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, 1999
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) 540-2000
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 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
<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, totaled
$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
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. During the year ended
December 31, 1999, the Partnership sold its Properties in Amherst, New York and
Fort Myers Beach, Florida. During 1999, the Partnership reinvested the proceeds
from the Amherst, New York sale in a Property in Fremont, Nebraska. 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. In addition, during 1999, the
Partnership reinvested the majority of the net sales proceeds from the Fort
Myers Beach, Florida sale in a joint venture arrangement, Peoria Joint Venture,
with CNL Income Fund II, Ltd., an affiliate of the General Partners to purchase
and hold one Property.
As a result of the above transactions, as of December 31, 1999, the
Partnership owned 49 Properties. The 49 Properties include 11 Properties owned
by joint ventures in which the Partnership is a co-venturer and two Properties
owned with affiliates of the General Partners to purchase and hold one Property.
The Partnership leases the Properties generally 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. The Partnership has no obligation to sell all or any portion of a
Property at any particular time, except as may be required under property
purchase options granted to certain lessees.
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 "Termination
of 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. Under the Agreement and
Plan of Merger, APF was to issue shares of its common stock as consideration for
the Merger. On March 1, 2000, the General Partners and APF announced that they
had mutually agreed to terminate the Agreement and Plan of Merger. the agreement
to terminate the Agreement and Plan of Merger was based, in large part, on the
General Partners' concern that, in light of market conditions relating to
publicly traded real estate investment trusts, the value of the transaction had
diminished. As a result of such diminishment, the General partners; ability to
unequivocally recommend voting for the transaction, in the exercise of their
fiduciary duties, had become questionable.
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 2019. All leases are generally 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 $28,000 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 49 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 March, 1996, the lease relating to the Perkins Property in Ft.
Pierce, Florida, was amended to provide for annual base rent effective
retroactively back to October 1, 1995 through January 1, 1997. In addition, in
December 1998, retroactive back to May 1997 through December 31, 1998, the
Partnership agreed to reduce base rent, with rent deferrals totaling $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. In September 1999, the
tenant vacated the Property. The Partnership is currently seeking a replacement
tenant or a purchaser for this Property.
During 1998, two tenants, Brambury Associates, Inc. and Boston Chicken,
Inc., filed for bankruptcy and rejected the leases relating to two of their
three Properties and ceased making rental payments to the Partnership on the
rejected leases. In January 2000, the Partnership re-leased one of the rejected
lease Properties to a new tenant, to operate a Kinko's Copies. The Partnership
will not recognize rental and earned income from the remaining rejected lease
Property until a new tenant is located or until the Property is sold and the
proceeds from such sale is reinvested in an additional Property. The Partnership
continued receiving rental payments relating to the lease that was not rejected
until the Partnership sold this Property in March 1999. In March 1999, the
Partnership reinvested the net sales proceeds in a Golden Corral Property
located in Fremont, Nebraska. The lost revenues resulting from the remaining
lease that was rejected, as described above, could have an adverse affect on the
results of operations of the Partnership if the Partnership is unable to
re-lease this Property in a timely manner. The General Partners are currently
seeking either a new tenant or purchaser for the Property.
In January 1999 and November 1999, the Partnership invested in Ocean
Shores Joint Venture and Peoria Joint Venture, each with affiliates of the
General Partners to hold one restaurant property. The lease terms for the
Properties owned by the joint ventures are substantially the same as the
Partnership's other leases as described above.
In August 1999, the leases relating to the Long John Silver's
Properties in Alamogordo and Las Cruces, New Mexico were amended to provide rent
deferrals. The rent deferrals are payable by the tenant beginning in August
2001.
<PAGE>
Major Tenants
During 1999, two lessees of the Partnership and its consolidated joint
venture, Golden Corral Corporation and Jack in the Box 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 ten Properties owned by unconsolidated joint
ventures and two Properties owned with affiliates of the General Partners as
tenants-in-common). As of December 31, 1999, Golden Corral Corporation was the
lessee under leases relating to five restaurants and Jack in the Box, 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 2000. 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 1999 (including rental income from the
Partnership's consolidated joint venture and the Partnership's share of rental
income from ten Properties owned by unconsolidated joint ventures and two
Properties owned with affiliates of the General Partners as tenants-in-common).
In 2000, it is anticipated that these five Restaurant Chains each will continue
to account for more than ten percent of the total rental income to which the
Partnership is entitled under the terms of the leases. Any failure of these
lessees or Restaurant Chains could have a material adverse affect on the
Partnership's income if the Partnership is not able to re-lease the Properties
in a timely manner. No single tenant or groups 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., to purchase and hold six Properties; Ashland Joint Venture with CNL Income
Fund IX, Ltd. and CNL Income Fund XI, Ltd., to purchase and hold one Property;
and Williston Real Estate Joint Venture with CNL Income Fund XII, Ltd., to
purchase and hold one Property. In addition, in January 1999, the Partnership
entered into a joint venture arrangement, Ocean Shores Joint Venture, with CNL
Income Fund XVII, Ltd., to purchase and hold one restaurant Property.
In November 1999, the Partnership also entered into a joint venture
arrangement, Peoria Joint Venture, with CNL Income Fund II, Ltd., to purchase
and hold one restaurant Property. Each of the CNL Income Funds is an affiliate
of the General Partners and is a limited partnership organized pursuant to the
laws of the State of Florida.
The joint venture arrangements provide for the Partnership and its
joint venture partners to share in all costs and benefits associated with the
joint 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, a 40.95% interest in Williston Real Estate
Joint Venture, a 69.06% interest in Ocean Shores Joint Venture, and a 52 percent
interest in Peoria 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 for a fixed term, but continues in existence until terminated by either
of the joint venturers. Ashland Joint Venture has an initial term of 14 years
and Allegan Real Estate Joint Venture, Williston Real Estate Joint Venture and
Peoria Joint Venture each have an initial term of 20 years. After the expiration
of the initial term, each of the 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, Ashland Joint Venture, Ocean Shores Joint Venture and Peoria 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, Williston Real Estate
Joint Venture, Ocean Shores Joint Venture and Peoria Joint Venture is
distributed 50 percent, 88.26%, 10.51%, 40.95%, 69.06% and 52 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 arrangements, the Partnership
entered into an agreement to hold a Property in Clinton, North Carolina, as
tenants-in-common with CNL Income Fund IV, Ltd., CNL Income Fund VI, Ltd. and
CNL Income Fund XV, Ltd. In addition, the Partnership entered into an agreement
to hold a Property in Miami, Florida, as tenants-in-common, with CNL Income Fund
III, Ltd., CNL Income Fund VII, Ltd., and CNL Income Fund XIII, Ltd. The
agreements provide for the Partnership and the other parties to share in the
profits and losses of the Properties in proportion to each party's percentage
interest. The Partnership owns a 13 percent and 6.69% interest, respectively in
these Properties. Each CNL Income Fund is an affiliate of the General Partners
and is a limited partnership organized pursuant to the laws of the State of
Florida. The tenancy in common agreement restricts each party'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 party.
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 a
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 American Properties Fund, Inc.
("APF"), the parent company 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 Financial
Group, Inc., (formerly CNL Group, Inc.), a diversified real estate company, and
its affiliates, who may also perform certain services for the Partnership.
<PAGE>
Item 2. Properties
As of December 31, 1999, the Partnership owned 49 Properties. Of the 49
Properties, 36 are owned by the Partnership in fee simple, 11 are owned through
joint venture arrangements and two are owned through tenancy in common
arrangements. See Item 1. Business - Joint Venture and Tenancy in Common
Arrangements. The Partnership is not permitted to encumber its Properties under
the terms of its partnership agreement. Reference is made to the Schedule of
Real Estate and Accumulated Depreciation 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 15,700
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.
The following table lists the Properties owned by the Partnership as of
December 31, 1999 by state. More detailed information regarding the location of
the Properties is contained in the Schedule of Real Estate and Accumulated
Depreciation for the year ended December 31, 1999.
State Number of Properties
----- --------------------
Alabama 2
Arizona 1
Florida 5
Idaho 1
Illinois 1
Louisiana 2
Michigan 2
Missouri 1
Montana 5
Nebraska 1
New Hampshire 3
New Mexico 3
New York 2
North Carolina 4
Ohio 3
Pennsylvania 1
South Carolina 1
Tennessee 3
Texas 7
Washington 1
------
TOTAL PROPERTIES 49
======
Buildings. Each of the Properties owned by the Partnership includes a
building that is one of a Restaurant Chain's approved designs. The buildings
generally are rectangular and are constructed from various combinations of
stucco, steel, wood, brick and tile. Building sizes range from approximately
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 sue for other than
restaurant operations. As of December 31, 1999, the Partnership had no plans for
renovation of the Properties. Depreciation expense is computed for buildings and
improvements using the straight line method using a depreciable life of 40 years
for federal income tax purposes. As of December 31, 1999, the aggregate cost of
the Properties owned by the Partnership (including its consolidated joint
venture) and the unconsolidated joint ventures (including Properties owned
through tenancy in common arrangements) for federal income tax purposes was
$19,722,031 and $9,399,386, respectively.
<PAGE>
The following table lists the Properties owned by the Partnership as of
December 31, 1999 by Restaurant Chain.
Restaurant Chain Number of Properties
---------------- --------------------
Boston Market 1
Burger King 13
Chevy's Fresh Mex 1
Denny's 3
Golden Corral 5
Hardee's 7
IHOP 1
Jack in the Box 6
Long John Silver's 2
Perkins 2
Pizza Hut 5
Shoney's 3
-----
TOTAL PROPERTIES 49
=====
The General Partners consider the Properties to be well-maintained and
sufficient for the Partnership's operations.
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.
Leases. The Partnership leases the Properties to operators of selected
national and regional fast-food restaurant chains. The leases are generally on a
long-term "triple net" basis, meaning that the tenant is responsible for
repairs, maintenance, property taxes, utilities and insurance. 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. The terms of the leases of the
Properties owned by the Partnership are described in Item 1. Business - Leases.
At December 31, 1999, 1998, 1997, 1996, and 1995, the Properties were
96%, 96%, 100%, 100%, and 100% occupied, respectively. The following is a
schedule of the average rent per Property for the years ended December 31:
<TABLE>
<CAPTION>
<S> <C>
1999 1998 1997 1996 1995
-------------- ------------- -------------- ------------- -------------
Rental Revenues (1) $3,490,765 $3,163,838 $3,823,808 $3,894,384 $3,882,392
Properties (2) 47 47 49 48 47
Average Rent Per Property $ 74,272 $ 67,316 $ 78,037 $ 81,133 $ 82,604
</TABLE>
(1) Rental income includes the Partnership's share of rental income from
the Properties owned through joint venture arrangements and the
Properties owned through tenancy in common arrangements. Rental
revenues have been adjusted, as applicable, for any amounts for which
the Partnership has established an allowance for doubtful accounts.
(2) Excludes Properties that were vacant at December 31, which did not
generate any rental revenues during the year ended December 31.
The following is a schedule of lease expirations for leases in place as
of December 31, 1999, for the next ten years and thereafter.
<TABLE>
<CAPTION>
<S> <C>
Percentage of
Number Annual Rental Gross Annual
Expiration Year of Leases Revenues Rental Income
------------------- -------------- ---------------- ------------------
2000 -- $ -- --
2001 -- -- --
2002 -- -- --
2003 -- -- --
2004 -- -- --
2005 -- -- --
2006 10 653,230 20.21%
2007 3 538,740 16.67%
2008 -- -- --
2009 4 344,873 10.67%
Thereafter 30 1,695,269 52.45%
--------- ---------------- -----------------
Total (1) 47 $ 3,232,112 100.00%
========= ================ =================
</TABLE>
(1) Excludes two Properties which were vacant at December 31, 1999.
Leases with Major Tenants. The terms of the leases with the
Partnership's major tenants as of December 31, 1999 (see Item 1. Business -
Major Tenants), are substantially the same as those described in Item 1.
Business Leases.
Golden Corral Corporation leases five Golden Corral restaurants. The
initial term of each lease is 15 years (expiring between 2007 and 2014) and the
average minimum base rent is approximately $160,250 (ranging from approximately
$102,300 to $198,500).
Jack in the Box Inc. leases six Jack in the Box restaurants. The
initial term of each lease is between 18 and 20 years (expiring between 2009 and
2016) and the average minimum base rent is approximately $77,750 (ranging from
approximately $63,000 to $92,600).
Competition
The fast-food and family-style restaurant business is characterized by
intense competition. The restaurants on the Partnership's Properties compete
with independently owned restaurants, restaurants which are part of local or
regional chains, and restaurants in other well-known national chains, including
those offering different types of food and service.
