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, 1996
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 0-21558
CNL INCOME FUND XII, LTD.
(Exact name of registrant as specified in its charter)
Florida 59-3078856
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
400 East South Street, Suite 500
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
PART I
ITEM 1. BUSINESS
CNL Income Fund XII, 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 September 29, 1992, the
Partnership offered for sale up to $45,000,000 of limited partnership
interests (the "Units") (4,500,000 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 March 15, 1993,
at which date the maximum offering proceeds of $45,000,000 had been received
from investors who were admitted to the Partnership as limited partners
("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 $39,615,456, and were used to acquire 48 Properties, including
interests in three Properties owned by joint ventures in which the Partnership
is a co-venturer, to loan $208,855 to the tenant of Kingsville Real Estate
Joint Venture (as described in Note 6 to the financial statements in Item 8 of
this report) and to establish a working capital reserve for Partnership
purposes. During the year ended December 31, 1996, the Partnership sold its
Property in Houston, Texas, and reinvested the sales proceeds, along with
additional funds, in Middleburg Joint Venture. As a result of the above
transactions, the Partnership currently owns 48 Properties, including
interests in four Properties owned by joint ventures in which the Partnership
is co-venturer. The Partnership leases the Properties on a triple-net basis
with the lessee 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 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 19 years), and expire between
2007 and 2016. All leases are on a triple-net basis, with the lessee
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
$46,900 to $213,800. 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 four 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
1
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 June 1996, the tenant of the Sizzler Property in Tempe, Arizona,
declared bankruptcy and ceased operations of the restaurant business located
on the Property. The Partnership is currently seeking a replacement tenant
for this Property.
Major Tenants
During 1996, three lessees (or group of affiliated lessees) of the
Partnership, (i) Long John Silver's, Inc., (ii) Foodmaker, Inc. and (iii)
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), each contributed more than
ten percent of the Partnership's total rental income (including the
Partnership's share of rental income from four Properties owned by joint
ventures). As of December 31, 1996, Long John Silver's, Inc. was the lessee
under leases relating to eight restaurants, Foodmaker, Inc. was the lessee
under leases relating to ten restaurants and Flagstar Corporation was the
lessee under leases relating to 15 restaurants. It is anticipated that based
on the minimum rental payments required by the leases, these three lessees or
group of affiliated lessees each will continue to contribute more than ten
percent of the Partnership's total rental income in 1997 and subsequent years.
In addition, four Restaurant Chains, Long John Silver's, Hardee's, Jack in the
Box and Denny's, each accounted for more than ten percent of the Partnership's
total rental income during 1996 (including the Partnership's share of rental
income from four Properties owned by joint ventures). 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. As of December 31, 1996, Foodmaker, Inc. and Flagstar Corporation
each leased 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 three separate joint venture
arrangements, Williston Real Estate Joint Venture, Des Moines Real Estate
Joint Venture and Kingsville Real Estate Joint Venture, with affiliates of the
General Partners to hold three Properties. In May 1996, the Partnership
entered into a joint venture arrangement, Middleburg Joint Venture, with an
affiliate of the General Partnership, to purchase and hold one property.
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.
Each joint venture has an initial term of 20 years and, after the
expiration of the initial term, continues 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 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 shares management control equally with affiliates of the
General Partners for each 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.
2
Net cash flow from operations of Williston Real Estate Joint Venture,
Des Moines Real Estate Joint Venture, Kingsville Real Estate Joint Venture and
Middleburg Joint Venture is distributed 59 percent, 18.61%, 31.13%, 87.54%,
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.
Certain Management Services
CNL Investment Company, 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 December 31,
1994. Under this agreement, CNL Investment Company 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 Investment Company also assisted the General
Partners in negotiating the leases. For these services, the Partnership had
agreed to pay CNL Investment Company 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 January 1, 1995, certain officers and employees of CNL
Investment Company became officers and employees of CNL Income Fund Advisors,
Inc., an affiliate of the General Partners, and CNL Investment Company
assigned its rights in, and its obligations under, the management agreement
with the Partnership to CNL Income Fund Advisors, Inc. In addition, 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.
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.
3
ITEM 2. PROPERTIES
As of December 31, 1996, the Partnership owned, either directly or
through joint venture arrangements, 48 Properties, located in 15 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 9,200
to 467,400 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 acquired by the
Partnership 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, 1996 (see Item 1. Business -
Major Tenants), are substantially the same as those described in Item 1.
Business - Leases.
Flagstar Corporation leases 11 Hardee's restaurants, three Denny's
restaurants, and one Quincy's restaurant. The initial term of each lease is
20 years (expiring between 2012 and 2013) and the average minimum base annual
rent is approximately $77,900 (ranging from approximately $51,400 to
$128,800).
Long John Silver's, Inc. leases eight Long John Silver's restaurants.
The initial term of each lease is 20 years (expiring between 2012 and 2013)
and the average minimum base annual rent is approximately $70,000 (ranging
from approximately $61,600 to $76,300).
Foodmaker, Inc. leases ten Jack in the Box restaurants. The initial
term of each lease is 18 years (expiring between 2010 and 2011) and the
average minimum base annual rent is approximately $98,200 (ranging from
approximately $75,900 to $123,400).
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.
4
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
As of February 28, 1997, there were 3,464 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 1996 and 1995 other
than pursuant to the Plan, net of commissions (which ranged from zero to
15.56%).
1996 (1) 1995 (1)
---------------------- ----------------------
High Low Average High Low Average
------ ----- ------- ------ ----- -------
First Quarter $10.00 $9.50 $9.56 $ 7.75 $ 7.75 $ 7.75
Second Quarter 9.50 8.79 9.15 8.63 7.52 8.20
Third Quarter 10.00 4.64 8.41 9.50 8.75 9.13
Fourth Quarter 9.50 7.66 8.53 10.00 8.46 9.31
(1) A total of 22,480 and 27,830 Units were transferred other than pursuant
to the Plan for the years ended December 31, 1996 and 1995,
respectively.
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, 1996 and 1995, the Partnership declared
cash distributions of $3,825,008 and $3,870,007, respectively, to the Limited
Partners. During the quarter ended December 31, 1995, the Partnership
declared a special distribution to the Limited Partners of $45,000 which
represented cumulative excess operating reserves. No amounts distributed to
partners for the years ended December 31, 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. 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. This amount
includes monthly distributions made in arrears for the Limited Partners
electing to receive such distributions on this basis.
Quarter Ended 1996 1995
------------- ---------- ----------
March 31 $ 956,252 $ 956,252
June 30 956,252 956,252
September 30 956,252 956,252
December 31 956,252 1,001,251
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.
5
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Year Ended December 31:
Revenues (1) $ 4,553,058 $ 4,570,571 $ 4,548,580 $ 3,614,326 $ 70,407
Net income (2) 3,943,043 4,014,372 4,027,834 3,134,229 59,199
Cash distributions
declared (3) 3,825,008 3,870,007 3,825,006 2,870,011 124,995
Net income per Unit (2)(4) 0.87 0.88 0.89 0.72 0.05
Cash distributions declared
per Unit (3)(4) 0.85 0.86 0.85 0.66 0.12
At December 31:
Total assets $41,343,138 $41,229,132 $41,127,173 $40,945,978 $18,910,975
Partners' capital 40,290,106 40,172,071 40,027,706 39,824,878 18,702,875
</TABLE>
(1) Revenues include equity in earnings of joint ventures.
(2) Net income for the year ended December 31, 1996, includes $15,355 from a
loss on sale of land and building.
(3) Distributions for the year ended December 31, 1995, include a special
distribution to the Limited Partners of $45,000, which represented
cumulative excess operating reserves.
