FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
--------------------------
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number
0-21560
----------------------
CNL Income Fund XI, Ltd.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Florida 59-3078854
- ----------------------------- -------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organiza- Identification No.)
tion)
400 E. South Street, #500
Orlando, Florida 32801
- ---------------------------- -------------------
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number -------------------
(including area code) (407) 422-1574
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
<PAGE>
CONTENTS
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Part I Page
----
Item 1. Financial Statements:
Condensed Balance Sheets 1
Condensed Statements of Income 2
Condensed Statements of Partners' Capital 3
Condensed Statements of Cash Flows 4
Notes to Condensed Financial Statements 5-7
Item 2. Management's Discussion and Analysis
of Financial Condition and
Results of Operations 8-11
Part II
Other Information 12
<PAGE>
CNL INCOME FUND XI, LTD.
(A Florida Limited Partnership)
CONDENSED BALANCE SHEETS
March 31, December 31,
ASSETS 1997 1996
----------- ------------
Land and buildings on operating
leases, less accumulated
depreciation of $2,111,134 and
$1,996,469 $23,905,012 $24,019,677
Net investment in direct financing
leases 6,669,542 6,686,367
Investment in joint ventures 2,571,190 1,537,430
Cash and cash equivalents 1,292,639 1,225,860
Restricted cash - 1,047,822
Receivables, less allowance for
doubtful accounts of $13,529 and
$14,746 21,695 92,546
Prepaid expenses 7,906 13,227
Organization costs, less accumulated
amortization of $9,911 and $9,411 89 589
Accrued rental income 1,331,262 1,257,503
Other assets 122,024 122,024
----------- -----------
$35,921,359 $36,003,045
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 15,159 $ 2,202
Escrowed real estate taxes payable 18,580 21,573
Distributions payable 875,006 915,006
Due to related parties 5,062 2,121
Rents paid in advance and deposits 114,717 61,196
----------- -----------
Total liabilities 1,028,524 1,002,098
Minority interests 486,659 487,770
Partners' capital 34,406,176 34,513,177
----------- -----------
$35,921,359 $36,003,045
=========== ===========
See accompanying notes to condensed financial statements.
1
<PAGE>
CNL INCOME FUND XI, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF INCOME
Quarter Ended
March 31,
1997 1996
---------- ----------
Revenues:
Rental income from operating leases $ 675,694 $ 692,846
Earned income from direct financing
leases 211,817 211,661
Contingent rental income 24,643 22,978
Interest and other income 15,455 17,224
---------- ----------
927,609 944,709
---------- ----------
Expenses:
General operating and administrative 33,860 42,373
Professional services 6,459 11,304
Management fees to related parties 9,999 8,824
State and other taxes 23,723 19,606
Depreciation and amortization 115,165 120,306
---------- ----------
189,206 202,413
---------- ----------
Income Before Minority Interests in
Income of Consolidated Joint
Ventures and Equity in Earnings of
Unconsolidated Joint Ventures 738,403 742,296
Minority Interests in Income of
Consolidated Joint Ventures (17,202) (17,166)
Equity in Earnings of Unconsolidated
Joint Ventures 46,804 26,074
---------- ----------
Net Income $ 768,005 $ 751,204
========== ==========
Allocation of Net Income:
General partners $ 7,680 $ 7,512
Limited partners 760,325 743,692
---------- ----------
$ 768,005 $ 751,204
========== ==========
Net Income Per Limited Partner Unit $ 0.19 $ 0.19
========== ==========
Weighted Average Number of Limited
Partner Units Outstanding 4,000,000 4,000,000
========== ==========
See accompanying notes to condensed financial statements.
