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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K/A
Amendment No. 2
(Mark One)
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1998
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______ to _______
Commission file number 0-20016
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)
450 South Orange Avenue
Orlando, Florida 32801
(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code: (407) 650-1000
Securities registered pursuant to Section 12(b) of the Act:
Title of each class: Name of exchange on which registered:
None Not Applicable
Securities registered pursuant to Section 12(g) of the Act:
Units of limited partnership interest ($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 __________
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Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [x]
Aggregate market value of the voting stock held by nonaffiliates of the
registrant: The registrant registered an offering of 4,000,000 units of limited
partnership interest (the "Units") on Form S-11 under the Securities Act of
1933, as amended. Since no established market for such Units exists, there is
no market value for such Units. Each Unit was originally sold at $10 per Unit.
DOCUMENTS INCORPORATED BY REFERENCE:
None
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The Form 10-K of CNL Income Fund X, Ltd. for the year ended December 31,
1998 is being amended to revise the disclosure under Item 1. Business.
PART I
Item 1. Business
CNL Income Fund 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.
During the year ended December 31, 1998, the Partnership sold its Properties in
Sacramento, California and Billings, Montana. During 1998, the Partnership
reinvested the proceeds from the Sacramento, California sale in a Property in
San Marcos, Texas. As a result of the above transactions, as of December 31,
1998, the Partnership owned 48 Properties. The 48 Properties included 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 1999,
the Partnership reinvested the net sales proceeds from the sale of its Property
in Billings, Montana in a joint venture, Ocean Shores Joint Venture, to purchase
and hold one 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.
On March 11, 1999, the Partnership entered into an Agreement and Plan of
Merger with CNL American Properties Fund, Inc. ("APF"), pursuant to which the
Partnership would be merged with and into a subsidiary of APF (the "Merger").
APF is a real estate investment trust whose primary business is the ownership of
restaurant properties leased on a long-term, "triple-net" basis to operators of
national and regional restaurant chains. APF has agreed to issue shares of its
common stock, par value $0.01 per share (the "APF Shares"), as consideration for
the Merger. At a special meeting of the partners that is expected to be held in
the fourth quarter of 1999, Limited Partners holding in excess of 50% of the
Partnership's outstanding limited partnership interests must approve the Merger
prior to consummation of the transaction. If the Limited Partners at the
special meeting approve the Merger, APF will own the Properties and other assets
of the Partnership.
In the event that the Limited Partners vote against the Merger, the
Partnership will hold its Properties until the General Partners determine that
the sale or other disposition of the Properties is advantageous in view of the
Partnership's investment objectives. In deciding whether to sell Properties,
the General Partners will consider factors such as potential capital
appreciation, net cash flow and federal income tax considerations. Certain
lessees also have
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been granted options to purchase Properties, generally at the Property's then
fair market value after a specified portion of the lease term has elapsed. The
Partnership has no obligation to sell all or any portion of a Property at any
particular time, except as may be required under property or joint venture
purchase options granted to certain lessees.
Leases
Although there are variations in the specific terms of the leases, the
following is a summarized description of the general structure of the
Partnership's leases. 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 $26,160 to $198,500. The majority 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.
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.
Lessees of 33 of the Partnership's 48 Properties 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. Fair market value will be
determined through an appraisal by an independent appraisal firm. 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. Effective January 1, 1999, the rents reverted back to the amounts due
under the original lease agreement.
During 1998, two tenants, Brambury Associates and Boston Chicken, Inc.,
filed for bankruptcy and rejected the leases relating to two of their three
leases and ceased making rental payments to the Partnership on the rejected
leases. The Partnership will not recognize rental and earned income from these
Properties until new tenants for these Properties are located or until the
Properties are sold and the proceeds from such sales are reinvested in
additional Properties. The Partnership continued receiving rental payments
relating to the lease that was not rejected until the Partnership sold this
Property in March 1999. The lost revenues resulting from the two leases that
were rejected, as described above, could have an adverse effect on the results
of operations of the Partnership if the Partnership is unable to re-lease these
Properties in a timely manner. The General Partners are currently seeking
either new tenants or purchasers for the two Properties with rejected leases.
During 1994, the lease relating to the Property in Fremont, Ohio, was
amended to provide for the payment of reduced annual base rent with no scheduled
rent increases. However, the lease amendment provided for a lower percentage
rent breakpoint, as compared to the original lease agreement, a change that was
designed to result in higher percentage rent payments at any time that
percentage rent became payable. In accordance with a provision in the
amendment, as a result of the tenant assigning the leases to a new tenant during
1998, the rents under the assigned lease reverted back to those that were
required under the original lease agreement.
During 1998, three of the Partnership's leases were amended to provide for
rent reductions from August 1998 through the end of the lease term.
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In January 1999, the Partnership invested in Ocean Shores Joint Venture
with an affiliate of the General Partners to hold one restaurant property. The
lease terms for the Property owned by the joint venture are substantially the
same as the Partnership's other leases as described above in the first three
paragraphs of this section.
