FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT of 1934
For the quarterly period ended September 30, 2000
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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
0-19140
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CNL Income Fund VII, Ltd.
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(Exact name of registrant as specified in its charter)
Florida 59-2963871
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
450 South Orange Avenue
Orlando, Florida 32801-3336
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number
(including area code) (407) 540-2000
------------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No _________
<PAGE>
CONTENTS
Part I Page
Item 1. Financial Statements:
Condensed Balance Sheets 1
Condensed Statements of Income 2
Condensed Statements of Partners' Capital 3
Condensed Statements of Cash Flows 4
Notes to Condensed Financial Statements 5-8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9-13
Item 3. Quantitative and Qualitative Disclosures About
Market Risk 13
Part II
Other Information 14-15
<PAGE>
CNL INCOME FUND VII, LTD.
(A Florida Limited Partnership)
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
------------------ -------------------
<S> <C>
ASSETS
Land and buildings on operating leases, less
accumulated depreciation $ 11,514,545 $ 13,984,334
Net investment in direct financing leases 2,873,609 3,273,155
Investment in joint ventures 5,561,928 4,605,906
Mortgage notes receivable, less deferred gain of
$123,319 and $124,143, respectively 997,218 994,408
Cash and cash equivalents 1,721,121 925,348
Restricted cash 1,503,929 --
Receivables, less allowance for doubtful accounts
of $16,679 for the year ended 1999 24,209 72,644
Prepaid expenses 25,919 14,220
Accrued rental income, less allowance for doubtful
accounts of $9,845 in 2000 and 1999 1,166,327 1,215,696
Other assets 60,422 60,422
------------------ -------------------
$ 25,449,227 $ 25,146,133
================== ===================
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 28,527 $ 96,894
Distributions payable 675,000 675,000
Due to related parties 92,180 59,131
Rents paid in advance and deposits 3,000 10,107
------------------ -------------------
Total liabilities 798,707 841,132
Minority interest 144,647 145,515
Partners' capital 24,505,873 24,159,486
------------------ -------------------
$ 25,449,227 $ 25,146,133
================== ===================
See accompanying notes to condensed financial statements.
<PAGE>
CNL INCOME FUND VII, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF INCOME
Quarter Ended Nine Months Ended
September 30, September 30,
2000 1999 2000 1999
------------ ------------ ------------- ------------
Revenues:
Rental income from operating leases $441,670 $ 465,767 $1,376,390 $1,448,945
Earned income from direct financing leases 96,044 100,506 293,376 303,583
Contingent rental income 2,331 3,197 8,846 6,876
Interest and other income 57,404 51,251 139,145 135,390
------------ ------------ ------------- ------------
597,449 620,721 1,817,757 1,894,794
------------ ------------ ------------- ------------
Expenses:
General operating and administrative 50,258 31,954 139,566 95,781
Professional services 3,755 5,417 18,965 17,202
State and other taxes -- -- 14,430 13,055
Depreciation and amortization 64,742 71,540 207,298 222,259
Transaction costs -- 58,043 65,043 169,940
------------ ------------ ------------- ------------
118,755 166,954 445,302 518,237
------------ ------------ ------------- ------------
Income Before Minority Interest in Income of
Consolidated Joint Venture, Equity in Earnings
of Unconsolidated Joint Ventures, and
Gain on Sale of Land and Buildings 478,694 453,767 1,372,455 1,376,557
Minority Interest in Income of Consolidated
Joint Venture (4,710 ) (4,674 ) (14,027 ) (13,954 )
Equity in Earnings of Unconsolidated Joint
Ventures 108,790 73,394 295,584 341,768
Gain on Sale of Land and Buildings 619,811 287 717,375 189,531
------------ ------------ ------------- ------------
Net Income $1,202,585 $ 522,774 $2,371,387 $1,893,902
============ ============ ============= ============
Allocation of Net Income:
General partners $ 10,391 $ 5,228 $ 22,079 $ 18,705
Limited partners 1,192,194 517,546 2,349,308 1,875,197
------------ ------------ ------------- ------------
$1,202,585 $ 522,774 $2,371,387 $1,893,902
============ ============ ============= ============
Net Income Per Limited Partner Unit $ 0.040 $ 0.017 $ 0.078 $ 0.063
============ ============ ============= ============
Weighted Average Number of Limited Partner
Units Outstanding 30,000,000 30,000,000 30,000,000 30,000,000
============ ============ ============= ============
See accompanying notes to condensed financial statements.