(4) Based on the weighted average number of Limited Partner Units
outstanding during each of the years ended December 31, 1996, 1995, 1994
and 1993, and during the period October 8, 1992 through December 31,
1992.
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 lessee generally responsible for
all repairs and maintenance, property taxes, insurance and utilities. As of
December 31, 1996, the Partnership owned 48 Properties, either directly or
through joint venture arrangements.
Liquidity and Capital Resources
The Partnership's primary source of capital for the years ended December
31, 1996, 1995 and 1994, 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 $3,951,689,
$3,819,362 and $3,848,962 for the years ended December 31, 1996, 1995 and
1994, respectively. The increase in cash from operations during 1996, and the
decrease during 1995, each as compared to the previous year, are primarily a
result of changes in income and expenses as discussed in "Results of
Operations" below and 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, 1996, 1995 and 1994.
6
In April 1996, the Partnership sold its Property in Houston, Texas, to
an unrelated third party for $1,640,000. As a result of this transaction, the
Partnership recognized a loss of $15,355 for financial reporting purposes
primarily due to acquisition fees and miscellaneous acquisition expenses that
the Partnership had allocated to this property. In May 1996, the Partnership
reinvested the sales proceeds from this sale, along with additional funds, in
Middleburg Joint Venture. The Partnership has an 87.54% interest in the
profits and losses of Middleburg Joint Venture and the remaining interest in
this joint venture is held by an affiliate of the Partnership which has the
same General Partners.
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, 1996, the Partnership had
$1,800,601 invested in such short-term investments as compared to $1,716,203
at December 31, 1995. The funds remaining at December 31, 1996, after payment
of distributions and other liabilities, will be used to meet the Partnership's
working capital and other needs.
During 1996, 1995 and 1994, affiliates of the General Partners incurred
on behalf of the Partnership $118,929, $105,019 and $102,675, respectively,
for certain operating expenses. As of December 31, 1996 and 1995, the
Partnership owed $2,981 and $7,250, respectively, to affiliates for such
amounts and accounting and administrative services. As of February 28, 1997,
the Partnership had reimbursed the affiliates all such amounts. Other
liabilities increased to $1,050,051 at December 31, 1996, from $1,049,811 at
December 31, 1995. The General Partners believe that the Partnership has
sufficient cash on hand to meet its current working capital needs.
Based on cash from operations, the Partnership declared distributions to
the Limited Partners of $3,825,008, $3,870,007 and $3,825,006 for the years
ended December 31, 1996, 1995 and 1994, respectively. This represents a
distribution of $0.85, $0.86 and $0.85 per Unit for the years ended December
31, 1996, 1995 and 1994, respectively. No amounts distributed or to be
distributed to the Limited Partners for the years ended December 31, 1996,
1995 and 1994, 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.
7
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, 1995 and 1994, the
Partnership owned and leased 45 wholly owned Properties (including one
Property in Houston, Texas, which was sold in April 1996). In addition,
during 1995 and 1994, the Partnership was a co-venturer in three separate
joint ventures that each owned and leased one Property, and during 1996, the
Partnership was a co-venturer in four separate joint ventures that each owned
and leased one Property. As of December 31, 1996, the Partnership owned,
either directly or through joint venture arrangements, 48 Properties which are
subject to long-term, triple-net leases. The leases of the Properties provide
for minimum base annual rental payments (payable in monthly installments)
ranging from approximately $46,900 to $213,800. 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, 1996, 1995 and 1994, the Partnership
earned $4,165,640, $4,330,100 and $4,358,194, respectively, in rental income
from operating leases and earned income from direct financing leases from
Properties wholly owned by the Partnership. The decrease in rental and earned
income during 1996, as compared to 1995, is primarily attributable to a
decrease of approximately $136,500 during the year ended December 31, 1996, as
a result of the sale of the Property in Houston, Texas, in April 1996, as
discussed above in "Liquidity and Capital Resources".
Rental and earned income also decreased approximately $39,800 during
1996, as compared to 1995, as a result of the fact that the tenant of the
Sizzler Property in Tempe, Arizona, declared bankruptcy and ceased operations
of the restaurant business located on the Property in June 1996. The
Partnership is currently seeking a replacement tenant for this Property;
however, rental income amounts are expected to be reduced until such time as a
replacement tenant can be located. As a result of the termination of this
lease, during the year ended December 31, 1996, the Partnership reclassified
this lease from a direct financing lease to an operating lease.
During the years ended December 31, 1996, 1995 and 1994, the Partnership
also earned $67,652, $70,819 and $35,383, respectively, in contingent rental
income. The increase in contingent rental income during 1995, as compared to
1994, is primarily attributable to the fact that contingent rent became due on
certain Properties which had not previously been required to pay percentage
rent under the terms of their leases.
In addition, for the years ended December 31, 1996, 1995 and 1994, the
Partnership earned $200,499, $81,582 and $85,252, respectively, attributable
to net income earned by joint ventures in which the Partnership is a co-
venturer. The increase in net income earned by joint ventures is primarily
due to the fact that the Partnership invested in Middleburg Joint Venture in
May 1996, as described above in "Liquidity and Capital Resources."
During the year ended December 31, 1996, three of the Partnership's
lessees (or group of affiliated lessees), (i) Long John Silver's, Inc., (ii)
Foodmaker, Inc. and (iii) 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),
each contributed more than ten percent of the Partnership's total rental
income (including the Partnership's share of rental income from four
Properties owned by joint ventures). As of December 31, 1996, Long John
Silver's, Inc. was the lessee under leases relating to eight restaurants,
Foodmaker, Inc. was the lessee under leases relating to ten restaurants and
Flagstar Corporation was the lessee under leases relating to 15 restaurants.
It is anticipated that based on the minimum rental payments required by the
leases, these three lessees or group of affiliated lessees each will continue
to contribute more than ten percent of the Partnership's total rental income
during 1997 and subsequent years. In addition, four Restaurant Chains, Long
John Silver's, Hardee's, Jack in the Box and Denny's, each accounted for more
than ten percent of the Partnership's total rental income during 1996
(including the Partnership's share of rental income from four Properties owned
by joint ventures). 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.
8
During the years ended December 31, 1996, 1995 and 1994, the Partnership
also earned $119,267, $88,070 and $69,751, respectively, in interest and other
income. The increase in interest and other income during 1996, as compared to
1995, is primarily attributable to the Partnership granting certain easement
rights to the owner of the property adjacent to the Partnership's Property in
Black Mountain, North Carolina, in exchange for $25,000. The increase in
interest and other income during 1995, as compared to 1994, is primarily
attributable to an increase in interest rates earned by the Partnership from
money market accounts or other short-term liquid investments.
Operating expenses, including depreciation and amortization expense,
were $594,660, $556,199 and $520,746 for the years ended December 31, 1996,
1995 and 1994, respectively. The increase in operating expenses for the years
ended December 31, 1996 and 1995, each as compared to the prior year, is
primarily attributable to 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, as discussed
above in "Liquidity and Capital Resources."
The increase in operating expenses during 1996, as compared to 1995,
also is a result of the Partnership recording current and past due real estate
taxes relating to the Property in Tempe, Arizona, during 1996, as a result of
the tenant declaring bankruptcy and ceasing operations of the restaurant
business located on the Property. The Partnership expects to continue to
incur certain expenses, such as real estate taxes, insurance and maintenance
until a replacement tenant is located. The Partnership is currently seeking a
replacement tenant for this Property.
The increase in operating expenses during 1996, as compared to 1995, was
partially offset by a decrease in depreciation expense during the year ended
December 31, 1996, as a result of the sale of the Property located in Houston,
Texas, in April 1996, as described above in "Liquidity and Capital Resources".
