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, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-20017
CNL INCOME FUND IX, LTD.
(Exact name of registrant as specified in its charter)
Florida 59-3004138
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
400 East South Street
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 ($10 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 $10 per Unit.
DOCUMENTS INCORPORATED BY REFERENCE:
None
<PAGE>
PART I
Item 1. Business
CNL Income Fund IX, Ltd. (the "Registrant" or the "Partnership") is a
limited partnership which was organized pursuant to the laws of the State of
Florida on April 16, 1990. 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 March 20, 1991, the Partnership offered
for sale up to $35,000,000 in limited partnership interests (the "Units")
(3,500,000 Units each at $10 per Unit) pursuant to a registration statement on
Form S-11 under the Securities Act of 1933, as amended. The offering terminated
on September 6, 1991, 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 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
$30,800,000, and were used to acquire 40 Properties, including 13 Properties
owned by joint ventures in which the Partnership is a co-venturer, and to
establish a working capital reserve for Partnership purposes. During the year
ended December 31, 1997, the Partnership sold its Property in Alpharetta,
Georgia, and reinvested the net sales proceeds in an IHOP Property located in
Englewood, Colorado, with an affiliate of the General Partners, as
tenants-in-common. As a result of the above transactions, as of December 31,
1997, the Partnership owned 40 Properties, including 13 Properties owned by
joint ventures in which the Partnership is a co-venturer and one Property owned
with an affiliate as tenants-in-common. The Partnership leases the Properties on
a triple-net basis with the lessees 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 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, generally provide
for initial terms ranging from 10 to 20 years (the average being 17 years), and
expire between 2005 and 2017. The 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
$50,400 to $171,400. In addition, generally the leases provide for percentage
rent, based on sales in excess of a specified amount. In addition, a majority of
the leases provide that, commencing in specified lease years (ranging from the
third to the sixth lease year), the annual base rent required under the terms of
the lease will increase.
Generally, the leases of the Properties provide for two to 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 after a specified portion of
the lease term has elapsed. Under the terms of certain leases, the option
purchase price may equal the Partnership's original cost to purchase the
Property (including acquisition costs), plus a specified percentage from the
date of the lease or a specified percentage of the Partnership's purchase price,
if that amount is greater than the Property's fair market value at the time the
purchase option is exercised.
1
<PAGE>
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 1994, a temporary operator assumed operations of the restaurant
business located at the Copley Township, Ohio Property and paid the Partnership
rent on a month-to-month basis. During 1995, a new temporary operator assumed
operations of the restaurant business for this Property and was paying the
Partnership rent on a month-to-month basis. During 1997, the Partnership
re-leased this Property to Shells Seafood Restaurants. The new lease terms for
this Property are substantially the same as the Partnership's other leases as
described above in the first two paragraphs of this section.
Major Tenants
During 1997, five of the Partnership's lessees (or group of affiliated
lessees), (i) Carrols Corporation, (ii) TPI Restaurants, Inc., (iii) Flagstar
Enterprises, Inc., (iv) Burger King Corporation and BK Acquisition, Inc. (which
are affiliated entities under common control) (herinafter referred to as Burger
King Corp.) and (v) Golden Corral Corporation, each contributed more than ten
percent of the Partnership's total rental income (including the Partnership's
share of rental income from 13 Properties owned by joint ventures and one
Property owned as tenants-in-common). As of December 31, 1997, Carrols
Corporation was the lessee under leases relating to four restaurants, TPI
Restaurants, Inc. was the lessee under leases relating to five restaurants,
Flagstar Enterprises, Inc. was the lessee under leases relating to six
restaurants, Burger King Corp. was the lessee under leases relating to the 13
restaurants owned by joint ventures and Golden Corral Corporation was the lessee
under leases relating to two restaurants. It is anticipated that, based on the
minimum rental payments required by the leases, these five lessees or groups of
affiliated lessees each will continue to contribute more than ten percent of the
Partnership's total rental income in 1998 and subsequent years. In addition,
four Restaurant Chains, Burger King, Hardee's, Shoney's and Golden Corral Family
Steakhouse Restaurants ("Golden Corral"), each accounted for more than ten
percent of the Partnership's total rental income during 1997 (including the
Partnership's share of the rental income from 13 Properties owned by joint
ventures and one Property owned as tenants-in-common). In subsequent years, it
is anticipated that these four Restaurant Chains each will continue to account
for more than ten percent of the total rental income to which the Partnership is
entitled under the terms of its leases. Any failure of these lessees or
Restaurant Chains could materially affect the Partnership's income. 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 three separate joint venture
arrangements, CNL Restaurant Investments II, CNL Restaurant Investments III and
Ashland Joint Venture, with affiliates of the General Partners to purchase and
hold 13 Properties.
The joint venture arrangements provide for the Partnership and its
joint venture partners to share in all costs and benefits associated with the
joint ventures in accordance with their respective percentage interests in the
joint ventures. The Partnership and its joint venture partners are also jointly
and severally liable for all debts, obligations and other liabilities of the
joint ventures.
CNL Restaurant Investments II's and CNL Restaurant Investments III's
joint venture agreements do not provide a fixed term, but continue in existence
until terminated by any of the joint venturers. Ashland Joint Venture has an
initial term of 30 years and, after the expiration of the initial term,
continues in existence from year to year unless terminated at the option of any
of the joint venturers 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 partners to dissolve the 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 partners, 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.
2
<PAGE>
Net cash flow from operations of CNL Restaurant Investments II, CNL
Restaurant Investments III and Ashland Joint Venture is distributed 45.2%, 50
percent and 27.33%, respectively, to the Partnership and the balance is
distributed to each of the other joint venture partners in accordance with their
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, in July 1997, the
Partnership entered into an agreement to hold an IHOP 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 67.23% interest in this Property.
Certain Management Services
CNL Income Fund Advisors, Inc., 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
September 30, 1995. Under this agreement, CNL Income Fund Advisors, Inc. 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 Income Fund Advisors, Inc. also
assisted the General Partners in negotiating the leases. For these services, the
Partnership had agreed to pay CNL Income 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, 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 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.
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.
3
<PAGE>
Item 2. Properties
As of December 31, 1997, the Partnership owned, either directly or
through joint venture arrangements, 40 Properties, located in 17 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 21,400
to 169,800 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
2,100 to 10,600 square feet. All buildings on Properties 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, 1997 (see Item 1. Business -
Major Tenants), are substantially the same as those described in Item 1.
Business - Leases.
Carrols Corporation leases four Burger King restaurants. The initial
term of each lease is 20 years (expiring in 2011) and the average minimum base
annual rent is approximately $112,300 (ranging from approximately $108,000 to
$121,200).
TPI Restaurants, Inc. leases four Shoney's restaurants and one Captain
D's restaurant. The initial term of each lease is 15 years (expiring in 2006)
and the average minimum base annual rent is approximately $111,500 (ranging from
approximately $64,200 to $161,000).
Flagstar Enterprises, Inc. leases six Hardee's restaurants. The initial
term of each lease is 20 years (expiring in 2011) and the average minimum base
annual rent is approximately $74,400 (ranging from approximately $51,500 to
$93,700).
Burger King Corporation leases 13 Burger King restaurants with an
initial term of 14 years (expiring between 2005 and 2006) and the average
minimum base annual rent is approximately $103,700 (ranging from approximately
$73,800 to $134,100).
Golden Corral Corporation leases two Golden Corral restaurants with an
initial term of 15 years (expiring in 2005) and the average minimum base annual
rent is approximately $164,500 (ranging from approximately $157,500 to
$171,400).
The General Partners consider the Properties to be well-maintained and
sufficient for the Partnership's operations.
4
<PAGE>
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, 1998, there were 3,405 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. Since inception,
the price for any Unit transferred pursuant to the Plan has been $9.50 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 1997 and 1996 other than
pursuant to the Plan, net of commissions.
<TABLE>
<CAPTION>
1997 (1) 1996 (1)
---------------------------------- ----------------------
<S> <C>
High Low Average High Low Average
First Quarter $ 9.50 $ 8.35 $ 9.12 $10.00 $ 9.50 $ 9.67
Second Quarter 10.00 8.10 9.10 9.50 9.50 9.50
Third Quarter 9.50 7.90 9.04 9.50 6.67 9.82
Fourth Quarter (2) (2) (2) 9.50 9.09 9.36
</TABLE>
(1) A total of 22,979 and 29,614 Units were transferred other than pursuant
to the Plan for the years ended December 31, 1997 and 1996,
respectively.
(2) No transfer of Units took place during the quarter other than pursuant to
the Plan.
The capital contribution per Unit was $10. All cash available for
distribution will be distributed to the partners pursuant to the provisions of
the Partnership Agreement.
For the years ended December 31, 1997 and 1996 the Partnership declared
cash distributions in the aggregate amounts of $3,150,004 and $3,185,004,
respectively, to the Limited Partners. During the quarter ended December 31,
1996, the Partnership declared a special distribution to the Limited Partners of
$35,000 which represented cumulative excess operating reserves. The General
Partners anticipate that the Partnership will declare a special distribution to
the Limited Partners during the quarter ending March 31, 1998, representing
cumulative excess operating reserves. No amounts distributed to partners for the
years ended December 31, 1997 and 1996, are required to be or have been treated
by the Partnership as a return of capital for purposes of calculating the
Limited Partners' return on their adjusted capital contributions. 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 such distributions
on this basis.