2
<PAGE>
CNL INCOME FUND XI, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF PARTNERS' CAPITAL
Quarter Ended Year Ended
March 31, December 31,
1997 1996
------------- ------------
General partners:
Beginning balance $ 143,281 $ 109,925
Net income 7,680 33,356
----------- -----------
150,961 143,281
----------- -----------
Limited partners:
Beginning balance 34,369,896 34,478,571
Net income 760,325 3,431,349
Distributions ($0.22 and $0.89
per limited partner unit,
respectively) (875,006) (3,540,024)
----------- -----------
34,255,215 34,369,896
----------- -----------
Total partners' capital $34,406,176 $34,513,177
=========== ===========
See accompanying notes to condensed financial statements.
3
<PAGE>
CNL INCOME FUND XI, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF CASH FLOWS
Quarter Ended
March 31,
1997 1996
----------- -----------
Increase (Decrease) in Cash and
Cash Equivalents:
Net Cash Provided by Operating
Activities $ 1,000,098 $ 858,373
----------- -----------
Cash Flows from Investing
Activities:
Investment in joint ventures (1,044,750) -
Decrease in restricted cash 1,044,750 -
----------- -----------
Net cash provided by
investing activities - -
----------- -----------
Cash Flows from Financing
Activities:
Distributions to limited
partners (915,006) (915,006)
Distributions to holders
of minority interests (18,313) (14,643)
---------- ----------
Net cash used in
financing activities (933,319) (929,649)
---------- ----------
Net Increase (Decrease) in Cash and
Cash Equivalents 66,779 (71,276)
Cash and Cash Equivalents at
Beginning of Quarter 1,225,860 1,222,888
---------- ----------
Cash and Cash Equivalents at
End of Quarter $1,292,639 $1,151,612
========== ==========
Supplemental Schedule of Non-Cash
Financing Activities:
Distributions declared and
unpaid at end of quarter $ 875,006 $ 875,006
========== ==========
See accompanying notes to condensed financial statements.
4
<PAGE>
CNL INCOME FUND XI, LTD.
(A Florida Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS
Quarters Ended March 31, 1997 and 1996
1. Basis of Presentation:
The accompanying unaudited condensed financial statements have been
prepared in accordance with the instructions to Form 10-Q and do not
include all of the information and note disclosures required by
generally accepted accounting principles. The financial statements
reflect all adjustments, consisting of normal recurring adjustments,
which are, in the opinion of management, necessary to a fair statement
of the results for the interim periods presented. Operating results for
the quarter ended March 31, 1997, may not be indicative of the results
that may be expected for the year ending December 31, 1997. Amounts as
of December 31, 1996, included in the financial statements, have been
derived from audited financial statements as of that date.
These unaudited financial statements should be read in conjunction with
the financial statements and notes thereto included in Form 10-K of CNL
Income Fund XI, Ltd. (the "Partnership") for the year ended December
31, 1996.
The Partnership accounts for its 85 percent interest in Denver Joint
Venture and its 77.33% interest in CNL/Airport Joint Venture using the
consolidation method. Minority interests represent the minority joint
venture partners' proportionate share of equity in the Partnership's
consolidated joint ventures. All significant intercompany accounts and
transactions have been eliminated.
2. Investment in Joint Ventures:
In January 1997, the Partnership acquired an approximate 73 percent
interest in a Black-eyed Pea property in Corpus Christi, Texas, as
tenants-in-common with an affiliate of the general partners. The
Partnership accounts for its investment in this property using the
equity method since the Partnership shares control with an affiliate,
and amounts relating to its investment are included in investment in
joint ventures.
5
<PAGE>
CNL INCOME FUND XI, LTD.
(A Florida Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS - CONTINUED
Quarters Ended March 31, 1997 and 1996
2. Investment in Joint Ventures:
The following presents the combined, condensed financial information
for all of the Partnership's investments in joint ventures at:
March 31, December 31,
1997 1996
--------- ------------
Land and buildings on
operating leases,
less accumulated
depreciation $3,574,376 $2,152,524
Cash 9,527 722
Prepaid expenses 173 6,606
Accrued rental income 68,305 59,917
Liabilities 10,727 343
Partners' capital 3,641,654 2,219,426
Revenues 93,619 239,454
Net income 65,311 169,376
The Partnership recognized income totalling $46,804 and $26,074 for the
quarters ended March 31, 1997 and 1996, respectively, from these joint
ventures.