<PAGE>
CNL INCOME FUND VII, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF PARTNERS' CAPITAL
Nine Months Ended Year Ended
September 30, December 31,
2000 1999
------------------------- ---------------------
General partners:
Beginning balance $ 230,931 $ 205,744
Net income 22,079 25,187
------------------------- ---------------------
253,010 230,931
------------------------- ---------------------
Limited partners:
Beginning balance 23,928,555 24,108,052
Net income 2,349,308 2,520,503
Distributions ($0.0675 and $0.090 per
limited partner unit, respectively) (2,025,000 ) (2,700,000 )
------------------------- ---------------------
24,252,863 23,928,555
------------------------- ---------------------
Total partners' capital $ 24,505,873 $ 24,159,486
========================= =====================
See accompanying notes to condensed financial statements.
<PAGE>
CNL INCOME FUND VII, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF CASH FLOWS
Nine Months Ended
September 30,
2000 1999
---------------- ---------------
Increase (Decrease) in Cash and Cash Equivalents
Net Cash Provided by Operating Activities $1,942,752 $2,072,209
---------------- ---------------
Cash Flows from Investing Activities:
Proceeds from sale of land and building 3,397,334 1,059,954
Increase in restricted cash (1,503,682 ) (1,061,529 )
Return of capital from joint venture 460,885 --
Investment in joint ventures (1,469,000 ) --
Collections on mortgage notes receivable 7,379 243,093
---------------- ---------------
Net cash provided by investing activities 892,916 241,518
---------------- ---------------
Cash Flows from Financing Activities:
Distributions to limited partners (2,025,000 ) (2,025,000 )
Distributions to holder of minority interest (14,895 ) (14,774 )
---------------- ---------------
Net cash used in financing activities (2,039,895 ) (2,039,774 )
---------------- ---------------
Net Increase in Cash and Cash Equivalents 795,773 273,953
Cash and Cash Equivalents at Beginning of Period 925,348 856,825
---------------- ---------------
Cash and Cash Equivalents at End of Period $1,721,121 $1,130,778
================ ===============
Supplemental Schedule of Non-Cash Financing
Activities:
Distributions declared and unpaid at end of
quarter $ 675,000 $ 675,000
================ ===============
See accompanying notes to condensed financial statements.
</TABLE>
<PAGE>
CNL INCOME FUND VII, LTD.
(A Florida Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS
Quarters and Nine Months Ended September 30, 2000 and 1999
1. Basis of Presentation:
The accompanying unaudited condensed financial statements have been
prepared in accordance with the instructions to Form 10-Q and do not
include all of the information and note disclosures required by
generally accepted accounting principles. The financial statements
reflect all adjustments, consisting of normal recurring adjustments,
which are, in the opinion of management, necessary to a fair statement
of the results for the interim periods presented. Operating results for
the quarter and nine months ended September 30, 2000, may not be
indicative of the results that may be expected for the year ending
December 31, 2000. Amounts as of December 31, 1999, included in the
financial statements, have been derived from audited financial
statements as of that date.
These unaudited financial statements should be read in conjunction with
the financial statements and notes thereto included in Form 10-K of CNL
Income Fund VII, Ltd. (the "Partnership") for the year ended December
31, 1999.
The Partnership accounts for its 83 percent interest in San Antonio
#849 Joint Venture using the consolidation method. Minority interest
represents the minority joint venture partners' proportionate share of
the equity in the Partnership's consolidated joint venture. All
significant intercompany accounts and transactions have been
eliminated.