As a result of the sale of the Property in Houston, Texas, as described
above in "Liquidity and Capital Resources," the Partnership recognized a loss
of $15,355 for financial reporting purposes for the year ended December 31,
1996. The loss was primarily due to acquisition fees and miscellaneous
acquisition expenses that the Partnership had allocated to this Property. No
Properties were sold during 1995 and 1994.
Effective January 1, 1996, the Partnership adopted Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." The statement
requires that an entity review long-lived assets and certain identifiable
intangibles, to be held and used, for impairment whenever events or changes in
circumstances indicate that the carrying amount of the asset may not be
recoverable. Adoption of this standard had no material effect on the
Partnership's financial position or results of operations.
The Partnership's leases as of December 31, 1996, 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
9
CNL INCOME FUND XII, LTD.
(A Florida Limited Partnership)
CONTENTS
Page
Report of Independent Accountants 11
Financial Statements:
Balance Sheets 12
Statements of Income 13
Statements of Partners' Capital 14
Statements of Cash Flows 15
Notes to Financial Statements 17
10
Report of Independent Accountants
To the Partners
CNL Income Fund XII, Ltd.
We have audited the financial statements and the financial statement schedule
of CNL Income Fund XII, 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 pro-vide 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 XII, Ltd. as
of December 31, 1996 and 1995, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1996 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 18, 1997
11
CNL INCOME FUND XII, LTD.
(A Florida Limited Partnership)
BALANCE SHEETS
December 31,
ASSETS 1996 1995
----------- -----------
Land and buildings on operating
leases, less accumulated
depreciation $21,082,468 $22,308,784
Net investment in direct
financing leases 13,789,036 14,652,991
Investment in joint ventures 2,496,749 841,822
Cash and cash equivalents 1,800,601 1,716,203
Receivables, less allowance for
doubtful accounts of $23,395
and $39,791 202,908 259,320
Prepaid expenses 6,786 1,924
Organization costs, less
accumulated amortization of
$8,465 and $6,465 1,535 3,535
Accrued rental income 1,963,055 1,444,553
----------- -----------
$41,343,138 $41,229,132
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 9,303 $ 7,655
Accrued and escrowed real estate
taxes payable 14,706 7,609
Distributions payable 956,252 1,001,252
Due to related parties 2,981 7,250
Rents paid in advance 69,790 33,295
----------- -----------
Total liabilities 1,053,032 1,057,061
Partners' capital 40,290,106 40,172,071
----------- -----------
$41,343,138 $41,229,132
=========== ===========
See accompanying notes to financial statements.
12
CNL INCOME FUND XII, LTD.
(A Florida Limited Partnership)
STATEMENTS OF INCOME
Year Ended December 31,
1996 1995 1994
---------- ---------- ----------
Revenues:
Rental income from operating
leases $2,473,574 $2,599,899 $2,604,691
Earned income from direct
financing leases 1,692,066 1,730,201 1,753,503
Contingent rental income 67,652 70,819 35,383
Interest and other income 119,267 88,070 69,751
---------- ---------- ----------
4,352,559 4,488,989 4,463,328
---------- ---------- ----------
Expenses:
General operating and admini-
strative 173,614 141,271 110,448
Professional services 39,121 27,680 31,712
Management fees to related parties 40,244 40,774 40,596
Real estate taxes 7,891 - -
State and other taxes 18,471 18,679 10,195
Depreciation and amortization 315,319 327,795 327,795
---------- ---------- ----------
594,660 556,199 520,746
---------- ---------- ----------
Income Before Equity in Earnings of
Joint Ventures and Loss on Sale
of Land and Building 3,757,899 3,932,790 3,942,582
Equity in Earnings of Joint Ventures 200,499 81,582 85,252
Loss on Sale of Land and Building (15,355) - -
---------- ---------- ----------
Net Income $3,943,043 $4,014,372 $4,027,834
========== ========== ==========
Allocation of Net Income:
General partners $ 39,533 $ 40,144 $ 40,278
Limited partners 3,903,510 3,974,228 3,987,556
---------- ---------- ----------
$3,943,043 $4,014,372 $4,027,834
========== ========== ==========
Net Income Per Limited Partner Unit $ 0.87 $ 0.88 $ 0.89
========== ========== ==========
Weighted Average Number of Limited
Partner Units Outstanding 4,500,000 4,500,000 4,500,000
========== ========== ==========
See accompanying notes to financial statements.
13
CNL INCOME FUND XII, LTD.
(A Florida Limited Partnership)
STATEMENTS OF PARTNERS' CAPITAL
Years Ended December 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
General Partners Limited Partners
----------------- --------------------------------------------------
Accumu- Accumu-
Contri- lated Contri- Distri- lated Syndication
butions Earnings butions butions Earnings Costs Total
------- -------- ----------- ------------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1993 $1,000 $31,934 $45,000,000 $ (2,995,006) $ 3,161,494 $(5,374,544) $39,824,878
Distributions to limited
partners ($0.85 per
limited partner unit) - - - (3,825,006) - - (3,825,006)
Net income - 40,278 - - 3,987,556 - 4,027,834
------ -------- ----------- ------------ ----------- ----------- -----------
Balance, December 31, 1994 1,000 72,212 45,000,000 (6,820,012) 7,149,050 (5,374,544) 40,027,706
Distributions to limited
partners ($0.86 per
limited partner unit) - - - (3,870,007) - - (3,870,007)
Net income - 40,144 - - 3,974,228 - 4,014,372
------ -------- ----------- ------------ ----------- ----------- -----------
Balance, December 31, 1995 1,000 112,356 45,000,000 (10,690,019) 11,123,278 (5,374,544) 40,172,071
Distributions to limited
partners ($0.85 per
limited partner unit) - - - (3,825,008) - - (3,825,008)
Net income - 39,533 - - 3,903,510 - 3,943,043
------ -------- ----------- ------------ ----------- ----------- -----------
Balance, December 31, 1996 $1,000 $151,889 $45,000,000 $(14,515,027) $15,026,788 $(5,374,544) $40,290,106
====== ======== =========== ============ =========== =========== ===========
See accompanying notes to financial statements.
14
</TABLE>
CNL INCOME FUND XII, LTD.
(A Florida Limited Partnership)
STATEMENTS OF CASH FLOWS
Year Ended December 31,
1996 1995 1994
------------ ------------ ------------
Increase (Decrease) in Cash and
Cash Equivalents:
Cash Flows From Operating
Activities:
Cash received from tenants $ 3,951,047 $ 3,878,623 $ 3,906,229
Distributions from joint
ventures 190,596 80,633 83,893
Cash paid for expenses (278,240) (224,091) (206,607)
Interest received 88,286 84,197 65,447
------------ ------------ ------------
Net cash provided by
operating activities 3,951,689 3,819,362 3,848,962
------------ ------------ ------------
Cash Flows From Investing
Activities:
Proceeds from sale of
land and building 1,640,000 - -
Additions to land and
buildings on operating
leases - - (230)
Investment in direct
financing leases - - (591)
Investment in joint
ventures (1,645,024) - (4,400)
Collections on loan to
tenant of joint venture 7,741 7,008 6,400
Other - - 973
------------ ------------ ------------
Net cash provided by
investing activities 2,717 7,008 2,152
------------ ------------ ------------
Cash Flows From Financing
Activities:
Distributions to limited
partners (3,870,008) (3,825,007) (3,768,754)
------------ ------------ ------------
Net cash used in
financing activities (3,870,008) (3,825,007) (3,768,754)
------------ ------------ ------------
Net Increase in Cash and Cash
Equivalents 84,398 1,363 82,360
Cash and Cash Equivalents at
Beginning of Year 1,716,203 1,714,840 1,632,480
------------ ------------ ------------
Cash and Cash Equivalents at
End of Year $ 1,800,601 $ 1,716,203 $ 1,714,840
============ ============ ============
See accompanying notes to financial statements.
