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, 1996
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 0-19144
CNL INCOME FUND VI, LTD.
(Exact name of registrant as specified in its charter)
Florida 59-2922954
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or 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 value for such Units. Each Unit was originally sold at $500 per Unit.
DOCUMENTS INCORPORATED BY REFERENCE:
None
<PAGE>
PART I
Item 1. Business
CNL Income Fund VI, Ltd. (the "Registrant" or the "Partnership") is a
limited partnership which was organized pursuant to the laws of the State of
Florida on August 17, 1988. 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 June 8, 1989, the Partnership
offered for sale up to $35,000,000 in limited partnership interests (the
"Units") (70,000 Units at $500 per Unit) pursuant to a registration statement on
Form S-11 under the Securities Act of 1933, as amended, effective December 16,
1988. The offering terminated on January 22, 1990, at which date the maximum
offering proceeds of $35,000,000 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 and family-style
restaurant chains (the "Restaurant Chains"). Net proceeds to the Partnership
from its offering of Units, after deduction of organizational and offering
expenses, totalled $30,975,000, and were used to acquire 42 Properties,
including interests in four Properties owned by joint ventures in which the
Partnership is a co-venturer. During the year ended December 31, 1994, the
Partnership sold its Properties in Batesville and Heber Springs, Arkansas, to
the tenant and reinvested the net sales proceeds in a Jack in the Box Property
in Dallas, Texas, and a Jack in the Box Property in Yuma, Arizona, which is
owned as tenants-in-common with an affiliate of the General Partners. In
addition, during the year ended December 31,1995, the Partnership sold its
Property in Little Canada, Minnesota, and reinvested the majority of the net
sales proceeds in a Denny's Property in Broken Arrow, Oklahoma. During the year
ended December 31, 1996, the Partnership reinvested the remaining net sales
proceeds from the sale of the Property in Little Canada, Minnesota, in a
Property located in Clinton, North Carolina, with affiliates of the General
Partners as tenants-in-common. Also, during the year ended December 31, 1996,
the Partnership sold its Property in Dallas, Texas. As a result of the above
transactions, as of December 31, 1996, the Partnership owned 42 Properties,
including interests in four Properties owned by joint ventures in which the
Partnership is a co-venturer and two Properties owned with affiliates as
tenants-in-common. During February 1997, the Partnership reinvested the net
sales proceeds from the sale of the Property in Dallas, Texas, in a Bertucci's
Property located in Marietta, Georgia. 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 purchase 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 some of
the Properties commencing seven to 12 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
the joint ventures in which the Partnership is a co-venturer provide for initial
terms, ranging from five to 20 years (the average being 18 years), and expire
between 1998 and 2015. All 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 $37,900 to
$185,700. Generally, the leases provide for percentage rent based on sales in
excess of a specified amount. In addition, some of the leases provide that,
commencing in the fourth to sixth lease year, the percentage
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rent will be an amount equal to the greater of the percentage rent calculated
under the lease formula or a specified percentage (ranging from one to five
percent) of the purchase price or gross sales.
Generally, the leases of the Properties provide for two, three or four
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 purchase price of the Property, after a specified portion
of the lease term has elapsed.
The leases also generally 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.
During 1991, a restaurant on one of the Partnership's Properties,
Captain D's in Chester, Pennsylvania, ceased operations. In September 1992, the
tenant and a franchisee of a regional Restaurant Chain entered into a sublease
agreement for this Property and operations of the restaurant resumed. During
1994, the franchisee ceased operations of the Property in Chester, Pennsylvania.
The original tenant of the Property will continue to be responsible for
complying with the lease terms. The Partnership agreed to accept reduced rent
for this Property and the Property leased by the same tenant in Orlando,
Florida. The difference between the rent due on these Properties under the lease
agreements and the rent collected for the period December 1, 1992 to March 31,
1996, was deferred. During 1996, the Partnership entered into an agreement with
the tenant to collect these deferred amounts in annual installments through
2002. In conjunction therewith, the tenant began paying full rent in accordance
with the terms of the original lease agreement.
The term of the lease relating to the Property in Liverpool, New York,
was terminated in December 1996. The Partnership is currently seeking a
replacement tenant or purchaser for this Property.
Major Tenants
During 1996, three lessees of the Partnership and its consolidated
joint venture, Golden Corral Corporation, Restaurant Management Services, Inc.
and Mid-America Corporation, each contributed more than ten percent of the
Partnership's total rental income (including rental income from the
Partnership's consolidated joint venture in which the Partnership is a
co-venturer and the Partnership's share of the rental income from the three
Properties owned by unconsolidated joint ventures and two Properties owned with
affiliates as tenants-in-common). As of December 31, 1996, Golden Corral
Corporation was the lessee under leases relating to five restaurants, Restaurant
Management Services, Inc. was the lessee under leases relating to eight
restaurants and Mid-America Corporation was the lessee under leases relating to
four restaurants. It is anticipated that, based on the minimum rental payments
required by the leases, these three lessees each will continue to contribute
more than ten percent of the Partnership's total rental income in 1997 and
subsequent years. In addition, three Restaurant Chains, Golden Corral Family
Steakhouse Restaurants, Hardee's and Burger King, each accounted for more than
ten percent of the Partnership's total rental income in 1996 (including the
Partnership's consolidated joint venture and the Partnership's share of the
rental income from the three Properties owned by unconsolidated joint ventures
in which the Partnership is a co-venturer and two Properties owned with
affiliates as tenants-in-common). In subsequent years, it is anticipated that
these three Restaurant Chains each will continue to account for more than ten
percent of the Partnership's total rental income to which the Partnership is
entitled under the terms of the leases. Any failure of these lessees or
Restaurant Chains could materially affect the Partnership's income. No single
tenant or group of affiliated tenants lease Properties with an aggregate
carrying value, excluding acquisition fees and certain acquisition expenses, in
excess of 20 percent of the total assets of the Partnership.
Joint Venture Arrangements
The Partnership has entered into a joint venture arrangement, Caro
Joint Venture, with an unaffiliated entity to purchase and hold one Property. In
addition, the Partnership has entered into three separate joint venture
arrangements, Auburn Joint Venture, Show Low Joint Venture and Asheville Joint
Venture, with affiliates of the General Partners, to purchase and hold three
Properties through such joint ventures. The joint venture arrangements provide
for the Partnership and its joint venture partners to share in all costs and
benefits associated with the joint
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venture in accordance with their respective percentage interests in the joint
venture. The Partnership and its joint venture partners are jointly and
severally liable for all debts, obligations and other liabilities of the joint
venture.
Each joint venture has an initial term of 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 Caro Joint Venture and shares
management control equally with affiliates of the General Partners for Auburn
Joint Venture, Show Low Joint Venture and Asheville Joint Venture. 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 its 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 Auburn Joint Venture, Show Low Joint
Venture, Caro Joint Venture and Asheville Joint Venture is distributed 3.9%,
36.0%, 66.0% and 14.0%, respectively, to the Partnership and the balance is
distributed to each of the other joint venture partners in accordance with its
respective percentage interest in the joint venture. 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 joint venture
partner's percentage interest in the joint venture.
In addition to the above joint venture agreements, the Partnership
entered into an agreement to hold a Jack in the Box Property as
tenants-in-common with an affiliate of the General Partners. The agreement
provides for the Partnership and the affiliate to share in the profits and
losses of the Property in proportion to each co-venturer's percentage interest.
The Partnership owns a 51.67% interest in this Property.
In addition, in January 1996, the Partnership entered into an agreement
to hold a Golden Corral Property as tenants-in-common with affiliates of the
General Partners. The agreement provides for the Partnership and the affiliates
to share in the profits and losses of the Property in proportion to each
co-venturer's percentage interest. The Partnership owns a 17.93% interest in
this Property.
Certain Management Services
CNL Investment Company, an affiliate of the General Partners, provided
certain services relating to management of the Partnership and its Properties
pursuant to a 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 percent of the sum of gross rental
revenues from Properties wholly owned by the Partnership plus the Partnership's
allocable share of gross revenues of joint ventures in which the Partnership is
a co-venturer and the Property held as tenants-in-common with an affiliate, but
not in excess of competitive fees for comparable services. Under the management
agreement, the management fee is subordinated to receipt by the Limited Partners
of an aggregate, ten percent, cumulative, 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").
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 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 management agreement with the Partnership to CNL Fund Advisors, Inc.
All of the terms and conditions of the management agreement, including the
payment of fees, as described above, remain unchanged.
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The 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, 1996, the Partnership owned, either directly or
through joint venture arrangements, 42 Properties located in 16 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 10,000
to 88,200 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
1,200 to 10,700 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, 1996 (see Item 1. Business -
Major Tenants), are substantially the same as those described in Item 1.
Business - Leases.
Restaurant Management Services leases five Popeyes restaurants, one
Shoney's restaurant, one Church's Fried Chicken restaurant and one other
restaurant (formerly operated as a Captain D's). The initial term of each lease
is 20 years (expiring between 2009 and 2010) and the average minimum base annual
rent is approximately $61,600 (ranging from approximately $46,000 to $121,300).
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Golden Corral Corporation leases four Golden Corral restaurants. The
initial term of each lease is 15 years (expiring between 2004 and 2011) and the
average minimum base annual rent is approximately $152,900 (ranging from
approximately $88,000 to $185,700).
Mid-America Corporation leases four Burger King restaurants. The
initial term of each lease is between 14 and 16 years (expiring between 2004 and
2006) and the average minimum base annual rent is approximately $102,200
(ranging from approximately $100,000 to $103,000).
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 28, 1997, there were 2,997 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 has been $475 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 1996 and 1995 other than
pursuant to the Plan, net of commissions (which ranged from zero to 15.5
percent).
<TABLE>
<CAPTION>
1996 (1) 1995 (1)
---------------------------------- ---------------------------
High Low Average High Low Average
---- --- ------- ---- --- -------
<S> <C>
First Quarter $475 $355 $431 $500 $500 $500
Second Quarter 475 372 456 475 475 475
Third Quarter 475 400 438 485 475 481
Fourth Quarter 416 416 416 475 365 461
</TABLE>
(1) A total of 664 and 1,203 Units were transferred other than pursuant to
the Plan for the years ended December 31, 1996 and 1995, respectively.
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.
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For the years ended December 31, 1996 and 1995, the Partnership
declared cash distributions of $3,220,000 and $3,150,000, respectively, to the
Limited Partners. For the quarter ended December 31, 1996, the Partnership
declared a special distribution to the Limited Partners of $70,000, which
represented cumulative excess operating reserves. No amounts distributed to
partners for the years ended December 31, 1996 and 1995, 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, these distributions were declared at the close
of each of the Partnership's calendar quarters. These amounts include monthly
distributions made in arrears for the Limited Partners electing to receive
distributions on this basis.
Quarter Ended 1996 1995
------------- ---------- ---------
March 31 $787,500 $787,500
June 30 787,500 787,500
September 30 787,500 787,500
December 31 (1) 857,500 787,500
(1) Includes a special distribution to Limited Partners of $70,000, for the
quarter ended December 31, 1996.