2. Land and Buildings on Operating Leases:
Land and buildings on operating leases consisted of the following at:
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
------------------ -----------------
<S> <C>
Land $ 7,012,561 $ 8,010,699
Building 6,671,945 8,576,088
------------------ -----------------
13,684,506 16,586,787
Less accumulated depreciation (2,169,961 ) (2,602,453 )
------------------ -----------------
$ 11,514,545 $ 13,984,334
================== =================
</TABLE>
<PAGE>
CNL INCOME FUND VII, LTD.
(A Florida Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS
Quarters and Nine Months Ended September 30, 2000 and 1999
2. Land and Buildings on Operating Leases - Continued:
In June 2000, the Partnership sold its property in Pueblo, Colorado to
a third party for $1,005,000, resulting in a gain of approximately
$97,100 for financial reporting purposes. This property was originally
acquired by the Partnership in August 1990 and had a cost of
approximately $961,600, excluding acquisition fees and miscellaneous
acquisition expenses; therefore, the Partnership sold the property for
approximately $43,400 in excess of its original purchase price.
In September, the Partnership sold three properties in Jacksonville,
Florida, one property in Brunswick, Georgia and one property in Lake
City, Florida, to a third party for $2,404,835 and received net sales
proceeds of approximately $2,392,300 resulting in a gain of
approximately $619,500 for financial reporting purposes. These
properties were originally acquired by the partnership in April and
November of 1990 and had a cost of approximately $2,100,214, excluding
acquisition fees and miscellaneous acquisition expenses; therefore, the
Partnership sold the properties for approximately $292,100 in excess of
their original purchase price.
3. Investment in Joint Ventures:
In June 1999, Halls Joint Venture, in which the Partnership owned a
51.1% interest, sold its property to the tenant in accordance with the
purchase option under the lease agreement. As of September 30, 2000,
the Partnership and the joint venture partner had liquidated the joint
venture and the Partnership had received approximately $460,900
representing its pro rata share of the liquidation proceeds of the
joint venture.
In 2000, the Partnership used the liquidation proceeds received from
the liquidation of Halls Joint Venture, as described above, to enter
into a joint venture arrangement, TGIF Pittsburgh Joint Venture, with
CNL Income Fund XV, Ltd., CNL Income Fund XVI, Ltd. and CNL Income Fund
XVIII, Ltd., each a Florida limited partnership and an affiliate of the
general partners, to hold one restaurant property. The Partnership
accounts for its investment using the equity method since the
Partnership shares control with affiliates. As of September 30, 2000,
the Partnership owned a 17.16% interest in the profits and losses of
the joint venture.
In August 2000, the Partnership reinvested the majority of the net
sales proceeds from the 2000 sale of the Property in Pueblo, Colorado,
in a Property in Colorado Springs, Colorado, as tenants-in-common with
CNL Income Fund XII, Ltd. ("CNL XII"), an affiliate of the general
partners. In connection therewith, the Partnership and the affiliate
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. The Partnership and CNL
<PAGE>
CNL INCOME FUND VII, LTD.
(A Florida Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS
Quarters and Nine Months Ended September 30, 2000 and 1999
3. Investment in Joint Ventures - Continued:
XII acquired this Property from CNL BB Corp., an affiliate of the
general partners. As of September 30, 2000, the Partnership owned a 43
percent interest in the Property in Colorado Springs, Colorado.
The following presents the combined, condensed financial information
for the joint ventures and the properties held as tenants-in-common
with affiliates at:
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
-------------------- ---------------------
<S> <C>
Land and buildings on operating leases,
less accumulated depreciation $ 16,929,651 $ 11,427,388
Net investment in direct financing lease 924,841 932,696
Cash 224,624 962,409
Receivables 6,470 39,213
Accrued rental income 201,470 148,868
Other assets 1,498 1,917
Liabilities 490,849 68,783
Partners' capital 17,797,705 13,443,708
Revenues 1,101,356 1,297,799
Gain on sale of land and building -- 239,336
Net income 873,625 1,246,689
</TABLE>
The Partnership recognized income totaling $295,584 and $341,768 during
the nine months ended September 30, 2000 and 1999, respectively, from
these joint ventures and the properties held as tenants-in-common with
affiliates, of which $108,790 and $73,394 was earned during the
quarters ended September 30, 2000 and 1999, respectively.
