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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K/A
Amendment No. 2
(Mark One)
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1998
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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)
450 South Orange Avenue
Orlando, Florida 32801
(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code: (407) 650-1000
Securities registered pursuant to Section 12(b) of the Act:
Title of each class: Name of exchange on which registered:
None Not Applicable
Securities registered pursuant to Section 12(g) of the Act:
Units of limited partnership interest ($10 per Unit)
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days: Yes X No __________
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Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [x]
Aggregate market value of the voting stock held by nonaffiliates of the
registrant: The registrant registered an offering of 4,500,000 units of limited
partnership interest (the "Units") on Form S-11 under the Securities Act of
1933, as amended. Since no established market for such Units exists, there is
no market value for such Units. Each Unit was originally sold at $10 per Unit.
DOCUMENTS INCORPORATED BY REFERENCE:
None
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The Form 10-K of CNL Income Fund XII, Ltd. for the year ended December 31,
1998 is being amended to revise the disclosure under Item 1. Business.
PART I
Item 1. Business
CNL Income Fund 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. During the year ended December 31, 1998, the
Partnership entered into a joint venture arrangement, Columbus Joint Venture,
with affiliates of the General Partners, to construct and hold one restaurant
Property. In addition, during 1998, the Partnership sold the Property in Monroe,
North Carolina. As a result of the above transactions, as of December 31, 1998,
the Partnership owned 48 Properties. The 48 properties include five Properties
owned by joint ventures in which the Partnership is co-venturer. The Partnership
leases the Properties on a triple-net basis with the lessees responsible for all
repairs and maintenance, property taxes, insurance and utilities.
On March 11, 1999, the Partnership entered into an Agreement and Plan of
Merger with CNL American Properties Fund, Inc. ("APF"), pursuant to which the
Partnership would be merged with and into a subsidiary of APF (the "Merger").
APF is a real estate investment trust whose primary business is the ownership of
restaurant properties leased on a long-term, "triple-net" basis to operators of
national and regional restaurant chains. APF has agreed to issue shares of its
common stock, par value $0.01 per share (the "APF Shares"), as consideration for
the Merger. At a special meeting of the partners that is expected to be held in
the fourth quarter of 1999, Limited Partners holding in excess of 50% of the
Partnership's outstanding limited partnership interests must approve the Merger
prior to consummation of the transaction. If the Limited Partners at the
special meeting approve the Merger, APF will own the Properties and other assets
of the Partnership.
In the event that the Limited Partners vote against the Merger, the
Partnership will hold its Properties until the General Partners determine that
the sale or other disposition of the Properties is advantageous in view of the
Partnership's investment objectives. In deciding whether to sell Properties,
the General Partners will consider factors such as potential capital
appreciation, net cash flow and federal income tax considerations. Certain
lessees also have been granted options to purchase Properties, generally at the
Property's then fair market value after a specified portion of the lease term
has elapsed. The Partnership has no obligation to sell all or any portion of a
Property at any particular time, except as may be required under property
purchase options granted to certain lessees.
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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 2018. The leases are generally on a triple-net basis, with the lessees
responsible for all repairs and maintenance, property taxes, insurance and
utilities. The leases of the Properties provide for minimum base annual rental
payments (payable in monthly installments) ranging from approximately $48,000 to
$213,800. The majority of the leases provide for percentage rent, based on
sales in excess of a specified amount. In addition, some of the leases provide
that, commencing in specified lease years (generally the sixth lease year), the
annual base rent required under the terms of the lease will increase.
Generally, the leases of the Properties provide for two to four five-year
renewal options subject to the same terms and conditions as the initial lease.
Lessees of 33 of the Partnership's 48 Properties also have been granted options
to purchase Properties at the Property's then fair market value after a
specified portion of the lease term has elapsed. Fair market value will be
determined through an appraisal by an independent appraisal firm. Under the
terms of certain leases, the option purchase price may equal the Partnership's
original cost to purchase the Property (including acquisition costs), plus a
specified percentage from the date of the lease or a specified percentage of the
Partnership's purchase price, if that amount is greater than the Property's fair
market value at the time the purchase option is exercised.
