CNL INCOME FUND XI LTD
10-K405/A, 1999-12-21
REAL ESTATE
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<PAGE>

                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                            Washington, D. C. 20549
                                  FORM 10-K/A
                                Amendment No. 2

(Mark One)

[x]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934

          For the fiscal year ended  December 31, 1998
                                     ---------------------------------

                                      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)

                            450 South Orange Avenue
                            Orlando, Florida  32801
          (Address of principal executive offices, including zip code)

      Registrant's telephone number, including area code:  (407) 650-1000

          Securities registered pursuant to Section 12(b) of the Act:

        Title of each class:         Name of exchange on which registered:
               None                             Not Applicable

          Securities registered pursuant to Section 12(g) of the Act:

              Units of limited partnership interest ($10 per Unit)
                                (Title of class)

     Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days:  Yes      X      No  __________
                                         ---------

     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.  [x]

     Aggregate market value of the voting stock held by nonaffiliates of the
registrant:  The registrant registered an offering of 4,000,000 units of limited
partnership interest (the "Units") on Form S-11 under the Securities Act of
1933, as amended.  Since no established market for such Units exists, there is
no market value for such Units.  Each Unit was originally sold at $10 per Unit.

                      DOCUMENTS INCORPORATED BY REFERENCE:
                                      None
<PAGE>

     The Form 10-K of CNL Income Fund XI, Ltd. for the year ended December 31,
1998 is being amended to revise the disclosure under Item 1. Business.


                                     PART I

Item 1.  Business

     CNL Income Fund 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.  During 1998, the Partnership sold its
Property in Nashua, New Hampshire.  As a result of these transactions, as of
December 31, 1998, the Partnership owned 38 Properties.  The 38 Properties
include 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.  In
January 1999, the Partnership reinvested a portion of the net sales proceeds
from the sale of the Property in Nashua, New Hampshire in a Property in Yelm,
Washington.  In February 1999, the Partnership invested the remaining net sales
proceeds from the sale of the Property in Nashua, New Hampshire in a joint
venture arrangement, Portsmouth Joint Venture, with an affiliate of the General
Partners.  The Partnership leases the Properties on a triple-net basis with the
lessees responsible for all repairs and maintenance, property taxes, insurance
and utilities.

     On March 11, 1999, the Partnership entered into an Agreement and Plan of
Merger with CNL American Properties Fund, Inc. ("APF"), pursuant to which the
Partnership would be merged with and into a subsidiary of APF (the "Merger").
APF is a real estate investment trust whose primary business is the ownership of
restaurant properties leased on a long-term, "triple-net" basis to operators of
national and regional restaurant chains.  APF has agreed to issue shares of its
common stock, par value $0.01 per share (the "APF Shares"), as consideration for
the Merger.  At a special meeting of the partners that is expected to be held in
the fourth quarter of 1999, Limited Partners holding in excess of 50% of the
Partnership's outstanding limited partnership interests must approve the Merger
prior to consummation of the transaction.  If the Limited Partners at the
special meeting approve the Merger, APF will own the Properties and other assets
of the Partnership.

     In the event that the Limited Partners vote against the Merger, the
Partnership will hold its Properties until the General Partners determine that
the sale or other disposition of the Properties is advantageous in view of the
Partnership's investment objectives.  In deciding whether to sell Properties,
the General Partners will consider factors such as potential capital
appreciation, net cash flow and federal income tax considerations. Certain
lessees also have been granted options to purchase Properties, generally at the
Property's then fair market value after a specified portion of the lease term
has elapsed. The Partnership has no obligation to sell all or any portion of a
Property at any particular time, except as may be required under property
purchase options granted to certain lessees.
<PAGE>

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,
the joint ventures in which the Partnership is a co-venturer and the property
owned with an affiliate as tenants-in-common 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
$191,900.  The majority 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.
Lessees of 23 of the Partnership's 38 Properties also have been granted options
to purchase Properties at the Property's then fair market value after a
specified portion of the lease term has elapsed.  Fair market value will be
determined through an appraisal by an independent appraisal firm.  Under the
terms of certain leases, the option purchase price may equal the Partnership's
original cost to purchase the Property (including acquisition costs), plus a
specified percentage from the date of the lease or a specified percentage of the
Partnership's purchase price, if that amount is greater than the Property's fair
market value at the time the purchase option is exercised.

     The leases also generally provide that, in the event the Partnership wishes
to sell the Property subject to that lease, the Partnership first must offer the
lessee the right to purchase the Property on the same terms and conditions, and
for the same price, as any offer which the Partnership has received for the sale
of the Property.

     During 1994, the leases relating to the Properties in Wadsworth and Kent,
Ohio were amended to provide for the payment of reduced annual base rent with no
scheduled rent increases.  However, the lease amendments provided for lower
percentage rent breakpoints, as compared to the original lease agreements, a
change that was designed to result in higher percentage rent payments at any
time that percentage rent became payable.  In accordance with a provision in the
amendments, as a result of the former tenant assigning the leases to a new
tenant during 1998, the rents under the assigned leases reverted back to those
required under the original lease agreements.

