highly liquid investments
pending the Partnership's use of such funds to pay Partnership expenses or to
make distributions to the partners. At December 31, 1995, the Partnership had
$271,575 invested in such short-term investments as compared to $1,253,629 at
December 31, 1994. The decrease in funds invested in short-term investments
at December 31, 1995, is primarily a result of the fact that, in January 1995,
the Partnership distributed $861,500 of net sales proceeds, representing a
return of capital to the Limited Partners, relating to the sale of the
Property in Fairfield, California, in October 1994. The funds remaining at
December 31, 1995, will be used for the payment of distributions and other
liabilities.
None of the Properties owned by the Partnership or any joint venture in
which the Partnership owns an interest is or may be encumbered. Subject to
certain restrictions on borrowings from the General Partners, however, the
Partnership may borrow, in the discretion of the General Partners, for the
purpose of maintaining the operations of the Partnership. The Partnership
will not encumber any of the Properties in connection with any borrowings or
advances. The Partnership will not borrow for the purpose of returning
capital to the Limited Partners. The Partnership also will not borrow under
circumstances which would make the Limited Partners liable to creditors of the
Partnership. Affiliates of the General Partners from time to time incur
certain operating expenses on behalf of the Partnership for which the
Partnership reimburses the affiliates without interest.
During 1995, 1994 and 1993, affiliates of the General Partners incurred
on behalf of the Partnership $50,300, $60,965 and $66,188, respectively, for
certain operating expenses. As of December 31, 1995, the Partnership owed
$8,389 to affiliates for such amounts and accounting and administrative
services. In addition, as of December 31, 1995, the Partnership had incurred
a total of $66,750 in real estate disposition fees due to affiliates as a
result of its services in connection with the sale of two Properties. The
payment of such fees is deferred until the Limited Partners have received the
sum of their cumulative 10% Preferred Return and their adjusted capital
contributions.
Amounts payable to other parties, including distributions payable,
decreased to $329,589 at December 31, 1995, from $1,228,816 at December 31,
1994, primarily as a result of the Partnership's payment of distributions
resulting from the sale of its Property in Fairfield, California, as described
above, during 1995, which had been accrued at December 31, 1994. Liabilities
at December 31, 1995, to the extent they exceed cash and cash equivalents at
December 31, 1995, will be paid from future cash from operations, or, in the
event the General Partners elect to make additional contributions or loans to
the Partnership, from future General Partner contributions or loans.
Based primarily on current and anticipated future cash from operations
and, for the year ended December 31, 1994, proceeds received from the sale of
the Property in Fairfield, California, and to a lesser extent additional
capital contributions received from the General Partners, the Partnership
declared distributions to Limited Partners of $1,264,883, $2,279,123 and
$1,417,622 for the years ended December 31, 1995, 1994 and 1993, respectively.
This represents distributions of $42.16, $75.97 and $47.25 per Unit for the
years ended December 31, 1995, 1994 and 1993, respectively. The Partnership
intends to continue to make distributions of cash available for distribution
to the Limited Partners on a quarterly basis.
The General Partners believe that the Properties are adequately covered
by insurance. In addition, during 1995, the General Partners obtained
contingent liability and property coverage for the Partnership. This
insurance policy is intended to reduce the Partnership's exposure in the
unlikely event a tenant's insurance policy lapses or is insufficient to cover
a claim relating to the Property.
The Partnership's investment strategy of acquiring Properties for cash
and generally leasing them under triple-net leases to operators who generally
meet specified financial standards minimizes the Partnership's operating
expenses. The General Partners believe that the leases will continue to
generate cash flow in excess of operating expenses.
Due to low operating expenses and ongoing cash flow, the General
Partners do not believe that working capital reserves are necessary at this
time. In addition, because the leases for the Partnership's Properties are
generally on a triple-net basis, it is not anticipated that a permanent
reserve for maintenance and repairs will be established at this time. To the
extent, however, that the Partnership has insufficient funds for such
purposes, the General Partners will contribute to the Partnership an aggregate
amount of up to one percent of the offering proceeds for maintenance and
repairs.
Results of Operations
During the years ended December 31, 1994 and 1993, the Partnership owned
and leased 16 wholly owned Properties (including one Property in Fairfield,
California, which was sold in October 1994) and during the year ended December
31, 1995, the Partnership owned and leased 15 wholly owned Properties. In
addition, during the years ended December 31, 1995, 1994 and 1993, the
Partnership was a co-venturer in three separate joint ventures that each owned
and leased one Property. As of December 31, 1995, the Partnership owned,
either directly or through joint venture arrangements, 18 Properties which
are, in general, subject to long-term, triple net leases. The leases of the
Properties provide for minimum base annual rental amounts (payable in monthly
installments) ranging from approximately $16,000 to $117,000. Generally, the
leases provide for percentage rent based on sales in excess of a specified
amount. In addition, certain leases provide for increases in the annual base
rent during the lease terms. For further description of the Partnership's
leases and Properties, see Item 1. Business - Leases and Item 2. Properties,
respectively.
During the years ended December 31, 1995, 1994 and 1993, the Partnership
earned $1,129,406, $1,180,678 and $1,258,013, respectively, in base rental
income from the Partnership's wholly owned Properties described above. Rental
income decreased in 1995 (as compared to 1994) by approximately $82,000, and
in 1994 (as compared to 1993) by approximately $26,000, as a result of the
sale of the Property in Fairfield, California, in October 1994. Rental
income also decreased in 1995 (as compared to 1994) by approximately $29,300,
and in 1994 (as compared to 1993) by approximately $21,000, as a result of the
Partnership's reducing base rent for the Property in Mesquite, Texas, in
anticipation of a lease amendment to provide for lower initial base rent with
scheduled rent increases. The decrease in rental income in 1995 (as compared
to 1994) was partially offset by, and the decrease in rental income in 1994
(as compared to 1993) was partially attributable to, the fact that the
Partnership established an allowance for doubtful accounts of approximately
$62,000 relating to the Property in Mesquite, Texas, during the year ended
December 31, 1994. As of February 29, 1996, the General Partners were
negotiating an agreement with the tenant of this Property for the collection
of past due amounts. The Partnership will recognize such amounts as income in
future periods if collected.
During each of the years ended December 31, 1995, 1994 and 1993, the
Partnership received approximately $72,000 from the former tenant of three
Properties, representing the difference between (i) the original leases
entered into between the Partnership and the former tenant and (ii) the
current leases on the Properties between the Partnership and new tenants (two
of which were re-leased to the corporate franchisor). The Partnership will
not receive such amounts in 1996 and subsequent years; therefore, rental
income in the future years will decrease accordingly.
In addition, effective September 1, 1995, the lease relating to the
Wendy's Property in Payson, Arizona, was amended to reduce annual base rent by
$12,000 and to provide for a change in the percentage rent calculation, which
based on the past sales history of the restaurant will result in less
percentage rent payable to the Partnership in future years.
During the years ended December 31, 1995, 1994 and 1993, the Partnership
also earned $35,176, $45,216 and $21,889, respectively, in contingent rental
income. The decrease in contingent rental income during 1995, as compared to
1994, is primarily attributable to the sale of the Property in Fairfield,
California, in October 1994. The increase in contingent rental income during
1994, as compared to 1993, is attributable to increases in gross sales
relating to certain restaurant Properties. The increase in contingent rent
during 1994 was partially offset by a decrease of approximately $28,900 as a
result of the Partnership's establishing an allowance for doubtful accounts
for contingent rental amounts due on the Mesquite Property.
In addition, during the years ended December 31, 1995, 1994 and 1993,
the Partnership earned $112,974, $112,160 and $114,028, respectively,
attributable to net income earned by the three joint ventures in which the
Partnership is a co-venturer.
During the years ended December 31, 1995, 1994 and 1993, two of the
Partnership's lessees, Golden Corral Corporation and Wendy's International,
Inc., each contributed more than ten percent of the Partnership's total rental
income (including the Partnership's share of the rental income from three
Properties owned by joint ventures). As of December 31, 1995, Golden Corral
Corporation was the lessee under leases relating to five restaurants and
Wendy's International, Inc. was the lessee under leases relating to three
restaurants. It is anticipated that Golden Corral Corporation and Wendy's
International, Inc. each will continue to contribute ten percent or more of
the Partnership's total rental income during 1996 and subsequent years. In
addition, two Restaurant Chains, Golden Corral Family Steakhouse Restaurants
("Golden Corral") and Wendy's Old Fashioned Hamburger Restaurants ("Wendy's"),
each accounted for more than ten percent of the Partnership's total rental
income in 1995, 1994 and 1993 (including the Partnership's share of the rental
income from three Properties owned by joint ventures). In subsequent years,
it is anticipated that Golden Corral and Wendy's each will continue to account
for more than ten percent of the total rental income to which the Partnership
is entitled under the terms of its leases. Any failure of these lessees or
Restaurant Chains could materially affect the Partnership's income.
