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 0-20016
CNL INCOME FUND X, LTD.
(Exact name of registrant as specified in its charter)
Florida 59-3004139
(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 X, 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 September 9, 1991, the Partnership
offered for sale up to $40,000,000 of limited partnership interests (the
"Units") (4,000,000 Units at $10 per Unit) pursuant to a registration statement
on Form S-11 under the Securities Act of 1933, as amended, effective March 20,
1991. The offering terminated on March 18, 1992, at which date the maximum
offering proceeds of $40,000,000 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
$35,200,000, and were used to acquire 47 Properties, including interests in nine
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, 1995, the Partnership sold its Property in Denver,
Colorado, and reinvested the majority of the net sales proceeds in a Shoney's in
Fort Myers Beach, Florida. During the year ended December 31, 1996, the
Partnership reinvested the remaining net sales proceeds from the 1995 sale of
the Property in Denver, Colorado, in a Golden Corral Property located in
Clinton, North Carolina, with affiliates of the General Partners as
tenants-in-common. During the year ended December 31, 1997, the Partnership sold
its Property in Fremont, California, and reinvested the majority of the net
sales proceeds in a Boston Market in Homewood, Alabama. In addition, during
1997, the Partnership used approximately $130,400 that had been previously
reserved for working capital purposes, to invest in a Chevy's Fresh Mex Property
located in Miami, Florida, with affiliates of the General Partners as
tenants-in-common. As a result of the above transactions, as of December 31,
1997, the Partnership owned 49 Properties, including nine Properties owned by
joint ventures in which the Partnership is a co-venturer and two Properties
owned with affiliates as tenants-in-common. During January 1998, the Partnership
sold its Property in Sacramento, California, to the tenant and intends to
reinvest the net sales proceeds in an additional Property. 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 or joint venture
purchase options granted to certain lessees.
Leases
Although there are variations in the specific terms of the leases, the
following is a summarized description of the general structure of the
Partnership's leases. Generally, the leases of the Properties owned by the
Partnership and the joint ventures in which the Partnership is a co-venturer,
provide for initial terms ranging from 14 to 20 years (the average being 18
years) and expire between 2006 and 2016. All leases are on a triple-net basis,
with the lessee responsible for all repairs and maintenance, property taxes,
insurance and utilities. The leases of the Properties provide for minimum base
annual rental payments (payable in monthly installments) ranging from
approximately $26,200 to $198,500. All of the leases provide for percentage
rent, based on sales in excess of a specified amount.
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<PAGE>
In addition, a majority of the leases provide that, commencing in specified
lease years (ranging from the second 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 five
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.
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.
In December 1997, the lease relating to the Perkins Property in Ft.
Pierce, Florida, was amended to provide for reduced base rents effective May
1997 through December 31, 1998, with rent deferrals totalling $144,633 being
payable by the tenant at the time that the Property is leased to another tenant,
the date the Property is sold or upon termination of the lease, whichever occurs
first.
Major Tenants
During 1997, three lessees (or group of affiliated lessees) of the
Partnership and its consolidated joint venture, (i) Golden Corral Corporation,
(ii) Foodmaker, Inc. and (iii) Flagstar Enterprises, Inc. and Denny's, Inc.
(which are affiliated entities under common control of Flagstar Corporation)
(hereinafter referred to as Flagstar Corporation), each contributed more than
ten percent of the Partnership's total rental income (including rental income
from the Partnership's consolidated joint venture and the Partnership's share of
rental income from eight Properties owned by unconsolidated joint ventures and
two Properties owned with affiliates as tenants-in-common). As of December 31,
1997, Golden Corral Corporation was the lessee under leases relating to four
restaurants, Foodmaker, Inc. was the lessee under leases relating to six
restaurants and Flagstar Corporation was the lessee under leases relating to
nine restaurants. It is anticipated that based on the minimum rental payments
required by the leases, these three 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, five Restaurant
Chains, Golden Corral Family Steakhouse Restaurants ("Golden Corral"), Hardee's,
Burger King, Shoney's and Jack in the Box, each accounted for more than ten
percent of the Partnership's total rental income during 1997 (including rental
income from the Partnership's consolidated joint venture and the Partnership's
share of rental income from eight Properties owned by unconsolidated joint
ventures and two Properties owned with affiliates as tenants-in-common). In
subsequent years, it is anticipated that these five Restaurant Chains each will
continue to account for more than ten percent of the Partnership's total rental
income to which the Partnership is entitled under the terms of the leases. Any
failure of these lessees or Restaurant Chains could materially affect the
Partnership's income. No single tenant or group of affiliated tenants lease
Properties with an aggregate carrying value, excluding acquisition fees and
certain acquisition expenses, in excess of 20 percent of the total assets of the
Partnership.
Joint Venture Arrangements
The Partnership has entered into a joint venture arrangement, Allegan
Real Estate Joint Venture, with an unaffiliated entity to purchase and hold one
Property. In addition, the Partnership has entered into three separate joint
venture arrangements, CNL Restaurant Investments III, Ashland Joint Venture and
Williston Real Estate Joint Venture, with affiliates of the General Partners, to
purchase and hold eight 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.
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CNL Restaurant Investments III's joint venture agreement does not
provide a fixed term, but continues in existence until terminated by either of
the joint venturers. Ashland Joint Venture has an initial term of 30 years and
Allegan Real Estate Joint Venture and Williston Real Estate Joint Venture each
have an initial term of 20 years and, after the expiration of the initial term,
each of the three joint ventures 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 Partnership has management control of Allegan Real Estate Joint
Venture and shares management control equally with affiliates of the General
Partners for CNL Restaurant Investments III, Williston Real Estate Joint Venture
and Ashland 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.
Net cash flow from operations of CNL Restaurant Investments III,
Allegan Real Estate Joint Venture, Ashland Joint Venture and Williston Real
Estate Joint Venture is distributed 50 percent, 88.26%, 10.51% and 41 percent,
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 agreements, in January 1996, the
Partnership entered into an agreement to hold a Golden Corral Property as
tenants-in-common with affiliates of the General Partners. The agreement
provides for the Partnership and the affiliates to share in the profits and
losses of the Property in proportion to each co-venturer's percentage interest.
The Partnership owns a 13.37% interest in this Property.
In addition, in December 1997, the Partnership entered into an
agreement to hold a Chevy's Fresh Mex Property as tenants-in-common with
affiliates of the General Partners. The agreement provides for the Partnership
and the affiliates to share in the profits and losses of the Property in
proportion to each co-venturer's percentage interest. The Partnership owns a
6.69% 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 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, 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.
3
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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 which offer different types of food and service.
At the time the Partnership elects to dispose of its Properties, other
than as a result of the exercise of tenant options to purchase Properties, the
Partnership will be in competition with other persons and entities to locate
purchasers for its Properties.
Employees
The Partnership has no employees. The officers of CNL Realty
Corporation and the officers and employees of CNL Fund Advisors, Inc. perform
certain services for the Partnership. In addition, the General Partners have
available to them the resources and expertise of the officers and employees of
CNL Group, Inc., a diversified real estate company, and its affiliates, who may
also perform certain services for the Partnership.
Item 2. Properties
As of December 31, 1997, the Partnership owned, either directly or
through joint venture arrangements, 49 Properties, located in 18 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 14,000
to 200,900 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 include a
building that is one of a Restaurant Chain's approved designs. The buildings
generally are rectangular and are constructed from various combinations of
stucco, steel, wood, brick and tile. Building sizes range from approximately
1,800 to 10,700 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 restaurant 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 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.
Golden Corral Corporation leases four Golden Corral restaurants. The
initial term of each lease is 15 years (expiring between 2007 and 2011) and the
average minimum base rent is approximately $156,900 (ranging from approximately
$88,100 to $198,500).