The Partnership intends to continue to make distributions of cash
available for distribution to the Limited Partners on a quarterly basis,
although some Limited Partners, in accordance with their election, receive
monthly distributions, for an annual fee.
Item 6. Selected Financial Data
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
------------ ------------ ------------ ------------ -----------
<S> <C>
Year ended December 31:
Revenues (1) $ 3,565,493 $ 3,438,286 $ 3,468,897 $ 3,635,782 $ 3,593,219
Net income (2) 2,803,601 2,861,381 3,095,028 2,955,692 2,886,502
Cash distributions declared (3) 3,220,000 3,150,000 3,150,000 3,150,000 3,150,000
Net income per Unit (2) 39.65 40.47 43.80 41.80 40.82
Cash distributions declared
per Unit (2) 46.00 45.00 45.00 45.00 45.00
At December 31:
Total assets $30,129,286 $30,442,314 $30,754,999 $30,837,521 $30,271,003
Partners' capital 29,044,367 29,460,766 29,749,385 29,804,357 29,998,665
</TABLE>
(1) Revenues include equity in earnings of unconsolidated joint ventures
and minority interest in income of the consolidated joint venture.
(2) Net income for the year ended December 31, 1996, includes provision for
loss on land and building of $77,023. In addition, net income for the
years ended December 31, 1996 and 1995, includes $1,706 and $7,370,
respectively, from a loss on sale of land and buildings. Net income for
the years ended December 31, 1995 and 1994, also includes $103,283 and
$332,664, respectively, from gains on sale of land and buildings.
(3) Distributions for the year ended December 31, 1996, include a special
distribution to the Limited Partners of $70,000, which represented
cumulative excess operating reserves.
The above selected financial data should be read in conjunction with
the financial statements and related notes contained in Item 8 hereof.
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Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The Partnership was organized on August 17, 1988, 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 and family-style 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, 1996, the Partnership owned 42 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, 1996, 1995 and 1994, 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 $3,310,762, $3,222,430
and $3,253,674 for the years ended December 31, 1996, 1995 and 1994,
respectively. The increase in cash from operations during 1996, as compared to
1995, and the decrease during 1995, as compared to 1994, are primarily a result
of changes in income and expenses as discussed in "Results of Operations" below
and changes in the Partnership's working capital during each of the respective
years.
Other sources and uses of capital included the following during the
years ended December 31, 1996, 1995 and 1994.
In May 1994, the Partnership sold its Properties in Batesville and
Heber Springs, Arkansas, for a total of $1,432,178 and received net sales
proceeds of $1,429,481, resulting in a gain for financial reporting purposes of
$332,664. These Properties were originally acquired by the Partnership in
November 1989 and February 1990 and had a combined, total cost of approximately
$1,148,100, excluding acquisition fees and miscellaneous acquisition expenses;
therefore, the Partnership sold the Properties for approximately $281,400 in
excess of their original purchase prices. The sale of these Properties was
structured to qualify as like-kind exchange transactions in accordance with
Section 1031 of the Internal Revenue Code. As a result, no gain or loss was
recognized for federal income tax purposes. Therefore, the Partnership was not
required to distribute any of the net sales proceeds from the sale of these two
Properties to the Limited Partners for the purposes of paying federal and state
income taxes. In June 1994, the Partnership reinvested $846,596 of the net sales
proceeds in a Jack in the Box Property in Dallas, Texas, that was under
construction. Construction was completed in September 1994, and the Partnership
funded additional construction costs of $134,308. In July 1994, the Partnership
reinvested the remaining net sales proceeds in a Jack in the Box Property in
Yuma, Arizona, as tenants-in-common with an affiliate of the General Partners.
In June 1995, the Partnership sold its Property in Little Canada,
Minnesota, for $904,000 and received net sales proceeds of $899,503, resulting
in a gain of $103,283 for financial reporting purposes. This Property was
originally acquired by the Partnership in October 1989 and had a cost of
approximately $823,900, excluding acquisition fees and miscellaneous acquisition
expenses; therefore, the Partnership sold the Property for approximately $75,600
in excess of its original purchase price. In August 1995, the Partnership
reinvested $724,612 in a Property in Broken Arrow, Oklahoma. In addition, in
August 1995, the Partnership sold a small parcel of vacant land adjacent to its
Property in Orlando, Florida, for $7,500, resulting in a loss of $7,370 for
financial reporting purposes. In connection therewith, the Partnership accepted
a promissory note for $6,000. The promissory note was collateralized by a
mortgage on the Property, bore interest at a rate of nine percent per annum and
was scheduled to be collected in six monthly installments of $1,026, with
collections commencing September 1995. Receivables include $3,056 from the note
at December 31, 1995. The receivable was collected in full during 1996.
In January 1996, the Partnership reinvested the remaining net sales
proceeds from the 1995 sale of the Property in Little Canada, Minnesota, in a
Golden Corral Property located in Clinton, North Carolina, with affiliates of
the General Partners as tenants-in-common. In connection therewith, the
Partnership and its affiliates entered into an agreement whereby each
co-venturer will share in the profits and losses of the Property in proportion
to its applicable percentage interest. As of December 31, 1996, the Partnership
owned a 17.93% interest in this property.
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In March 1996, the Partnership entered into an agreement with the
tenant of the Properties in Chester, Pennsylvania, and Orlando, Florida, for
payment of certain rental payment deferrals the Partnership had granted to the
tenant through March 31, 1996. Under the agreement, the Partnership agreed to
abate approximately $42,700 of the rental payment deferral amounts. The tenant
made the first payment of approximately $18,600 in April 1996 in accordance with
the terms of the agreement, and has agreed to pay the Partnership the remaining
balance due of approximately $109,500 in six remaining annual installments
through 2002.
In December 1996, the Partnership sold its Property in Dallas, Texas,
to an unrelated third party for $1,016,000 and received net sales proceeds of
$982,980. This Property was originally acquired by the Partnership in June 1994
and had a cost of approximately $980,900, excluding acquisition fees and
miscellaneous acquisition expenses; therefore, the Partnership sold the Property
for approximately $2,100 in excess of its original purchase price. Due to the
fact that the Partnership had recognized accrued rental income since the
inception of the lease relating to the straight-lining of future scheduled rent
increases in accordance with generally accepted accounting principles, the
Partnership wrote-off the cumulative balance of such accrued rental income at
the time of the sale of this Property, resulting in a loss on land and building
of $1,706 for financial reporting purposes. Due to the fact that the
straight-lining of future rent increases over the term of the lease is a
non-cash accounting adjustment, the write-off of these amounts is a loss for
financial statement purposes only. As of December 31, 1996, the net sales
proceeds of $977,017, plus accrued interest of $739, were being held in an
interest bearing escrow account pending the release of funds by the escrow agent
to acquire an additional Property. The sale of this Property was structured to
qualify as a like-kind exchange transaction in accordance with Section 1031 of
the Internal Revenue Code. As a result, no gain was recognized for federal
income tax purposes. Therefore, the Partnership was not required to distribute
any of the net sales proceeds from the sale of this Property to Limited Partners
for the purposes of paying federal and state income taxes. In February 1997, the
Partnership reinvested the net sales proceeds, along with additional funds, in a
Bertucci's Property located in Marietta, Georgia.
None of the Properties owned by the Partnership or the joint ventures
in which the Partnership owns an interest is or may be encumbered. Under its
Partnership Agreement, the Partnership is prohibited from borrowing for any
purpose; provided, however, that the General Partners or their affiliates are
entitled to reimbursement, at cost, for actual expenses incurred by the General
Partners or their affiliates on behalf 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.
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, 1996, the Partnership had
$1,127,930 invested in such short-term investments as compared to $1,120,999 at
December 31, 1995. The funds remaining at December 31, 1996, after payment of
distributions and other liabilities, will be used to invest in an additional
Property as discussed above and to meet the Partnership's working capital and
other needs.
During 1996, 1995 and 1994, affiliates of the General Partners,
incurred on behalf of the Partnership $96,112, $95,898 and $87,733,
respectively, for certain operating expenses. As of December 31, 1996 and 1995,
the Partnership owed $2,633 and $6,024, respectively, to affiliates for such
amounts and accounting and administrative services. As of February 28, 1997, the
Partnership had reimbursed the affiliates all such amounts. Other liabilities of
the Partnership, including distributions payable, increased to $917,704 at
December 31, 1996, from $822,187 at December 31, 1995. The increase in other
liabilities is primarily attributable to the Partnership accruing a special
distribution payable to the Limited Partners of $70,000 at December 31, 1996,
from excess operating reserves. The General Partners believe that the
Partnership has sufficient cash on hand to meet its current working capital
needs.
Based on cash from operations, and cumulative excess operating reserves
for the year ended December 31, 1996, the Partnership declared distributions to
the Limited Partners of $3,220,000 for the year ended December 31, 1996, and
$3,150,000 for each of the years ended December 31, 1995 and 1994. This
represents distributions of $46 per Unit for the year ended December 31, 1996,
and $45 per Unit for each of the years ended December 31, 1995 and 1994. No
amounts distributed or to be distributed to the Limited Partners for the years
ended December 31, 1996, 1995 and 1994, 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
8
<PAGE>
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, the General Partners have obtained contingent
liability and property coverage for the Partnership. This insurance 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 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 of the Partnership's Properties are 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.
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 1994, the Partnership owned and leased 39 wholly owned
Properties (including two Properties in Batesville and Heber Springs, Arkansas,
which were sold in May 1994), during 1995, the Partnership owned and leased 38
wholly owned Properties (including one Property in Little Canada, Minnesota,
which was sold in June 1995), and during 1996, the Partnership owned and leased
37 wholly owned properties (including one Property in Dallas, Texas, which was
sold in December 1996). In addition, during 1996, 1995 and 1994, the Partnership
was a co-venturer in four separate joint ventures that each owned and leased one
Property, and during 1995 and 1994, the Partnership owned and leased one
Property with an affiliate as tenants-in-common. During 1996, the Partnership
also owned and leased another Property with affiliates as tenants-in-common. As
of December 31, 1996, the Partnership owned, either directly, as
tenants-in-common with affiliates, or through joint venture arrangements, 42
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 $37,900 to $185,700.
Generally, the leases provide for percentage rent based on sales in excess of a
specified amount. In addition, some of the leases provide that, commencing in
the fourth to sixth lease year, the percentage rent will be an amount equal to
the greater of the percentage rent calculated under the lease formula or a
specified percentage (ranging from one to five percent) of the purchase price or
gross sales. 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, 1996, 1995 and 1994, the
Partnership and its consolidated joint venture, Caro Joint Venture, earned
$3,333,665, $3,207,860 and $3,235,244, respectively, in rental income from
operating leases and earned income from direct financing leases. Rental and
earned income increased approximately $43,700 and $33,400 for the years ended
December 31, 1996 and 1995, respectively, due to the acquisition of a Property
located in Broken Arrow, Oklahoma, in August 1995 with the net sales proceeds
from the sale of the Property in Little Canada, Minnesota, in June 1995. The
increase in rental income was partially offset by a decrease of approximately
$6,800 and $83,600, respectively, during the years ended December 31, 1996 and
1995, due to the sale of the Property in Little Canada, Minnesota, in June 1995.
