FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT of 1934
For the quarterly period ended September 30, 2000
--------------------------------------------------------------------------
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
incorporation or organization) Identification No.)
450 South Orange Avenue
Orlando, Florida 32801-3336
----------------------------------- -----------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number
(including area code) (407) 540-2000
-----------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No _________
<PAGE>
CONTENTS
Page
Part I.
Item 1. Financial Statements:
Condensed Balance Sheets 1
Condensed Statements of Income 2
Condensed Statements of Partners' Capital 3
Condensed Statements of Cash Flows 4
Notes to Condensed Financial Statements 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 6-9
Item 3. Quantitative and Qualitative Disclosures About
Market Risk 9
Part II.
Other Information 10-11
<PAGE>
CNL INCOME FUND XI, LTD.
(A Florida Limited Partnership)
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
------------------- -------------------
<S> <C>
ASSETS
Land and buildings on operating leases, less
accumulated depreciation of $3,336,320 and
$3,016,369, respectively $ 21,275,069 $21,595,007
Net investment in direct financing leases 7,280,410 7,372,041
Investment in joint ventures 3,051,994 3,077,302
Cash and cash equivalents 1,792,981 1,656,500
Receivables, less allowance for doubtful accounts
of $72,169 and $11,646, respectively 84,652 175,500
Prepaid expenses 12,807 14,115
Accrued rental income 1,716,028 1,779,603
Other assets 122,024 122,024
------------------- -------------------
$ 35,335,965 $ 35,792,092
=================== ===================
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 34,067 $ 121,191
Accrued and escrowed real estate taxes payable 29,449 13,646
Distributions payable 875,006 875,006
Due to related parties 313,093 70,600
Rents paid in advance and deposits 35,143 102,480
------------------- -------------------
Total liabilities 1,286,758 1,182,923
Minority interests 508,972 509,807
Partners' capital 33,540,235 34,099,362
------------------- -------------------
$ 35,335,965 $ 35,792,092
=================== ===================
See accompanying notes to condensed financial statements.
<PAGE>
CNL INCOME FUND XI, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF INCOME
Quarter Ended Nine Months Ended
September 30, September 30,
2000 1999 2000 1999
------------ ------------ ------------- ------------
Revenues:
Rental income from operating leases $ 637,483 $646,209 $ 1,895,571 $ 1,935,980
Adjustments to accrued income -- -- (163,178 ) --
Earned income from direct financing leases 219,828 238,460 694,349 713,558
Contingent rental income 42,435 43,572 97,423 98,465
Interest and other income 24,463 20,847 76,343 62,902
------------ ------------ ------------- ------------
924,209 949,088 2,600,508 2,810,905
------------ ------------ ------------- ------------
Expenses:
General operating and administrative 52,661 39,838 152,853 111,787
Professional services 15,699 3,988 36,118 26,460
Management fees to related party 9,472 9,810 28,502 29,010
Real estate taxes 3,612 -- 10,753 --
State and other taxes 819 20 50,597 28,366
Depreciation and amortization 106,646 106,646 319,938 319,938
Transaction costs -- 63,691 68,951 183,788
------------ ------------ ------------- ------------
188,909 223,993 667,712 699,349
------------ ------------ ------------- ------------
Income Before Minority Interests in Income of
Consolidated Joint Ventures and Equity in
Earnings of Unconsolidated Joint Ventures 735,300 725,095 1,932,796 2,111,556
Minority Interests in Income of Consolidated
Joint Ventures (16,945 ) (16,943 ) (50,833 ) (50,149 )
Equity in Earnings of Unconsolidated Joint
Ventures 50,943 64,914 183,928 188,049
------------ ------------ ------------- ------------
Net Income $ 769,298 $773,066 $ 2,065,891 $ 2,249,456
============ ============ ============= ============
Allocation of Net Income:
General partners $ 7,693 $ 7,731 $ 20,659 $ 22,495
Limited partners 761,605 765,335 2,045,232 2,226,961
------------ ------------ ------------- ------------
$ 769,298 $773,066 $ 2,065,891 $ 2,249,456
============ ============ ============= ============
Net Income Per Limited Partner Unit $ 0.19 $ 0.19 $ 0.51 $ 0.56
============ ============ ============= ============
Weighted Average Number of Limited Partner
Units Outstanding 4,000,000 4,000,000 4,000,000 4,000,000
============ ============ ============= ============
See accompanying notes to condensed financial statements.