Operating expenses, including depreciation and amortization expense,
were $328,465, $332,679 and $372,782 for the years ended December 31, 1995,
1994 and 1993, respectively. The decrease in operating expenses during 1995,
as compared to 1994, is primarily attributable to a decrease in depreciation
and amortization expense as a result of the sale of the Property in Fairfield,
California, in October 1994. The decrease in operating expenses during 1995
was partially offset by an increase in (i) accounting and administrative
expenses associated with operating the Partnership and its Properties and (ii)
insurance expense as a result of the General Partners' obtaining contingent
liability and property coverage for the Partnership as discussed above in
"Liquidity and Capital Resources." The decrease in operating expenses during
1994, as compared to 1993, is primarily attributable to the Partnership's
incurring approximately $30,000 for repairs relating to the Property in
Mesquite, Texas, during 1993, as discussed above in "Liquidity and Capital
Resources." Due to the fact that the leases are, in general, on a triple-net
basis, the Partnership does not anticipate incurring significant repairs and
maintenance expenses for its Properties on an on-going basis.
Operating expenses in 1995, 1994 and 1993, include amounts incurred for
real estate tax expense relating to the Properties in Angleton and Mesquite,
Texas. In accordance with the lease agreement relating to the Property in
Angleton, Texas, the Partnership is responsible for one-half of the real
estate taxes. Payment of real estate taxes relating to the Property in
Mesquite, Texas, remains the responsibility of the tenant; however, because of
the current financial difficulties this tenant is experiencing, the General
Partners believe the tenant's ability to pay these expenses through 1995 is
doubtful. The General Partners anticipate that the tenant will pay these
taxes in 1996 and future years, and as discussed above, as of February 29,
1996, the General Partners were negotiating an agreement with the tenant of
this Property for the collection of past due amounts, including real estate
taxes. The Partnership will recognize such amounts as income in future
periods if collected.
As a result of the sale of the Property in Fairfield, California, the
Partnership recognized a gain of $182,384 for the year ended December 31,
1994. No Properties were sold during the years ended December 31, 1995 and
1993.
In March 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." The
Statement, which is effective for fiscal years beginning after December 15,
1995, requires that an entity review long-lived assets and certain
identifiable intangibles, to be held and used, for impairment whenever events
or changes in circumstances indicate that the carrying amount of the asset may
not be recoverable. The Partnership will adopt this standard in 1996. The
General Partners believe that adoption of this standard currently would not
have had a material effect on the Partnership's financial position or results
of operations.
The Partnership's leases as of December 31, 1995, are, in general,
triple-net leases and contain provisions that the General Partners believe
mitigate the adverse effect of inflation. Such provisions include clauses
requiring the payment of percentage rent based on certain restaurant sales
above a specified level and/or automatic increases in base rent at specified
times during the term of the lease. Management expects that increases in
restaurant sales volumes due to inflation and real sales growth should result
in an increase in rental income over time. Continued inflation also may cause
capital appreciation of the Partnership's Properties. Inflation and changing
prices, however, also may have an adverse impact on the operating margins of
the restaurants and on potential capital appreciation of the Properties.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
CNL INCOME FUND, LTD.
(A Florida Limited Partnership)
CONTENTS
--------
Page
----
Report of Independent Accountants 12
Financial Statements:
Balance Sheets 13
Statements of Income 14
Statements of Partners' Capital 15
Statements of Cash Flows 16
Notes to Financial Statements 18
Report of Independent Accountants
---------------------------------
To the Partners
CNL Income Fund, Ltd.
We have audited the financial statements and the financial statement schedules
of CNL Income Fund, Ltd. (a Florida limited partnership) listed in Item 14(a)
of this Form 10-K. These financial statements and financial statement
schedules are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements and
financial statement schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of CNL Income Fund, Ltd. as of
December 31, 1995 and 1994, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1995 in
conformity with generally accepted accounting principles. In addition, in our
opinion, the financial statement schedules referred to above, when considered
in relation to the basic financial statements taken as a whole, present
fairly, in all material respects, the information required to be included
therein.
/s/Coopers & Lybrand L.L.P.
Orlando, Florida
January 17, 1996
CNL INCOME FUND, LTD.
(A Florida Limited Partnership)
BALANCE SHEETS
--------------
December 31,
ASSETS 1995 1994
------ ----------- -----------
Land and buildings on operating leases,
less accumulated depreciation $ 8,298,860 $ 8,506,557
Investment in and due from joint
ventures 1,007,527 1,023,559
Cash and cash equivalents 271,575 1,253,629
Receivables, less allowance for
doubtful accounts of $122,136 and
$99,744 29,143 12,729
Prepaid expenses 3,815 2,563
Lease costs, less accumulated
amortization of $16,875 and
$14,375 33,125 35,625
Accrued rental income 24,833 22,752
----------- -----------
$ 9,668,878 $10,857,414
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
---------------------------------
Accounts payable $ 2,988 $ 3,398
Accrued and escrowed real estate taxes
payable 10,380 9,512
Distributions payable 316,221 1,215,906
Due to related parties 75,139 66,750
Rents paid in advance and deposits 37,198 32,115
----------- -----------
Total liabilities 441,926 1,327,681
Partners' capital 9,226,952 9,529,733
----------- -----------
$ 9,668,878 $10,857,414
=========== ===========
See accompanying notes to financial statements.
CNL INCOME FUND, LTD.
(A Florida Limited Partnership)
STATEMENTS OF INCOME
--------------------
Year Ended December 31,
1995 1994 1993
---------- ---------- ----------
Revenues:
Rental income from
operating leases $1,129,406 $1,180,678 $1,258,013
Contingent rental income 35,176 45,216 21,889
Interest and other income 13,011 20,817 18,397
---------- ---------- ----------
1,177,593 1,246,711 1,298,299
---------- ---------- ----------
Expenses:
General operating and
administrative 84,700 66,383 98,532
Professional services 14,465 20,157 27,463
Bad debt expense - 5,146 -
Real estate taxes 13,746 14,224 13,662
State and other taxes 5,357 4,342 7,759
Depreciation and
amortization 210,197 222,427 225,366
---------- ---------- ----------
328,465 332,679 372,782
---------- ---------- ----------
Income Before Equity in
Earnings of Joint Ventures
and Gain on Sale of Land
and Building 849,128 914,032 925,517
Equity in Earnings of Joint
Ventures 112,974 112,160 114,028
Gain on Sale of Land and
Building - 182,384 -
---------- ---------- ----------
Net Income $ 962,102 $1,208,576 $1,039,545
========== ========== ==========
Allocation of Net Income:
General partners $ 9,621 $ 11,333 $ 10,395
Limited partners 952,481 1,197,243 1,029,150
---------- ---------- ----------
$ 962,102 $1,208,576 $1,039,545
========== ========== ==========
Net Income Per Limited
Partner Unit $ 31.75 $ 39.91 $ 34.31
========== ========== ==========
Weighted Average Number
of Limited Partner
Units Outstanding 30,000 30,000 30,000
========== ========== ==========
See accompanying notes to financial statements.
<TABLE>
CNL INCOME FUND, LTD.
(A Florida Limited Partnership)
STATEMENTS OF PARTNERS' CAPITAL
-------------------------------
Years Ended December 31, 1995, 1994 and 1993
<CAPTION>
General Partners Limited Partners
------------------- ---------------------------------------------------
Accumu- Accumu-
Contri- lated Contri- Distri- lated Syndication
butions Earnings butions butions Earnings Costs Total
-------- -------- ----------- ------------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1992 $ 73,400 $ 74,792 $14,176,025 $ (9,328,950) $ 7,526,230 $(1,663,140) $10,858,357
Distributions to limited
partners ($47.25 per
limited partner unit) - - - (1,417,622) - - (1,417,622)
Net income - 10,395 - - 1,029,150 - 1,039,545
-------- -------- ----------- ------------ ----------- ----------- -----------
Balance, December 31, 1993 73,400 85,187 14,176,025 (10,746,572) 8,555,380 (1,663,140) 10,480,280
Contributions from general
partner 120,000 - - - - - 120,000
Distributions to limited
partners ($75.97 per
limited partner unit) - - (861,500) (1,417,623) - - (2,279,123)
Net income - 11,333 - - 1,197,243 - 1,208,576
-------- -------- ----------- ----------- ----------- ----------- -----------
Balance, December 31, 1994 193,400 96,520 13,314,525 (12,164,195) 9,752,623 (1,663,140) 9,529,733
Distributions to limited
partners ($42.16 per
limited partner unit) - - - (1,264,883) - - (1,264,883)
Net income - 9,621 - - 952,481 - 962,102
-------- -------- ----------- ------------ ----------- ----------- -----------
Balance, December 31, 1995 $193,400 $106,141 $13,314,525 $(13,429,078) $10,705,104 $(1,663,140) $ 9,226,952
======== ======== =========== ============ =========== =========== ===========
See accompanying notes to financial statements.