5
<PAGE>
Quarter Ended 1997 1996
------------- -------- ------
March 31 $787,501 $787,501
June 30 787,501 787,501
September 30 787,501 787,501
December 31 787,501 822,501
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>
1997 1996 1995 1994 1993
-------------- -------------- ------------- ------------- -------------
<S> <C>
Year ended December 31:
Revenues (1) $ 3,230,343 $ 3,404,066 $ 3,428,147 $ 3,362,394 $ 3,504,029
Net income (3) 2,937,632 2,960,299 2,987,971 3,003,583 3,116,862
Cash distributions
declared (2) 3,150,004 3,185,004 3,185,004 3,150,002 3,150,000
Net income per Unit 0.83 0.84 0.85 0.85 0.88
Cash distributions
declared per Unit (2) 0.90 0.91 0.91 0.90 0.90
At December 31:
Total assets $31,096,421 $31,343,847 $31,517,255 $31,735,391 $31,854,573
Partners' capital 30,147,224 30,359,596 30,584,301 30,781,334 30,927,753
</TABLE>
(1) Revenues include equity in earnings of joint ventures.
(2) Distributions for the years ended December 31, 1996 and 1995, each
include a special distribution to the Limited Partners of $35,000,
which represented cumulative excess operating reserves.
(3) Net income for the year ended December 31, 1997, includes $199,643 from
a gain on sale of land and building.
The above selected financial data should be read in conjunction with
the financial statements and related notes contained in Item 8 hereof.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The Partnership was organized on April 16, 1990, 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, to be leased primarily to operators of
selected national and regional fast-food and family-style Restaurant Chains. The
leases are triple-net leases, with the lessees responsible for all repairs and
maintenance, property taxes, insurance and utilities. As of December 31, 1997,
the Partnership owned 40 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, 1997, 1996 and 1995, 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 $3,157,964, $3,356,240
and $3,098,276 for the years ended December 31, 1997, 1996 and 1995,
respectively. The decrease in cash from operations during 1997, as compared to
1996 is primarily a result of changes in income and expenses as discussed in
"Results of Operations"
6
<PAGE>
below and changes in the Partnership's working capital. The increase in cash
from operations during 1996, as compared to 1995, is primarily due to changes in
the Partnership's working capital.
Other sources and uses of capital included the following during the
years ended December 31, 1997, 1996 and 1995.
In June 1997, the Partnership sold its Property in Alpharetta, Georgia,
and received net sales proceeds of $1,053,571, resulting in a gain for financial
reporting purposes of $199,643. This Property was originally acquired by the
Partnership in September 1991 and had a cost of approximately $711,200,
excluding acquisition fees and miscellaneous acquisition expenses; therefore,
the Partnership sold the Property for approximately $342,400 in excess of its
original purchase price. In July 1997, the Partnership reinvested approximately
$1,049,800 of these net sales proceeds in an IHOP Property in Englewood,
Colorado, as tenants-in-common, with 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 each co-venturer's percentage interest. As of December
31, 1997, the Partnership owned a 67.23% interest in the Property. The General
Partners believe that the transaction, or a portion thereof, relating to the
sale of the Property in Alpharetta, Georgia, and the reinvestment of the
proceeds in an IHOP Property in Englewood, Colorado, will qualify as a like-kind
exchange transaction for federal income tax purposes.
In December 1996, the tenant of the Property in Woodmere, Ohio,
exercised its option under the terms of its lease agreement, to substitute the
existing Property for a replacement Property. In conjunction therewith, the
Partnership simultaneously exchanged the Burger King Property in Woodmere, Ohio,
with a Burger King Property in Carrboro, North Carolina. The lease for the
Property in Woodmere, Ohio, was amended to allow the Property in Carrboro, North
Carolina, to continue under the terms of the original lease. All closing costs
were paid by the tenant. The Partnership accounted for this as a non-monetary
exchange of similar assets and recorded the acquisition of the Property in
Carrboro, North Carolina, at the net book value of the Property in Woodmere,
Ohio. No gain or loss was recognized due to this being accounted for as a
non-monetary exchange of similar assets.
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, 1997, the Partnership had
$1,250,388 invested in such short-term investments as compared to $1,288,618 at
December 31, 1996. The funds remaining at December 31, 1997, after the payment
of distributions and other liabilities, will be used to meet the Partnership's
working capital and other needs.
During 1997, 1996 and 1995, affiliates of the General Partners incurred
on behalf of the Partnership $77,999, $97,032 and $88,563, respectively, for
certain operating expenses. As of December 31, 1997 and 1996, the Partnership
owed $4,619 and $1,405, respectively, to affiliates for such amounts and
accounting and administrative services. As of February 28, 1998, the Partnership
had reimbursed the affiliates all such amounts. Other liabilities, including
distributions payable, decreased to $944,578 at December 31, 1997, from $982,846
at December 31, 1996, primarily as the result of the Partnership's accruing a
special distribution payable to the Limited Partners of $35,000, at December 31,
1996, which was paid in January 1997. The General Partners believe that the
Partnership has sufficient cash on hand to meet its current working capital
needs.
Based on cash from operations, the Partnership declared distributions
to the Limited Partners of $3,150,004 for the year ended December 31, 1997 and
$3,185,004 for each of the years ended December 31, 1996 and 1995. This
represents a distribution of $0.90 per Unit for the year ended December 31, 1997
and $0.91 per Unit for each of the years ended December 31, 1996 and 1995. The
General Partners anticipate that the Partnership will declare a special
distribution to the Limited Partners during the quarter ending March 31, 1998,
representing cumulative
7
<PAGE>
excess operating reserves. No amounts distributed to the Limited Partners for
the years ended December 31, 1997, 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. The Partnership intends to continue to make distributions of cash
available for distribution to the Limited Partners on a quarterly basis.
The General Partners believe that the Properties are adequately covered
by insurance. In addition, 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 believe that the Partnership has sufficient working capital reserves at
this time. In addition, because all 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 purpose, 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 the years ended December 31, 1997, 1996 and 1995, the
Partnership owned and leased 27 wholly-owned Properties (including one Property
in Alpharetta, Georgia, which was sold in June 1997). In addition, during 1997,
1996 and 1995, the Partnership was a co-venturer in two separate joint ventures
that each owned and leased six properties and one joint venture that owned and
leased one Property. During 1997, the Partnership also owned and leased one
Property with an affiliate as tenants-in-common. As of December 31, 1997, the
Partnership owned, either directly or through joint venture arrangements, 40
Properties, which are 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 $50,400 to $171,400. Generally, the
leases provide for percentage rent based on sales in excess of a specified
amount. In addition, a majority of the leases provide that, commencing in
specified lease years (ranging from the third to the sixth lease year), the
annual base rent required under the terms of the lease will increase. 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, 1997, 1996 and 1995, the
Partnership earned $2,572,954, $2,771,319 and $2,807,108, respectively, in
rental income from operating leases and earned income from direct financing
leases from the Partnership's wholly owned Properties. The decrease in rental
and earned income in 1997, as compared to 1996, is partially due to a decrease
in rental and earned income of approximately $65,000 during 1997, due to the
fact that during April 1997, the operator of the Property in Copley Township,
Ohio, ceased operations of the Property and the Partnership ceased recording
rental income and wrote-off the allowance for doubtful accounts. The Partnership
re-leased this Property to Shells Seafood Restaurants in September 1997 and rent
commenced December 1997. The decrease in rental and earned income during 1996,
as compared to 1995, is primarily the result of the fact that during 1996, the
Partnership established an allowance for doubtful accounts relating to the same
Property in Copley Township, Ohio.
Rental and earned income also decreased during 1997, as compared to
1996, due to the fact that the Partnership established an allowance for doubtful
accounts of approximately $70,000 during 1997, relating to the Perkins
Properties in Williamsville and Rochester, New York, which are leased by the
same tenant, due to financial difficulties the tenant is experiencing. No such
allowance was established during 1996. The Partnership intends to pursue
collection of past due amounts from this tenant and will recognize such amounts
as income if collected.
8
<PAGE>
In addition, rental and earned income decreased approximately $51,800
during 1997, as a result of the sale of the Property in Alpharetta, Georgia, in
June 1997. In July 1997, the Partnership reinvested the net sales proceeds in a
Property in Englewood, Colorado, as tenants-in-common, with an affiliate of the
General Partners, as discussed above in "Liquidity and Capital Resources."
In addition, for the years ended December 31, 1997, 1996 and 1995, the
Partnership earned $74,867, $120,999 and $110,036, respectively, in contingent
rental income. The decrease in contingent rental income for 1997, as compared to
1996, is primarily attributable to a change in the contingent rent formula
(consisting of an increase to the sales breakpoint on which contingent rents are
computed) in accordance with the terms of the leases, for certain restaurant
Properties requiring the payment of contingent rental income. The increase in
contingent rental income during 1996, as compared to 1995, is primarily a result
of increased gross sales of certain restaurant Properties requiring the payment
of contingent rental income.
During the years ended December 31, 1997, 1996 and 1995, the
Partnership also earned $537,853, $460,400 and $453,794, respectively, in income
attributable to net income earned by joint ventures in which the Partnership is
a co-venturer. The increase in net income earned by joint ventures during 1997,
as compared to 1996 and 1995, is primarily due to the fact that in July 1997,
the Partnership reinvested the net sales proceeds it received from the sale of
the Property in Alpharetta, Georgia, in an IHOP Property located in Englewood,
Colorado, as tenants-in-common, with an affiliate of the General Partners.
