UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
(Mark One)
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-21560
CNL INCOME FUND XI, LTD.
(Exact name of registrant as specified in its charter)
Florida 59-3078854
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
400 East South Street
Orlando, Florida 32801
(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code: (407) 422-1574
Securities registered pursuant to Section 12(b) of
the Act:
Title of each class: Name of exchange on which registered:
None Not Applicable
Securities registered pursuant to Section 12(g) of
the Act:
Units of limited partnership interest ($10 per Unit)
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days: Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [x]
Aggregate market value of the voting stock held by nonaffiliates of the
registrant: The registrant registered an offering of units of limited
partnership interest (the "Units") on Form S-11 under the Securities Act of
1933, as amended. Since no established market for such Units exists, there is no
market value for such Units. Each Unit was originally sold at $10 per Unit.
DOCUMENTS INCORPORATED BY REFERENCE:
None
<PAGE>
PART I
Item 1. Business
CNL Income Fund XI, Ltd. (the "Registrant" or the "Partnership") is a
limited partnership which was organized pursuant to the laws of the State of
Florida on August 20, 1991. 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 March 18, 1992, 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 12, 1992. The offering terminated on September 28, 1992, at which date the
maximum offering proceeds of $40,000,000 had been received from investors who
were admitted to the Partnership as limited partners (the "Limited Partners").
The Partnership was organized to acquire both newly constructed and
existing restaurant properties, as well as properties upon which restaurants
were to be constructed (the "Properties"), which are leased primarily to
operators of national and regional fast-food and family-style restaurant chains
(the "Restaurant Chains"). Net proceeds to the Partnership from its offering of
Units, after deduction of organizational and offering expenses, totalled
$35,200,000, and were used to acquire 39 Properties, including interests in four
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, 1996, the Partnership sold its Property in Philadelphia,
Pennsylvania. During January 1997, the Partnership reinvested the net sales
proceeds from the sale 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. As a result of these transactions, as
of December 31, 1997, the Partnership owned 39 Properties, including interest in
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. The
Partnership leases the Properties on a triple-net basis with the lessees
responsible for all repairs and maintenance, property taxes, insurance and
utilities.
The Partnership will hold its Properties until the General Partners
determine that the sale or other disposition of the Properties is advantageous
in view of the Partnership's investment objectives. In deciding whether to sell
Properties, the General Partners will consider factors such as potential capital
appreciation, net cash flow and federal income tax considerations. Certain
lessees also have been granted options to purchase Properties, generally at the
Property's then fair market value after a specified portion of the lease term
has elapsed. In general, the General Partners plan to seek the sale of some of
the Properties commencing seven to 12 years after their acquisition. The
Partnership has no obligation to sell all or any portion of a Property at any
particular time, except as may be required under property purchase options
granted to certain lessees.
Leases
Although there are variations in the specific terms of the leases, the
following is a summarized description of the general structure of the
Partnership's leases. The leases of the Properties owned by the Partnership and
the joint ventures in which the Partnership is a co-venturer provide for initial
terms, ranging from 14 to 20 years (the average being 18 years), and expire
between 2006 and 2016. All leases are on a triple-net basis, with the lessees
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 $45,600 to
$183,600. All of the leases provide for percentage rent, based on sales in
excess of a specified amount. In addition, some of the leases provide that,
commencing in specified lease years (generally the sixth lease year), the annual
base rent required under the terms of the lease will increase.
Generally, the leases of the Properties provide for two to five
five-year renewal options subject to the same terms and conditions as the
initial lease. Certain lessees also have been granted options to purchase
Properties at the Property's then fair market value after a specified portion of
the lease term has elapsed. Under the terms of certain leases, the option
purchase price may equal the Partnership's original cost to purchase the
Property (including acquisition costs), plus a specified percentage from the
date of the lease or a specified percentage of the Partnership's
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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 January 1997, the Partnership reinvested the net sales proceeds from
the sale 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, as described below in "Joint Venture
Arrangements." The lease terms for this Property are substantially the same as
the Partnership's other leases, as described above in the first three paragraphs
of this section.
Major Tenants
During 1997, five lessees (or group of affiliated lessees) of the
Partnership and its consolidated joint ventures, (i) Golden Corral 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 Corporation), (iv) 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), and
DenAmerica Corporation each contributed more than ten percent of the
Partnership's total rental income (including rental income from the
Partnership's consolidated joint ventures, the Partnership's share of rental
income from two Properties owned by unconsolidated joint ventures and one
Property owned with an affiliate as tenants-in-common). As of December 31, 1997,
Golden Corral Corporation was the lessee under leases relating to three
restaurants, Foodmaker, Inc. was the lessee under leases relating to eight
restaurants, Burger King Corporation was the lessee under leases relating to
eight restaurants, Flagstar Corporation was the lessee under leases relating to
nine restaurants and DenAmerica Corporation was the lessee under leases relating
to five restaurants. It is anticipated that, based on the minimum rental
payments required by the leases, these five lessees (or group of affiliated
lessees) each will continue to contribute more than ten percent of the
Partnership's total rental income in 1998 and subsequent years. In addition,
four Restaurant Chains, Golden Corral Family Steakhouse Restaurants ("Golden
Corral"), Jack in the Box, Burger King and Denny's, each accounted for more than
ten percent of the Partnership's total rental income during 1997 (including
rental income from the Partnership's consolidated joint ventures, the
Partnership's share of rental income from two Properties owned by unconsolidated
joint ventures and one Property owned with an affiliate as tenants-in-common).
In subsequent years, it is anticipated that these four Restaurant Chains each
will continue to account for more than ten percent of the Partnership's total
rental income to which the Partnership is entitled under the terms of the
leases. Any failure of these lessees or Restaurant Chains could materially
affect the Partnership's income. No single tenant or group of affiliated tenants
lease Properties with an aggregate carrying value, excluding acquisition fees
and certain acquisition expenses, in excess of 20 percent of the total assets of
the Partnership.
Joint Venture Arrangements
The Partnership has entered into two separate joint venture
arrangements, Denver Joint Venture and CNL/Airport Joint Venture, with
unaffiliated entities to purchase and hold two Properties. In addition, the
Partnership has entered into two separate joint venture arrangements, Ashland
Joint Venture and Des Moines Real Estate Joint Venture, with affiliates of the
General Partners, to purchase and hold two Properties.
The joint venture arrangements provide for the Partnership and its
joint venture partners to share in all costs and benefits associated with the
joint ventures in accordance with their respective percentage interests in the
joint ventures. The Partnership and its joint venture partners are also jointly
and severally liable for all debts, obligations and other liabilities of the
joint ventures.
CNL/Airport Joint Venture, Denver Joint Venture and Des Moines Real
Estate Joint Venture each have an initial term of 20 years and Ashland Joint
Venture has an initial term of 30 years and, after the expiration of the initial
term, continue 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
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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 CNL/Airport Joint Venture and
Denver Joint Venture and shares management control equally with affiliates of
the General Partners for Ashland Joint Venture and Des Moines Real Estate 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/Airport Joint Venture, Denver
Joint Venture, Ashland Joint Venture and Des Moines Real Estate Joint Venture is
distributed 77.33%, 85 percent, 62.16% and 76.6%, respectively, to the
Partnership and the balance is distributed to each of the joint venture partners
in accordance with its respective percentage interest in the joint venture. Any
liquidation proceeds, after paying joint venture debts and liabilities and
funding reserves for contingent liabilities, will be distributed first to the
joint venture partners with positive capital account balances in proportion to
such balances until such balances equal zero, and thereafter in proportion to
each joint venture partner's percentage interest in the joint venture.
In addition to the above joint venture agreements, in January 1997, the
Partnership entered into an agreement to hold a Black-eyed Pea Property as
tenants-in-common with an affiliate of the General Partners. The agreement
provides for the Partnership and the affiliate to share in the profits and
losses of the Property in proportion to each co-venturer's percentage interest.
The Partnership owns a 72.50 percent interest in this Property.
Certain Management Services
CNL Income Fund Advisors, Inc., an affiliate of the General Partners,
provided certain services relating to management of the Partnership and its
Properties pursuant to a management agreement with the Partnership through
September 30, 1995. Under this agreement, CNL Income Fund Advisors, Inc. was
responsible for collecting rental payments, inspecting the Properties and the
tenants' books and records, assisting the Partnership in responding to tenant
inquiries and notices and providing information to the Partnership about the
status of the leases and the Properties. CNL Income Fund Advisors, Inc. also
assisted the General Partners in negotiating the leases. For these services, the
Partnership had agreed to pay CNL Income Fund Advisors, Inc. an annual fee of
one percent of the sum of gross 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.
Effective October 1, 1995, CNL Income Fund Advisors, Inc. assigned its
rights in, and its obligations under, the management agreement with the
Partnership to CNL Fund Advisors, Inc. All of the terms and conditions of the
management agreement, including the payment of fees, as described above, remain
unchanged.
The management agreement continues until the Partnership no longer owns
an interest in any Properties unless terminated at an earlier date upon 60 days'
prior notice by either party.
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.
At the time the Partnership elects to dispose of its Properties, other
than as a result of the exercise of tenant options to purchase Properties, the
Partnership will be in competition with other persons and entities to locate
purchasers for its Properties.
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Employees
The Partnership has no employees. The officers of CNL Realty
Corporation and the officers and employees of CNL Fund Advisors, Inc. perform
certain services for the Partnership. In addition, the General Partners have
available to them the resources and expertise of the officers and employees of
CNL Group, Inc., a diversified real estate company, and its affiliates, who may
also perform certain services for the Partnership.
Item 2. Properties
As of December 31, 1997, the Partnership owned, either directly or
through joint venture arrangements, 39 Properties, located in 20 states.
Reference is made to the Schedule of Real Estate and Accumulated Depreciation
filed with this report for a listing of the Properties and their respective
costs, including acquisition fees and certain acquisition expenses.
Description of Properties
Land. The Partnership's Property sites range from approximately 18,000
to 329,000 square feet depending upon building size and local demographic
factors. Sites purchased by the Partnership are in locations zoned for
commercial use which have been reviewed for traffic patterns and volume.
Buildings. Each of the Properties owned by the Partnership 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
2,100 to 11,400 square feet. All buildings on Properties are freestanding and
surrounded by paved parking areas. Buildings are suitable for conversion to
various uses, although modifications may be required prior to use for other than
restaurant operations.
Generally, a lessee is required, under the terms of its lease
agreement, to make such capital expenditures as may be reasonably necessary to
refurbish buildings, premises, signs and equipment so as to comply with the
lessee's obligations, if applicable, under the franchise agreement to reflect
the current commercial image of its Restaurant Chain. These capital expenditures
are required to be paid by the lessee during the term of the lease.
Leases with Major Tenants. The terms of each of the leases with the
Partnership's major tenants as of December 31, 1997 (see Item 1. Business -
Major Tenants), are substantially the same as those described in Item 1.
Business - Leases.
Golden Corral Corporation leases three Golden Corral restaurants with
an initial terms of 15 years (expiring in 2007) and average minimum base annual
rent of approximately $166,300 (ranging from approximately $157,300 to
$172,400).
Foodmaker, Inc. leases eight Jack in the Box restaurants with an
initial term of 18 years (expiring in 2010) and the average minimum base annual
rent is approximately $87,500 (ranging from approximately $63,600 to $103,400).