15
CNL INCOME FUND XII, LTD.
(A Florida Limited Partnership)
STATEMENTS OF CASH FLOWS - CONTINUED
Year Ended December 31,
1996 1995 1994
------------ ------------ ------------
Reconciliation of Net Income to
Net Cash Provided by Operating
Activities:
Net income $ 3,943,043 $ 4,014,372 $ 4,027,834
------------ ------------ ------------
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation 313,319 325,795 325,795
Amortization 2,000 2,000 2,000
Equity in earnings of
joint ventures, net of
distributions (9,903) (949) (1,359)
Loss on sale of land and
building 15,355 - -
Decrease (increase) in
receivables 48,671 (24,836) (6,462)
Decrease in net invest-
ment in direct finan-
cing leases 121,597 111,675 98,979
Increase in prepaid
expenses (4,862) (1,924) -
Increase in accrued
rental income (518,502) (519,365) (520,295)
Increase (decrease) in
accounts payable and
accrued expenses 8,745 (9,623) (22,434)
Increase (decrease) in
due to related parties (4,269) 7,055 (9,611)
Increase (decrease) in
rents paid in advance 36,495 (84,838) (45,485)
------------ ------------ ------------
Total adjustments 8,646 (195,010) (178,872)
------------ ------------ ------------
Net Cash Provided by Operating
Activities $ 3,951,689 $ 3,819,362 $ 3,848,962
============ ============ ============
Supplemental Schedule of Non-
Cash Financing Activities:
Distributions declared and
unpaid at December 31 $ 956,252 $ 1,001,252 $ 956,252
============ ============ ============
See accompanying notes to financial statements.
16
CNL INCOME FUND XII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
Years Ended December 31, 1996, 1995 and 1994
1. Significant Accounting Policies:
Organization and Nature of Business - CNL Income Fund XII, 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 or franchisees 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.
17
CNL INCOME FUND XII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1996, 1995 and 1994
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, a loss will be recorded for
the amount by which the carrying value of the asset exceeds its fair
market 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 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's investments in Des
Moines Real Estate Joint Venture, Williston Real Estate Joint Venture,
Kingsville Real Estate Joint Venture and Middleburg Joint Venture are
accounted for using the equity method since the Partnership shares
control with affiliates which have the same general partners.
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.
18
CNL INCOME FUND XII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1996, 1995 and 1994
1. Significant Accounting Policies - Continued:
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. Actual results could differ from those
estimates.
Reclassification - Certain items in the prior years' financial
statements have been reclassified to conform to 1996 presentation.
These reclassifications had no effect on partners' capital or net
income.
New Accounting Standard - Effective January 1, 1996, the Partnership
adopted Statement of Financial Accounting Standards No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be
Disposed Of." The statement requires that an entity review long-lived
assets and certain identifiable intangibles, to be held and used, for
impairment
19
CNL INCOME FUND XII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1996, 1995 and 1994
1. Significant Accounting Policies - Continued:
whenever events or changes in circumstances indicate that the carrying
amount of the asset may not be recoverable. Adoption of this standard
had no material effect on the Partnership's financial position or
results of operations.
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." Seventeen of the leases have
been classified as operating leases and 27 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
21 of the 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 four 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:
1996 1995
----------- -----------
Land $12,837,754 $13,484,739
Buildings 9,388,412 9,763,460
----------- -----------
22,226,166 23,248,199
Less accumulated
depreciation (1,143,698) (939,415)
----------- -----------
$21,082,468 $22,308,784
=========== ===========
20
CNL INCOME FUND XII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1996, 1995 and 1994
3. Land and Buildings on Operating Leases - Continued:
In April 1996, the Partnership sold its property in Houston, Texas, to
an unrelated third party for $1,640,000. As a result of this
transaction, the Partnership recognized a loss of $15,355 for financial
reporting purposes primarily due to acquisition fees and miscellaneous
acquisition expenses that the Partnership had allocated to this
property.
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, 1996, 1995 and 1994, the Partnership
recognized $518,502, $519,365 and $520,295, 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, 1996:
1997 $ 1,894,841
1998 2,155,885
1999 2,206,192
2000 2,208,628
2001 2,218,570
Thereafter 26,845,479
-----------
$37,529,595
===========
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.
21
CNL INCOME FUND XII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1996, 1995 and 1994
4. Net Investment in Direct Financing Leases:
The following lists the components of the net investment in direct
financing leases at December 31:
1996 1995
------------ ------------
Minimum lease payments
receivable $ 30,188,147 $ 33,136,882
Estimated residual
values 4,190,941 4,473,273
Less unearned income (20,590,052) (22,957,164)
------------ ------------
Net investment in
direct financing
leases $ 13,789,036 $ 14,652,991
============ ============
The following is a schedule of future minimum lease payments to be
received on direct financing leases at December 31, 1996:
1997 $ 1,774,482
1998 1,810,632
1999 1,818,830
2000 1,818,830
2001 1,818,830
Thereafter 21,146,543
-----------
$30,188,147
===========
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).
During the year ended December 31, 1996, one of the Partnership's leases
was terminated. As a result of the lease termination, the Partnership
reclassified this lease from a direct financing lease to an operating
lease, whereby the property was recorded at its net carrying value of
$742,358. Due to the fact that the net carrying value was less than the
cost of the property, no loss was recorded for financial reporting
purposes.
22
CNL INCOME FUND XII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1996, 1995 and 1994
5. Investment in Joint Ventures:
The Partnership has a 59 percent, an 18.61% and a 31.13% interest in the
profits and losses of Williston Real Estate Joint Venture, Des Moines
Real Estate Joint Venture and Kingsville 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 May 1996, the Partnership entered into a joint venture arrangement,
Middleburg Joint Venture, with an affiliate of the Partnership which has
the same general partners to hold one restaurant property. As of
December 31, 1996, the Partnership and its co-venture partner had
contributed $1,645,024 and $234,059, respectively, to the joint venture
to acquire the restaurant property. As of December 31, 1996, the
Partnership and its co-venture partner owned an 87.54% and a 12.46%
interest, respectively, in the profits and losses of the joint
venture. The Partnership accounts for its investment in this joint
venture under the equity method since the Partnership shares control
with the affiliate.
Williston Real Estate Joint Venture, Des Moines Real Estate Joint
Venture, Kingsville Real Estate Joint Venture and Middleburg Joint
Venture each own and lease one property to an operator of national fast-
food or family-style restaurants. The following presents the joint
ventures' combined, condensed financial information at December 31:
1996 1995
---------- ----------
Land and building on
operating leases,
less accumulated
depreciation $1,795,026 $1,299,844
Net investment in direct
financing leases 2,466,050 1,120,930
Cash 668 6,373
Accrued rental income 102,435 61,805
Other assets 358 119
Liabilities 673 6,330
Partners' capital 4,363,864 2,482,741
Revenues 405,615 268,393
Net income 372,158 236,811
The Partnership recognized income totalling $200,499, $81,582 and
$85,252 for the years ended December 31, 1996, 1995 and 1994,
respectively, from these joint ventures.