Item 3. Legal Proceedings
On May 11, 1999, four limited partners in several CNL Income Funds
served a derivative and purported class action lawsuit filed April 22, 1999
against the general partners and APF in the Circuit Court of the Ninth Judicial
Circuit of Orange County, Florida, alleging that the general partners breached
their fiduciary duties and violated provisions of certain of the CNL Income Fund
partnership agreements in connection with the proposed Merger. The plaintiffs
are seeking unspecified damages and equitable relief. On July 8, 1999, the
plaintiffs filed an amended complaint which, in addition to naming three
additional plaintiffs, includes allegations of aiding and abetting and
conspiring to breach fiduciary duties, negligence and breach of duty of good
faith against certain of the defendants and seeks additional equitable relief.
As amended, the caption of the case is Jon Hale, Mary J. Hewitt, Charles A.
Hewitt, Gretchen M. Hewitt, Bernard J. Schulte, Edward M. and Margaret Berol
Trust, and Vicky Berol v. James M. Seneff, Jr., Robert A. Bourne, CNL Realty
Corporation, and CNL American Properties Fund, Inc., Case No.
CIO-99-0003561.
On June 22, 1999, a limited partner of several CNL Income Funds served
a purported class action lawsuit filed April 29, 1999 against the general
partners and APF, Ira Gaines, individually and on behalf of a class of persons
similarly situated, v. CNL American Properties Fund, Inc., James M. Seneff, Jr.,
Robert A. Bourne, CNL Realty Corporation, CNL Fund Advisors, Inc., CNL Financial
Corporation a/k/a CNL Financial Corp., CNL Financial Services, Inc. and CNL
Group, Inc., Case NO. CIO-99-3796, in the Circuit Court of the Ninth Judicial
Circuit of Orange County, Florida, alleging that the general partners breached
their fiduciary duties and that APF aided and abetted their breach of fiduciary
duties in connection with the proposed Merger. The plaintiff is seeking
unspecified damages and equitable relief.
On September 23, 1999, Judge Lawrence Kirkwood entered an order
consolidating the two cases under the caption In re: CNL Income Funds
Litigation, Case No. 99-3561. Pursuant to this order, the plaintiffs in these
cases filed a consolidated and amended complaint on November 8, 1999. On
December 22, 1999, the General Partners and CNL Group, inc. filed motions to
dismiss and motions to strike. On December 28, 1999, APF and CNL Fund Advisors,
Inc. filed motions to dismiss. On March 6, 2000, all of the defendants filed a
Joint Notice of Filing Form 8-K Reports and Suggestion of Mootness.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
<PAGE>
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
(a) As of March 15, 2000, there were 3,507 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. During 1999, Limited Partners who
wished to sell their Units may have offered the Units for sale pursuant to the
Partnership's distribution reinvestment plan (the "Plan"), and Limited Partners
who wished to have their distributions used to acquire additional Units (to the
extent Units were available for purchase), may have done so pursuant to such
Plan. The General Partners have the right to prohibit transfers of Units. From
inception, the price for any Unit transferred pursuant to the Plan was $9.50 per
Unit. The price paid for any Unit transferred other than pursuant to the Plan
was 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 1999 and 1998 other than
pursuant to the Plan, net of commissions.
<TABLE>
<CAPTION>
<S> <C>
1999 (1) 1998 (1)
---------------------------------- ----------------------------------
High Low Average High Low Average
--------- -------- ---------- --------- -------- -----------
First Quarter (2) (2) (2) $10.00 $9.30 $9.65
Second Quarter (2) (2) (2) 9.50 8.50 9.30
Third Quarter $9.50 $7.83 $8.58 9.50 7.80 9.29
Fourth Quarter 8.42 7.27 7.78 9.70 8.25 8.85
</TABLE>
(1) A total of 5,600 and 19,100 Units were transferred other than pursuant
to the Plan for the years ended December 31, 1999 and 1998,
respectively.
(2) No transfer of Units took place during the quarter other than pursuant to
the Plan.
The capital contribution per Unit was $10. All cash available for
distribution will be distributed to the partners pursuant to the provisions of
the partnership agreement.
For the years ended December 31, 1999 and 1998, the Partnership
declared cash distributions of $3,600,004 and $3,680,004, respectively, to the
Limited Partners. Distributions for 1998 include $80,000 declared as a special
distribution to the Limited Partners of $80,000 which represented cumulative
excess operating reserves. No amounts distributed to partners for the years
ended December 31, 1999 and 1998, 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 1999 1998
--------------------- --------------- ----------------
March 31 $900,001 $980,001
June 30 900,001 900,001
September 30 900,001 900,001
December 31 900,001 900,001
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.
(b) Not applicable
<PAGE>
Item 6. Selected Financial Data
<TABLE>
<CAPTION>
<S> <C>
1999 1998 1997 1996 1995
--------------- -------------- -------------- --------------- --------------
Year ended December 31:
Revenues (1) $3,417,506 $3,169,493 $3,813,248 $3,871,869 $3,875,779
Net income (2) 2,269,401 1,878,858 3,531,381 3,461,812 3,552,067
Cash distributions
declared (3) 3,600,004 3,680,004 3,600,003 3,640,003 3,640,003
Net income per Unit (2) .56 .46 .87 .86 .88
Cash distributions
declared per Unit (3) .90 .92 .90 .91 .91
At December 31:
Total assets $33,248,120 $34,480,865 $36,289,727 $36,437,560 $36,563,796
Partners' capital 32,022,294 33,352,897 35,154,043 35,222,665 35,400,856
</TABLE>
(1) Revenues include equity in earnings of unconsolidated joint ventures,
minority interest in income of the consolidated joint venture, and
adjustments to accrued renal income as a result of certain tenants
filing for bankruptcy and rejecting the leases relating to these
Properties.
(2) Net income for the years ended December 31, 1999, 1998, 1997 and 1995,
includes $32,499, $218,960, $132,238, and $67,214, respectively, from
gains on sale of land and buildings. Net income for the years ended
December 31, 1999 and 1998, includes $357,760 and $1,001,846,
respectively, from provision for loss on land, building and net
investment in direct financing lease.
(3) Distributions for the years ended December 31, 1998, 1996, and 1995,
include a special distribution to the Limited Partners of $80,000,
$40,000, and $40,000, respectively, 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 generally triple-net leases, with the lessees responsible for all
repairs and maintenance, property taxes, insurance and utilities. As of December
31, 1999, the Partnership owned 49 Properties, either directly or indirectly
through joint venture or tenancy in common arrangements.
Capital Resources
The Partnership's primary source of capital for the years ended
December 31, 1999, 1998, and 1997, 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 $3,182,882, $3,604,438,
and $3,596,417 for the years ended December 31, 1999, 1998, and 1997,
respectively. The decrease in cash from operations during 1999, as compared to
1998, was primarily a result of changes in income and expenses as described in
"Results of Operations" below and changes in the Partnership's working capital.
The increase in cash from operations during 1998, as compared to 1997, was
primarily a result of changes in the Partnership's working capital.
Other sources and uses of capital included the following during the
years ended December 31, 1999, 1998, and 1997.
In September 1997, the Partnership sold its Property in Fremont,
California, to the franchisor for $1,420,000 and received net sales proceeds 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 $246,900 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. A portion of the transaction
relating to the sale of the Property in Fremont, California, and the
reinvestment of the proceeds in a Boston Market Property in Homewood, Alabama,
qualified as a like-kind exchange transaction for federal income tax 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 an agreement whereby each party will share in the
profits and losses of the Property in proportion to its applicable percentage
interest. As of December 31, 1999, the Partnership owned a 6.69% interest in
this Property.
In January 1998, the Partnership sold its Property in Sacramento,
California, to the tenant for $1,250,000 and received net sales proceeds of
$1,230,672, resulting in a gain of $163,350 for financial reporting purposes.
This Property was originally acquired by the Partnership in December 1991 and
had a cost of approximately $969,400, excluding acquisition fees and
miscellaneous acquisition expenses; therefore, the Partnership sold the Property
for approximately $261,300 in excess of its original purchase price. In November
1998, the Partnership reinvested the majority of the net sales proceeds in a
Jack in the Box Property located in San Marcos, Texas. The Partnership
distributed amounts sufficient to enable the Limited Partners to pay federal and
state income taxes, if any (at a level reasonably assumed by the General
Partners), resulting from the sale.
In October 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 (less closing costs of $1,000 that were incurred in
anticipation of the sale) from the subtenant, to the Partnership. In March 1998,
the sale for the vacant parcel of land was consummated and the Partnership
recorded the net sales proceeds of $68,434 ($68,000 of which had been received
as a deposit in 1995), resulting in a gain of $7,810 for financial reporting
purposes.
In October 1998, the Partnership sold its Property in Billings, Montana
to the tenant for $362,000 and received net sales proceeds of $360,688,
resulting in a gain of $47,800 for financial reporting purposes. This Property
was originally acquired by the Partnership in April 1992 and had a cost of
approximately $302,000, excluding acquisition fees and miscellaneous acquisition
expenses; therefore, the Partnership sold the Property for approximately $58,700
in excess of its original purchase price. In January 1999, the Partnership
reinvested the majority of these proceeds plus remaining net proceeds from other
sales of properties in a joint venture, Ocean Shores Joint Venture, with an
affiliate of the General Partners, to hold one restaurant property. The
Partnership owns a 69.06% interest in the profits and losses of the joint
venture. The Partnership distributed amounts sufficient to enable the Limited
Partners to pay federal and state income taxes, if any (at a level reasonably
assumed by the General Partners), resulting from the sale.
In March 1999, the Partnership sold its Property in Amherst, New York
to a third party and received net sales proceeds of $1,150,000. The Partnership
had recorded an allowance for impairment in the carrying value relating to this
Property of $93,328 at December 31, 1998 due to the tenant filing for
bankruptcy. The allowance represented the difference between the carrying value
of the Property at December 31, 1998 and the estimated net realizable value for
a Property. During 1999, the Partnership recorded a gain relating to the sale of
this Property of $74,640 for financial reporting purposes, resulting in an
aggregate net loss of approximately $18,700. In March 1999, the Partnership
reinvested the net sales proceeds plus additional funds, totaling approximately
$1,257,200 in a Golden Corral Property in Fremont, Nebraska. The Partnership
distributed amounts sufficient to enable the Limited Partners to pay federal and
state income taxes, if any (at a level reasonably assumed by the General
Partners), resulting from the sale.
In addition, in August 1999, the Partnership sold its Property in Fort
Myers Beach, Florida for $931,725, resulting in a loss of $42,141 for financial
reporting purposes. In November 1999, the Partnership reinvested the majority of
these proceeds in a joint venture arrangement, Peoria Joint Venture, with CNL
Income Fund II, Ltd., a Florida limited partnership and an affiliate of the
General Partners, to purchase and hold one restaurant Property. The Partnership
contributed approximately $825,700 and had a 52 percent interest in the profits
and losses of the joint venture as of December 31, 1999. The Partnership
distributed 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.
None of the Properties owned by the Partnership, or the joint ventures
or tenancy in common arrangements 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 and net
sales proceeds from the sale of Properties are invested in money market accounts
or other short-term highly liquid investments such as demand deposit accounts at
commercial banks, certificates of deposit and money market accounts with less
than a 30-day maturity date, pending the Partnership's use of such funds to pay
Partnership expenses, to make distributions to partners or to reinvest in
additional Properties. At December 31, 1999, the Partnership had $967,094,
invested in such short-term investments as compared to $1,835,972 at December
31, 1998. The decrease in cash and cash equivalents was primarily attributable
to the fact that during 1999, the Partnership reinvested the net sales proceeds
relating to the sale of several Properties during 1998 in a Property in Ocean
Shores, Washington, as a joint venture with affiliates of the General Partners,
in a Property in Fremont, Nebraska, and a Property in Peoria, Arizona, as a
joint venture with affiliates of the General Partners, as described above. As of
December 31, 1999, the average interest rate earned on the rental income
deposited in demand deposit accounts at commercial banks was approximately 2.67%
annually. The funds remaining at December 31, 1999 will be used towards the
payment of distributions and other liabilities.
Short-Term Liquidity
The Partnership's short-term liquidity requirements consist primarily
of the operating expenses of the Partnership.
The Partnership's investment strategy of acquiring Properties for cash
and leasing them under triple-net leases to operators who generally meet
specified financial standards minimizes the Partnership's operating expenses.
The General Partners believe that the leases will continue to generate cash flow
in excess of operating expenses.
Due to low operating expenses and ongoing cash flow, the General
Partners believe that the Partnership has sufficient working capital reserves at
this time. In addition, because all leases of the Partnership's Properties are
on a triple-net basis, it is not anticipated that a permanent reserve for
maintenance and repairs will be established at this time. To the extent,
however, that the Partnership has insufficient funds for such purpose, the
General Partners will contribute to the Partnership an aggregate amount of up to
one percent of the offering proceeds for maintenance and repairs.