Burger King Corporation leases eight Burger King restaurants with an
initial term of 14 years (expiring in 2006) and average minimum base annual rent
of approximately $94,800 (ranging from approximately $73,200 to $124,700).
Flagstar Corporation leases five Hardee's restaurants, two Denny's
restaurants and two Quincy's restaurants with an initial term of 20 years
(expiring in 2012) and the average minimum base annual rent is approximately
$79,900 (ranging from approximately $57,100 to $116,000).
DenAmerica Corporation leases four Denny's restaurants and one
Black-Eyed Pea restaurant with an initial term of 20 years (expiring between
2012 and 2016) and average minimum base annual rent of approximately $98,200
(ranging from approximately $52,800 to $142,700).
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The General Partners consider the Properties to be well-maintained and
sufficient for the Partnership's operations.
Item 3. Legal Proceedings
Neither the Partnership, nor its General Partners or any affiliate of
the General Partners, nor any of their respective properties, is a party to, or
subject to, any material pending legal proceedings.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
As of February 28, 1998, there were 3,196 holders of record of the
Units. There is no public trading market for the Units, and it is not
anticipated that a public market for the Units will develop. Limited Partners
who wish to sell their Units may offer the Units for sale pursuant to the
Partnership's distribution reinvestment plan (the "Plan"), and Limited Partners
who wish to have their distributions used to acquire additional Units (to the
extent Units are available for purchase) may do so pursuant to such Plan. The
General Partners have the right to prohibit transfers of Units. Since inception,
the price paid for any Unit transferred pursuant to the Plan has been $9.50 per
Unit. The price to be paid for any Unit transferred other than pursuant to the
Plan is subject to negotiation by the purchaser and the selling Limited Partner.
The Partnership will not redeem or repurchase Units.
The following table reflects, for each calendar quarter, the high, low
and average sales prices for transfers of Units during 1997 and 1996 other than
pursuant to the Plan, net of commissions.
<TABLE>
<CAPTION>
1997 (1) 1996 (1)
--------------------------------- ------------------------
<S> <C>
High Low Average High Low Average
First Quarter $ 9.50 $ 8.10 $ 9.12 $10.00 $ 7.62 $ 9.05
Second Quarter 9.50 8.17 8.89 9.50 8.81 9.27
Third Quarter 9.50 8.27 8.89 (2) (2) (2)
Fourth Quarter (2) (2) (2) 9.50 9.50 9.50
</TABLE>
(1) A total of 23,250 and 21,283 Units were transferred other than pursuant
to the Plan for the years ended December 31, 1997 and 1996,
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, 1997 and 1996, the Partnership
declared cash distributions of $3,500,024 and $3,540,024, respectively, to the
Limited Partners. During the quarter ended December 31, 1996, the Partnership
declared a special distribution to the Limited Partners of $40,000 which
represented cumulative excess operating reserves. The General Partners
anticipate that the Partnership will declare a special distribution to the
Limited Partners during the quarter ending March 31, 1998, representing
cumulative excess operating reserves. No amounts distributed to partners for the
years ended December 31, 1997 and 1996 are required to be or have been treated
by
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the Partnership as a return of capital for purposes of calculating the Limited
Partners' return on their adjusted capital contributions. No distributions have
been made to the General Partners to date. As indicated in the chart below,
these distributions were declared at the close of each of the Partnership's
calendar quarters. These amounts include monthly distributions made in arrears
for the Limited Partners electing to receive such distributions on this basis.
Quarter Ended 1997 1996
------------- ---------- ----------
March 31 $875,006 $875,006
June 30 875,006 875,006
September 30 875,006 875,006
December 31 875,006 915,006
The Partnership intends to continue to make distributions of cash
available for distribution to the Limited Partners on a quarterly basis,
although some Limited Partners, in accordance with their election, receive
monthly distributions, for an annual fee.
Item 6. Selected Financial Data
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
------------- ------------- ------------- ------------- ------------
<S> <C>
Year Ended December 31:
Revenues (1) $ 3,998,538 $ 3,976,787 $ 3,920,528 $ 3,933,435 $ 3,908,566
Net income (2) 3,295,079 3,464,705 3,202,176 3,272,492 3,232,452
Cash distributions declared (3) 3,500,024 3,540,024 3,540,023 3,425,007 3,325,000
Net income per Unit (2) .82 .86 .79 .81 .80
Cash distributions declared
per Unit (3) .88 .89 .89 .86 .83
At December 31:
Total assets $35,785,538 $36,003,045 $36,086,683 $36,335,476 $36,536,663
Partners' Capital 34,308,232 34,513,177 34,588,496 34,926,343 35,078,858
</TABLE>
(1) Revenues include equity in earnings of unconsolidated joint ventures
and minority interest in income of consolidated joint ventures.
(2) Net income for the year ended December 31, 1996, includes $213,685 from
a gain on sale of land and building.
(3) Distributions for the year ended December 31, 1996, includes a special
distribution to the Limited Partners of $40,000, which represented
cumulative excess operating reserves.
The above selected financial data should be read in conjunction with
the financial statements and related notes contained in Item 8 hereof.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The Partnership was organized on August 20, 1991, to acquire for cash,
either directly or through joint venture arrangements, both newly constructed
and existing restaurant Properties, as well as land upon which restaurant
Properties were to be constructed, which are leased primarily to operators of
selected national and regional fast-food and family-style Restaurant Chains. The
leases are triple-net leases, with the lessees generally responsible for all
repairs and maintenance, property taxes, insurance and utilities. As of December
31, 1997, the Partnership owned 39 Properties, either directly or through joint
venture arrangements.
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Liquidity and Capital Resources
The Partnership's primary source of capital for the years ended
December 31, 1997, 1996 and 1995, was cash from operations (which includes cash
received from tenants, distributions from joint ventures and interest received,
less cash paid for expenses). Cash from operations was $3,642,796, $3,601,714
and $3,652,185 for the years ended December 31, 1997, 1996 and 1995,
respectively. The increase in cash from operations during 1997, as compared to
1996, is primarily a result of changes in income and expenses as described in
"Results of Operations" below, and the decrease during 1996, as compared to
1995, is primarily a result of changes in the Partnership's working capital
during each of the respective years.
Other sources and uses of capital included the following during the
years ended December 31, 1997, 1996 and 1995.
In November 1996, the Partnership sold its Property in Philadelphia,
Pennsylvania, for $1,050,000 and received net sales proceeds of $1,044,750,
resulting in a gain of $213,685 for financial reporting purposes. This Property
was originally acquired by the Partnership in September 1992, and had a cost of
approximately $877,900, excluding acquisition fees and miscellaneous acquisition
expenses; therefore, the Partnership sold the Property for approximately
$166,900 in excess of its original purchase price. As of December 31, 1996, the
net sales proceeds of $1,044,750, plus accrued interest of $3,072, were being
held in an interest-bearing escrow account pending the release of funds by the
escrow agent to acquire an additional Property. The sale of this Property was
structured to qualify as a like-kind exchange transaction in accordance with
Section 1031 of the Internal Revenue Code. As a result, no gain was recognized
for federal income tax purposes. Therefore, the Partnership was not required to
distribute any of the net sales proceeds from the sale of this Property to
Limited Partners for the purpose of paying federal and state income taxes.
In January 1997, the Partnership reinvested the net sales proceeds from
the 1996 sale 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 December 31, 1997, the Partnership owned a 72.5% interest in
this Property.
None of the Properties owned by the Partnership or the joint ventures
in which the Partnership owns an interest is or may be encumbered. Subject to
certain restrictions on borrowing, however, the Partnership may borrow funds but
will not encumber any of the Properties in connection with any such borrowing.
The Partnership will not borrow for the purpose of returning capital to the
Limited Partners. The Partnership will not borrow under arrangements that would
make the Limited Partners liable to creditors of the Partnership. The General
Partners further have represented that they will use their reasonable efforts to
structure any borrowing so that it will not constitute "acquisition
indebtedness" for federal income tax purposes and also will limit the
Partnership's outstanding indebtedness to three percent of the aggregate
adjusted tax basis of its Properties. Affiliates of the General Partners from
time to time incur certain operating expenses on behalf of the Partnership for
which the Partnership reimburses the affiliates without interest.
Currently, rental income from the Partnership's Properties is invested
in money market accounts or other short-term highly liquid investments pending
the Partnership's use of such funds to pay Partnership expenses or to make
distributions to partners. At December 31, 1997, the Partnership had $1,272,386
invested in such short-term investments as compared to $1,225,860 at December
31, 1996. The funds remaining at December 31, 1997, after payment of
distributions and other liabilities, will be used to meet the Partnership's
working capital and other needs.
During 1997, 1996 and 1995, affiliates of the General Partners incurred
$83,747, $105,643 and $92,276, respectively, for certain operating expenses. As
of December 31, 1997 and 1996, the Partnership owed $6,648 and $2,121,
respectively, to affiliates for such amounts, accounting and administrative
services and management fees. As of February 28, 1998, the Partnership had
reimbursed the affiliates all such amounts. Other liabilities, including
distributions payable, decreased to $969,257 at December 31, 1997, from $999,977
at December 31, 1996, partially as the result of the Partnership's accruing a
special distribution payable to the Limited Partners of $40,000 at December 31,
1996, which was paid in January 1997. The General Partners believe that the
Partnership has sufficient cash on hand to meet its current working capital
needs.
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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 February 28,
1998, the sale had not occurred.
Based on cash from operations, and during the years ended December 31,
1996 and 1995, cumulative excess operating reserves, the Partnership declared
distributions to the Limited Partners of $3,500,024, $3,540,024 and $3,540,023
for the years ended December 31, 1997, 1996 and 1995, respectively. This
represents a distribution of $0.88 per Unit for the year ended December 31, 1997
and $0.89 per Unit for each of the years ended December 31, 1996 and 1995. The
General Partners anticipate that the Partnership will declare a special
distribution to the Limited Partners during the quarter ending March 31, 1998,
representing cumulative excess operating reserves. No amounts distributed to the
Limited Partners for the years ended December 31, 1997, 1996 and 1995, are
required to be or have been treated by the Partnership as a return of capital
for purposes of calculating the Limited Partners' return on their adjusted
capital contributions. The Partnership intends to continue to make distributions
of cash available for distribution to the Limited Partners on a quarterly basis.
The General Partners believe that the Properties are adequately covered
by insurance. In addition, the General Partners have obtained contingent
liability and Property coverage for the Partnership. This insurance is intended
to reduce the Partnership's exposure in the unlikely event a tenant's insurance
policy lapses or is insufficient to cover a claim relating to the Property.
The Partnership's investment strategy of acquiring Properties for cash
and leasing them under triple-net leases to operators who generally meet
specified financial standards minimizes the Partnership's operating expenses.
The General Partners believe that the leases will continue to generate cash flow
in excess of operating expenses.
Due to low operating expenses and ongoing cash flow, the General
Partners believe that the Partnership has sufficient working capital reserves at
this time. In addition, because all leases of the Partnership's Properties are
on 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 purposes, the
General Partners will contribute to the Partnership an aggregate amount of up to
one percent of the offering proceeds for maintenance and repairs.
The General Partners have the right, but not the obligation, to make
additional capital contributions if they deem it appropriate in connection with
the operations of the Partnership.