Foodmaker, Inc. leases six Jack in the Box restaurants. The initial
term of each lease is between 18 and 20 years (expiring between 2009 and 2012)
and the average minimum base rent is approximately $81,600 (ranging from
approximately $62,900 to $99,400).
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Flagstar Corporation leases seven Hardee's restaurants and two Denny's
restaurants. The initial term of each lease is 20 years (expiring in 2012) and
the average minimum base rent is approximately $69,100 (ranging from
approximately $43,500 to $111,800).
The General Partners consider the Properties to be well-maintained and
sufficient for the Partnership's operations.
Item 3. Legal Proceedings
Neither the Partnership, nor its General Partners or any affiliate of
the General Partners, nor any of their respective properties, is a party to, or
subject to, any material pending legal proceedings.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
As of February 28, 1998, there were 3,531 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 $ 7.75 $ 9.13 $10.00 $ 8.10 $ 9.37
Second Quarter 8.70 7.75 8.38 9.50 9.50 9.50
Third Quarter 9.50 8.25 8.67 8.15 5.74 6.61
Fourth Quarter 9.20 8.65 8.62 8.50 7.60 8.20
</TABLE>
(1) A total of 15,700 and 26,865 Units were transferred other than pursuant
to the Plan for the years ended December 31, 1997 and 1996,
respectively.
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 of $3,600,003 and $3,640,003, respectively, to the
Limited Partners. During the year ended December 31, 1996, the Partnership
declared a special distribution to the Limited Partners of $40,000 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
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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.
Quarter Ended 1997 1996
------------- --------- ----------
March 31 $900,000 $900,001
June 30 900,001 900,001
September 30 900,001 900,001
December 31 900,001 940,000
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) $ 3,813,248 $ 3,871,869 $ 3,875,779 $ 4,020,289 $ 4,030,010
Net income (2) 3,531,381 3,461,812 3,552,067 3,672,841 3,636,573
Cash distributions declared (3) 3,600,003 3,640,003 3,640,003 3,625,017 3,500,000
Net income per Unit (2) .87 .86 .88 .91 .90
Cash distributions declared per
Unit (3) .90 .91 .91 .91 .88
At December 31:
Total assets $36,289,727 $36,437,560 $36,563,796 $36,722,696 $36,462,746
Partners' capital 35,154,043 35,222,665 35,400,856 35,488,792 35,440,968
</TABLE>
(1) Revenues include equity in earnings of unconsolidated joint ventures
and minority interest in income of the consolidated joint venture.
(2) Net income for the years ended December 31, 1997 and 1995, include
$132,238 and $67,214, respectively, from gains on sale of land and
buildings.
(3) Distributions for the years ended December 31, 1996 and 1995, each
include a special distribution to the Limited Partners of $40,000 which
represented cumulative excess operating reserves.
The above selected financial data should be read in conjunction with
the financial statements and related notes contained in Item 8 hereof.
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, which are leased primarily to operators of
selected national and regional fast-food and family-style Restaurant Chains. The
leases are triple-net leases, with the lessees generally responsible for all
repairs and maintenance, property taxes, insurance and utilities. As of December
31, 1997, the Partnership owned 49 Properties, either directly or indirectly
through joint venture arrangements.
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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 $3,596,417, $3,695,802
and $3,527,362 for the years ended December 31, 1997, 1996 and 1995,
respectively. The decrease in cash from operations during 1997, as compared to
1996, and the increase in 1996, as compared to 1995, is primarily a result of
changes in the Partnership's working capital during each of the respective
years.
Other sources and uses of capital included the following during the
years ended December 31, 1997, 1996 and 1995.
In July 1995, the Partnership sold a small parcel of land as a result
of an easement relating to its Property in Hendersonville, North Carolina, for
$7,200, resulting in a gain of $1,112 for financial reporting purposes. In
addition, in August 1995, the Partnership sold its Property in Denver, Colorado,
for $1,057,000 and received net sales proceeds of $1,050,186, resulting in a
gain of $66,102 for financial reporting purposes. This Property was originally
acquired by the Partnership in December 1991 and had a cost of approximately
$977,000, excluding acquisition fees and miscellaneous acquisition expenses;
therefore, the Partnership sold the Property for approximately $73,200 in excess
of its original purchase price. In September 1995, the Partnership reinvested
$928,122 in a Shoney's in Fort Myers Beach, Florida.
In October 1995, the tenant of the Partnership's Property located in
Austin, Texas, entered into a sublease agreement for a vacant parcel of land
under which the subtenant has the option to purchase such land. The subtenant
exercised the purchase option and in accordance with the terms of the sublease
agreement, the tenant assigned the purchase contract, together with the purchase
contract payment of $69,000 from the subtenant, to the Partnership. As of
February 28, 1998, the sale for the vacant parcel of land had not been
consummated and as a result, the net proceeds of $68,000 (representing the
original $69,000 received by the Partnership, less $1,000 in costs incurred in
anticipation of the sale) were recorded as a deposit at December 31, 1997.
In January 1996, the Partnership reinvested the remaining net sales
proceeds from the 1995 sale of the Property in Denver, Colorado, and the
proceeds from the granting of an easement relating to the Property in
Hendersonville, North Carolina, in a Golden Corral Property located in Clinton,
North Carolina, with affiliates of the General Partners as tenants-in-common. In
connection therewith, the Partnership and its affiliates entered into an
agreement whereby each co-venturer will share in the profits and losses of the
Property in proportion to its applicable percentage interest. As of December 31,
1997, the Partnership owned a 13.37% interest in this Property.
In September 1997, the Partnership sold its Property in Fremont,
California, to the franchisor, for $1,420,000 and received net sales proceeds
(net of $2,745 which represents amounts due to the former tenant for prorated
rent) of $1,363,805, resulting in a gain of $132,238 for financial reporting
purposes. This Property was originally acquired by the Partnership in March 1992
and had a cost of approximately $1,116,900, excluding acquisition fees and
miscellaneous acquisition expenses; therefore, the Partnership sold the Property
for approximately $249,700 in excess of its original purchase price. In October
1997, the Partnership reinvested approximately $1,277,300 of the net sales
proceeds in a Boston Market Property in Homewood, Alabama. The Partnership
acquired the Boston Market Property from an affiliate of the General Partners.
The affiliate had purchased and temporarily held title to the Property in order
to facilitate the acquisition of the Property by the Partnership. The purchase
price paid by the Partnership represented the costs incurred by the affiliate to
acquire the Property, including closing costs. The General Partners believe that
the transaction, or a portion thereof, relating to the sale of the Property in
Fremont, California, and the reinvestment of the proceeds in a Boston Market
Property in Homewood, Alabama, will qualify as a like-kind exchange transaction
for federal income tax purposes. However, the Partnership will distribute
amounts sufficient to enable the Limited Partners to pay federal and state
income taxes, if any (at a level reasonably assumed by the General Partners)
resulting from the sale. The Partnership intends to reinvest the remaining net
sales proceeds in an additional Property or use such amounts for other
Partnership purposes.
In December 1997, the Partnership used approximately $130,400 that had
been previously reserved for working capital purposes, to invest in a Chevy's
Fresh Mex Property located in Miami, Florida, with affiliates of the General
Partners as tenants-in-common. In connection therewith, the Partnership and its
affiliates entered into
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<PAGE>
an agreement whereby each co-venturer will share in the profits and losses of
the Property in proportion to its applicable percentage interest. As of December
31, 1997, the Partnership owned a 6.69% interest in this Property.
During 1997, the Partnership entered into a contract to sell the
Property in Sacramento, California, to the tenant. In January 1998, the
Partnership sold this Property for $1,250,000 and received net sales proceeds of
$1,234,175, resulting in a gain of approximately $163,300 for financial
reporting purposes. The Partnership intends to reinvest the net sales proceeds
in an additional Property.