The General Partners have the right, but not the obligation, to make
additional capital contributions if they deem it appropriate in connection with
the operations of the Partnership.
The Partnership generally distributes cash from operations remaining
after the payment of the operating expenses of the Partnership, to the extent
that the General Partners determine that such funds are available for
distribution. Based on cash from operations, and during the year ended December
31, 1998, cumulative excess operating reserves, the Partnership declared
distributions to the Limited Partners of $3,600,004, $3,680,004, and $3,600,003
for the years ended December 31, 1999, 1998, and 1997, respectively. This
represents distributions of $0.90, $0.92, $0.90 per Unit for the years ended
December 31, 1999, 1998, and 1997, respectively. No amounts distributed to the
Limited Partners for the years ended December 31, 1999, 1998, and 1997, 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.
During 1999, 1998, and 1997, affiliates of the General Partners
incurred $203,582, $125,405, and $86,327, respectively, for certain operating
expenses. As of December 31, 1999 and 1998, the Partnership owed $60,116 and
$29,987, respectively, to affiliates for such amounts and accounting and
administrative services. As of March 15, 2000, the Partnership had reimbursed
the affiliates all such amounts. Other liabilities, including distributions
payable, increased to $1,100,659 at December 31, 1999, from $1,033,236 at
December 31, 1998, primarily as a result of the Partnership accruing transaction
costs relating to the proposed merger with CNL American Properties Fund, Inc.
("APF"), as described in "Termination of Merger". The increase was partially
offset by a decrease of rents paid in advance as of December 31, 1999.
Liabilities at December 31, 1999, to the extent they exceed cash and cash
equivalents at December 31, 1999, will be paid from future cash from operations
or from future General Partners contributions.
Long-Term Liquidity
The Partnership has no long-term debt or other long-term liquidity
requirements.
Results of Operations
During 1997, the Partnership and its consolidated joint venture,
Allegan Real Estate Joint Venture, owned and leased 40 wholly owned Properties
(including one Property in Fremont, California, which was sold in September
1997). During 1998, the Partnership owned and leased 40 wholly owned Properties
(including two Properties sold in 1998) and during 1999, the Partnership owned
and leased 39 wholly owned Properties (including two Properties sold in 1999).
In addition, during 1999, 1998, and 1997, the Partnership was a co-venturer in
two separate joint ventures that each owned and leased one Property and one
joint venture which owned and leased six Properties. During 1999, the
Partnership was a co-venturer in two additional joint ventures that each owned
and leased one Property. In addition, during 1997, 1998 and 1999, the
Partnership owned and leased two Properties with affiliates as
tenants-in-common. As of December 31, 1999, the Partnership owned, either
directly or through joint venture arrangements, 49 Properties which are
generally 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 $28,000 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. 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, 1999, 1998, and 1997, the
Partnership and its consolidated joint venture, earned $2,899,879, $2,710,790,
and $3,402,320, respectively, in rental income from operating leases (net of
adjustments to accrued rental income) and earned income from direct financing
leases. The increase during the year ended December 31, 1999, as compared to
1998, was partially offset by, and the decrease during 1998, as compared to
1997, was partially due to, a decrease in rental and earned income of
approximately $138,900 and $33,300, during 1999 and 1998, respectively, due to
the fact that during 1998, the tenant of the Properties in Lancaster and
Amherst, New York, Brambury Associates, Inc. filed for bankruptcy and rejected
the lease relating to the Property in Lancaster, New York. As a result, the
tenant ceased making rental payments on this Property. The Partnership continued
receiving rental payments relating to the lease that was not rejected until the
Partnership sold this Property in March 1999, as described above in "Capital
Resources," which led to a decrease in rental and earned income during 1999, as
compared to 1998. The lost revenues resulting from the lease that was rejected,
as described above, could have an adverse affect on the results of operations of
the Partnership if the Partnership is unable to re-lease this Property in a
timely manner. The General Partners are currently seeking either a new tenant or
purchaser for the Property with the rejected lease. Rental and earned income
were lower during 1998, as compared to 1999 and 1997, due to the fact that as a
result of the bankruptcy, during 1998, the Partnership reversed approximately
$292,600 of accrued rental income that it has previously recorded (non-cash
accounting adjustment relating to the straight-lining of future scheduled rent
increases over the lease term in accordance with generally accepted accounting
principles) relating to both Properties. No such amounts were reversed during
1999.
Rental and earned income were lower during 1998, as compared to 1997
due to the fact that the lease relating to the Perkins Property in Ft. Pierce,
Florida, was amended to provide for rent reductions from May 1997 through
December 31, 1998. Due to the lease amendment and questionable collectibility of
future scheduled rent increases from this tenant, during 1998, the Partnership
increased its reserve for accrued rental income (non-cash accounting adjustment
relating to the straight-lining of future scheduled rent increases over the
lease term in accordance with generally accepted accounting principles) by
approximately $151,800. In September 1999, the tenant vacated the Property and
ceased making rental payments to the Partnership, resulting in a decrease in
rental and earned
<PAGE>
income of $23,300 during 1999, as compared to 1998. The General
Partners are currently seeking either a new tenant or purchaser for this
Property.
In addition, the increase in rental and earned income during 1999, as
compared to 1998, was partially offset by, and the decrease during 1998, as
compared to 1997, was partially attributable to a decrease of approximately
$138,800 and $3,800 during 1999 and 1998, respectively, due to the fact that in
October 1998, Boston Chicken, Inc., the tenant of the Boston Market Property in
Homewood, Alabama, filed for bankruptcy and rejected the lease relating to this
Property and ceased making payments to the Partnership. In conjunction with the
rejected lease, during 1998, the Partnership reversed approximately $13,200 of
accrued rental income that it had previously recorded (non-cash accounting
adjustments relating to the straight-lining of future scheduled rent increases
over the lease term in accordance with generally accepted accounting
principles). In January 2000, the Partnership entered into a new lease with a
new tenant to operate the location as a Kinko's Copies. In connection therewith,
the Partnership agreed to remove the old building so the tenant could construct
a new building. As a result, the Partnership recorded a loss representing the
undepreciated cost of the building as of December 31, 1999.
The increase in rental and earned income during 1999, as compared to
1998, was partially offset by, and the decrease during 1998, as compared to
1997, was partially attributable to a decrease of approximately $52,900 and
$39,900 for 1999 and 1998, respectively, due to the fact that the leases
relating to the Burger King Properties in Irondequoit, New York; Ashland, Ohio;
and Henderson, North Carolina were amended to provide for rent reductions from
August 1998 through the end of the lease term.
The increase in rental income during 1999, as compared to 1998, was
partially offset by, and the decrease during 1998, as compared to 1997, was
partially attributable to a decrease of approximately $80,000 and $210,100,
during 1999 and 1998, respectively, as a result of the sale of several
Properties during 1997, 1998 and 1999. This decrease was partially offset by an
increase of approximately $188,200 and $143,800 during 1999 and 1998,
respectively, due to the reinvestment of the majority of net sales proceeds
received.
During the years ended December 31, 1999, 1998, and 1997, the
Partnership also earned $96,541, $67,511, and $51,678, respectively, in
contingent rental income. The increase in contingent rental income during 1999
and 1998, each as compared to the previous year, was primarily attributable to
an increase in gross sales relating to certain restaurant properties whose
leases require the payment of contingent rent.
For the years ended December 31, 1999, 1998, and 1997, the Partnership
also earned $380,616, $292,013, and $278,919, 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 1999, as compared to 1998, was primarily attributable to the fact that
during 1999, the Partnership invested in Ocean Shores Joint Venture and Peoria
Joint Venture, as described above in "Capital Resources." The increase during
1998, as compared to 1997, was primarily attributable to the Partnership
investing in a Property in Miami, Florida, in December 1997, with affiliates of
the General Partners as tenants-in-common, also as described above in "Capital
Resources."
During the year ended December 31, 1999, two lessees, Golden Corral
Corporation and Jack in the Box 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 ten Properties owned by unconsolidated joint ventures and two
Properties owned with affiliates of the General Partners as tenants-in-common).
As of December 31, 1999, Golden Corral Corporation was the lessee under leases
relating to five restaurants and Jack in the Box 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 will continue to
contribute more than ten percent of the Partnership's total rental income during
2000. In addition, during the year ended December 31, 1999, 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 ten Properties owned by
unconsolidated joint ventures and two Properties owned with affiliates as
tenants-in-common). In 2000, it is anticipated that these five Restaurant Chains
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.
During the years ended 1999, 1998 and 1997, the Partnership also earned
$48,935, $108,481 and $88,853, respectively, in interest and other income. The
decrease in interest and other income during 1999, as compared to 1998, was
primarily attributable to the fact that during 1998, the Partnership earned
interest on the net sales proceeds relating to the sale of the Property in
Sacramento, California, pending the reinvestment of the net sales proceeds in a
Jack in the Box Property in San Marcos, Texas in November 1998.
Operating expenses, including depreciation and amortization expense,
were $822,844, $507,749, and $414,105 for the years ended December 31, 1999,
1998, and 1997, respectively. The increase in operating expenses during the
years ended December 31, 1999 and 1998, each as compared to the previous year,
was partially the result of an increase in depreciation expense due to the
purchase of several Properties during 1997, 1998 and 1999 and the fact that
during 1998, the Partnership reclassified the leases relating to the Properties
in Irondequoit, New York, Ashland, Ohio, and Henderson, North Carolina from
direct financing leases to operating leases due to lease amendments. In
addition, the increase in operating expenses was partially due to the fact that
the Partnership recorded legal expenses, real estate taxes, insurance and
maintenance relating to the Properties in Lancaster, New York and Homewood,
Alabama due to the fact that the tenants of these Properties filed for
bankruptcy. In January 2000, the Partnership re-leased the Property in Homewood,
Alabama, to a new tenant who will be responsible for such expenses in the
future, based on the terms of the lease agreement. The Partnership expects to
continue to incur such expenses relating to the remaining Property with a
rejected lease and the vacant Property, until replacement tenants or purchasers
are located. The Partnership is currently seeking either replacement tenants or
purchasers for these Properties.
In addition, the increase in operating expenses for 1999 and 1998 was
due to the fact that the Partnership incurred $195,746 and $23,779,
respectively, in transaction costs related to the General Partners retaining
financial and legal advisors to assist them in evaluating and negotiating the
proposed Merger with APF, as described below in "Termination of Merger."
As a result of the sale of the Properties in Amherst, New York and Fort
Myers Beach, Florida, the Partnership recorded a gain of $74,640 and a loss of
$42,141, respectively, for financial reporting purposes during the year ended
December 31, 1999. As a result of the sale of the Properties in Sacramento,
California and Billings, Montana, and the sale of the parcel of land in Austin,
Texas, the Partnership recognized a gain of $218,960 for financial reporting
purposes during the year ended December 31, 1998. As a result of the sale of the
Property in Fremont, California, the Partnership recognized a gain of $132,238
for financial reporting purposes for the year ended December 31, 1997. For
additional information on the sales of these Properties, see "Capital
Resources."
During the year ended December 31, 1998, the Partnership recorded a
provision for loss totaling $1,001,846 relating to the land, building, and
carrying value of the net investment in direct financing lease relating to the
Properties in Lancaster, New York; Amherst, New York; and Homewood, Alabama. The
tenants of these Properties filed for bankruptcy during 1998, and rejected two
of the three leases related to these Properties. The allowance represented the
difference between the carrying value of the Properties at December 31, 1998,
and the estimated net realizable value for these Properties. In March 1999, the
Partnership sold the Property in Amherst, New York, as described above in
"Capital Resources." In connection with the Property in Homewood, Alabama, in
January 2000, the Partnership entered into a new lease with a new tenant for a
Kinko's Copies store. In connection therewith, the Partnership agreed to remove
the old building from the Property so the new tenant can construct a new
building. Therefore, at December 31, 1999, the Partnership recorded an
impairment for $357,760, representing the undepreciated cost of the old building
for financial reporting purposes.
The Partnership's leases as of December 31, 1999, are generally
triple-net leases and contain provisions that the General Partners believe
mitigate the adverse effect of inflation. Such provisions include clauses
requiring the payment of percentage rent based on certain restaurant sales above
a specified level and/or automatic increases in base rent at specified times
during the term of the lease. Management expects that increases in restaurant
sales volumes due to inflation and real sales growth should result in an
increase in rental income over time. Continued inflation also may cause capital
appreciation of the Partnership's Properties. Inflation and changing prices,
however, also may have an adverse impact on the sales of the restaurants and on
potential capital appreciation of the Properties.