     In January 1999, the Partnership reinvested the net sales proceeds from the
sale of the Property in Nashua, New Hampshire in a Burger King Property located
in Yelm, Washington.  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 1998, 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) Denny's, Inc. and Quincy's Restaurants, Inc.
(which are affiliated entities under common control of Advantica Restaurant
Group, Inc.) (hereinafter referred to as Advantica Restaurant Group, Inc.), 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,
1998, 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
seven  restaurants,  Advantica  Restaurant Group, Inc. was the lessee under
leases relating to five 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 1999.  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 1998 (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 1999, 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
<PAGE>

is entitled under the terms of the leases. Any failure of these lessees or
Restaurant Chains could materially affect the Partnership's income if the
Partnership is not able to re-lease the Properties in a timely manner. No single
tenant or group of affiliated tenants lease Properties with an aggregate
carrying value in excess of 20 percent of the total assets of the Partnership.

Joint Venture and Tenancy in Common Arrangements

     The Partnership has entered into two separate joint venture arrangements:
Denver Joint Venture with an unaffiliated entity to purchase and hold one
Property and CNL/Airport Joint Venture with an unaffiliated entity to purchase
and hold one Property.  In addition, the Partnership has entered into the
following separate joint venture arrangements:  Ashland Joint Venture with CNL
Income Fund IX, Ltd. and CNL Income Fund X, Ltd., affiliates of the General
Partners, to purchase and hold one Property; and Des Moines Real Estate Joint
Venture with CNL Income Fund VII, Ltd. and CNL Income Fund XII, Ltd., affiliates
of the General Partners, to purchase and hold one Property.  Each of the
affiliates is a limited partnership organized pursuant to the laws of the State
of Florida.

     The joint venture arrangements provide for the Partnership and its joint
venture partners to share in all costs and benefits associated with the joint
ventures in accordance with their respective percentage interests in the joint
ventures.  The Partnership has an 85 percent interest in Denver Joint Venture, a
77.33% interest in CNL/Airport Joint Venture, a 62.16% interest in Ashland Joint
Venture, and a 76.6% interest in Des Moines Real Estate Joint Venture. The
Partnership and its joint venture partners are also jointly and severally liable
for all debts, obligations and other liabilities of the joint ventures.

     CNL/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 ventures or by an event of dissolution.  Events of dissolution
include the bankruptcy, insolvency or termination of any joint venturer, sale of
the Property owned by the joint venture and mutual agreement of the Partnership
and its joint venture partners to dissolve the joint venture.

     The Partnership has management control of 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, in February 1999, the Partnership entered into a joint venture
arrangement, Portsmouth, Joint Venture, with CNL Income Fund XVIII, Ltd., an
affiliate of the General Partners, to purchase and hold one restaurant Property.
The joint venture agreement provides for the Partnership and its joint venture
partner to share in all costs and benefits associated with the joint venture in
proportion to each partner's percentage interest in the joint venture.  The
Partnership owns an approximate 43 percent interest in the profits and losses of
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 CNL Income Fund XVII, Ltd., 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-tenant's
percentage interest.  The Partnership owns a 72.58 percent interest in this
Property.
<PAGE>

     Each of the affiliates is a limited partnership organized pursuant to the
laws of the State of Florida.  The tenancy in common agreement restricts each
co-tenant's ability to sell, transfer, or assign its interest in the tenancy in
common's Property without first offering it for sale to the remaining co-tenant.

     The use of joint venture and tenancy in common arrangements allows the
Partnership to fully invest its available funds at times at which it would not
have sufficient funds to purchase an additional property, or at times when a
suitable opportunity to purchase an additional property is not available. The
use of joint venture and tenancy in common arrangements also provides the
Partnership with increased diversification of its portfolio among a greater
number of properties. In addition, tenancy in common arrangements may allow the
Partnership to defer the gain for federal income tax purposes upon the sale of
the property if the proceeds are reinvested in an additional property.

Certain Management Services

     CNL Fund Advisors, Inc., an affiliate of the General Partners, provides
certain services relating to management of the Partnership and its Properties
pursuant to a management agreement with the Partnership. Under this agreement,
CNL Fund Advisors, Inc. is responsible for collecting rental payments,
inspecting the Properties and the tenants' books and records, assisting the
Partnership in responding to tenant inquiries and notices and providing
information to the Partnership about the status of the leases and the
Properties. CNL Fund Advisors, Inc. also assists the General Partners in
negotiating the leases. For these services, the Partnership has agreed to pay
CNL Fund Advisors, Inc. an annual fee of one percent of the sum of gross rental
revenues from Properties wholly owned by the Partnership plus the Partnership's
allocable share of gross revenues of joint ventures in which the Partnership is
a co-venturer, but not in excess of competitive fees for comparable services.

     The management agreement continues until the Partnership no longer owns an
interest in any Properties unless terminated at an earlier date upon 60 days'
prior notice by either party.

Employees

     The Partnership has no employees.  The officers of CNL Realty Corporation
and the officers and employees of CNL Fund Advisors, Inc. perform certain
services for the Partnership.  In addition, the General Partners have available
to them the resources and expertise of the officers and employees of CNL Group,
Inc., a diversified real estate company, and its affiliates, who may also
perform certain services for the Partnership.
<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 17th day of
December, 1999.


                                 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>                                              <C>
/s/ Robert A. Bourne                    President, Treasurer and Director               December 17, 1999
- ------------------------------------   (Principal Financial and Accounting
Robert A. Bourne                                     Officer)

/s/ James M. Seneff, Jr.               Chief Executive Officer and Director             December 17, 1999
- ------------------------------------      (Principal Executive Officer)
James M. Seneff, Jr.
</TABLE>


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