Rental and earned income also increased during the year ended December
31, 1996, as a result of the fact that the Partnership collected and recorded as
income approximately $5,300 in rental payment deferrals for the two Properties
leased by the same tenant in Chester, Pennsylvania, and Orlando, Florida.
Previously, the Partnership had established an allowance for doubtful accounts
for these amounts. These amounts were collected in accordance with the agreement
entered into in March 1996, with the tenant to collect the remaining balance of
the rental payment deferral amounts as discussed above in "Liquidity and Capital
Resources." If such amounts are collected, the
9
<PAGE>
Partnership will reverse the remaining related allowance for doubtful accounts
and record such amounts as income. The increase in rental and earned income
during 1996, as compared to 1995, was partially attributable to, and the
decrease in 1995, as compared to 1994, was partially offset by, the fact that
during the years ended December 31, 1995 and 1994 the Partnership established an
allowance for doubtful accounts of approximately $52,900 and $82,400,
respectively, for rental payment deferral amounts relating to these Properties
deemed uncollectible. No such allowance was established during the year ended
December 31, 1996.
Rental and earned income also decreased in 1995, as compared to 1994,
by approximately $51,700 as a result of the fact that the tenant of the Property
in Hermitage, Tennessee, elected to exercise its option to terminate its lease
with the Partnership effective August 31, 1994, and the fact that the
Partnership had established an allowance for doubtful accounts for rent
receivable amounts relating to this Property. The increase in rental income
during 1996, as compared to 1995, was partially attributable to, and the
decrease in 1995, as compared to 1994, was partially offset by, an increase of
approximately $35,300 and $48,500 during 1996 and 1995, respectively, due to the
fact that in April 1995, the Partnership entered into a new lease for this
Property, for which rent commenced in June 1995.
In addition, rental and earned income decreased by approximately
$56,200 during 1995, as compared to 1994, as a result of the sale of the
Properties in Batesville and Heber Springs, Arkansas, in May 1994. However, the
decrease was partially offset by an increase of approximately $51,800 during
1995, as compared to 1994, due to the reinvestment of a portion of the net sales
proceeds in a Property in Dallas, Texas, in June 1994. This Property was
subsequently sold in December 1996, as discussed above in "Liquidity and Capital
Resources," causing a $6,800 decrease in rental and earned income during 1996,
as compared to 1995.
For the years ended December 31, 1996, 1995 and 1994, the Partnership
also earned $110,073, $115,946 and $150,372, respectively, in contingent rental
income. The decrease in contingent rental income during 1996 and 1995, each as
compared to the prior year, is primarily attributable to decreases in gross
sales relating to certain Properties.
In addition, for the years ended December 31, 1996, 1995 and 1994, the
Partnership earned $97,381, $83,483 and $70,499, respectively, attributable to
net income earned by joint ventures in which the Partnership is a co-venturer.
The increase in net income earned by these joint ventures during 1996, as
compared to 1995, is primarily attributable to the fact that in January 1996,
the Partnership acquired an interest in a Golden Corral Property in Clinton,
North Carolina, with affiliates as tenants-in-common, as described above in
"Liquidity and Capital Resources." The increase in 1995, as compared to 1994, is
primarily attributable to the acquisition in July 1994, of a Property in Yuma,
Arizona, with an affiliate as tenants-in-common.
During the years ended December 31, 1996, 1995 and 1994, three of the
Partnership's lessees, Golden Corral Corporation, Restaurant Management
Services, Inc. and Mid-America Corporation, each contributed more than ten
percent of the Partnership's total rental income (including rental income from
the Partnership's consolidated joint venture and the Partnership's share of the
rental income from the three Properties owned by unconsolidated joint ventures
in which the Partnership is a co-venturer and two Properties owned with
affiliates as tenants-in-common). As of December 31, 1996, Golden Corral
Corporation was the lessee under leases relating to five restaurants, Restaurant
Management Services, Inc. was the lessee under leases relating to eight
restaurants and Mid-America Corporation was the lessee under leases relating to
four restaurants. It is anticipated that, based on the minimum annual rental
payments required by the leases, these three lessees each will continue to
contribute more than ten percent of the Partnership's total rental income during
1997 and subsequent years. In addition, three Restaurant Chains, Golden Corral
Family Steakhouse Restaurants, Hardee's and Burger King, each accounted for more
than ten percent of the Partnership's total rental income in 1996, 1995 and 1994
(including the Partnership's consolidated joint venture and the Partnership's
share of the rental income from the three Properties owned by unconsolidated
joint ventures in which the Partnership is a co-venturer and two Properties
owned with affiliates as tenants-in-common). In subsequent years, it is
anticipated that these three Restaurant Chains each will continue to account for
more than ten percent of the Partnership's total rental income to which the
Partnership is entitled under the terms of the leases. Any failure of these
lessees or Restaurant Chains could materially affect the Partnership's income.
Operating expenses, including depreciation and amortization expense,
were $683,163, $672,818 and $706,533 for the years ended December 31, 1996, 1995
and 1994, respectively. The increase in operating expenses
10
<PAGE>
during 1996, as compared to 1995, was partially a result of, and the decrease
during 1995, as compared to 1994, was partially offset by, an increase in
accounting and administrative expenses associated with operating the Partnership
and its Properties and an increase in 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 in 1995, as compared to 1994, is
partially attributable to the Partnership's establishing an allowance for
doubtful accounts of approximately $43,400 for amounts previously recorded as
income relating to the Properties in Chester, Pennsylvania, and Little Canada,
Minnesota, during the year ended December 31, 1994. In addition, operating
expenses decreased during 1995, as compared to 1994, due to the fact that the
tenant of the Property in Hermitage, Tennessee, elected to exercise its option
to terminate its lease with the Partnership, effective August 31, 1994. In
connection therewith, the Partnership expensed approximately $9,600 in
unamortized lease costs relating to this lease and incurred certain expenses
relating to this Property, such as real estate taxes, during the year ended
December 31, 1994. In April 1995, the Partnership entered into a new lease for
this Property.
Depreciation expense decreased during 1996 and 1995, each as compared
to the prior year, as a result of the sale of the Properties in Dallas, Texas,
in December 1996, and Little Canada, Minnesota, in June 1995.
As a result of the sale of the Property in Dallas, Texas, in December
1996, the Partnership recognized a loss for financial reporting purposes of
$1,706, for the year ended December 31, 1996, as discussed above in "Liquidity
and Capital Resources." In addition, as a result of the sale of the Property in
Little Canada, Minnesota, the Partnership recognized a gain of $103,283, and as
a result of the sale during 1995, of a portion of the land of the Property in
Orlando, Florida, the Partnership recognized a loss of $7,370, for the year
ended December 31, 1995, as discussed above in "Liquidity and Capital
Resources." In addition, as a result of the sale of the Properties in Batesville
and Heber Springs, Arkansas, during 1994, the Partnership recognized a gain of
$332,664 for the year ended December 31, 1994, as discussed above in "Liquidity
and Capital Resources."
In addition, during 1996, the Partnership established an allowance for
loss on land and building for its Property in Liverpool, New York. The allowance
of $77,023, represents the difference between the Property's carrying value at
December 31, 1996, and the sales value of the Property based on an anticipated
sales price of this Property to an interested and unrelated third party.
Effective January 1, 1996 the Partnership adopted 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,
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. Adoption of this standard currently had no material effect on the
Partnership's financial position or results of operations.
The Partnership's leases as of December 31, 1996, are 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 sales of the restaurants and on potential capital
appreciation of the Properties.
Item 8. Financial Statements and Supplementary Data
11
<PAGE>
CNL INCOME FUND VI, LTD.
(A Florida Limited Partnership)
CONTENTS
Page
Report of Independent Accountants 13
Financial Statements:
Balance Sheets 14
Statements of Income 15
Statements of Partners' Capital 16
Statements of Cash Flows 17
Notes to Financial Statements 20
12
<PAGE>
Report of Independent Accountants
To the Partners
CNL Income Fund VI, Ltd.
We have audited the financial statements and the financial statement schedules
of CNL Income Fund VI, 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 VI, Ltd. as of
December 31, 1996 and 1995, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1996 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.
Orlando, Florida
January 30, 1997
13
<PAGE>
CNL INCOME FUND VI, LTD.
(A Florida Limited Partnership)
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
ASSETS 1996 1995
------ ----------- -------
<S> <C>
Land and buildings on operating
leases, less accumulated
depreciation and allowance for
loss on land and building $21,105,355 $22,610,686
Net investment in direct financing
leases 4,659,024 4,727,201
Investment in joint ventures 997,016 867,708
Cash and cash equivalents 1,127,930 1,120,999
Restricted cash 977,756 -
Receivables, less allowance for
doubtful accounts of $115,892
and $194,409 174,983 88,395
Prepaid expenses 1,163 5,250
Lease costs, less accumulated
amortization of $3,691 and
$1,801 14,009 15,899
Accrued rental income, less
allowance for doubtful accounts
of $9,697 and $9,160 1,045,319 979,445
Other assets 26,731 26,731
----------- -----------
$30,129,286 $30,442,314
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 18,161 $ 19,846
Accrued and escrowed real
estate taxes payable 11,338 10,424
Due to related parties 2,633 6,024
Distributions payable 857,500 787,500
Rents paid in advance 30,705 4,417
----------- -----------
Total liabilities 920,337 828,211
Minority interest 164,582 153,337
Partners' capital 29,044,367 29,460,766
----------- -----------
$30,129,286 $30,442,314
=========== ===========
</TABLE>
See accompanying notes to financial statements.
14
<PAGE>
CNL INCOME FUND VI, LTD.
(A Florida Limited Partnership)
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Year Ended December 31,
1996 1995 1994
---------- ---------- -------
<S> <C>
Revenues:
Rental income from operating
leases $2,776,239 $2,738,218 $2,800,034
Earned income from direct
financing leases 557,426 469,642 435,210
Contingent rental income 110,073 115,946 150,372
Interest and other income 49,056 51,130 33,574
---------- ---------- ----------
3,492,794 3,374,936 3,419,190
---------- ---------- ----------
Expenses:
General operating and
administrative 159,388 147,902 107,152
Professional services 32,272 27,741 28,774
Real estate taxes - - 3,359
Bad debt expense - - 45,040
State and other taxes 7,930 6,789 11,962
Depreciation and amortization 483,573 490,386 510,246
---------- ---------- ----------
683,163 672,818 706,533
---------- ---------- ----------
Income Before Minority Interest
in Income of Consolidated
Joint Venture, Equity in
Earnings of Unconsolidated
Joint Ventures, Gain (Loss) on
Sale of Land and Buildings,
and Provision for Loss on
Land and Building 2,809,631 2,702,118 2,712,657
Minority Interest in Income of
Consolidated Joint Venture (24,682) (20,133) (20,792)
Equity in Earnings of Uncon-
solidated Joint Ventures 97,381 83,483 70,499
Gain (Loss) on Sale of Land and
Buildings (1,706) 95,913 332,664
Provision for Loss on Land and
Building (77,023) - -
---------- ---------- ---------
Net Income $2,803,601 $2,861,381 $3,095,028
========== ========== ==========
Allocation of Net Income:
General partners $ 28,337 $ 28,411 $ 28,936
Limited partners 2,775,264 2,832,970 3,066,092
---------- ---------- ----------
$2,803,601 $2,861,381 $3,095,028
========== ========== ==========
Net Income Per Limited Partner
Unit $ 39.65 $ 40.47 $ 43.80
========== ========== ==========
Weighted Average Number of
Limited Partner Units
Outstanding 70,000 70,000 70,000
========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
15
<PAGE>
CNL INCOME FUND VI, LTD.
