FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number
0-26218
CNL Income Fund XVI, Ltd.
(Exact name of registrant as specified in its charter)
Florida 59-3198891
(State or other juris- (I.R.S. Employer
diction of incorporation Identification No.)
or organization)
400 E. South Street, #500
Orlando, Florida 32801
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number
(including area code) (407) 422-1574
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Sections 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes X No
<PAGE>
CONTENTS
Part I Page
Item 1. Financial Statements:
Condensed Balance Sheets 1
Condensed Statements of Income 2
Condensed Statements of Partners' Capital 3
Condensed Statements of Cash Flows 4-5
Notes to Condensed Financial Statements 6
Item 2. Management's Discussion and Analysis
of Financial Condition and
Results of Operations 7-9
Part II
Other Information 10
<PAGE>
CNL INCOME FUND XVI, LTD.
(A Florida Limited Partnership)
CONDENSED BALANCE SHEETS
September 30, December 31,
ASSETS 1997 1996
Land and buildings on operating
leases, less accumulated
depreciation $30,799,411 $31,766,349
Net investment in direct financing
leases 5,978,704 6,006,496
Investment in joint venture 772,405 774,389
Cash and cash equivalents 2,327,584 1,546,203
Receivables, less allowance for
doubtful accounts of $16,008
and $9,875 36,638 76,094
Prepaid expenses 12,754 9,174
Organization costs, less accumu-
lated amortization of $6,050
and $4,550 3,950 5,450
Accrued rental income 1,081,983 771,487
$41,013,429 $40,955,642
LIABILITIES AND PARTNERS' CAPITAL
Acquisition and construction costs
payable $ 53,278 $ 106,036
Accounts payable 988 2,262
Escrowed real estate taxes payable 6,022 3,343
Distributions payable 900,000 900,000
Due to related parties 12,444 2,292
Rents paid in advance and deposits 142,857 97,110
Total liabilities 1,115,589 1,111,043
Partners' capital 39,897,840 39,844,599
$41,013,429 $40,955,642
See accompanying notes to condensed financial statements.
1
<PAGE>
CNL INCOME FUND XVI, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Quarter Ended Nine Months Ended
September 30, September 30,
1997 1996 1997 1996
<S> <C>
Revenues:
Rental income from
operating leases $ 888,575 $ 907,162 $2,677,179 $2,673,321
Earned income from direct
financing leases 175,648 176,736 527,794 549,835
Interest and other income 19,767 22,363 58,596 70,256
1,083,990 1,106,261 3,263,569 3,293,412
Expenses:
General operating and
administrative 33,457 43,067 114,516 148,476
Professional services 5,684 6,527 18,996 17,994
Management fees to
related parties 9,823 9,739 29,565 28,880
State and other taxes 25 - 20,559 12,806
Depreciation and
amortization 140,916 140,808 422,966 411,639
189,905 200,141 606,602 619,795
Income Before Equity in
Earnings of Joint Venture
and Gain on Sale of Land 894,085 906,120 2,656,967 2,673,617
Equity in Earnings of Joint
Venture 18,506 - 55,126 -
Gain on Sale of Land - - 41,148 124,305
Net Income $ 912,591 $ 906,120 $2,753,241 $2,797,922
Allocation of Net Income:
General partners $ 9,125 $ 9,061 $ 27,120 $ 26,736
Limited partners 903,466 897,059 2,726,121 2,771,186
$ 912,591 $ 906,120 $2,753,241 $2,797,922
Net Income Per Limited
Partner Unit $ 0.20 $ 0.20 $ 0.61 $ 0.62
Weighted Average Number
of Limited Partner
Units Outstanding 4,500,000 4,500,000 4,500,000 4,500,000
</TABLE>
See accompanying notes to condensed financial statements.
2
<PAGE>
CNL INCOME FUND XVI, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF PARTNERS' CAPITAL
Nine Months Ended Year Ended
September 30, December 31,
1997 1996
General partners:
Beginning balance $ 63,423 $ 27,184
Net income 27,120 36,239
90,543 63,423
Limited partners:
Beginning balance 39,781,176 39,612,968
Net income 2,726,121 3,711,959
Distributions ($0.60 and $0.79
per limited partner unit,
respectively) (2,700,000) (3,543,751)
39,807,297 39,781,176
Total partners' capital $39,897,840 $39,844,599
See accompanying notes to condensed financial statements.