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 partners. At December 31, 1997, the Partnership had $1,583,883
invested in such short-term investments as compared to $1,769,483 at December
31, 1996. The decrease in cash is primarily attributable to the Partnership
using approximately $130,400 that had been previously reserved for working
capital purposes, to invest in a Property located in Miami, Florida, with
affiliates, as tenants-in-common, in December 1997. The funds remaining at
December 31, 1997, after 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
$86,327, $112,363 and $100,249, respectively, for certain operating expenses. As
of December 31, 1997 and 1996, the Partnership owed $4,946 and $1,609,
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 $1,066,237 at December 31, 1997, from $1,148,901 at December 31, 1996,
partially as the result of the Partnership's accruing a special distribution
payable to the Limited Partners of $40,000 at December 31, 1996, which was paid
in January 1997. Other liabilities also decreased due to a decrease in escrowed
real estate taxes payable and rents paid in advance at December 31, 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, and during the years ended December 31,
1996 and 1995, cumulative excess operating reserves, the Partnership declared
distributions to the Limited Partners of $3,600,003 for the year ended December
31, 1997 and $3,640,003 for each of the years ended December 31, 1996 and 1995.
This represents distributions 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 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
8
<PAGE>
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 1995, the Partnership owned and leased 39 wholly owned
Properties (including one Property in Denver, Colorado, which was sold in August
1995), during 1996, the Partnership owned and leased 38 wholly owned Properties,
and during 1997, the Partnership owned and leased 39 wholly owned Properties
(including one Property in Fremont, California, which was sold in September
1997). In addition, during 1997, 1996 and 1995, the Partnership was a
co-venturer in three separate joint ventures that each owned and leased one
Property and one joint venture which owned and leased six Properties. During
1996, the Partnership also owned and leased one Property with affiliates as
tenants-in-common and during 1997, the Partnership owned and leased two
Properties with affiliates as tenants-in-common. As of December 31, 1997, the
Partnership owned, either directly or through joint venture arrangements 49
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 $26,200 to $198,500. All of 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 second 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 and its consolidated joint venture, Allegan Real Estate Joint
Venture, earned $3,402,320, $3,481,139 and $3,474,227, respectively, in rental
income from operating leases and earned income from direct financing leases. The
decrease in rental and earned income during 1997, as compared to 1996, is
partially attributable to the Partnership increasing its allowance for doubtful
accounts by approximately $64,600 during 1997, for rental amounts relating to
the Perkins Properties located in Lancaster and Amherst, New York, which are
leased by the same tenant, due to the 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. Rental and earned income also
decreased by approximately $36,600 during 1997, as compared to 1996, due to the
fact that the Partnership sold its Property in Fremont, California, in September
1997. This decrease was partially offset by an increase of approximately $28,100
in rental income as a result of reinvesting the majority of these net sales
proceeds in a Property in Homewood, Alabama, in October 1997.
During the years ended December 31, 1997, 1996 and 1995, the
Partnership also earned $51,678, $45,126 and $53,189, respectively, in
contingent rental income. The increase in contingent rental income during 1997,
as compared to 1996, is primarily attributable to a change in the percentage
rent formula in accordance with the terms of the lease agreement for one of the
Partnership's leases during 1997. The decrease in contingent rent during 1996,
as compared to 1995, was primarily a result of decreases in gross sales relating
to certain restaurant Properties during 1996.
For the years ended December 31, 1997, 1996 and 1995, the Partnership
also earned $278,919, $278,371 and $267,799, respectively, attributable to net
income earned by unconsolidated joint ventures in which the Partnership is a
co-venturer. The increase in net income earned by unconsolidated joint ventures
during 1996, as compared to 1995, is primarily attributable to the Partnership
investing in a Property in Clinton, North Carolina, in January 1996, with
affiliates of the General Partners as tenants-in-common, as described above in
"Liquidity and Capital Resources."
During at least one of the years ended December 31, 1997, 1996 and
1995, three lessees (or group of affiliated lessees), of the Partnership and its
consolidated joint venture, Golden Corral Corporation, Foodmaker, Inc. and
Flagstar Corporation, each contributed more than ten percent of the
Partnership's total rental income (including rental income from the
Partnership's consolidated joint venture and the Partnership's share of rental
income from
9
<PAGE>
eight Properties owned by unconsolidated joint ventures and two Properties owned
with affiliates as tenants-in-common). As of December 31, 1997, Golden Corral
Corporation was the lessee under leases relating to four restaurants, Foodmaker,
Inc. was the lessee under leases relating to six restaurants and Flagstar
Corporation was the lessee under leases relating to nine restaurants. It is
anticipated that based on the minimum rental payments required by the leases,
these three lessees (or groups of affiliated lessees) each will continue to
contribute more than ten percent of the Partnership's total rental income during
1998 and subsequent years. In addition, during at least one of the years ended
December 31, 1997, 1996 and 1995, five Restaurant Chains, Golden Corral,
Hardee's, Burger King, Shoney's and Jack in the Box, each accounted for more
than ten percent of the Partnership's total rental income (including rental
income from the Partnership's consolidated joint venture and the Partnership's
share of rental income from eight Properties owned by unconsolidated joint
ventures and two Properties owned with affiliates as tenants-in-common). In
subsequent years, it is anticipated that these five Restaurant Chains each will
continue to account for more than ten percent of the Partnership's total rental
income to which the Partnership is entitled under the terms of the leases. Any
failure of these lessees or Restaurant Chains could materially affect the
Partnership's income.
Operating expenses, including depreciation and amortization expense,
were $414,105, $410,057 and $390,926 for the years ended December 31, 1997, 1996
and 1995, respectively. The increase in operating expenses during 1997, as
compared to 1996, is partially a result of the Partnership recording
approximately $9,700, for real estate taxes relating to the Perkins Properties
located in Lancaster and Amherst, New York, which are leased by the same tenant,
due to the current financial difficulties of the tenant. Payment of these taxes
remains the responsibility of the tenant of this Property; however, the General
Partners believe that the tenant's ability to pay these expenses is doubtful.
The Partnership intends to pursue collection from the tenant of any such amounts
paid by the Partnership and will recognize such amounts as income if collected.
The increase in operating expenses during 1997, as compared to 1996, is
partially offset by a decrease in accounting and administrative expenses
associated with operating the Partnership and its Properties.
The increase in operating expenses during 1997, as compared to 1996, is
also partially attributable to, and the increase during 1996, as compared to
1995, is partially offset by a decrease in state taxes during 1996 as a result
of receiving a state tax refund from the state of New Hampshire during 1996, for
taxes paid in prior years.
Operating expenses increased during 1996, as compared to 1995, due to
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. Operating expenses also
increased during 1996, as compared to 1995, due to an increase in professional
fees during the year ended December 31, 1996, as a result of obtaining appraisal
updates for 1996 and 1995, to prepare an annual statement of unit valuation to
qualified plans in accordance with the Partnership's partnership agreement.
As a result of the sale of the Property in Fremont, California, as
discussed above in "Liquidity and Capital Resources," the Partnership recognized
a gain of $132,238 for financial reporting purposes for the year ended December
31, 1997. In addition, as a result of the granting of an easement relating to
the Property in Hendersonville, North Carolina, and the sale of the Property in
Denver, Colorado, as described above in "Liquidity and Capital Resources," the
Partnership recognized a gain for financial reporting purposes of $67,214 during
the year ended December 31, 1995. No Properties were sold during the year ended
December 31, 1996.
The General Partners of the Partnership are in the process of assessing
and addressing the impact of the year 2000 on its company 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, 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,
10
<PAGE>
also may have an adverse impact on the sales of the restaurants and on potential
capital appreciation of the Properties.
Item 8. Financial Statements and Supplementary Data
11
<PAGE>
CNL INCOME FUND X, LTD.