The leases also generally provide that, in the event the Partnership wishes
to sell the Property subject to that lease, the Partnership first must offer the
lessee the right to purchase the Property on the same terms and conditions, and
for the same price, as any offer which the Partnership has received for the sale
of the Property.
In June 1998, a tenant, Long John Silver's, Inc., filed for bankruptcy and
rejected the leases relating to three of its eight leases and ceased making
rental payments to the Partnership under these rejected leases. In December
1998, the Partnership sold one of the vacant Properties and intends to reinvest
the net sales proceeds from the sale of this Property in an additional Property.
The Partnership will not recognize rental and earned income from the two
remaining vacant Properties until new tenants for these Properties are located
or until the Properties are sold and the proceeds from such sales are reinvested
in additional Properties. As of March 11, 1999, the Partnership has received
rental payments on the five leases that were not rejected. While Long John
Silver's, Inc. has not rejected or affirmed the remaining five leases, there can
be no assurance that some or all of the leases will not be rejected in the
future. The lost revenues resulting from the two vacant Properties, as
described above, and the possible rejection of the remaining five leases could
have an adverse effect on the results of operations of the Partnership, if the
Partnership is not able to re-lease these Properties in a timely manner. The
General Partners are currently seeking either new tenants or purchasers for the
two remaining vacant Properties.
During 1994, the leases relating to the Properties in Columbus, Georgia,
and Amherst, Ohio were amended to provide for the payment of reduced annual base
rent with no scheduled rent increases. However, the lease amendments provided
for lower percentage rent breakpoints, as compared to the original lease
agreements, a change that was designed to result in higher percentage rent
payments at any time that percentage rent became payable. In accordance with a
provision in the amendments, as a result of the former tenant assigning the
leases to a new tenant during 1998, the rents under the assigned leases reverted
back to those required under the original lease agreements.
In August 1998, the Partnership entered into a joint venture arrangement,
Columbus Joint Venture, with affiliates of the General Partners, to construct
and hold one restaurant Property. The lease terms for this Property are
substantially the same as the Partnership's other leases as described above in
the first two paragraphs of this section.
During 1998, the tenant of the Property in Kingsville Real Estate Joint
Venture experienced financial difficulties and ceased payment of rents under the
terms of its lease agreement. In January 1999, Kingsville Real Estate Joint
Venture entered into a five year lease with a new tenant.
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Major Tenants
During 1998, four lessees (or groups of affiliated lessees) of the
Partnership, (i) Long John Silver's, Inc., (ii) Denny's, Inc. and Quincy's, Inc.
(which are affiliated entities under common control of Advantica Restaurant
Group, Inc.) (hereinafter referred to as "Advantica Restaurant Group, Inc."),
(iii) Foodmaker, Inc., and (iv) Flagstar Enterprises, Inc., each contributed
more than ten percent of the Partnership's total rental income (including the
Partnership's share of rental income from five Properties owned by joint
ventures). As of December 31, 1998, Long John Silver's, Inc. was the lessee
under leases relating to five restaurants, (excluding the three leases rejected
by this tenant, as described above), Foodmaker, Inc. was the lessee under leases
relating to ten restaurants, Advantica Restaurant Group, Inc. was the lessee
under leases relating to four restaurants, and Flagstar Enterprises, Inc. was
the lessee under leases relating to 11 restaurants. During 1998, Long John
Silver's, Inc. filed for bankruptcy. It is anticipated that based on the
minimum rental payments required by the leases, Advantica Restaurant Group,
Inc., Foodmaker, Inc., and Flagstar Enterprises, Inc., each will continue to
contribute more than ten percent of the Partnership's total rental income in
1999. 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 1998 (including the Partnership's share
of rental income from five Properties owned by joint ventures). In 1999, it is
anticipated that Jack in the Box, Denny's, and Hardee's 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 if the Partnership is not able to re-lease these Properties in a timely
manner. As of December 31, 1998, Foodmaker, Inc. leased Properties with an
aggregate carrying value in excess of 20 percent of the total assets of the
Partnership.