3
<PAGE>
CNL INCOME FUND XVI, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF CASH FLOWS
Nine Months Ended
September 30,
1997 1996
Increase (Decrease) in Cash and Cash
Equivalents:
Net Cash Provided by Operating
Activities $ 2,923,755 $ 2,815,893
Cash Flows From Investing
Activities:
Proceeds from sale of land
and building 610,384 775,000
Additions to land and
buildings on operating
leases (23,501) (2,392,562)
Investment in direct
financing leases (29,257) (382,372)
Increase in restricted cash - (775,000)
Net cash provided by
(used in) investing
activities 557,626 (2,774,934)
Cash Flows From Financing
Activities:
Reimbursement of acquisition
costs paid by related
parties on behalf of the
Partnership, net - (2,494)
Distributions to limited
partners (2,700,000) (2,531,251)
Net cash used in
financing activities (2,700,000) (2,533,745)
Net Increase (Decrease) in Cash and
Cash Equivalents 781,381 (2,492,786)
Cash and Cash Equivalents at
Beginning of Period 1,546,203 3,987,786
Cash and Cash Equivalents at End
of Period $ 2,327,584 $ 1,495,000
See accompanying notes to condensed financial statements.
4
<PAGE>
CNL INCOME FUND XVI, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF CASH FLOWS - CONTINUED
Nine Months Ended
September 30,
1997 1996
Supplemental Schedule of Non-Cash
Investing and Financing Activities:
Related parties paid certain
acquisition costs on behalf
of the Partnership $ - $ 10,336
Distributions declared and
unpaid at end of period $ 900,000 $ 900,000
See accompanying notes to condensed financial statements.
5
<PAGE>
CNL INCOME FUND XVI, LTD.
(A Florida Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS
Quarters and Nine Months Ended September 30, 1997 and 1996
1. Basis of Presentation:
The accompanying unaudited condensed financial statements have been
prepared in accordance with the instructions to Form 10-Q and do not
include all of the information and note disclosures required by
generally accepted accounting principles. The financial statements
reflect all adjustments, consisting of normal recurring adjustments,
which are, in the opinion of management, necessary to a fair statement
of the results for the interim periods presented. Operating results for
the quarter and nine months ended September 30, 1997, may not be
indicative of the results that may be expected for the year ending
December 31, 1997. Amounts as of December 31, 1996, included in the
financial statements, have been derived from audited financial
statements as of that date.
These unaudited financial statements should be read in conjunction with
the financial statements and notes thereto included in Form 10-K of CNL
Income Fund XVI, Ltd. (the "Partnership") for the year ended December
31, 1996.
2. Land and Buildings on Operating Leases:
Land and buildings on operating leases consisted of the following at:
September 30, December 31,
1997 1996
Land $15,259,455 $15,804,927
Buildings 16,836,982 16,836,982
32,096,437 32,641,909
Less accumulated
depreciation (1,297,026) (875,560)
$30,799,411 $31,766,349
In March 1997, the Partnership sold its property in Oviedo, Florida,
for $620,000 and received net sales proceeds of $610,384, resulting in
a gain of $41,148 for financial reporting purposes. This property was
originally acquired by the Partnership in November 1994 and had a cost
of approximately $509,700, excluding acquisition fees and miscellaneous
acquisition expenses; therefore, the Partnership sold the property for
approximately $100,700 in excess of its original purchase price.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
CNL Income Fund XVI, Ltd. (the "Partnership") is a Florida limited
partnership that was organized on September 2, 1993, to acquire for cash, either
directly or through joint venture arrangements, both newly constructed and
existing restaurant properties, as well as land upon which restaurants were to
be constructed (the "Properties"), which are leased primarily to operators of
national and regional fast-food and family-style restaurant chains. The leases
are triple-net leases, with the lessee responsible for all repairs and
maintenance, property taxes, insurance and utilities. As of September 30, 1997,
the Partnership owned 42 Properties, including one Property owned with an
affiliate as tenants-in-common.
