FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number
0-16824
CNL Income Fund II, Ltd.
(Exact name of registrant as specified in its charter)
Florida 59-2733859
(State or other juris- (I.R.S. Employer
diction of incorporation Identification No.)
or organization)
400 E. South Street, #500
Orlando, Florida 32801
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number
(including area code) (407) 422-1574
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Sections 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes X No
<PAGE>
CONTENTS
Part I Page
Item 1. Financial Statements:
Condensed Balance Sheets 1
Condensed Statements of Income 2
Condensed Statements of Partners' Capital 3
Condensed Statements of Cash Flows 4
Notes to Condensed Financial Statements 5-8
Item 2. Management's Discussion and Analysis
of Financial Condition and
Results of Operations 9-13
Part II
Other Information 14
<PAGE>
CNL INCOME FUND II, LTD.
(A Florida Limited Partnership)
CONDENSED BALANCE SHEETS
June 30, December 31,
ASSETS 1997 1996
----------- --------
Land and buildings on operating
leases, less accumulated
depreciation of $3,873,884
and $3,816,091 $16,087,601 $16,803,789
Investment in joint ventures 1,545,465 1,314,386
Mortgage note receivable 42,000 -
Cash and cash equivalents 141,012 318,756
Restricted cash 624,118 -
Receivables, less allowance for
doubtful accounts of $113,498
and $126,036 99,629 99,185
Prepaid expenses 7,256 4,819
Lease costs, less accumulated
amortization of $9,528 and
$7,537 11,035 13,026
Accrued rental income 128,661 117,357
----------- -----------
$18,686,777 $18,671,318
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 4,356 $ 12,188
Accrued construction costs payable - 29,526
Accrued and escrowed real estate
taxes payable 4,072 6,449
Distributions payable 594,000 594,000
Due to related parties 92,544 45,078
Rents paid in advance and deposits 39,871 46,308
----------- -----------
Total liabilities 734,843 733,549
Commitments (Note 7)
Partners' capital 17,951,934 17,937,769
----------- -----------
$18,686,777 $18,671,318
=========== ===========
See accompanying notes to condensed financial statements.
1
<PAGE>
CNL INCOME FUND II, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
-------- -------- ---------- -------
<S> <C>
Revenues:
Rental income from
operating leases $517,524 $556,961 $1,044,384 $1,112,675
Contingent rental income - 13,556 - 14,639
Interest and other
income 9,237 6,211 16,945 10,458
-------- -------- ---------- ----------
526,761 576,728 1,061,329 1,137,772
-------- -------- ---------- ----------
Expenses:
General operating and
administrative 29,717 34,613 59,729 74,082
Bad debt expense 18,033 - 18,033 -
Professional services 6,335 3,179 10,350 12,683
Real estate taxes - 2,680 399 2,680
State and other taxes 203 151 10,403 4,255
Depreciation and
amortization 104,661 105,399 210,548 210,798
-------- -------- ---------- ----------
158,949 146,022 310,322 304,498
-------- -------- ---------- ----------
Income Before Equity in
Earnings of Joint
Ventures and Gain on Sale
of Land and Building 367,812 430,706 751,007 833,274
Equity in Earnings of
Joint Ventures 33,050 37,590 292,907 74,341
Gain on Sale of Land and
Building 158,251 - 158,251 -
-------- -------- ---------- ---------
Net Income $559,113 $468,296 $1,202,165 $ 907,615
======== ======== ========== ==========
Allocation of Net Income:
General partners $ 5,516 $ 4,683 $ 11,947 $ 9,076
Limited partners 553,597 463,613 1,190,218 898,539
-------- -------- ---------- ----------
$559,113 $468,296 $1,202,165 $ 907,615
======== ======== ========== ==========
Net Income Per Limited
Partner Unit $ 11.07 $ 9.27 $ 23.80 $ 17.97
======== ======== ========== ==========
Weighted Average Number
of Limited Partner Units
Outstanding 50,000 50,000 50,000 50,000
======== ======== ========== ==========
</TABLE>
See accompanying notes to condensed financial statements.