(A Florida Limited Partnership)
STATEMENTS OF PARTNERS' CAPITAL
Years Ended December 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
General Partners Limited Partners
------------------- ----------------------------------------------------------
Accumu- Accumu-
Contri- lated Contri- Distri- lated Syndication
butions Earnings butions butions Earnings Costs Total
------- -------- ----------- ------------ ----------- ----------- -----------
<S> <C>
Balance, December 31, 1993 $1,000 $117,326 $35,000,000 $(12,914,226) $11,615,257 $(4,015,000) $29,804,357
Distributions to limited
partners ($45.00 per
limited partner unit) - - - (3,150,000) - - (3,150,000)
Net income - 28,936 - - 3,066,092 - 3,095,028
------ -------- ----------- ------------ ----------- ----------- -----------
Balance, December 31, 1994 1,000 146,262 35,000,000 (16,064,226) 14,681,349 (4,015,000) 29,749,385
Distributions to limited
partners ($45.00 per
limited partner unit) - - - (3,150,000) - - (3,150,000)
Net income - 28,411 - - 2,832,970 - 2,861,381
------ -------- ----------- ------------ ----------- ----------- -----------
Balance, December 31, 1995 $1,000 $174,673 $35,000,000 $(19,214,226) $17,514,319 $(4,015,000) $29,460,766
Distributions to limited
partners ($46.00 per
limited partner unit) - - - (3,220,000) - - (3,220,000)
Net income - 28,337 - - 2,775,264 - 2,803,601
------ -------- ----------- ------------ ----------- ----------- -----------
Balance, December 31, 1996 $1,000 $203,010 $35,000,000 $(22,434,226) $20,289,583 $(4,015,000) $29,044,367
====== ======== =========== ============ =========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
16
<PAGE>
CNL INCOME FUND VI, LTD.
(A Florida Limited Partnership)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31,
1996 1995 1994
----------- ----------- ----------
<S> <C>
Increase (Decrease) in Cash and
Cash Equivalents:
Cash Flows from Operating
Activities:
Cash received from tenants $ 3,363,188 $ 3,264,527 $ 3,297,916
Distributions from
unconsolidated joint
ventures 114,163 95,931 80,796
Cash paid for expenses (203,432) (181,153) (149,971)
Interest received 36,843 43,125 24,933
----------- ----------- -----------
Net cash provided by
operating activities 3,310,762 3,222,430 3,253,674
----------- ----------- -----------
Cash Flows from Investing
Activities:
Proceeds from sale of
land and buildings 982,980 899,503 1,429,481
Additions to land and
buildings on operating
leases - (25,646) (980,904)
Investment in direct
financing leases - (723,237) -
Investment in joint
ventures (146,090) - (455,146)
Collections on mortgage
note receivable 3,033 2,967 -
Increase in restricted cash (977,017) - -
Payment of lease costs (3,300) (3,300) (1,500)
----------- ----------- -----------
Net cash provided
by (used in)
investing activities (140,394) 150,287 (8,069)
----------- ----------- -----------
Cash Flows from Financing
Activities:
Reimbursement of acquisi-
tion costs paid by
related parties on
behalf of the Part-
nership - (1,375) -
Distributions to limited
partners (3,150,000) (3,150,000) (3,150,000)
Distributions to holder
of minority interest 13,437 (26,824) (22,077)
----------- ----------- -----------
Net cash used in
financing activities (3,163,437) (3,178,199) (3,172,077)
----------- ----------- -----------
Net Increase in Cash and Cash
Equivalents 6,931 194,518 73,528
Cash and Cash Equivalents at
Beginning of Year 1,120,999 926,481 852,953
----------- ----------- -----------
Cash and Cash Equivalents at
End of Year $ 1,127,930 $ 1,120,999 $ 926,481
=========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
17
<PAGE>
CNL INCOME FUND VI, LTD.
(A Florida Limited Partnership)
STATEMENTS OF CASH FLOWS - CONTINUED
<TABLE>
<CAPTION>
Year Ended December 31,
1996 1995 1994
----------- ----------- ----------
<S> <C>
Reconciliation of Net Income to
Net Cash Provided by Operating
Activities:
Net income $ 2,803,601 $ 2,861,381 $ 3,095,028
----------- ----------- -----------
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation 481,683 489,480 496,384
Amortization 1,890 906 13,862
Minority interest in income
of consolidated joint
venture 24,682 20,133 20,792
Equity in earnings of
unconsolidated joint
ventures, net of
distributions 16,782 12,448 10,297
Loss (gain) on sale of land
and building 1,706 (95,913) (332,664)
Provision for loss on land
and building 77,023 - -
Decrease (increase) in
receivables (90,360) 44,096 73,209
Decrease (increase) in
prepaid expenses 4,087 (2,042) 262
Decrease in net investment
in direct financing leases 68,177 53,944 48,202
Increase in accrued rental
income (103,935) (131,428) (169,433)
Increase in accounts payable
and accrued expenses 2,529 215 3,426
Increase (decrease) in
due to related parties (3,391) 5,909 -
Increase (decrease) in
rents paid in advance
and deposits 26,288 (36,699) (5,691)
----------- ----------- -----------
Total adjustments 507,161 361,049 158,646
----------- ----------- -----------
Net Cash Provided by Operating
Activities $ 3,310,762 $ 3,222,430 $ 3,253,674
=========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
18
<PAGE>
CNL INCOME FUND VI, LTD.
(A Florida Limited Partnership)
STATEMENTS OF CASH FLOWS - CONTINUED
<TABLE>
<CAPTION>
Year Ended December 31,
1996 1995 1994
----------- ----------- ----------
<S> <C>
Supplemental Schedule of Non-Cash
Investing and Financing
Activities:
Acquisition costs paid by
affiliates on behalf of
the Partnership $ - $ 1,375 $ -
=========== =========== ==========
Mortgage note accepted in
connection with sale of
land $ - $ 6,000 $ -
=========== =========== ==========
Distributions declared and
unpaid at December 31 $ 857,500 $ 787,500 $ 787,500
=========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
19
<PAGE>
CNL INCOME FUND VI, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
Years Ended December 31, 1996, 1995 and 1994
1. Significant Accounting Policies:
Organization and Nature of Business - CNL Income Fund VI, 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 and family-style 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.
Real Estate and Lease Accounting - The Partnership records the
acquisition of land and buildings at cost, including acquisition and
closing costs. Land and buildings are leased to unrelated third parties
on a triple-net 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 either the direct financing or the operating method. Such methods
are described below:
Direct financing method - The leases accounted for using the
direct financing method are recorded at their net investment
(which at the inception of the lease generally represents the
cost of the asset) (Note 4). Unearned income is deferred and
amortized to income over the lease terms so as to produce a
constant periodic rate of return on the Partnership's
investment in the leases.
Operating method - Land and building leases accounted for
using the operating method are recorded at cost, revenue is
recognized as rentals are earned and depreciation is charged
to operations as incurred. Buildings are depreciated on the
straight-line method over their estimated useful lives of 30
years. When scheduled rentals vary during the lease term,
income is recognized on a straight-line basis so as to produce
a constant periodic rent over the lease term commencing on the
date the property is placed in service.
20
<PAGE>
CNL INCOME FUND VI, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1996, 1995 and 1994
1. Significant Accounting Policies - Continued:
Accrued rental income represents the aggregate amount of
income recognized on a straight-line basis in excess of
scheduled rental payments to date.
When the properties are sold, the related cost and accumulated
depreciation for operating leases and the net investment for direct
financing leases, plus any accrued rental income, are removed from the
accounts and gains or losses from sales are reflected in income. The
general partners of the Partnership review the properties for
impairment whenever events or changes in circumstances indicate that
the carrying amount of the assets may not be recoverable through
operations. The general partners determine whether an impairment in
value has occurred by comparing the estimated future undiscounted cash
flows, including the residual value of the property, with the carrying
cost of the individual property. Although the general partners have
made their best estimate of these factors based on current conditions,
it is reasonably possible that changes could occur in the near term
which could adversely affect the general partners' best estimate of net
cash flows expected to be generated from its properties and the need
for asset impairment write-downs. If an impairment is indicated, a loss
will be recorded for the amount by which the carrying value of the
asset exceeds its fair market value.
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 accrued rental income, 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 allowance for doubtful accounts are decreased
accordingly.
Investment in Joint Ventures - The Partnership accounts for its 66
percent interest in Caro Joint Venture, a Florida general partnership,
using the consolidation method. Minority interest represents the
minority joint venture partner's proportionate share of equity in the
Partnership's consolidated joint venture. All significant intercompany
accounts and transactions have been eliminated.
21
<PAGE>
CNL INCOME FUND VI, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1996, 1995 and 1994
1. Significant Accounting Policies - Continued:
The Partnership's investments in Auburn Joint Venture, Show Low Joint
Venture, Asheville Joint Venture,a property in Yuma, Arizona, held as
tenants-in-common with an affiliate, and a property in Clinton, North
Carolina, held as tenants-in-common with an affiliate, are accounted
for using the equity method since the Partnership shares control with
affiliates which have the same general partners.
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 and money market funds (some of which are
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 - Brokerage fees and lease incentive costs incurred in
finding new tenants and negotiating new leases for the Partnership's
properties 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.
22
<PAGE>
CNL INCOME FUND VI, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1996, 1995 and 1994
1. Significant Accounting Policies - Continued:
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. The more significant areas requiring
the use of management estimates relate to the allowance for doubtful
accounts and future cash flows associated with long-lived assets.
Actual results could differ from those estimates.
Reclassification - Certain items in the prior years' financial
statements have been reclassified to conform to 1996 presentation.
These reclassifications had no effect on partners' capital or net
income.
New Accounting Standard - Effective January 1, 1996 the Partnership
adopted Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of LongLived Assets and for Long-Lived
Assets to Be Disposed Of." The statement 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.
