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, 1998
--------------------------
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
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
Item 2. Management's Discussion and Analysis
of Financial Condition and
Results of Operations 6-8
Part II
Other Information 9
<PAGE>
CNL INCOME FUND XI, LTD.
(A Florida Limited Partnership)
CONDENSED BALANCE SHEETS
March 31, December 31,
ASSETS 1998 1997
----------- -----------
Land and buildings on operating
leases, less accumulated
depreciation of $2,569,794 and
$2,455,129 $23,446,352 $23,561,017
Net investment in direct financing
leases 6,588,334 6,611,661
Investment in joint ventures 2,541,028 2,567,786
Cash and cash equivalents 1,403,251 1,272,386
Receivables 47,517 119,575
Prepaid expenses 18,066 13,363
Accrued rental income 1,549,184 1,517,726
Other assets 122,024 122,024
----------- -----------
$35,715,756 $35,785,538
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 11,381 $ 6,508
Escrowed real estate taxes payable 20,033 19,410
Distributions payable 915,006 875,006
Due to related parties 5,155 6,648
Rents paid in advance and deposits 115,706 68,333
----------- -----------
Total liabilities 1,067,281 975,905
Minority interests 499,293 501,401
Partners' capital 34,149,182 34,308,232
----------- -----------
$35,715,756 $35,785,538
=========== ===========
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,
1998 1997
---------- -------
Revenues:
Rental income from operating leases $ 675,491 $ 675,694
Earned income from direct financing
leases 207,060 211,817
Contingent rental income 19,768 24,643
Interest and other income 12,405 15,455
---------- ----------
914,724 927,609
---------- ----------
Expenses:
General operating and administrative 29,458 33,860
Professional services 4,952 6,459
Management fees to related parties 9,342 9,999
State and other taxes 23,334 23,723
Depreciation and amortization 114,665 115,165
---------- ----------
181,751 189,206
---------- ----------
Income Before Minority Interests in
Income of Consolidated Joint
Ventures and Equity in Earnings of
Unconsolidated Joint Ventures 732,973 738,403
Minority Interests in Income of
Consolidated Joint Ventures (17,018) (17,202)
Equity in Earnings of Unconsolidated
Joint Ventures 40,001 46,804
---------- ----------
Net Income $ 755,956 $ 768,005
========== ==========
Allocation of Net Income:
General partners $ 7,560 $ 7,680
Limited partners 748,396 760,325
---------- ----------
$ 755,956 $ 768,005
========== ==========
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,
1998 1997
------------- ------------
General partners:
Beginning balance $ 176,232 $ 143,281
Net income 7,560 32,951
----------- -----------
183,792 176,232
----------- -----------
Limited partners:
Beginning balance 34,132,000 34,369,896
Net income 748,396 3,262,128
Distributions ($0.23 and $0.88
per limited partner unit,
respectively) (915,006) (3,500,024)
----------- -----------
33,965,390 34,132,000
----------- -----------
Total partners' capital $34,149,182 $34,308,232
=========== ===========
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,
1998 1997
----------- -------
Increase (Decrease) in Cash and
Cash Equivalents:
Net Cash Provided by Operating
Activities $ 1,024,997 $ 1,000,098
----------- -----------
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 (875,006) (915,006)
Distributions to holders
of minority interests (19,126) (18,313)
----------- -----------
Net cash used in
financing activities (894,132) (933,319)
----------- -----------
Net Increase in Cash and Cash
Equivalents 130,865 66,779
Cash and Cash Equivalents at
Beginning of Quarter 1,272,386 1,225,860
----------- -----------
Cash and Cash Equivalents at
End of Quarter $ 1,403,251 $ 1,292,639
=========== ===========
Supplemental Schedule of Non-Cash
Financing Activities:
Distributions declared and
unpaid at end of quarter $ 915,006 $ 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, 1998 and 1997
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, 1998, may not be indicative of the results
that may be expected for the year ending December 31, 1998. Amounts as
of December 31, 1997, 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, 1997.