</TABLE>
CNL INCOME FUND, LTD.
(A Florida Limited Partnership)
STATEMENTS OF CASH FLOWS
------------------------
Year Ended December 31,
1995 1994 1993
----------- ----------- -----------
Increase (Decrease) in Cash and
Cash Equivalents:
Cash Flows from Operating
Activities:
Cash received from tenants $ 1,152,159 $ 1,266,032 $ 1,260,716
Distributions from joint
ventures 129,006 130,755 122,848
Cash paid for expenses (110,488) (130,697) (102,595)
Interest received 11,837 13,111 4,764
----------- ----------- -----------
Net cash provided by
operating activities 1,182,514 1,279,201 1,285,733
----------- ----------- -----------
Cash Flows from Investing
Activities:
Proceeds from sale of land
and building - 1,018,490 -
Collections on loan to
tenant - - 25,000
----------- ----------- -----------
Net cash provided by
investing activities - 1,018,490 25,000
----------- ----------- -----------
Cash Flows from Financing
Activities:
Contributions from general
partner - 120,000 -
Distributions to limited
partners (2,164,568) (1,417,623) (1,063,216)
----------- ----------- -----------
Net cash used in
financing activities (2,164,568) (1,297,623) (1,063,216)
----------- ----------- -----------
Net Increase (Decrease) in Cash
and Cash Equivalents (982,054) 1,000,068 247,517
Cash and Cash Equivalents at
Beginning of Year 1,253,629 253,561 6,044
----------- ----------- -----------
Cash and Cash Equivalents at
End of Year $ 271,575 $ 1,253,629 $ 253,561
=========== =========== ===========
See accompanying notes to financial statements.
CNL INCOME FUND, LTD.
(A Florida Limited Partnership)
STATEMENTS OF CASH FLOWS - CONTINUED
------------------------------------
Year Ended December 31,
1995 1994 1993
----------- ----------- -----------
Reconciliation of Net Income to
Net Cash Provided by Operating
Activities:
Net income $ 962,102 $ 1,208,576 $ 1,039,545
----------- ----------- -----------
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation 207,697 218,827 222,466
Amortization 2,500 3,600 2,900
Equity in earnings of
joint ventures, net of
distributions 16,032 18,595 16,623
Gain on sale of land and
building - (182,384) -
Decrease (increase) in
receivables (16,414) 32,052 (30,613)
Decrease (increase) in
prepaid expenses (1,252) (2,563) 325
Increase in accrued rental
income (2,081) (1,863) (561)
Decrease in other assets - - 30,000
Increase (decrease) in
accounts payable and
accrued expenses 458 (21,294) 7,603
Increase in due to related
parties 8,389 - -
Increase (decrease) in
rents paid in advance
and deposits 5,083 5,655 (2,555)
----------- ----------- -----------
Total adjustments 220,412 70,625 246,188
----------- ----------- -----------
Net Cash Provided by Operating
Activities $ 1,182,514 $ 1,279,201 $ 1,285,733
=========== =========== ===========
Supplemental Schedule of Non-Cash
Investing and Financing
Activities:
Deferred real estate
disposition fee incurred
and unpaid at December 31 $ - $ 31,500 $ -
=========== =========== ===========
Distributions declared and
unpaid at December 31 $ 316,221 $ 1,215,906 $ 354,406
=========== =========== ===========
See accompanying notes to financial statements.
CNL INCOME FUND, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
-----------------------------
Years Ended December 31, 1995, 1994 and 1993
1. Significant Accounting Policies:
-------------------------------
Organization and Nature of Business - CNL Income Fund, Ltd. (the
"Partnership") is a Florida limited partnership that was organized for
the purpose of acquiring both newly constructed and existing restaurant
properties, as well as properties upon which restaurants were to be
constructed, which are leased primarily to operators of national and
regional fast-food restaurant chains.
The general partners of the Partnership are CNL Realty Corporation (the
"Corporate General Partner"), James M. Seneff, Jr. and Robert A. Bourne.
Mr. Seneff and Mr. Bourne are also 50 percent shareholders of the
Corporate General Partner. The general partners have responsibility for
managing the day-to-day operations of the Partnership.
Land and Buildings on Operating Leases - Land and buildings on operating
leases are stated at cost. Buildings are depreciated using the
straight-line method over their estimated useful lives of 30 years.
When properties are sold, the related cost and accumulated depreciation
are removed from the accounts and gains or losses from sales are
reflected in income in accordance with Statement of Financial Accounting
Standards No. 66, "Accounting for Sales of Real Estate." The properties
will be written down to net realizable value in the event the general
partners believe that the undepreciated cost cannot be recovered through
operations. The general partners determine whether an impairment in
value has occurred by comparing the estimated undiscounted future cash
flows with the carrying cost of the individual properties.
Lease Accounting and Rental Income - Generally, land and buildings are
leased to others on a triple-net lease basis, whereby the tenant is
generally responsible for all operating expenses relating to the
property, including property taxes, insurance, maintenance and repairs.
The leases are accounted for using the operating method. As such, land
and buildings are recorded at cost, revenue is recognized as rentals are
earned and depreciation is charged to operations as incurred. When
scheduled rentals vary during the lease term, income is recognized on a
straight-line basis over the lease term so as to produce a constant
periodic rent. Accrued rental income is the aggregate difference
between the scheduled rents which vary during the lease term and the
income recognized on a straight-line basis.
When the collection of amounts recorded as rental or other income is
considered to be doubtful, an adjustment is made to increase the
allowance for doubtful accounts, which is netted against receivables,
and to decrease rental or other income or increase bad debt expense for
the current period, although the Partnership continues to pursue
collection of such amounts. If amounts are subsequently determined to
be uncollectible, the corresponding receivable and the allowance for
doubtful accounts are decreased accordingly.
Investment in Joint Ventures - The Partnership is a partner in three
joint ventures and accounts for its investments using the equity method.
Cash and Cash Equivalents - The Partnership considers all highly liquid
investments with a maturity of three months or less when purchased to be
cash equivalents. Cash and cash equivalents consist of demand deposits
at commercial banks, money market funds and overnight repurchase
agreements backed by government securities. Cash equivalents are stated
at cost plus accrued interest, which approximates market value.
Cash accounts maintained on behalf of the Partnership in demand deposits
at commercial banks and money market funds may exceed federally insured
levels; however, the Partnership has not experienced any losses in such
accounts. The Partnership limits investment of temporary cash
investments to financial institutions with high credit standing;
therefore, the Partnership believes it is not exposed to any significant
credit risk on cash and cash equivalents.
Lease Costs - Lease incentive costs and brokerage and legal fees
associated with negotiating new leases are amortized over the terms of
the new leases using the straight-line method.
Income Taxes - Under Section 701 of the Internal Revenue Code, all
income, expenses and tax credit items flow through to the partners for
tax purposes. Therefore, no provision for federal income taxes is
provided in the accompanying financial statements. The Partnership is
subject to certain state taxes on its income and property.
Additionally, for tax purposes, syndication costs are included in
Partnership equity and in the basis of each partner's investment. For
financial reporting purposes, syndication costs are netted against
partners' capital and represent a reduction of Partnership equity and
a reduction in the basis of each partner's investment.
Use of Estimates - The general partners of the Partnership have made a
number of estimates and assumptions relating to the reporting of assets
and liabilities and the disclosure of contingent assets and liabilities
to prepare these financial statements in conformity with generally
accepted accounting principles. Actual results could differ from those
estimates.
New Accounting Standard - In March 1995, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-
Lived Assets to Be Disposed Of." The Statement, which is effective for
fiscal years beginning after December 15, 1995, requires that an entity
review long-lived assets and certain identifiable intangibles, to be
held and used, for impairment whenever events or changes in
circumstances indicate that the carrying amount of the asset may not be
recoverable. The Partnership will adopt this standard in 1996. The
general partners believe that adoption of this standard currently would
not have had a material effect on the Partnership's financial position
or results of operations.
2. Leases:
------
The Partnership leases its land and buildings primarily to operators of
national and regional fast-food restaurants. The leases are accounted
for under the provisions of Statement of Financial Accounting Standards
No. 13, "Accounting for Leases." The leases have been classified as
operating leases. Substantially all leases are for 15 to 20 years and
provide for minimum and contingent rentals. In addition, the tenant
generally pays all property taxes and assessments, fully maintains the
interior and exterior of the building and carries insurance coverage for
public liability, property damage, fire and extended coverage. The
lease options generally allow tenants to renew the leases for two or
three successive five-year periods subject to the same terms and
conditions as the initial lease. Most leases also allow the tenant to
purchase the property at fair market value after a specified portion of
the lease has elapsed.