During at least one of the years ended December 31, 1997, 1996 and
1995, five of the Partnership's lessees (or group of affiliated lessees),
Carrols Corporation, TPI Restaurants, Inc., Flagstar Enterprises, Inc., Golden
Corral Corporation and Burger King Corporation, each contributed more than ten
percent of the Partnership's total rental income (including the Partnership's
share of rental income from 13 Properties owned by joint ventures and one
Property owned as tenants-in-common). As of December 31, 1997, Carrols
Corporation was the lessee under leases relating to four restaurants, TPI
Restaurants, Inc. was the lessee under leases relating to five restaurants,
Flagstar Enterprises, Inc. was the lessee under leases relating to six
restaurants, Burger King Corp. was the lessee under leases relating to the 13
restaurants owned by joint ventures and Golden Corral Corporation was the lessee
under leases relating to two restaurants. It is anticipated that, based on the
minimum rental payments required by the leases, these five lessees or groups of
affiliated lessees each will continue to contribute more than ten percent of the
Partnership's total rental income in 1998 and subsequent years. In addition,
during at least one of the years ended December 31, 1997, 1996 and 1995, four
Restaurant Chains, Burger King, Hardee's, Golden Corral and Shoney's, each
accounted for more than ten percent of the Partnership's total rental income
(including the Partnership's share of the rental income from 13 Properties owned
by joint ventures and one Property owned as tenants-in-common). In subsequent
years, it is anticipated that these four Restaurant Chains each will continue to
account for more than ten percent of the total rental income to which the
Partnership is entitled under the terms of its leases. Any failure of these
lessees or Restaurant Chains could materially affect the Partnership's income.
Operating expenses, including depreciation and amortization expense,
were $492,354, $443,767 and $440,176 for the years ended December 31, 1997, 1996
and 1995, respectively. The increase in operating expenses for 1997, as compared
to 1996, is partially attributable to the fact that the Partnership recorded bad
debt expense of $21,000 relating to the Property in Copley Township, Ohio. Due
to the fact that the former tenant ceased operating the Property in April 1997,
the General Partners believe collection of this amount is doubtful. In addition,
the increase in operating expenses during 1997, was partially due to the fact
that during 1997, the Partnership recorded past due real estate taxes relating
to the Property in Copley Township, Ohio of $23,191. The Partnership recorded
$9,905 of such expense during 1996. In addition, the increase in operating
expenses for 1997, as compared to 1996, was partially attributable to the fact
that the Partnership recorded approximately $7,600 in real estate tax expense in
1997 relating to the Perkins Properties in Williamsville and Rochester, New
York, which are leased by the same tenant, due to the financial difficulties the
tenant is experiencing. The Partnership intends to pursue collection of such
amounts and will recognize such amounts as income if collected. No real estate
tax expense was recorded for these Properties in 1996.
The increase in operating expenses during 1996, as compared to 1995, is
primarily a result of 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 beginning in May 1995.
9
<PAGE>
As a result of the 1997 sale of the Property in Alpharetta, Georgia, as
described above in "Liquidity and Capital Resources," the Partnership recognized
a gain for financial reporting purposes of $199,643 for the year ended December
31, 1997. No Properties were sold during 1996 or 1995.
The General Partners of the Partnership are in the process of assessing
and addressing the impact of the year 2000 on its computer package software. The
hardware and built-in software are believed to be year 2000 compliant.
Accordingly, the General Partners do not expect this matter to materially impact
how the Partnership conducts business nor its current or future results of
operations or financial position.
The Partnership's leases as of December 31, 1997, in general, 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
10
<PAGE>
CNL INCOME FUND IX, LTD.
(A Florida Limited Partnership)
CONTENTS
Page
Report of Independent Accountants 12
Financial Statements:
Balance Sheets 13
Statements of Income 14
Statements of Partners' Capital 15
Statements of Cash Flows 16
Notes to Financial Statements 18
11
<PAGE>
Report of Independent Accountants
To the Partners
CNL Income Fund IX, Ltd.
We have audited the financial statements and the financial statement schedules
of CNL Income Fund IX, 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 IX, Ltd. as of
December 31, 1997 and 1996, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1997 in conformity
with generally accepted accounting principles. In addition, in our opinion, the
financial statement schedules referred to above, when considered in relation to
the basic financial statements taken as a whole, present fairly, in all material
respects, the information required to be included therein.
/s/ Coopers & Lybrand L.L.P.
- -------------------------------------
Orlando, Florida
January 12, 1998
12
<PAGE>
CNL INCOME FUND IX, LTD.
(A Florida Limited Partnership)
BALANCE SHEETS
December 31,
ASSETS 1997 1996
------ ----------- ----------
Land and buildings on operating
leases, less accumulated
depreciation $14,163,111 $14,797,549
Net investment in direct
financing leases 7,482,757 7,964,985
Investment in joint ventures 6,619,364 5,708,555
Cash and cash equivalents 1,250,388 1,288,618
Receivables, less allowance for
doubtful accounts of $108,316
and $28,983 96,134 75,256
Prepaid expenses 3,924 3,845
Lease costs, less accumulated
amortization of $77 in 1997 14,923 -
Accrued rental income 1,465,820 1,505,039
----------- -----------
$31,096,421 $31,343,847
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 4,490 $ 4,987
Accrued and escrowed real estate
taxes payable 45,591 61,618
Distributions payable 787,501 822,500
Due to related parties 4,619 1,405
Rents paid in advance and deposits 106,996 93,741
----------- -----------
Total liabilities 949,197 984,251
Partners' capital 30,147,224 30,359,596
----------- -----------
$31,096,421 $31,343,847
=========== ===========
See accompanying notes to financial statements.
13
<PAGE>
CNL INCOME FUND IX, LTD.
(A Florida Limited Partnership)
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Year Ended December 31,
1997 1996 1995
---------- ---------- -------
<S> <C>
Revenues:
Rental income from
operating leases $1,742,351 $1,854,245 $1,880,854
Earned income from direct
financing leases 830,603 917,074 926,254
Contingent rental income 74,867 120,999 110,036
Interest and other income 44,669 51,348 57,209
---------- ---------- ----------
2,692,490 2,943,666 2,974,353
---------- ---------- ----------
Expenses:
General operating and
administrative 153,175 152,437 130,167
Professional services 24,658 26,610 20,566
Bad debt expense 21,000 - -
Real estate taxes 30,835 9,906 24,837
State and other taxes 11,126 2,775 11,123
Depreciation and
amortization 251,560 252,039 253,483
---------- ---------- ----------
492,354 443,767 440,176
---------- ---------- ----------
Income Before Equity in
Earnings of Joint
Ventures and Gain on Sale
of Land and Building 2,200,136 2,499,899 2,534,177
Equity in Earnings of
Joint Ventures 537,853 460,400 453,794
Gain on Sale of Land
and Building 199,643 - -
---------- ---------- ---------
Net Income $2,937,632 $2,960,299 $2,987,971
========== ========== ==========
Allocation of Net Income:
General partners $ 27,380 $ 29,603 $ 29,880
Limited partners 2,910,252 2,930,696 2,958,091
---------- ---------- ----------
$2,937,632 $2,960,299 $2,987,971
========== ========== ==========
Net Income Per Limited
Partner Unit $ 0.83 $ 0.84 $ 0.85
========== ========== ==========
Weighted Average Number of
Limited Partner Units
Outstanding 3,500,000 3,500,000 3,500,000
========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
14
<PAGE>
CNL INCOME FUND IX, LTD.
(A Florida Limited Partnership)
STATEMENTS OF PARTNERS' CAPITAL
Years Ended December 31, 1997, 1996 and 1995
<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, 1994 $ 1,000 $102,909 $35,000,000 $(10,320,575) $10,188,000 $(4,190,000) $30,781,334
Distributions to limited
partners ($0.91 per
limited partner unit) - - - (3,185,004) - - (3,185,004)
Net income - 29,880 - - 2,958,091 - 2,987,971
------- -------- ----------- ------------ ----------- ----------- -----------
Balance, December 31, 1995 1,000 132,789 35,000,000 (13,505,579) 13,146,091 (4,190,000) 30,584,301
Distributions to limited
partners ($0.91 per
limited partner unit) - - - (3,185,004) - - (3,185,004)
Net income - 29,603 - - 2,930,696 - 2,960,299
------- -------- ----------- ------------ ----------- ----------- -----------
Balance, December 31, 1996 1,000 162,392 35,000,000 (16,690,583) 16,076,787 (4,190,000) 30,359,596
Distributions to limited
partners ($0.90 per
limited partner unit) - - - (3,150,004) - - (3,150,004)
Net income - 27,380 - - 2,910,252 - 2,937,632
------- -------- ----------- ------------ ----------- ----------- -----------
Balance, December 31, 1996 $ 1,000 $189,772 $35,000,000 $(19,840,587) $18,987,039 $(4,190,000) $30,147,224
======= ======== =========== ============ =========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
15
<PAGE>
CNL INCOME FUND IX, LTD.
(A Florida Limited Partnership)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31,
1997 1996 1995
----------- ----------- --------
<S> <C>
Increase (Decrease) in Cash
and Cash Equivalents:
Cash Flows From Operating
Activities:
Cash received from
tenants $ 2,666,373 $ 2,900,048 $ 2,608,733
Distributions from
joint ventures 676,806 603,833 602,845
Cash paid for expenses (229,884) (186,126) (157,127)
Interest received 44,669 38,485 43,825
----------- ----------- -----------
Net cash provided
by operating
activities 3,157,964 3,356,240 3,098,276
----------- ----------- -----------
Cash Flows from Investing
Activities:
Proceeds from sale of
land and building 1,053,571 - -
Investment in joint
venture (1,049,762) - -
Payment of lease costs (15,000) - -
----------- ----------- ----------
Net cash used
in investing
activities (11,191) - -
----------- ----------- ----------
Cash Flows From Financing
Activities:
Distributions to
limited partners (3,185,003) (3,185,004) (3,150,004)
----------- ----------- -----------
Net cash used in
financing
activities (3,185,003) (3,185,004) (3,150,004)
----------- ----------- -----------
Net Increase (Decrease) in
Cash and Cash Equivalents (38,230) 171,236 (51,728)
Cash and Cash Equivalents at
Beginning of Year 1,288,618 1,117,382 1,169,110
----------- ----------- -----------
Cash and Cash Equivalents at
End of Year $ 1,250,388 $ 1,288,618 $ 1,117,382
=========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
16
<PAGE>
CNL INCOME FUND IX, LTD.