2
<PAGE>
CNL INCOME FUND II, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF PARTNERS' CAPITAL
<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, December 31,
1997 1996
---------------- --------
<S> <C>
General partners:
Beginning balance $ 342,375 $ 323,705
Net income 11,947 18,670
----------- -----------
354,322 342,375
----------- -----------
Limited partners:
Beginning balance 17,595,394 18,123,103
Net income 1,190,218 1,848,291
Distributions ($23.76 and
$47.52 per limited partner
unit, respectively) (1,188,000) (2,376,000)
----------- -----------
17,597,612 17,595,394
----------- -----------
Total partners' capital $17,951,934 $17,937,769
=========== ===========
</TABLE>
See accompanying notes to condensed financial statements.
3
<PAGE>
CNL INCOME FUND II, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended
June 30,
1997 1996
----------- -------
<S> <C>
Increase (Decrease) in Cash and Cash
Equivalents:
Net Cash Provided by Operating
Activities $ 1,041,712 $ 1,164,486
----------- -----------
Cash Flows from Investing
Activities:
Proceeds from sale of land
and building 623,882 -
Additions to land and buildings
on operating leases (29,526) -
Increase in restricted cash (623,882) -
Payment of lease costs (1,930) (1,930)
----------- -----------
Net cash used in investing
activities (31,456) (1,930)
----------- -----------
Cash Flows from Financing
Activities:
Proceeds from loans from
corporate general partner 371,000 45,900
Repayment of loans from
corporate general partner (371,000) (45,900)
Distributions to limited
partners (1,188,000) (1,188,000)
----------- -----------
Net cash used in financing
activities (1,188,000) (1,188,000)
----------- -----------
Net Decrease in Cash and Cash
Equivalents (177,744) (25,444)
Cash and Cash Equivalents at Beginning
of Period 318,756 360,062
----------- -----------
Cash and Cash Equivalents at End of
Period $ 141,012 $ 334,618
=========== ===========
Supplemental Schedule of Non-Cash
Investing and Financing Activities:
Mortgage note accepted in exchange
for sale of land and building $ 42,000 $ -
=========== ==========
Distributions declared and unpaid
at end of period $ 594,000 $ 594,000
=========== ===========
</TABLE>
See accompanying notes to condensed financial statements.
4
<PAGE>
CNL INCOME FUND II, LTD.
(A Florida Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS
Quarters and Six Months Ended June 30, 1997 and 1996
1. Basis of Presentation:
The accompanying unaudited condensed financial statements have been
prepared in accordance with the instructions to Form 10-Q and do not
include all of the information and note disclosures required by
generally accepted accounting principles. The financial statements
reflect all adjustments, consisting of normal recurring adjustments,
which are, in the opinion of management, necessary to a fair statement
of the results for the interim periods presented. Operating results for
the quarter and six months ended June 30, 1997, may not be indicative
of the results that may be expected for the year ending December 31,
1997. Amounts as of December 31, 1996, included in the financial
statements, have been derived from audited financial statements as of
that date.
These unaudited financial statements should be read in conjunction with
the financial statements and notes thereto included in Form 10-K of CNL
Income Fund II, Ltd. (the "Partnership") for the year ended December
31, 1996.
2. Land and Buildings on Operating Leases:
In June 1997, the Partnership sold its property in Eagan, Minnesota, to
the tenant, for $668,033 and received net sales proceeds of $665,882,
of which $42,000 were in the form of a promissory note, resulting in a
gain of $158,251 for financial reporting purposes. This property was
originally acquired by the Partnership in August 1987 and had a cost of
approximately $601,100, excluding acquisition fees and miscellaneous
acquisition expenses; therefore, the Partnership sold the property for
approximately $64,800 in excess of its original purchase price.
3. Investment in Joint Ventures:
In January 1997, Show Low Joint Venture, in which the Partnership owns
a 64 percent interest, sold its property to the tenant for $970,000,
resulting in a gain to the joint venture of approximately $360,000 for
financial reporting purposes. The property was originally contributed
to Show Low Joint Venture in July 1990 and had a total cost of
approximately $663,500, excluding acquisition fees and miscellaneous
acquisition expenses; therefore, the joint venture sold the property
for approximately $306,500 in excess of its original purchase price.