3. Concentration of Credit Risk:
The following schedule presents total rental and earned income from
individual lessees, each representing more than ten percent of the
Partnership's total rental and earned income (including the
Partnership's share of rental and earned income from the unconsolidated
joint ventures), for the quarters ended March 31:
1997 1996
-------- --------
Flagstar Enterprises, Inc.,
Denny's, Inc. and Quincy's
Restaurants, Inc. $202,051 $192,635
Foodmaker, Inc. 192,008 192,008
Burger King Corporation and
BK Acquisition, Inc. 178,084 178,084
Golden Corral Corporation 119,736 123,418
DenAmerica Corp. 114,612 92,169
6
<PAGE>
CNL INCOME FUND XI, LTD.
(A Florida Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS - CONTINUED
Quarters Ended March 31, 1997 and 1996
3. 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 the unconsolidated joint ventures), for the quarters ended March
31:
1997 1996
-------- --------
Burger King $273,691 $296,122
Jack in the Box 192,008 192,008
Denny's 205,915 202,698
Golden Corral Family
Steakhouse Restaurants 119,736 123,418
Although the Partnership's properties are geographically diverse
throughout the United States and the Partnership's lessees operate a
variety of restaurant concepts, default by any one of these lessees or
restaurant chains could significantly impact the results of operations
of the Partnership. However, the general partners believe that the risk
of such a default is reduced due to the essential or important nature
of these properties for the on-going operations of the lessees.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
CNL Income Fund XI, Ltd. (the "Partnership") is a Florida limited
partnership that was organized on August 20, 1991, to acquire for cash, either
directly or through joint venture arrangements, both newly constructed and
existing restaurants, 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 leases
are triple-net leases, with the lessees responsible for all repairs and
maintenance, property taxes, insurance and utilities. As of March 31, 1997, the
Partnership owned 39 Properties, including four Properties owned by joint
ventures in which the Partnership is a co-venturer and one Property owned with
an affiliate as tenants-in-common.
Liquidity and Capital Resources
The Partnership's primary source of capital for the quarters ended
March 31, 1997 and 1996, was cash from operations (which includes cash received
from tenants, distributions from joint ventures, and interest and other income
received, less cash paid for expenses). Cash from operations was $1,000,098 and
$858,373 for the quarters ended March 31, 1997 and 1996, respectively. The
increase in cash from operations for the quarter ended March 31, 1997, is
primarily a result of changes in income and expenses as discussed in "Results of
Operations" below, and changes in the Partnership's working capital.
In January 1997, the Partnership reinvested the net sales proceeds it
received from the sale, in November 1996, of the Property in Philadelphia,
Pennsylvania, in a Black-eyed Pea Property located in Corpus Christi, Texas,
with an affiliate of the general partners as tenants-in-common. In connection
therewith, the Partnership and the affiliate entered into an agreement whereby
each co-venturer will share in the profits and losses of the Property in
proportion to its applicable percentage interest. As of March 31, 1997, the
Partnership owned an approximate 73 percent interest in this Property.
Currently, rental income from the Partnership's Properties is invested
in money market accounts or other short-term, highly liquid investments pending
the Partnership's use of such funds to pay Partnership expenses or to make
distributions to the partners. At March 31, 1997, the Partnership had $1,292,639
invested in such short-term investments as compared to $1,225,860 at December
31, 1996. The funds remaining at March 31, 1997, after payment of distributions
and other liabilities, will be used to meet the Partnership's working capital
and other needs.
8
<PAGE>
Liquidity and Capital Resources - Continued
Total liabilities of the Partnership, including distributions payable,
increased to $1,028,524 at March 31, 1997, from $1,002,098 at December 31, 1996.