Results of Operations
During the years ended December 31, 1996 and 1995, the Partnership
owned and leased 35 wholly owned Properties (including one Property in
Philadelphia, Pennsylvania, which was sold in November 1996). During the year
ended December 31, 1997, the Partnership owned and leased 34 wholly owned
Properties. In addition, during 1997, 1996 and 1995, the Partnership was a
co-venturer in four separate joint ventures that each owned and leased one
Property, and during 1997, the Partnership owned and leased one Property with an
affiliate as tenants-in-common. As of December 31, 1997, the Partnership owned,
either directly or through joint venture arrangements, 39 Properties which are
subject to long-term, triple-net leases. The leases of the Properties provide
for minimum base annual rental amounts (payable in monthly installments) ranging
from approximately $45,600 to $183,600. All of the leases provide for percentage
rent based on sales in excess of a specified amount. In addition, some of the
leases provide that, commencing in specified lease years (generally the sixth
lease year), the annual base rent required under the terms of the lease will
increase. For further description of the Partnership's leases and Properties,
see Item 1. Business - Leases and Item 2. Properties, respectively.
During the years ended December 31, 1997, 1996 and 1995, the
Partnership and its consolidated joint ventures, Denver Joint Venture and
CNL/Airport Joint Venture, earned $3,543,984, $3,615,977 and $3,609,385,
respectively, in rental income from operating leases and earned income from
direct financing leases. The decrease in rental and earned income during 1997 as
compared to 1996, is primarily attributable to the sale of the Property in
Philadelphia, Pennsylvania in November 1996, as described above in "Liquidity
and Capital Resources." 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 described above in "Liquidity and Capital Resources."
8
<PAGE>
For the years ended December 31, 1997, 1996 and 1995, the Partnership
also earned $225,888, $251,312 and $200,198, respectively, in contingent rental
income. The decrease during 1997, as compared to 1996, is primarily due to the
sale of the Property in Philadelphia, Pennsylvania. The increase in contingent
rental income during 1996, as compared to 1995, is primarily due to an increase
in gross sales of certain restaurant properties whose leases require the payment
of contingent rental income.
In addition, for the years ended December 31, 1997, 1996 and 1995, the
Partnership earned $236,103, $118,211 and $118,384, 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
venture during 1997, as compared to 1996, is primarily attributable to the
Partnership investing in a Property in Corpus Christi, Texas, in January 1997,
with an affiliate of the General Partners as tenants-in-common, as described
above in "Liquidity and Capital Resources."
During at least one of the years ended December 31, 1997, 1996 and
1995, five lessees (or group of affiliated lessees) of the Partnership and its
consolidated joint ventures, Golden Corral Corporation, Foodmaker, Inc., Burger
King Corporation, Den America and Flagstar Corporation, each contributed more
than ten percent of the Partnership's total rental income (including rental
income from the Partnership's consolidated joint ventures, the Partnership's
share of rental income from two Properties owned by unconsolidated joint
ventures and one Property owned with an affiliate as tenants-in-common). As of
December 31, 1997, Golden Corral Corporation was the lessee under leases
relating to three restaurants, Foodmaker, Inc. was the lessee under leases
relating to eight restaurants, Burger King Corporation was the lessee under
leases relating to eight restaurants, Flagstar Corporation was the lessee under
leases relating to nine restaurants, and DenAmerica Corporation was the lessee
under leases relating to five restaurants. 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 1998 and subsequent years. In
addition, during at least one of the years ended December 31, 1997, 1996 and
1995 four Restaurant Chains, Golden Corral, Jack in the Box, Burger King and
Denny's, each accounted for more than ten percent of the Partnership's total
rental income (including rental income from the Partnership's consolidated joint
ventures and the Partnership's share of rental income from two Properties owned
by unconsolidated joint ventures and one Property owned with an affiliate as
tenants-in-common). In subsequent years, it is anticipated that these 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 $703,459, $725,767 and $718,352 for the years ended December 31, 1997, 1996
and 1995, respectively. The decrease in operating expenses during 1997 as
compared to 1996 is primarily attributable to a decrease in depreciation expense
as a result of the sale of the Property in Philadelphia, Pennsylvania. The
increase in operating expenses during 1996, as compared to 1995, is primarily
the result of an increase in accounting and administrative expenses associated
with operating the Partnership and its Properties, and an increase in insurance
expense as a result of the General Partners' obtaining contingent liability and
property coverage for the Partnership beginning in May 1995.
The increase in operating expenses during 1996, as compared to 1995,
was partially offset by the Partnership receiving a state tax refund during
1996, for state taxes paid in prior years and by a decrease in depreciation
expense as a result of the sale of the Property in Philadelphia, Pennsylvania,
in November 1996, as described above in "Liquidity and Capital Resources."
As a result of the sale of the Property in Philadelphia, Pennsylvania,
as described above in "Liquidity and Capital Resources," the Partnership
recognized a gain of $213,685 for financial reporting purposes for the year
ended December 31, 1996. No Properties were sold during the years ended December
31, 1997 or 1995.
The General Partners of the Partnership are in the process of assessing
and addressing the impact of the year 2000 on its computer package software. The
hardware and built-in software are believed to be year 2000 compliant.
Accordingly, the General Partners do not expect this matter to materially impact
how the Partnership conducts business nor its current or future results of
operations or financial position.
9
<PAGE>
The Partnership's leases as of December 31, 1997, are triple-net leases
and contain provisions that the General Partners believe mitigate the adverse
effect of inflation. Such provisions include clauses requiring the payment of
percentage rent based on certain restaurant sales above a specified level and/or
automatic increases in base rent at specified times during the term of the
lease. Management expects that increases in restaurant sales volumes due to
inflation and real sales growth should result in an increase in rental income
over time. Continued inflation also may cause capital appreciation of the
Partnership's Properties. Inflation and changing prices, however, also may have
an adverse impact on the sales of the restaurants and on potential capital
appreciation of the Properties.
Item 8. Financial Statements and Supplementary Data
10
<PAGE>
CNL INCOME FUND XI, LTD.
(A Florida Limited Partnership)
CONTENTS
Page
Report of Independent Accountants 12
Financial Statements:
Balance Sheets 13
Statements of Income 14
Statements of Partners' Capital 15
Statements of Cash Flows 16
Notes to Financial Statements 18
11
<PAGE>
Report of Independent Accountants
To the Partners
CNL Income Fund XI, Ltd.
We have audited the financial statements and the financial statement schedule of
CNL Income Fund XI, Ltd. (a Florida limited partnership) listed in Item 14(a) of
this Form 10-K. These financial statements and financial statement schedule are
the responsibility of the Partnership's management. Our responsibility is to
express an opinion on these financial statements and financial statement
schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of CNL Income Fund XI, Ltd. as of
December 31, 1997 and 1996, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1997 in conformity
with generally accepted accounting principles. In addition, in our opinion, the
financial statement schedule referred to above, when considered in relation to
the basic financial statements taken as a whole, presents fairly, in all
material respects, the information required to be included therein.
/s/ Coopers & Lybrand, L.L.P.
- ---------------------------------
Orlando, Florida
January 16, 1998
12
<PAGE>
CNL INCOME FUND XI, LTD.
(A Florida Limited Partnership)
BALANCE SHEETS
December 31,
ASSETS 1997 1996
------ ----------- ------------
Land and buildings on operating
leases, less accumulated
depreciation $23,561,017 $24,019,677
Net investment in direct financing
leases 6,611,661 6,686,367
Investment in joint ventures 2,567,786 1,537,430
Cash and cash equivalents 1,272,386 1,225,860
Restricted cash - 1,047,822
Receivables, less allowance for
doubtful accounts $14,746 in
1996 119,575 92,546
Prepaid expenses 13,363 13,227
Organization costs, less accumulated
amortization of $10,000 and $9,411 - 589
Accrued rental income 1,517,726 1,257,503
Other assets 122,024 122,024
----------- -----------
$35,785,538 $36,003,045
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 6,508 $ 2,202
Escrowed real estate taxes payable 19,410 21,573
Distributions payable 875,006 915,006
Due to related parties 6,648 2,121
Rents paid in advance and deposits 68,333 61,196
----------- -----------
Total liabilities 975,905 1,002,098
Commitment (Note 11)
Minority interests 501,401 487,770
Partners' capital 34,308,232 34,513,177
----------- -----------
$35,785,538 $36,003,045
=========== ===========
See accompanying notes to financial statements.
13
<PAGE>
CNL INCOME FUND XI, LTD.
(A Florida Limited Partnership)
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Year Ended December 31,
1997 1996 1995
---------- ---------- -------
<S> <C>
Revenues:
Rental income from operating
leases $2,702,558 $2,765,327 $2,774,204
Earned income from direct
financing leases 841,426 850,650 835,181
Contingent rental income 225,888 251,312 200,198
Interest and other income 62,440 61,403 62,599
---------- ---------- ----------
3,832,312 3,928,692 3,872,182
---------- ---------- ----------
Expenses:
General operating and
administrative 148,380 164,642 135,605
Professional services 32,077 30,984 22,995
Management fees to related
parties 37,974 37,293 36,930
State and other taxes 25,779 14,650 41,596
Depreciation and amorti-
zation 459,249 478,198 481,226
---------- ---------- ----------
703,459 725,767 718,352
---------- ---------- ----------
Income Before Minority Interests
in Income of Consolidated Joint
Ventures, Equity in Earnings of
Unconsolidated Joint Ventures
and Gain on Sale of Land and
Building 3,128,853 3,202,925 3,153,830
Minority Interests in Income of
Consolidated Joint Ventures (69,877) (70,116) (70,038)
Equity in Earnings of Unconsoli-
dated Joint Ventures 236,103 118,211 118,384
Gain on Sale of Land and Building - 213,685 -
---------- ---------- ---------
Net Income $3,295,079 $3,464,705 $3,202,176
========== ========== ==========
Allocation of Net Income:
General partners $ 32,951 $ 33,356 $ 32,021
Limited partners 3,262,128 3,431,349 3,170,155
---------- ---------- ----------
$3,295,079 $3,464,705 $3,202,176
========== ========== ==========
Net Income Per Limited
Partner Unit $ 0.82 $ 0.86 $ 0.79
========== ========== ==========
Weighted Average Number
of Limited Partner
Units Outstanding 4,000,000 4,000,000 4,000,000
========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
14
<PAGE>
CNL INCOME FUND XI, LTD.
(A Florida Limited Partnership)
STATEMENTS OF PARTNERS' CAPITAL
Years Ended December 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
General Partners Limited Partners
Accumu- Accumu-
Contri- lated Contri- Distri- lated Syndication
butions Earnings butions butions Earnings Costs Total
------- -------- ----------- ------------ ----------- ----------- ----------
<S> <C>
Balance, December 31, 1994 $1,000 $ 76,904 $40,000,000 $ (7,975,039) $ 7,613,478 $(4,790,000) $34,926,343
Distributions to limited
partners ($0.89 per
limited partner unit) - - - (3,540,023) - - (3,540,023)
Net income - 32,021 - - 3,170,155 - 3,202,176
------ -------- ----------- ------------ ----------- ----------- -----------
Balance, December 31, 1995 1,000 108,925 40,000,000 (11,515,062) 10,783,633 (4,790,000) 34,588,496
Distributions to limited
partners ($0.89 per
limited partners unit) - - - (3,540,024) - - (3,540,024)
Net income - 33,356 - - 3,431,349 - 3,464,705
------ -------- ----------- ------------ ----------- ----------- -----------
Balance, December 31, 1996 1,000 142,281 40,000,000 (15,055,086) 14,214,982 (4,790,000) 34,513,177
Distributions to limited
partners ($0.88 per
limited partners unit) - - - (3,500,024) - - (3,500,024)
Net income - 32,951 - - 3,262,128 - 3,295,079
------ -------- ----------- ------------ ----------- ----------- -----------
Balance, December 31, 1997 $1,000 $175,232 $40,000,000 $(18,555,110) $17,477,110 $(4,790,000) $34,308,232
====== ======== =========== ============ =========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
15
<PAGE>
CNL INCOME FUND XI, LTD.