<PAGE>
Termination of Merger
On March 11, 1999, the Partnership entered into an Agreement and Plan
of Merger with APF, pursuant to which the Partnership would be merged with and
into a subsidiary of APF. Under the Agreement and Plan of Merger, APF was to
issue shares of its common stock as consideration for the Merger. On March 1,
2000, the General Partners and APF announced that they had mutually agreed to
terminate the Agreement and Plan of Merger. The agreement to terminate the
Agreement and Plan of Merger was based, in large part, on the General Partners'
concern that, in light of market conditions relating to publicly traded real
estate investment trusts, the value of the transaction had diminished. As a
result of such diminishment, the General Partners' ability to unequivocally
recommend voting for the transaction, in the exercise of their fiduciary duties,
had become questionable.
Overview of Year 2000 Problem
The year 2000 problem concerns the inability of information and
non-information technology systems to properly recognize and process
date-sensitive information beyond January 1, 2000. The failure to accurately
recognize the year 2000 could result in a variety of problems from data
miscalculations to the failure of entire systems.
Status
The Partnership generally does not directly own information technology
systems. The General Partners and their affiliates generally provide all
services requiring the use of information and some non-information technology
systems. In early 1998, affiliates of the General Partners formed a year 2000
committee ("the Y2K Team") that assessed the readiness of any systems that are
date sensitive and completed upgrades for the hardware equipment and software
that was not year 2000 compliant, as necessary. The cost for these upgrades and
other remedial measures is the responsibility of the General Partners and their
affiliates. The General Partners and their affiliates do not expect that the
Partnership will incur any costs in connection with the year 2000 remedial
measures. In addition, the Y2K Team requested and received certifications of
compliance from other companies with which the General Partners, their
affiliates, and the Partnership have material third party relationships.
In assessing the risks presented by the year 2000 problem, the Y2K Team
identified potential worst case scenarios involving the future of the
information and non-information technology systems used by the Partnership's
transfer agent, financial institutions and tenants. As of January 14, 2000, the
General Partners and their affiliates have tested the information and
non-information technology systems used by the Partnership and have not
experienced material disruption or other significant problems. In addition, as
of the same date, the General Partners are not aware of any material year 2000
problems relating to information and non-information technology systems of third
parties with which the Partnership maintains material relationships, including
those of the Partnership's transfer agent, financial institutions and tenants.
In addition, in the Partnership's interactions with its transfer agent,
financial institutions and tenants, the systems of these third parties have
functioned normally. Until the Partnership's first distribution in 2000 and the
delivery of the information by the transfer agent to stockholders in early 2000,
the General Partners will continue to monitor the year 2000 compliance of the
transfer agent. In addition, the General Partners will continue to monitor the
systems used by the Partnership and to maintain contact with third parties with
which the Partnership has material relationships with respect to year 2000
compliance and any year 2000 issues that may arise at a later date. The General
Partners will develop contingency plans relating to ongoing year 2000 issues at
the time that such issues are identified and such plans are deemed necessary.
Based on the information provided to the Y2K Team, the upgrades and
remedial measures by the General Partners and their affiliates, and the normal
functioning to date of information and non-information technology systems used
by the Partnership and those third parties, the General Partners do not foresee
significant risks associated with its year 2000 compliance at this time. In
addition, the General Partners and their affiliates do not expect to incur any
additional costs in connection with the year 2000 remedial efforts. However,
there can be no assurance that the General Partners and their affiliates or any
third parties will not have ongoing year 2000 issues that may have adverse
effects on the Partnership.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
Item 8. Financial Statements and Supplementary Data
<PAGE>
CNL INCOME FUND X, LTD.
(A Florida Limited Partnership)
CONTENTS
Page
Report of Independent Certified Public Accountants 19
Financial Statements:
Balance Sheets 20
Statements of Income 21
Statements of Partners' Capital 22
Statements of Cash Flows 23
Notes to Financial Statements 25
<PAGE>
Report of Independent Certified Public Accountants
To the Partners
CNL Income Fund X, Ltd.
In our opinion, the financial statements listed in the index appearing under
item 14(a)(1) present fairly, in all material respects, the financial position
of CNL Income Fund X, Ltd. (a Florida limited partnership) at December 31, 1999
and 1998, and the results of its operations and its cash flows for each of the
three years in the period ended December 31, 1999 in conformity with accounting
principles generally accepted in the United States. In addition, in our opinion,
the financial statement schedules listed in the index appearing under item
14(a)(2) presents fairly, in all material respects, the information set forth
therein when read in conjunction with the related financial statements. 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 of these statements in accordance with auditing
standards generally accepted in the United States which 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, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion expressed
above.
/s/ PricewaterhouseCoopers LLP
Orlando, Florida
February 4, 2000, except for Note 11 for which the date is March 1, 2000.
<PAGE>
CNL INCOME FUND X, LTD.
(A Florida Limited Partnership)
BALANCE SHEETS
<TABLE>
<CAPTION>
<S> <C>
December 31,
1999 1998
------------------- --------------------
ASSETS
Land and buildings on operating leases, less
accumulated depreciation and allowance
for loss on land and buildings $ 16,391,447 $ 16,685,182
Net investment in direct financing leases,
less allowance for impairment in
carrying value 9,391,291 10,713,000
Investment in joint ventures 4,989,209 3,421,329
Cash and cash equivalents 967,094 1,835,972
Restricted cash -- 361,403
Receivables, less allowance for doubtful accounts of
$122,914 and $236,810, respectively
100,952 81,100
Prepaid expenses 19,283 5,229
Accrued rental income, less allowance for
doubtful accounts of $1,210 and
$269,421, respectively 1,353,160 1,342,166
Other assets 35,684 35,484
------------------- --------------------
$ 33,248,120 $ 34,480,865
=================== ====================
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 119,660 $ 2,403
Accrued and escrowed real estate taxes
payable 9,364 27,418
Distributions payable 900,001 900,001
Due to related parties 60,116 29,987
Rents paid in advance and deposits 71,634 103,414
------------------- --------------------
Total liabilities 1,160,775 1,063,223
Minority interest 65,051 64,745
Partners' capital 32,022,294 33,352,897
------------------- --------------------
$ 33,248,120 $ 34,480,865
=================== ====================
See accompanying notes to financial statements.
<PAGE>
CNL INCOME FUND X, LTD.
(A Florida Limited Partnership)
STATEMENTS OF INCOME
Year Ended December 31,
1999 1998 1997
----------------- ---------------- -----------------
Revenues:
Rental income from operating leases $ 1,773,037 $ 1,886,761 $ 1,896,607
Adjustments to accrued rental income (19,506 ) (457,567) (28,812)
Earned income from direct financing leases 1,146,348 1,281,596 1,534,525
Contingent rental income 96,541 67,511 51,678
Interest and other income 48,935 108,481 88,853
----------------- ---------------- -----------------
3,045,355 2,886,782 3,542,851
----------------- ---------------- -----------------
Expenses:
General operating and administrative 182,554 163,189 153,672
Bad debt expense -- 5,887 --
Professional services 64,806 44,309 26,890
Real estate taxes 39,219 199 9,703
State and other taxes 15,457 10,520 9,372
Depreciation and amortization 325,062 259,866 214,468
Transaction costs 195,746 23,779 --
----------------- ---------------- -----------------
822,844 507,749 414,105
----------------- ---------------- -----------------
Income Before Minority Interest in Income
of Consolidated Joint Venture, Equity
in Earnings of Unconsolidated Joint
Ventures, Gain on Sale of Land and Buildings
and Provision for Loss on Land and Buildings,
and Impairment in Carrying Value of Net Investment
in Direct Financing Lease 2,222,511 2,379,033 3,128,746
Minority Interest in Income of Consolidated
Joint Venture (8,465 ) (9,302) (8,522)
Equity in Earnings of Unconsolidated Joint Ventures 380,616 292,013 278,919
Gain on Sale of Land and Buildings 32,499 218,960 132,238
Provision for Loss on Land and Buildings, and Impairment
in Carrying Value of Net Investment in Direct
Financing Lease (357,760 ) (1,001,846) --
----------------- ---------------- -----------------
Net Income $ 2,269,401 $ 1,878,858 $ 3,531,381
================= ================ =================
Allocation of Net Income
General partners $ 23,210 $ 21,016 $ 33,991
Limited partners 2,246,191 1,857,842 3,497,390
================= ================ =================
$ 2,269,401 $ 1,878,858 $ 3,531,381
================= ================ =================
Net Income Per Limited Partner Unit $ 0.56 $ 0.46 $ 0.87
================= ================ =================
Weighted Average Number of Limited Partner Units
Outstanding 4,000,000 4,000,000 4,000,000
================= ================ =================
See accompanying notes to financial statements.
<PAGE>
CNL INCOME FUND X, LTD.
(A Florida Limited Partnership)
STATEMENTS OF PARTNERS' CAPITAL
Years Ended December 31, 1999, 1998 and 1997
General Partners Limited Partners
--------------------------------- -------------------------------------------------------------------
Accumulated Accumulated Syndication
Contributions Earnings Contributions Distributions Earnings Costs
---------------- --------------- --------------- ----------------- -------------- --------------
Balance, December 31, 1996 $ 1,000 $ 173,718 $ 40,000,000 $ (17,363,136 ) $ 17,201,083 $ (4,790,000)
Distributions to limited
partners ($0.90 per
limited partner unit) -- -- -- (3,600,003 ) -- --
Net income -- 33,991 -- -- 3,497,390 --
------------- --------------- -------------- ----------------- -------------- --------------
Balance, December 31, 1997 1,000 207,709 40,000,000 (20,963,139 ) 20,698,473 (4,790,000)
Distributions to limited
partners ($0.92 per
limited partner unit) -- -- -- (3,680,004 ) -- --
Net income -- 21,016 -- -- 1,857,842 --
------------- --------------- -------------- ----------------- -------------- --------------
Balance, December 31, 1998 1,000 228,725 40,000,000 (24,643,143 ) 22,556,315 (4,790,000)
Distributions to limited
partners ($0.90 per
limited partner unit) -- -- -- (3,600,004 ) -- --
Net income -- 23,210 -- -- 2,246,191 --
------------- --------------- -------------- ----------------- -------------- --------------
Balance, December 31, 1999 $ 1,000 $ 251,935 $ 40,000,000 $ (28,243,147 ) $ 24,802,506 $ (4,790,000)
============= =============== ============== ================= ============== ==============
<PAGE>
Limited Partners
---------------------
Total
--------------
Balance, December 31, 1996 $ 35,222,665
Distributions to limited
partners ($0.90 per
limited partner unit) (3,600,003 )
Net income 3,531,381
---------------
Balance, December 31, 1997 35,154,043
Distributions to limited
partners ($0.92 per
limited partner unit) (3,680,004 )
Net income 1,878,858
---------------
Balance, December 31, 1998 33,352,897
Distributions to limited
partners ($0.90 per
limited partner unit) (3,600,004 )
Net income 2,269,401
---------------
Balance, December 31, 1999 $ 32,022,294
===============
See accompanying notes to financial statements.
<PAGE>
CNL INCOME FUND X, LTD.
(A Florida Limited Partnership)
STATEMENTS OF CASH FLOWS
Year Ended December 31,
1999 1998 1997
---------------- ---------------- ---------------
Increase (Decrease) in Cash and Cash Equivalents:
Cash Flows from Operating Activities:
Cash received from tenants $ 3,049,409 $ 3,382,562 $ 3,380,391
Distributions from unconsolidated
joint venture 440,831 373,004 353,207
Cash paid for expenses (355,273) (221,284) (190,902)
Interest received 47,915 70,156 53,721
---------------- ---------------- ---------------
Net cash provided by operating activities 3,182,882 3,604,438 3,596,417
---------------- ---------------- ---------------
Cash Flows from Investing Activities:
Proceeds from sale of land and buildings 2,081,725 1,591,794 1,363,805
Additions to land and buildings on operating
leases (1,257,217) (1,020,329) (1,277,308)
Investment in joint ventures (1,628,095) -- (130,404)
Decrease (increase) in restricted cash 359,990 (237,758) (89,702)
Other -- 3,006 --
---------------- ---------------- ---------------
Net cash provided by (used in)
investing activities (443,597) 336,713 (133,609)
---------------- ---------------- ---------------
Cash Flows from Financing Activities:
Distributions to limited partners (3,600,004) (3,680,004) (3,640,002)
Distributions to holder of minority interest (8,159) (9,058) (8,406)
---------------- ---------------- ---------------
Net cash used in financing activities (3,608,163) (3,689,062) (3,648,408)
---------------- ---------------- ---------------
Net Increase (Decrease) in Cash and Cash Equivalents (868,878) 252,089 (185,600)
Cash and Cash Equivalents at Beginning of Year 1,835,972 1,583,883 1,769,483
---------------- ---------------- ---------------
Cash and Cash Equivalents at End of Year $ 967,094 $ 1,835,972 $ 1,583,883
================ ================ ===============
See accompanying notes to financial statements.
<PAGE>
CNL INCOME FUND X, LTD.