(A Florida Limited Partnership)
CONTENTS
Page
Report of Independent Accountants 13
Financial Statements:
Balance Sheets 14
Statements of Income 15
Statements of Partners' Capital 16
Statements of Cash Flows 17
Notes to Financial Statements 19
12
<PAGE>
Report of Independent Accountants
To the Partners
CNL Income Fund X, Ltd.
We have audited the financial statements and the financial statement schedules
of CNL Income Fund X, 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 X, 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 14, 1998
13
<PAGE>
CNL INCOME FUND X, LTD.
(A Florida Limited Partnership)
BALANCE SHEETS
December 31,
ASSETS 1997 1996
------ ----------- -----------
Land and buildings on operating
leases, less accumulated
depreciation $15,709,899 $15,224,392
Net investment in direct financing
leases 13,460,125 14,219,805
Investment in joint ventures 3,505,326 3,449,210
Cash and cash equivalents 1,583,883 1,769,483
Restricted cash 92,236 -
Receivables, less allowance for
doubtful accounts of $137,856
and $4,428 123,903 52,470
Prepaid expenses 5,877 5,503
Accrued rental income, less
allowance for doubtful accounts
of $117,593 and $88,781 1,775,374 1,683,593
Other assets 33,104 33,104
----------- -----------
$36,289,727 $36,437,560
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 6,033 $ 2,913
Escrowed real estate taxes payable 27,784 45,060
Distributions payable 900,001 940,000
Due to related parties 4,946 1,609
Rents paid in advance and deposits 132,419 160,928
----------- -----------
Total liabilities 1,071,183 1,150,510
Commitments and Contingencies (Note 11)
Minority interest 64,501 64,385
Partners' capital 35,154,043 35,222,665
----------- -----------
$36,289,727 $36,437,560
=========== ===========
See accompanying notes to financial statements.
14
<PAGE>
CNL INCOME FUND X, 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 $1,867,795 $1,832,781 $1,783,928
Earned income from direct
financing leases 1,534,525 1,648,358 1,690,299
Contingent rental income 51,678 45,126 53,189
Interest and other income 88,853 75,896 89,630
---------- ---------- ----------
3,542,851 3,602,161 3,617,046
---------- ---------- ----------
Expenses:
General operating and
administrative 153,672 166,049 150,157
Professional services 26,890 33,692 23,563
Real estate taxes 9,703 - -
State and other taxes 9,372 2,357 15,510
Depreciation and amortization 214,468 207,959 201,696
---------- ---------- ----------
414,105 410,057 390,926
---------- ---------- ----------
Income Before Minority Interest
in Income of Consolidated
Joint Venture, Equity in
Earnings of Unconsolidated
Joint Ventures and Gain on
Sale of Land and Building 3,128,746 3,192,104 3,226,120
Minority Interest in Income of
Consolidated Joint Venture (8,522) (8,663) (9,066)
Equity in Earnings of
Unconsolidated Joint Ventures 278,919 278,371 267,799
Gain on Sale of Land and Building 132,238 - 67,214
---------- ---------- ----------
Net Income $3,531,381 $3,461,812 $3,552,067
========== ========== ==========
Allocation of Net Income:
General partners $ 33,991 $ 34,618 $ 35,491
Limited partners 3,497,390 3,427,194 3,516,576
---------- ---------- ----------
$3,531,381 $3,461,812 $3,552,067
========== ========== ==========
Net Income per Limited Partner
Unit $ 0.87 $ 0.86 $ 0.88
========== ========== ==========
Weighted Average Number of Limited
Partner Units Outstanding 4,000,000 4,000,000 4,000,000
========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
15
<PAGE>
CNL INCOME FUND X, 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 $103,609 $40,000,000 $(10,083,130) $10,257,313 $(4,790,000) $35,488,792
Distributions to limited
partners ($0.91 per
limited partner unit) - - - (3,640,003) - - (3,640,003)
Net income - 35,491 - - 3,516,576 - 3,552,067
------ -------- ----------- ------------ ----------- ----------- -----------
Balance, December 31, 1995 1,000 139,100 40,000,000 (13,723,133) 13,773,889 (4,790,000) 35,400,856
Distributions to limited
partners ($0.91 per
limited partner unit) - - - (3,640,003) - - (3,640,003)
Net income - 34,618 - - 3,427,194 - 3,461,812
------ -------- ----------- ------------ ----------- ----------- -----------
Balance, December 31, 1996 1,000 173,718 40,000,000 (17,363,136) 17,201,083 (4,790,000) 35,222,665
Distributions to limited
partners ($0.90 per
limited partner unit) - - - (3,600,003) - - (3,600,003)
Net income - 33,991 - - 3,497,390 - 3,531,381
------ -------- ----------- ------------ ----------- ----------- -----------
Balance, December 31, 1997 $1,000 $207,709 $40,000,000 $(20,963,139) $20,698,473 $(4,790,000) $35,154,043
====== ======== =========== ============ =========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
16
<PAGE>
CNL INCOME FUND X, 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 $ 3,380,391 $ 3,491,064 $ 3,290,242
Distributions from uncon-
solidated joint ventures 353,207 354,648 341,527
Cash paid for expenses (190,902) (211,345) (177,007)
Interest received 53,721 61,435 72,600
----------- ----------- -----------
Net cash provided by
operating activities 3,596,417 3,695,802 3,527,362
----------- ----------- -----------
Cash Flows From Investing
Activities:
Proceeds from sale of
land and building 1,363,805 - 1,057,386
Deposit received on
contract for sale of
land - - 69,000
Additions to land and
buildings on operating
leases (1,277,308) (978) (359,506)
Investment in direct
financing leases - (1,542) (566,097)
Investment in joint venture (130,404) (108,952) -
Increase in restricted cash (89,702) - -
----------- ----------- ----------
Net cash provided by
(used in) investing
activities (133,609) (111,472) 200,783
----------- ----------- -----------
Cash Flows From Financing
Activities:
Distributions to limited
partners (3,640,002) (3,640,003) (3,700,003)
Distributions to holder of
minority interest (8,406) (7,697) (7,998)
----------- ----------- -----------
Net cash used in
financing activities (3,648,408) (3,647,700) (3,708,001)
----------- ----------- -----------
Net Increase (Decrease) in Cash and
Cash Equivalents (185,600) (63,370) 20,144
Cash and Cash Equivalents at
Beginning of Year 1,769,483 1,832,853 1,812,709
----------- ----------- -----------
Cash and Cash Equivalents at
End of Year $ 1,583,883 $ 1,769,483 $ 1,832,853
=========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
17
<PAGE>
CNL INCOME FUND X, 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 $ 3,531,381 $ 3,461,812 $ 3,552,067
----------- ----------- -----------
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation 214,468 206,497 199,696
Amortization - 1,462 2,000
Minority interest in income
of consolidated joint
venture 8,522 8,663 9,066
Equity in earnings of
unconsolidated joint
ventures, net of
distributions 74,288 75,898 73,630
Gain on sale of land and
building (132,238) - (67,214)
Decrease (increase) in
receivables (71,222) 46,834 10,222
Increase in prepaid expenses (374) (3,852) (664)
Decrease in net investment
in direct financing leases 211,942 160,007 141,684
Increase in accrued rental
income (201,022) (315,028) (309,574)
Increase (decrease) in
accounts payable and
accrued expenses (14,156) 14,317 (1,057)
Increase (decrease) in due
to related parties 3,337 (5,395) 7,004
Increase (decrease) in rents
paid in advance and
deposits (28,509) 44,587 (89,498)
----------- ----------- -----------
Total adjustments 65,036 233,990 (24,705)
----------- ----------- -----------
Net Cash Provided by Operating
Activities $ 3,596,417 $ 3,695,802 $ 3,527,362
=========== =========== ===========
Supplemental Schedule of Non-Cash
Financing Activities:
Distributions declared and
unpaid at December 31 $ 900,001 $ 940,000 $ 940,000
============ =========== ===========
</TABLE>
See accompanying notes to financial statements.