Adoption of this standard had no 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 and family-style restaurants. The
leases are accounted for under the provisions of Statement of Financial
Accounting Standards No. 13, "Accounting for Leases." The leases
generally are classified as operating leases; however, nine leases have
been classified as direct financing leases. For the leases classified
as direct financing leases, the building portions of the property
leases are accounted for as direct financing leases while the land
portions of four of these leases are operating leases. Substantially
all leases are for 15 to 20 years and provide for minimum and
contingent rentals. In addition, the tenant 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 to four
23
<PAGE>
CNL INCOME FUND VI, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1996, 1995 and 1994
2. Leases - Continued:
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:
1996 1995
----------- -----------
Land $10,364,275 $10,880,540
Buildings 13,983,253 14,447,892
----------- -----------
24,347,528 25,328,432
Less accumulated
depreciation (3,165,150) (2,717,746)
----------- -----------
21,182,378 22,610,686
Less allowance for loss
on land and building (77,023) -
----------- ----------
$21,105,355 $22,610,686
=========== ===========
In May 1994, the Partnership sold its properties in Batesville and
Heber Springs, Arkansas, for a total of $1,432,178 and received net
sales proceeds of $1,429,481, resulting in a gain of $332,664 for
financial reporting purposes. These properties were originally acquired
by the Partnership in November 1989 and February 1990 and had combined,
total cost of approximately $1,148,100, excluding acquisition fees and
miscellaneous acquisition expenses; therefore, the Partnership sold the
properties for approximately $281,400 in excess of their original
purchase price. The Partnership reinvested $980,904 of the net sales
proceeds in a property in Dallas, Texas.
In addition, in June 1995, the Partnership sold its property in Little
Canada, Minnesota, for $904,000 and received net sales proceeds of
$899,503, resulting in a gain of $103,283 for financial reporting
purposes. This property was originally acquired by the Partnership in
October 1989 and had a cost of approximately $823,900, excluding
acquisition fees and miscellaneous acquisition expenses; therefore, the
Partnership sold the property for approximately $75,600 in excess of
its original purchase price. In August 1995, the Partnership reinvested
$724,612 of the net sales proceeds in
24
<PAGE>
CNL INCOME FUND VI, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1996, 1995 and 1994
3. Land and Buildings on Operating Leases - Continued:
a property in Broken Arrow, Oklahoma. Also, in August 1995, the
Partnership sold a small parcel of vacant land adjacent to its property
in Orlando, Florida, for $7,500, resulting in a loss of $7,370 for
financial reporting purposes. In connection therewith, the Partnership
accepted a promissory note for $6,000 (see Note 6).
In December 1996, the Partnership sold its property in Dallas, Texas,
to an unrelated third party for $1,016,000 and received net sales
proceeds of $982,980. This property was originally acquired by the
Partnership in June 1994 and had a cost of approximately $980,900,
excluding acquisition fees and miscellaneous acquisition expenses;
therefore, the Partnership sold the property for approximately $2,100
in excess of its original purchase price. Due to the fact that the
Partnership had recognized accrued rental income since the inception of
the lease relating to the straight-lining of future scheduled rent
increases in accordance with generally accepted accounting principles,
the Partnership wrote-off the cumulative balance of such accrued rental
income at the time of the sale of this property, resulting in a loss on
land and building of $1,706 for financial reporting purposes. Due to
the fact that the straight-lining of future rent increases over the
term of the lease is a non-cash accounting adjustment, the write-off of
these amounts is a loss for financial statement purposes only.
At December 31, 1996, the Partnership established an allowance for loss
on land and building in the amount of $77,023 for financial reporting
purposes for the property in Liverpool, New York. The allowance
represents the difference between (i) the property's carrying value at
December 31, 1996, and (ii) the general partners' estimate of the net
realizable value of the property based on an anticipated sales price of
this property to an interested and unrelated third party.
Some 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, 1996, 1995 and 1994, the Partnership
recognized $103,935, $131,428 and $169,433, respectively, of such
rental income.
25
<PAGE>
CNL INCOME FUND VI, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1996, 1995 and 1994
3. Land and Buildings on Operating Leases - Continued:
The following is a schedule of the future minimum lease payments to be
received on noncancellable operating leases at December 31, 1996:
1997 $ 2,560,283
1998 2,544,073
1999 2,542,105
2000 2,662,772
2001 2,701,460
Thereafter 15,906,564
-----------
$28,917,257
===========
Since lease renewal periods are exercisable at the option of the
tenant, the above table only presents future minimum lease payments due
during the initial lease terms. In addition, this table does not
include any amounts for future contingent rentals which may be received
on the leases based on a percentage of the tenant's gross sales.
4. Net Investment in Direct Financing Leases:
The following lists the components of the net investment in direct
financing leases at December 31:
1996 1995
----------- --------
Minimum lease payments
receivable $ 8,955,426 $ 9,577,697
Estimated residual
values 1,704,299 1,704,299
Less unearned income (6,000,701) (6,554,795)
----------- -----------
Net investment in direct
financing leases $ 4,659,024 $ 4,727,201
=========== ===========
26
<PAGE>
CNL INCOME FUND VI, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1996, 1995 and 1994
4. Net Investment in Direct Financing Leases - Continued:
The following is a schedule of future minimum lease payments to be
received on direct financing leases at December 31, 1996:
1997 $ 622,269
1998 622,269
1999 622,269
2000 624,409
2001 637,129
Thereafter 5,827,081
----------
$8,955,426
==========
The above table does not include future minimum lease payments for
renewal periods or for contingent rental payments that may become due
in future periods (See Note 3).
5. Investment in Joint Ventures:
The Partnership has a 3.9%, a 36 percent and a 14 percent interest in
the profits and losses of Auburn Joint Venture, Show Low Joint Venture
and Asheville Joint Venture, respectively. The remaining interests in
these joint ventures are held by affiliates of the Partnership which
have the same general partners. The Partnership also has a 51.67%
interest in a property in Yuma, Arizona with an affiliate of the
Partnership that has the same general partners, as tenants-in-common.
The Partnership accounts for its investment in this property using the
equity method since the Partnership shares control with an affiliate.
Amounts relating to its investment are included in investment in joint
ventures.
In January 1996, the Partnership acquired a property in Clinton, North
Carolina, as tenants-in-common with affiliates of the general partners.
In connection therewith, the Partnership contributed $146,090 for a
17.93% interest in such property. The Partnership accounts for its
investment in this property using the equity method since the
Partnership shares control with affiliates, and amounts relating to its
investment are included in investment in joint ventures.
27
<PAGE>
CNL INCOME FUND VI, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1996, 1995 and 1994
5. Investment in Joint Venture - Continued:
Auburn Joint Venture, Show Low Joint Venture, Asheville Joint Venture,
and the Partnership and affiliates as tenants-in-common in two separate
tenancy-in-common arrangements, each own and lease one property to an
operator of national fast-food and family-style restaurants. The
following presents the combined, condensed financial information for
the joint ventures and the two properties held as two separate
tenants-in-common with an affiliate at December 31:
1996 1995
---------- ----------
Land and buildings on
operating leases,
less accumulated
depreciation $3,463,093 $2,726,011
Net investment in direct
financing lease 401,650 408,936
Cash 11,177 1,950
Receivables 21,826 18,298
Accrued rental income 191,594 170,695
Other assets 44,380 47,283
Liabilities 10,221 2,208
Partners' capital 4,123,499 3,370,965
Revenues 528,092 432,218
Net income 436,981 363,865
The Partnership recognized income totalling $97,381, $83,483, and
$70,499 for the years ended December 31, 1996, 1995 and 1994,
respectively, from these joint ventures and the properties held as
tenants-in-common with affiliates.
6. Restricted Cash:
As of December 31, 1996, net sales proceeds of $977,017 from the sale
of the property in Dallas, Texas, plus accrued interest of $739, were
being held in an interest-bearing escrow account pending the release of
funds by the escrow agent to acquire an additional property.
28
<PAGE>
CNL INCOME FUND VI, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1996, 1995 and 1994
7. Allocations and Distributions:
Generally, 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 subordinated to receipt by the limited partners of an
aggregate, ten percent, cumulative, 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 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 year ended December 31, 1996, the Partnership declared
distributions to the limited partners of $3,220,000 and during each of
the years ended December 31, 1995 and 1994, the Partnership declared
distributions to the limited partners of $3,150,000. No distributions
have been made to the general partners to date.
29
<PAGE>
CNL INCOME FUND VI, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1996, 1995 and 1994
8. 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:
1996 1995 1994
---------- ---------- ----------
Net income for financial
reporting purposes $2,803,601 $2,861,381 $3,095,028
Depreciation for tax
reporting purposes
in excess of depreci-
ation for financial
reporting purposes (104,412) (94,987) (92,651)
Allowance for loss on
land and building 77,023 - -
Direct financing leases
recorded as operating
leases for tax
reporting purposes 68,177 53,944 48,202
Gain and loss on sale of
land and buildings for
financial reporting
purposes in excess of
gain and loss on sale
for tax reporting
purposes 1,706 (2,914) (332,664)
Equity in earnings of
unconsolidated joint
ventures for financial
reporting purposes in
excess of equity in
earnings of unconsolidated
joint ventures for
tax reporting purposes (49) (5,299) (3,031)
Allowance for doubtful
accounts (78,517) 16,154 178,255
Accrued rental income (103,935) (131,428) (169,433)
Rents paid in advance 26,288 (36,699) 1,309
Minority interest in
timing differences
of consolidated
joint venture 1,781 (200) (200)
---------- ---------- ----------
Net income for federal
income tax purposes $2,691,663 $2,659,952 $2,724,815
========== ========== ==========
30
<PAGE>
CNL INCOME FUND VI, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1996, 1995 and 1994
9. 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, 1996, 1995 and 1994, 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, 1996, 1995 and 1994, certain
Affiliates acted as manager of the Partnership's properties pursuant to
a management agreement with the Partnership. In connection therewith,
the Partnership agreed to pay the Affiliates a management fee of one
percent of the sum of gross revenues from properties wholly owned by
the Partnership and the Partnership's allocable share of gross revenues
from joint ventures and the property held as tenants-in-common with an
affiliate, but not in excess of competitive fees for comparable
services. These fees are payable only after the limited partners
receive their 10% Preferred Return. Due to the fact that these fees are
noncumulative, if the limited partners do not receive their 10%
Preferred Return in any particular year, no management fees will be due
or payable for such year. As a result of such threshold, no management
fees were incurred during the years ended December 31, 1996, 1995 and
1994.
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. However, if the sales proceeds are reinvested in a
replacement property, no such real estate disposition fees will be
incurred until such replacement property is sold and the net sales
proceeds are distributed. The payment of the real estate disposition
fee is subordinated to receipt by the limited partners of their
aggregate 10% Preferred Return, plus their adjusted capital
contributions. No deferred, subordinated real estate disposition fees
have been incurred since inception.
31
<PAGE>
CNL INCOME FUND VI, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1996, 1995 and 1994
9. Related Party Transactions - Continued:
During the years ended December 31, 1996, 1995 and 1994, Affiliates
provided accounting and administrative services to the Partnership on a
day-to-day basis. The Partnership incurred $95,420, $81,847 and $49,761
for the years ended December 31, 1996, 1995 and 1994, respectively, for
such services.
The due to related parties at December 31, 1996 and 1995, totalled
$2,633 and $6,024, respectively.