3. Land and Buildings on Operating Leases:
--------------------------------------
Land and buildings on operating leases consisted of the following at
December 31:
1995 1994
----------- -----------
Land $ 3,973,607 $ 3,973,607
Buildings 6,226,321 6,226,321
----------- -----------
10,199,928 10,199,928
Less accumulated
depreciation (1,901,068) (1,693,371)
----------- -----------
$ 8,298,860 $ 8,506,557
=========== ===========
During 1994, the Partnership sold its property in Fairfield, California,
for a total of $1,018,490, excluding a deferred, real estate disposition
fee payable to an affiliate of the general partners of $31,500,
resulting in a gain of $182,384 for financial reporting purposes.
Certain leases provide for escalating guaranteed minimum rents
throughout the lease terms. Income from these scheduled rent increases
is recognized on a straight-line basis over the terms of the leases.
For the years ended December 31, 1995, 1994 and 1993, the Partnership
recognized $2,081, $1,863 and $561, respectively, of such income.
The following is a schedule of the future minimum lease payments to be
received on noncancellable operating leases at December 31, 1995:
1996 $ 926,630
1997 927,830
1998 929,030
1999 901,630
2000 899,130
Thereafter 3,673,621
----------
$8,257,871
==========
4. Investment in and Due from Joint Ventures:
-----------------------------------------
The Partnership has a 50 percent interest in the profits and losses of
Orange Avenue Joint Venture, Seventh Avenue Joint Venture and Sand Lake
Road Joint Venture. These joint ventures each own and lease one
property to an operator of national fast-food or family-style
restaurants. The following presents the joint ventures' combined,
condensed financial information at December 31:
1995 1994
---------- ----------
Land and buildings on
operating leases,
less accumulated
depreciation $1,794,290 $1,838,514
Cash 3,372 5,747
Receivables 27,682 22,741
Prepaid expenses 119 -
Accrued rental income 14,102 10,717
Liabilities 38,281 32,162
Partners' capital 1,801,284 1,845,557
Revenues 272,155 269,879
Net income 225,948 224,320
The Partnership recognized income totalling $112,974, $112,160 and
$114,028 for the years ended December 31, 1995, 1994 and 1993,
respectively, from these joint ventures.
The investment in and due from joint ventures includes $27,682 and
$21,578 at December 31, 1995 and 1994, respectively, due from Seventh
Avenue Joint Venture as a result of an underpayment of distributions to
the Partnership.
5. Allocations and Distributions:
-----------------------------
All net income and net losses of the Partnership, excluding gains and
losses from the sale of properties, are allocated 99 percent to the
limited partners and one percent to the general partners. Distributions
of net cash flow are made 99 percent to the limited partners and one
percent to the general partners; provided, however, that the one percent
of net cash flow to be distributed to the general partners is subordi-
nated to receipt by the limited partners of an aggregate, ten percent,
noncumulative, noncompounded annual return on their adjusted capital
contributions (the "10% Preferred Return").
Generally, net sales proceeds from the sale of properties, to the extent
distributed, will be distributed first to the limited partners in an
amount sufficient to provide them with their cumulative 10% Preferred
Return, plus the return of their adjusted capital contributions. The
general partners will then receive, to the extent previously
subordinated and unpaid, a one percent interest in all prior
distributions of net cash flow and a return of their capital
contributions. Any remaining sales proceeds will be distributed 95
percent to the limited partners and five percent to the general
partners. Any gain from the sale of a property is, in general,
allocated in the same manner as net sales proceeds are distributable.
Any loss from the sale of a property is, in general, allocated first, on
a pro rata basis, to partners with positive balances in their capital
accounts; and thereafter, 95 percent to the limited partners and five
percent to the general partners.
During the years ended December 31, 1995, 1994 and 1993, the Partnership
declared distributions to the limited partners of $1,264,883, $2,279,123
and $1,417,622, respectively. Distributions for the year ended
December 31, 1994, included $861,500 as a result of the distribution of
net sales proceeds from the sale of the property in Fairfield,
California, which were treated as a return of capital for purposes of
calculating the limited partners' cumulative 10% Preferred Return. As a
result of the return of capital, the amount of the limited partners'
adjusted capital contributions (which generally is the limited partners'
capital contributions, less distributions from the sale of a property
that are considered to be a return of capital) was decreased; therefore,
the amount of the limited partners' adjusted capital contributions on
which the 10% Preferred Return is calculated was lowered accordingly.
No distributions have been made to the general partners to date.
6. Income Taxes:
------------
The following is a reconciliation of net income for financial reporting
purposes to net income for federal income tax purposes for the years
ended December 31:
1995 1994 1993
---------- ---------- ----------
Net income for financial
reporting purposes $ 962,102 $1,208,576 $1,039,545
Depreciation for tax
reporting purposes
in excess of
depreciation for
financial reporting
purposes (109,002) (109,002) (108,293)
Gain on sale of land
and building for
financial reporting
purposes in excess
of gain for tax
reporting purposes - (5,160) -
Equity in earnings of
joint ventures for
financial reporting
purposes in excess
of equity in earnings
of joint ventures for
tax reporting purposes (14,739) (11,057) (18,420)
Allowance for doubtful
accounts 22,392 99,273 471
Accrued rental income (2,081) (1,863) (561)
Rents paid in advance 5,083 (6,711) 9,611
---------- ---------- ----------
Net income for federal
income tax purposes $ 863,755 $1,174,056 $ 922,353
========== ========== ==========
7. Related Party Transactions:
--------------------------
One of the individual general partners, James M. Seneff, Jr., is one of
the principal shareholders of CNL Group, Inc., the parent company of CNL
Investment Company and CNL Fund Advisors, Inc. The other individual
general partner, Robert A. Bourne, is the president of CNL Investment
Company and CNL Fund Advisors, Inc. CNL Income Fund Advisors, Inc. was
a wholly owned subsidiary of CNL Group, Inc. until its merger, effective
January 1, 1996, with CNL Fund Advisors, Inc. During the years ended
December 31, 1995, 1994 and 1993, CNL Investment Company, CNL Income
Fund Advisors, Inc. and CNL Fund Advisors, Inc. (hereinafter referred to
collectively as the "Affiliates") each performed certain services for
the Partnership, as described below.
During the years ended December 31, 1995, 1994 and 1993, certain
Affiliates acted as manager of the Partnership's properties pursuant to
a property management agreement with the Partnership. In connection
therewith, the Partnership agreed to pay the Affiliates a management fee
of one-half of one percent of the Partnership assets under management
(valued at cost) annually. The property management fee is limited to
one percent of the sum of gross operating revenues from properties
wholly owned by the Partnership and the Partnership's allocable share of
gross operating revenues from joint ventures or competitive fees for
comparable services. In addition, these fees are payable only after the
limited partners receive their aggregate, noncumulative 10% Preferred
Return. Due to the subordinated nature of these fees, no property
management fees were incurred for the years ended December 31, 1995,
1994 and 1993.
Certain Affiliates are also entitled to receive a deferred, subordinated
real estate disposition fee, payable upon the sale of one or more
properties based on the lesser of one-half of a competitive real estate
commission or three percent of the sales price if the Affiliates provide
a substantial amount of services in connection with the sale. In
addition, the real estate disposition fee is subordinated to receipt by
the limited partners of their aggregate, cumulative 10% Preferred
Return, plus their adjusted capital contributions. For the year ended
December 31, 1994, the Partnership incurred $31,500 in deferred,
subordinated real estate disposition fees as a result of the
Partnership's sale of its property in Fairfield, California. No
deferred, subordinated real estate disposition fees were incurred for
the years ended December 31, 1995 and 1993.
During the years ended December 31, 1995, 1994 and 1993, the Affiliates
provided accounting and administrative services to the Partnership on a
day-to-day basis. The Partnership incurred $58,543, $43,992 and $35,320
for the years ended December 31, 1995, 1994 and 1993, respectively, for
such services.
The due to related parties consisted of the following at December 31:
1995 1994
------- -------
Due to Affiliates:
Deferred, subordinated real
estate disposition fee $66,750 $66,750
Expenditures incurred on
behalf of the Partnership 3,106 -
Accounting and administrative
services 5,283 -
------- -------
$75,139 $66,750
======= =======
The deferred, subordinated real estate disposition fees are the result
of the Partnership's sale of a property during the year ended December
31, 1992 and the sale of another property during the year ended December
31, 1994. These fees will not be paid until after the limited partners
have received their cumulative 10% Preferred Return, plus their adjusted
capital contributions, as described above.