4. Related Party Transactions:
During the nine months ended September 30, 2000, the Partnership and
CNL Income Fund XII, Ltd., as tenants-in-common, acquired an interest
in a Bennigan's property from CNL BB Corp., an affiliate of the general
partners, for a purchase price of $2,226,134. CNL BB Corp. had
purchased and temporarily held title to this property in order to
facilitate the acquisition of the property by the Partnership. The
purchase price paid by
<PAGE>
CNL INCOME FUND VII, LTD.
(A Florida Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS
Quarters and Nine Months Ended September 30, 2000 and 1999
3. Related Party Transactions - Continued:
the Partnership represents the costs incurred by CNL BB Corp. to
acquire and carry the property, including closing costs. In accordance
with the Statement of Policy of Real Estate Programs for the North
American Securities Administrators Association, Inc., all income,
expenses, profits and losses generated by or associated with the
property, were treated as belonging to the Partnership. For the nine
months ended September 30, 2000, other income of the tenants-in-common
includes $3,693 of such amounts.
5. Termination of Merger:
On March 1, 2000, the general partners and CNL American Properties
Fund, Inc. ("APF") mutually agreed to terminate the Agreement and Plan
of Merger entered into in March 1999. The general partners are
continuing to evaluate strategic alternatives for the Partnership,
including alternatives to provide liquidity to the limited partners.
6. Subsequent Events:
In October 2000, the Partnership used the majority of the net sale
proceeds from the sales of the properties in Brunswick, Georgia and
Jacksonville, Florida, to acquire a 33 percent and 12 percent interest
in Duluth Joint Venture from CNL Income Fund XV, Ltd. and CNL Income
Fund V, Ltd., respectively. CNL Income Fund XV, Ltd. and CNL Income
Fund V, Ltd., are affiliates of the general partners.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
CNL Income Fund VII, Ltd. (the "Partnership") is a Florida limited
partnership that was organized on August 18, 1989, to acquire for cash, either
directly or through joint venture arrangements, both newly constructed and
existing restaurants, as well as land upon which restaurants were to be
constructed (the "Properties"), which are leased primarily to operators of
national and regional fast-food restaurant chains. The leases generally are
triple-net leases, with the lessees responsible for all repairs and maintenance,
property taxes, insurance and utilities. As of September 30, 2000, the
Partnership owned 36 Properties, which included interests in eleven Properties
owned by joint ventures in which the Partnership is a co-venturer and four
Properties owned with affiliates of the general partners as tenants-in-common.
Capital Resources
The Partnership's primary source of capital for the nine months ended
September 30, 2000 and 1999 was cash from operations (which includes cash
received from tenants, distributions from joint ventures, and interest and other
income received, less cash paid for expenses). Cash from operations was
$1,942,752 and $2,072,209 for the nine months ended September 30, 2000 and 1999,
respectively. The decrease in cash from operations for the nine months ended
September 30, 2000, as compared to the nine months ended September 30, 1999, was
primarily a result of changes in income and expenses as described in "Results of
Operations" below and changes in the Partnership's working capital.
Other sources and uses of capital included the following during the
nine months ended September 30, 2000.