5
<PAGE>
CNL INCOME FUND II, LTD.
(A Florida Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS - CONTINUED
Quarters and Six Months Ended June 30, 1997 and 1996
3. Investment in Joint Ventures - Continued:
In June 1997, Show Low Joint Venture reinvested $782,413 of the net
sales proceeds in a Darryl's property in Greensboro, North Carolina.
The joint venture expects to distribute the remaining net sales
proceeds to the Partnership and its co-venture partner on a pro-rata
basis.
The following presents the combined, condensed financial information
for all of the Partnership's investments in joint ventures at:
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
<S> <C>
Land and buildings on
operating leases, less
accumulated depreciation $2,346,868 $2,664,752
Net investment in direct
financing leases 521,116 -
Cash 24,223 21,905
Restricted cash 193,965 -
Receivables 647 9,980
Prepaid expenses 298 -
Accrued rental income 75,266 70,782
Other assets - 44,263
Liabilities 20,725 28,558
Partners' capital 3,141,658 2,783,124
Revenues 172,738 363,338
Gain on sale 360,002 -
Net income 493,014 250,026
</TABLE>
The Partnership recognized income totalling $292,907 and $74,341 for
the six months ended June 30, 1997 and 1996, respectively, from these
joint ventures, $33,050 and $37,590 of which was earned for the
quarters ended June 30, 1997 and 1996, respectively.
4. Mortgage Note Receivable:
In connection with the sale in June 1997 of its property in Eagan,
Minnesota, the Partnership accepted a promissory note in the amount of
$42,000. The promissory note bears interest at a rate of 10.50% per
annum, is collateralized by personal property and is being collected in
18 monthly installments of interest only and thereafter, the entire
principal sum shall become due.
6
<PAGE>
CNL INCOME FUND II, LTD.
(A Florida Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS - CONTINUED
Quarters and Six Months Ended June 30, 1997 and 1996
5. Restricted Cash:
As of June 30, 1997, the net cash sales proceeds of $623,882 from the
sale of the property in Eagan, Minnesota, plus accrued interest of
$236, were being held in an interest-bearing escrow account pending the
release of funds by the escrow agent to acquire an additional property
on behalf of the Partnership.
6. Concentration of Credit Risk:
The following schedule presents total rental income from individual
lessees, each representing more than ten percent of the Partnerships'
total rental income (including the Partnership's share of rental income
from joint ventures and the property held as tenants-in-common with an
affiliate) for at least one of the quarters ended June 30:
<TABLE>
<CAPTION>
1997 1996
-------- ------
<S> <C>
Golden Corral Corporation $194,736 $193,612
Restaurant Management Services,
Inc. 114,219 114,219
</TABLE>
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 and the property held as
tenants-in-common with an affiliate) for at least one of the quarters
ended June 30:
<TABLE>
<CAPTION>
1997 1996
-------- ------
<S> <C>
Wendy's Old Fashioned
Hamburger Restaurants $213,939 $210,297
Golden Corral Family
Steakhouse Restaurants 194,736 193,612
KFC 138,945 175,011
Denny's 122,728 199,314
Popeyes Famous Fried
Chicken Restaurants 114,219 114,219
</TABLE>
Although the Partnership's properties are geographically diverse
throughout the United States and the Partnership's lessees operate a
variety of restaurant concepts, default by 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.
7
<PAGE>
CNL INCOME FUND II, LTD.
(A Florida Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS - CONTINUED
Quarters and Six Months Ended June 30, 1997 and 1996
7. Commitments:
In February 1997, the Partnership entered into a sales contract with an
unrelated third party to sell the Denny's property in Plant City,
Florida. In addition, in June 1997, the Partnership entered into a
sales contract with an unrelated third party to sell the KFC property
in Jacksonville, Florida. The sale of these properties had not occurred
as of June 30, 1997.