(A Florida Limited Partnership)
STATEMENTS OF CASH FLOWS - CONTINUED
<TABLE>
<CAPTION>
Year Ended December 31,
1997 1996 1995
----------- ----------- --------
<S> <C>
Reconciliation of Net Income to
Net Cash Provided by Operating
Activities:
Net income $ 2,937,632 $ 2,960,299 $ 2,987,971
----------- ----------- -----------
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation 251,483 251,483 251,483
Amortization 77 556 2,000
Equity in earnings of
joint ventures, net of
distributions 138,953 143,433 149,051
Gain on sale of land
and building (199,643) - -
Decrease (increase) in
receivables (20,878) 87,823 (21,714)
Increase in prepaid
expenses (79) (2,913) (932)
Decrease in net investment
in direct financing
leases 121,311 89,696 73,784
Increase in accrued
rental income (70,837) (225,434) (287,264)
Increase (decrease) in
accounts payable and
accrued expenses (16,524) 12,111 32,889
Increase (decrease) in
due to related parties 3,214 (4,639) 6,044
Increase (decrease) in
rents paid in advance
and deposits 13,255 43,825 (95,036)
----------- ----------- -----------
Total adjustments 220,332 395,941 110,305
----------- ----------- -----------
Net Cash Provided by Operating
Activities $ 3,157,964 $ 3,356,240 $ 3,098,276
=========== =========== ===========
Supplemental Schedule of
Non-Cash Investing and
Financing Activities:
Distributions declared and
unpaid at December 31 $ 787,501 $ 822,500 $ 822,500
=========== =========== ===========
Land and building under
operating lease
simultaneously exchanged
for land and building
under operating lease $ - $ 406,768 $ -
=========== =========== ==========
</TABLE>
See accompanying notes to financial statements.
17
<PAGE>
CNL INCOME FUND IX, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
Years Ended December 31, 1997, 1996 and 1995
1. Significant Accounting Policies:
Organization and Nature of Business - CNL Income Fund IX, 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) (see 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.
18
<PAGE>
CNL INCOME FUND IX, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1997, 1996 and 1995
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, will be removed from
the accounts and gains or losses from sales will be 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. If an impairment is indicated, the
assets are adjusted to their fair 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 to decrease rental or other income or increase bad debt expense for
the current period, although the Partnership continued 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's investments in three
joint ventures and a property in Englewood, Colorado, for which the
property is 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.
19
<PAGE>
CNL INCOME FUND IX, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1997, 1996 and 1995
1. Significant Accounting Policies - Continued:
Cash accounts maintained on behalf of the Partnership in demand
deposits at commercial banks and money market funds may exceed
federally insured levels; however, the Partnership has not experienced
any losses in such accounts. The Partnership limits investment of
temporary cash investments to financial institutions with high credit
standing; therefore, the Partnership believes it is not exposed to any
significant credit risk on cash and cash equivalents.
Lease costs - Lease costs associated with negotiating a new lease are
amortized over the term of the new lease using the straight-line
method.
Income Taxes - Under Section 701 of the Internal Revenue Code, all
income, expenses and tax credit items flow through to the partners for
tax purposes. Therefore, no provision for federal income taxes is
provided in the accompanying financial statements. The Partnership is
subject to certain state taxes on its income and property.
Additionally, for tax purposes, syndication costs are included in
Partnership equity and in the basis of each partner's investment. For
financial reporting purposes, syndication costs are netted against
partners' capital and represent a reduction of Partnership equity and a
reduction in the basis of each partner's investment.
Use of Estimates - The general partners of the Partnership have made a
number of estimates and assumptions relating to the reporting of assets
and liabilities and the disclosure of contingent assets and liabilities
to prepare these financial statements in conformity with generally
accepted accounting principles. 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. 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.
20
<PAGE>
CNL INCOME FUND IX, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1997, 1996 and 1995
2. Leases:
The Partnership leases its land and buildings 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." Some of the leases have been
classified as operating leases and some of the 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 a majority of the
land portion 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 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:
1997 1996
----------- -----------
Land $ 8,207,939 $ 8,590,894
Buildings 7,452,942 7,452,942
----------- -----------
15,660,881 16,043,836
Less accumulated
depreciation (1,497,770) (1,246,287)
----------- -----------
$14,163,111 $14,797,549
=========== ===========
21
<PAGE>
CNL INCOME FUND IX, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1997, 1996 and 1995
3. Land and Buildings - Continued:
In December 1996, the tenant of the property in Woodmere, Ohio,
exercised its option under the terms of its lease agreement, to
substitute the existing property for a replacement property. In
conjunction therewith, the Partnership simultaneously exchanged the
Burger King property in Woodmere, Ohio, with a Burger King property in
Carrboro, North Carolina. The lease for the property in Woodmere, Ohio,
was amended to allow the property in Carrboro, North Carolina, to
continue under the terms of the original lease. All closing costs were
paid by the tenant. The Partnership accounted for this as a
non-monetary exchange of similar assets and recorded the acquisition of
the property in Carrboro, North Carolina, at the net book value of the
property in Woodmere, Ohio. No gain or loss was recognized due to this
being accounted for as a non-monetary exchange of similar assets.
In June 1997, the Partnership sold its property in Alpharetta, Georgia,
and received net sales proceeds of $1,053,571, resulting in a gain of
$199,643 for financial reporting purposes. This property was originally
acquired by the Partnership in September 1991 and had a cost of
approximately $711,200, excluding acquisition fees and miscellaneous
acquisition expenses; therefore, the Partnership sold the property for
approximately $342,400 in excess of its original purchase price.
Some leases provide for escalating guaranteed minimum rents throughout
the lease term. 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, 1997, 1996 and 1995, the Partnership
recognized $70,837, $225,434 and $287,264, respectively, of such rental
income.
The following is a schedule of the future minimum lease payments to be
received on noncancellable operating leases at December 31, 1997:
1998 $ 1,766,123
1999 1,766,123
2000 1,766,123
2001 1,802,660
2002 1,933,986
Thereafter 12,647,153
-----------
$21,682,168
22
<PAGE>
CNL INCOME FUND IX, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1997, 1996 and 1995
3. Land and Buildings - Continued:
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:
1997 1996
------------ -----------
Minimum lease payments
receivable $ 13,764,606 $ 15,621,897
Estimated residual
values 2,495,379 2,590,434
Less unearned income (8,777,228) (10,247,346)
------------ ------------
Net investment in
direct financing
leases $ 7,482,757 $ 7,964,985
============ ============
The following is a schedule of future minimum lease payments to be
received on the direct financing leases at December 31, 1997:
1998 $ 968,047
1999 968,047
2000 968,047
2001 975,586
2002 999,905
Thereafter 8,884,974
-----------
$13,764,606
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).
23
<PAGE>
CNL INCOME FUND IX, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1997, 1996 and 1995
5. Investment in Joint Ventures:
The Partnership has a 45.2%, a 50 percent and a 27.33% interest in the
profits and losses of CNL Restaurant Investments II, CNL Restaurant
Investments III and Ashland Joint Venture, respectively. The remaining
interests in these joint ventures are held by affiliates of the
Partnership which have the same general partners.
In July 1997, the Partnership used the net sales proceeds from the sale
of the property in Alpharetta, Georgia, to acquire a 67.23% interest in
an IHOP property located in Englewood, Colorado, as tenants-in-common
with an affiliate of the general partners. The Partnership accounts for
its investment in this property using the equity method since the
Partnership shares control with an affiliate, and amounts relating to
its investment are included in investment in joint ventures.
CNL Restaurant Investments II and CNL Restaurant Investments III each
own and lease six properties to an operator of national fast-food
restaurants and Ashland Joint Venture owns and leases one property to
an operator of national fast-food restaurants. The Partnership and an
affiliate, as tenants in common own and lease one property to an
operator of a national family-style restaurant. The following presents
the joint ventures' combined, condensed financial information at
December 31:
1997 1996
----------- ------------
Land and buildings on
operating leases,
less accumulated
depreciation $12,582,754 $12,359,586
Net investment in
direct financing
lease 1,003,680 -
Cash 15,124 1,497
Receivables 35,773 13,840
Prepaid expenses 23,544 22,543
Accrued rental income 11,620 -
Liabilities 14,280 1,198
Partners' capital 13,658,215 12,396,268
Revenues 1,506,380 1,362,027
Net income 1,141,755 1,000,884
The Partnership recognized income totalling $537,853, $460,400 and
$453,794 for the years ended December 31, 1997, 1996 and 1995,
respectively, from these joint ventures.
24
<PAGE>
CNL INCOME FUND IX, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1997, 1996 and 1995
6. 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, 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, 1997, the Partnership declared
distributions to the limited partners of $3,150,004 and during each of
the years ended December 31, 1996 and 1995, the Partnership declared
distributions to the limited partners of $3,185,004. No distributions
have been made to the general partners to date.
