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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K/A
Amendment No. 2
(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, 1998
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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)
450 South Orange Avenue
Orlando, Florida 32801
(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code: (407) 650-1000
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 __________
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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 70,000 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
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The Form 10-K of CNL Income Fund VI, Ltd. for the year ended December 31,
1998 is being amended to revise the disclosure under Item 1. Business.
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. During the year ended
December 31, 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. In addition, during 1997, the Partnership sold its
Properties in Plattsmouth, Nebraska; Venice, Florida; Naples, Florida, and
Whitehall, Michigan, and the Property in Yuma, Arizona, which was held as
tenants-in-common with an affiliate of the General Partners, and reinvested a
portion of these net sales proceeds in two IHOP Properties, one in each of
Elgin, Illinois, and Manassas, Virginia, and in a Property in Vancouver,
Washington, as tenants-in-common with affiliates of the General Partners. In
addition, Show Low Joint Venture, a joint venture in which the Partnership is a
co-venturer with an affiliate of the General Partners, sold its Property in Show
Low, Arizona. The joint venture reinvested the net sales proceeds in a Property
in Greensboro, North Carolina. During 1998, the Partnership reinvested the net
sales proceeds from the sales of the Properties in Whitehall, Michigan and
Plattsmouth, Nebraska in one Property in Overland Park, Kansas and one Property
in Memphis, Tennessee, as tenants-in-common, with affiliates of the General
Partners. In addition, in 1998, the Partnership sold its Property in Deland,
Florida, Liverpool, New York, Melbourne, Florida, and Bellevue, Nebraska. The
Partnership reinvested the net sales proceeds from the sales of the Property in
Deland, Florida in one Property in Fort Myers, Florida, as tenants-in-common,
with an affiliate of the General Partners and the Partnership reinvested the net
sales proceeds from the sales of the Properties in Melbourne, Florida and
Bellevue, Nebraska in two joint ventures, Warren Joint Venture and Melbourne
Joint Venture, respectively, to each purchase and hold one restaurant Property.
As a result of the above transactions, as of December 31, 1998, the Partnership
owned 42 Properties. The 42 Properties include six Properties owned by joint
ventures in which the Partnership is a co-venturer and five Properties owned
with affiliates as tenants-in-common. Generally, the Properties are leased on a
triple-net basis with the lessees responsible for all repairs and maintenance,
property taxes, insurance and utilities.
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On March 11, 1999, the Partnership entered into an Agreement and Plan of
Merger with CNL American Properties Fund, Inc. ("APF"), pursuant to which the
Partnership would be merged with and into a subsidiary of APF (the "Merger").
APF is a real estate investment trust whose primary business is the ownership of
restaurant properties leased on a long-term, "triple-net" basis to operators of
national and regional restaurant chains. APF has agreed to issue shares of its
common stock, par value $0.01 per share (the "APF Shares"), as consideration for
the Merger. At a special meeting of the partners that is expected to be held in
the fourth quarter of 1999, Limited Partners holding in excess of 50% of the
Partnership's outstanding limited partnership interests must approve the Merger
prior to consummation of the transaction. If the Limited Partners at the
special meeting approve the Merger, APF will own the Properties and other assets
of the Partnership.
In the event that the General Partners vote against the Merger, 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. 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,
the joint ventures in which the Partnership is a co-venturer and the properties
owned with affiliates as tenants-in-common provide for initial terms, ranging
from five to 20 years (the average being 18 years), and expire between 2003 and
2018. All leases are on a triple-net basis, with the lessees 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 $30,000 to $222,800.
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.
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. Lessees of 27 of the Partnership's 42 Properties 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. Fair market value will
be determined through an appraisal by an independent appraisal firm.
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 1998, the lease relating to the Church's Property in Gainesville,
Florida was amended to provide for rent reductions effective July 1997 through
June 2002, at which time the rental payments will revert back to the original
agreement.
Major Tenants
During 1998, four lessees of the Partnership and its consolidated joint
venture, Golden Corral Corporation, Restaurant Management Services, Inc., Mid-
America Corporation, and IHOP Properties Inc., 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 five
properties owned by unconsolidated joint venturers and five Properties owned
with affiliates as tenants-in-common). As of December 31, 1998, Golden Corral
Corporation was the lessee under leases relating to five restaurants, Restaurant
Management Services, Inc. was the lessee under leases relating to seven
restaurants, Mid-America
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Corporation was the lessee under leases relating to four restaurants, and IHOP
Properties Inc. was the lessee under leases relating to five restaurants. It is
anticipated that, based on the minimum rental payments required by the leases,
these four lessees each will continue to contribute more than ten percent of the
Partnership's total rental income in 1999. In addition, three Restaurant Chains,
Golden Corral Family Steakhouse Restaurants ("Golden Corral"), Burger King and
IHOP, each accounted for more than ten percent of the Partnership's total rental
income in 1998 (including the Partnership's consolidated joint venture and the
Partnership's share of the rental income from the five Properties owned by
unconsolidated joint ventures in which the Partnership is a co-venturer and five
Properties owned with affiliates as tenants-in-common). In 1999, 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 if
the Partnership is not able to re-lease the Properties in a timely manner. No
single tenant or group of affiliated tenants lease Properties with an aggregate
carrying value in excess of 20 percent of the total assets of the Partnership.