18
<PAGE>
CNL INCOME FUND X, 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 X, 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 methods. Such
methods are described below:
Direct financing method - The leases accounted for using the
direct financing method are recorded at their net investment
(which at the inception of the lease generally represents the
cost of the asset) (Note 4). Unearned income is deferred and
amortized to income over the lease terms so as to produce a
constant periodic rate of return on the Partnership's net
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.
19
<PAGE>
CNL INCOME FUND X, 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, are removed from the
accounts and gains or losses from sales are reflected in income. The
general partners of the Partnership review 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 accounts for its 88.26%
interest in Allegan Real Estate Joint Venture using the consolidation
method. Minority interest represents the minority joint venture
partner's proportionate share of the equity in the Partnership's
consolidated joint venture. All significant intercompany accounts and
transactions have been eliminated.
The Partnership's investments in CNL Restaurant Investments III,
Williston Real Estate Joint Venture and Ashland Joint Venture, and the
property in Clinton, North Carolina, and the property in Miami,
Florida, for which each property is held as tenants-in-common with
affiliates, are accounted for using the equity method since the
Partnership shares control with affiliates which have the same general
partners.
20
<PAGE>
CNL INCOME FUND X, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1997, 1996 and 1995
1. Significant Accounting Policies - Continued:
Cash and Cash Equivalents - The Partnership considers all highly liquid
investments with a maturity of three months or less when purchased to
be cash equivalents. Cash and cash equivalents consist of demand
deposits at commercial banks and money market funds (some of which are
backed by government securities). Cash equivalents are stated at cost
plus accrued interest, which approximates market value.
Cash accounts maintained on behalf of the Partnership in demand
deposits at commercial banks and money market funds may exceed
federally insured levels; however, the Partnership has not experienced
any losses in such accounts. The Partnership limits investment of
temporary cash investments to financial institutions with high credit
standing; therefore, the Partnership believes it is not exposed to any
significant credit risk on cash and cash equivalents.
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.
Actual results could differ from those estimates.
21
<PAGE>
CNL INCOME FUND X, 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 the land portions of
the majority 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 five 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 $ 9,947,295 $ 9,926,720
Buildings 6,875,851 6,196,451
----------- -----------
16,823,146 16,123,171
Less accumulated
depreciation (1,113,247) (898,779)
----------- -----------
$15,709,899 $15,224,392
=========== ===========
22
<PAGE>
CNL INCOME FUND X, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1997, 1996 and 1995
3. Land and Buildings on Operating Leases - Continued:
In September 1997, the Partnership sold its property in Fremont,
California, to the franchisor, for $1,420,000 and received net sales
proceeds (net of $2,745 which represents amounts due to the former
tenant for prorated rent) of $1,363,805, resulting in a gain of
$132,238 for financial reporting purposes. This property was originally
acquired by the Partnership in March 1992 and had a cost of
approximately $1,116,900, excluding acquisition fees and miscellaneous
acquisition expenses; therefore, the Partnership sold the property for
approximately $249,700 in excess of its original purchase price. In
October 1997, the Partnership reinvested approximately $1,277,300 in a
Boston Market property located in Homewood, Alabama.
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 $201,021, $315,029 and $309,574, 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 $ 1,796,664
1999 1,817,764
2000 1,830,536
2001 1,875,201
2002 2,004,123
Thereafter 16,727,751
-----------
$26,052,039
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.
23
<PAGE>
CNL INCOME FUND X, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1997, 1996 and 1995
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 $ 25,273,063 $ 27,990,876
Estimated residual
values 4,225,008 4,375,790
Less unearned income (16,037,946) (18,146,861)
------------ ------------
Net investment in direct
financing leases $ 13,460,125 $ 14,219,805
============ ============
In September 1997, the Partnership sold its property in Fremont,
California, for which the building portion had been classified as a
direct financing lease. In connection therewith, the gross investment
(minimum lease payment receivable and estimated residual value) and
unearned income relating to this property were removed from the
accounts and the gain from the sale relating to the land portion of the
property was reflected in income (Note 3).
The following is a schedule of future minimum lease payments to be
received on the direct financing leases at December 31, 1997:
1998 $ 1,758,896
1999 1,761,323
2000 1,762,806
2001 1,770,249
2002 1,800,446
Thereafter 16,419,343
-----------
$25,273,063
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).
24
<PAGE>
CNL INCOME FUND X, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1997, 1996 and 1995
4. Net Investment in Direct Financing Leases - Continued:
During the year ended December 31, 1996, one of the Partnership's
leases was amended. As a result of the lease amendment, the Partnership
reclassified this lease from a direct financing lease to an operating
lease, whereby the property was recorded at its net carrying value of
$567,923.
5. Investment in Joint Ventures:
The Partnership has a 50 percent, a 10.51% and a 41 percent interest in
the profits and losses of CNL Restaurant Investments III, Ashland Joint
Venture and Williston Real Estate Joint Venture, respectively. The
remaining interests in these joint ventures are held by affiliates of
the Partnership which have the same general partners.
In January 1996, the Partnership acquired and leased a property in
Clinton, North Carolina, as tenants-in-common with affiliates of the
general partners. The Partnership accounts for its investment in this
property using the equity method since the Partnership shares control
with affiliates, and amounts relating to its investment are included in
investment in joint ventures. As of December 31, 1997, the Partnership
owned a 13.37% interest in this property.
In December 1997, the Partnership acquired and leased a property in
Miami, Florida, as tenants-in-common with affiliates of the general
partners. The Partnership accounts for its investment in this property
using the equity method since the Partnership shares control with
affiliates, and amounts relating to its investment are included in
investment in joint ventures. As of December 31, 1997, the Partnership
owned a 6.69% interest in this property.
25
<PAGE>
CNL INCOME FUND X, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1997, 1996 and 1995
5. Investment in Joint Ventures - Continued:
CNL Restaurant Investments III owns and leases six properties to an
operator of national fast-food restaurants. Ashland Joint Venture,
Williston Real Estate Joint Venture and the Partnership and affiliates
as tenants-in-common in two separate tenancy-in-common arrangements,
each own and lease one property to an operator of national fast-food or
family- style restaurants. The following presents the joint ventures'
combined, condensed financial information at December 31:
1997 1996
---------- ----------
Land and buildings on
operating leases, less
accumulated deprecia-
tion $9,573,341 $7,822,804
Net investment in direct
financing lease 661,991 658,422
Cash 8,197 1,750
Receivables 26,766 8,164
Prepaid expenses 22,852 21,910
Liabilities 7,415 1,094
Partners' capital 10,285,732 8,511,956
Revenues 930,470 916,897
Net income 695,878 686,789
The Partnership recognized income totalling $278,919, $278,371 and
$267,799 for the years ended December 31, 1997, 1996 and 1995,
respectively, from these joint ventures.
6. Restricted Cash:
As of December 31, 1997, net sales proceeds of $89,702 from the sale of
the property in Fremont, California, plus accrued interest of $2,534,
were being held in an interest-bearing escrow account pending the
release of funds by the escrow agent to acquire an additional property.
26
<PAGE>
CNL INCOME FUND X, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1997, 1996 and 1995
7. Allocations and Distributions:
Generally, all net income and net losses of the Partnership, excluding
gains and losses from the sale of properties, are allocated 99 percent
to the limited partners and one percent to the general partners.
Distributions of net cash flow are made 99 percent to the limited
partners and one percent to the general partners; provided, however,
that the one percent of net cash flow to be distributed to the general
partners is subordinated to receipt by the limited partners of an
aggregate, ten percent, cumulative, noncompounded annual return on
their adjusted capital contributions (the "10% Preferred Return").