25
<PAGE>
CNL INCOME FUND IX, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1997, 1996 and 1995
7. 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:
<TABLE>
<CAPTION>
1997 1996 1995
---------- ---------- -------
<S> <C>
Net income for financial
reporting purposes $2,937,632 $2,960,299 $2,987,971
Depreciation for tax
reporting purposes
in excess of depreci-
ation for financial
reporting purposes (116,620) (123,734) (123,820)
Direct financing leases
recorded as operating
leases for tax
reporting purposes 121,311 89,696 73,784
Gain on sale of land and
building for financial
reporting purposes in
excess of gain for tax
reporting purposes (195,820) - -
Equity in earnings of
joint ventures for tax
reporting purposes in
excess of equity in
earnings of joint
ventures for financial
reporting purposes 36,745 37,469 37,469
Accrued rental income (70,837) (225,434) (287,264)
Rents paid in advance 13,255 43,825 (95,036)
Allowance for doubtful
accounts 79,333 14,221 (11,173)
---------- ---------- ----------
Net income for federal
income tax purposes $2,804,999 $2,796,342 $2,581,931
========== ========== ==========
</TABLE>
26
<PAGE>
CNL INCOME FUND IX, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1997, 1996 and 1995
8. 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 Fund Advisors, Inc. The other individual general partner, Robert A.
Bourne, served as president of CNL Fund Advisors, Inc. through October
1997. 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, 1997, 1996 and
1995, 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, 1997, 1996 and 1995, 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 Affiliates an annual, noncumulative,
subordinated 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, but not in
excess of competitive fees for comparable services. These fees will be
incurred and will be 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, 1997, 1996 and
1995.
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 net 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.
27
<PAGE>
CNL INCOME FUND IX, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1997, 1996 and 1995
8. Related Party Transactions - Continued:
During the years ended December 31, 1997, 1996 and 1995, Affiliates
provided accounting and administrative services to the Partnership on a
day-to-day basis. The Partnership incurred $79,234, $82,487 and $64,398
for the years ended December 31, 1997, 1996 and 1995, respectively, for
such services.
The due to related parties at December 31, 1997 and 1996, totalled
$4,619 and $1,405, respectively.
9. 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), for at least one of the years ended December 31:
1997 1996 1995
-------- -------- ------
Burger King
Corporation and
BK Acquisition,
Inc. $649,445 $623,949 $617,694
TPI Restaurants, Inc. 556,700 565,351 562,259
Carrols Corporation 440,057 442,286 444,866
Flagstar Enterprises,
Inc. 436,312 460,762 486,188
Golden Corral
Corporation 337,337 328,975 329,997
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), for at least one of the years ended December 31:
1997 1996 1995
---------- ---------- ----------
Burger King $1,249,715 $1,310,994 $1,293,094
Shoney's 808,675 889,148 904,534
Hardees 436,312 460,762 486,188
Golden Corral Family
Steakhouse
Restaurants 337,337 328,975 329,997
28
<PAGE>
CNL INCOME FUND IX, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1997, 1996 and 1995
9. 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.
29
<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 51, 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., CNL Real Estate 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 through December 31, 1997, at which time CNL Realty Advisors,
Inc. merged with Commercial Net Lease Realty, Inc., 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 a director, 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 a director,
Chairman of the Board and Chief Executive Officer of CNL American Properties
Fund, Inc. since 1994, and has served as a director, 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 $60 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 VI, Ltd., CNL Income Fund VII, Ltd., CNL Income
Fund VIII, 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.
30
<PAGE>
Robert A. Bourne, age 50, 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, and prior to its merger with
CNL Fund Advisors, Inc., effective January 1, 1996, CNL Income Fund Advisors,
Inc., and Chief Investment Officer, Vice Chairman of the Board of Directors, a
director and Treasurer of CNL Institutional Advisors, Inc., a registered
investment advisor. Mr. Bourne served as President of CNL Institutional
Advisors, Inc. from the date of its inception through June 30, 1997 and served
as President of CNL Fund Advisors, Inc. from the date of its inception through
October 1997. Mr. Bourne also has served as a director since 1992, as President
from July 1992 to February 1996, as Secretary and Treasurer from February 1996
through December 1997, and since February 1996, served as Vice Chairman of the
Board of Directors 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, served as Treasurer and Vice Chairman of CNL Realty Advisors, Inc. through
December 31, 1997, at which time CNL Realty Advisors, Inc. merged with
Commercial Net Lease Realty, 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 1994 under the laws of the State of Florida, and its
principal office is located at 400 East South Street, 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., was organized in 1980 under the laws of the State of Florida. CNL Group,
Inc. is a diversified real estate company which provides a wide range of real
estate, development and financial services to companies in the United States
through the activities of its subsidiaries. These activities are primarily
focused on the franchised restaurant and hospitality industries. 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.
31
<PAGE>
Curtis B. McWilliams, age 42, joined CNL Fund Advisors, Inc. in April
1997 and currently serves as President of CNL Fund Advisors, Inc. and as
Executive Vice President of CNL American Properties Fund, Inc. In addition, Mr.
McWilliams serves as Executive Vice President of CNL Group, Inc. and as
President of CNL Financial Services, Inc. and certain other subsidiaries of CNL
Group, Inc. From September 1983 through March 1997, Mr. McWilliams was employed
by Merrill Lynch. From January 1991 to August 1996, Mr. McWilliams was a
managing director in the corporate banking group of Merrill Lynch's investment
banking division. During this time, he was a senior relationship manager with
Merrill Lynch and as such was responsible for a number of the firm's larger
clients. From February 1990 to February 1993, he also served as co-head of one
of the Industrial Banking Groups within Merrill Lynch's investment banking
division and had administrative responsibility for a group of bankers and client
relationships, including the firm's transportation group. From September 1996 to
March 1997, Mr. McWilliams served as Chairman of Merrill Lynch's Private
Advisory Services. Mr. McWilliams received a B.S.E. in Chemical Engineering from
Princeton University in 1977 and a Masters of Business Administration with a
concentration in finance from the University of Chicago in 1983.
John T. Walker, age 39, is 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 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 49, 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, served as a director and Secretary of CNL Realty Advisors, Inc. since its
inception in 1991 through December 31, 1997, at which time CNL Realty Advisors,
Inc. merged with Commercial Net Lease Realty, Inc., 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 300 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. She was licensed as a certified public accountant in 1979.
32
<PAGE>
Jeanne A. Wall, age 39, has served as Chief Operating Officer of CNL
Investment Company and of CNL Securities Corp. since November 1994 and has
served as Executive Vice President of CNL Investment Company since January 1991.
In 1984, Ms. Wall joined CNL Securities Corp. In 1985, Ms. Wall became Vice
President of CNL Securities Corp., in 1987, she became Senior Vice President and
in July 1997, she became Executive 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 product development, partnership administration and
investor services for programs offered through participating brokers, and
corporate communications for CNL Group, Inc. and Affiliates. 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 through 1997, as Vice
President of Commercial Net Lease Realty, Inc. from 1992 through 1997, 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 34, has served as Chief Financial Officer of
CNL Fund Advisors, Inc. since September 1996 and as Chief Financial Officer of
CNL American Properties Fund, Inc. since January 1997. 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 audit 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.
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, 1998, 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, 1998, the beneficial
ownership interests of the General Partners in the Registrant.
<TABLE>
<CAPTION>
Title of Class Name of Partner Percent of Class
<S> <C>
General Partnership Interests James M. Seneff, Jr. 45%
Robert A. Bourne 45%
CNL Realty Corporation 10%
----
100%
</TABLE>
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.
33
<PAGE>
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, 1997, 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, 1997
----------------------- --------------------- -----------------------
<S> <C>
Reimbursement to affiliates for Operating expenses are reimbursed Operating expenses incurred on
Operating expenses at the lower of cost or 90 percent behalf of the Partnership:
of the prevailing rate at which $77,999
comparable services could have
been obtained in the same Accounting and administrative
geographic area. Affiliates of the services: $79,234
General Partners from time to
time incur certain operating
expenses on behalf of the
Partnership for which the
Partnership reimburses the
affiliates without interest.
Annual, subordinated manage- One percent of the sum of gross $ - 0 -
ment fee to affiliates 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, 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.
==========================================================================================================================
</TABLE>
34
<PAGE>
<TABLE>
<CAPTION>
==========================================================================================================================
Amount Incurred
Type of Compensation For the Year
and Recipient Method of Computation Ended December 31, 1997
----------------------- --------------------- -----------------------
<S> <C>
Deferred, subordinated real estate A deferred, subordinated real $ - 0 -
disposition fee payable to estate disposition fee, payable
affiliates 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.
General Partners' deferred, sub- A deferred, subordinated share $ - 0 -
ordinated share of Partnership net equal to one percent of
cash flow Partnership distributions of net
cash flow, subordinated to certain
minimum returns to the Limited
Partners.
General Partners' deferred, sub- A deferred, subordinated share $ - 0 -
ordinated share of Partnership net equal to five percent of
sales proceeds from a sale or Partnership distributions of such
sales net sales proceeds, subordinated to
certain minimum returns to the
Limited Partners.
==========================================================================================================================
</TABLE>
35
<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, 1997 and 1996
Statements of Income for the years ended December 31, 1997,
1996 and 1995
Statements of Partners' Capital for the years ended December
31, 1997, 1996 and 1995
Statements of Cash Flows for the years ended December 31,
1997, 1996 and 1995
Notes to Financial Statements
2. Financial Statement Schedule
Schedule II - Valuation and Qualifying Accounts for the years
ended December 31, 1997, 1996 and 1995.
Schedule III - Real Estate and Accumulated Depreciation at
December 31, 1997
Notes to Schedule III - Real Estate and Accumulated
Depreciation at December 31, 1997
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 Affidavit and Certificate of Limited Partnership of
CNL Income Fund IX, Ltd. (Included as Exhibit 3.1 to
Registration Statement No. 33-35049 on Form S-11 and
incorporated herein by reference.)