(A Florida Limited Partnership)
STATEMENTS OF CASH FLOWS - CONTINUED
Year Ended December 31,
1999 1998 1997
--------------- ---------------- ----------------
Reconciliation of Net Income to Net Cash Provided by
Operating Activities:
Net income $ 2,269,401 $ 1,878,858 $ 3,531,381
--------------- ---------------- ----------------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 325,062 259,866 214,468
Minority interest in income of consolidated
joint venture 8,465 9,302 8,522
Equity in earnings of unconsolidated joint
ventures, net of distributions 60,215 80,991 74,288
Gain on sale of land and buildings (32,499) (218,960) (132,238)
Provision for loss on land and building, and
impairment in carrying value of net investment
in direct financing lease 357,760 1,001,846 --
Bad debt expense -- 5,887 --
Decrease (increase) in receivables (18,439) 8,312 (71,222)
Decrease (increase) in prepaid expenses (14,054) 648 (374)
Decrease in net investment in direct financing
leases 209,710 219,237 211,942
Decrease (increase) in accrued rental income (80,091) 300,791 (201,022)
Increase in other assets (200) (2,380) --
Increase (decrease) in accounts payable and accrued
expenses 99,203 (3,996) (14,156)
Increase in due to related parties 30,129 25,041 3,337
Increase (decrease) in rents paid in advance and
deposits (31,780) 38,995 (28,509)
--------------- ---------------- ----------------
Total adjustments 913,481 1,725,580 65,036
--------------- ---------------- ----------------
Net Cash Provided by Operating Activities $ 3,182,882 $ 3,604,438 $ 3,596,417
=============== ================ ================
Supplemental Schedule of Non-Cash Financing Activities:
Distributions declared and unpaid at December 31 $ 900,001 $ 900,001 $ 900,001
=============== ================ ================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
CNL INCOME FUND X, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
Years Ended December 31, 1999, 1998, and 1997
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
generally on a triple-net basis, whereby the tenant is 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.
Accrued rental income represents the aggregate amount of
income recognized on a straight-line basis in excess of
scheduled rental payments to date. Whenever a tenant defaults
under the terms of its lease, or events or changes in
circumstance indicate that the tenant will not lease the
property through the end of the lease term, the Partnership
either reserves or reverses the cumulative accrued rental
income balance.
<PAGE>
CNL INCOME FUND X, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1999, 1998, and 1997
1. Significant Accounting Policies - Continued:
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. Although the general partners have made their best
estimate of these factors based on current conditions, it is reasonably
possible that changes could occur in the near term which could
adversely affect the general partners' estimate of net cash flows
expected to be generated from its properties and the need for asset
impairment write-downs. 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, Ashland Joint Venture, Ocean
Shores Joint Venture and Peoria Joint Venture, and the properties in
Clinton, North Carolina, and 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.
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.
<PAGE>
CNL INCOME FUND X, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1999, 1998, and 1997
1. Significant Accounting Policies - Continued:
Cash accounts maintained on behalf of the Partnership in demand
deposits at commercial banks and money market funds may exceed
federally insured levels; however, the Partnership has not experienced
any losses in such accounts. The Partnership limits investment of
temporary cash investments to financial institutions with high credit
standing; therefore, the Partnership believes it is not exposed to any
significant credit risk on cash and cash equivalents.
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.
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
<PAGE>
CNL INCOME FUND X, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1999, 1998, and 1997
2. Leases - Continued:
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 25
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:
1999 1998
-------------- --------------
Land $ 9,076,722 $ 9,741,686
Building 10,235,897 8,588,903
-- 592,943
Construction in process
-------------- --------------
19,312,619 18,923,532
Less accumulated depreciation (1,654,894 ) (1,329,832 )
-------------- --------------
17,657,725 17,593,700
Less allowance for loss on
land and building (1,266,278 ) (908,518 )
-------------- --------------
$ 16,391,447 $ 16,685,182
============== ==============
In March 1998, a vacant parcel of land relating to the property in
Austin, Texas, was sold to a third party who had previously subleased
the land from the Partnership's lessee. In connection therewith, the
Partnership received net sales proceeds of $68,434 ($68,000 of which
had been received and recorded as a deposit in 1995), resulting in a
gain of $7,810 for financial reporting purposes.
<PAGE>
CNL INCOME FUND X, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1999, 1998, and 1997
3. Land and Buildings on Operating Leases - Continued:
During 1998, the Partnership sold its properties in Sacramento,
California and Billings, Montana, for a total of $1,612,000 and
received net sales proceeds totaling $1,591,360, resulting in a total
gain of $211,150 for financial reporting purposes. These properties
were originally acquired by the Partnership in 1991 and 1992,
respectively, and had costs totaling approximately $1,271,400,
excluding acquisition fees and miscellaneous acquisition expenses;
therefore, the Partnership sold the properties for approximately
$320,000 in excess of their original purchase prices. In November 1998,
the Partnership reinvested the majority of the net sales proceeds from
the sale of its property in Sacramento, California in a Jack in the Box
property in San Marcos, Texas.
During the year ended December 31, 1998, the Partnership recorded a
provision for loss on land and building totaling $908,518 for financial
reporting purposes relating to the properties in Lancaster, New York,
and Homewood, Alabama. In connection with the property in Homewood,
Alabama, in January 2000, the Partnership entered into a new lease with
a new tenant for a Kinko's Copies store. In connection therewith, the
Partnership agreed to remove the old building from the Property so the
new tenant can construct a new building. Therefore, at December 31,
1999, the Partnership recorded an impairment for $357,760, representing
the undepreciated cost of the old building, for financial reporting
purposes (see Note 12). The tenants of these properties filed for
bankruptcy during 1998, and rejected the leases related to these two
properties. The allowance represents the difference between the
carrying value of the properties at December 31, 1999 and 1998 and the
estimated net realizable value for these properties, respectively.
In March 1999, the Partnership sold its property in Amherst, New York
and received net sales proceeds of $1,150,000, resulting in a total
gain of $74,640 for financial reporting purposes (see Note 4). In March
1999, the Partnership reinvested the net sales proceeds, plus
additional funds, totaling approximately $1,257,200, in a Golden Corral
property in Fremont, Nebraska.
In August 1999, the Partnership sold its property in Fort Myers Beach,
Florida for $931,725 and recorded a loss of $42,141 for financial
reporting purposes. In November 1999, the Partnership reinvested the
majority of the net sales proceeds in Peoria Joint Venture, with CNL
Income Fund II, Ltd., an affiliate of the general partners (see Note
5).
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, 1999 and 1997, the Partnership recognized
income of $80,091 and $201,022, respectively (net of reserves of $1,210
and $28,812, respectively and net of reversals of $18,296 in 1999).
<PAGE>
CNL INCOME FUND X, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1999, 1998, and 1997
3. Land and Buildings on Operating Leases - Continued:
For the year ended December 31, 1998, the Partnership recognized a loss
of $300,791 (net of $151,828 in reserves and $305,739 in reversals).
The following is a schedule of the future minimum lease payments to be
received on noncancellable operating leases at December 31, 1999:
2000 $1,728,579
2001 1,759,899
2002 1,842,971
2003 1,851,750
2004 1,907,836
Thereafter 10,179,739
----------------
$19,270,774
================
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. These
amounts do not include minimum lease payments that will become due when
the property under development is completed.
4. Net Investment in Direct Financing Leases:
The following lists the components of the net investment in direct
financing leases at December 31:
<TABLE>
<CAPTION>
<S> <C>
1999 1998
------------- --------------
Minimum lease payments receivable $14,942,831 $ 18,740,085
Estimated residual values 3,229,175 3,553,036
Less unearned income (8,780,715 ) (11,486,793 )
------------- --------------
9,391,291 10,806,328
Less allowance for impairment in
carrying value -- (93,328 )
------------- --------------
Net investment in direct financing leases $ 9,391,291 $ 10,713,000
============= ==============
</TABLE>
<PAGE>
CNL INCOME FUND X, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1999, 1998, and 1997
4. Net Investment in Direct Financing Leases - Continued:
During 1998, the Partnership sold a property, for which the building
portion had been classified as a direct financing lease. In connection
therewith, the gross investment (minimum lease payments receivable and
the estimated residual value) and unearned income relating to the
building were removed from the accounts and the gain from the sale of
the property was reflected in income (see Note 3).
During 1998, three of the Partnership's leases were amended and one of
the Partnership's leases that was classified as a direct financing
lease was rejected in connection with the tenant filing for bankruptcy.
As a result, the Partnership reclassified two of the three amended
leases and the rejected lease from direct financing leases to operating
leases. In accordance with the Statement of Financial Accounting
Standards No. 13, "Accounting for Leases," the Partnership recorded the
reclassified leases at the lower of original cost, present fair value,
or present carrying amount. No losses on the termination of direct
financial leases were recorded for financial reporting purposes.
At December 31, 1998, the Partnership had recorded an allowance of
$93,328 for the impairment in the carrying value of the Property in
Amherst, New York, due to the tenant filing for bankruptcy. The
allowance represented the difference between the carrying value of the
property at December 31, 1998 and the estimated net realizable value
for this property. In March 1999, the Partnership sold this property,
received net sales proceeds of $1,150,000 and recorded a gain of
$74,640 for financial reporting purposes, resulting in an aggregate net
loss of approximately $18,700. The building portion of this property
had been classified as a direct financing lease. In connection
therewith, the gross investment (minimum lease payments receivable and
the estimated residual value), unearned income, and the allowance for
impairment in carrying value relating to the building were removed from
the accounts and the gain from the sale of the property was reflected
in income (see Note 3).
In August 1999, the Partnership sold its property in Fort Myers Beach,
Florida for which the building portion had been classified as a direct
financing lease. In connection therewith, the gross investment (minimum
lease payments receivable and the estimated residual value) and
unearned income relating to the building were removed from the accounts
and the loss from the sale of the property was reflected in income (see
Note 3).
<PAGE>
CNL INCOME FUND X, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1999, 1998, and 1997
4. Net Investment in Direct Financing Leases - Continued:
The following is a schedule of future minimum lease payments to be
received on the direct financing leases at December 31, 1999:
2000 $1,215,792
2001 1,223,235
2002 1,253,431
2003 1,264,941
2004 1,275,724
Thereafter 8,709,708
----------------
$14,942,831
================
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).
5. Investment in Joint Ventures:
The Partnership has a 50 percent, a 10.51%, a 40.95%, a 13 percent, and
6.69% interest in the profits and losses of CNL Restaurant Investments
III, Ashland Joint Venture, Williston Real Estate Joint Venture, and a
property in Clinton, North Carolina, and a property in Miami, Florida,
held as tenants-in-common with affiliates of the general partners. The
remaining interests in these joint ventures are held by affiliates of
the Partnership which have the same general partners.
In January 1999, the Partnership entered into a joint venture
arrangement, Ocean Shores Joint Venture, with CNL Income Fund XVII,
Ltd., an affiliate of the general partners, to own and lease one
restaurant property. The Partnership contributed approximately $802,400
to the joint venture and as of December 31, 1999, owned a 69.06%
interest in the profits and losses of the joint venture.
In addition, in November 1999, the Partnership entered into a joint
venture arrangement, Peoria Joint Venture, with CNL Income Fund II,
Ltd., an affiliate of the general partners, to own and lease one
restaurant property. The Partnership contributed approximately $825,700
to the joint venture and as of December 31, 1999, owned a 52 percent
interest in the profits and losses of the joint venture.
<PAGE>
CNL INCOME FUND X, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1999, 1998, and 1997
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, Ocean Shores Joint Venture, Peoria
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:
1999 1998
------------- ------------
Land and buildings on operating
leases, less accumulated
depreciation $ 9,925,836 $ 9,340,944
Net investment in direct financing
leases 2,575,174 657,426
Cash 70,698 2,935
Receivables 27,948 7,597
Prepaid expenses 21,674 24,337
Accrued rental income 59,081 19,880
Liabilities 71,721 3,119
Partners' capital 12,608,690 10,050,000
Revenues 1,266,458 1,115,856
Net income 996,372 843,914
The Partnership recognized income totaling $380,616, $292,013, and
$278,919 for the years ended December 31, 1999, 1998, and 1997,
respectively, from these joint ventures.
6. Restricted Cash:
As of December 31, 1998, net sales proceeds of $359,990 from the sale
of a property, plus accrued interest of $1,413, were being held in an
interest-bearing escrow account pending the release of funds by the
escrow agent to acquire an additional property. These funds were
released by the escrow agent in 1999 and were used, along with other
funds, to acquire an interest in Ocean Shores Joint Venture (see Note
5).
<PAGE>
CNL INCOME FUND X, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1999, 1998, and 1997
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 not in
liquidation of the Partnership, 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 not in
liquidation of the Partnership 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.