23
CNL INCOME FUND XII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1996, 1995 and 1994
6. Receivables:
During 1993, the Partnership loaned $208,855 to the tenant of the
property owned by Kingsville Real Estate Joint Venture in connection
with the purchase of equipment for the restaurant property. The loan,
which bears interest at a rate of ten percent, is payable over 84 months
and is collateralized by the restaurant equipment. Receivables at
December 31, 1996 and 1995, include $186,040 and $193,781, respectively,
relating to this loan.
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, 1996, 1995 and 1994, the Partnership
declared distributions to the limited partners of $3,825,008, $3,870,007
and $3,825,006, respectively. No distributions have been made to the
general partners to date.
24
CNL INCOME FUND XII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1996, 1995 and 1994
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:
1996 1995 1994
---------- ---------- ----------
Net income for finan-
cial reporting
purposes $3,943,043 $4,014,372 $4,027,834
Depreciation for tax
reporting purposes
in excess of depreci-
ation for financial
reporting purposes (259,752) (264,905) (264,905)
Direct financing leases
recorded as operating
leases for tax
reporting purposes 121,597 111,675 98,979
Loss on sale of land and
building for tax
reporting purposes
in excess of loss for
financial reporting
purposes (26,151) - -
Equity in earnings of
joint ventures for
tax reporting purposes
less than equity in
earnings of joint
ventures for financial
reporting purposes (46,345) (15,685) (14,122)
Allowance for doubtful
accounts (16,396) 20,792 18,999
Accrued rental income (518,502) (519,365) (520,295)
Rents paid in advance 36,495 (84,838) (45,485)
---------- ---------- ----------
Net income for federal
income tax purposes $3,233,989 $3,262,046 $3,301,005
========== ========== ==========
25
CNL INCOME FUND XII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1996, 1995 and 1994
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
Securities, Corp., CNL Investment Company and CNL Fund Advisors, Inc.
The other individual general partner, Robert A. Bourne, is the president
of CNL Securities Corp., CNL Investment Company and CNL Fund Advisors,
Inc. 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, 1996, 1995 and
1994, CNL Investment Company, 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, 1996, 1995 and 1994, 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 the Affiliates a management fee of one
percent of the sum of gross revenues from properties 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 $40,244, $40,774 and $40,596 for the years ended December 31, 1996,
1995 and 1994, 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 net 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.
26
CNL INCOME FUND XII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1996, 1995 and 1994
9. Related Party Transactions - Continued:
During the years ended December 31, 1996, 1995 and 1994, the Affiliates
provided accounting and administrative services to the Partnership on a
day-to-day basis. The Partnership incurred $97,722, $68,337 and $44,324
for the years ended December 31, 1996, 1995 and 1994, respectively, for
such services.
The due to related parties at December 31, 1996 and 1995, totalled
$2,981 and $7,250, respectively.
10. Concentration of Credit Risk:
The following schedule presents rental and earned income from individual
lessees, or affiliated groups of 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
joint ventures) for at least one of the years ended December 31:
1996 1995 1994
---------- ---------- ----------
Flagstar Enter-
prises, Inc.,
Denny's, Inc.
and Quincy's
Restaurants,
Inc. $1,224,953 $1,234,649 $1,243,538
Foodmaker, Inc. 1,024,667 1,024,668 1,024,668
Long John Sil-
ver's, Inc. 649,992 654,384 653,457
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 rental and earned income from
joint ventures) for at least one of the years ended December 31:
1996 1995 1994
---------- ---------- ----------
Jack in the Box $1,024,667 $1,024,668 $1,024,668
Denny's 818,672 823,411 815,470
Hardee's 791,998 798,357 804,482
Long John
Silver's 715,685 720,077 719,150
27
CNL INCOME FUND XII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1996, 1995 and 1994
13. Concentration of Credit Risk - Continued:
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 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.
28
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 50, 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., 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,
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 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 Chairman of the Board and Chief Executive Officer of CNL
American Properties Fund, Inc. since 1994, and has served as 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 $40 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 XI,
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.
Robert A. Bourne, age 49, 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, CNL Fund Advisors, Inc.,
and prior to its merger with CNL Fund Advisors, Inc., effective January 1,
1996, CNL Income Fund
29
Advisors, Inc., and President, Chief Investment Officer and a director of CNL
Institutional Advisors, Inc., a registered investment advisor. Mr. Bourne
also has served as a director since 1992, as President from July 1992 to
February 1996, and since February 1996, as Vice Chairman of the Board of
Directors, Secretary and Treasurer 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, as Treasurer and Vice Chairman of CNL Realty
Advisors, 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, Suite 500, 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.,
is a diversified real estate corporation organized in 1980 under the laws of
the State of Florida. Other subsidiaries and affiliates of CNL Group, Inc.
include a property development and management company, two investment advisory
companies, and seven corporations organized as strategic business units.
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.
John T. Walker, age 38, joined CNL Group, Inc. in September 1994, as
Senior Vice President, responsible for Research and Development. He currently
serves as 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
30
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 48, 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, a director of CNL Realty Advisors, Inc. since its
inception in 1991, Secretary of CNL Realty Advisors, Inc. since its inception
in 1991 (excluding February 1996 to July 1996), 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 250
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 and is a registered financial and operations
principal of CNL Securities Corp. She was licensed as a certified public
accountant in 1979.
Jeanne A. Wall, age 38, has served as Chief Operating Officer of
CNL Investment Company and of CNL Securities Corp. since November 1994 and
previously served as Executive Vice President of CNL Investment Company since
January 1991. In 1984, Ms. Wall joined CNL Securities Corp. as its Partnership
Administrator. In 1985, Ms. Wall became Vice President of CNL Securities
Corp. and, in 1987, she became a Senior 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 the partnership administration and investor
services for programs offered through participating brokers. 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, as Vice President of
Commercial Net Lease Realty, Inc. since 1992, as Executive Vice President of
CNL Income Fund Advisors, Inc. from its inception in 1994 to December 1995, 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 33, has served as Chief Financial Officer of
CNL Fund Advisors, Inc. since September 1996. Mr. Shackelford joined CNL
Group, Inc. in September 1996. He also currently serves as the Chief
Financial Officer of CNL American Properties Fund, Inc. 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 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.
31
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, 1997, 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, 1997, the beneficial
ownership interests of the General Partners in the Registrant.
Title of Class Name of Partner Percent of Class
-------------- --------------- ----------------
General Partnership Interests James M. Seneff, Jr. 45%
Robert A. Bourne 45%
CNL Realty Corporation 10%
----
100%
====
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.
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, 1996, exclusive of any distributions to which the General
Partners or their affiliates may be entitled by reason of their purchase and
ownership of Units.
Amount Incurred
Type of Compensation For the Year
and Recipient Method of Computation Ended December 31, 1996
-------------------- --------------------- -----------------------
Reimbursement to Operating expenses are Operating expenses
affiliates for operating reimbursed at the incurred behalf of the
expenses lower of cost or 90 Partnership: $118,929
percent of the
prevailing rate at Accounting and
which comparable administrative
services could have services: $97,722
been obtained in the
same geographic area.
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.
32
Amount Incurred
Type of Compensation For the Year
and Recipient Method of Computation Ended December 31, 1996
-------------------- --------------------- -----------------------
Annual management fee to One percent of the sum $40,244
affiliates of gross 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.
Deferred, subordinated A deferred, $ - 0 -
real estate disposition subordinated real
fee payable to estate disposition
affiliates fee, payable 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' A deferred, $ - 0 -
deferred, sub-ordinated subordinated share
share of Partnership net equal to one percent
cash flow of Partnership
distributions of net
cash flow,
subordinated to
certain minimum
returns to the Limited
Partners.