Generally, net sales proceeds from the sale of properties, to the
extent distributed, will be distributed first to the limited partners
in an amount sufficient to provide them with their 10% Preferred
Return, plus the return of their adjusted capital contributions. The
general partners will then receive, to the extent previously
subordinated and unpaid, a one percent interest in all prior
distributions of net cash flow and a return of their capital
contributions. Any remaining sales proceeds will be distributed 95
percent to the limited partners and five percent to the general
partners. Any gain from the sale of a property is, in general,
allocated in the same manner as net sales proceeds are distributable.
Any loss from the sale of a property is, in general, allocated first,
on a pro rata basis, to partners with positive balances in their
capital accounts; and thereafter, 95 percent to the limited partners
and five percent to the general partners.
During the year ended December 31, 1997, the Partnership declared
distributions to the limited partners of $3,600,003 and during each of
the years ended December 31, 1996 and 1995, the Partnership declared
distributions to the limited partners of $3,640,003. No distributions
have been made to the general partners to date.
27
<PAGE>
CNL INCOME FUND X, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1997, 1996 and 1995
8. Income Taxes:
The following is a reconciliation of net income for financial reporting
purposes to net income for federal income tax purposes for the years
ended December 31:
<TABLE>
<CAPTION>
1997 1996 1995
---------- ---------- -------
<S> <C>
Net income for
financial reporting
purposes $3,531,381 $3,461,812 $3,552,067
Depreciation for tax
reporting purposes
in excess of
depreciation for
financial reporting
purposes (289,098) (298,518) (304,027)
Direct financing leases
recorded as operating
leases for tax
reporting purposes 211,942 160,007 141,684
Equity in earnings of
unconsolidated joint
ventures for tax
reporting purposes
in excess of equity
in earnings of
unconsolidated joint
ventures for financial
reporting purposes 15,294 10,839 12,592
Gain on sale of land
and building for
financial reporting
purposes in excess
of gain for tax
reporting purposes (42,996) - (16,395)
Allowance for doubtful
accounts 133,428 - -
Accrued rental income (201,022) (315,029) (309,574)
Rents paid in advance (22,593) 45,447 (80,403)
Minority interest in
timing differences
of consolidated
joint venture 1,461 2,184 2,062
Other - (7,738) 9,613
---------- ---------- ----------
Net income for federal
income tax purposes $3,337,797 $3,059,004 $3,007,619
========== ========== ==========
</TABLE>
28
<PAGE>
CNL INCOME FUND X, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1997, 1996 and 1995
9. Related Party Transactions:
One of the individual general partners, James M. Seneff, Jr., is one of
the principal shareholders of CNL Group, Inc., the parent company of
CNL 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 the 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. In addition, 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.
29
<PAGE>
CNL INCOME FUND X, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1997, 1996 and 1995
9. Related Party Transactions - Continued:
During the years ended December 31, 1997, 1996 and 1995, the Affiliates
provided accounting and administrative services to the Partnership on a
day-to-day basis. The Partnership incurred $87,967, $94,496 and $76,108
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
$4,946 and $1,609, respectively.
During 1997, the Partnership acquired a property for a purchase price
of $1,277,300 from CNL BB Corp., an affiliate of the general partners.
CNL BB Corp. had purchased and temporarily held title to this property
in order to facilitate the acquisition of the property by the
Partnership. The purchase price paid by the Partnership represented the
costs incurred by CNL BB Corp. to acquire and carry the property,
including closing costs.
10. Concentration of Credit Risk:
The following schedule presents total rental and earned income from
individual lessees, or affiliated groups of 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 unconsolidated joint ventures and the properties held as
tenants-in-common with affiliates), for at least one of the years ended
December 31:
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- ------
<S> <C>
Foodmaker, Inc. $646,477 $684,277 $686,417
Flagstar Enterprises,
Inc. and Denny's,
Inc. 602,913 668,919 674,611
Golden Corral
Corporation 548,399 568,164 567,654
</TABLE>
30
<PAGE>
CNL INCOME FUND X, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1997, 1996 and 1995
10. Concentration of Credit Risk - Continued:
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 unconsolidated joint ventures and the properties held as
tenants-in-common with affiliates) for at least one of the years ended
December 31:
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- ------
<S> <C>
Burger King $777,378 $714,792 $721,870
Jack in the Box 646,477 684,277 686,417
Golden Corral Family
Steakhouse
Restaurants 548,399 568,164 567,654
Shoney's 441,052 439,330 354,457
Hardees 403,882 468,037 471,507
Perkins 336,983 393,046 449,149
</TABLE>
Although the Partnership's properties are geographically diverse
throughout the United States and the Partnership's lessees operate a
variety of restaurant concepts, default by any one of these lessees or
restaurant chains could significantly impact the results of operations
of the Partnership. However, the general partners believe that the risk
of such a default is reduced due to the essential or important nature
of these properties for the on-going operations of the lessees.
11. Commitments and Contingencies:
In October 1995, the tenant of the Partnership's property located in
Austin, Texas, entered into a sublease agreement for a vacant parcel of
land under which the subtenant has the option to purchase such land.
The subtenant exercised the purchase option and in accordance with the
terms of the sublease agreement, the tenant assigned the purchase
contract, together with the purchase contract payment of $69,000, from
the subtenant, to the Partnership. As of December 31, 1997, the sale
for the vacant parcel of land had not been consummated and as a result,
the net proceeds of $68,000 (representing the original $69,000 received
by the Partnership, less $1,000 in costs incurred in anticipation of
the sale) were recorded as a deposit at December 31, 1997. The contract
price of $69,000 exceeds the Partnership's cost attributable to the
parcel of land.
31
<PAGE>
CNL INCOME FUND X, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1997, 1996 and 1995
12. Subsequent Event:
During 1997, the Partnership entered into a contract to sell the
property in Sacramento, California to the tenant. In January 1998, the
Partnership sold this property for $1,250,000 and received net sales
proceeds of $1,234,175, resulting in a gain of approximately $163,300
for financial reporting purposes. The Partnership intends to reinvest
the net sales proceeds in a replacement property.
32
<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 IX, 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.
33
<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.
34
<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.
35
<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.
36
<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 Operating expenses are reimbursed Operating expenses incurred on
for operating expenses at the lower of cost or 90 percent behalf of the Partnership:
behalf of the Partnership: $86,327
of the prevailing rate at which
comparable services could have
been obtained in the same
geographic area. Affiliates of the
General Partners from time to
time incur certain operating Accounting and administrative
expenses on behalf of the services: $87,967
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>
37
<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>
38
<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 X, Ltd. (Included as Exhibit 3.2 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 X, Ltd. (Included as Exhibit 3.2 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 X, Ltd. (Included as Exhibit 3.3
to Post-Effective Amendment No. 4 to Registration
Statement No. 33-35049 on Form S-11 and incorporated
herein by reference.)
10.1 Management Agreement between CNL Income Fund X, 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.)
39
<PAGE>
10.3 Assignment of Management Agreement from CNL Income
Fund Advisors, Inc. to CNL Fund Advisors, Inc.
(Included as Exhibit 10.3 to Form 10-K filed with the
Securities and Exchange Commission on April 1, 1996,
and incorporated herein by reference)
27 Financial Data Schedule (Filed herewith.)
(b) The Registrant filed no reports on Form 8-K during the period
October 1, 1997 through December 31, 1997.
40
<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 X, 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 X, LTD.