Joint Venture and Tenancy in Common 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 the following separate joint venture
arrangements: Auburn Joint Venture with CNL Income Fund IV, Ltd., an affiliate
of the General Partners, to purchase and hold one Property; Show Low Joint
Venture with CNL Income Fund II, Ltd., an affiliate of the General Partners, to
purchase and hold one Property; Asheville Joint Venture with CNL Income Fund
VIII, Ltd., an affiliate of the General Partners, to purchase and hold one
Property; Melbourne Joint Venture with CNL Income Fund XIV, Ltd., an affiliate
of the General Partners, to purchase and hold one Property; and Warren Joint
Venture with CNL Income Fund IV, Ltd., an affiliate of the General Partners, to
purchase and hold one Property. Each of the affiliates is a limited partnership
organized pursuant to the laws of the State of Florida.
The joint venture arrangements provide for the Partnership and its joint
venture partners to share in all costs and benefits associated with the joint
venture in accordance with their respective percentage interest in the joint
venture. The Partnership has 66.14% interest in Caro Joint Venture, a 3.9%
interest in Auburn Joint Venture, a 36 percent interest in Show Low Joint
Venture, a 14.46% interest in Asheville Joint Venture, a 50 percent interest in
Melbourne Joint Venture, and a 64.29% interest in Warren 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 form year to year unless
terminated at the option of either joint venturer 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 share
management control equally with affiliates of the General Partners for Auburn
Joint Venture, Show Low Joint Venture, Asheville Joint Venture, Melbourne Joint
Venture, and Warren Joint Venture. The joint venture agreements restrict each
venturer's ability to sell, transfer to 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, Asheville Joint Venture, Melbourne Joint Venture,
and Warren Joint Venture is distributed 3.9%, 36.0%, 66.14%, 14.46%, 50 percent
and 64.29%, 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 arrangements, the Partnership has
entered into agreements to hold a Property in Vancouver, Washington, as tenants-
in-common, with CNL Income Fund, Ltd., CNL Income Fund II, Ltd.,
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and CNL Income Fund V, Ltd., affiliates of the General Partners; a Property in
Clinton, North Carolina, as tenants-in-common, with CNL Income Fund IV, Ltd.,
CNL Income Fund X, Ltd., and CNL Income Fund XV, Ltd., affiliates of the General
Partners; a Property in Overland Park, Kansas, as tenants-in-common, with CNL
Income Fund II, Ltd. and CNL Income Fund III, Ltd., affiliates of the General
Partners; a Property in Memphis, Tennessee, as tenants-in-common, with CNL
Income Fund II, Ltd. and CNL Income Fund XVI, Ltd., affiliates of the General
Partners; and a Property in Ft. Myers, Florida, as tenants-in-common, with CNL
Income Fund XV, Ltd., an affiliate of the General Partners. The agreements
provide for the Partnership and the affiliates to share in the profits and
losses of the Property and net cash flow from the Properties, in proportion to
each co-tenant's percentage interest. The Partnership owns a 23.04%, an 18
percent, a 34.74%, a 46.2% and an 85 percent interest in the Properties in
Vancouver, Washington; Clinton, North Carolina; Overland Park, Kansas; Memphis,
Tennessee; and Ft. Myers, Florida, respectively.
Each of the affiliates is a limited partnership organized pursuant to the
laws of the State of Florida. The tenancy in common agreement restricts each
co-tenant's ability to sell, transfer, or assign its interest in the tenancy in
common's Property without first offering it for sale to the remaining co-tenant.
The use of joint venture and tenancy in common arrangements allows the
Partnership to fully invest its available funds at times at which it would not
have sufficient funds to purchase an additional property, or at times when a
suitable opportunity to purchase an additional property is not available. The
use of joint venture and tenancy in common arrangements also provides the
Partnership with increased diversification of its portfolio among a greater
number of properties. In addition, tenancy in common arrangements may allow
the Partnership to defer the gain for federal income tax purposes upon the sale
of the property if the proceeds are reinvested in an additional property.
Certain Management Services
CNL Fund Advisors, Inc., an affiliate of the General Partners, provides
certain services relating to management of the Partnership and its Properties
pursuant to a management agreement with the Partnership. Under this agreement,
CNL Fund Advisors, Inc. is 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 Fund Advisors, Inc. also assists the General Partners in
negotiating the leases. For these services, the Partnership has agreed to pay
CNL Fund Advisors, Inc. 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"). In any year in which the Limited Partners have not
received the 10% Preferred Return, no property management fee will be paid.
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.
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.
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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 17th day of
December, 1999.
CNL INCOME FUND VI, LTD.
By: CNL REALTY CORPORATION
General Partner
/s/ Robert A. Bourne
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ROBERT A. BOURNE, President
By: ROBERT A. BOURNE
General Partner
/s/ Robert A. Bourne
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ROBERT A. BOURNE
By: JAMES M. SENEFF, JR.
General Partner
/s/ James M. Seneff, Jr.
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JAMES M. SENEFF, JR.
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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.
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Signature Title Date
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/s/ Robert A. Bourne President, Treasurer and Director December 17, 1999
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Robert A. Bourne (Principal Financial and Accounting
Officer)
/s/ James M. Seneff, Jr. Chief Executive Officer and Director December 17, 1999
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James M. Seneff, Jr. (Principal Executive Officer)
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