Generally, net sales proceeds from a liquidating sale of properties,
will be used in the following order: (i) first to pay and discharge all
of the Partnership's liabilities to creditors, (ii) second, to
establish reserves that may be deemed necessary for any anticipated or
unforeseen liabilities or obligations of the Partnership, (iii) third,
to pay all of the Partnership's liabilities, if any, to the general and
limited partners, (iv) fourth, after allocations of net income, gains
and/or losses, to distribute to the partners with positive capital
accounts balances, in proportion to such balances, up to amounts
sufficient to reduce such positive balances to zero, and (v)
thereafter, any funds remaining shall then be distributed 95 percent to
the limited partners and five percent to the general partners.
During the years ended December 31, 1999, 1998, and 1997, the
Partnership declared distributions to the limited partners of
$3,600,004, $3,680,004, and $3,600,003, respectively. No distributions
have been made to the general partners to date.
<PAGE>
CNL INCOME FUND X, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1999, 1998, and 1997
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>
<S> <C>
1999 1998 1997
-------------- -------------- --------------
Net income for financial reporting purposes $ 2,269,401 $ 1,878,858 $3,531,381
Depreciation for tax reporting purposes in
excess of depreciation for financial
reporting purposes (171,877) (228,986) (289,098)
Direct financing leases recorded as operating
leases for tax reporting purposes 209,517 219,237 211,942
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 20,342 12,612 15,294
Gain on sale of land and buildings for financial
reporting purposes less than (in excess of)
gain for tax reporting purposes 138,449 65,474 (42,996)
Allowance for loss on land and building 357,760 1,001,846 --
Allowance for doubtful accounts (113,896) 98,954 133,428
Accrued rental income (80,091) 300,791 (201,022)
Rents paid in advance (31,780) 38,995 (22,593)
Minority interest in timing differences of
consolidated joint venture 1,846 413 1,461
Capitalization of transaction costs for tax
reporting purposes 195,746 23,779 --
-------------- -------------- --------------
Net income for federal income tax purposes $ 2,795,417 $ 3,411,973 $3,337,797
============== ============== ==============
</TABLE>
<PAGE>
CNL INCOME FUND X, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1999, 1998, and 1997
9. Related Party Transactions:
One of the individual general partners, James M. Seneff, Jr., is one of
the principal shareholders of CNL Holdings, Inc. The other individual
general partner, Robert A. Bourne, serves as President and Treasurer of
CNL Financial Group, Inc., a wholly owned subsidiary of CNL Holdings,
Inc., CNL Fund Advisors, Inc. (the "Advisor") was a majority owned
subsidiary of CNL Financial Group, Inc. until it merged with CNL
American Properties Fund, Inc. ("APF"), effective September 1, 1999.
The individual general partners are stockholders and directors of APF.
The Advisor provides certain services relating to management of the
Partnership and its properties pursuant to a management agreement with
the Partnership. In connection therewith, the Partnership has agreed to
pay the Advisor 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, 1999, 1998, and 1997.
The Advisor is 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 Advisor 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 the 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.
<PAGE>
CNL INCOME FUND X, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1999, 1998, and 1997
9. Related Party Transactions - Continued:
During the years ended December 31, 1999, 1998, and 1997, the Advisor
and its affiliates provided accounting and administrative services to
the Partnership on a day-to-day basis including services relating to
the proposed and terminated merger as described in Note 11. The
Partnership incurred $129,209, $105,445, and $87,967 for the years
ended December 31, 1999, 1998, and 1997, respectively, for such
services.
The due to related parties at December 31, 1999 and 1998, totaled
$60,116 and $29,987, respectively.
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 of the general partners) for each of
the years ended December 31:
1999 1998 1997
--------- --------- ----------
Golden Corral Corporation $686,144 $578,430 $548,399
Jack in the Box Inc. 514,747 436,577 646,477
Flagstar Enterprises, Inc. (and
Denny's, Inc. during the year
ended December 31, 1997) N/A N/A 602,913
<PAGE>
CNL INCOME FUND X, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1999, 1998, and 1997
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 of the general partners) for each of
the years ended December 31:
1999 1998 1997
----------- --------- ---------
Burger King $797,192 $758,178 $777,378
Golden Corral Family
Steakhouse Restaurant 686,144 578,430 548,399
Jack in the Box 514,747 436,577 646,477
Shoney's 398,103 440,333 441,052
Hardee's 395,902 400,716 403,882
The information denoted by N/A indicates that for each period
presented, the tenant and the chains did not represent more than ten
percent of the Partnership's total rental and earned income.
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 if the Partnership is not able to re-lease the
properties in a timely manner.
11. Termination of Merger:
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"). Under the Agreement and Plan of Merger, APF was to
issue shares of its common stock as consideration for the Merger. On
March 1, 2000, the General Partners and APF announced that they had
mutually agreed to terminate the Agreement and Plan of Merger. The
agreement to terminate the Agreement and Plan of Merger was based, in
large part, on the General Partners' concern that, in light of market
conditions relating to publicly traded real estate investment trusts,
the value of the transaction had diminished. As a result of such
diminishment, the General Partners' ability to unequivocally recommend
voting for the transaction, in the exercise of their fiduciary duties,
had become questionable.
<PAGE>
CNL INCOME FUND X, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1999, 1998, and 1997
12. Subsequent Event:
In January 2000, the Partnership entered into a new lease with a new
tenant for a Kinko's Copies store in Homewood, Alabama. In connection
therewith, the Partnership agreed to remove the old building from the
property so the new tenant can construct a new building. Therefore, at
December 31, 1999, the Partnership recorded an impairment of $357,760,
representing the undepreciated cost of the old building, for financial
reporting purposes.
<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 Financial Group, Inc.
and their affiliates, all of which are affiliates of the General Partners.
James M. Seneff, Jr., age 53, 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
co-venturer in over 100 real estate ventures. These ventures have involved the
financing, acquisition, construction, and leasing of restaurants, office
buildings, apartment complexes, hotels, and other real estate. Mr. Seneff is a
principal stockholder of CNL Holdings, Inc., the parent company of CNL Financial
Group, Inc. (formerly CNL Group, Inc.), a diversified real estate company, and
has served as a director, Chairman of the Board and Chief Executive Officer of
CNL Financial Group, Inc. since its formation in 1980. Mr. Seneff has served as
a director and Chairman of the Board since inception in 1994, and served as
Chief Executive Officer from 1994 through August 1999, of CNL American
Properties Fund, Inc., a public, unlisted real estate investment trust. He also
served as a director, Chairman of the Board and Chief Executive Officer of CNL
Fund Advisors, Inc., the advisor to CNL American Properties Fund, Inc. until it
merged with the company in September 1999. In addition, he serves as a director,
Chairman of the Board and Chief Executive Officer of CNL Health Care Properties,
Inc., as well as CNL Health Care Corp., the advisor to the company. He also
serves as director, Chairman of the Board and Chief Executive Officer of CNL
Hospitality Properties, Inc., a public, unlisted real estate investment trust,
as well as CNL Hospitality Corp., its advisor. Since 1992, Mr. Seneff has served
as Chairman of the Board and Chief Executive Officer of Commercial Net Lease
Realty, Inc., a public real estate investment trust that is listed on the New
York Stock Exchange. Mr. Seneff has also served as a director, Chairman of the
Board and Chief Executive Officer of the following affiliated companies since
formation: CNL Securities Corp., since 1979; CNL Investment Company, since 1990;
and CNL Institutional Advisors, a registered investment advisor for pension
plans, since 1990. Mr. Seneff formerly served as a director of First Union
National Bank of Florida, N.A., and currently serves as the Chairman of the
Board of CNLBank. Mr. Seneff 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 is Florida's principal investment advisory and money management
agency and oversees the investment of more than $60 billion of retirement funds.
Mr. Seneff received his degree in Business Administration from Florida State
University in 1968.
Robert A. Bourne, age 52, Since joining CNL Securities Corp. in 1979,
Mr. Bourne has participated as a general partner or co-venturer in over 100 real
estate ventures involved in the financing, acquisition, construction, and
leasing of restaurants, office buildings, apartment complexes, hotels, and other
real estate. Mr. Bourne is the President and Treasurer of CNL Financial Group,
Inc. (formerly CNL Group, Inc.). Mr. Bourne has served as a director since
inception in 1994, President from 1994 through February 1999, Treasurer from
February 1999 through August 1999, and Vice Chairman of the Board since February
1999 of CNL American Properties Fund, Inc., a public, unlisted real estate
investment trust. He also served in the following positions for CNL Fund
Advisors, Inc., the advisor to CNL American Properties Fund, Inc. prior to its
merger with CNL American Properties Fund, Inc.: director from 1994 through
August 1999, Treasurer from July 1998 through August 1999, President from 1994
through September 1997, and Vice Chairman of the Board from September 1997
through August 1999. Mr. Bourne is a director and President of CNL Health Care
Properties, Inc., as well as a director and President of CNL Health Care Corp.,
the advisor to the company. He is also a director, Vice Chairman of the Board
and President of CNL Hospitality Properties, Inc., a public, unlisted real
estate investment trust, as well as CNL Hospitality Corp., its advisor. Mr.
Bourne also serves as a director of CNLBank. He has served as a director since
1992, Vice Chairman of the Board since February 1996, Secretary and Treasurer
from February 1996 through 1997, and President from July 1992 through February
1996, of Commercial Net Lease Realty Inc., a public real estate investment trust
listed on the New York Stock Exchange. Mr. Bourne holds the following positions
for these affiliates of CNL Financial Group, Inc.: director, President and
Treasurer of CNL Investment Company; director, President, Treasurer, and
Registered Principal of CNL Securities Corp., a subsidiary of CNL Investment
Company and director, President, Treasurer, and Chief Investment Officer of CNL
Institutional Advisors, Inc., a registered investment advisor for pension plans.
Mr. Bourne began his career as a certified public accountant employed by Coopers
& Lybrand, Certified Public Accountants, from 1971 through 1978, where he
attained the position of tax manager in 1975. Mr. Bourne graduated from Florida
State University in 1970 where he received a B.A. in Accounting, with honors.
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 450 South Orange Avenue, Orlando, Florida 32801.
CNL Fund Advisors, Inc. was a majority owned subsidiary of CNL Financial Group,
Inc., until its merger effective September 1, 1999. On September 1, 1999, CNL
American Properties Fund, Inc. acquired CNL Fund Advisors, Inc. and was
organized to perform property acquisition, property management and other
services.
CNL Financial Group, Inc., which was the parent company of CNL Fund
Advisors, Inc. through August 1999, was organized in 1980 under the laws of the
State of Florida. CNL Financial 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 Financial Group, Inc. Mr. Seneff and his wife own all of the
outstanding shares of CNL Holdings, Inc., the Parent company of CNL Financial
Group, Inc.
The following persons serve as operating officers of CNL Financial
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 Financial Group, Inc. and its affiliated companies.
Curtis B. McWilliams, age 44, joined CNL Financial Group, Inc. in April
1997 and served as an Executive Vice President through August 1999. He serves as
Chief Executive Officer of CNL American Properties Fund, Inc. and CNL Fund
Advisors, Inc. In addition, Mr. McWilliams served as President of CNL Fund
Advisors, Inc. and as President of the Restaurant and Financial Services Groups
within CNL Financial Group, Inc. through August 1999. Mr. McWilliams served as
President of CNL American Properties Fund, Inc. from February 1999 through
August 1999 and previously served as Executive Vice President from February 1998
through February 1999. From September 1983 through March 1997, Mr. McWilliams
was employed by Merrill Lynch & Co., most recently as Chairman of Merrill
Lynch's Private Advisory Services until March 1997. 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 41, serves as President and Chief Operating Officer
of CNL American Properties Fund, Inc. and CNL Fund Advisors, Inc. He served as
Executive Vice President of CNL American Properties Fund, Inc. from January 1996
through August 1999, as Chief Operating Officer since March 1995 through August
1999, and previously served as Senior Vice President from December 1994 through
August 1999. In addition, Mr. Walker has served as Executive Vice President of
CNL Fund Advisors, Inc. since January 1996 through August 1999, Chief Operating
Officer from April 1995 through August 1999, and previously served as Senior
Vice President from November 1994 through January 1996. In addition, Mr. Walker
previously served as Executive Vice President of CNL Hospitality Properties,
Inc. and CNL Hospitality Advisors, Inc. As of September 1, 1999, Mr. Walker
serves as President for CNL American Properties Fund, Inc. From May 1992 to May
1994, Mr. Walker, a certified public accountant, was Executive Vice President
for Finance and Administration and Chief Financial Officer of Z Music, Inc., a
cable television network (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 51, Ms. Rose served as Secretary of CNL American
Properties Fund, Inc., a public, unlisted real estate investment trust, from
1994 through August 1999, and served as Treasurer from 1994 through February
1999. She also served as Treasurer of CNL Fund Advisors, Inc., from 1994 through
July 1998, and served as Secretary and a director from 1994 through August 1999,
at which point it merged with CNL American Properties Fund, Inc. In addition,
she is Secretary and Treasurer of CNL Health Care Properties, Inc., and serves
as Secretary of its subsidiaries. In addition, she serves as Secretary,
Treasurer and a director of CNL Health Care Corp., the advisor. to the company.