<PAGE>
CNL INCOME FUND XI, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF PARTNERS' CAPITAL
Nine Months Ended Year Ended
September 30, December 31,
2000 1999
-------------------------- ---------------------
General partners:
Beginning balance $ 242,465 $ 211,047
Net income 20,659 31,418
-------------------------- ---------------------
263,124 242,465
-------------------------- ---------------------
Limited partners:
Beginning balance 33,856,897 34,246,565
Net income 2,045,232 3,110,356
Distributions ($0.66 and $0.88 per
limited partner unit, respectively) (2,625,018 ) (3,500,024 )
-------------------------- ---------------------
33,277,111 33,856,897
-------------------------- ---------------------
Total partners' capital $ 33,540,235 $ 34,099,362
========================== =====================
See accompanying notes to condensed financial statements.
<PAGE>
CNL INCOME FUND XI, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF CASH FLOWS
Nine Months Ended
September 30,
2000 1999
--------------- ----------------
Increase (Decrease) in Cash and Cash Equivalents
Net Cash Provided by Operating Activities $2,813,167 $2,826,757
--------------- ----------------
Cash Flows from Investing Activities:
Additions to land and buildings on operating
leases -- (337,806 )
Investment in direct financing leases -- (694,610 )
Investment in joint venture -- (247,286 )
Decrease in restricted cash -- 1,630,296
--------------- ----------------
Net cash provided by investing activities -- 350,594
--------------- ----------------
Cash Flows from Financing Activities:
Distributions to limited partners (2,625,018 ) (2,745,018 )
Distributions to holders of minority interests (51,668 ) (48,752 )
--------------- ----------------
Net cash used in financing activities (2,676,686 ) (2,793,770 )
--------------- ----------------
Net Increase in Cash and Cash Equivalents 136,481 383,581
Cash and Cash Equivalents at Beginning of Period 1,656,500 1,559,240
--------------- ----------------
Cash and Cash Equivalents at End of Period 1,792,981 1,942,821
=============== ================
Supplemental Schedule of Non-Cash Investing and
Financing Activities:
Distributions declared and unpaid at end of
period $ 875,006 $ 875,006
=============== ================
See accompanying notes to condensed financial statements.
</TABLE>
<PAGE>
CNL INCOME FUND XI, LTD.
(A Florida Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS
Quarters and Nine Months Ended September 30, 2000 and 1999
1. Basis of Presentation:
The accompanying unaudited condensed financial statements have been
prepared in accordance with the instructions to Form 10-Q and do not
include all of the information and note disclosures required by generally
accepted accounting principles. The financial statements reflect all
adjustments, consisting of normal recurring adjustments, which are, in the
opinion of management, necessary to a fair statement of the results for the
interim periods presented. Operating results for the quarter and nine
months ended September 30, 2000 may not be indicative of the results that
may be expected for the year ending December 31, 2000. Amounts as of
December 31, 1999, included in the financial statements, have been derived
from audited financial statements as of that date.
These unaudited financial statements should be read in conjunction with the
financial statements and notes thereto included in Form 10-K of CNL Income
Fund XI, Ltd. (the "Partnership") for the year ended December 31, 1999.
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 the equity in the Partnership's
consolidated joint ventures. All significant intercompany accounts and
transactions have been eliminated.
2. Termination of Merger:
On March 1, 2000, the general partners and CNL American Properties Fund,
Inc. ("APF") mutually agreed to terminate the Agreement and Plan of Merger
entered into in March 1999. The general partners are continuing to evaluate
strategic alternatives for the Partnership, including alternatives to
provide liquidity to the limited partners.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
CNL Income Fund XI, Ltd. (the "Partnership") is a Florida limited
partnership that was organized on August 20, 1991 to acquire for cash, either
directly or through joint venture arrangements, both newly constructed and
existing restaurants, as well as properties upon which restaurants were to be
constructed (the "Properties"), which are leased primarily to operators of
national and regional fast-food and family-style restaurant chains. The leases
are, in general, triple-net leases, with the lessees responsible for all repairs
and maintenance, property taxes, insurance, and utilities. As of September 30,
2000, the Partnership owned 41 Properties, which included interests in five
Properties owned by joint ventures in which the Partnership is a co-venturer and
two Properties owned with affiliates as tenants-in-common.