(A Florida Limited Partnership)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31,
1997 1996 1995
----------- ----------- --------
<S> <C>
Increase (Decrease) in Cash and
Cash Equivalents:
Cash Flows From Operating
Activities:
Cash received from
tenants $ 3,585,979 $ 3,657,138 $ 3,693,039
Distributions from
unconsolidated joint
ventures 250,497 148,375 141,377
Cash paid for expenses (237,312) (251,408) (233,423)
Interest received 43,632 47,609 51,192
----------- ----------- -----------
Net cash provided
by operating
activities 3,642,796 3,601,714 3,652,185
----------- ----------- -----------
Cash Flows From Investing
Activities:
Proceeds from sale of
land and building - 1,044,750 -
Investment in joint
venture (1,044,750) - -
Decrease (increase) in
restricted cash 1,044,750 (1,044,750) -
----------- ----------- ----------
Net cash provided by
investing activities - - -
----------- ----------- ----------
Cash Flows From Financing
Activities:
Distributions to limited
partners (3,540,024) (3,540,024) (3,500,023)
Distributions to holders
of minority interests (56,246) (58,718) (54,227)
----------- ----------- -----------
Net cash used in
financing
activities (3,596,270) (3,598,742) (3,554,250)
----------- ----------- -----------
Net Increase in Cash and Cash
Equivalents 46,526 2,972 97,935
Cash and Cash Equivalents at
Beginning of Year 1,225,860 1,222,888 1,124,953
----------- ----------- -----------
Cash and Cash Equivalents at
End of Year $ 1,272,386 $ 1,225,860 $ 1,222,888
=========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
16
<PAGE>
CNL INCOME FUND XI, LTD.
(A Florida Limited Partnership)
STATEMENTS OF CASH FLOWS - CONTINUED
<TABLE>
<CAPTION>
Year Ended December 31,
1997 1996 1995
----------- ----------- --------
<S> <C>
Reconciliation of Net Income
to Net Cash Provided by
Operating Activities:
Net income $ 3,295,079 $ 3,464,705 $ 3,202,176
----------- ----------- -----------
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Depreciation 458,660 476,198 479,226
Amortization 589 2,000 2,000
Gain on sale of land and
building - (213,685) -
Minority interests in
income of consolidated
joint ventures 69,877 70,116 70,038
Equity in earnings of
unconsolidated joint
ventures, net of
distributions 14,394 30,164 22,993
Decrease (increase) in
receivables (23,957) 25,855 58,262
Decrease (increase) in
prepaid expenses (136) 151 (1,003)
Decrease in net investment
in direct financing
leases 74,706 62,366 55,203
Increase in accrued
rental income (260,223) (296,439) (269,953)
Increase (decrease) in
accounts payable and
accrued expenses 2,143 4,280 (28,847)
Increase (decrease) in
due to related parties 4,527 (4,386) 5,106
Increase (decrease) in
rents paid in advance
and deposits 7,137 (19,611) 56,984
----------- ----------- -----------
Total adjustments 347,717 137,009 450,009
----------- ----------- -----------
Net Cash Provided by Operating
Activities $ 3,642,796 $ 3,601,714 $ 3,652,185
=========== =========== ===========
Supplemental Schedule of Non-
Cash Financing Activities:
Distributions declared and
unpaid at December 31 $ 875,006 $ 915,006 $ 915,006
=========== ============ ===========
</TABLE>
See accompanying notes to financial statements.
17
<PAGE>
CNL INCOME FUND XI, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
Years Ended December 31, 1997, 1996 and 1995
1. Significant Accounting Policies:
Organization and Nature of Business - CNL Income Fund XI, Ltd. (the
"Partnership") is a Florida limited partnership that was organized for
the purpose of acquiring both newly constructed and existing restaurant
properties, as well as properties upon which restaurants were to be
constructed, which are leased primarily to operators of national and
regional fast-food and family-style restaurant chains.
The general partners of the Partnership are CNL Realty Corporation (the
"Corporate General Partner"), James M. Seneff, Jr. and Robert A.
Bourne. Mr. Seneff and Mr. Bourne are also 50 percent shareholders of
the Corporate General Partner. The general partners have responsibility
for managing the day-to-day operations of the Partnership.
Real Estate and Lease Accounting - The Partnership records the
acquisition of land and buildings at cost, including acquisition and
closing costs. Land and buildings are leased to unrelated third parties
on a triple-net basis, whereby the tenant is generally responsible for
all operating expenses relating to the property, including property
taxes, insurance, maintenance and repairs. The leases are accounted for
using either the direct financing or the operating methods. Such
methods are described below:
Direct financing method - The leases accounted for using the
direct financing method are recorded at their net investment
(which at the inception of the lease generally represents the
cost of the asset) (Note 4). Unearned income is deferred and
amortized to income over the lease terms so as to produce a
constant periodic rate of return on the Partnership's net
investment in the leases.
Operating method - Land and building leases accounted for
using the operating method are recorded at cost, revenue is
recognized as rentals are earned and depreciation is charged
to operations as incurred. Buildings are depreciated on the
straight-line method over their estimated useful lives of 30
years. When scheduled rentals vary during the lease term,
income is recognized on a straight-line basis so as to produce
a constant periodic rent over the lease term commencing on the
date the property is placed in service.
18
<PAGE>
CNL INCOME FUND XI, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1997, 1996 and 1995
1. Significant Accounting Policies - Continued:
Accrued rental income represents the aggregate amount of
income recognized on a straight-line basis in excess of
scheduled rental payments to date.
When the properties are sold, the related cost and accumulated
depreciation for operating leases and the net investment for direct
financing leases, plus any accrued rental income, are removed from the
accounts and gains or losses from sales are reflected in income. The
general partners of the Partnership review properties for impairment
whenever events or changes in circumstances indicate that the carrying
amount of the assets may not be recoverable through operations. The
general partners determine whether an impairment in value has occurred
by comparing the estimated future undiscounted cash flows, including
the residual value of the property, with the carrying cost of the
individual property. If an impairment is indicated, the assets are
adjusted to the 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 accrued rental income, and to decrease rental or other income or
increase bad debt expense for the current period, although the
Partnership continues 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 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.
The Partnership's investments in Ashland Joint Venture and Des Moines
Real Estate Joint Venture, and a property in Corpus Christi, Texas, for
which the property is held as tenants-in-common, are accounted for
using the equity method since the Partnership shares control with
affiliates which have the same general partners.
19
<PAGE>
CNL INCOME FUND XI, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1997, 1996 and 1995
1. Significant Accounting Policies - Continued:
Cash and Cash Equivalents - The Partnership considers all highly liquid
investments with a maturity of three months or less when purchased to
be cash equivalents. Cash and cash equivalents consist of demand
deposits at commercial banks and money market funds (some of which are
backed by government securities). Cash equivalents are stated at cost
plus accrued interest, which approximates market value.
Cash accounts maintained on behalf of the Partnership in demand
deposits at commercial banks and money market funds may exceed
federally insured levels; however, the Partnership has not experienced
any losses in such accounts. The Partnership limits investment of
temporary cash investments to financial institutions with high credit
standing; therefore, the Partnership believes it is not exposed to any
significant credit risk on cash and cash equivalents.
Organization Costs - Organization costs are amortized over five years
using the straight-line method.
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 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.
20
<PAGE>
CNL INCOME FUND XI, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1997, 1996 and 1995
2. Leases:
The Partnership leases its land and buildings to operators of national
and regional fast-food and family-style restaurants. The leases are
accounted for under the provisions of Statement of Financial Accounting
Standards No. 13, "Accounting for Leases." Some of the leases are
classified as operating leases and some of the leases have been
classified as direct financing leases. For the leases classified as
direct financing leases, the building portions of the property leases
are accounted for as direct financing leases while the land portions of
the majority of these leases are operating leases. Substantially all
leases are for 14 to 20 years and provide for minimum and contingent
rentals. In addition, the tenant pays all property taxes and
assessments, fully maintains the interior and exterior of the building
and carries insurance coverage for public liability, property damage,
fire and extended coverage. The lease options generally allow tenants
to renew the leases for two to five successive five-year periods
subject to the same terms and conditions as the initial lease. Most
leases also allow the tenant to purchase the property at fair market
value after a specified portion of the lease has elapsed.
3. Land and Buildings on Operating Leases:
Land and buildings on operating leases consisted of the following at
December 31:
1997 1996
----------- -----------
Land $12,269,964 $12,269,964
Buildings 13,746,182 13,746,182
----------- -----------
26,016,146 26,016,146
Less accumulated
depreciation (2,455,129) (1,996,469)
----------- -----------
$23,561,017 $24,019,677
=========== ===========
In November 1996, the Partnership sold its property in Philadelphia,
Pennsylvania, for $1,050,000 and received net sales proceeds of
$1,044,750, resulting in a gain of $213,685 for financial reporting
purposes. This property was originally acquired by the Partnership in
September 1992, and had a cost of approximately $877,900, excluding
acquisition fees and miscellaneous acquisition expenses; therefore, the
Partnership sold the property for approximately $166,900 in excess of
its original purchase price.
21
<PAGE>
CNL INCOME FUND XI, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1997, 1996 and 1995
3. Land and Buildings on Operating Leases - Continued:
Some leases provide for escalating guaranteed minimum rents throughout
the lease term. Income from these scheduled rent increases is
recognized on a straight-line basis over the terms of the leases. For
the years ended December 31, 1997, 1996 and 1995, the Partnership
recognized $260,223, $296,439 and $269,953, respectively, of such
rental income.
The following is a schedule of the future minimum lease payments to be
received on noncancellable operating leases at December 31, 1997:
1998 $ 2,584,403
1999 2,592,664
2000 2,592,664
2001 2,601,669
2002 2,650,408
Thereafter 19,991,002
-----------
$33,012,810
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.
4. Net Investment in Direct Financing Leases:
The following lists the components of the net investment in direct
financing leases at December 31:
1997 1996
------------ ------------
Minimum lease payments
receivable $ 13,834,907 $ 14,744,153
Estimated residual
values 2,144,114 2,144,114
Less unearned income (9,367,360) (10,201,900)
------------ ------------
Net investment in
direct financing
leases $ 6,611,661 $ 6,686,367
============ ============
22
<PAGE>
CNL INCOME FUND XI, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1997, 1996 and 1995
4. Net Investment in Direct Financing Leases - Continued:
The following is a schedule of future minimum lease payments to be
received on the direct financing leases at December 31, 1997:
1998 $ 921,552
1999 921,552
2000 921,552
2001 921,552
2002 926,847
Thereafter 9,221,852
-----------
$13,834,907
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 62.16% and a 76.6% interest in the profits and
losses of Ashland Joint Venture and Des Moines Real Estate Joint
Venture, respectively. The remaining interests in these joint ventures
are held by affiliates of the Partnership which have the same general
partners.