8. Concentration of Credit Risk:
----------------------------
The following schedule presents total rental income from individual
lessees, each representing more than ten percent of the Partnership's
total rental income (including the Partnership's share of rental income
from joint ventures), for the years ended December 31:
1995 1994 1993
-------- -------- --------
Golden Corral
Corporation $452,653 $452,653 $452,653
Wendy's Inter-
national, Inc. 206,805 205,185 207,041
In addition, the following schedule presents total rental income from
individual restaurant chains, each representing more than ten percent of
the Partnership's total rental income (including the Partnership's share
of rental income from joint ventures), for the years ended December 31:
1995 1994 1993
-------- -------- --------
Wendy's Old Fashioned
Hamburger Restaurants $582,315 $646,507 $700,621
Golden Corral
Family Steakhouse
Restaurants 452,653 452,653 452,653
Although the Partnership's properties are geographically diverse and the
Partnership's lessees operate a variety of restaurant concepts, failure
of any one of these lessees or restaurant chains could significantly
impact the results of operations of the Partnership. However, the
general partners believe that the risk of such a default is reduced due
to the essential or important nature of these properties for the on-
going operations of the lessees.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The General Partners of the Registrant are James M. Seneff, Jr., Robert
A. Bourne and CNL Realty Corporation, a Florida corporation. The General
Partners manage and control the Partnership's affairs and have general
responsibility and the ultimate authority in all matters affecting the
Partnership's business. The Partnership has available to it the services,
personnel and experience of CNL Investment Company, CNL Fund Advisors, Inc.,
and CNL Group, Inc. and its affiliates, all of which are affiliates of the
General Partners. In addition, during 1995, the Partnership had available to
it the services, personnel and experience of CNL Income Fund Advisors, Inc.,
prior to its merger with CNL Fund Advisors, Inc., effective January 1, 1996.
James M. Seneff, Jr., age 49, is a principal stockholder of CNL Group,
Inc., a diversified real estate company, and has served as its Chairman of the
Board of Directors and Chief Executive Officer since its formation in 1973.
CNL Group, Inc. is the parent company of CNL Securities Corp., CNL Investment
Company, CNL Fund Advisors, Inc., and prior to its merger with CNL Fund
Advisors, Inc., effective January 1, 1996, CNL Income Fund Advisors, Inc. Mr.
Seneff has been a director and registered principal of CNL Securities Corp.,
which served as the managing dealer in the Partnership's offering of Units,
since its formation in 1979. Mr. Seneff also has held the position of
President and a director of CNL Management Company, a registered investment
advisor, since its formation in 1976, has served as Chairman of the Board and
Chief Executive Officer of CNL Investment Company and Chief Executive Officer
and Chairman of the Board of Commercial Net Lease Realty, Inc. since 1992, has
served as Chairman of the Board and Chief Executive Officer of CNL Realty
Advisors, Inc. since its inception in 1991, served as Chairman of the Board
and Chief Executive Officer of CNL Income Fund Advisors, Inc. since its
inception in 1994 through December 31, 1995, has served as Chairman of the
Board and Chief Executive Officer of CNL Fund Advisors, Inc. since its
inception in 1994, and has held the position of Chief Executive Officer and a
director of CNL Institutional Advisors, Inc., a registered investment advisor,
since its inception in 1990. Mr. Seneff previously served on the Florida
State Commission on Ethics and is a former member and past Chairman of the
Florida Investment Advisory Council, which recommends to the Florida Board of
Administration investments for various Florida employee retirement funds. The
Florida Board of Administration, Florida's principal investment advisory and
money management agency, oversees the investment of more than $40 billion of
retirement funds. Since 1971, Mr. Seneff has been active in the acquisition,
development and management of real estate projects and, directly or through an
affiliated entity, has served as a general partner or joint venturer in
approximately 100 real estate ventures involved in the financing, acquisition,
construction and rental of office buildings, apartment complexes, restaurants,
hotels and other real estate. Included in these 100 real estate ventures are
approximately 57 privately offered real estate limited partnerships in which
Mr. Seneff, directly or through an affiliated entity, serves or has served as
a general partner. Also included are CNL Income Fund II, Ltd., CNL Income
Fund III, Ltd., CNL Income Fund IV, Ltd., CNL Income Fund V, Ltd., CNL Income
Fund VI, Ltd., CNL Income Fund VII, Ltd., CNL Income Fund VIII, Ltd., CNL
Income Fund IX, Ltd., CNL Income Fund X, Ltd., CNL Income Fund XI, Ltd., CNL
Income Fund XII, Ltd., CNL Income Fund XIII, Ltd., CNL Income Fund XIV, Ltd.,
CNL Income Fund XV, Ltd., CNL Income Fund XVI, Ltd., CNL Income Fund XVII,
Ltd. and CNL Income Fund XVIII, Ltd. (the "CNL Income Fund Partnerships"),
public real estate limited partnerships with investment objectives similar to
those of the Partnership, in which Mr. Seneff serves as a general partner.
Mr. Seneff received his degree in Business Administration from Florida State
University in 1968.
Robert A. Bourne, age 48, is President and Treasurer of CNL Group, Inc.,
President, a director and a registered principal of CNL Securities Corp.,
President and a director of CNL Investment Company, CNL Fund Advisors, Inc.,
and prior to its merger with CNL Fund Advisors, Inc., effective January 1,
1996, CNL Income Fund Advisors, Inc., and President, Chief Investment Officer
and a director of CNL Institutional Advisors, Inc., a registered investment
advisor. Mr. Bourne also has served as a director since 1992, as President
from July 1992 to February 1996, and as Vice Chairman of the Board of
Directors, Secretary and Treasurer since February 1996, of Commercial Net
Lease Realty, Inc. In addition, Mr. Bourne has served as a director since its
inception in 1991, as President from 1991 to February 1996, and as Secretary
and Treasurer since February 1996, of CNL Realty Advisors, Inc. Upon
graduation from Florida State University in 1970, where he received a B.A. in
Accounting, with honors, Mr. Bourne worked as a certified public accountant
and, from September 1971 through December 1978, was employed by Coopers &
Lybrand, Certified Public Accountants, where he held the position of tax
manager beginning in 1975. From January 1979 until June 1982, Mr. Bourne was
a partner in the accounting firm of Cross & Bourne and from July 1982 through
January 1987, he was a partner in the accounting firm of Bourne & Rose, P. A.,
Certified Public Accountants. Mr. Bourne, who joined CNL Securities Corp. in
1979, has participated as a general partner or joint venturer in
approximately 100 real estate ventures involved in the financing, acquisition,
construction and rental of office buildings, apartment complexes, restaurants,
hotels and other real estate. Included in these 100 real estate ventures are
approximately 57 privately offered real estate limited partnerships in which
Mr. Bourne, directly or through an affiliated entity, serves or has served as
a general partner. Also included are the CNL Income Fund Partnerships, public
real estate limited partnerships with investment objectives similar to those
of the Partnership, in which Mr. Bourne serves as a general partner.
CNL Realty Corporation is a corporation organized on November 26, 1985,
under the laws of the State of Florida. Its sole directors and shareholders
are James M. Seneff, Jr. and Robert A. Bourne, the individual General
Partners. CNL Realty Corporation was organized to serve as the corporate
general partner of real estate limited partnerships, such as the Partnership,
organized by one or both of the individual General Partners. CNL Realty
Corporation currently serves as the corporate general partner of the CNL
Income Fund Partnerships.
CNL Investment Company, which through December 31, 1994, provided
certain management services in connection with the Partnership and its
Properties, is a corporation organized in 1990 under the laws of the State of
Florida. Its principal office is located at 400 East South Street, Suite 500,
Orlando, Florida 32801. CNL Investment Company is a wholly owned subsidiary
of CNL Group, Inc., a diversified real estate company, and was organized to
perform property acquisition, property management and other services.
CNL Income Fund Advisors, Inc., for the period January 1, 1995 through
September 30, 1995, provided certain management services in connection with
the Partnership and its Properties following the assignment by CNL Investment
Company of its rights and obligations under the property management agreement.
CNL Income Fund Advisors, Inc. was a corporation organized in 1994 under the
laws of the State of Florida, and its principal office was located at 400 East
South Street, Suite 500, Orlando, Florida 32801. CNL Income Fund Advisors,
Inc. was a wholly owned subsidiary of CNL Group, Inc., a diversified real
estate company, and was organized to perform property acquisition, property
management and other services. CNL Income Fund Advisors, Inc. merged with CNL
Fund Advisors, Inc. effective January 1, 1996.