Capital Resources
The Partnership's primary source of capital for the nine months ended
September 30, 2000 and 1999 was cash from operations (which includes cash
received from tenants, distributions from joint ventures, and interest and other
income received, less cash paid for expenses). Cash from operations was
$2,813,167 and $2,826,757 for the nine months ended September 30, 2000 and 1999,
respectively. The decrease in cash from operations for the nine months ended
September 30, 2000 was primarily a result of changes in income and expenses as
described in "Results of Operations" below and changes in the Partnership's
working capital.
Currently, rental income from the Partnership's Properties are invested
in money market accounts or other short-term, highly liquid investments such as
demand deposit accounts at commercial banks, money market accounts and
certificates of deposit with less than a 30-day maturity date, pending the
Partnership's use of such funds to pay Partnership expenses or to make
distributions to the partners. At September 30, 2000, the Partnership had
$1,792,981 invested in such short-term investments, as compared to $1,656,500 at
December 31, 1999. The funds remaining at September 30, 2000, after payment of
distributions and other liabilities, will be used to meet the Partnership's
working capital needs.
Short-Term Liquidity
The Partnership's short-term liquidity requirements consist primarily
of the operating expenses of the Partnership.
The Partnership's investment strategy of acquiring Properties for cash
and leasing them under triple-net leases to operators who generally meet
specified financial standards minimizes the Partnership's operating expenses.
The general partners believe that the leases will continue to generate cash flow
in excess of operating expenses.
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.
Total liabilities of the Partnership, including distributions payable,
increased to $1,286,758 at September 30, 2000 from $1,182,923 at December 31,
1999, primarily as a result of an increase in amounts due to related parties at
September 30, 2000, as compared to December 31, 1999. The increase in
liabilities was partially offset by a decrease in accounts payable and a
decrease in rents paid in advance at September 30, 2000, as compared to December
31, 1999. The general partners believe that the Partnership has sufficient cash
on hand to meet its current working capital needs.
The Partnership generally distributes cash from operations
remaining after the payment of operating expenses of the Partnership, to the
extent that the general partners determine that such funds are available for
distribution. Based primarily on cash from operations, the Partnership declared
distributions to limited partners of $2,625,018 for each of the nine months
ended September 30, 2000 and 1999 ($875,006 for each of the quarters ended
September 30, 2000 and 1999). This represents distributions of $0.66 per unit
for each of the nine months ended September 30, 2000 and 1999 ($0.22 per unit
for each applicable quarter). No distributions were made to the general partners
for the quarters and nine months ended September 30, 2000 and 1999. No amounts
distributed to the limited partners for the nine months ended September 30, 2000
and 1999 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.
Long-Term Liquidity
The Partnership has no long-term debt or other long-term liquidity
requirements.
Results of Operations
During the nine months ended September 30, 2000 and 1999, the
Partnership and its consolidated joint ventures, Denver Joint Venture and
CNL/Airport Joint Venture, owned and leased 36 wholly owned Properties to
operators of fast-food and family-style restaurant chains. In connection
therewith, during the nine months ended September 30, 2000 and 1999, the
Partnership, Denver Joint Venture and CNL/Airport Joint Venture earned
$2,426,742 and $2,649,538, respectively, in rental income from operating leases
(net of adjustments to accrued rental income) and earned income from direct
financing leases, $857,311 and $884,669 of which was earned during the quarters
ended September 30, 2000 and 1999, respectively. In addition, during the
quarters and nine months ended September 30, 2000 and 1999, the Partnership
earned $97,423 and $98,465, respectively, in contingent rental income, $42,435
and $43,572 of which was earned during the quarters ended September 30, 2000 and
1999, respectively. Rental and earned income decreased during the nine months
ended September 30, 2000, as compared to the nine months ended September 30,
1999, primarily as a result of the fact that during the nine months ended
September 30, 2000, the tenant of the Property in Sebring, Florida defaulted
under the terms of its lease and discontinued the operations of the restaurant.
As a result, during the nine months ended September 30, 2000, the Partnership
established an allowance for doubtful accounts of approximately $21,700 for past
due rental amounts. In addition, during the nine months ended September 30,
2000, the Partnership reversed approximately $137,100 of accrued rental income.