Joint Venture Arrangements
The Partnership has entered into the following separate joint venture
arrangements: Williston Real Estate Joint Venture with CNL Income Fund X, Ltd.,
an affiliate of the General Partners, to hold one Property; Des Moines Real
Estate Joint Venture with CNL Income Fund VII, Ltd. and CNL Income Fund XI,
Ltd., affiliates of the General Partners, to hold one Property; Kingsville Real
Estate Joint Venture with CNL Income Fund IV, Ltd., an affiliate of the General
Partners, to hold one Property; Middleburg Joint Venture with CNL Income Fund
VIII, Ltd., an affiliate of the General Partners, to purchase and hold one
Property; and Columbus Joint Venture with CNL Income Fund XVI, Ltd. and CNL
Income Fund XVIII, Ltd., affiliates of the General Partners, to hold one
Property. Each of the affiliates is a limited partnership organized pursuant to
the laws of the State of Florida.
The joint venture arrangements provide for the Partnership and its joint
venture partners to share in all costs and benefits associated with the joint
ventures in accordance with their respective percentage interests in the joint
ventures. The Partnership has a 59.05% interest in Williston Real Estate Joint
Venture, an 18.61% interest in Des Moines Real Estate Joint Venture, a 31.13%
interest in Kingsville Real Estate Joint Venture, an 87.54% interest in
Middleburg Joint Venture and a 27.72% interest in Columbus Joint Venture. The
Partnership and its joint venture partners are also jointly and severally liable
for all debts, obligations and other liabilities of the joint ventures.
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.
Net cash flow from operations of Williston Real Estate Joint Venture, Des
Moines Real Estate Joint Venture, Kingsville Real Estate Joint Venture,
Middleburg Joint Venture, and Columbus Joint Venture is distributed 59.05
percent, 18.61%, 31.13% 87.54% and 27.72%, 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
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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.
The use of joint venture arrangements allows the Partnership to fully
invest its available funds at times at which it would not have sufficient funds
to purchase an additional property, or at times when a suitable opportunity to
purchase an additional property is not available. The use of joint venture
arrangements also provides the Partnership with increased diversification of its
portfolio among a greater number of properties.
Certain Management Services
CNL Fund Advisors, Inc., an affiliate of the General Partners, provides
certain services relating to management of the Partnership and its Properties
pursuant to a management agreement with the Partnership. Under this agreement,
CNL Fund Advisors, Inc. is responsible for collecting rental payments,
inspecting the Properties and the tenants' books and records, assisting the
Partnership in responding to tenant inquiries and notices and providing
information to the Partnership about the status of the leases and the
Properties. CNL Fund Advisors, Inc. also assists the General Partners in
negotiating the leases. For these services, the Partnership has agreed to pay
CNL Fund Advisors, Inc. an annual fee of one percent of the sum of gross rental
revenues from Properties wholly owned by the Partnership plus the Partnership's
allocable share of gross revenues of joint ventures in which the Partnership is
a co-venturer, but not in excess of competitive fees for comparable services.
The management agreement continues until the Partnership no longer owns an
interest in any Properties unless terminated at an earlier date upon 60 days'
prior notice by either party.
Employees
The Partnership has no employees. The officers of CNL Realty Corporation
and the officers and employees of CNL Fund Advisors, Inc. perform certain
services for the Partnership. In addition, the General Partners have available
to them the resources and expertise of the officers and employees of CNL Group,
Inc., a diversified real estate company, and its affiliates, who may also
perform certain services for the Partnership.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on the 17th day of
December, 1999.
CNL INCOME FUND XII, LTD.
By: CNL REALTY CORPORATION
General Partner
/s/ Robert A. Bourne
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ROBERT A. BOURNE, President
By: ROBERT A. BOURNE
General Partner
/s/ Robert A. Bourne
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ROBERT A. BOURNE
By: JAMES M. SENEFF, JR.
General Partner
/s/ James M. Seneff, Jr.
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JAMES M. SENEFF, JR.
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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.
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<CAPTION>
Signature Title Date
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<S> <C> <C>
/s/ Robert A. Bourne President, Treasurer and Director December 17, 1999
- --------------------- (Principal Financial and Accounting
Robert A. Bourne Officer)
/s/ James M. Seneff, Jr. Chief Executive Officer and Director December 17, 1999
- --------------------------- (Principal Executive Officer)
James M. Seneff, Jr.
</TABLE>