33
Amount Incurred
Type of Compensation For the Year
and Recipient Method of Computation Ended December 31, 1996
-------------------- --------------------- -----------------------
General Partners' A deferred, $ - 0 -
deferred, sub-ordinated subordinated share
share of Partnership net equal to five percent
sales proceeds from a of Partnership
sale or sales distributions of such
net sales proceeds,
subordinated to
certain minimum
returns to the Limited
Partners.
34
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, 1996 and 1995
Statements of Income for the years ended December 31, 1996, 1995
and 1994
Statements of Partners' Capital for the years ended December 31,
1996, 1995 and 1994
Statements of Cash Flows for the years ended December 31, 1996,
1995 and 1994
Notes to Financial Statements
2. Financial Statement Schedule
Schedule III - Real Estate and Accumulated Depreciation at
December 31, 1996
Notes to Schedule III - Real Estate and Accumulated Depreciation
at December 31, 1996
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 XII, Ltd. (Included as Exhibit 3.2 to
Registration Statement No. 33-43278-01 on Form S-11 and
incorporated herein by reference.)
4.1 Affidavit and Certificate of Limited Partnership of CNL
Income Fund XII, Ltd. (Included as Exhibit 3.2 to
Registration Statement No. 33-43278-01 on Form S-11 and
incorporated herein by reference.)
4.2 Amended and Restated Agreement of Limited Partnership of
CNL Income Fund XII, 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 XII, 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 31, 1995, and incorporated
herein by reference.)
35
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, 1996 through December 31, 1996.
(c) Not applicable.
(d) The following summarized financial information is filed as part of
this report as a result of the fact that two of the Partnership's
tenants, Foodmaker, Inc. and Flagstar Corporation, each leased
more than 20 percent of the Partnership's total assets for the
year ended December 31, 1996. The summarized financial
information presented for Foodmaker, Inc. and Subsidiaries as of
September 29, 1996 and October 1, 1995, and for the fifty-two
weeks ended September 29, 1996, October 1, 1995 and October 2,
1994 was obtained from Form 10-K filed by Foodmaker, Inc. and
Subsidiaries with the Securities and Exchange Commission. The
summarized financial information presented for Flagstar
Corporation and Subsidiaries as of December 31, 1996 and 1995, and
for each of the years ended December 31, 1996, 1995 and 1994, was
obtained from Form 10-K filed by Flagstar Corporation and
Subsidiaries with the Securities and Exchange Commission.
Foodmaker, Inc. and Subsidiaries
Selected Financial Data
(in Thousands)
September 29, October 1,
Consolidated Balance Sheet Data: 1996 1995
- ------------------------------- ------------- ----------
Current Assets $ 96,476 $ 97,889
Noncurrent Assets 557,162 564,785
Current Liabilities 147,063 132,017
Noncurrent Liabilities 455,191 499,404
Fifty-two Weeks Ended
Consolidated Statements of September 29, October 1, October 2,
Operations Data: 1996 1995 1994
- -------------------------- ------------- ----------- -----------
Gross Revenues $ 1,062,822 $ 1,018,716 $ 1,053,326
Costs and Expenses (including
taxes) (1,042,771) (1,087,674) (1,089,594)
Extraordinary Item, net of taxes - - (3,302)
----------- ----------- -----------
Net Earnings (Loss) $ 20,051 $ (68,958) $ (39,570)
=========== =========== ===========
36
Flagstar Corporation and Subsidiaries
Selected Financial Data
(In Thousands)
December 31,
Consolidated Balance Sheet: 1996 1995
- -------------------------- ---------- ----------
Current Assets $ 190,655 $ 285,353
Noncurrent Assets 1,502,778 1,228,475
Current Liabilities 486,805 407,530
Noncurrent Liabilities 2,581,622 2,381,198
Consolidated Statements of Year Ended December 31,
Operations Data: 1996 1995 1994
- -------------------------- ----------- ----------- -----------
Gross Revenues $ 2,542,302 $ 2,571,487 $ 2,665,966
Costs and Expenses (including
income tax benefit) (2,641,937) (2,718,588) (2,696,970)
----------- ----------- -----------
Loss from continuing
operations (99,635) (147,101) (31,004)
Net gain on discontinued
operations, net of income
tax provision - 77,241 392,670
Extraordinary items, net of
income tax provision (benefit) - 466 (11,757)
----------- ----------- -----------
Net Income (Loss) $ (99,635) $ (69,394) $ 349,909
=========== =========== ===========
37
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 26th day
of March, 1997.
CNL INCOME FUND XII, 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.
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.
Signature Title Date
/s/ Robert A. Bourne President, Treasurer and March 26, 1997
Robert A. Bourne Director (Principal
Financial and Accounting
Officer)
/s/ James M. Seneff, Jr. Chief Executive Officer March 26, 1997
James M. Seneff, Jr. and Director (Principal
Executive Officer)
<TABLE>
CNL INCOME FUND XII, LTD.
(A Florida Limited Partnership)
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1996
<CAPTION>
Costs Capitalized
Subsequent
Initial Cost To Acquisition
------------------------ -------------------
Buildings
Encum- and Improve- Carrying
brances Land Improvements ments Costs
------- ----------- ------------ ---------- --------
<S> <C> <C> <C> <C> <C>
Properties the Partnership
has Invested in Under
Operating Leases:
Burger King Restaurants:
Valdosta, Georgia - $ 238,891 $ 316,670 $ - $ -
Natchitoches, Louisiana - 152,329 - 489,366 -
Denny's Restaurants:
St. Ann, Missouri - 338,826 - - -
Phoenix, Arizona - 456,306 - - -
Black Mountain, North Carolina - 260,493 - - -
Blue Springs, Missouri - 497,604 - - -
Columbus, Georgia - 125,818 314,690 - -
Tempe, Arizona - 709,275 - - -
Golden Corral Family
Steakhouse Restaurants:
Arlington, Texas - 711,558 1,159,978 - -
Hardee's Restaurants:
Crossville, Tennessee - 290,136 334,350 - -
Toccoa, Georgia - 208,847 - - -
Columbia, Mississippi - 134,809 - - -
Pensacola, Florida - 277,236 - - -
Columbia, South Carolina - 325,674 - - -
Simpsonville, South Carolina - 239,494 - - -
Indian Trail, North Carolina - 298,938 - - -
Clarksville, Georgia - 160,478 415,540 - -
Jack in the Box Restaurants:
Spring, Texas - 564,164 510,639 - -
Houston, Texas - 360,617 659,805 - -
Arlington, Texas - 329,226 716,600 - -
Grapevine, Texas - 471,367 590,987 - -
Rialto, California - 524,251 595,226 - -
Phoenix, Arizona - 294,773 527,466 - -
Petaluma, California - 534,076 800,780 - -
Willis, Texas - 569,077 427,381 - -
Houston, Texas - 368,758 663,022 - -
KFC Restaurant:
Las Cruces, New Mexico - 175,905 - - -
<CAPTION>
Life
Gross Amount at Which Carried on Which
at Close of Period (c) Depreciation
------------------------------------- In Latest
Buildings Date Income
and Accumulated of Con- Date Statement is
Land Improvements Total Depreciation struction Acquired Computed
----------- ------------ ----------- ------------ --------- -------- ------------
<C> <C> <C> <C> <C> <C> <C>
$ 238,891 $ 316,670 $ 555,561 $ 35,427 1990 08/92 (b)
152,329 489,366 641,695 61,674 1993 12/92 (b)
338,826 (f) 338,826 - 1993 11/92 (d)
456,306 (f) 456,306 - 1993 11/92 (d)
260,493 (f) 260,493 - 1992 12/92 (d)
497,604 (f) 497,604 - 1993 12/92 (d)
125,818 314,690 440,508 32,509 1980 01/93 (g)
709,275 (f) 709,275 - 1982 02/93 (d)
711,558 1,159,978 1,871,536 157,630 1992 12/92 (b)
290,136 334,350 624,486 44,855 1992 12/92 (b)
208,847 (f) 208,847 - 1992 12/92 (d)
134,809 (f) 134,809 - 1991 01/93 (d)
277,236 (f) 277,236 - 1993 03/93 (d)
325,674 (f) 325,674 - 1991 05/93 (d)
239,494 (f) 239,494 - 1992 06/93 (d)
298,938 (f) 298,938 - 1992 07/93 (d)
160,478 415,540 576,018 47,436 1992 07/93 (b)
564,164 510,639 1,074,803 67,432 1993 01/93 (b)
360,617 659,805 1,020,422 87,130 1993 01/93 (b)
329,226 716,600 1,045,826 94,630 1992 01/93 (b)
471,367 590,987 1,062,354 78,043 1992 01/93 (b)
524,251 595,226 1,119,477 78,602 1992 01/93 (b)
294,773 527,466 822,239 70,184 1992 01/93 (b)
534,076 800,780 1,334,856 105,747 1993 01/93 (b)
569,077 427,381 996,458 55,774 1993 02/93 (b)
368,758 663,022 1,031,780 86,526 1993 02/93 (b)
175,905 (f) 175,905 - 1990 03/93 (d)
F-1
CNL INCOME FUND XII, LTD.