The accrued rental income was the accumulated amount of non-cash accounting
adjustments previously recorded in order to recognize future scheduled rent
increases as income evenly over the term of the lease. During the quarter and
nine months ended September 30, 2000, the Partnership collected and recognized
as income $21,700 in past due rental amounts received from the subtenant, for
which the Partnership had previously established an allowance for doubtful
accounts relating to the Property in Sebring, Florida.
In addition, rental and earned income decreased during the nine months
ended September 30, 2000, as compared to the nine months ended September 30,
1999, as a result of the Partnership establishing an allowance for doubtful
accounts during the quarter and nine months ended September 30, 2000, of
approximately $43,100 and $64,600, respectively, for past due rental amounts
relating to two Properties in Abilene, Texas and Avon, Colorado, in accordance
with the Partnership's policy. The general partners are continuing to pursue
collection of these amounts and will recognize such amounts as income if
collected.
During the nine months ended September 30, 1999, the Partnership owned
and leased three Properties indirectly through other joint venture arrangements
and owned and leased one Property with an affiliate as tenants-in-common. During
the nine months ended September 30, 2000, the Partnership owned and leased three
Properties indirectly through other joint venture arrangements and owned and
leased two Properties with affiliates as tenants-in-common. In connection
therewith, during the nine months ended September 30, 2000 and 1999, the
Partnership earned $183,928 and $188,049, respectively, attributable to net
income earned by the unconsolidated joint ventures, $50,943 and $64,914 of which
was earned during the quarters ended September 30, 2000 and 1999, respectively.
The decrease in net income earned by unconsolidated joint ventures was due to
the fact that during the quarter and nine months ended September 30, 2000, the
Partnership established an allowance for doubtful accounts for past due rental
amounts relating to its Property in Corpus Christi, Texas, in accordance with
the Partnership's policy. The joint venture partners will continue to pursue
collection of past due rental amounts relating to this Property and will
recognize such amounts as income, if collected. The decrease in net income
earned by unconsolidated joint ventures during the quarter and nine months ended
September 30, 2000, was partially offset by an increase in net income earned by
unconsolidated joint ventures as a result of the fact that the Partnership
reinvested a portion of the net sales proceeds from the 1998 sale of the
Property in Nashua, New Hampshire in an interest in an IHOP Property in Round
Rock, Texas, in October 1999.
Operating expenses, including depreciation and amortization expense,
were $667,712 and $699,349 for the nine months ended September 30, 2000 and
1999, respectively, $188,909 and $223,993 of which were incurred during the
quarters ended September 30, 2000 and 1999, respectively. The decrease in
operating expenses during the quarter and nine months ended September 30, 2000,
as compared to the quarter and nine months ended September 30, 1999, was
primarily attributable to the fact that the Partnership incurred less in
transaction costs relating to the general partners retaining financial and legal
advisors to assist them in evaluating and negotiating the proposed merger with
CNL American Properties Fund, Inc. ("APF"), due to the termination of the
proposed merger as described below in "Termination of Merger".
The decrease in operating expenses during the quarter and nine months
ended September 30, 2000, as compared to the quarter and nine months ended
September 30, 1999, was also attributable to an increase in (i) administrative
expenses for servicing the Partnership and its Properties, (ii) state tax
expense and (iii) real estate tax expense, (iv) professional services due to the
default by the tenant of the Property in Sebring, Florida, as described above.
Termination of Merger
On March 1, 2000, the general partners and APF mutually agreed to
terminate the Agreement and Plan of Merger entered into in March 1999. The
general partners are continuing to evaluate strategic alternatives for the
Partnership, including alternatives to provide liquidity to the limited
partners.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings. Inapplicable.
Item 2. Changes in Securities. Inapplicable.
Item 3. Defaults upon Senior Securities. Inapplicable.
Item 4. Submission of Matters to a Vote of Security Holders. Inapplicable.
Item 5. Other Information. Inapplicable.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
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 Exhibit 3.2 to
Registration Statement 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 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.)
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended
September 30, 2000.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
DATED this 10th day of November, 2000.
CNL INCOME FUND XI, LTD.
By: CNL REALTY CORPORATION
General Partner
By:/s/ James M. Seneff, Jr.
---------------------------
JAMES M. SENEFF, JR.
Chief Executive Officer
(Principal Executive Officer)
By:/s/ Robert A. Bourne
---------------------------
ROBERT A. BOURNE
President and Treasurer
(Principal Financial and
Accounting Officer)