The general partners believe that the Partnership has sufficient cash on hand to
meet its current working capital needs.
Based primarily on cash from operations, the Partnership declared
distributions to the limited partners of $875,006 for each of the quarters ended
March 31, 1997 and 1996. This represents distributions for each applicable
quarter of $0.22 per unit. No distributions were made to the general partners
for the quarters ended March 31, 1997 and 1996. No amounts distributed or to be
distributed to the limited partners for the quarters ended March 31, 1997 and
1996, are required to be or have been treated by the Partnership as a return of
capital for purposes of calculating the limited partners' return on their
adjusted capital contributions. The Partnership intends to continue to make
distributions of cash available for distribution to the limited partners on a
quarterly basis.
The Partnership's investment strategy of acquiring Properties for cash
and leasing them under triple-net leases to operators who meet specified
financial standards minimizes the Partnership's operating expenses. The general
partners believe that the leases will continue to generate cash flow in excess
of operating expenses.
The general partners have the right, but not the obligation, to make
additional capital contributions if they deem it appropriate in connection with
the operations of the Partnership.
Results of Operations
During the quarter ended March 31, 1996, the Partnership and its
consolidated joint ventures, Denver Joint Venture and CNL/Airport Joint Venture,
owned and leased 37 wholly owned Properties and during the quarter ended March
31, 1997, the Partnership and its consolidated joint ventures owned and leased
36 wholly owned Properties to operators of fast-food and family-style restaurant
chains. In connection therewith, during the quarters ended March 31, 1997 and
1996, the Partnership, Denver Joint Venture and CNL/Airport Joint Venture earned
$887,511 and $904,507, respectively, in rental income from operating leases and
earned income from direct financing leases. The decrease in rental and earned
income during the quarter ended March 31, 1997, as compared to the quarter ended
March 31, 1996, is primarily attributable to a decrease of approximately $18,000
as a result of the sale of the
9
<PAGE>
Results of Operations - Continued
Property in Philadelphia, Pennsylvania, in November 1996. In January 1997, the
Partnership reinvested the net sales proceeds in a Property in Corpus Christi,
Texas, with an affiliate of the general partners, as discussed above in
"Liquidity and Capital Resources."
During the quarters ended March 31, 1997 and 1996, the Partnership
earned $24,643 and $22,978, respectively, in contingent rental income.
In addition, for the quarters ended March 31, 1997 and 1996, the
Partnership owned and leased two Properties indirectly through other joint
venture arrangements and during the quarter ended March 31, 1997, the
Partnership owned and leased one Property with an affiliate as
tenants-in-common. In connection therewith, during the quarters ended March 31,
1997 and 1996, the Partnership earned $46,804 and $26,074, respectively,
attributable to net income earned by unconsolidated joint ventures. The increase
in net income earned by joint ventures during the quarter ended March 31, 1997,
is primarily due to the fact that in January 1997, the Partnership reinvested
the net sales proceeds it received from the sale, in November 1996, of the
Property in Philadelphia, Pennsylvania, in a Black-eyed Pea in Corpus Christi,
Texas, with an affiliate of the general partners as tenants-in-common.