8. Subsequent Event:
In July 1997, the Partnership entered into a promissory note with the
corporate general partner for a loan in the amount of $350,000 in
connection with the operations of the Partnership. The loan is
uncollateralized, non-interest bearing and due on demand.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
CNL Income Fund II, Ltd. (the "Partnership") is a Florida limited
partnership that was organized on November 13, 1986, to acquire for cash, either
directly or through joint venture arrangements, both newly constructed and
existing restaurant properties, as well as land upon which restaurants were to
be constructed, which are leased primarily to operators of national and regional
fast-food restaurant chains (collectively, the "Properties"). The leases
generally are triple-net leases, with the lessees responsible for all repairs
and maintenance, property taxes, insurance and utilities. As of June 30, 1997,
the Partnership owned 39 Properties, including three Properties owned by joint
ventures in which the Partnership is a co-venturer and one Property owned with
an affiliate as tenants-in-common.
Liquidity and Capital Resources
The Partnership's primary source of capital for the six months ended
June 30, 1997 and 1996, was cash from operations (which includes cash received
from tenants, distributions from joint ventures, and interest and other income
received, less cash paid for expenses). Cash from operations was $1,041,712 and
$1,164,486 for the six months ended June 30, 1997 and 1996, respectively. The
decrease in cash from operations for the six months ended June 30, 1997, as
compared with the six months ended June 30, 1996, is primarily a result of
changes in the Partnership's working capital.
Other sources and uses of capital included the following during the six
months ended June 30, 1997.
In June 1997, the Partnership sold its Property in Eagan, Minnesota, to
the tenant, for $668,033 and received net sales proceeds of $665,882, of which
$42,000 were in the form of a promissory note, resulting in a gain of $158,251
for financial reporting purposes. This Property was originally acquired by the
Partnership in August 1987 and had a cost of approximately $601,100, excluding
acquisition fees and miscellaneous acquisition expenses; therefore, the
Partnership sold the Property for approximately $64,800 in excess of its
original purchase price. As of June 30, 1997, the net cash sales proceeds of
$623,882 plus accrued interest of $236, were being held in an interest-bearing
escrow account pending the release of funds by the escrow agent to acquire an
additional Property. The general partners believe that the transaction, or a
portion thereof, relating to the sale of the Property in Eagan, Minnesota, and
the reinvestment of the proceeds will be structured to qualify as a like-kind
exchange transaction for federal income tax purposes.
In connection with the sale in June 1997 of its Property in Eagan,
Minnesota, the Partnership accepted a promissory note in the principal sum of
$42,000. The promissory note bears interest at a rate of 10.50% per annum, is
collateralized by personal property and is being collected in 18 monthly
installments of interest only and thereafter, the entire principal sum shall
become due.
9
<PAGE>
Liquidity and Capital Resources - Continued
In January and April 1997, the Partnership entered into promissory
notes with the corporate general partner for loans in the amounts of $147,000
and $224,000, respectively, in connection with the operations of the
Partnership. The loans were uncollateralized, non-interest bearing and due on
demand. As of June 30, 1997, the Partnership had repaid the loans in full to the
corporate general partner. In addition, in July 1997, the Partnership entered
into a promissory note with the corporate general partner for a loan in the
amount of $350,000 in connection with the operations of the Partnership. The
loan is uncollateralized, non-interest bearing and due on demand.
In January 1997, Show Low Joint Venture, in which the Partnership owns
a 64 percent interest, sold its Property to the tenant for $970,000, resulting
in a gain to the joint venture of approximately $360,000 for financial reporting
purposes. The property was originally contributed to Show Low Joint Venture in
July 1990 and had a total cost of approximately $663,500, excluding acquisition
fees and miscellaneous acquisition expenses; therefore, the joint venture sold
the Property for approximately $306,500 in excess of its original purchase
price. In June 1997, Show Low Joint Venture reinvested $782,413 of the net sales
proceeds in a Darryl's Property in Greensboro, North Carolina. The joint venture
expects to distribute the remaining net sales proceeds to the Partnership and
its co-venture partner on a pro-rata basis during July 1997.
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 June 30, 1997, the Partnership had $141,012
invested in such short-term investments, as compared to $318,756 at December 31,
1996. The funds remaining at June 30, 1997, will be used towards the payment of
distributions and other liabilities.