CNL Fund Advisors, Inc., effective October 1, 1995, began providing
certain management services in connection with the Partnership and its
Properties following the assignment by CNL Income Fund Advisors, Inc. of its
rights and obligations under the property management agreement. CNL Fund
Advisors, Inc. is a corporation organized in 1994 under the laws of the State
of Florida, and its principal office is located at 400 East South Street,
Suite 500, Orlando, Florida 32801. CNL Fund Advisors, Inc. is a wholly owned
subsidiary of CNL Group, Inc., a diversified real estate company, and was
organized to perform property acquisition, property management and other
services.
CNL Group, Inc., which is the parent company of CNL Investment Company
and CNL Fund Advisors, Inc., is a diversified real estate corporation
organized in 1980 under the laws of the State of Florida. Other subsidiaries
and affiliates of CNL Group, Inc. include a property development and
management company, two investment advisory companies, and six corporations
organized as strategic business units. James M. Seneff, Jr., an individual
General Partner of the Partnership, is the Chairman of the Board, Chief
Executive Officer, and a director of CNL Group, Inc. Mr. Seneff and his wife
own all of the outstanding shares of CNL Group, Inc.
The following persons serve as operating officers of CNL Group, Inc. or
its affiliates or subsidiaries in the discretion of the Boards of Directors of
those companies, but, except as specifically indicated, do not serve as
members of the Boards of Directors of those entities. The Boards of Directors
have the responsibility for creating and implementing the policies of
CNL Group, Inc. and its affiliated companies.
John T. Walker, age 37, joined CNL Group, Inc. in September 1994, as
Senior Vice President, responsible for Research and Development. He currently
serves as the Chief Operating Officer and Executive Vice President of CNL Fund
Advisors, Inc. and CNL American Properties Fund, Inc. From May 1992 to May
1994, he was Executive Vice President for Finance and Administration and Chief
Financial Officer of Z Music, Inc., a television network which was
subsequently acquired by Gaylord Entertainment, where he was responsible for
overall financial and administrative management and planning. From January
1990 through April 1992, Mr. Walker was Chief Financial Officer of the First
Baptist Church in Orlando, Florida. From April 1984 through December 1989, he
was a partner in the accounting firm of Chastang, Ferrell & Walker, P.A.,
where he was the partner in charge of audit and consulting services, and from
1981 to 1984, Mr. Walker was a Senior Consultant/Audit Senior at Price
Waterhouse. Mr. Walker is a Cum Laude graduate of Wake Forest University with
a B.S. in Accountancy and is a Certified Public Accountant.
Lynn E. Rose, age 47, a certified public accountant, has served as Chief
Financial Officer and Secretary of CNL Group, Inc. since December 1993, and
served as Controller and Secretary of CNL Group, Inc. from 1987 until December
1993. She has served as Chief Operating Officer of CNL Corporate Services,
Inc. since November 1994. Ms. Rose also has served as Chief Financial Officer
of CNL Institutional Advisors, Inc. since its inception in 1990, a director of
CNL Realty Advisors, Inc. since its inception in 1991, Secretary and Treasurer
of CNL Realty Advisors, Inc. from 1991 to February 1996, Secretary and
Treasurer of Commercial Net Lease Realty, Inc. from 1992 to February 1996,
Secretary of CNL Income Fund Advisors, Inc. since its inception in 1994 to
December 1995, and Secretary and Treasurer of CNL Fund Advisors, Inc. since
its inception in 1994. Ms. Rose also has served as Chief Financial Officer,
Secretary and Treasurer of CNL American Properties Fund, Inc. since its
inception in 1994. In addition, Ms. Rose oversees the management information
services, administration, legal compliance, accounting, tenant compliance, and
reporting for over 200 corporations, partnerships, and joint ventures. Prior
to joining CNL, Ms. Rose was a partner with Robert A. Bourne in the accounting
firm of Bourne & Rose, P.A., Certified Public Accountants. Ms. Rose holds a
B.A. in Sociology from the University of Central Florida and is a registered
financial and operations principal of CNL Securities Corp. She was licensed as
a Certified Public Accountant in 1979.
Jeanne A. Wall, age 37, has served as Chief Operating Officer of
CNL Investment Company and of CNL Securities Corp. since November 1994 and
previously served as Executive Vice President of CNL Investment Company since
January 1991. In 1984, Ms. Wall joined CNL Securities Corp. as its Partnership
Administrator. In 1985, Ms. Wall became Vice President of CNL Securities
Corp. and, in 1987, she became a Senior Vice President of CNL Securities Corp.
In this capacity, Ms. Wall serves as national marketing director and oversees
the national marketing plan for the CNL investment programs. In addition, Ms.
Wall oversees the partnership administration and investor services for
programs offered through participating brokers. Ms. Wall also has served as
Senior Vice President of CNL Institutional Advisors, Inc., a registered
investment advisor, from 1990 to 1993, as Vice President of CNL Realty
Advisors, Inc. since its inception in 1991, as Vice President of Commercial
Net Lease Realty, Inc. since 1992, as Executive Vice President of CNL Income
Fund Advisors, Inc. from its inception in 1994 to December 1995, as Executive
Vice President of CNL Fund Advisors, Inc. since its inception in 1994, and as
Executive Vice President of CNL American Properties, Inc. since its inception
in 1994. Ms. Wall holds a B.A. in Business Administration from Linfield
College and is a registered principal of CNL Securities Corp. Ms. Wall
currently serves as a trustee on the board of the Investment Program
Association and on the Direct Participation Program committee for the National
Association of Securities Dealers (NASD).
ITEM 11. EXECUTIVE COMPENSATION
Other than as described in Item 13, the Partnership has not paid and
does not intend to pay any executive compensation to the General Partners or
any of their affiliates. There are no compensatory plans or arrangements
regarding termination of employment or change of control.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of February 29, 1996, no person was known to the Registrant to be a
beneficial owner of more than five percent of the Units.
The following table sets forth, as of February 29, 1996, the beneficial
ownership interests of the General Partners in the Registrant.
Title of Class Name of Partner Percent of Class
-------------- --------------- ----------------
General Partnership Interests James M. Seneff, Jr. 45%
Robert A. Bourne 45%
CNL Realty Corporation 10%
----
100%
====
Neither the General Partners, nor any of their affiliates, owns any
interest in the Registrant, except as noted above. There are no arrangements
which at a subsequent date may result in a change in control of the
Registrant.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The table below summarizes the types, recipients, methods of computation
and amounts of compensation, fees and distributions paid or payable by the
Partnership to the General Partners and their affiliates for the year ended
December 31, 1995, exclusive of any distributions to which the General
Partners or their affiliates may be entitled by reason of their purchase and
ownership of Units.
Amount Incurred
Type of Compensation For the Year
and Recipient Method of Computation Ended December 31, 1995
-------------------- --------------------- -----------------------
Reimbursement to Operating expenses are Operating expenses
affiliates for reimbursed at the incurred on behalf
operating expenses lower of cost or 90 of the Partnership:
percent of the $50,300
prevailing rate at
which comparable Accounting and
services could have administrative
been obtained in the services: $58,543
same geographic area.
If the General
Partners or their
affiliates loan funds
to the Partnership,
the General Partners
or their affiliates
will be reimbursed for
the interest and fees
charged to them by
unaffiliated lenders
for such loans.
Affiliates of the
General Partners from
time to time incur
certain operating
expenses on behalf of
the Partnership for
which the Partnership
reimburses the
affiliates without
interest.
Annual, subordinated One-half of one $ - 0 -
property management percent per year of
fee to affiliates Partnership assets
under management
(valued at cost),
subordinated to
certain minimum
returns to the Limited
Partners. The
property management
fee will not exceed
the lesser of one
percent of gross
operating revenues or
competitive fees for
comparable services.
Deferred, subordinated A deferred, $ - 0 -
real estate subordinated real
disposition fee estate disposition
payable to affiliates fee, payable upon sale
of one or more
Properties, in an
amount equal to the
lesser of (i) one-half
of a competitive real
estate commission, or
(ii) three percent of
the sales price of
such Property or
Properties. Payment
of such fee shall be
made only if
affiliates of the
General Partners
provide a substantial
amount of services in
connection with the
sale of a Property or
Properties and shall
be subordinated to
certain minimum
returns to the Limited
Partners.
General Partners' A deferred, $ - 0 -
deferred, sub- subordinated share
ordinated share of equal to one percent
Partnership net cash of Partnership
flow distributions of net
cash flow,
subordinated to
certain minimum
returns to the Limited
Partners.
General Partners' A deferred, $ - 0 -
deferred, sub- subordinated share
ordinated share of equal to five percent
Partnership net sales of Partnership
proceeds from a sale distributions of such
or sales net sales proceeds,
subordinated to
certain minimum
returns to the Limited
Partners.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report.