4.1 Affidavit and Certificate of Limited Partnership of
CNL Income Fund IX, Ltd. (Included as Exhibit 3.1 to
Registration Statement No. 33-35049 on Form S-11 and
incorporated herein by reference.)
4.2 Amended and Restated Agreement of Limited Partnership
of CNL Income Fund IX, Ltd. (Included as Exhibit 4.6
to Post-Effective Amendment No. 1 to Registration
Statement No. 33-35049 on Form S-11 and incorporated
herein by reference.)
10.1 Management Agreement between CNL Income Fund IX, Ltd.
and CNL Investment Company (Filed herewith.)
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.)
36
<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 files no reports on Form 8-K during the period
October 1, 1997 through December 31, 1997.
37
<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 13th day of
March, 1998.
CNL INCOME FUND IX, 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 13, 1998
- ---------------------------------------- (Principal Financial and Accounting
Robert A. Bourne Officer)
/s/ James M. Seneff, Jr. Chief Executive Officer and Director March 13, 1998
- --------------------------------------- (Principal Executive Officer)
James M. Seneff, Jr.
==========================================================================================================================
</TABLE>
<PAGE>
CNL INCOME FUND IX, LTD.
(A Florida Limited Partnership)
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
Years Ended December 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
Additions Deductions
Balance at Charged to Charged to Deemed Balance
Beginning Costs and Other Uncollec- Collec- at End
Year Description of Year Expenses Accounts tible ted of Year
- ---- ----------- ---------- ---------- ---------- --------- ------- ---------
<S> <C>
1995 Allowance for
doubtful
accounts (a) $122,922 $ - $ 10,593 (b) $116,023 $2,730 $ 14,762
======== ==== ======== ======== ====== ========
1996 Allowance for
doubtful
accounts (a) $ 14,762 $ - $ 22,298 (b) $ 8,077 $ - $ 28,983
======== ==== ======== ======== ====== ========
1997 Allowance for
doubtful
accounts (a) $ 28,983 $ - $107,293 (b) $ 27,960 $ - $108,316
======== ==== ======== ======== ====== ========
</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 IX, LTD.
(A Florida Limited Partnership)
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1997
<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:
Shelby, North Carolina - $ 289,663 $ - $ - $ -
Maple Heights, Ohio - 430,563 454,823 - -
Suwanee, Georgia - 437,658 - - -
Watertown, New York - 360,181 529,594 - -
Carrboro, North Carolina - 406,768 - - -
Denny's Restaurants:
Grand Prairie, Texas - 240,876 96,580 161,889 -
North Baltimore, Ohio - 133,187 361,010 - -
Golden Corral Family
Steakhouse Restaurants:
Brownsville, Texas - 518,605 988,611 - -
Tyler, Texas - 652,103 982,353 - -
Hardee's Restaurants:
Farragut, Tennessee - 308,269 455,341 - -
Greenville, South Carolina - 310,545 511,438 - -
Perkins Restaurants:
Williamsville, New York - 349,299 - - -
Rochester, New York - 503,527 - - -
Shell's Seafood Restaurants:
Copley Township, Ohio - 361,412 552,301 - -
Shoney's Restaurants:
Windcrest, Texas - 445,983 670,370 - -
Wildwood, Florida - 420,416 - - -
Bedford, Indiana - 262,103 - - -
Grenada, Mississippi - 335,001 454,723 - -
Huntsville, Alabama (g) - 638,400 717,302 - -
Corpus Christi, Texas - 803,380 516,607 - -
---------- ---------- -------- -------
$8,207,939 $7,291,053 $161,889 $ -
========== ========== ======== =======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Life
on Which
Gross Amount at Which Carried Depreciation
at Close of Period (c) in Latest
Buildings Date Income
and Accumulated of Con- Date Statement is
Land Improvements Total Depreciation struction Acquired Computed
---------- ------------ ----------- ------------ --------- -------- ----------
<S> <C>
$ 289,663 (f) $ 289,663 (d) 1985 05/91 (d)
430,563 $ 454,823 885,386 $ 99,729 1980 06/91 (b)
437,658 (f) 437,658 (d) 1991 11/91 (d)
360,181 529,594 889,775 108,337 1986 11/91 (b)
406,768 (f) 406,768 (d) 1983 12/96(j) (d)
240,876 258,469 499,345 53,348 1991 08/91 (b)
133,187 361,010 494,197 51,776 1986 11/91 (h)
518,605 988,611 1,507,216 215,508 1990 06/91 (b)
652,103 982,353 1,634,456 214,144 1990 06/91 (b)
308,269 455,341 763,610 94,561 1991 10/91 (b)
310,545 511,438 821,983 105,651 1991 10/91 (b)
349,299 (f) 349,299 (d) 1986 12/91 (d)
503,527 (f) 503,527 (d) 1988 12/91 (d)
361,412 552,301 913,713 61,462 1991 12/91 (i)
445,983 670,370 1,116,353 142,768 1991 08/91 (b)
420,416 (f) 420,416 (d) 1991 08/91 (d)
262,103 (f) 262,103 (d) 1991 08/91 (d)
335,001 454,723 789,724 94,807 1991 09/91 (b)
638,400 717,302 1,355,702 149,291 1989 10/91 (b)
803,380 516,607 1,319,987 106,388 1991 10/91 (b)
---------- ------------ ----------- ----------
$8,207,939 $ 7,452,942 $15,660,881 $1,497,770
========== ============ =========== ==========
</TABLE>
F-2
<PAGE>
CNL INCOME FUND IX, LTD.
(A Florida Limited Partnership)
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION - CONTINUED
December 31, 1997
<TABLE>
<CAPTION>
Costs Capitalized
Subsequent
Initial Cost To Acquisition
Buildings
Encum- and Improve- Carrying
brances Land Improvements ments Costs
<S> <C>
Properties of Joint Venture in Which the
Partnership has a 45.2% Interest and
has Invested in Under Operating Leases:
Burger King Restaurants:
Columbus, Ohio - $ 345,696 $ 651,985 $ - $ -
San Antonio, Texas - 350,479 623,615 - -
Pontiac, Michigan - 277,192 982,200 - -
Raceland, Louisiana - 174,019 986,879 - -
New Castle, Indiana - 264,239 662,265 - -
Hastings, Minnesota - 155,553 657,159 - -
---------- ---------- -------- -------
$1,567,178 $4,564,103 $ - $ -
========== ========== ======== =======
Properties of Joint Venture in Which the
Partnership has a 50% Interest and has
Invested in Under Operating Leases:
Burger King Restaurants:
Greensboro, North Carolina - $ 338,800 $ 650,109 $ - $ -
Metairie, Louisiana - 429,883 342,455 - -
Lafayette, Louisiana - 350,932 773,129 - -
Nashua, New Hampshire - 514,815 838,536 - -
Pontiac, Illinois - 203,095 719,226 - -
Dover, New Hampshire - 406,259 998,023 - -
---------- ---------- -------- -------
$2,243,784 $4,321,478 $ - $ -
========== ========== ======== =======
Property of Joint Venture in
Which the Partnership has a
27.33% Interest and has Invested
in Under Operating Lease:
Burger King Restaurant:
Ashland, New Hampshire - $ 293,478 $ 997,104 $ - $ -
========== ========== ======== =======
Property of Joint Venture in
Which the Partnership has a
67.23% Interest and has Invested
in Under Operating Lease:
IHOP:
Englewood, Colorado - $ 552,590 - $ - $ -
========== ========== ======== =======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Life
on Which
Gross Amount at Which Carried Depreciation
at Close of Period (c) in Latest
Buildings Date Income
and Accumulated of Con- Date Statement is
Land Improvements Total Depreciation struction Acquired Computed
---------- ------------ ----------- ------------ --------- -------- ----------
<S> <C>
$ 345,696 $ 651,985 $ 997,681 $ 136,113 1986 09/91 (b)
350,479 623,615 974,094 130,190 1986 09/91 (b)
277,192 982,200 1,259,392 205,051 1987 09/91 (b)
174,019 986,879 1,160,898 206,028 1988 09/91 (b)
264,239 662,265 926,504 138,259 1988 09/91 (b)
155,553 657,159 812,712 137,193 1990 09/91 (b)
---------- ---------- ----------- ----------
$1,567,178 $4,564,103 $ 6,131,281 $ 952,834
========== ========== =========== ==========
$ 338,800 $ 650,109 $ 988,909 $ 124,797 1990 03/92 (b)
429,883 342,455 772,338 65,739 1990 03/92 (b)
350,932 773,129 1,124,061 148,413 1989 03/92 (b)
514,815 838,536 1,353,351 160,968 1987 03/92 (b)
203,095 719,226 922,321 138,065 1988 03/92 (b)
406,259 998,023 1,404,282 191,583 1987 03/92 (b)
---------- ---------- ----------- ----------
$2,243,784 $4,321,478 $ 6,565,262 $ 829,565
========== ========== =========== ==========
$ 293,478 $ 997,104 $ 1,290,582 $ 174,562 1987 10/92 (b)
========== ========== =========== ==========
$ 552,590 (f) $ 552,590 (d) 1996 07/97 (d )
========== ========== =========== ==========
</TABLE>
F-3
<PAGE>
CNL INCOME FUND IX, LTD.