In June 1999, Halls Joint Venture, in which the Partnership owned a
51.1% interest, sold its Property to the tenant in accordance with the purchase
option under the lease agreement. As of September 30, 2000, the Partnership and
the joint venture partner had liquidated the joint venture and the Partnership
had received approximately $460,900 representing its pro rata share of the
liquidation proceeds of the joint venture. The Partnership used the liquidation
proceeds to enter into a joint venture arrangement, TGIF Pittsburgh Joint
Venture, with CNL Income Fund XV, Ltd., CNL Income Fund XVI, Ltd. and CNL Income
Fund XVIII, Ltd., each a Florida limited partnership and an affiliate of the
general partners, to hold one restaurant property. The Partnership will
distribute amounts sufficient to enable the limited partners to pay federal and
state income taxes, if any (at a level reasonably assumed by the general
partners), resulting from the sale.
In June 2000, the Partnership sold its Property in Pueblo, Colorado to
a third party for $1,005,000, resulting in a gain of approximately $97,100 for
financial reporting purposes. This Property was originally acquired by the
Partnership in August 1990 and had a cost of approximately $961,600, excluding
acquisition fees and miscellaneous acquisition expenses; therefore, the
Partnership sold the Property for approximately $43,400 in excess of its
original purchase price. In August 2000, the Partnership reinvested the majority
of these net sales proceeds in a Property in Colorado Springs, Colorado, as
tenants-in-common with CNL Income Fund XII, Ltd. ("CNL XII"), a Florida limited
partnership and an affiliate of the general partners. In connection therewith,
the Partnership and the affiliate 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. The Partnership and CNL XII acquired this
Property from CNL BB Corp., an affiliate of the general partners. The
transaction, or a portion thereof, relating to the sale of the Property in
Pueblo, Colorado, and the reinvestment of the net sales proceeds in the Property
in Colorado Springs, Colorado, as tenants-in-common, was structured to qualify
as a like-kind exchange transaction for federal income tax purposes. As of
September 30, 2000, the Partnership owned a 43 percent interest in the Property
in Colorado Springs, Colorado.
In September 2000, the Partnership sold three properties in
Jacksonville, Florida, one property in Brunswick, Georgia and one property in
Lake City, Florida, to a third party for $2,404,835 and received net sales
proceeds of approximately $2,392,300 resulting in a gain of approximately
$619,500 for financial reporting purposes. These properties were originally
acquired by the partnership in April and November of 1990 and had a cost of
approximately $2,100,214, excluding acquisition fees and miscellaneous
acquisition expenses; therefore, the Partnership sold the property for
approximately $292,100 in excess of its original purchase price. The Partnership
intends to reinvest the majority of the net sale proceeds in an additional
Property. The Partnership will distribute amounts sufficient to enable the
limited partners to pay federal and state income taxes, if any (at a level
reasonably assumed by the general partners), resulting from the sale.
In October 2000, the Partnership used the majority of the net sale
proceeds from the sales of the Properties in Brunswick, Georgia and
Jacksonville, Florida, to acquire a 33 percent and 12 percent interest in Duluth
Joint Venture from CNL Income Fund XV, Ltd. and CNL Income Fund V, Ltd.,
respectively. CNL Income Fund XV, Ltd. and CNL Income Fund V, Ltd., are a
Florida limited Partnership and are affiliates of the general partners.
Currently, rental income from the Partnership's Properties and net
sales proceeds from the sale of Properties are invested in money market accounts
or other short-term, highly liquid investments, such as demand deposit accounts
at commercial banks and certificates of deposit with less than a 30-day maturity
date, pending the Partnership's use of such funds to pay Partnership expenses,
to make distributions to the partners or to reinvest in an additional Property.
At September 30, 2000, the Partnership had $1,721,121 invested in such
short-term investments, as compared to $925,348 at December 31, 1999. The
increase in cash and cash equivalents was primarily due to the receipt of net
sales proceeds from the sale of Properties, as described above. The funds
remaining at September 30, 2000, after payment of distributions and other
liabilities, will be used to purchase additional Properties and to meet the
Partnership's working capital and other needs.
Short-Term Liquidity
The Partnership's short-term liquidity requirements consist primarily
of the operating expenses of the Partnership.
The Partnership's investment strategy of acquiring Properties for cash
and leasing them under triple-net leases to operators who generally meet
specified financial standards minimizes the Partnership's operating expenses.