10. Concentration of Credit Risk:
The following schedule presents total rental and earned income from
individual lessees, each representing more than ten percent of the
Partnership's total rental and earned income (including the
Partnership's share of total rental and earned income from joint
ventures and the two properties held as tenants-in-common with
affiliates), for the years ended December 31:
1996 1995 1994
-------- -------- ------
Golden Corral
Corporation $758,348 $725,908 $747,050
Restaurant Manage-
ment Services, Inc. 511,040 440,987 401,460
Mid-America
Corporation 439,519 439,519 439,519
In addition, the following schedule presents total rental and earned
income from individual restaurant chains, each representing more than
ten percent of the Partnership's total rental and earned income
(including the Partnership's share of total rental and earned income
from joint ventures and the two properties held as tenants-in-common
with affiliates), for the years ended December 31:
1996 1995 1994
-------- -------- ------
Golden Corral
Family Steakhouse
Restaurants $758,348 $725,908 $747,050
Burger King 455,764 455,820 455,820
Hardee's 410,951 431,465 576,633
32
<PAGE>
CNL INCOME FUND VI, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1996, 1995 and 1994
10. Concentration of Credit Risk - Continued:
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.
33
<PAGE>
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 Fund Advisors, Inc., CNL Group, Inc. and their
affiliates, all of which are affiliates of the General Partners.
James M. Seneff, Jr., age 50, is a principal stockholder of CNL Group,
Inc., a diversified real estate company, and has served as its Chairman of the
Board of Directors, director and Chief Executive Officer since its formation in
1980. 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 is Chief Executive Officer, and 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 Chief
Executive Officer and Chairman of the Board of CNL Investment Company, and Chief
Executive Officer and Chairman of the Board of Commercial Net Lease Realty, Inc.
since 1992, has served as the Chairman of the Board and the 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. In addition, Mr. Seneff has
served as Chairman of the Board and Chief Executive Officer of CNL American
Properties Fund, Inc. since 1994, and has served as Chairman of the Board and
Chief Executive Officer of CNL American Realty Fund, Inc. since 1996 and of CNL
Real Estate Advisors, Inc. since January 1997. Mr. Seneff previously served on
the Florida State Commission on Ethics and is a former member and past Chairman
of the State of 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 over 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 real estate
ventures are approximately 65 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, Ltd., CNL Income
Fund II, Ltd., CNL Income Fund III, Ltd., CNL Income Fund IV, Ltd., CNL Income
Fund V, 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 49, 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
34
<PAGE>
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 since February 1996, as Vice
Chairman of the Board of Directors, Secretary and Treasurer 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, as Secretary from
February 1996 to July 1996, and since February 1996, as Treasurer and Vice
Chairman of CNL Realty Advisors, Inc. In addition, Mr. Bourne has served as
President and a director of CNL American Properties Fund, Inc. since 1994, and
has served as President and a director of CNL American Realty Fund, Inc. since
1996 and of CNL Real Estate Advisors, Inc. since January 1997. 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 over 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 real estate ventures are approximately 64 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 Fund Advisors, Inc., provides certain management services in
connection with the Partnership and its Properties. CNL Fund Advisors, Inc. is a
corporation organized in 1995 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 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 seven 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 38, 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. and serves as Executive
Vice President of CNL American Realty Fund, Inc. and CNL Real Estate Advisors,
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 cable 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
35
<PAGE>
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 48, a certified public accountant, has served as
Chief Financial Officer of CNL Group, Inc. since December 1993, has served as
Secretary of CNL Group, Inc. since 1987, and served as Controller of CNL Group,
Inc. from 1987 until December 1993. In addition, Ms. Rose has served as Chief
Financial Officer and Secretary of CNL Securities Corp. since July 1994. She
has served as Chief Operating Officer, Vice President and Secretary of CNL
Corporate Services, Inc. since November 1994. Ms. Rose also has served as Chief
Financial Officer and Secretary of CNL Institutional Advisors, Inc. since its
inception in 1990, a director of CNL Realty Advisors, Inc. since its inception
in 1991, Secretary of CNL Realty Advisors, Inc. since its inception in 1991
(excluding February 1996 to July 1996), 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 a director, Secretary and
Treasurer of CNL Fund Advisors, Inc. since 1994 and has served as a director,
Secretary and Treasurer of CNL Real Estate Advisors, Inc. since January 1997.
Ms. Rose also has served as Secretary and Treasurer of CNL American Properties
Fund, Inc. since 1994, and has served as Secretary and Treasurer of CNL American
Realty Fund, Inc. since 1996. Ms. Rose also currently serves as Secretary for
approximately 50 additional corporations. Ms. Rose oversees the management
information services, administration, legal compliance, accounting, tenant
compliance, and reporting for over 250 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 38, 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 and sales 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 1994, and as Executive Vice President
of CNL American Properties Fund, Inc. since 1994. In addition, Ms. Wall has
served as Executive Vice President of CNL Real Estate Advisors, Inc. since
January 1997 and as Executive Vice President of CNL American Realty Fund, Inc.
since 1996. 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).
Steven D. Shackelford, age 33, has served as Chief Financial Officer of
CNL Fund Advisors, Inc. since September 1996. Mr. Shackelford joined CNL Group,
Inc. in September 1996. He also currently serves as the Chief Financial Officer
of CNL American Properties Fund, Inc. From March 1995 to July 1996, he was a
senior manager in the national office of Price Waterhouse where he was
responsible for advising foreign clients seeking to raise capital and a public
listing in the United States. From August 1992 to March 1995, he served as a
manager in the Price Waterhouse, Paris, France office serving several
multinational clients. Mr. Shackelford was an audit staff and senior from 1986
to 1992 in the Orlando, Florida office of Price Waterhouse. Mr Shackelford
received a B.A. in Accounting, with honors, and a Masters of Business
Administration from Florida State University and is a certified public
accountant.
36
<PAGE>
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 28, 1997, 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 28, 1997, 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, 1996, exclusive of any distributions to which the General
Partners or their affiliates may be entitled by reason of their purchase and
ownership of Units.
<TABLE>
<CAPTION>
Amount Incurred
Type of Compensation For the Year
and Recipient Method of Computation Ended December 31, 1996
--------------------- --------------------- ---------------------------
<S> <C>
Reimbursement to affiliates Operating expenses are Operating expenses incurred on
for operating expenses reimbursed at the lower of behalf of the Partnership:
cost or 90 percent of the $96,112
prevailing rate at which
comparable services could have Accounting and administrative
been obtained in the same services: $95,420
geographic area. 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.
</TABLE>
37
<PAGE>
<TABLE>
<CAPTION>
Type of Compensation For the Year
and Recipient Method of Computation Ended December 31, 1996
--------------------- --------------------- ---------------------------
<S> <C>
Annual, subordinated manage- One percent of the sum of $ - 0 -
ment fee to affiliates gross operating revenues from
Properties wholly owned by the
Partnership plus the
Partnership's allocable share
of gross revenues of joint
ventures in which the
Partnership is a co-venturer
and the Property owned with an
affiliate as tenants-in-
common, subordinated to
certain minimum returns to the
Limited Partners. The
management fee will not exceed
competitive fees for
comparable services. Due to
the fact that these fees are
non-cumulative, if the Limited
Partners do not receive their
10% Preferred Return in any
particular year, no management
fees will be due or payable
for such year.
Deferred, subordinated real A deferred, subordinated real $ - 0 -
estate disposition fee payable estate disposition fee,
to affiliates 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. However, if
the net sales proceeds are
reinvested in a replacement
property, no such real estate
disposition fee will be
incurred until such
replacement property is sold
and the net sales proceeds are
distributed.
</TABLE>
38
<PAGE>
<TABLE>
<CAPTION>
Type of Compensation For the Year
and Recipient Method of Computation Ended December 31, 1996
--------------------- --------------------- ---------------------------
<S> <C>
General Partners' deferred, A deferred, subordinated share $ - 0 -
sub-ordinated share of equal to one percent of
Partnership net cash flow Partnership distributions of
net cash flow, subordinated to
certain minimum returns to the
Limited Partners.
General Partners' deferred, A deferred, subordinated share $ - 0 -
sub-ordinated share of equal to five percent of
Partnership net sales proceeds Partnership distributions of
from a sale or sales such net sales proceeds,
subordinated to certain
minimum returns to the Limited
Partners.
</TABLE>
39
<PAGE>
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, 1996 and 1995
Statements of Income for the years ended December 31, 1996,
1995 and 1994
Statements of Partners' Capital for the years ended December
31, 1996, 1995 and 1994
Statements of Cash Flows for the years ended December 31,
1996, 1995 and 1994
Notes to Financial Statements
2. Financial Statement Schedules
Schedule II - Valuation and Qualifying Accounts for
the years ended December 31, 1996, 1995 and
1996
Schedule III - Real Estate and Accumulated Depreciation at
December 31, 1996
Notes to Schedule III - Real Estate and Accumulated
Depreciation at December 31, 1996
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 VI, Ltd.
(Included as Exhibit 3.3 to Registration Statement No.
33-23892 on Form S-11 and incorporated herein by reference.)
4.1 Certificate of Limited Partnership of CNL Income Fund VI, Ltd.
(Included as Exhibit 4.2 to Registration Statement No.
33-23892 on Form S-11 and incorporated herein by reference.)
4.2 Agreement and Certificate of Limited Partnership of CNL Income
Fund VI, Ltd. (Included as Exhibit 4.2 to Form 10-K filed with
the Securities and Exchange Commission on April 1, 1996, and
incorporated herein by reference.)
10.1 Management Agreement (Included as Exhibit 10.1 to Form 10-K
filed with the Securities and Exchange Commission on March 31,
1994, and incorporated herein by reference.)
10.2 Assignment of 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.)
40
<PAGE>
10.3 Assignment of Management Agreement from CNL Income Fund
Advisors, Inc. to CNL Fund Advisors, Inc. (Included as Exhibit
10.3 to Form 10-K filed with the Securities and Exchange
Commission on April 1, 1996, and incorporated herein by
reference.)
27 Financial Data Schedule (Filed herewith.)
(b) The Registrant filed no reports on Form 8-K during the period from
October 1, 1996 through December 31, 1996.
41
<PAGE>
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 26th day of
March, 1997.
CNL INCOME FUND VI, 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.
<PAGE>
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.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C>
/s/ Robert A. Bourne President, Treasurer and Director March 26, 1997
- ------------------------- (Principal Financial and Accounting
Robert A. Bourne Officer)
/s/ James M. Seneff, Jr. Chief Executive Officer and Director March 26, 1997
- ------------------------- (Principal Executive Officer)
James M. Seneff, Jr.
</TABLE>
<PAGE>
CNL INCOME FUND VI, LTD.