(A Florida Limited Partnership)
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
Years Ended December 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
Additions Deductions
Collected
or Deter-
Balance at Charged to Charged to Deemed mined to Balance
Beginning Costs and Other Uncollec- be Col- at End
Year Description of Year Expenses Accounts tible lectible of Year
- ---- ----------- ---------- ---------- ----------- --------- --------- --------
<S> <C>
1995 Allowance for
doubtful
accounts (a) $ 2,555 $ - $ 20,271(b) $ 9,533 $ 1,126 $ 12,167
======== ======== ======== ======== ======== ========
1996 Allowance for
doubtful
accounts (a) $ 12,167 $ - $ 91,857(b) $ 10,368 $ 447 $ 93,209
======== ======== ======== ======== ======== ========
1997 Allowance for
doubtful
accounts (a) $ 93,209 $ - $192,212(b) $ 5,083 $ 24,889 $255,449
======== ======== ======== ======== ======== ========
</TABLE>
(a) Deducted from receivables and accrued rental income on the balance
sheet.
(b) Reduction of rental, earned and other income.
(c) Amounts written off as uncollectible.
F-1
<PAGE>
CNL INCOME FUND X, 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:
Boston Market:
Homewood, Alabama - $ 597,907 $ 679,400 $ - $ -
Burger King Restaurants:
Hendersonville, North Carolina - 222,632 - - -
Irondequoit, New York - 383,359 - - -
Denny's Restaurants:
Fremont, Ohio - 160,896 - 273,700 -
Detroit, Michigan - 285,842 - - -
Spartanburg, South Carolina - 287,959 - - -
Golden Corral Family
Steakhouse Restaurants:
Austin, Texas - 653,462 - 1,106,384 -
Austin, Texas - 711,354 - 1,124,040 -
Las Cruces, New Mexico - 580,655 920,521 - -
Hardee's Restaurants:
Pace, Florida - 174,850 - - -
Jacksonville, Florida - 326,972 - - -
Centerville, Tennessee - 130,494 - - -
Jack in the Box Restaurants:
Sacramento, California - 448,491 - - -
Desloge, Missouri - 276,701 - - -
San Antonio, Texas - 327,322 - - -
Missouri City, Texas - 348,646 - - -
Pasadena, Texas - 202,393 - - -
Long John Silver's Restaurants:
Alamogordo, New Mexico - 157,401 - - -
Las Cruces, New Mexico - 222,778 - - -
Perkins Restaurants:
Lancaster, New York - 336,872 - - -
Ft. Pierce, Florida - 487,752 - 567,923 -
Amherst, New York - 507,648 - - -
</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>
$ 597,907 $ 679,400 $ 1,277,307 $ 4,322 1997 10/97 (b)
222,632 (f) 222,632 - 1986 11/91 (d)
383,359 (f) 383,359 - 1986 11/91 (d)
160,896 $ 273,700 434,596 39,030 1992 12/91 (g)
285,842 (f) 285,842 - 1992 02/92 (d)
287,959 (f) 287,959 - 1992 03/92 (d)
653,462 1,106,384 1,759,846 213,699 1992 12/91 (b)
711,354 1,124,040 1,835,394 210,232 1992 12/91 (b)
580,655 920,521 1,501,176 173,428 1992 05/92 (b)
174,850 (f) 174,850 - 1992 01/92 (d)
326,972 (f) 326,972 - 1990 02/92 (d)
130,494 (f) 130,494 - 1991 02/92 (d)
448,491 (f) 448,491 - 1991 12/91 (d)
276,701 (f) 276,701 - 1991 12/91 (d)
327,322 (f) 327,322 - 1992 02/92 (d)
348,646 (f) 348,646 - 1991 04/92 (d)
202,393 (f) 202,393 - 1991 04/92 (d)
157,401 (f) 157,401 - 1977 03/92 (d)
222,778 (f) 222,778 - 1975 03/92 (d)
336,872 (f) 336,872 - 1991 11/91 (d)
487,752 567,923 1,055,675 40,138 1992 01/92 (h)
507,648 (f) 507,648 - 1987 02/92 (d)
</TABLE>
F-2
<PAGE>
CNL INCOME FUND X, 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>
Pizza Hut Restaurants:
Bozeman, Montana - 99,879 224,614 - -
Sidney, Montana - 101,690 - - -
Livingston, Montana - 71,989 161,211 - -
Laurel, Montana - 109,937 255,060 - -
Billings, Montana - 123,879 200,328 - -
Shoney's Restaurants:
Greenville, North Carolina - 323,573 515,134 - -
North Richland Hills, Texas - 513,032 - 420,219 -
Pelham, Alabama - 410,448 - 427,317 -
Fort Myers Beach, Florida - 360,482 - - -
----------- ---------- ---------- -------
$ 9,947,295 $2,956,268 $3,919,583 $ -
=========== ========== ========== =======
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
10.51% Interest and has Invested
in Under Operating Lease:
Burger King Restaurant:
Ashland, New Hampshire - $ 293,478 $ 997,104 $ - $ -
=========== ========== ========== =======
Property in Which the Partnership
has a 13.37% Interest as Tenants-
in-Common and has Invested in Under
Operating Lease:
Golden Corral Family
Steakhouse Restaurant:
Clinton, North Carolina - $ 138,382 $ 676,588 $ - $ -
=========== ========== ========== =======
</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>
99,879 224,614 324,493 42,769 1976 03/91 (b)
101,690 (f) 101,690 - 1985 03/91 (d)
71,989 161,211 233,200 30,696 1979 03/91 (b)
109,937 255,060 364,997 48,566 1985 03/91 (b)
123,879 200,328 324,207 38,146 1970 03/91 (b)
323,573 515,134 838,707 105,708 1987 11/91 (b)
513,032 420,219 933,251 81,089 1992 12/91 (b)
410,448 427,317 837,765 85,424 1992 01/92 (b)
360,482 (f) 360,482 - 1991 09/95 (d)
---------- ---------- ----------- ----------
$9,947,295 $6,875,851 $16,823,146 $1,113,247
========== ========== =========== ==========
$ 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 1,124,061 148,412 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 $ 829,564
========== ========== =========== ==========
$ 293,478 $ 997,104 $ 1,290,582 $174,472 1987 10/92 (b)
========== ========== =========== ========
$ 138,382 $ 676,588 $ 814,970 $ 43,721 1996 01/96 (b)
========== ========== =========== ========
</TABLE>
F-3
<PAGE>
CNL INCOME FUND X, 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>
Property in Which the Partnershi
has a 6.69% Interest as Tenants-
in-Common and has Invested in
Under Operating Lease:
Chevy's Fresh Mex:
Miami, Florida - $ 976,357 $ 974,016 $ - $ -
=========== =========== ========== =======
</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>
$ 976,357 $ 974,016 $ 1,950,373 $ 89 1995 12/97 (b)
========== ========== =========== ========
</TABLE>
F-4
<PAGE>
CNL INCOME FUND X, 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:
Hendersonville, North Carolina - $ - $ 631,129 $ - $ -
Ashland, Ohio - 190,695 724,348 - -
Irondequoit, New York - - 612,810 1,123 -
Allegan, Michigan - 91,238 - 418,782 -
Denny's Restaurants:
Detroit, Michigan - - 752,829 - -
Spartanburg, South Carolina - - 529,410 - -
Hardee's Restaurants:
Pace, Florida - - 467,272 - -
Jacksonville, Florida - - 405,985 - -
Hohenwald, Tennessee - 49,201 376,415 - -
Ravenna, Ohio - 114,244 496,032 - -
New Bethlehem, Pennsylvania - 135,929 452,507 - -
Morristown, Tennessee - 131,289 456,925 - -
Centerville, Tennessee - - 348,032 - -
Jack in the Box Restaurants:
Desloge, Missouri - - 630,981 - -
Sacramento, California - - 577,009 - -
San Antonio, Texas - - - 206,031 -
Nampa, Idaho - 151,574 584,533 - -
Missouri City, Texas - - 619,686 - -
Pasadena, Texas - - 575,429 - -
Long John Silver's Restaurants:
Alamogordo, New Mexico - - 275,270 20,204 -
Las Cruces, New Mexico - - 318,378 57,828 -
Perkins Restaurants:
Lancaster, New York - - 865,814 - -
Amherst, New York - - 727,806 - -
Pizza Hut Restaurants:
Glasgow, Montana - 57,482 266,726 - -
Sidney, Montana - - 291,238 - -
Shoney's Restaurant:
Fort Myers Beach, Florida - - 567,640 - -
----------- ----------- ---------- -------
$ 921,652 $12,554,204 $ 703,968 $ -
=========== =========== ========== =======
</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) - 1986 11/91 (d)
(f) (f) (f) - 1988 11/91 (e)
- (f) (f) - 1986 11/91 (d)
(f) (f) (f) - 1992 04/92 (e)
- (f) (f) - 1992 02/92 (d)
- (f) (f) - 1992 03/92 (d)
- (f) (f) - 1992 01/92 (d)
- (f) (f) - 1990 02/92 (d)
(f) (f) (f) - 1991 02/92 (e)