1. Financial Statements
Report of Independent Accountants
Balance Sheets at December 31, 1995 and 1994
Statements of Income for the years ended December 31, 1995, 1994
and 1993
Statements of Partners' Capital for the years ended December 31,
1995, 1994 and 1993
Statements of Cash Flows for the years ended December 31, 1995,
1994 and 1993
Notes to Financial Statements
2. Financial Statement Schedules
Schedule II - Valuation and Qualifying Accounts for the years
ended December 31, 1995, 1994 and 1993
Schedule III - Real Estate and Accumulated Depreciation at
December 31, 1995
Notes to Schedule III - Real Estate and Accumulated Depreciation
at December 31, 1995
All other Schedules are omitted as the required information is
inapplicable or is presented in the financial statements or notes
thereto.
3. Exhibits
3.1 Certificate of Limited Partnership of CNL Income Fund, Ltd., as
amended. (Included as Exhibit 3.1 to Amendment No. 1 to
Registration Statement No. 33-2850 on Form S-11 and incorporated
herein by reference.)
3.2 Amended and Restated Certificate and Agreement of Limited
Partnership of CNL Income Fund, Ltd. (Included as Exhibit 3.2 to
Form 10-K filed with the Securities and Exchange Commission on
April 7, 1992, and incorporated herein by reference.)
4.1 Certificate of Limited Partnership of CNL Income Fund, Ltd., as
amended. (Included as Exhibit 4.1 to Amendment No. 1 to
Registration Statement No. 33-2850 on Form S-11 and incorporated
herein by reference.)
4.2 Form of Amended and Restated Certificate and Agreement of Limited
Partnership of CNL Income Fund, Ltd. (Included as Exhibit 3.2 to
Form 10-K filed with the Securities and Exchange Commission on
April 7, 1992, and incorporated herein by reference.)
10.1 Property Management Agreement. (Included as Exhibit 10.1 to Form
10-K filed with the Securities and Exchange Commission on April 7,
1992, and incorporated herein by reference.)
10.2 Assignment of Property Management Agreement from CNL Investment
Company to CNL Income Fund Advisors, Inc. (Included as Exhibit
10.2 to Form 10-K filed with the Securities and Exchange
Commission on March 30, 1995 and incorporated herein by
reference.)
10.3 Assignment of Property Management Agreement from CNL Income Fund
Advisors, Inc. to CNL Fund Advisors, Inc. (Filed herewith.)
(b) The Registrant filed no reports on Form 8-K during the period from
October 1, 1995 through December 31, 1995.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized, on the 22nd day
of March, 1996.
CNL INCOME FUND, LTD.
By: CNL REALTY CORPORATION
General Partner
/s/ Robert A. Bourne
---------------------------
ROBERT A. BOURNE, President
By: ROBERT A. BOURNE
General Partner
/s/ Robert A. Bourne
---------------------------
ROBERT A. BOURNE
By: JAMES M. SENEFF, JR.
General Partner
/s/ James M. Seneff, Jr.
---------------------------
JAMES M. SENEFF, JR.
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Robert A. Bourne President, Treasurer and March 22, 1996
- ----------------------- Director (Principal
Robert A. Bourne Financial and Accounting
Officer)
/s/ James M. Seneff, Jr. Chief Executive Officer March 22, 1996
- ----------------------- and Director (Principal
James M. Seneff, Jr. Executive Officer)
CNL INCOME FUND, LTD.
(A Florida Limited Partnership)
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
-----------------------------------------------
Years Ended December 31, 1995, 1994 and 1993
Additions
----------------------
Balance at Charged to Charged To Balance
Beginning Costs and Other at End
Year Description of Year Expenses Accounts Deductions of Year
- ---- ----------- ---------- ---------- ---------- ---------- --------
1993 Allowance
for
doubtful
accounts (a) $ - $ - $ 471(b) $ - $ 471
======= ======= ======= ======= ========
1994 Allowance
for
doubtful
accounts (a) $ 471 $ 4,260 $95,484(b) $ 471(c) $ 99,744
======= ======= ======= ======= ========
1995 Allowance
for
doubtful
accounts (a) $99,744 $ - $22,392(b) $ - $122,136
======= ======= ======= ======= ========
(a) Deducted from receivables on the balance sheet.
(b) Reduction of rental and other income.
(c) Amounts written off as uncollectible.
CNL INCOME FUND, LTD.
(A Florida Limited Partnership)
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
-------------------------------------------------------
December 31, 1995
(A) (B) (C) (D) (E)
Costs Capitalized
Initial Cost Subsequent
To Partnership To Acquisition
----------------------- ------------------
Buildings
Encum- and Improve- Carrying
brances Land Improvements ments Costs
------- ---------- ------------ -------- --------
Properties the Partnership
has Invested in:
Golden Corral Family
Steakhouse Restau-
rants:
Virginia Beach, VA - $ 340,125 $ 580,432 $ - $ -
Kent Island, MD - 140,703 637,826 - -
Salisbury, MD - 263,217 532,213 - -
Jasper, AL (d) - 220,665 473,818 - -
Eunice, LA - 186,009 477,947 - -
Pizza Hut Restaurant:
Bowie, TX - 26,958 106,042 13,622 -
Popeyes Famous Fried
Chicken Restaurants:
Kissimmee, FL - 239,934 266,628 - -
Merritt Island, FL - 248,564 303,406 - -
Wendy's Old Fashioned
Hamburger Restaurants:
Mesa, AZ - 440,339 328,579 - -
Oklahoma City, OK - 278,878 393,423 20,000 -
Stockbridge, GA - 282,482 363,008 - -
Mesquite, TX - 443,956 456,983 - -
Casa Grande, AZ - 305,869 391,563 7,255 -
Payson, AZ - 391,076 427,218 - -
Other:
Angleton, TX - 162,107 447,511 1,572 -
---------- ---------- -------- --------
$3,970,882 $6,186,597 $ 42,449 $ -
========== ========== ======== ========
Properties of Joint Ventures
in Which the Partnership
has a 50% Interest:
Burger King Restaurant:
Orlando, FL - $ 291,159 $ 695,033 $ - $ -
Pizza Hut Restaurant:
Orlando, FL - 206,575 234,064 - -
Wendy's Old Fashioned
Hamburger Restaurant:
Miami, FL - 392,407 397,633 - -
---------- ---------- -------- --------
$ 890,141 $1,326,730 $ - $ -
========== ========== ======== ========
CNL INCOME FUND, LTD.
(A Florida Limited Partnership)
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION - CONTINUED
-------------------------------------------------------------------
December 31, 1995
(F) (G) (H) (I)
Gross Amount at Which Carried
at Close of Period (c)
-----------------------------------
Buildings
and Accumulated
Land Improvements Total Depreciation
---------- ------------ ----------- ------------
Properties the Partnership
has Invested in:
Golden Corral Family
Steakhouse Restau-
rants:
Virginia Beach, VA $ 340,125 $ 580,432 $ 920,557 $ 178,966
Kent Island, MD 140,703 637,826 778,529 193,120
Salisbury, MD 263,217 532,213 795,430 162,621
Jasper, AL (d) 220,665 473,818 694,483 143,462
Eunice, LA 186,009 477,947 663,956 143,384
Pizza Hut Restaurant:
Bowie, TX 29,683 116,939 146,622 31,319
Popeyes Famous Fried
Chicken Restaurants:
Kissimmee, FL 239,934 266,628 506,562 80,729
Merritt Island, FL 248,564 303,406 551,970 91,865
Wendy's Old Fashioned
Hamburger Restaurants:
Mesa, AZ 440,339 328,579 768,918 103,137
Oklahoma City, OK 278,878 413,423 692,301 126,686
Stockbridge, GA 282,482 363,008 645,490 113,944
Mesquite, TX 443,956 456,983 900,939 142,172
Casa Grande, AZ 305,869 398,818 704,687 120,480
Payson, AZ 391,076 427,218 818,294 129,352
Other:
Angleton, TX 162,107 449,083 611,190 139,831
---------- ---------- ----------- ----------
$3,973,607 $6,226,321 $10,199,928 $1,901,068
========== ========== =========== ==========
Properties of Joint Ventures
in Which the Partnership
has a 50% Interest:
Burger King Restaurant:
Orlando, FL $ 291,159 $ 695,033 $ 986,192 $ 216,371
Pizza Hut Restaurant:
Orlando, FL 206,575 234,064 440,639 74,770
Wendy's Old Fashioned
Hamburger Restaurant:
Miami, FL 392,407 397,633 790,040 131,440
---------- ---------- ----------- ----------
$ 890,141 $1,326,730 $ 2,216,871 $ 422,581
========== ========== =========== ==========
CNL INCOME FUND, LTD.