During the quarter ended March 31, 1997, five of the Partnership's
lessees (or groups of affiliated lessees), (i) Flagstar Enterprises, Inc.,
Denny's Inc., and Quincy's Restaurants, Inc. (which are affiliated entities
under common control of Flagstar Corporation) (hereinafter referred to as
Flagstar Corporation), (ii) Foodmaker, Inc., (iii) Burger King Corporation and
BK Acquisition, Inc. (which are affiliated entities under common control)
(hereinafter referred to as Burger King Corp.) , (iv) Golden Corral Corporation
and (v) DenAmerica Corp., each contributed more than ten percent of the
Partnership's total rental income (including the Partnership's share of rental
income from four Properties owned by joint ventures in which the Partnership is
a co-venturer and one Property owned with an affiliate as tenants-in-common). As
of March 31, 1997, Flagstar Corporation was the lessee under leases relating to
nine restaurants, Foodmaker, Inc. was the lessee under leases relating to seven
restaurants, Burger King Corp. was the lessee under leases relating to seven
restaurants, Golden Corral Corporation was the lessee under leases relating to
three restaurants and DenAmerica Corp. was the lessee under leases relating to
four restaurants and one restaurant owned with an affiliate as
tenants-in-common. It is anticipated that, based on the minimum rental payments
required by the leases, these five lessees or groups of affiliated lessees each
will continue to contribute more than ten percent of the Partnership's total
rental income during the remainder of 1997 and subsequent years. In addition,
during the quarter ended March 31, 1997, four restaurant chains, Burger King,
Jack in the Box, Denny's and Golden Corral, each accounted for more than ten
percent of the Partnership's total
10
<PAGE>
Results of Operations - Continued
rental income (including the Partnership's share of the rental income from four
Properties owned by joint ventures in which the Partnership is a co-venturer and
one Property owned with an affiliate as tenants-in-common). During the remainder
of 1997 and subsequent years, it is anticipated that these four restaurant
chains each will continue to account for more than ten percent of the total
rental income to which the Partnership is entitled under the terms of its
leases. Any failure of these lessees or restaurant chains could materially
affect the Partnership's income.
Operating expenses, including depreciation and amortization expense,
were $189,206 and $202,413 for the quarters ended March 31, 1997 and 1996,
respectively. The decrease in operating expenses during the quarter ended March
31, 1997, as compared to the quarter ended March 31, 1996, is primarily
attributable to a decrease in accounting and administrative expenses associated
with operating the Partnership and its Properties and a decrease in professional
services as a result of the Partnership incurring the cost of the 1996 appraisal
updates obtained to prepare an annual statement of unit valuation to qualified
plans in accordance with the partnership agreement during the quarter ended
December 31, 1996. The Partnership incurred the cost of the 1995 appraisal
updates during the quarter ended March 31, 1996.
11
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings. Inapplicable.
Item 2. Changes in Securities. Inapplicable.
Item 3. Defaults upon Senior Securities. Inapplicable.
Item 4. Submission of Matters to a Vote of Security Holders.
Inapplicable.
Item 5. Other Information. Inapplicable.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits - None.
(b) No reports on Form 8-K were filed during the
quarter ended March 31, 1997.
12
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
DATED this 9th day of May, 1997.
CNL INCOME FUND XI, LTD.
By: CNL REALTY CORPORATION
General Partner
By: /s/ James M. Seneff, Jr.
------------------------
JAMES M. SENEFF, JR.
Chief Executive Officer
(Principal Executive Officer)
By: /s/ Robert A. Bourne
--------------------
ROBERT A. BOURNE
President and Treasurer
(Principal Financial and
Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
the balance sheet of CNL Income Fund XI, Ltd. at March 31, 1997, and
its statement of income for the three months then ended and is qualified
in its entirety by reference to the Form 10-Q of CNL Income Fund XI, Ltd.
for the three months ended March 31, 1997.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 1,292,639
<SECURITIES> 0
<RECEIVABLES> 35,224
<ALLOWANCES> 13,529
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 26,016,146
<DEPRECIATION> 2,111,134
<TOTAL-ASSETS> 35,921,359
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 34,406,176
<TOTAL-LIABILITY-AND-EQUITY> 35,921,359
<SALES> 0
<TOTAL-REVENUES> 927,609
<CGS> 0
<TOTAL-COSTS> 189,206
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 768,005
<INCOME-TAX> 0
<INCOME-CONTINUING> 768,005
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 768,005
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>Due to the nature of its industry, CNL Income Fund XI, Ltd. has
an unclassified balance sheet; therefore, no values are shown above
for current assets and current liabilities.
</FN>
</TABLE>