In January 1997, the Partnership acquired a 72.5% 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.
23
<PAGE>
CNL INCOME FUND XI, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1997, 1996 and 1995
5. Investment in Joint Ventures - Continued:
Ashland Joint Venture, Des Moines Real Estate Joint Venture and the
Partnership and affiliates, as tenants-in-common, each own and lease
one property to an operator of national fast-food restaurants. The
following presents the joint ventures' combined, condensed financial
information at December 31:
1997 1996
---------- -----------
Land and buildings on
operating leases,
less accumulated
depreciation $3,511,507 $2,152,524
Cash 621 722
Receivables 21,638 -
Prepaid expenses 6,939 6,606
Accrued rental income 99,429 59,917
Liabilities 466 343
Partners' capital 3,639,668 2,219,426
Revenues 430,923 239,454
Net income 334,962 169,376
The Partnership recognized income totalling $236,103, $118,211 and
$118,384 for the years ended December 31, 1997, 1996 and 1995,
respectively, from these joint ventures.
6. Restricted Cash:
As of December 31, 1996, the net sales proceeds of $1,044,750 from the
sale of the property in Philadelphia, Pennsylvania, plus accrued
interest of $3,072, were being held in an interest-bearing escrow
account pending the release of funds by the escrow agent to acquire an
additional property. In January 1997 these proceeds were reinvested in
a Black-eyed Pea property in Corpus Christi, Texas, as
tenants-in-common with an affiliate of the general partners (see Note
5).
24
<PAGE>
CNL INCOME FUND XI, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1997, 1996 and 1995
7. Allocations and Distributions:
Generally, all net income and net losses of the Partnership, excluding
gains and losses from the sale of properties, are allocated 99 percent
to the limited partners and one percent to the general partners.
Distributions of net cash flow are made 99 percent to the limited
partners and one percent to the general partners; provided, however,
that the one percent of net cash flow to be distributed to the general
partners is subordinated to receipt by the limited partners of an
aggregate, ten percent, cumulative, noncompounded annual return on
their invested capital contributions (the "Limited Partners' 10%
Return").
Generally, net sales proceeds from the sale of properties, to the
extent distributed, will be distributed first to the limited partners
in an amount sufficient to provide them with their Limited Partners'
10% Return, plus the return of their adjusted capital contributions.
The general partners will then receive, to the extent previously
subordinated and unpaid, a one percent interest in all prior
distributions of net cash flow and a return of their capital
contributions. Any remaining sales proceeds will be distributed 95
percent to the limited partners and five percent to the general
partners. Any gain from the sale of a property is, in general,
allocated in the same manner as net sales proceeds are distributable.
Any loss from the sale of a property is, in general, allocated first,
on a pro rata basis, to partners with positive balances in their
capital accounts; and thereafter, 95 percent to the limited partners
and five percent to the general partners.
During the years ended December 31, 1997, 1996 and 1995, the
Partnership declared distributions to the limited partners of
$3,500,024, $3,540,024 and $3,540,023, respectively. No distributions
have been made to the general partners to date.
25
<PAGE>
CNL INCOME FUND XI, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1997, 1996 and 1995
8. Income Taxes:
The following is a reconciliation of net income for financial reporting
purposes to net income for federal income tax purposes for the years
ended December 31:
<TABLE>
<CAPTION>
1997 1996 1995
---------- ---------- -------
<S> <C>
Net income for finan-
cial reporting
purposes $3,295,079 $3,464,705 $3,202,176
Depreciation for tax
reporting purposes
in excess of
depreciation for
financial reporting
purposes (43,077) (39,035) (37,935)
Gain on sale of land
and building for
financial reporting
purposes in excess
of gain for tax
reporting purposes - (213,685) -
Direct financing
leases recorded as
operating leases
for tax reporting
purposes 74,706 62,366 55,203
Equity in earnings of unconsolidated joint ventures for
financial reporting purposes in excess of equity in earnings
of unconsolidated joint ventures for tax
reporting purposes (13,296) (606) (7,207)
Accrued rental income (260,223) (296,439) (269,953)
Rents paid in advance 22,436 (19,611) 11,087
Minority interests in
timing differences
of consolidated
joint ventures 14,430 15,933 17,613
Other (14,746) (8,114) 14,237
---------- ---------- ----------
Net income for federal
income tax purposes $3,075,309 $2,965,514 $2,985,221
========== ========== ==========
</TABLE>
26
<PAGE>
CNL INCOME FUND XI, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1997, 1996 and 1995
9. Related Party Transactions:
One of the individual general partners, James M. Seneff, Jr., is one of
the principal shareholders of CNL Group, Inc., the parent company of
CNL Fund Advisors, Inc. The other individual general partner, Robert A.
Bourne, served as president of CNL Fund Advisors, Inc. through October
1997. CNL Income Fund Advisors, Inc. was a wholly owned subsidiary of
CNL Group, Inc. until its merger, effective January 1, 1996, with CNL
Fund Advisors, Inc. During the years ended December 31, 1997, 1996 and
1995, CNL Income Fund Advisors, Inc. and CNL Fund Advisors, Inc.
(hereinafter referred to collectively as the "Affiliates") each
performed certain services for the Partnership as described below.
During the years ended December 31, 1997, 1996 and 1995, certain
Affiliates acted as manager of the Partnership's properties pursuant to
a management agreement with the Partnership. In connection therewith,
the Partnership agreed to pay Affiliates a 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. The management fee, which will not exceed fees
which are competitive for similar services in the same geographic area,
may or may not be taken, in whole or in part as to any year, in the
sole discretion of the Affiliates. The Partnership incurred management
fees of $37,974, $37,293 and $36,930 for the years ended December 31,
1997, 1996 and 1995, respectively.
Certain Affiliates are also entitled to receive a deferred,
subordinated real estate disposition fee, payable upon the sale of one
or more properties based on the lesser of one-half of a competitive
real estate commission or three percent of the sales price if the
Affiliates provide a substantial amount of services in connection with
the sale. However, if the 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. The payment of the real estate disposition
fee is subordinated to receipt by the limited partners of their
aggregate 10% Preferred Return, plus their adjusted capital
contributions. No deferred, subordinated real estate disposition fees
have been incurred since inception.
27
<PAGE>
CNL INCOME FUND XI, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1997, 1996 and 1995
9. Related Party Transactions - Continued:
During the years ended December 31, 1997, 1996 and 1995, Affiliates
provided accounting and administrative services to the Partnership on a
day-to-day basis. The Partnership incurred $88,667, $95,845 and $69,156
for the years ended December 31, 1997, 1996 and 1995, respectively, for
such services.
The due to related parties at December 31, 1997 and 1996, totalled
$6,648 and $2,121, respectively.
During 1997, the Partnership and an affiliate of the general partners
acquired a property as tenants-in-common for a purchase price of
$1,441,057 (of which the Partnership contributed $1,044,750 or 72.50%)
from CNL BB Corp., an affiliate of the general partners. CNL BB Corp.
had purchased and temporarily held title to this property in order to
facilitate the acquisition of the property by the Partnership and the
affiliate. The purchase price paid by the Partnership and the affiliate
represented the costs incurred by CNL BB Corp. to acquire and carry the
property, including closing costs.
10. Concentration of Credit Risk:
The following schedule presents total rental and earned income from
individual lessees, 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 and the property held as tenants-in-common with an
affiliate of the general partners), for at lease one of the years ended
December 31:
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- ------
<S> <C>
Flagstar Enterprises,
Inc., Denny's, Inc.
and Quincy's Restau-
rants, Inc. $780,502 $774,347 $785,556
Foodmaker, Inc. 768,032 768,032 768,032
Burger King Corpora-
tion and BK Acqui-
sition, Inc. 733,620 712,334 712,334
Golden Corral
Corporation 538,871 538,355 529,854
DenAmerica Corpora-
tion 489,623 381,129 -
</TABLE>
28
<PAGE>
CNL INCOME FUND XI, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1997, 1996 and 1995
10. Concentration of Credit Risk - Continued:
In addition, the following schedule presents total rental and earned
income from individual restaurant chains, each representing more than
ten percent of the Partnership's total rental and earned income
(including the Partnership's share of total rental and earned income
from the unconsolidated joint ventures and the property held as
tenants-in-common with an affiliate of the general partners), for the
years ended December 31:
<TABLE>
<CAPTION>
1997 1996 1995
---------- ---------- ----------
<S> <C>
Burger King $1,198,027 $1,271,606 $1,237,483
Jack in the Box 768,032 768,032 768,032
Denny's 854,141 747,341 821,011
Golden Corral
Family
Steakhouse
Restaurants 538,871 538,355 529,854
</TABLE>
Although the Partnership's properties are geographically diverse
throughout the United States and the Partnership's lessees operate a
variety of restaurant concepts, default by any one of these lessees or
restaurant chains could significantly impact the results of operations
of the Partnership. However, the general partners believe that the risk
of such a default is reduced due to the essential or important nature
of these properties for the on-going operations of the lessees.
11. 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 January 16, 1998, the sale had not occurred.
29
<PAGE>
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
The General Partners of the Registrant are James M. Seneff, Jr., Robert
A. Bourne and CNL Realty Corporation, a Florida corporation. The General
Partners manage and control the Partnership's affairs and have general
responsibility and the ultimate authority in all matters affecting the
Partnership's business. The Partnership has available to it the services,
personnel and experience of CNL Fund Advisors, Inc., CNL Group, Inc. and their
affiliates, all of which are affiliates of the General Partners.