Ms. Rose also serves as Secretary and Treasurer of CNL Hospitality Properties,
Inc., a public, unlisted real estate investment trust, as Secretary, Treasurer
and a director of CNL Hospitality Corp., its Advisor, and as Secretary of the
subsidiaries of the company. Ms. Rose served as Secretary and Treasurer of
Commercial Net Lease Realty, Inc., a public real estate investment trust listed
on the New York Stock Exchange, from 1992 to February 1996, and as Secretary and
a director of CNL Realty Advisors, Inc., its advisor, from its inception in 1991
through 1997. She also served as Treasurer of CNL Realty Advisors, Inc. from
1991 through February 1996. Ms. Rose, a certified public accountant, has served
as Secretary of CNL Financial Group, Inc. (formerly CNL Group, Inc.) since 1987,
served as Controller from 1987 to 1993 and has served as Chief Financial Officer
since 1993. She also serves as Secretary of the subsidiaries of CNL Financial
Group, Inc. and holds various other offices in the subsidiaries. In addition,
she serves as Secretary for approximately 50 additional corporations affiliated
with CNL Financial Group, Inc. and its subsidiaries. Ms. Rose oversees the tax
and legal compliance for over 375 corporations, partnerships and joint ventures,
and the accounting and financial reporting for over 200 entities. 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.
Jeanne A. Wall, age 41, Ms. Wall served as Executive Vice President of
CNL American Properties Fund, Inc., a public, unlisted real estate investment
trust, from 1994 through August 1999, and as Executive Vice President of CNL
Fund Advisors, Inc., its advisor, from 1994 through August 1999, at which point
it merged with CNL American Properties Fund, Inc. Ms. Wall also serves as
Executive Vice President of CNL Health Care Properties, Inc. and CNL Health Care
Corp., the Advisor to the Company. Ms. Wall also serves as Executive Vice
President of CNL Hospitality Properties, Inc., a public, unlisted real estate
investment trust, and serves as Executive Vice President and a director of CNL
Hospitality Corp., its advisor. She also serves as a director for CNLBank. Ms.
Wall serves as Executive Vice President of CNL Financial Group, Inc. (formerly
CNL Group, Inc.). Ms. Wall has served as Chief Operating Officer of CNL
Investment Company and of CNL Securities Corp. since 1994 and has served as
Executive Vice President of CNL Investment Company since January 1991. In 1984,
Ms. Wall joined CNL Securities Corp. and in 1985, became Vice President. In
1987, she became a Senior Vice President and in July 1997, 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,
communications and investor services for programs offered through participating
brokers. Ms. Wall also served as Senior Vice President of CNL Institutional
Advisors Inc., a registered investment advisor, from 1990 to 1993. Ms. Wall
served as Vice President of Commercial Net Lease Realty, Inc., a public real
estate investment trust listed on the New York Stock Exchange, from 1992 through
1997, and served as Vice President of CNL Realty Advisors, Inc. from its
inception in 1991 through 1997. Ms. Wall currently serves as a trustee on the
Board of the Investment Program Association, is a member of the Corporate
Advisory Council for the International Association for Financial Planning and is
a member of IWF, International Women's Forum. In addition, she previously served
on the Direct Participation Program committee for the National Association of
Securities Dealers, Inc. Ms. Wall holds a B.A. in Business Administration from
Linfield College and is a registered principal of CNL Securities Corp.
Steven D. Shackelford, age 36, a certified public accountant, serves as
Senior Vice President, Chief Financial Officer, and Secretary of CNL American
Properties Fund, Inc. and CNL Fund Advisors, Inc. He served as Chief Financial
Officer of CNL American Properties Fund, Inc. from January 1997 and as Chief
Financial Officer of CNL Fund Advisors, Inc. since September 1996 through August
1999. From March 1995 to July 1996, Mr. Shackelford 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..
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 March 15, 2000, 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 March 15, 2000 the beneficial
ownership interests of the General Partners in the Registrant.
Title of Class Name of Partner Percent of Class
-------------- --------------- ----------------
General Partnership Interests James M. Seneff, Jr. 45%
Robert A. Bourne 45%
CNL Realty Corporation 10%
========
100%
========
Neither the General Partners, nor any of their affiliates, owns any
interest in the Registrant, except as noted above.
<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, 1999, 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>
<S> <C>
Amount Incurred
Type of Compensation For the Year
and Recipient Method of Computation Ended December 31, 1999
- ---------------------------------- -------------------------------------- ------------------------------
Reimbursement to affiliates for Operating expenses are reimbursed at Operating expenses incurred
operating expenses the lower of cost or 90 percent of on behalf of the
the prevailing rate at which Partnership: $203,582
comparable services could have been
obtained in the same geographic Accounting and
area. Affiliates of the General administra-tive services:
Partners from time to time incur $129,209
certain operating expenses on behalf
of the Partnership for which the
Partnership reimburses the
affiliates without interest.
Annual, subordinated manage- One percent of the sum of gross $-0-
ment fee to affiliates operating revenues from Properties
wholly owned by the Partnership plus the
Partnership's allocable share of gross
revenues of joint ventures in which the
Partnership is a co-venturer,
subordinated to certain minimum returns
to the Limited Partners. The management
fee will not exceed competitive fees for
comparable services. Due to the fact that
these fees are noncumulative, if the
Limited Partners have not received their
10% Preferred Return in any particular
year, no management fees will be due or
payable for such year.
<PAGE>
Amount Incurred
Type of Compensation For the Year
and Recipient Method of Computation Ended December 31, 1999
- --------------------------------- -------------------------------------- ------------------------------
Deferred, subordinated real A deferred, subordinated real estate $-0-
estate disposition fee payable disposition fee, payable upon sale
to affiliates 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, A deferred, subordinated share equal $-0-
subordinated share of to one percent of Partnership
Partnership net cash flow distributions of net cash flow,
subordinated to certain minimum
returns to the Limited Partners.
General Partners' deferred, A deferred, subordinated share equal $-0-
subordinated share of to five percent of Partnership
Partnership net sales proceeds distributions of such net sales
from a sale or sales not in proceeds, subordinated to certain
liquidation of the Partnership minimum returns to the Limited
Partners.
<PAGE>
Amount Incurred
Type of Compensation For the Year
And Recipient Method of Computation Ended December 31, 1999
- --------------------------------- -------------------------------------- ------------------------------
General Partners' share of Distributions of net sales proceeds $-0-
Partnership net sales proceeds from a sale or sales of
from a sale or sales in substantially all of the
liquidation of the Partnership Partnership's assets will be
distributed in the following order or
priority: (i) first, to pay all debts and
liabilities of the Partnership and to
establish reserves; (ii) second, to
Partners with positive capital account
balances, determined after the allocation
of net income, net loss, gain and loss,
in proportion to such balances, up to
amounts sufficient to reduce such
balances to zero; and (iii) thereafter,
95% to the Limited Partners and 5% to the
General Partners.
</TABLE>
<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 Certified Public Accountants
Balance Sheets at December 31, 1999 and 1998
Statements of Income for the years ended December 31, 1999,
1998, and 1997
Statements of Partners' Capital for the years ended December
31, 1999, 1998, and 1997
Statements of Cash Flows for the years ended December 31,
1999, 1998, and 1997
Notes to Financial Statements
2. Financial Statement Schedule
Schedule II -Valuation and Qualifying Accounts for the years
ended December 31, 1999, 1998 and 1997
Schedule III - Real Estate and Accumulated Depreciation at
December 31, 1999
Notes to Schedule III - Real Estate and Accumulated
Depreciation at December 31, 1999
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 (Included as Exhibit 10.1
to Form 10-K filed with the Securities and Exchange
Commission on March 17, 1998, and incorporated herein
by reference.)
10.2 Assignment of Management Agreement from CNL
Investment Company to CNL Income Fund Advisors, Inc.
(Included as Exhibit 10.2 to Form 10-K filed with the
Securities and Exchange Commission on March 30, 1995,
and incorporated herein by reference.)
<PAGE>
10.3 Assignment of Management Agreement from CNL Income
Fund Advisors, Inc. to CNL Fund Advisors, Inc.
(Included as Exhibit 10.3 to Form 10-K filed with the
Securities and Exchange Commission on April 1, 1996,
and incorporated herein by reference.)
27 Financial Data Schedule (Filed herewith.)
(b) The Registrant filed no reports on Form 8-K during the period October
1, 1999 through December 31, 1999.
<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 24th day of
March, 2000.
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.
Signature Title Date
--------- ----- ----
/s/ Robert A. Bourne President, Treasurer and Director March 24, 2000
Robert A. Bourne (Principal Financial and Accounting
Officer)
/s/ James M. Seneff, Jr. Chief Executive Officer and Director March 24, 2000
James M. Seneff, Jr. (Principal Executive Officer)
<PAGE>
CNL INCOME FUND X, LTD.
(A Florida Limited Partnership)
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
Years Ended December 31, 1999, 1998, and 1997
<TABLE>
<CAPTION>
<S> <C>
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
- ---------- ----------------- -------------- --------------- ---------------- ------------- ------------ ------------
1997 Allowance for
doubtful
accounts (a) $ 93,209 $ -- $ 192,212 (b) $ 5,083 (c) $ 24,889 $ 255,449
============== =============== ================ ============= ============ ============
1998 Allowance for
doubtful
accounts (a) $ 255,449 $ -- $ 290,844 (b) $ 38,727 (c) $ 1,335 $ 506,231
============== =============== ================ ============= ============ ============
1999 Allowance for
doubtful
accounts (a) $ 506,231 $ -- $ 138,445 (b) $ 482,523 (c) $ 38,029 $ 124,124
============== =============== ================ ============= ============ ============
</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.
<PAGE>
CNL INCOME FUND X, LTD.