Major Tenants
During 1998, two lessees of the Partnership and its consolidated joint
venture, Golden Corral Corporation and Foodmaker, Inc., 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, 1998, Golden Corral Corporation was the lessee under leases
relating to four restaurants and Foodmaker, Inc. was the lessee under leases
relating to six restaurants. It is anticipated that based on the minimum rental
payments required by the leases, these two lessees each will continue to
contribute more than ten percent of the Partnership's total rental income in
1999. 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 1998 (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 1999, 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 if the Partnership is not able to re-
lease the Properties in a timely manner. No single tenant or group of
affiliated tenants lease Properties with an aggregate carrying value, in excess
of 20 percent of the total assets of the Partnership.
Joint Venture and Tenancy in Common Arrangements
The Partnership has entered into a joint venture arrangement, 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 with CNL Income Fund IX,
Ltd., an affiliate of the General Partners, to purchase and hold six Properties;
Ashland Joint Venture with CNL Income Fund IX, Ltd. and CNL Income Fund XI,
Ltd., affiliates of the General Partners, to purchase and hold one Property; and
Williston Real Estate Joint Venture with CNL Income Fund XII, Ltd., an affiliate
of the General Partners, to purchase and hold one Property. The affiliates are
limited partnerships organized pursuant to the laws of the State of Florida.
The joint venture arrangements provide for the Partnership and its joint
venture partners to share in all costs and benefits associated with the joint
ventures in accordance with their respective percentage interests in the joint
ventures. The Partnership has an 88.26% interest in Allegan Real Estate Joint
Venture, a 50 percent interest in CNL Restaurant Investments III, a 10.51%
interest in Ashland Joint Venture, and a 40.95% interest in Williston Real
Estate Joint Venture. The Partnership and its joint venture partners are also
jointly and severally liable for all debts, obligations and other liabilities of
the joint ventures.
CNL Restaurant Investments 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.
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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 40.95%, 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 January 1999, the Partnership entered into a joint venture arrangement,
Ocean Shore Joint Venture, with CNL Income Fund XVII, Ltd., an affiliate of the
General Partners, to purchase and hold one Property. The joint venture
arrangement provides for the Partnership and its joint venture partners to share
in all costs and benefits associated with the joint venture in proportion to
each partner's percentage interest in the joint venture. The Partnership owns a
69.06% in the profits and losses of 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 CNL Income Fund IV, Ltd., CNL Income Fund VI, Ltd., and
CNL Income Fund XV, Ltd., 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-tenant's percentage interest.
The Partnership owns a 13 percent 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 CNL Income Fund
III, Ltd., CNL Income Fund VII, Ltd., and CNL Income Fund XIII, Ltd., 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-tenant's percentage interest. The Partnership owns a 6.69% interest in
this Property.
Each of the affiliates is a limited partnership organized pursuant to the
laws of the State of Florida. The tenancy in common agreement restricts each
co-tenant's ability to sell, transfer, or assign its interest in the tenancy in
common's Property without first offering it for sale to the remaining co-tenant.
The use of joint venture and tenancy in common arrangements allows the
Partnership to fully invest its available funds at times at which it would not
have sufficient funds to purchase an additional property, or at times when a
suitable opportunity to purchase an additional property is not available. The
use of joint venture and tenancy in common arrangements also provides the
Partnership with increased diversification of its portfolio among a greater
number of properties. In addition, tenancy in common arrangements may allow
the Partnership to defer the gain for federal income tax purposes upon the sale
of the property if the proceeds are reinvested in an additional property.
Certain Management Services
CNL Fund Advisors, Inc., an affiliate of the General Partners, provides
certain services relating to management of the Partnership and its Properties
pursuant to a management agreement with the Partnership. Under this agreement,
CNL Fund Advisors, Inc. is responsible for collecting rental payments,
inspecting the Properties and the tenants' books and records, assisting the
Partnership in responding to tenant inquiries and notices and providing
information to the Partnership about the status of the leases and the
Properties. CNL Fund Advisors, Inc. also assists the General Partners in
negotiating the leases. For these services, the Partnership has agreed to pay
CNL Fund Advisors, Inc. an annual fee of one percent of the sum of gross rental
revenues from Properties wholly owned by the Partnership plus the Partnership's
allocable share of gross revenues of joint ventures in which the Partnership is
a co-venturer, 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").
The management agreement continues until the Partnership no longer owns an
interest in any Properties unless terminated at an earlier date upon 60 days'
prior notice by either party.
Employees
The Partnership has no employees. The officers of CNL Realty Corporation
and the officers and employees of CNL Fund Advisors, Inc. perform certain
services for the Partnership. In addition, the General Partners have available
to them the resources and expertise of the officers and employees of CNL Group,
Inc., a diversified real estate company, and its affiliates, who may also
perform certain services for the Partnership.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on the 17th day of
December, 1999.
CNL INCOME FUND X, LTD.
By: CNL REALTY CORPORATION
General Partner
/s/ Robert A. Bourne
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ROBERT A. BOURNE, President
By: ROBERT A. BOURNE
General Partner
/s/ Robert A. Bourne
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ROBERT A. BOURNE
By: JAMES M. SENEFF, JR.
General Partner
/s/ James M. Seneff, Jr.
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JAMES M. SENEFF, JR.
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Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
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Signature Title Date
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/s/ Robert A. Bourne President, Treasurer and Director December 17, 1999
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Robert A. Bourne (Principal Financial and Accounting
Officer)
/s/ James M. Seneff, Jr. Chief Executive Officer and Director December 17, 1999
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James M. Seneff, Jr. (Principal Executive Officer)
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