Total liabilities of the Partnership, including distributions payable,
increased to $734,843 at June 30, 1997, from $733,549 at December 31, 1996.
Liabilities at June 30, 1997, to the extent they exceed cash and cash
equivalents at June 30, 1997, will be paid from future cash from operations,
from the loan received from the corporate general partner in July 1997 described
above, and, in the event the general partners elect to make additional capital
contributions or loans to the Partnership, from future general partner capital
contributions or loans.
10
<PAGE>
Liquidity and Capital Resources - Continued
In February 1997, the Partnership entered into a sales contract with an
unrelated third party to sell the Denny's Property in Plant City, Florida. In
addition, in June 1997, the Partnership entered into a sales contract with an
unrelated third party to sell the KFC Property in Jacksonville, Florida. The
sale of these Properties had not occurred as of June 30, 1997. The Partnership
intends to reinvest the net sales proceeds in replacement Properties or use the
funds for other Partnership purposes.
Based on current and anticipated future cash from operations, and the
loan received from the corporate general partner, the Partnership declared
distributions to limited partners of $1,188,000 for each of the six months ended
June 30, 1997 and 1996 ($594,000 for each of the quarters ended June 30, 1997
and 1996). This represents distributions for each applicable six months of
$23.76 per unit ($11.88 per unit for each of the quarters ended June 30, 1997
and 1996). No distributions were made to the general partners for the quarters
and six months ended June 30, 1997 and 1996. No amounts distributed or to be
distributed to the limited partners for the six months ended June 30, 1997 and
1996, 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. The Partnership intends to continue to make
distributions of cash available for distribution to the limited partners on a
quarterly basis.
The Partnership's investment strategy of acquiring Properties for cash
and 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.
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.
Results of Operations
During each of the six months ended June 30, 1997 and 1996, the
Partnership owned and leased 36 wholly owned Properties (including one Property
in Eagan, Minnesota, which was sold in June 1997) to operators of fast-food and
family-style restaurant chains. In connection therewith, during the six months
ended June 30, 1997 and 1996, the Partnership earned $1,044,384 and $1,112,675,
respectively, in rental income from these Properties, $517,524 and $556,961 of
which was earned during the quarters ended June 30, 1997 and 1996, respectively.
Rental income decreased approximately $43,600 and $73,700 during the quarter and
six months ended June 30, 1997, respectively. Approximately $25,600 and $37,600
of the decrease for the quarter and six months ended June 30, 1997,
respectively, resulted from the fact that in February 1997, the Partnership
discontinued billing the former tenant of the Property in Plant City, Florida,
in connection with the sales contract
11
<PAGE>
Results of Operations - Continued
entered into by the Partnership and an unrelated third party, in February 1997,
as discussed above in "Liquidity and Capital Resources." In addition,
approximately $18,000 and $36,100 of the decrease for the quarter and six months
ended June 30, 1997, respectively, resulted from the Partnership increasing its
allowance for doubtful accounts for the Property in Eagan, Minnesota. In June
1997, the Partnership sold this Property, as discussed above in "Liquidity and
Capital Resources" and in connection therewith, the Partnership reversed the
balance of rent receivables relating to this Property and the related allowance
for doubtful accounts.
For the six months ended June 30, 1996, the Partnership also owned and
leased three Properties indirectly through joint venture arrangements and one
Property as tenants-in-common with an affiliate of the general partners and for
the six months ended June 30, 1997, the Partnership owned and leased four
Properties indirectly through joint venture arrangements (including one Property
in Show Low Joint Venture, which was sold in January 1997) and one Property as
tenants-in-common with an affiliate of the general partners. In connection
therewith, during the six months ended June 30, 1997 and 1996, the Partnership
earned $292,907 and $74,341, respectively, attributable to net income earned by
these joint ventures, $33,050 and $37,590 of which was earned during the
quarters ended June 30, 1997 and 1996, respectively. The increase in net income
earned by joint ventures is primarily attributable to the fact that in January
1997, Show Low Joint Venture, in which the Partnership owns a 64 percent
interest, recognized a gain of approximately $360,000 for financial reporting
purposes as a result of the sale of its Property in January 1997, as described
above in "Liquidity and Capital Resources". Show Low Joint Venture reinvested
the majority of the net sales proceeds in an additional property in June 1997.