(A Florida Limited Partnership)
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION - CONTINUED
December 31, 1996
<CAPTION>
Costs Capitalized
Subsequent
Initial Cost To Acquisition
------------------------ -------------------
Buildings
Encum- and Improve- Carrying
brances Land Improvements ments Costs
------- ----------- ------------ ---------- --------
<S> <C> <C> <C> <C> <C>
Long John Silver's Restaurants:
Clarksville, Tennessee - 166,283 - - -
Morganton, North Carolina - 321,674 - - -
Statesville, North Carolina - 240,870 - - -
Monroe, North Carolina - 253,369 - - -
El Paso, Texas - 314,270 - - -
Tucson, Arizona - 277,378 245,385 - -
Asheville, North Carolina - 213,536 - - -
Quincy's Restaurant:
Albany, Georgia - 378,547 - - -
Shoney's Restaurants:
Bradenton, Florida - 455,986 - - -
Winter Haven, Florida - 475,084 - - -
Sizzler Restaurant:
Tempe, Arizona - 121,831 620,527 - -
----------- ---------- ---------- --------
$12,837,754 $8,899,046 $ 489,366 $ -
=========== ========== ========== ========
Property of Joint Venture in
Which the Partnership has an
18.61% 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
31.13% Interest and has Invested
in Under an Operating Lease:
Denny's Restaurant:
Kingsville, Texas - $ 171,061 $ - $ 99,128 $ -
=========== ========== ========== ========
Property of Joint Venture in
Which the Partnership has a
87.54% Interest and has Invested
in Under an Operating Lease:
Golden Corral Family
Steakhouse Restaurant:
Middleburg Heights, Ohio - $ 521,571 $ - $ - $ -
=========== ========== ========== ========
<CAPTION>
Life
Gross Amount at Which Carried on Which
at Close of Period (c) Depreciation
------------------------------------- In Latest
Buildings Date Income
and Accumulated of Con- Date Statement is
Land Improvements Total Depreciation struction Acquired Computed
----------- ------------ ----------- ------------ --------- -------- ------------
<C> <C> <C> <C> <C> <C> <C>
166,283 (f) 166,283 - 1993 03/93 (d)
321,674 (f) 321,674 - 1993 04/93 (d)
240,870 (f) 240,870 - 1993 04/93 (d)
253,369 (f) 253,369 - 1993 04/93 (d)
314,270 (f) 314,270 - 1993 06/93 (d)
277,378 245,385 522,763 28,505 1992 07/93 (b)
213,536 (f) 213,536 - 1993 08/93 (d)
378,547 (f) 378,547 - 1991 12/92 (d)
455,986 (f) 455,986 - 1993 12/92 (d)
475,084 (f) 475,084 - 1993 05/93 (d)
121,831 620,527 742,358 11,594 1988 04/93 (h)
----------- ---------- ----------- ----------
$12,837,754 $9,388,412 $22,226,166 $1,143,698
=========== ========== =========== ==========
$ 322,726 $ 791,658 $ 1,114,384 $ 111,118 1992 12/92 (b)
=========== ========== =========== ==========
$ 270,189 (f) $ 270,189 $ - 1988 10/92 (d)
=========== =========== ==========
$ 521,571 (f) $ 521,571 $ - 1995 05/96 (d)
=========== =========== ==========
F-2
CNL INCOME FUND XII, LTD.
(A Florida Limited Partnership)
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION - CONTINUED
December 31, 1996
<CAPTION>
Costs Capitalized
Subsequent
Initial Cost To Acquisition
------------------------ -------------------
Buildings
Encum- and Improve- Carrying
brances Land Improvements ments Costs
------- ----------- ------------ ---------- --------
<S> <C> <C> <C> <C> <C>
Properties the Partnership
has Invested in Under
Direct Financing Leases:
Denny's Restaurants:
Phoenix, Arizona - $ - $ - $ 467,545 $ -
St. Ann, Missouri - - - 324,340 -
Black Mountain, North Carolina - - 696,851 - -
Blue Springs, Missouri - - - 485,945 -
Cleveland, Tennessee - 158,300 510,479 - -
Tempe, Arizona - - - 491,258 -
Amherst, Ohio - 127,672 169,928 316,796 -
Hardee's Restaurants:
Toccoa, Georgia - - 437,938 - -
Fultondale, Alabama - 173,016 - 636,480 -
Poplarville, Mississippi - 138,020 - 444,485 -
Columbia, Mississippi - - 367,836 - -
Pensacola, Florida - - - 450,193 -
Columbia, South Carolina - - 452,333 - -
Simpsonville, South Carolina - - 517,680 - -
Indian Trail, North Carolina - - 496,110 - -
KFC Restaurant:
Las Cruces, New Mexico - - 224,790 - -
Long John Silver's Restaurants:
Murfreesboro, Tennessee - 174,746 555,186 - -
Clarksville, Tennessee - - 422,539 - -
Morganton, North Carolina - - - 359,735 -
Statesville, North Carolina - - - 349,184 -
Monroe, North Carolina - - - 358,094 -
El Paso, Texas - - - 371,286 -
Chattanooga, Tennessee - 142,627 584,320 - -
Asheville, North Carolina - - 493,303 - -
Quincy's Restaurant:
Albany, Georgia - - 880,338 - -
Shoney's Restaurants:
Bradenton, Florida - - - 596,374 -
Winter Haven, Florida - - - 758,986 -
----------- ---------- ---------- --------
$ 914,381 $6,809,631 $6,410,701 $ -
=========== ========== ========== ========
<CAPTION>
Life
Gross Amount at Which Carried on Which
at Close of Period (c) Depreciation
------------------------------------- In Latest
Buildings Date Income
and Accumulated of Con- Date Statement is
Land Improvements Total Depreciation struction Acquired Computed
----------- ------------ ----------- ------------ --------- -------- ------------
<C> <C> <C> <C> <C> <C> <C>
- (f) (f) (d) 1993 11/92 (d)
- (f) (f) (d) 1993 11/92 (d)
- (f) (f) (d) 1992 12/92 (d)
- (f) (f) (d) 1993 12/92 (d)
(f) (f) (f) (e) 1992 12/92 (e)
- (f) (f) (d) 1982 02/93 (d)
(f) (f) (f) (e) 1987 07/93 (e)
- (f) (f) (d) 1992 12/92 (d)
(f) (f) (f) (e) 1993 12/92 (e)
(f) (f) (f) (e) 1993 01/93 (e)
- (f) (f) (d) 1991 01/93 (d)
- (f) (f) (d) 1993 03/93 (d)
- (f) (f) (d) 1991 05/93 (d)
- (f) (f) (d) 1992 06/93 (d)
- (f) (f) (d) 1992 07/93 (d)
- (f) (f) (d) 1990 03/93 (d)
(f) (f) (f) (e) 1989 02/93 (e)
- (f) (f) (d) 1993 03/93 (d)
- (f) (f) (d) 1993 04/93 (d)
- (f) (f) (d) 1993 04/93 (d)
- (f) (f) (d) 1993 04/93 (d)
- (f) (f) (d) 1993 06/93 (d)
(f) (f) (f) (e) 1993 07/93 (e)
- (f) (f) (d) 1993 08/93 (d)
- (f) (f) (d) 1991 12/92 (d)
- (f) (f) (d) 1993 12/92 (d)
- (f) (f) (d) 1993 05/93 (d)
F-3
CNL INCOME FUND XII, LTD.