The general partners believe that the leases will continue to generate cash flow
in excess of operating expenses.
The general partners have the right, but not the obligation, to make
additional capital contributions if they deem it appropriate in connection with
the operations of the Partnership.
Total liabilities of the Partnership, including distributions payable,
decreased to $798,707 at September 30, 2000, from $841,132 at December 31, 1999.
The decrease in liabilities was primarily a result of a decrease in accounts
payable at September 30, 2000, as compared to December 31, 1999. The general
partners believe that the Partnership has sufficient cash on hand to meet its
current working capital needs.
The Partnership generally distributes cash from operations remaining
after the payment of operating expenses of the Partnership, to the extent that
the general partners determine that such funds are available for distribution.
Based on current and anticipated future cash from operations, the Partnership
declared distributions to the limited partners of $2,025,000 for each of the
nine months ended September 30, 2000 and 1999 ($675,000 for each of the quarters
ended September 30, 2000 and 1999). This represents distributions for each
applicable nine months of $0.0675 per unit ($0.023 per unit for each applicable
quarter). No distributions were made to the general partners for the quarters
and nine months ended September 30, 2000 and 1999. No amounts distributed to the
limited partners for the nine months ended September 30, 2000 and 1999, are
required to be or have been treated by the Partnership as a return of capital
for purposes of calculating the limited partners' return on their adjusted
capital contributions. The Partnership intends to continue to make distributions
of cash available for distribution to the limited partners on a quarterly basis.
Long-Term Liquidity
The Partnership has no long-term debt or other long-term liquidity
requirements.
Results of Operations
During the nine months ended September 30, 1999, the Partnership and
its consolidated joint venture, San Antonio #849 Joint Venture, owned and leased
29 wholly owned Properties to operators of fast-food and family-style restaurant
chains (which included one Property which was sold in 1999). During the nine
months ended September 30, 2000, the Partnership and San Antonio #849 Joint
Venture owned and leased 28 wholly owned properties to operators of fast-food
and family-style restaurant chains (which included six Properties sold during
2000). In connection therewith, during the nine months ended September 30, 2000
and 1999, the Partnership and San Antonio #849 Joint Venture earned $1,669,766
and $1,752,528, respectively, in rental income from operating leases and earned
income from direct financing leases, $537,714 and $566,273 of which was earned
during the quarters ended September 30, 2000 and 1999, respectively. The
decrease in rental and earned income for the quarter and nine months ended
September 30, 2000, as compared to the quarter and nine months ended September
30, 1999, was primarily due to the sales of the Property in 1999 and six
Properties in 2000, as described above in "Capital Resources." Rental and earned
income are expected to remain at reduced amounts while equity in earnings of
joint ventures is expected to remain at increased amounts due to the fact that
the Partnership reinvested these net sales proceeds in Properties with
affiliates of the general partners as tenants-in-common and in joint venture
arrangements.
During the nine months ended September 30, 1999, the Partnership owned
and leased nine Properties indirectly through other joint venture arrangements
(which included one Property in Halls Joint Venture which was sold in 1999) and
owned two Properties indirectly with affiliates of the general partners as
tenants-in-common. During the nine months ended September 30, 2000, the
Partnership owned and leased ten Properties through joint venture arrangements
and owned three Properties indirectly with affiliates of the general partners,
as tenants-in-common. In connection therewith, during the nine months ended
September 30, 2000 and 1999, the Partnership earned $295,584 and $341,768,
respectively, $108,790 and $73,394 of which was earned during the quarters ended
September 30, 2000 and 1999, respectively. The decrease in net income earned by
joint ventures was primarily due to the fact that in June 1999, Halls Joint
Venture, in which the Partnership owns a 51.1% interest, recognized a gain of
approximately $239,300. The decrease was partially offset by the fact that the
Partnership reinvested the net sales proceeds received from the 1999 sale of a
Property in Maryville, Tennessee and the net sales proceeds from Halls Joint
Venture and the 2000 sale of a Property in Pueblo, Colorado, in two Properties
each with an affiliate of the general partners as tenants-in-common, and in a
joint venture arrangement, as described in "Capital Resources."