(A Florida Limited Partnership)
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
Years Ended December 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
Additions Deductions
---------------------------- --------------------------
Balance at Charged to Charged to Deemed Balance
Beginning Costs and Other Uncollec- at End
Year Description of Year Expenses Accounts tible Collected of Year
- ---- ----------- ---------- ---------- ---------- --------- --------- --------
<S> <C>
1994 Allowance for
doubtful
accounts (a) $ - $44,440 $141,902(b) $ - $ - $186,342
======== ======= ======== ======== ======== ========
1995 Allowance for
doubtful
accounts (a) $186,342 $ - $ 75,202(b) $ 49,672 $ 8,303 $203,569
======== ======= ======== ======== ======== ========
1996 Allowance for
doubtful
accounts (a) $203,569 $ - $ 11,762(b) $ 78,084 $ 11,658 $125,589
======== ======= ======== ======== ======== ========
</TABLE>
(a) Deducted from receivables and accrued rental income on the balance
sheet.
(b) Reduction of rental and other income.
F-1
<PAGE>
CNL INCOME FUND VI, LTD.
(A Florida Limited Partnership)
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1996
<TABLE>
<CAPTION>
Costs Capitalized
Subsequent
Initial Cost To Acquisition
--------------------------- ----------------------
Buildings
Encum- and Improve- Carrying
brances Land Improvements ments Costs
------- ------- ------------ -------- --------
<S> <C>
Properties the Partnership
has Invested In Under
Operating Leases:
Burger King Restaurants:
Sevierville, Tennessee - $ 352,845 $ 609,006 $ - $ -
Walker Springs, Tennessee - 370,839 563,193 - -
Knoxville, Tennessee - 421,258 539,964 - -
Greeneville, Tennessee - 318,817 642,538 - -
Church's Fried Chicken
Restaurant:
Orlando, Florida - 177,440 270,985 - -
Denny's Restaurant:
Deland, Florida - 448,435 - 600,394 -
Golden Corral Family
Steakhouse Restaurants:
Albuquerque, New Mexico - 717,708 1,018,823 - -
Amarillo, Texas - 773,627 908,171 - -
Lawton, Oklahoma - 559,095 838,642 - -
El Paso, Texas - 670,916 - 837,317 -
Hardee's Restaurants:
Greensburg, Indiana - 222,559 - 515,529 -
Bellevue, Nebraska - 397,402 - - -
Springfield, Tennessee - 203,159 413,221 - -
Jack in the Box Restaurant:
San Antonio, Texas - 272,300 - - -
KFC Restaurants:
Whitehall, Michigan - 230,867 553,862 74,156 -
Caro, Michigan - 150,804 - 373,558 -
Gainesville, Florida - 321,789 287,429 - -
Perkins Restaurants:
Melbourne, Florida - 428,901 - - -
Naples, Florida - 809,340 - - -
Popeyes Famous Fried
Chicken Restaurants:
Jacksonville, Florida - 121,901 190,505 123,663 -
Jacksonville, Florida - 141,356 185,933 132,144 -
Gainesville, Florida - 83,542 208,564 192,227 -
Jacksonville, Florida - 93,914 158,543 163,399 -
Tallahassee, Florida - 116,019 233,858 177,915 -
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Life
Gross Amount at Which Carried on Which
at Close of Period (c) Depreciation
---------------------------------------------- in Latest
Buildings Date Income
and Accumulated of Con- Date Statement is
Land Improvements Total Depreciation struction Acquired Computed
----------- ------------ ----------- ------------ --------- -------- -------------
<S> <C>
Properties the Partnership
has Invested In Under
Operating Leases:
Burger King Restaurants:
Sevierville, Tennessee $ 352,845 $ 609,006 $ 961,851 $ 141,879 1986 01/90 (b)
Walker Springs, Tennessee 370,839 563,193 934,032 130,949 1986 01/90 (b)
Knoxville, Tennessee 421,258 539,964 961,222 125,794 1985 01/90 (b)
Greeneville, Tennessee 318,817 642,538 961,355 149,691 1988 01/90 (b)
Church's Fried Chicken
Restaurant:
Orlando, Florida 177,440 270,985 448,425 60,310 1985 04/90 (b)
Denny's Restaurant:
Deland, Florida 448,435 600,394 1,048,829 135,706 1990 10/89 (b)
Golden Corral Family
Steakhouse Restaurants:
Albuquerque, New Mexico 717,708 1,018,823 1,736,531 238,289 1989 12/89 (b)
Amarillo, Texas 773,627 908,171 1,681,798 212,404 1989 12/89 (b)
Lawton, Oklahoma 559,095 838,642 1,397,737 196,143 1989 12/89 (b)
El Paso, Texas 670,916 837,317 1,508,233 179,163 1990 04/90 (b)
Hardee's Restaurants:
Greensburg, Indiana 222,559 515,529 738,088 122,447 1989 07/89 (b)
Bellevue, Nebraska 397,402 (f) 397,402 - 1990 12/89 (d)
Springfield, Tennessee 203,159 413,221 616,380 84,229 1990 11/90 (b)
Jack in the Box Restaurant:
San Antonio, Texas 272,300 (f) 272,300 - 1990 08/90 (d)
KFC Restaurants:
Whitehall, Michigan 230,867 628,018 858,885 141,494 1989 02/90 (b)
Caro, Michigan 150,804 373,558 524,362 84,051 1990 03/90 (b)
Gainesville, Florida 321,789 287,429 609,218 59,087 1985 11/90 (b)
Perkins Restaurants:
Melbourne, Florida 428,901 (f) 428,901 - 1990 11/89 (d)
Naples, Florida 809,340 (f) 809,340 - 1978 12/89 (d)
Popeyes Famous Fried
Chicken Restaurants:
Jacksonville, Florida 121,901 314,168 436,069 68,159 1985 04/90 (b)
Jacksonville, Florida 141,356 318,077 459,433 69,177 1985 04/90 (b)
Gainesville, Florida 83,542 400,791 484,333 84,110 1990 04/90 (b)
Jacksonville, Florida 93,914 321,942 415,856 67,850 1985 04/90 (b)
Tallahassee, Florida 116,019 411,773 527,792 87,206 1985 04/90 (b)
</TABLE>
F-2
<PAGE>
CNL INCOME FUND VI, LTD.
(A Florida Limited Partnership)
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION - CONTINUED
December 31, 1996
<TABLE>
<CAPTION>
Costs Capitalized
Subsequent
Initial Cost To Acquisition
---------------------------- -----------------------
Buildings
Encum- and Improve- Carrying
brances Land Improvements ments Costs
------- ---- ------------ -------- --------
<S> <C>
Shoney's Restaurants:
Venice, Florida - 471,467 - 608,671 -
Nashville, Tennessee - 320,540 531,507 - -
Taco Bell Restaurant:
Detroit, Michigan - 171,240 - 385,709 -
Waffle House Restaurants:
Clearwater, Florida - 130,499 268,580 - -
Roanoke, Virginia - 119,533 236,219 - -
Atlantic Beach, Florida - 141,627 263,021 - -
Wendy's Old Fashioned
Hamburger Restaurant:
Liverpool, New York - 213,380 155,981 - -
Other:
Hermitage, Tennessee - 391,156 - 720,026 -
----------- ---------- ---------- -------
$10,364,275 $9,078,545 $4,904,708 $ -
=========== ========== ========== =======
Property of Joint Venture
in Which the Partnership
has a 36% Interest and has
Invested in Under an
Operating Lease:
Denny's Restaurant:
Show Low, Arizona - $ 96,501 $ 189,000 $ 436,392 $ -
=========== ========== ========== =======
Property of Joint Venture
in Which the Partnership
has a 3.9% Interest and has
Invested in Under an
Operating Lease:
KFC Restaurant:
Auburn, Massachusetts - $ 484,362 $ - $ - $ -
=========== ========== ========== =======
Property of Joint Venture in Which the
Partnership has a 14% Interest and has
Invested in Under an Operating Lease:
Burger King Restaurant:
Asheville, North Carolina - $ 438,695 $ 450,432 $ - $ -
=========== ========== ========== =======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Life
Gross Amount at Which Carried on Which
at Close of Period (c) Depreciation
-------------------------------------- in Latest
Buildings Date Income
and Accumulated of Con- Date Statement is
Land Improvements Total Depreciation struction Acquired Computed
----------- ------------ ----------- ------------ --------- -------- -------------
<S> <C>
Shoney's Restaurants:
Venice, Florida 471,467 608,671 1,080,138 142,868 1989 08/89 (b)
Nashville, Tennessee 320,540 531,507 852,047 129,189 1988 09/89 (b)
Taco Bell Restaurant:
Detroit, Michigan 171,240 385,709 556,949 89,118 1990 11/89 (b)
Waffle House Restaurants:
Clearwater, Florida 130,499 268,580 399,079 62,399 1988 01/90 (b)
Roanoke, Virginia 119,533 236,219 355,752 54,880 1987 01/90 (b)
Atlantic Beach, Florida 141,627 263,021 404,648 60,819 1986 01/90 (b)
Wendy's Old Fashioned
Hamburger Restaurant:
Liverpool, New York 213,380 155,981 369,361 36,612 1977 12/89 (b)
Other:
Hermitage, Tennessee 391,156 720,026 1,111,182 151,127 1990 02/90 (b)
----------- ----------- ----------- ----------
$10,364,275 $13,983,253 $24,347,528 $3,165,150
=========== =========== =========== ==========
Property of Joint Venture
in Which the Partnership
has a 36% Interest and has
Invested in Under an
Operating Lease:
Denny's Restaurant:
Show Low, Arizona $ 96,501 $ 625,392 $ 721,893 $ 168,765 1987 06/90 (b)
=========== =========== =========== ==========
Property of Joint Venture
in Which the Partnership
has a 3.9% Interest and has
Invested in Under an
Operating Lease:
KFC Restaurant:
Auburn, Massachusetts $ 484,362 (f) $ 484,362 $ - 1989 01/90 (d)
=========== =========== ==========
Property of Joint Venture in Which
the Partnership has a 14% Interest
and has Invested in Under an
Operating Lease:
Burger King Restaurant:
Asheville, North Carolina $ 438,695 $ 450,432 $ 889,127 $ 86,919 1986 03/91 (b)
=========== =========== =========== ==========
</TABLE>
F-3
<PAGE>
CNL INCOME FUND VI, LTD.