(A Florida Limited Partnership)
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION - CONTINUED
December 31, 1997
<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
Direct Financing Leases:
Burger King Restaurants:
Shelby, North Carolina - $ - $ 622,661 $ - $ -
Suwanee, Georgia - - 330,541 - -
Carrboro, North Carolina - - 587,775 - -
Denny's Restaurants:
Alliance, Ohio - 92,120 - 490,706 -
Bluffton, Ohio - 150,380 538,173 - -
Hardee's Restaurants:
Millbrook, Alabama - 125,703 541,865 - -
Greeneville, Tennessee - 127,449 402,926 - -
Wooster, Ohio - 137,427 537,227 - -
Auburn, Alabama - 85,890 364,269 - -
Perkins Restaurants:
Williamsville, New York - - 712,723 - -
Rochester, New York - - 648,182 - -
Shoney's Restaurants:
Wildwood, Florida - - 846,903 - -
Bedford, Indiana - - 540,604 - -
---------- ---------- -------- -------
$ 718,969 $6,673,849 $490,706 $ -
========== ========== ======== =======
Property of Joint Venture in
Which the Partnership has a
67.23% Interest and has Invested
in Under Operating Lease:
IHOP:
Englewood, Colorado - $ - $1,008,839 $ - $ -
========== ========== ======== =======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Life
on Which
Gross Amount at Which Carried Depreciation
at Close of Period (c) in Latest
Buildings Date Income
and Accumulated of Con- Date Statement is
Land Improvements Total Depreciation struction Acquired Computed
---------- ------------ ----------- ------------ --------- -------- ----------
<S> <C>
- (f) (f) (d) 1985 05/91 (d)
- (f) (f) (d) 1991 11/91 (d)
- (f) (f) (d) 1983 12/96(j) (d)
(f) (f) (f) (e) 1992 10/91 (e)
(f) (f) (f) (e) 1986 10/91 (e)
(f) (f) (f) (e) 1991 10/91 (e)
(f) (f) (f) (e) 1991 10/91 (e)
(f) (f) (f) (e) 1991 10/91 (e)
(f) (f) (f) (e) 1991 10/91 (e)
- (f) (f) (d) 1986 12/91 (d)
- (f) (f) (d) 1988 12/91 (d)
- (f) (f) (d) 1991 08/91 (d)
- (f) (f) (d) 1991 08/91 (d)
$ - (f) (f) (d) 1996 07/97 (d)
========== =========== =========== ========
</TABLE>
F-4
<PAGE>
CNL INCOME FUND IX, LTD.
(A Florida Limited Partnership)
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1997
(a) Transactions in real estate and accumulated depreciation during 1997,
1996 and 1995 are summarized as follows:
<TABLE>
<CAPTION>
Accumulated
Cost Depreciation
<S> <C>
Properties the Partnership
has Invested in Under
Operating Leases:
Balance, December 31, 1994 $15,491,535 $ 743,321
Reclassified to operating
lease 552,301 -
Depreciation expense - 251,483
----------- ----------
Balance, December 31, 1995 16,043,836 994,804
Disposition (406,768) -
Acquisition 406,768 -
Depreciation expense - 251,483
----------- ----------
Balance, December 31, 1996 16,043,836 1,246,287
Disposition (382,955) -
Depreciation expense - 251,483
----------- ----------
Balance December 31, 1997 $15,660,881 $1,497,770
=========== ==========
Properties of Joint Venture in
Which the Partnership has a
45.2% Interest and has Invested
in Under Operating Leases:
Balance, December 31, 1994 $ 6,131,281 $ 496,424
Depreciation expense - 152,137
----------- ----------
Balance, December 31, 1995 6,131,281 648,561
Depreciation expense - 152,137
----------- ----------
Balance, December 31, 1996 6,131,281 800,698
Depreciation expense - 152,136
----------- ----------
Balance, December 31, 1997 $ 6,131,281 $ 952,834
=========== ==========
</TABLE>
F-5
<PAGE>
CNL INCOME FUND IX, LTD.
(A Florida Limited Partnership)
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED
DEPRECIATION - CONTINUED
December 31, 1997
<TABLE>
<CAPTION>
Accumulated
Cost Depreciation
<S> <C>
Properties of Joint Venture in
Which the Partnership has a
50% Interest and has Invested
in Under Operating Leases:
Balance, December 31, 1994 $ 6,565,262 $ 397,417
Depreciation expense - 144,050
----------- ----------
Balance, December 31, 1995 6,565,262 541,467
Depreciation expense - 144,049
----------- ----------
Balance, December 31, 1996 6,565,262 685,516
Depreciation expense - 144,049
----------- ----------
Balance, December 31, 1997 $ 6,565,262 $ 829,565
=========== ==========
Property of Joint Venture in
Which the Partnership has
a 27.33% Interest and has
Invested in Under Operating Lease:
Balance, December 31, 1994 $ 1,290,582 $ 74,851
Depreciation expense - 33,237
----------- ----------
Balance, December 31, 1995 1,290,582 108,088
Depreciation expense - 33,237
----------- ----------
Balance, December 31, 1996 1,290,582 141,325
Depreciation expense - 33,237
----------- ----------
Balance, December 31, 1997 $ 1,290,582 $ 174,562
=========== ==========
Property in Which the Partnership
has a 69.23% Interest as
Tenants-in-Common and has
Invested in Under an Operating
Lease:
Balance, December 31, 1996 $ - $ -
Acquisition 552,590 -
Depreciation expense (d) - -
----------- ---------
Balance, December 31, 1997 $ 552,590 $ -
=========== =========
</TABLE>
F-6
<PAGE>
CNL INCOME FUND IX, LTD.
(A Florida Limited Partnership)
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED
DEPRECIATION - CONTINUED
December 31, 1997
(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 joint ventures for federal income tax purposes
was $23,476,756 and $15,036,874, 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 Huntsville Property contains a Shoney's restaurant and a Captain
D's restaurant, both of which are operated by the same lessee
pursuant to one lease agreement.
(h) Effective January 1, 1994, the lease for this Property was amended,
resulting in the reclassification of the building portion of the
lease to an operating lease. The building was recorded at net book
value as of January 1, 1994, and depreciated over its remaining
estimated life of approximately 28 years.
(i) Effective January 1, 1995, the lease for this Property was
terminated, resulting in the reclassification of the building portion
of the lease to an operating lease. The building was recorded at net
book value as of January 1, 1995, and depreciated over its remaining
estimated life of approximately 27 years. During 1997, the
Partnership released this Property to Shells Seafood Restaurants.
(j) This Property was simultaneously exchanged for a Burger King Property
previously owned and located in Woodmere, Ohio, during 1996.
F-7
<PAGE>
EXHIBITS
<PAGE>
EXHIBIT INDEX
Exhibit Number
3.1 Affidavit and Certificate of Limited Partnership of CNL Income
Fund IX, Ltd. (Included as Exhibit 3.1 to Registration
Statement No. 33-35049 on Form S-11 and incorporated herein by
reference.)
4.1 Affidavit and Certificate of Limited Partnership of CNL Income
Fund IX, Ltd. (Included as Exhibit 3.1 to Registration
Statement No. 33-35049 on Form S-11 and incorporated herein by
reference.)
4.2 Amended and Restated Agreement of Limited Partnership of CNL
Income Fund IX, Ltd. (Included as Exhibit 4.6 to
Post-Effective Amendment No. 1 to Registration Statement No.
33-35049 on Form S-11 and incorporated herein by reference.)
10.1 Management Agreement between CNL Income Fund IX, Ltd. and CNL
Investment Company (Filed herewith.)
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.)
i
EXHIBIT 10.1
Management Agreement between CNL Income Fund IX, Ltd. and
CNL Investment Company
<PAGE>
MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT (the "Agreement") is made and entered into as
of this l1th day of April 1991, by and between CNL Income Fund X Ltd, a Florida
limited partnership (the Partnership"), and CNL Investment Company, a Florida
corporation (the "Manager").
WHEREAS, the Partnership intends to acquire, or enter into joint
ventures or partnerships which will acquire, certain real properties upon which
restaurants are to be located.
WHEREAS, the Partnership further intends to lease such properties, and
the buildings located thereon, on a "triple net" basis to operators or
franchisees of certain national or regional restaurants; and
WHEREAS, the Partnership desires to have the Manager perform the
management services specified in this Agreement with respect to such properties,
and the Manager desires to perform such services.
NOW, THEREFORE, for and in consideration of the premises and the mutual
covenants and agreements hereinafter set forth, the Partnership and the Manager
agree as follows.
1. Definitions. Whenever used in this Agreement, the following terms
shall have the following specified meaning. Unless the context otherwise clearly
indicates, all other terms used in this Agreement and having initial capital
letters shall have the same meanings as set forth in the Amended and Restated
Agreement of Limited Partnership of CNL Income Fund IX, Ltd., a form of which is
attached hereto as Exhibit A.
1.1 "Expenses" shall mean the actual cost of any and all
goods, materials, or services, other than overhead items, acquired by
the Manager from persons or entities not affiliated with the Manager
or the general partners of the Partnership, which are reasonably
necessary for the performance of any of its obligations under this
Agreement
1.2 "Joint Venture" shall mean any joint venture or
partnership in which the Partnership is a co-venturer or partner.
1.3 "Landord" shall mean any person or entity designated as
the landlord or lessor under any Lease.
1.4 "Lease" shall mean any lease entered into by the
Partnership or a Joint Venture with a Tenant for the lease of any
Property.
1.5 "Property" shall mean any real property owned by the
Partnership or a Joint Venture and described in Exhibit B, as such
exhibit may be amended from time to time by ageement of the parties,
including any buildings located on such real property and any
equipment located therein or thereon to the extent such equipment is
owned by the Partnership or a Joint Venture.
1.6 'Tenant", shall mean (i) any person or entity designated
as a tenant or lessee under a Lease, or (ii) any assignee or
subtenant of a Tenant pursuant to a valid assignment or subletting
under a Lease.