(A Florida Limited Partnership)
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION - CONTINUED
-------------------------------------------------------------------
December 31, 1995
(J) (K) (L)
Life
on Which
Depreciation
in Latest
Date Income
of Con- Date Statement is
struction Acquired Computed
--------- -------- ------------
Properties the Partnership
has Invested in:
Golden Corral Family
Steakhouse Restau-
rants:
Virginia Beach, VA 1986 10/86 (b)
Kent Island, MD 1986 12/86 (b)
Salisbury, MD 1986 12/86 (b)
Jasper, AL (d) 1986 12/86 (b)
Eunice, LA 1987 01/87 (b)
Pizza Hut Restaurant:
Bowie, TX 1976 12/87 (b)
Popeyes Famous Fried
Chicken Restaurants:
Kissimmee, FL 1981 12/86 (b)
Merritt Island, FL 1983 12/86 (b)
Wendy's Old Fashioned
Hamburger Restaurants:
Mesa, AZ 1986 08/86 (b)
Oklahoma City, OK 1986 08/86 (b)
Stockbridge, GA 1986 08/86 (b)
Mesquite, TX 1986 09/86 (b)
Casa Grande, AZ 1986 12/86 (b)
Payson, AZ 1986 12/86 (b)
Other:
Angleton, TX 1986 09/86 (b)
Properties of Joint Ventures
in Which the Partnership
has a 50% Interest:
Burger King Restaurant:
Orlando, FL 1986 11/86 (b)
Pizza Hut Restaurant:
Orlando, FL 1986 06/86 (b)
Wendy's Old Fashioned
Hamburger Restaurant:
Miami, FL 1987 06/86 (b)
CNL INCOME FUND, LTD.
(A Florida Limited Partnership)
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
----------------------------------------------------------------
December 31, 1995
(a) Transactions in real estate and accumulated depreciation during 1995,
1994 and 1993, are summarized as follows:
Accumulated
Cost Depreciation
----------- ------------
Properties the Partnership
has Invested in:
Balance, December 31, 1992 $11,111,618 $ 1,359,162
Depreciation expense - 222,466
----------- -----------
Balance, December 31, 1993 11,111,618 1,581,628
Dispositions (911,690) (107,084)
Depreciation expense - 218,827
----------- -----------
Balance, December 31, 1994 10,199,928 1,693,371
Depreciation expense - 207,697
----------- -----------
Balance, December 31, 1995 $10,199,928 $ 1,901,068
=========== ===========
Properties of Joint Ventures
in Which the Partnership
has a 50% Interest:
Balance, December 31, 1992 $ 2,216,871 $ 289,909
Depreciation expense - 44,224
----------- -----------
Balance, December 31, 1993 2,216,871 334,133
Depreciation expense - 44,224
----------- -----------
Balance, December 31, 1994 2,216,871 378,357
Depreciation expense - 44,224
----------- -----------
Balance, December 31, 1995 $ 2,216,871 $ 422,581
=========== ===========
(b) Depreciation expense is computed for buildings and improvements based
upon estimated lives of 30 years.
(c) As of December 31, 1995, the aggregate cost of the Properties owned by
the Partnership and joint ventures for federal income tax purposes was
$10,197,188 and $2,213,606, respectively. All of the leases are
treated as operating leases for federal income tax purposes.
(d) The tenant of this property, Golden Corral Corporation, has subleased
this property to a local, independent restaurant. Golden Corral
Corporation continues to be responsible for complying with all the
terms of the lease agreement and is continuing to pay rent on this
property to the Partnership.
EXHIBITS
EXHIBIT INDEX
Exhibit Number Page
-------------- ----
3.1 Certificate of Limited Partnership of CNL Income
Fund, Ltd., as amended. (Included as Exhibit
3.1 to Amendment No. 1 to Registration Statement
No. 33-2850 on Form S-11 and incorporated herein
by reference.)
3.2 Amended and Restated Certificate and Agreement
of Limited Partnership of CNL Income Fund, Ltd.
(Included as Exhibit 3.2 to Form 10-K filed with
the Securities and Exchange Commission on April
7, 1992, and incorporated herein by reference.)
4.1 Certificate of Limited Partnership of CNL Income
Fund, Ltd., as amended. (Included as Exhibit
4.1 to Amendment No. 1 to Registration Statement
No. 33-2850 on Form S-11 and incorporated herein
by reference.)
4.2 Form of Amended and Restated Certificate and
Agreement of Limited Partnership of CNL Income
Fund, Ltd. (Included as Exhibit 3.2 to Form 10-
K filed with the Securities and Exchange
Commission on April 7, 1992, and incorporated
herein by reference.)
10.1 Property Management Agreement. (Included as
Exhibit 10.1 to Form 10-K filed with the
Securities and Exchange Commission on April 7,
1992, and incorporated herein by reference.)
10.2 Assignment of Property Management Agreement from
CNL Investment Company to CNL Income Fund
Advisors, Inc. (Included as Exhibit 10.2 to Form
10-K filed with the Securities and Exchange
Commission on March 30, 1995 and incorporated
herein by reference.)
10.3 Assignment of Property Management Agreement from
CNL Income Fund Advisors, Inc. to CNL Fund
Advisors, Inc. (Filed herewith.)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the balance
sheet of CNL Income Fund, Ltd. at December 31, 1995, and its statement of income
for the year then ended and is qualified in its entirety by reference to the
Form 10-K of CNL Income Fund, Ltd. for the year ended December 31, 1995.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 271,575
<SECURITIES> 0
<RECEIVABLES> 151,279
<ALLOWANCES> 122,136
<INVENTORY> 0
<CURRENT-ASSETS> 304,533
<PP&E> 10,199,928
<DEPRECIATION> 1,901,068
<TOTAL-ASSETS> 9,668,878
<CURRENT-LIABILITIES> 441,926
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 9,226,952
<TOTAL-LIABILITY-AND-EQUITY> 9,668,878
<SALES> 0
<TOTAL-REVENUES> 1,177,593
<CGS> 0
<TOTAL-COSTS> 328,465
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 962,102
<INCOME-TAX> 0
<INCOME-CONTINUING> 962,102
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 962,102
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
ASSIGNMENT
THIS ASSIGNMENT made this 1st day of October, 1995 by and between CNL
INCOME FUND ADVISORS, INC., a Florida corporation ("Assignor") and CNL FUND
ADVISORS, INC., a Florida corporation ("Assignee").
WITNESSETH:
WHEREAS, the CNL Investment Company entered into that certain Property
Management Agreement, dated April 9, 1986 with CNL Income Fund, Ltd.
("Agreement"); and
WHEREAS, CNL Investment Company assigned its rights, duties and
obligations under the Agreement to Assignor by Assignment dated January 1,
1995; and
WHEREAS, the Assignor desires to assign its rights, duties and
obligations under the Agreement to Assignee, and Assignee desires to accept
such assignment and assume Assignors duties and obligations under the
Agreement, as assigned.
NOW, THEREFORE, the parties agree as follows:
1. ASSIGNMENT. Assignor hereby assigns and transfers to Assignee, all
of Assignor's rights, title and interest in, to, and under the Agreement as
assigned. Any funds or property of CNL Income Fund, Ltd. in Assignor's
possession shall be, or have been, delivered to Assignee upon the full
execution of this Assignment.
2. ACCEPTANCE AND ASSUMPTION. Assignee hereby accepts the
foregoing assignment and further hereby assumes and agrees to perform, from
and after October 1, 1995, all duties, obligations and responsibilities of the
property manager arising under the Agreement.
3. REPRESENTATIONS.
(a) Assignor hereby represents and warrants to Assignee:
(i) that the Agreement is in full force and effect;
(ii) that Assignor has fully performed all of its duties
under the Agreement through the date of this
Assignment;
(iii) that Assignor has no notice or knowledge of any claim,
cost, or liability (other than as specifically
contemplated under the Agreement, all of which have
been satisfied or discharged) which arose under the
Agreement or which may arise after the date hereof;
and
(iv) that this Assignment has been duly authorized by all
requisite corporate action and has been properly
executed by duly authorized officers of Assignor.
(b) CNL Income Fund, Ltd. hereby represents and warrants to
Assignee that the Agreement is in full force and effect, and that
no defaults or violations of such Agreement exist as of the date
of this Assignment.
IN WITNESS WHEREOF, this Assignment is executed the date above first
written.
ASSIGNOR:
CNL INCOME FUND ADVISORS, INC.,
a Florida corporation
By:
------------------------------
Robert A. Bourne, President
ASSIGNEE:
CNL FUND ADVISORS, INC.,
a Florida corporation
By:
------------------------------
Robert A. Bourne, President
CONSENT AND JOINDER
CNL Income Fund, Ltd. hereby consents to the foregoing Assignment and
joins in such agreement for the purpose of making the representations set
forth in subparagraph 3(b) thereof.
CNL INCOME FUND, LTD., a Florida
limited partnership
By:
------------------------------
Robert A. Bourne, General Partner