(A Florida Limited Partnership)
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION - CONTINUED
December 31, 1996
<TABLE>
<CAPTION>
Costs Capitalized
Subsequent
Initial Cost To Acquisition
------------------------------ ----------------------
Buildings
Encum- and Improve- Carrying
brances Land Improvements ments Costs
------- ---- ------------ -------- --------
<S> <C>
Property in Which the Partner-
ship has a 51.67% Interest
as Tenants-in-Common and
has Invested in Under an
Operating Lease:
Jack in the Box Restaurant:
Yuma, Arizona - $ 255,235 $ 625,798 $ - $ -
=========== ========== ========== =======
Property in Which the Partner-
has a 17.93% Interest as
Tenants-in-Common and has
Invested in Under an
Operating Lease:
Golden Corral Family
Steakhouse Restaurant:
Clinton, North Carolina - $ 138,382 $ 676,588 $ - $ -
=========== =========== ========== ======
Properties the Partnership
has Invested in Under
Direct Financing Leases:
Denny's Restaurant:
Cheyenne, Wyoming - $ 162,209 $ 648,839 $ - $ -
Broken Arrow, Oklahoma - 164,640 559,972 - -
Hardee's Restaurants:
Bellevue, Nebraska - - 556,737 - -
Plattsmouth, Nebraska - 93,448 517,080 - -
Waynesburg, Ohio - 136,242 441,299 - -
Jack in the Box Restaurant:
San Antonio, Texas - - 420,568 - -
Perkins Restaurants:
Melbourne, Florida - - - 305,120 -
Naples, Florida - - 365,831 - -
Other:
Chester, Pennsylvania (g) - 98,009 - 495,472 -
----------- ---------- ---------- -------
- $ 654,548 $3,510,326 $ 800,592 $ -
=========== ========== ========== =======
Property of Joint Venture
in Which the Partnership has
a 3.9% Interest and has
Invested in Under a
Direct Financing Lease:
KFC Restaurant:
Auburn, Massachusetts - $ - $ - $ 434,947 $ -
=========== ========== ========== =======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Life
Gross Amount at Which Carried on Which
at Close of Period (c) Depreciation
-------------------------------------- in Latest
Buildings Date Income
and Accumulated of Con- Date Statement is
Land Improvements Total Depreciation struction Acquired Computed
----------- ------------ ----------- ------------ --------- -------- ------------
<S> <C>
Property in Which the Partner-
ship has a 51.67% Interest
as Tenants-in-Common and
has Invested in Under an
Operating Lease:
Jack in the Box Restaurant:
Yuma, Arizona $ 255,235 $ 625,798 $ 881,033 $ 51,440 1992 07/94 (b)
=========== =========== =========== ==========
Property in Which the Partner-
has a 17.93% Interest as
Tenants-in-Common and has
Invested in Under an
Operating Lease:
Golden Corral Family
Steakhouse Restaurant:
Clinton, North Carolina $ 138,382 $ 676,588 $ 814,970 $ 21,168 1996 01/96 (b)
=========== =========== =========== ==========
Properties the Partnership
has Invested in Under
Direct Financing Leases:
Denny's Restaurant:
Cheyenne, Wyoming (f) (f) (f) (e) 1980 12/89 (e)
Broken Arrow, Oklahoma (f) (f) (f) (e) 1982 08/95 (e)
Hardee's Restaurants:
Bellevue, Nebraska - (f) (f) (d) 1990 12/89 (d)
Plattsmouth, Nebraska (f) (f) (f) (e) 1989 01/90 (e)
Waynesburg, Ohio (f) (f) (f) (e) 1990 11/90 (e)
Jack in the Box Restaurant:
San Antonio, Texas - (f) (f) (d) 1990 08/90 (d)
Perkins Restaurants:
Melbourne, Florida - (f) (f) (d) 1990 11/89 (d)
Naples, Florida - (f) (f) (d) 1978 12/89 (d)
Other:
Chester, Pennsylvania (g) (f) (f) (f) (e) 1991 12/89 (e)
Property of Joint Venture
in Which the Partnership has
a 3.9% Interest and has
Invested in Under a
Direct Financing Lease:
KFC Restaurant:
Auburn, Massachusetts - (f) (f) (d) 1989 01/90 (d)
</TABLE>
F-4
<PAGE>
CNL INCOME FUND VI, LTD.
(A Florida Limited Partnership)
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1996
(a) Transactions in real estate and accumulated depreciation during 1996,
1995 and 1994, are summarized as follows:
Accumulated
Cost (h) Depreciation
-------- ------------
Properties the Partnership
has Invested In Under
Operating Leases:
Balance, December 31, 1993 $26,439,040 $1,942,633
Dispositions (1,228,109) (131,292)
Acquisitions 980,904 -
Depreciation expense - 496,384
----------- ----------
Balance, December 31, 1994 26,191,835 2,307,725
Dispositions (889,049) (79,459)
Additional costs capitalized 25,646 -
Depreciation expense - 489,480
----------- ----------
Balance, December 31, 1995 25,328,432 2,717,746
Disposition (980,904) (34,279)
Depreciation expense - 481,683
----------- ----------
Balance, December 31, 1996 $24,347,528 $ 3,165,150
=========== ===========
Property of Joint Venture in
Which the Partnership has a 36%
Interest and has Invested in
Under an Operating Lease:
Balance, December 31, 1993 $ 721,893 $ 106,226
Depreciation expense - 20,846
----------- ----------
Balance, December 31, 1994 721,893 127,072
Depreciation expense - 20,847
----------- ----------
Balance, December 31, 1995 721,893 147,919
Depreciation expense - 20,846
----------- ----------
Balance, December 31, 1996 $ 721,893 $ 168,765
=========== ==========
F-5
<PAGE>
CNL INCOME FUND VI, LTD.
(A Florida Limited Partnership)
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED
DEPRECIATION - CONTINUED
December 31, 1996
Accumulated
Cost (h) Depreciation
-------- ------------
Property of Joint Venture in
Which the Partnership has a
3.9% Interest and has Invested
in Under an Operating
Lease:
Balance, December 31, 1993 $ 484,362 $ -
Depreciation expense (d) - -
----------- ---------
Balance, December 31, 1994 484,362 -
Depreciation expense (d) - -
----------- ---------
Balance, December 31, 1995 484,362 -
Depreciation expense (d) -
---------- ---------
Balance, December 31, 1996 $ 484,362 $ -
=========== =========
Property of Joint Venture in
Which the Partnership has a
14% Interest and has Invested
in Under an Operating Lease:
Balance, December 31, 1993 $ 889,127 $ 41,876
Depreciation expense - 15,015
----------- ----------
Balance, December 31, 1994 889,127 56,891
Depreciation expense - 15,014
----------- ----------
Balance, December 31, 1995 889,127 71,905
Depreciation expense - 15,014
----------- ----------
Balance, December 31, 1996 $ 889,127 $ 86,919
=========== ==========
Property in Which the Partnership
has a 51.67% Interest as
Tenants-in-Common and has
Invested in Under an Operating
Lease:
Balance, December 31, 1993 $ - $ -
Acquisitions 881,033 -
Depreciation expense - 9,720
----------- ----------
Balance, December 31, 1994 881,033 9,720
Depreciation expense - 20,860
----------- ----------
Balance, December 31, 1995 881,033 30,580
Depreciation expense - 20,860
----------- ----------
Balance, December 31, 1996 $ 881,033 $ 51,440
=========== ==========
F-6
<PAGE>
CNL INCOME FUND VI, LTD.
(A Florida Limited Partnership)
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED
DEPRECIATION - CONTINUED
December 31, 1996
Accumulated
Cost (h) Depreciation
-------- ------------
Property in Which the Partnership
has a 17.93% Interest as
Tenants-in-Common and has
Invested in Under an Operating
Lease:
Balance, December 31, 1995 $ - $ -
Acquisitions 814,970 -
Depreciation expense - 21,168
----------- ----------
Balance, December 31, 1996 $ 814,970 $ 21,168
=========== ==========
(b) Depreciation expense is computed for buildings and improvements based
upon estimated lives of 30 years.
(c) As of December 31, 1996, the aggregate cost of the Properties owned
by the Partnership and its consolidated joint venture, and the
unconsolidated joint ventures (including the two Properties held as
tenants-in-common) for federal income tax purposes was $27,956,036
and $4,042,142, respectively. All of the leases are treated as
operating leases for federal income tax purposes.
(d) For financial reporting purposes, the portion of the lease relating
to the building has been recorded as a direct financing lease. The
cost of the building has been included in net investment in direct
financing leases; therefore, depreciation is not applicable.
(e) For financial reporting purposes, the lease for the land and building
has been recorded as a direct financing lease. The cost of the land
and building has been included in net investment in direct financing
leases; therefore, depreciation is not applicable.
(f) For financial reporting purposes, certain components of the lease
relating to land and building have been recorded as a direct
financing lease. Accordingly, costs relating to these components of
this lease are not shown.
(g) The tenant of this property, Restaurant Management Services, Inc.
subleased this property to a franchisee of a regional restaurant
chain. The franchisee vacated the property; however, Restaurant
Management Services, Inc. continues to be responsible for complying
with all of the terms of the lease agreement and is continuing to pay
rent on this property, subject to certain rent concessions, to the
Partnership.
(h) For financial reporting purposes, the undepreciated cost of the
Property in Liverpool, New York, was written down to net realizable
value due to an anticipated impairment in value. The Partnership
recognized the impairment by recording an allowance for loss on land
and building in the amount of $77,023 at December 31, 1996. The
impairment at December 31, 1996, represents difference between the
property's carrying value and the General Partners' estimate of the
net realizable value of the property based on an anticipated sales
price of this Property to an interested and unrelated third party.
The cost of the Property presented on this schedule is the gross
amount at which the Property was carried at December 31, 1996,
excluding the allowance for loss on land and building.
F-7
<PAGE>
EXHIBITS
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Number Page
- -------------- ----
<S> <C>
3.1 Certificate of Limited Partnership of CNL Income Fund VI, Ltd.
(Included as Exhibit 3.3 to Registration Statement No.
33-23892 on Form S-11 and incorporated herein by reference.)
4.1 Certificate of Limited Partnership of CNL Income Fund VI, Ltd.
(Included as Exhibit 4.2 to Registration Statement No.
33-23892 on Form S-11 and incorporated herein by reference.)
4.2 Agreement and Certificate of Limited Partnership of CNL Income
Fund VI, Ltd. (Included as Exhibit 4.2 to Form 10-K filed with
the Securities and Exchange Commission on April 1, 1996, and
incorporated herein by reference.)
10.1 Management Agreement (Included as Exhibit 10.1 to Form 10-K
filed with the Securities and Exchange Commission on March 31,
1994, and incorporated herein by reference.)
10.2 Assignment of 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 Management Agreement from CNL Income Fund
Advisors, Inc. to CNL Fund Advisors, Inc. (Included as Exhibit
10.3 to Form 10-K filed with the Securities and Exchange
Commission on April 1, 1996, and incorporated herein by
reference.)
27 Financial Data Schedule (Filed herewith.)
</TABLE>
i
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
the balance sheet of CNL Income Fund VI, Ltd. at December 31, 1996,
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 VI,
Ltd. for the year ended December 31, 1996.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 2,105,686
<SECURITIES> 0
<RECEIVABLES> 290,875
<ALLOWANCES> 115,892
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 24,270,505
<DEPRECIATION> 3,165,150
<TOTAL-ASSETS> 30,129,286
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 29,044,367
<TOTAL-LIABILITY-AND-EQUITY> 30,129,286
<SALES> 0
<TOTAL-REVENUES> 3,492,794
<CGS> 0
<TOTAL-COSTS> 683,163
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,803,601
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,803,601
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,803,601
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>Due to the nature of its industry, CNL Income Fund VI, LTD. has an
unclassified balance sheet; therefore, no values are shown above
for current assets and current liabilities.
</FN>
</TABLE>