During the six months ended June 30, 1997, two of the Partnership's
lessees, Golden Corral Corporation and Restaurant Management Services, Inc.,
each contributed more than ten percent of the Partnership's total rental income
(including the Partnership's share of rental income from three Properties owned
by joint ventures and one Property owned with an affiliate as
tenants-in-common). As of June 30, 1997, Golden Corral Corporation was the
lessee under leases relating to five restaurants and Restaurant Management
Services, Inc. was the lessee under leases relating to four restaurants. It is
anticipated that, based on the minimum annual rental payments required by the
leases, Golden Corral Corporation and Restaurant Management Services, Inc. will
continue to contribute more than ten percent of the Partnership's total rental
income during the remainder of 1997 and subsequent years. In addition, five
Restaurant Chains, Golden Corral Family Steakhouse Restaurants, Denny's, KFC,
Popeyes Famous Fried Chicken Restaurants and Wendy's Old Fashioned Hamburger
Restaurants, each accounted for more than ten percent of the Partnership's total
rental income during the six months ended June 30, 1997 (including the
Partnership's share of the rental income from three Properties
12
<PAGE>
Results of Operations - Continued
owned by joint ventures and one Property owned with an affiliate as
tenants-in-common). During the remainder of 1997 and subsequent years, it is
anticipated that these five Restaurant Chains 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, were
$310,322 and $304,498 for the six months ended June 30, 1997 and 1996,
respectively, of which $158,949 and $146,022 were incurred for the quarters
ended June 30, 1997 and 1996, respectively. The increase in operating expenses
during the quarter and six months ended June 30, 1997, as compared to the
quarter and six months ended June 30, 1996, is due to the fact that the
Partnership wrote-off past due rental amounts relating to the Property in Eagan,
Minnesota, in conjunction with the sale of this Property, in June 1997.
As a result of the sale of the Property in Eagan, Minnesota, as
discussed above in "Liquidity and Capital Resources," the Partnership recognized
a gain of $158,251 for financial reporting purposes during the quarter and six
months ended June 30, 1997. No Properties were sold during the quarter and six
months ended June 30, 1996.
13
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings. Inapplicable.
Item 2. Changes in Securities. Inapplicable.
Item 3. Defaults upon Senior Securities. Inapplicable.
Item 4. Submission of Matters to a Vote of Security Holders.
Inapplicable.
Item 5. Other Information. Inapplicable.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits - None.
(b) No reports on Form 8-K were filed during the
quarter ended June 30, 1997.
14
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
DATED this 18th day of July, 1997.
CNL INCOME FUND II, LTD.
By: CNL REALTY CORPORATION
General Partner
By: /s/ James M. Seneff, Jr.
------------------------------
JAMES M. SENEFF, JR.
Chief Executive Officer
(Principal Executive Officer)
By: /s/ Robert A. Bourne
-------------------------------
ROBERT A. BOURNE
President and Treasurer
(Principal Financial and
Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary finanical information extracted from the balance
sheet of CNL Income Fund II, Ltd. at June 30, 1997, and its statement of income
fund for the six months then ended and is qualified in its entirety by reference
to the Form 10Q of CNL Income Fund II, Ltd. for the six months ended June 30,
1997.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 765,130
<SECURITIES> 0
<RECEIVABLES> 213,127
<ALLOWANCES> 113,498
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 19,961,485
<DEPRECIATION> 3,873,884
<TOTAL-ASSETS> 18,686,777
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 17,951,934
<TOTAL-LIABILITY-AND-EQUITY> 18,686,777
<SALES> 0
<TOTAL-REVENUES> 1,061,329
<CGS> 0
<TOTAL-COSTS> 292,289
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 18,033
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,202,165
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,202,165
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,202,165
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>Due to the nature of its industry, CNL Income Fund II, LTD has an unclassified
balance sheet, therefore, no values are shown above for current assets and
current liabilities.
</FN>
</TABLE>