James M. Seneff, Jr., age 51, is a principal stockholder of CNL Group,
Inc., a diversified real estate company, and has served as its Chairman of the
Board of Directors, director and Chief Executive Officer since its formation in
1980. CNL Group, Inc. is the parent company of CNL Securities Corp., CNL
Investment Company, CNL Fund Advisors, Inc., CNL Real Estate Advisors, Inc. and
prior to its merger with CNL Fund Advisors, Inc., effective January 1, 1996, CNL
Income Fund Advisors, Inc. Mr. Seneff is Chief Executive Officer, and has been a
director and registered principal of CNL Securities Corp., which served as the
managing dealer in the Partnership's offering of Units, since its formation in
1979. Mr. Seneff also has held the position of President and a director of CNL
Management Company, a registered investment advisor, since its formation in
1976, has served as Chief Executive Officer and Chairman of the Board of CNL
Investment Company, and Chief Executive Officer and Chairman of the Board of
Commercial Net Lease Realty, Inc. since 1992, has served as the Chairman of the
Board and the Chief Executive Officer of CNL Realty Advisors, Inc. since its
inception in 1991 through December 31, 1997, at which time CNL Realty Advisors,
Inc. merged with Commercial Net Lease Realty, Inc., served as Chairman of the
Board and Chief Executive Officer of CNL Income Fund Advisors, Inc. since its
inception in 1994 through December 31, 1995, has served as a director, Chairman
of the Board and Chief Executive Officer of CNL Fund Advisors, Inc. since its
inception in 1994, and has held the position of Chief Executive Officer and a
director of CNL Institutional Advisors, Inc., a registered investment advisor,
since its inception in 1990. In addition, Mr. Seneff has served as a director,
Chairman of the Board and Chief Executive Officer of CNL American Properties
Fund, Inc. since 1994, and has served as a director, Chairman of the Board and
Chief Executive Officer of CNL American Realty Fund, Inc. since 1996 and of CNL
Real Estate Advisors, Inc. since January 1997. Mr. Seneff previously served on
the Florida State Commission on Ethics and is a former member and past Chairman
of the State of Florida Investment Advisory Council, which recommends to the
Florida Board of Administration investments for various Florida employee
retirement funds. The Florida Board of Administration, Florida's principal
investment advisory and money management agency, oversees the investment of more
than $60 billion of retirement funds. Since 1971, Mr. Seneff has been active in
the acquisition, development and management of real estate projects and,
directly or through an affiliated entity, has served as a general partner or
joint venturer in over 100 real estate ventures involved in the financing,
acquisition, construction and rental of office buildings, apartment complexes,
restaurants, hotels and other real estate. Included in these real estate
ventures are approximately 65 privately offered real estate limited partnerships
in which Mr. Seneff, directly or through an affiliated entity, serves or has
served as a general partner. Also included are CNL Income Fund, Ltd., CNL Income
Fund II, Ltd., CNL Income Fund III, Ltd., CNL Income Fund IV, Ltd., CNL Income
Fund V, Ltd., CNL Income Fund VI, Ltd., CNL Income Fund VII, Ltd., CNL Income
Fund VIII, Ltd., CNL Income Fund IX, Ltd., CNL Income Fund X, Ltd., CNL Income
Fund XII, Ltd., CNL Income Fund XIII, Ltd., CNL Income Fund XIV, Ltd., CNL
Income Fund XV, Ltd., CNL Income Fund XVI, Ltd., CNL Income Fund XVII, Ltd. and
CNL Income Fund XVIII, Ltd. (the "CNL Income Fund Partnerships"), public real
estate limited partnerships with investment objectives similar to those of the
Partnership, in which Mr. Seneff serves as a general partner. Mr. Seneff
received his degree in Business Administration from Florida State University in
1968.
30
<PAGE>
Robert A. Bourne, age 50, is President and Treasurer of CNL Group,
Inc., President, a director and a registered principal of CNL Securities Corp.,
President and a director of CNL Investment Company, and prior to its merger with
CNL Fund Advisors, Inc., effective January 1, 1996, CNL Income Fund Advisors,
Inc., and Chief Investment Officer, Vice Chairman of the Board of Directors, a
director and Treasurer of CNL Institutional Advisors, Inc., a registered
investment advisor. Mr. Bourne served as President of CNL Institutional
Advisors, Inc. from the date of its inception through June 30, 1997 and served
as President of CNL Fund Advisors, Inc. from the date of its inception through
October 1997. Mr. Bourne also has served as a director since 1992, as President
from July 1992 to February 1996, as Secretary and Treasurer from February 1996
through December 1997, and since February 1996, served as Vice Chairman of the
Board of Directors of Commercial Net Lease Realty, Inc. In addition, Mr. Bourne
has served as a director since its inception in 1991, as President from 1991 to
February 1996, as Secretary from February 1996 to July 1996, and since February
1996, served as Treasurer and Vice Chairman of CNL Realty Advisors, Inc. through
December 31, 1997, at which time CNL Realty Advisors, Inc. merged with
Commercial Net Lease Realty, Inc. In addition, Mr. Bourne has served as
President and a director of CNL American Properties Fund, Inc. since 1994, and
has served as President and a director of CNL American Realty Fund, Inc. since
1996 and of CNL Real Estate Advisors, Inc. since January 1997. Upon graduation
from Florida State University in 1970, where he received a B.A. in Accounting,
with honors, Mr. Bourne worked as a certified public accountant and, from
September 1971 through December 1978, was employed by Coopers & Lybrand,
Certified Public Accountants, where he held the position of tax manager
beginning in 1975. From January 1979 until June 1982, Mr. Bourne was a partner
in the accounting firm of Cross & Bourne and from July 1982 through January
1987, he was a partner in the accounting firm of Bourne & Rose, P.A., Certified
Public Accountants. Mr. Bourne, who joined CNL Securities Corp. in 1979, has
participated as a general partner or joint venturer in over 100 real estate
ventures involved in the financing, acquisition, construction and rental of
office buildings, apartment complexes, restaurants, hotels and other real
estate. Included in these real estate ventures are approximately 64 privately
offered real estate limited partnerships in which Mr. Bourne, directly or
through an affiliated entity, serves or has served as a general partner. Also
included are the CNL Income Fund Partnerships, public real estate limited
partnerships with investment objectives similar to those of the Partnership, in
which Mr. Bourne serves as a general partner.
CNL Realty Corporation is a corporation organized on November 26, 1985,
under the laws of the State of Florida. Its sole directors and shareholders are
James M. Seneff, Jr. and Robert A. Bourne, the individual General Partners. CNL
Realty Corporation was organized to serve as the corporate general partner of
real estate limited partnerships, such as the Partnership, organized by one or
both of the individual General Partners. CNL Realty Corporation currently serves
as the corporate general partner of the CNL Income Fund Partnerships.
CNL Fund Advisors, Inc. provides certain management services in
connection with the Partnership and its Properties. CNL Fund Advisors, Inc. is a
corporation organized in 1994 under the laws of the State of Florida, and its
principal office is located at 400 East South Street, Orlando, Florida 32801.
CNL Fund Advisors, Inc. is a wholly owned subsidiary of CNL Group, Inc., a
diversified real estate company, and was organized to perform property
acquisition, property management and other services.
CNL Group, Inc., which is the parent company of CNL Fund Advisors,
Inc., was organized in 1980 under the laws of the State of Florida. CNL Group,
Inc. is a diversified real estate company which provides a wide range of real
estate, development and financial services to companies in the United States
through the activities of its subsidiaries. These activities are primarily
focused on the franchised restaurant and hospitality industries. James M.
Seneff, Jr., an individual General Partner of the Partnership, is the Chairman
of the Board, Chief Executive Officer, and a director of CNL Group, Inc. Mr.
Seneff and his wife own all of the outstanding shares of CNL Group, Inc.
The following persons serve as operating officers of CNL Group, Inc. or
its affiliates or subsidiaries in the discretion of the Boards of Directors of
those companies, but, except as specifically indicated, do not serve as members
of the Boards of Directors of those entities. The Boards of Directors have the
responsibility for creating and implementing the policies of CNL Group, Inc. and
its affiliated companies.
31
<PAGE>
Curtis B. McWilliams, age 42, joined CNL Fund Advisors, Inc. in April
1997 and currently serves as President of CNL Fund Advisors, Inc. and as
Executive Vice President of CNL American Properties Fund, Inc. In addition, Mr.
McWilliams serves as Executive Vice President of CNL Group, Inc. and as
President of CNL Financial Services, Inc. and certain other subsidiaries of CNL
Group, Inc. From September 1983 through March 1997, Mr. McWilliams was employed
by Merrill Lynch. From January 1991 to August 1996, Mr. McWilliams was a
managing director in the corporate banking group of Merrill Lynch's investment
banking division. During this time, he was a senior relationship manager with
Merrill Lynch and as such was responsible for a number of the firm's larger
clients. From February 1990 to February 1993, he also served as co-head of one
of the Industrial Banking Groups within Merrill Lynch's investment banking
division and had administrative responsibility for a group of bankers and client
relationships, including the firm's transportation group. From September 1996 to
March 1997, Mr. McWilliams served as Chairman of Merrill Lynch's Private
Advisory Services. Mr. McWilliams received a B.S.E. in Chemical Engineering from
Princeton University in 1977 and a Masters of Business Administration with a
concentration in finance from the University of Chicago in 1983.
John T. Walker, age 39, is the Chief Operating Officer and Executive
Vice President of CNL Fund Advisors, Inc. and CNL American Properties Fund, Inc.
and serves as Executive Vice President of CNL American Realty Fund, Inc. and CNL
Real Estate Advisors, Inc. From May 1992 to May 1994, he was Executive Vice
President for Finance and Administration and Chief Financial Officer of Z Music,
Inc., a cable television network which was subsequently acquired by Gaylord
Entertainment, where he was responsible for overall financial and administrative
management and planning. From January 1990 through April 1992, Mr. Walker was
Chief Financial Officer of the First Baptist Church in Orlando, Florida. From
April 1984 through December 1989, he was a partner in the accounting firm of
Chastang, Ferrell & Walker, P.A., where he was the partner in charge of audit
and consulting services, and from 1981 to 1984, Mr. Walker was a Senior
Consultant/Audit Senior at Price Waterhouse. Mr. Walker is a Cum Laude graduate
of Wake Forest University with a B.S. in Accountancy and is a certified public
accountant.
Lynn E. Rose, age 49, a certified public accountant, has served as
Chief Financial Officer of CNL Group, Inc. since December 1993, has served as
Secretary of CNL Group, Inc. since 1987, and served as Controller of CNL Group,
Inc. from 1987 until December 1993. In addition, Ms. Rose has served as Chief
Financial Officer and Secretary of CNL Securities Corp. since July 1994. She has
served as Chief Operating Officer, Vice President and Secretary of CNL Corporate
Services, Inc. since November 1994. Ms. Rose also has served as Chief Financial
Officer and Secretary of CNL Institutional Advisors, Inc. since its inception in
1990, served as a director and Secretary of CNL Realty Advisors, Inc. since its
inception in 1991 through December 31, 1997, at which time CNL Realty Advisors,
Inc. merged with Commercial Net Lease Realty, Inc., Treasurer of CNL Realty
Advisors, Inc. from 1991 to February 1996, Secretary and Treasurer of Commercial
Net Lease Realty, Inc. from 1992 to February 1996, Secretary of CNL Income Fund
Advisors, Inc. since its inception in 1994 to December 1995, and a director,
Secretary and Treasurer of CNL Fund Advisors, Inc. since 1994 and has served as
a director, Secretary and Treasurer of CNL Real Estate Advisors, Inc. since
January 1997. Ms. Rose also has served as Secretary and Treasurer of CNL
American Properties Fund, Inc. since 1994, and has served as Secretary and
Treasurer of CNL American Realty Fund, Inc. since 1996. Ms. Rose also currently
serves as Secretary for approximately 50 additional corporations. Ms. Rose
oversees the management information services, administration, legal compliance,
accounting, tenant compliance, and reporting for over 300 corporations,
partnerships, and joint ventures. Prior to joining CNL, Ms. Rose was a partner
with Robert A. Bourne in the accounting firm of Bourne & Rose, P.A., Certified
Public Accountants. Ms. Rose holds a B.A. in Sociology from the University of
Central Florida. She was licensed as a certified public accountant in 1979.
32
<PAGE>
Jeanne A. Wall, age 39, has served as Chief Operating Officer of CNL
Investment Company and of CNL Securities Corp. since November 1994 and has
served as Executive Vice President of CNL Investment Company since January 1991.