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. Commitment:
During 1996, the Partnership entered into an agreement with an
unrelated third party to sell the Burger King property in Nashua, New
Hampshire. The general partners believe that the anticipated sales
price will exceed the Partnership's cost attributable to the property;
however, as of April 30, 1998, the sale had not occurred.
5
<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, 1998, 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, 1998 and 1997, 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 $1,024,997 and
$1,000,098 for the quarters ended March 31, 1998 and 1997, respectively. The
increase in cash from operations for the quarter ended March 31, 1998, is
primarily a result of changes in the Partnership's working capital.
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, 1998, the Partnership had $1,403,251
invested in such short-term investments, as compared to $1,272,386 at December
31, 1997. The funds remaining at March 31, 1998, after payment of distributions
and other liabilities, will be used to meet the Partnership's working capital
and other needs.
Total liabilities of the Partnership, including distributions payable,
increased to $1,067,281 at March 31, 1998, from $975,905 at December 31, 1997,
partially as a result of the Partnership's accruing a special distribution of
accumulated, excess operating reserves payable to the limited partners of
$40,000 at March 31, 1998. The increase was also partially a result of an
increase in rents paid in advance at March 31, 1998. The general partners
believe that the Partnership has sufficient cash on hand to meet its current
working capital needs.
During 1996, the Partnership entered into an agreement with an
unrelated third party to sell the Burger King Property in Nashua, New Hampshire.
The general partners believe that the anticipated sales price will exceed the
Partnership's cost attributable to the Property; however, as of April 30, 1998,
the sale had not occurred.
6
<PAGE>
Liquidity and Capital Resources - Continued
Based on cash from operations, and for the quarter ended March 31,
1998, accumulated excess operating reserves, the Partnership declared
distributions to the limited partners of $915,006 and $875,006 for the quarters
ended March 31, 1998 and 1997, respectively. This represents distributions of
$0.23 and $0.22 per unit. No distributions were made to the general partners for
the quarters ended March 31, 1998 and 1997. No amounts distributed to the
limited partners for the quarters ended March 31, 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.
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 quarters ended March 31, 1998 and 1997, the Partnership and
its consolidated joint ventures, Denver Joint Venture and CNL/Airport Joint
Venture, 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, 1998 and 1997, the Partnership, Denver Joint Venture and
CNL/Airport Joint Venture earned $882,551 and $887,511, respectively, in rental
income from operating leases and earned income from direct financing leases. In
addition, during the quarters ended March 31, 1998 and 1997, the Partnership
earned $19,768 and $24,643, respectively, in contingent rental income.
In addition, for the quarters ended March 31, 1998 and 1997, the
Partnership owned and leased two Properties indirectly through other joint
venture arrangements and owned and leased one Property with an affiliate as
tenants-in-common. In connection therewith, during the quarters ended March 31,
1998 and 1997, the Partnership earned $40,001 and $46,804, respectively,
attributable to net income earned by unconsolidated joint ventures. Net income
earned by joint ventures decreased during the quarter ended March 31, 1998, as
compared to the quarter ended March 31, 1997, due to Ashland Joint Venture
adjusting estimated contingent rental amounts accrued at December 31, 1997, to
actual amounts during the quarter ended March 31, 1998.
7
<PAGE>
Results of Operations - Continued
Operating expenses, including depreciation and amortization expense,
were $181,751 and $189,206 for the quarters ended March 31, 1998 and 1997,
respectively.
8
<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, 1998.
9
<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 8th day of May, 1998.
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, 1998, and its statement of income
for the three months then ended and is qualified in its entirety by reference to
the Form 10Q of CNL Income Fund XI, Ltd. for the three months ended March 31,
1998.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 1,403,251
<SECURITIES> 0
<RECEIVABLES> 47,517
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 26,016,146
<DEPRECIATION> 2,569,794
<TOTAL-ASSETS> 35,715,756
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 34,149,182
<TOTAL-LIABILITY-AND-EQUITY> 35,715,756
<SALES> 0
<TOTAL-REVENUES> 914,724
<CGS> 0
<TOTAL-COSTS> 181,751
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 755,956
<INCOME-TAX> 0
<INCOME-CONTINUING> 755,956
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 755,956
<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>