2. Services. The Manager shall perform the following management
services for the Partnership with respect to the Properties:
(a) assisting the Partnership and any Joint Venture in
negotiating Leases;
<PAGE>
(b) visiting and inspecting each Property upon request of the
Partnership and at such other time or times as the Manager determines
is necessary or appropriate for the proper management of each such
Property;
(c) with respect to Properties wholly owned by the
Partnership, collecting all rents payable under each Lease,
depositing the rents so collected in accounts designated by the
Partnership, and rendering quarterly statements to the Partnership of
the rents so collected;
(d) at the request of the Partnership, inspecting the books,
records or financial statements of a Tenant to the extent permitted
under the terms of the applicable Lease, for the purpose of
determining whether such Tenant has paid or is paying the full amount
of rent required to be paid under such Lease;
(e) notifying the Partnership of any material default by a
Tenant under a Lease;
(f) except as otherwise directed by the Partnership, enforcing
any and all rights of each Landlord under the applicable Lease at
such times and in such manner and to such extent other than through
the initiation of legal proceedings against a Tenant, as the Manager
reasonably determines to be appropriate under the circumstances;
(g) providing reasonable assistance to the Partnership in
connection with any legal action brought by a Landlord against a
Tenant for default under a Lease;
(h) notifying the Partnership of any request, submission,
notice or other communication from a Tenant (other than rental
payments), and advising the Partnership with respect to the
appropriate response; and
(i) furnishing to the Partnership, within a reasonable time
after its request such information with respect to any Property as
the Partnership may from time to time reasonably request.
3. Compensation
3.1 Management Fee. Within sixty (60) days following the close of each
fiscal year of the Partnership, the Partnership shall, to the extent of
available Net Cash Flow, pay to the Manager an annual noncumulative management
fee equal to 1% of the gross revenues derived from Properties wholly owned by
the Partnership plus, in the case of Properties owned by any Joint Venture, the
Partnership's allocable share under the agreement governing the Joint Venture,
of gross operating revenues from any such Properties. Such fee, together with
fees paid by the Partnership to persons or entities unaffiliated with the
general partners of the Partnership for management services, shall not exceed
fees which are competitive for similar services in the same geographic area. The
management fee otherwise payable to the Manager during the first and last years
of this Agreement shall be prorated based on the number of days during the
Partnership's fiscal year for which this Agreement is in effect.
3.2 Expenses. The Partnership shall within 30 days after receipt of a
request by the Manager for reimbursement of Expenses reimburse the Manager for
all such Expenses. All such requests shall state in detail the nature of all
Expenses for which reimbursement is sought and shall be supported by appropriate
documentation.
4. Term of Agreement.
4.1 Commencement and Expiration. This Agreement shall commence as of the
date of this Agreement and, unless sooner terminated pursuant to Paragraph 4.2
hereof or by operation of law, or otherwise, shall expire at such time as the
Partnership no longer has an ownership interest in any Property.
2
<PAGE>
4.2 Termination. Either party may terminate this Agreement, without
penalty, by giving (60) days' prior written notice to the other party.
4.3 Obligations Surviving Expiration or Termination.
(a) In addition to any other obligations of the Partnership
which survive the expiration or termination of this Agreement, the
Partnership shall upon the expiration or termination of this Agreement
(i) promptly reimburse the Manager for all Expenses for which the
Manager seeks reimbursement and, (ii) pay to the Manager the management
fee payable under Paragraph 3.1 as soon after expiration or termination
of this Agreement.
(b) In addition to any other obligations of the Manager which
survive the expiration or termination of this Agreement the Manager
shall upon the expiration or termination of this Agreement (i) promptly
cause all hmds received from Tenants as payments under a Lease to be
deposited in the appropriate accounts designated by the Partnership, and
(ii) promptly deliver to the Partnership all records and documents in
its possession relating to the Properties. The Manager shall use its
best efforts to cooperate with the Partnership to accomplish an orderly
transfer of the management of the Properties to a party or parties
designated by the Partnership.
5. Indemnification.
5.1 By the Partnership. The Partnership releases and shall defend,
indemnify and hold harmless the Manager from all claims, losses, harm, costs,
liabilities, damages and expenses (including, but not limited to, attorneys'
fees) arising, whether before or after the expiration or termination of this
Agreement, out of or in connection with (a) the "Manager's" management of any
Property, or (b) any accident or injury (including death) to any person or
damage to any property or environment occurring in or about any Property or in
connection with the possession, use, or occupancy of any Property; provided,
however, that the Partnership shall have no obligation under this Paragraph 5.1
to release, defend, indemnify or hold harmless the Manager from any such claim
loss, harm, cost, liability, damage or expense, if the same arises out of (i) an
act by the Manager which is not taken in good faith or in a manner reasonably
believed to be in the best interests of the Partnership, or (ii) conduct by the
Manager constituting negligence, willful misconduct or breach of any of its
obligations under this Agreement.
5.2 Indemnification on by the Manager. The Manager releases and shall
defend, indemnify and hold harmless the Partnership from all claims, losses,
harm, costs, liabilities, damages and expenses (including but not limited to,
attorneys' fees) arising whether before or after the expiration or termination
of this Agreement solely out of conduct by the Manager constituting negligence,
willful misconduct or breach of any of its obligations under this Agreement.
6. Miscellaneous
6.1 Survival. Paragraphs 4.3 and 5 and all provisions of this Agreement
which may reasonably be interpreted or construed as surviving the expiration or
termination of this Agreement shall survive the expiration or termination of
this Agreement for a period of ten years.
6.2 Independent Contractor. The parties hereby recognized that the
Manager is serving as an independent contractor under this Agreement Nothing
contained in this Agreement shall be interpreted or construed to create a
partnership relationship between the Manager and the Partnership.
3
<PAGE>
6.3 Notices. Any notice, approval, request, authorization, consent,
direction or other communication required or permitted under this Agreement
shall be given in writing and shall be deemed to be delivered when delivered in
person or deposited in the United States mail properly addressed and stamped
with the required postage, registered or certified mail, return receipt
requested, to the intended recipient as set forth below.
If to the Partnership: CNL Income Fund DC, lAd.
400 East South Street, Suite 500
Orlando, Florida 32801
Attention: James M. Seneff, Jr.
If to the Manager CNL Investment Company
400 East South Street, Suite 500
Orlando, Florida 32801
Attention: Robert A. Bourne
Either party may change its address specified above by giving the other party
notice of such change in accordance with this Paragraph 6.3.
6.4 No Third Party Beneficiaries. Notwithstanding anything to the
contrary in this Agreement, the parties do not intend any person or entity not a
party to this Agreement to be a beneficiary of any provision of this Agreement,
and no provision of this Agreement shall be interpreted or construed as being
for the benefit of any third party. Further, no third party shall by virtue of
any provision of this agreement have a right of action or an enforceable legal
remedy against either party to this Agreement.
6.5 Nonwaiver. The failure of either party to insist upon or enforce
strict performance by the other party of any provision of this Agreement or to
exercise any right under this Agreement shall not be construed as a waiver or
relinquishment to any extent of such party's right to assert or rely upon any
such provision or right in that or any other instance; rather, such provision or
right shall be and remain in full force and effect.
6.6 Successors and Assigns. Neither party shall assign (voluntarily, by
operation of law or otherwise) this Agreement or any right, interest or benefit
under this Agreement without the prior written consent of the other party.
Subject to the foregoing, this Agreement shall be fully binding upon, inure to
the benefit of and be enforceable by, the parties hereto and their respective
successors and assigns.
6.7 Entire Agreement. This Agreement sets forth the entire agreement of
the parties with regard to the subject matter hereof and supersedes any and all
prior agreements of the parties with respect thereto.
6.8 Amendment. No change, amendment or modification of any provision of
this Agreement shall be valid unless set forth in a written instrument signed by
the party to be bound thereby.
6.9 Applicable Law. This Agreement shall be interpreted, construed and
enforced in an respects in accordance with the laws of the State of Florida.
IN WITNESS THEREOF, the parties have executed this Agreement as of the
date first-above written.
The Partnership: CNL INCOME FUND X, LTD.
By: /s/ James M. Seneff, Jr.
-------------------------------
JAMES M. SENEFF, JR., GENERAL PARTNER
4
<PAGE>
By: /s/ Robert A. Bourne
------------------------------
ROBERT A. BOURNE, GENERAL PARTNER
By: CNL REALTY CORPORATION
GENERAL PARTNER
By: /s/ James M. Seneff, Jr.
------------------------------
JAMES M. SENEFF JR., PRESIDENT
The Manager: CNL INVESTMENT COMPANY
By: Robert A. Bourne
-------------------------------
ROBERT A. BOURNE, PRESEDENT
5
<PAGE>
EXHIBIT B
[Provide name and address of each Property under management.]
(List of Properties Omitted)
6
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the balance
sheet of CNL Income Fund IX, Ltd. at December 31, 1997, 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 IX, Ltd. for the year ended December 31, 1997.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 1,250,388
<SECURITIES> 0
<RECEIVABLES> 204,450
<ALLOWANCES> 108,316
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 15,660,881
<DEPRECIATION> 1,497,770
<TOTAL-ASSETS> 31,096,421
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 30,147,224
<TOTAL-LIABILITY-AND-EQUITY> 31,096,421
<SALES> 0
<TOTAL-REVENUES> 2,692,490
<CGS> 0
<TOTAL-COSTS> 471,354
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 21,000
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,937,632
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,937,632
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,937,632
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>Due to the nature of its industry, CNL Income Fund IX, Ltd. has an
unclassified balance sheet; therefore, no values are shown above for current
assets and current liabilities.
</FN>
</TABLE>