(A Florida Limited Partnership)
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1999
<TABLE>
<CAPTION>
Costs Capitalized
Subsequent To
Initial Cost Acquisition
---------------------------------------- ---------------------------
Encum- Buildings and Improve- Carrying
brances Land Improvements ments Costs
--------------- --------------------- ----------------- -------------- ----------
<S> <C>
Properties the Partnership
has Invested in Under
Operating Leases:
Boston Market:
Homewood, Alabama (l) - $597,907 $679,400 - -
Burger King Restaurants:
Hendersonville, North Carolina - 222,632 568,573 - -
Irondequoit, New York - 383,359 554,084 - -
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 - 592,837 - 1,106,384 -
Austin, Texas - 711,354 - 1,124,040 -
Las Cruces, New Mexico - 580,655 920,521 - -
Freemont, Nebraska 203,166 1,054,051 - -
Hardee's Restaurants:
Pace, Florida - 174,850 - - -
Jacksonville, Florida - 326,972 - - -
Centerville, Tennnessee - 130,494 - - -
Jack in the Box Restaurants:
Desloge, Missouri - 276,701 - - -
San Antonio, Texas - 327,322 - - -
San Marcos, Texas - 427,386 - 592,943 -
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 (k) - 336,872 790,723 - -
Ft. Pierce, Florida - 487,752 - 567,923 -
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 - -
Shoney's Restaurants:
Greenville, North Carolina - 323,573 515,134 - -
North Richland Hills, Texas - 513,032 - 420,219 -
Pelham, Alabama 410,448 - 427,317 -
--------------------- ----------
----------------- --------------
$9,076,722 $5,723,371 $4,512,526 -
===================== ================= ============== ==========
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 an
Operating Lease:
Burger King Restaurant:
Ashland, New Hampshire - $293,478 $997,104 - -
===================== ================= ============== ==========
Property in Which the Partnership
has a 13% Interest as Tenants-
in-Common and has
Invested in Under an
Operating Lease:
Golden Corral Family
Steakhouse Restaurant:
Clinton, North Carolina - $138,382 $676,588 - -
===================== ================= ============== ==========
Property in Which the Parner-
ship has a 6.69% Interest
as Tenants-in-Common and
has Invested in Under an
Operating Lease:
Chevy's Fresh Mex
Miami, Florida - $976,357 $974,016 - -
===================== ================= ============== ==========
Property of Joint Venture
in Which the Partnership
has a 69.06% Interest and
has Invested in Under an
Operating Lease:
Burger King Restaurant:
Ocean Shores, Washington - $351,015 - - -
===================== ================= ============== ==========
Property of Joint Venture
in Which the Partnership
has a 52% Interest and
has Invested in Under an
Operating Lease:
IHOP Restaurant:
Peoria, Arizona - $466,182 - - -
===================== ================= ============== ==========
Properties the Partnership
has Invested in Under
Direct Financing Leases:
Burger King Restaurants:
Ashland Ohio - $190,695 $724,348 - -
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 - -
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 -
Pizza Hut Restaurants:
Glasgow, Montana - 57,482 266,726 - -
Sidney, Montana - - 291,238 - -
--------------------- ----------------- --------------
$921,652 $8,571,996 $702,845 -
===================== ================= ============== ----------
Property of Joint Venture in
Which the Partnership has
a 40.95% Interest and has Invested
in Under Direct Financing Lease:
Hardee's Restaurant:
Williston, Florida - $150,143 - $499,071 -
===================== ================= ============== ==========
Property of Joint Venture in
Which the Partnership has
a 69.06% Interest and has Invested
in Under Direct Financing Lease:
Burger King Restaurant:
Ocean Shores, Washington - - $810,902 - -
===================== ================= ============== ==========
Property of Joint Venture in
Which the Partnership has
a 52% Interest and has Invested
in Under Direct Financing Lease:
IHOP Restaurant:
Peoria, Arizona - - $1,121,633 - -
===================== ================= ============== ==========
Gross Amount at Which Life on Which
Carried at Close of Period (c) Depreciation in
- -------------------------------------------------------- Date Latest Income
Buildings and Accumulated of Con- Date Statement is
Land Improvements Total Depreciation struction Acquired Computed
- ------------------ ---------------- ----------------- --------------- --------- ------------- ----------------
$597,907 $679,400 $1,277,307 $40,184 1997 10/97 (b)
222,632 568,573 791,205 34,614 1986 11/91 (j)
383,359 554,084 937,443 33,732 1986 11/91 (j)
160,896 273,700 434,596 58,546 1992 12/91 (g)
285,842 (f) 285,842 - 1992 02/92 (d)
287,959 (f) 287,959 - 1992 03/92 (d)
592,837 1,106,384 1,699,221 287,458 1992 12/91 (b)
711,354 1,124,040 1,835,394 285,168 1992 12/91 (b)
580,655 920,521 1,501,176 234,796 1992 05/92 (b)
203,166 1,054,051 1,257,217 26,544 1998 03/99 (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)
276,701 (f) 276,701 - 1991 12/91 (d)
327,322 (f) 327,322 - 1992 02/92 (d)
427,386 592,943 1,020,329 16,394 1998 10/98 (b)
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)
336,872 790,723 1,127,595 25,708 1991 11/91 (i)
487,752 567,923 1,055,675 83,926 1992 01/92 (h)
99,879 224,614 324,493 57,743 1976 03/91 (b)
101,690 (f) 101,690 - 1985 03/91 (d)
71,989 161,211 233,200 41,444 1979 03/91 (b)
109,937 255,060 364,997 65,570 1985 03/91 (b)
323,573 515,134 838,707 140,051 1987 11/91 (b)
513,032 420,219 933,251 109,104 1992 12/91 (b)
410,448 427,317 837,765 113,912 1992 01/92 (b)
- ------------------ ---------------- ----------------- ---------------
$9,076,722 $10,235,897 $19,312,619 $1,654,894
================== ================ ================= ===============
$338,800 $650,109 $988,909 $168,138 1990 03/92 (b)
429,883 342,455 772,338 88,569 1990 03/92 (b)
350,932 773,129 1,124,061 199,954 1989 03/92 (b)
514,815 838,536 1,353,351 216,871 1987 03/92 (b)
203,095 719,226 922,321 186,013 1988 03/92 (b)
406,259 998,023 1,404,282 258,118 1987 03/92 (b)
- ------------------ ---------------- ----------------- ---------------
$2,243,784 $4,321,478 $6,565,262 $1,117,663
================== ================ ================= ===============
$293,478 $997,104 $1,290,582 $241,035 1987 10/92 (b)
================== ================ ================= ===============
$138,382 $676,588 $814,970 $88,827 1996 01/96 (b)
================== ================ ================= ===============
$976,357 $974,016 $1,950,373 $65,023 1995 12/97 (b)
================== ================ ================= ===============
$351,015 (f) $351,015 - 1998 01/99 (d)
================== ================ ================= ===============
$466,182 (f) $466,182 - 1998 11/99 (d)
================== ================ ================= ===============
(f) (f) (f) - 1988 11/91 (e)
(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) - 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) (f) - 1985 03/91 (e)
- (f) (f) - 1985 03/91 (d)
(f) (f) (f) - 1993 12/92 (e)
(f) (f) (f) - 1998 01/99 (d)
(f) (f) (f) - 1998 11/99 (d)
</TABLE>
<PAGE>
CNL INCOME FUND X, LTD.
(A Florida Limited Partnership)
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED
DEPRECIATION
December 31, 1999
(a) Transactions in real estate and accumulated depreciation during 1999,
1998, and 1997, are summarized as follows:
<TABLE>
<CAPTION>
<S> <C>
Accumulated
Cost Depreciation
--------------- ----------------
Properties the Partnership has
Invested in Under Operating Leases:
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
Acquisitions 1,020,329 --
Dispositions (833,323 ) (43,281 )
Reclassify as operating lease 1,913,380 --
Depreciation expense (k)(l) -- 259,866
--------------- ----------------
Balance, December 31, 1998 18,923,532 1,329,832
Acquisition 1,257,217 --
Deposition (868,130 ) --
Depreciation expense -- 325,062
--------------- ----------------
Balance, December, 31 1999 $19,312,619 $1,654,894
=============== ================
Properties of Joint Venture in Which
the Partnership has a 50% Interest
and has Invested in Under Operating
Leases:
Balance, December 31, 1996 $ 6,565,262 $ 685,517
Depreciation expense -- 144,047
--------------- ----------------
Balance, December 31, 1997 6,565,262 829,564
Depreciation expense -- 144,050
--------------- ----------------
Balance, December 31, 1998 6,565,262 973,614
Depreciation expense -- 144,049
--------------- ----------------
Balance, December 31, 1999 $ 6,565,262 $ 1,117,663
=============== ================
</TABLE>
<PAGE>
CNL INCOME FUND X, LTD.
(A Florida Limited Partnership)
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED
DEPRECIATION - CONTINUED
December 31, 1999
<TABLE>
<CAPTION>
<S> <C>
Accumulated
Cost Depreciation
----------------- ----------------
Property of Joint Venture in Which the
Partnership has a 10.51% Interest
and has Invested in Under
Operating Leases:
Balance, December 31, 1996 $ 1,290,582 $ 141,325
Depreciation expense -- 33,147
----------------- ----------------
Balance, December 31, 1997 1,290,582 174,472
Depreciation expense -- 33,327
----------------- ----------------
Balance, December 31, 1998 1,290,582 207,799
Depreciation expense -- 33,236
----------------- ----------------
Balance, December 31, 1999 $ 1,290,582 $ 241,035
================= ================
Property in Which the Partnership has
a 13% Interest as Tenants-in-Common
and hasInvested in Under an Operating
Lease:
Balance, December 31, 1996 $ 814,970 $ 21,168
Depreciation expense -- 22,553
----------------- ----------------
Balance, December 31, 1997 814,970 43,721
Depreciation expense -- 22,553
----------------- ----------------
Balance, December 31, 1998 814,970 66,274
Depreciation expense -- 22,553
----------------- ----------------
Balance, December 31, 1999 $ 814,970 $ 88,827
================= ================
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, 1997 $ 1,950,373 $ 89
Depreciation expense -- 32,467
----------------- ----------------
Balance, December 31, 1998 1,950,373 32,556
Depreciation expense -- 32,467
----------------- ----------------
Balance, December 31, 1999 $ 1,950,373 $ 65,023
================= ================
<PAGE>
CNL INCOME FUND X, LTD.
(A Florida Limited Partnership)
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED
DEPRECIATION - CONTINUED
December 31, 1999
Accumulated
Cost Depreciation
---------------- -----------------
Property of Joint Venture in Which the
Partnership has a 69.06% Interest
and has Invested in Under Operating
Leases:
Balance, December 31, 1998 $ -- $ --
Acquisition 351,015 --
Depreciation expense (d) -- --
---------------- -----------------
Balance, December 31, 1999 $ 351,015 $ --
================ =================
Property of Joint Venture in Which the
Partnership has a 52% Interest and
has Invested in Under Operating
Leases:
Balance, December 31, 1998 $ -- $ --
Acquisition 466,182 --
Depreciation (d) -- --
---------------- -----------------
Balance, December 31, 1999 $ 466,182 $ --
================ =================
</TABLE>
(b) Depreciation expense is computed for buildings and improvements based
upon estimated lives of 30 years.
(c) As of December 31, 1999, 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
$29,643,748 and $14,018,133, respectively. All of the leases are
treated as operating leases for federal income tax purposes.
(d) For financial reporting purposes, the portion of the lease relating to
the building has been recorded as a direct financing lease. The cost of
the building has been included in net investment in direct financing
leases; therefore, depreciation is not applicable.
(e) For financial reporting purposes, the lease for the land and building
has been recorded as a direct financing lease. The cost of the land and
building has been included in net investment in direct financing
leases; therefore, depreciation is not applicable.
(f) For financial reporting purposes, certain components of the lease
relating to land and building have been recorded as a direct financing
lease. Accordingly, costs relating to these components of this lease
are not shown.
(g) 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 and
depreciated over its remaining estimated life of approximately 28
years.
<PAGE>
CNL INCOME FUND X, LTD.
(A Florida Limited Partnership)
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED
DEPRECIATION - CONTINUED
December 31, 1999
(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 and
depreciated over its remaining life of approximately 26 years.
(i) Effective October 1, 1998, the lease for this Property was terminated,
resulting in the reclassification of the building portion of the lease
to an operating lease. The building was recorded at net book value and
depreciated over its remaining useful life of approximately 23 years.
(j) Effective August 1, 1998, the lease for this Property was amended,
resulting in the reclassification of the building portion of the lease
as an operating lease. The building was recorded at net book value and
depreciated over its remaining estimate life of approximately 23 years.
(k) For financial reporting purposes the undepreciated cost of the Property
in Lancaster, New York, was reduced to its estimated net realizable
value to an impairment in value. The tenant of this Property filed for
bankruptcy and rejected the lease relating to this Property. The
Partnership recognized the impairment by recording an allowance for
loss on building in the amount of $387,202 at December 31, 1998. The
impairment at December 31, 1998 represents the difference between the
Property's carrying value and the net realizable value of the Property
at December 31, 1999 and 1998, respectively. The cost of the Property
presented on this schedule is the gross amount at which the Property
was carried at December 31, 1999, excluding the allowance for loss on
building.
(l) During 1998, the tenant of the Property in Homewood, Alabama filed for
bankruptcy and rejected the lease relating to the Property. For
financial reporting purposes, the undepreciated cost of the property
was reduced down to its estimated net realizable value due to an
impairment in value of $521,316 during 1998. The impairment represented
the difference between the Property's carrying value and the estimated
net realizable value of the Property at December 31, 1998. In January
2000, the Partnership entered into a new lease with a new tenant. In
connection therewith, the Partnership agreed to remove the old building
so the new tenant can construct a new building to operate a Kinko's
Copies store. Therefore, at December 31, 1999, the Partnership recorded
an additional impairment of $357,760, representing the undepreciated
cost of the old building, for financial reporting purposes. The cost of
the property presented on this schedule is the gross amount at which
the Property was carried at December 31, 1999, excluding the allowance
for loss on land and building.
<PAGE>
EXHIBITS
<PAGE>
EXHIBIT INDEX
Exhibit Number
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 (Included as Exhibit 10.1 to Form 10-K filed with the
Securities and Exchange Commission on March 17, 1998, and incorporated
herein by reference.)
10.2 Assignment of Management Agreement from CNL Investment Company to CNL
Income Fund Advisors, Inc. (Included as Exhibit 10.2 to Form 10-K filed
with the Securities and Exchange Commission on March 30, 1995, and
incorporated herein by reference.)
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.)
<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, 1999, and its statement of
income for the twelve months then ended and is qualified in its entirety by
reference to the Form 10-K of CNL Income Fund X, Ltd. for the twelve months
ended December 31, 1999.
</LEGEND>
<S> <C>
<PERIOD-TYPE> year
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 967,094
<SECURITIES> 0
<RECEIVABLES> 223,866
<ALLOWANCES> 122,914
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 18,046,341
<DEPRECIATION> 1,654,894
<TOTAL-ASSETS> 33,248,120
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 32,022,294
<TOTAL-LIABILITY-AND-EQUITY> 33,248,120
<SALES> 0
<TOTAL-REVENUES> 3,045,355
<CGS> 0
<TOTAL-COSTS> 822,844
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,269,401
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,269,401
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,269,401
<EPS-BASIC> 0
<EPS-DILUTED> 0
<FN>
<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>