(f) (f) (f) - 1991 04/92 (e)
(f) (f) (f) - 1991 04/92 (e)
(f) (f) (f) - 1991 04/92 (e)
- (f) (f) - 1991 02/92 (d)
- (f) (f) - 1991 12/91 (d)
- (f) (f) - 1991 12/91 (d)
- (f) (f) - 1992 12/91 (d)
(f) (f) (f) - 1991 12/92 (e)
- (f) (f) - 1991 04/92 (d)
- (f) (f) - 1991 04/92 (d)
- (f) (f) - 1977 03/92 (d)
- (f) (f) - 1975 03/92 (d)
- (f) (f) - 1991 11/91 (d)
- (f) (f) - 1987 02/92 (d)
(f) (f) (f) - 1985 03/91 (e)
- (f) (f) - 1985 03/91 (d)
- (f) (f) - 1991 09/95 (d)
</TABLE>
F-5
<PAGE>
CNL INCOME FUND X, 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>
Property of Joint Venture in
Which the Partnership has a
41% Interest and has Invested
in Under Direct Financing Lease:
Hardee's Restaurant:
Williston, Florida - $ 150,143 $ - $ 499,071 $ -
=========== ========== ========== =======
</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) (f) - 1993 12/92 (e)
</TABLE>
F-6
<PAGE>
CNL INCOME FUND X, 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 1996,
1995 and 1994, are summarized as follows:
<TABLE>
<CAPTION>
Accumulated
Cost Depreciation
<S> <C>
Properties the Partnership
has Invested in Under
Operating Leases:
Balance, December 31, 1994 $16,249,224 $ 556,873
Acquisitions 360,482 -
Dispositions (1,054,458) (64,287)
Depreciation expense - 199,696
----------- ----------
Balance, December 31, 1995 15,555,248 692,282
Reclassified to operating
lease 567,923 -
Depreciation expense - 206,497
----------- ----------
Balance, December 31, 1996 16,123,171 898,779
Acquisitions 1,277,307 -
Dispositions (577,332) -
Depreciation Expense - 214,468
----------- ----------
Balance, December 31, 1997 $16,823,146 $1,113,247
=========== ==========
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 - 144,050
----------- --------
Balance, December 31, 1996 6,565,262 685,517
Depreciation expense - 144,047
----------- --------
Balance, December 31, 1997 $ 6,565,262 $829,564
=========== ========
</TABLE>
F-7
<PAGE>
CNL INCOME FUND X, 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>
Property of Joint Venture
in Which the Partnership has a
10.51% 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 - 33,147
----------- --------
Balance, December 31, 1997 $ 1,290,582 $174,472
=========== ========
Property in Which the Partnership
has a 13.37% Interest as Tenants-
in-Common and has Invested in
Under an Operating Lease:
Balance, December 31, 1995 $ - $ -
Acquisition 814,970 -
Depreciation expense - 21,168
----------- --------
Balance, December 31, 1996 814,970 21,168
Depreciation expense - 22,553
----------- --------
Balance, December 31, 1997 $ 814,970 $ 43,721
=========== ========
Property in Which the Partnership
has a 6.69% Interest as Tenants-
in-Common and has Invested in
Under an Operating Lease:
Balance, December 31, 1996 $ - $ -
Acquisitions 1,950,373 -
Depreciation expense - 89
----------- --------
Balance, December 31, 1997 $ 1,950,373 $ 89
=========== ========
</TABLE>
(b) Depreciation expense is computed for buildings and improvements based
upon estimated lives of 30 years.
(c) As of December 31, 1997, the aggregate cost of the Properties owned
by the Partnership and its consolidated joint venture, and the
unconsolidated joint ventures for federal income tax purposes was
$30,453,448 and $9,254,434, respectively. All of the leases are
treated as operating leases for federal income tax purposes.
F-8
<PAGE>
CNL INCOME FUND X, LTD.
(A Florida Limited Partnership)
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED
DEPRECIATION - CONTINUED
December 31, 1997
(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) 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.
(h) Effective March 1, 1996, 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 March 1, 1996, and depreciated over its remaining
estimated life of approximately 26 years.
F-9
<PAGE>
EXHIBITS
<PAGE>
EXHIBIT INDEX
Exhibit Number Page
3.1 Affidavit and Certificate of Limited Partnership of CNL Income
Fund X, Ltd. (Included as Exhibit 3.2 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 X, Ltd. (Included as Exhibit 3.2 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 X, Ltd. (Included as Exhibit 3.3 to Post-Effective
Amendment No. 4 to Registration Statement No. 33-35049 on Form
S-11 and incorporated herein by reference.)
10.1 Management Agreement between CNL Income Fund X, 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 X, Ltd. and
CNL Investment Company
<PAGE>
MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT (the "Agreement") is made and entered into as
of this 24th day of September, 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 meanings. 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 X, 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 "Landlord" 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 agreement 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;
(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;
<PAGE>
(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 reques4
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 form 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.
4.2 Termination. Either party may terminate this Agreement, without
penalty, by giving sixty (60) days' prior written notice to the other party.
2
<PAGE>
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 funds 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 cjaims, 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 "Managers" 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 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 recognize 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.
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.
3
<PAGE>
If to the Partnership: CNL Income Fund X, Ltd.
400 East South Street
Orlando, Florida 32801
Attention: James M. Seneff, Jr.
If to the Manager: CNL Investment Company
400 East South Street
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 Amendnent. 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 WHEREOF, 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
By: /s/ Robert A. Bourne
-------------------------------------
ROBERT A. BOURNE, GENERAL PARTNER
[SIGNATURES CONTINUED ON NEXT PAGE]
4
<PAGE>
By: CNL REALTY CORPORATION
GENERAL PARTNER
By: /s/ James M. Seneff, Jr.
------------------------------
JAMES M. SENEFF, JR., PRESIDENT
The Manager: CNL INVESTMENT COMPANY
By: /s/ Robert A. Bourne
-------------------------------
ROBERT A. BOURNE, PRESIDENT
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 X, 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 X, 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> 1,676,119<F2>
<SECURITIES> 0
<RECEIVABLES> 261,759
<ALLOWANCES> 137,856
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 16,823,146
<DEPRECIATION> 1,113,247
<TOTAL-ASSETS> 36,289,727
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 35,154,043
<TOTAL-LIABILITY-AND-EQUITY> 36,289,727
<SALES> 0
<TOTAL-REVENUES> 3,542,851
<CGS> 0
<TOTAL-COSTS> 414,105
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 3,531,381
<INCOME-TAX> 0
<INCOME-CONTINUING> 3,531,381
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,531,381
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F2>Cash balance includes $92,236 in restricted cash.
<F1>Due to the nature of its industry, CNL Income Fund X, Ltd. has an
unclassified balance sheet; therefore, no values are shown above for current
assets and current liabilities.
</FN>
</TABLE>