(A Florida Limited Partnership)
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION - CONTINUED
December 31, 1996
<CAPTION>
Costs Capitalized
Subsequent
Initial Cost To Acquisition
------------------------ -------------------
Buildings
Encum- and Improve- Carrying
brances Land Improvements ments Costs
------- ----------- ------------ ---------- --------
<S> <C> <C> <C> <C> <C>
Property of Joint Venture in
Which the Partnership has a
59% Interest and has Invested
in Under a Direct Financing Lease:
Hardee's Restaurant:
Williston, Florida - $ 150,143 $ - $ 499,071 $ -
=========== ========== ========== ========
Property of Joint Venture in
Which the Partnership has a
31.13% Interest and has Invested
in Under a Direct Financing Lease:
Denny's Restaurant:
Kingsville, Texas - $ - $ - $ 535,489 $ -
=========== ========== ========== ========
Property of Joint Venture in
Which the Partnership has an
87.54% Interest and has Invested
in Under a Direct Financing Lease:
Golden Corral Family
Steakhouse Restaurant:
Middleburg Heights, OH - $ - $1,357,288 $ - $ -
=========== ========== ========== ========
<CAPTION>
Life
Gross Amount at Which Carried on Which
at Close of Period (c) Depreciation
------------------------------------- In Latest
Buildings Date Income
and Accumulated of Con- Date Statement is
Land Improvements Total Depreciation struction Acquired Computed
----------- ------------ ----------- ------------ --------- -------- ------------
<C> <C> <C> <C> <C> <C> <C>
(f) (f) (f) (e) 1993 12/92 (e)
(f) (f) (f) (e) 1988 10/92 (e)
(f) (f) (f) (e) 1995 05/96 (e)
F-4
</TABLE>
CNL INCOME FUND XII, LTD.
(A Florida Limited Partnership)
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1996
(a) Transactions in real estate and accumulated depreciation during 1996,
1995 and 1994, are summarized as follows:
Accumulated
Cost Depreciation
----------- ------------
Properties the Partnership
has Invested in Under
Operating Leases:
Balance, December 31, 1993 $22,933,279 $ 287,825
Reclassified to operating
lease 314,690 -
Acquisitions 230 -
Depreciation expense - 325,795
----------- ----------
Balance, December 31, 1994 23,248,199 613,620
Depreciation expense - 325,795
----------- ----------
Balance, December 31, 1995 23,248,199 939,415
Disposition (1,764,391) (109,036)
Reclassified to operating
lease 742,358 -
Depreciation expense - 313,319
----------- ----------
Balance, December 31, 1996 $22,226,166 $1,143,698
=========== ==========
Property of Joint Venture in
Which the Partnership has an
18.61% Interest and has Invested
in Under an Operating Lease:
Balance, December 31, 1993 $ 1,114,384 $ 31,952
Depreciation expense - 26,389
----------- ----------
Balance, December 31, 1994 1,114,384 58,341
Depreciation expense - 26,388
----------- ----------
Balance, December 31, 1995 1,114,384 84,729
Depreciation expense - 26,389
----------- ----------
Balance, December 31, 1996 $ 1,114,384 $ 111,118
=========== ==========
F-5
CNL INCOME FUND XII, LTD.
(A Florida Limited Partnership)
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED
DEPRECIATION - CONTINUED
December 31, 1996
Accumulated
Cost Depreciation
----------- ------------
Property of Joint Venture in
Which the Partnership has a
31.13% Interest and has Invested
in Under an Operating Lease:
Balance, December 31, 1993 $ 270,189 $ -
Depreciation expense (d) - -
----------- ----------
Balance, December 31, 1994 270,189 -
Depreciation expense (d) - -
----------- ----------
Balance, December 31, 1995 270,189 -
Depreciation expense (d) - -
----------- ----------
Balance, December 31, 1996 $ 270,189 $ -
=========== ==========
Property of Joint Venture in
Which the Partnership has an
87.54% Interest and has Invested
in Under an Operating Lease:
Balance, December 31, 1995 $ - $ -
Acquisition 521,571 -
Depreciation expense (d) - -
----------- ----------
Balance, December 31, 1996 $ 521,571 $ -
=========== ==========
(b) Depreciation expense is computed for buildings and improvements based
upon estimated lives of 30 years.
(c) As of December 31, 1996, the aggregate cost of the Properties owned by
the Partnership and joint ventures for federal income tax purposes was
$36,384,555 and $4,397,441, 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 the net investment in direct financing
leases; therefore, depreciation is not applicable.
F-6
CNL INCOME FUND XII, LTD.
(A Florida Limited Partnership)
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED
DEPRECIATION - CONTINUED
December 31, 1996
(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.
(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) Effective July 1, 1996, the lease for this property terminated,
resulting in the lease being reclassified as an operating lease. The
land and building were recorded at net book value as of July 1, 1996,
and the building is being depreciated over its remaining estimated life
of approximately 27 years.
F-7
EXHIBITS
EXHIBIT INDEX
Exhibit Number Page
3.1 Affidavit and Certificate of Limited Partnership of CNL
Income Fund XII, Ltd. (Included as Exhibit 3.2 to
Registration Statement No. 33-43278-01 on Form S-11 and
incorporated herein by reference.)
4.1 Affidavit and Certificate of Limited Partnership of CNL
Income Fund XII, Ltd. (Included as Exhibit 3.2 to
Registration Statement No. 33-43278-01 on Form S-11 and
incorporated herein by reference.)
4.2 Amended and Restated Agreement of Limited Partnership of
CNL Income Fund XII, 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 XII, 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 31, 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 XII, Ltd. at December 31, 1996, 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 XII, Ltd. for the year ended December 31, 1996.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 1,800,601
<SECURITIES> 0
<RECEIVABLES> 226,303
<ALLOWANCES> 23,395
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 22,226,166
<DEPRECIATION> 1,143,698
<TOTAL-ASSETS> 41,343,138
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 40,290,106
<TOTAL-LIABILITY-AND-EQUITY> 41,343,138
<SALES> 0
<TOTAL-REVENUES> 4,352,559
<CGS> 0
<TOTAL-COSTS> 594,660
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 3,943,043
<INCOME-TAX> 0
<INCOME-CONTINUING> 3,943,043
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,943,043
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>Due to the nature of its industry, CNL Income Fund XII, Ltd. has an
unclassified balance sheet; therefore, no values are shown above for current
assets and current liabilities.
</FN>
</TABLE>