In 1984, Ms. Wall joined CNL Securities Corp. In 1985, Ms. Wall became Vice
President of CNL Securities Corp., in 1987, she became Senior Vice President and
in July 1997, she became Executive Vice President of CNL Securities Corp. In
this capacity, Ms. Wall serves as national marketing and sales director and
oversees the national marketing plan for the CNL investment programs. In
addition, Ms. Wall oversees product development, partnership administration and
investor services for programs offered through participating brokers, and
corporate communications for CNL Group, Inc. and Affiliates. Ms. Wall also has
served as Senior Vice President of CNL Institutional Advisors, Inc., a
registered investment advisor, from 1990 to 1993, as Vice President of CNL
Realty Advisors, Inc. since its inception in 1991 through 1997, as Vice
President of Commercial Net Lease Realty, Inc. from 1992 through 1997, as
Executive Vice President of CNL Fund Advisors, Inc. since 1994, and as Executive
Vice President of CNL American Properties Fund, Inc. since 1994. In addition,
Ms. Wall has served as Executive Vice President of CNL Real Estate Advisors,
Inc. since January 1997 and as Executive Vice President of CNL American Realty
Fund, Inc. since 1996. Ms. Wall holds a B.A. in Business Administration from
Linfield College and is a registered principal of CNL Securities Corp. Ms. Wall
currently serves as a trustee on the board of the Investment Program Association
and on the Direct Participation Program committee for the National Association
of Securities Dealers (NASD).
Steven D. Shackelford, age 34, has served as Chief Financial Officer of
CNL Fund Advisors, Inc. since September 1996 and as Chief Financial Officer of
CNL American Properties Fund, Inc. since January 1997. From March 1995 to July
1996, he was a senior manager in the national office of Price Waterhouse where
he was responsible for advising foreign clients seeking to raise capital and a
public listing in the United States. From August 1992 to March 1995, he served
as a manager in the Price Waterhouse, Paris, France office serving several
multinational clients. Mr. Shackelford was an audit staff and audit senior from
1986 to 1992 in the Orlando, Florida office of Price Waterhouse. Mr. Shackelford
received a B.A. in Accounting, with honors, and a Masters of Business
Administration from Florida State University and is a certified public
accountant.
Item 11. Executive Compensation
Other than as described in Item 13, the Partnership has not paid and
does not intend to pay any executive compensation to the General Partners or any
of their affiliates. There are no compensatory plans or arrangements regarding
termination of employment or change of control.
Item 12. Security Ownership of Certain Beneficial Owners and Management
As of February 28, 1998, no person was known to the Registrant to be a
beneficial owner of more than five percent of the Units.
The following table sets forth, as of February 28, 1998, the beneficial
ownership interests of the General Partners in the Registrant.
<TABLE>
<CAPTION>
Title of Class Name of Partner Percent of Class
<S> <C>
General Partnership Interests James M. Seneff, Jr. 45%
Robert A. Bourne 45%
CNL Realty Corporation 10%
----
100%
</TABLE>
Neither the General Partners, nor any of their affiliates, owns any
interest in the Registrant, except as noted above. There are no arrangements
which at a subsequent date may result in a change in control of the Registrant.
33
<PAGE>
Item 13. Certain Relationships and Related Transactions
The table below summarizes the types, recipients, methods of
computation and amounts of compensation, fees and distributions paid or payable
by the Partnership to the General Partners and their affiliates for the year
ended December 31, 1997, exclusive of any distributions to which the General
Partners or their affiliates may be entitled by reason of their purchase and
ownership of Units.
<TABLE>
<CAPTION>
==========================================================================================================================
Amount Incurred
Type of Compensation For the Year
and Recipient Method of Computation Ended December 31, 1997
----------------------- --------------------- -----------------------
<S> <C>
Reimbursement to affiliates for Operating expenses are reimbursed Operating
expenses incurred operating expenses at the lower of cost or 90 percent on
behalf of the Partnership:
of the prevailing rate at which $83,747
comparable services could have
been obtained in the same
geographic area. Affiliates of the
General Partners from time to
time incur certain operating
expenses on behalf of the Accounting and administra-
Partnership for which the tive services: $88,667
Partnership reimburses the
affiliates without interest.
Annual management fee to One percent of the sum of gross $37,974
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. The management fee,
which will not exceed competitive fees
for comparable services in the same
geographic area, may or may not be
taken, in whole or in part as to any
year, in the sole discretion of
affiliates.
==========================================================================================================================
</TABLE>
34
<PAGE>
<TABLE>
<CAPTION>
==========================================================================================================================
Amount Incurred
Type of Compensation For the Year
and Recipient Method of Computation Ended December 31, 1997
----------------------- --------------------- -----------------------
<S> <C>
Deferred, subordinated real estate A deferred, subordinated real $ - 0 -
disposition fee payable to estate disposition fee, payable
affiliates upon sale of one or more
Properties, in an amount equal to the
lesser of (i) one-half of a competitive
real estate commission, or (ii) three
percent of the sales price of such
Property or Properties. Payment of such
fee shall be made only if affiliates of
the General Partners provide a
substantial amount of services in
connection with the sale of a Property
or Properties and shall be subordinated
to certain minimum returns to the
Limited Partners. However, if the net
sales proceeds are reinvested in a
replacement Property, no such real
estate disposition fee will be incurred
until such replacement Property is sold
and the net sales proceeds are
distributed.
General Partners' deferred, sub- A deferred, subordinated share $ - 0 -
ordinated share of Partnership net equal to one percent of
cash flow Partnership distributions of net
cash flow, subordinated to certain
minimum returns to the Limited
Partners.
General Partners' deferred, sub- A deferred, subordinated share $ - 0 -
ordinated share of Partnership net equal to five percent of
sales proceeds from a sale or Partnership distributions of such
sales net sales proceeds, subordinated to
certain minimum returns to the
Limited Partners.
==========================================================================================================================
</TABLE>
35
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) The following documents are filed as part of this report.
1. Financial Statements
Report of Independent Accountants
Balance Sheets at December 31, 1997 and 1996
Statements of Income for the years ended December 31, 1997,
1996 and 1995
Statements of Partners' Capital for the years ended December
31, 1997, 1996 and 1995
Statements of Cash Flows for the years ended December 31,
1997, 1996 and 1995
Notes to Financial Statements
2. Financial Statement Schedule
Schedule III - Real Estate and Accumulated Depreciation at
December 31, 1997
Notes to Schedule III - Real Estate and Accumulated
Depreciation at December 31, 1997
All other Schedules are omitted as the required information is
inapplicable or is presented in the financial statements or
notes thereto.
3. Exhibits
3.1 Affidavit and Certificate of Limited Partnership of
CNL Income Fund XI, Ltd. (Included as Exhibit 3.2 to
Registration Statement No. 33-43278 on Form S-11 and
incorporated herein by reference.)
4.1 Affidavit and Certificate of Limited Partnership of
CNL Income Fund XI, Ltd. (Included as Exhibit 3.2 to
Registration Statement No. 33-43278 on Form S-11 and
incorporated herein by reference.)
4.2 Amended and Restated Agreement of Limited Partnership
of CNL Income Fund XI, Ltd. (Included as Exhibit 4.2
to Form 10-K filed with the Securities and Exchange
Commission on April 15, 1993, and incorporated herein
by reference.)
10.1 Management Agreement between CNL Income Fund XI, Ltd.
and CNL Investment Company (Included as Exhibit 10.1
to Form 10-K filed with the Securities and Exchange
Commission on April 15, 1993, 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.)
36
<PAGE>
10.3 Assignment of Management Agreement from CNL Income
Fund Advisors, Inc. to CNL Fund Advisors, Inc.
(Included as Exhibit 10.3 to Form 10-K filed with the
Securities and Exchange Commission on April 1, 1996,
and incorporated herein by reference.)
27 Financial Data Schedule (Filed herewith.)
(b) The Registrant filed no reports on Form 8-K during the period
October 1, 1997 through December 31, 1997.
37
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on the 13th day of
March, 1998.
CNL INCOME FUND XI, LTD.
By: CNL REALTY CORPORATION
General Partner
/s/ Robert A. Bourne
---------------------------
ROBERT A. BOURNE, President
By: ROBERT A. BOURNE
General Partner
/s/ Robert A. Bourne
--------------------------
ROBERT A. BOURNE
By: JAMES M. SENEFF, JR.
General Partner
/s/ James M. Seneff, Jr.
--------------------------
JAMES M. SENEFF, JR.
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
==========================================================================================================================
Signature Title Date
<S> <C>
/s/ Robert A. Bourne President, Treasurer and Director March 13, 1998
- ------------------------- (Principal Financial and
Robert A. Bourne Accounting Officer)
/s/ James M. Seneff, Jr. Chief Executive Officer and March 13, 1998
- ------------------------- Director (Principal Executive
James M. Seneff, Jr. Officer)
==========================================================================================================================
</TABLE>
<PAGE>
CNL INCOME FUND XI, LTD.
(A Florida Limited Partnership)
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1997
<TABLE>
<CAPTION>
Costs Capitalized
Subsequent
Initial Cost To Acquisition
Buildings
Encum- and Improve- Carrying
brances Land Improvements ments Costs
<S> <C>
Properties the Partnership
has Invested in Under
Operating Leases:
Burger King Restaurants:
Amesbury, Massachusetts - $ 359,458 $ 791,913 $ - $ -
Bloomfield, Connecticut - 266,685 555,656 - -
Columbus, Ohio - 220,496 629,855 - -
East Detroit, Michigan - 305,813 508,386 - -
Gonzales, Louisiana - 362,073 575,454 - -
Nashua, New Hampshire - 662,538 639,876 - -
Denver, Colorado - 438,756 - - -
Columbus, Ohio - 399,679 363,795 - -
Dayton, Ohio - 472,964 441,860 - -
Lawrence, Kansas - 321,505 411,353 - -
Roswell, New Mexico - 205,379 461,219 - -
Denny's Restaurants:
Orlando, Florida - 627,065 - - -
Abilene, Texas - 274,220 - - -
Wadsworth, Ohio - 187,368 - 308,741 -
Avon, Colorado - 755,815 - 569,297 -
Ocean Springs, Mississippi - 303,267 - - -
Golden Corral Family
Steakhouse Restaurants:
McAllen, Texas - 649,484 947,085 - -
Midwest City, Oklahoma - 506,420 975,640 - -
Oklahoma City, Oklahoma - 650,655 975,170 - -
Hardee's Restaurants:
Dothan, Alabama - 275,791 - - -
Huntersville, North Carolina - 308,894 - - -
North Augusta, South Carolina - 201,056 - - -
Jack in the Box Restaurants:
Houston, Texas - 475,618 447,374 - -
Houston, Texas - 350,115 607,530 - -
Houston, Texas - 362,591 582,149 - -
Kingswood, Texas - 373,894 544,539 - -
Rockwall, Texas - 348,497 652,932 - -
Sacramento, California - 500,623 524,823 - -
Show Low, Arizona - 185,602 503,343 - -
KFC Restaurant:
Deming, New Mexico - 150,455 - - -
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Life
on Which
Gross Amount at Which Carried Depreciation
at Close of Period (c) in Latest
Buildings Date Income
and Accumulated of Con- Date Statement is
Land Improvements Total Depreciation struction Acquired Computed
----------- ------------ ----------- ------------ --------- -------- ----------
<S> <C>
$ 359,458 $ 791,913 $ 1,151,371 $ 145,437 1982 06/92 (b)
266,685 555,656 822,341 102,048 1990 06/92 (b)
220,496 629,855 850,351 115,675 1987 06/92 (b)
305,813 508,386 814,199 93,367 1987 06/92 (b)
362,073 575,454 937,527 105,684 1989 06/92 (b)
662,538 639,876 1,302,414 117,515 1977 06/92 (b)
438,756 (f) 438,756 - 1992 06/92 (d)
399,679 363,795 763,474 64,686 1982 09/92 (b)
472,964 441,860 914,824 77,436 1987 09/92 (b)
321,505 411,353 732,858 72,090 1982 09/92 (b)
205,379 461,219 666,598 80,829 1986 09/92 (b)
627,065 (f) 627,065 - 1992 06/92 (d)
274,220 (f) 274,220 - 1992 07/92 (d)
187,368 308,741 496,109 42,985 1992 09/92 (g)
755,815 569,297 1,325,112 93,531 1993 09/92 (b)
303,267 (f) 303,267 - 1992 09/92 (d)
649,484 947,085 1,596,569 174,886 1992 06/92 (b)
506,420 975,640 1,482,060 180,159 1992 06/92 (b)
650,655 975,170 1,625,825 182,833 1992 05/92 (b)
275,791 (f) 275,791 - 1992 09/92 (d)
308,894 (f) 308,894 - 1992 09/92 (d)
201,056 (f) 201,056 - 1992 09/92 (d)
475,618 447,374 922,992 78,566 1992 09/92 (b)
350,115 607,530 957,645 106,692 1992 09/92 (b)
362,591 582,149 944,740 102,235 1992 09/92 (b)
373,894 544,539 918,433 95,630 1992 09/92 (b)
348,497 652,932 1,001,429 114,666 1992 09/92 (b)
500,623 524,823 1,025,446 92,168 1992 09/92 (b)
185,602 503,343 688,945 88,395 1992 09/92 (b)
150,455 (f) 150,455 - 1993 09/92 (d)
</TABLE>
F-1
<PAGE>
CNL INCOME FUND XI, LTD.