Operating expenses, including depreciation expense, were $445,302 and
$518,237 for the nine months ended September 30, 2000 and 1999, respectively,
$118,755 and $166,954 of which were incurred during the quarters ended September
30, 2000 and 1999, respectively. Operating expenses decreased partially due to
the fact that the Partnership incurred less transaction costs during the quarter
and nine months ended September 30, 2000 related to the general partners
retaining financial and legal advisors to assist them in evaluating and
negotiating the proposed merger with CNL American Properties Fund, Inc. ("APF"),
due to the termination of the merger as described below in "Termination of
Merger." In addition, the decrease during the quarter and nine months ended
September 30, 2000 was partially attributable to a decrease in depreciation
expense as a result of the sale of one Property in June 1999 and six Properties
in 2000. The decrease in operating expenses was partially offset by an increase
in administrative expenses for servicing the Partnership and its Properties.
As a result of the sale of the Property in Florence, South Carolina, in
August 1995, and recording the gain using the installment method, the
Partnership recognized a gain for financial reporting purposes of $824 and $840
for the nine months ended September 30, 2000 and 1999, respectively, $316 and
$287 of which was recognized for the quarters ended September 30, 2000 and 1999,
respectively. In addition, as a result of the sales of five and six Properties
during the quarter and nine months ended September 30, 2000, respectively, as
described above in "Capital Resources," the Partnership recognized a gain of
$619,495 and $716,551 for financial reporting purposes during the quarter and
nine months ended September 30, 2000, respectively. As a result of the 1999 sale
of the Partnership's Property in Maryville, Tennessee, the Partnership
recognized a gain of $188,691 for financial reporting purposes during the
quarter and nine months ended September 30,1999.
Termination of Merger
On March 1, 2000, the general partners and APF mutually agreed to
terminate the Agreement and Plan of Merger entered into in March 1999. The
general partners are continuing to evaluate strategic alternatives for the
Partnership, including alternatives to provide liquidity to the limited
partners.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
No material changes in the Partnership's market risk occurred from
December 31, 1999 through September 30, 2000. Information regarding the
Partnership's market risk at December 31, 1999 is included in its Annual Report
on Form 10-K for the year ended December 31, 1999.
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings. Inapplicable.
Item 2. Changes in Securities. Inapplicable.
Item 3. Default upon Senior Securities. Inapplicable.
Item 4. Submission of Matters to a Vote of Security Holders. Inapplicable.
Item 5. Other Information. Inapplicable.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
3.1 Affidavit and Certificate of Limited Partnership of
CNL Income Fund VII, Ltd. (Included as Exhibit 4.1 to
Registration Statement No. 33-31482 on Form S-11 and
incorporated herein by reference.)
4.1 Affidavit and Certificate of Limited Partnership of
CNL Income Fund VII, Ltd. (Included as Exhibit 4.1 to
Registration Statement No. 33-31482 on Form S-11 and
incorporated herein by reference.)
4.2 Amended and Restated Agreement of Limited Partnership
of CNL Income Fund VII, 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 between CNL Income Fund VII, Ltd.
and CNL Investment Company (Included as Exhibit 10.1
to Form 10-K filed with the Securities and Exchange
Commission on April 1, 1996, 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.)
<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) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended
September 30, 2000.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
DATED this 10th day of November, 2000
CNL INCOME FUND VII, LTD.
By: CNL REALTY CORPORATION
General Partner
By:/s/ James M. Seneff, Jr.
---------------------------
JAMES M. SENEFF, JR.
Chief Executive Officer
(Principal Executive Officer)
By:/s/ Robert A. Bourne
---------------------------
ROBERT A. BOURNE
President and Treasurer
(Principal Financial and
Accounting Officer)