(A Florida Limited Partnership)
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION - CONTINUED
December 31, 1997
<TABLE>
<CAPTION>
Costs Capitalized
Subsequent
Initial Cost To Acquisition
Buildings
Encum- and Improve- Carrying
brances Land Improvements ments Costs
<S> <C>
Quincy's Restaurants:
Lynchburg, Virginia - 359,532 - - -
Sebring, Florida - 407,656 728,192 - -
----------- ----------- ---------- ------
$12,269,964 $12,868,144 $ 878,038 $ -
=========== =========== ========== ======
Property of Joint Venture in
Which the Partnership has a
76.6% Interest and has
Invested in Under an Operating
Lease:
Jack in the Box Restaurant:
Des Moines, Washington - $ 322,726 $ 791,658 $ - $ -
=========== =========== ========== ======
Property of Joint Venture in Which
the Partnership has a 62.16% 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 72.5% Interest as Tenants-in-Common
and has Invested in Under an Operating
Lease:
Black-Eyed Pea Restaurant:
Corpus Christi, Texas - $ 715,052 $ 726,005 $ - $ -
=========== =========== ========== ======
Properties the Partnership
has Invested in Under
Direct Financing Leases:
Burger King Restaurant:
Denver, Colorado - $ - $ - $ 403,692 $ -
Denny's Restaurants:
Orlando, Florida - - - 696,187 -
Abilene, Texas - - - 534,519 -
Kent, Ohio - 101,488 421,645 - -
Cullman, Alabama - 191,016 577,043 - -
Ocean Springs, Mississippi - - 324,225 - -
Hardee's Restaurants:
Dothan, Alabama - - 407,368 - -
Laurens, South Carolina (h) - 170,905 537,361 - -
Huntersville, North Carolina - - 465,665 - -
North Augusta, South Carolina - - 457,712 - -
Old Fort, North Carolina - 100,413 457,747 - -
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Life
on Which
Gross Amount at Which Carried Depreciation
at Close of Period (c) in Latest
Buildings Date Income
and Accumulated of Con- Date Statement is
Land Improvements Total Depreciation struction Acquired Computed
----------- ------------ ----------- ------------ --------- -------- ----------
<S> <C>
359,532 (f) 359,532 - 1992 09/92 (d)
407,656 728,192 1,135,848 127,616 1992 09/92 (b)
----------- ----------- ----------- ----------
$12,269,964 $13,746,182 $26,016,146 $2,455,129
=========== =========== =========== ==========
$ 322,726 $ 791,658 $ 1,114,384 $ 137,506 1992 10/92 (b)
=========== =========== =========== ==========
$ 293,478 $ 997,104 $ 1,290,582 $ 174,562 1987 10/92 (b)
=========== =========== =========== ==========
$ 715,052 $ 726,005 $ 1,441,057 $ 22,448 1992 01/97 (b)
=========== =========== =========== ==========
- (f) (f) (d) 1992 06/92 (d)
- (f) (f) (d) 1992 06/92 (d)
- (f) (f) (d) 1992 07/92 (d)
(f) (f) (f) (e) 1987 07/92 (e)
(f) (f) (f) (e) 1992 09/92 (e)
- (f) (f) (d) 1992 09/92 (d)
- (f) (f) (d) 1992 09/92 (d)
(f) (f) (f) (e) 1992 09/92 (e)
- (f) (f) (d) 1992 09/92 (d)
- (f) (f) (d) 1992 09/92 (d)
(f) (f) (f) (e) 1992 09/92 (e)
</TABLE>
F-2
<PAGE>
CNL INCOME FUND XI, LTD.
(A Florida Limited Partnership)
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION - CONTINUED
December 31, 1997
<TABLE>
<CAPTION>
Costs Capitalized
Subsequent
Initial Cost To Acquisition
Buildings
Encum- and Improve- Carrying
brances Land Improvements ments Costs
<S> <C>
KFC Restaurant:
Deming, New Mexico - - - 389,033 -
Quincy's Restaurant:
Lynchburg, Virginia - - 648,972 - -
----------- ----------- ---------- ------
$ 563,822 $ 4,297,738 $2,023,431 $ -
=========== =========== ========== ======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Life
on Which
Gross Amount at Which Carried Depreciation
at Close of Period (c) in Latest
Buildings Date Income
and Accumulated of Con- Date Statement is
Land Improvements Total Depreciation struction Acquired Computed
----------- ------------ ----------- ------------ --------- -------- ----------
<S> <C>
- (f) (f) (d) 1993 09/92 (d)
- (f) (f) (d) 1992 09/92 (d)
</TABLE>
F-3
<PAGE>
CNL INCOME FUND XI, LTD.
(A Florida Limited Partnership)
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1997
(a) Transactions in real estate and accumulated depreciation during 1997,
1996 and 1995, are summarized as follows:
<TABLE>
<CAPTION>
Accumulated
Cost Depreciation
<S> <C>
Properties the Partnership
has Invested in Under
Operating Leases:
Balance, December 31, 1994 $26,955,605 $1,125,573
Depreciation expense - 479,226
----------- ----------
Balance, December 31, 1995 26,955,605 1,604,799
Dispositions (939,459) (84,528)
Depreciation expense - 476,198
----------- ----------
Balance, December 31, 1996 26,016,146 1,996,469
Depreciation expense - 458,660
----------- ----------
Balance, December 31, 1997 $26,016,146 $2,455,129
=========== ==========
Property of Joint Venture
in Which the Partnership
has a 76.6% Interest and has
Invested in Under an Operating
Lease:
Balance, December 31, 1994 $ 1,114,384 $ 58,341
Depreciation expense - 26,388
----------- ----------
Balance, December 31, 1995 1,114,384 84,729
Depreciation expense - 26,388
----------- ----------
Balance, December 31, 1996 1,114,384 111,117
Depreciation expense - 26,389
----------- ----------
Balance, December 31, 1997 $ 1,114,384 $ 137,506
=========== ==========
</TABLE>
F-4
<PAGE>
CNL INCOME FUND XI, LTD.
(A Florida Limited Partnership)
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED
DEPRECIATION - CONTINUED
December 31, 1997
<TABLE>
<CAPTION>
Accumulated
Cost Depreciation
<S> <C>
Property of Joint Venture
in Which the Partnership has a
62.16% Interest and has
Invested in Under an Operating
Lease:
Balance, December 31, 1994 $ 1,290,582 $ 74,851
Depreciation expense - 33,237
----------- ----------
Balance, December 31, 1995 1,290,582 108,088
Depreciation expense - 33,237
----------- ----------
Balance, December 31, 1996 1,290,582 141,325
Depreciation expense - 33,237
----------- ----------
Balance, December 31, 1997 $ 1,290,582 $ 174,562
=========== ==========
Property of Joint Venture
in Which the Partnership
has a 72.5% Interest and
has Invested in Under an
Operating Lease:
Balance, December 31, 1996 $ - $ -
Acquisitions 1,441,057 -
Depreciation expense - 22,448
----------- ----------
Balance, December 31, 1997 $ 1,441,057 $ 22,448
=========== ==========
</TABLE>
(b) Depreciation expense is computed for buildings and improvements based
upon estimated lives of 30 years.
(c) As of December 31, 1997, the aggregate cost of the Properties owned
by the Partnership and its consolidated joint ventures, and the
unconsolidated joint ventures for federal income tax purposes was
$32,903,294 and $3,449,716, 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.
F-5
<PAGE>
CNL INCOME FUND XI, LTD.
(A Florida Limited Partnership)
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED
DEPRECIATION - CONTINUED
December 31, 1997
(g) Effective January 1, 1994, the lease for this Property was amended
resulting in the reclassification of the building portion of the
lease to an operating lease. The building was recorded at net book
value as of January 1, 1994, and depreciated over its remaining
estimated life of approximately 29 years.
(h) The restaurant on this Property was converted from a Denny's
restaurant to a Hardee's restaurant during 1994.
F-6
<PAGE>
EXHIBITS
<PAGE>
EXHIBIT INDEX
Exhibit Number
3.1 Affidavit and Certificate of Limited Partnership of CNL Income
Fund XI, Ltd. (Included as Exhibit 3.2 to Registration
Statement No. 33-43278 on Form S-11 and incorporated herein by
reference.)
4.1 Affidavit and Certificate of Limited Partnership of CNL Income
Fund XI, Ltd. (Included as Exhibit 3.2 to Registration
Statement No. 33-43278 on Form S-11 and incorporated herein by
reference.)
4.2 Amended and Restated Agreement of Limited Partnership of CNL
Income Fund XI, Ltd. (Included as Exhibit 4.2 to Form 10-K
filed with the Securities and Exchange Commission on April 15,
1993, and incorporated herein by reference.)
10.1 Management Agreement between CNL Income Fund XI, Ltd. and CNL
Investment Company (Included as Exhibit 10.1 to Form 10-K
filed with the Securities and Exchange Commission on April 15,
1993, 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.)
i
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the balance
sheet of CNL Income Fund XI, Ltd. at December 31, 1997, and its statement of
income for the year then ended and is qualified in its entirety by reference to
the Form 10-K of CNL Income Fund XI, Ltd. for the year ended December 31, 1997.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 1,272,386
<SECURITIES> 0
<RECEIVABLES> 119,575
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 26,016,146
<DEPRECIATION> 2,455,129
<TOTAL-ASSETS> 35,785,538
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 34,308,232
<TOTAL-LIABILITY-AND-EQUITY> 35,785,538
<SALES> 0
<TOTAL-REVENUES> 3,832,312
<CGS> 0
<TOTAL-COSTS> 703,459
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 3,295,079
<INCOME-TAX> 0
<INCOME-CONTINUING> 3,295,079
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,295,079
<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>