Liquidity and Capital Resources
The Partnership's primary source of capital for the nine months ended
September 30, 1997 and 1996, was cash from operations (which includes cash
received from tenants, distributions from the joint venture, and interest and
other income received, less cash paid for expenses). Cash from operations was
$2,923,755 and $2,815,893 for the nine months ended September 30, 1997 and 1996,
respectively. The increase in cash from operations for the nine months ended
September 30, 1997, as compared to the nine months ended September 30, 1996, is
primarily a result of changes in income and expenses as discussed in "Results of
Operations" below and changes in the Partnership's working capital.
Other sources and uses of capital included the following during the
nine months ended September 30, 1997.
In March 1997, the Partnership sold its Property in Oviedo, Florida,
for $620,000 and received net sales proceeds of $610,384, resulting in a gain of
$41,148 for financial reporting purposes. This Property was originally acquired
by the Partnership in November 1994 and had a cost of approximately $509,700,
excluding acquisition fees and miscellaneous acquisition expenses; therefore,
the Partnership sold the Property for approximately $100,700 in excess of its
original purchase price. The Partnership anticipates that it will distribute
amounts sufficient to enable the limited partners to pay federal and state
income taxes, if any (at a level reasonably assumed by the general partners),
resulting from the sale. The Partnership intends to reinvest the net sales
proceeds in an additional Property.
Currently, cash reserves and rental income from the Partnership's
Properties are invested in money market accounts or other short-term, highly
liquid investments pending the use of such funds to pay Partnership expenses or
to make distributions to partners. At September 30, 1997, the Partnership had
$2,327,584 invested in such short-term investments, as compared to $1,546,203 at
December 31, 1996. The increase in cash and cash equivalents for the nine months
ended September 30, 1997, is primarily attributable to the receipt of net sales
proceeds relating to the
7
<PAGE>
Liquidity and Capital Resources - Continued
sale of the Property in Oviedo, Florida, as discussed above. The funds remaining
at September 30, 1997, after the payment of distributions and other liabilities,
will be used to meet the Partnership's working capital and other needs and, as
discussed above, are expected to be invested in an additional Property.
Total liabilities of the Partnership, including distributions payable,
increased to $1,115,589 at September 30, 1997, from $1,111,043 at December 31,
1996. The general partners believe that the Partnership has sufficient cash on
hand to meet its current working capital needs.
Based primarily on cash from operations, the Partnership declared
distributions to the limited partners of $2,700,000 and $2,643,751 for the nine
months ended September 30, 1997 and 1996, respectively ($900,000 for each of the
quarters ended September 30, 1997 and 1996). This represents distributions of
$0.60 and $0.59 per unit for the nine months ended September 30, 1997 and 1996,
respectively ($0.20 for each of the quarters ended September 30, 1997 and 1996).
No distributions were made to the general partners for the quarters and nine
months ended September 30, 1997 and 1996. No amounts distributed or to be
distributed to the limited partners for the nine months ended September 30, 1997
and 1996, 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 Partnership's investment strategy of acquiring Properties for cash
and leasing them under triple-net leases to operators who generally meet
specified financial standards minimizes the Partnership's operating expenses.
The general partners believe that the leases will continue to generate cash flow
in excess of operating expenses.
The general partners have the right, but not the obligation, to make
additional capital contributions if they deem it appropriate in connection with
the operations of the Partnership.
Results of Operations
During the nine months ended September 30, 1996, the Partnership owned
and leased 43 wholly owned Properties (including one Property in Appleton,
Wisconsin, which was sold in April 1996) and during the nine months ended
September 30, 1997, the Partnership owned and leased 42 wholly owned Properties
(including one Property in Oviedo, Florida, which was sold in March 1997), to
operators of fast-food and family-style restaurant chains. In connection
therewith, during the nine months ended September 30, 1997 and 1996, the
Partnership earned $3,204,973 and $3,223,156, respectively, in rental income
from operating leases and earned income from direct financing leases from these
Properties, $1,064,223 and $1,083,898 of which was earned during the quarters
8
<PAGE>
Results of Operations - Continued
ended September 30, 1997, and 1996, respectively. The decrease in rental and
earned income during the quarter and nine months ended September 30, 1997, as
compared to the quarter and nine months ended September 30, 1996, is primarily
the result of the sale of the Property in Oviedo, Florida, in March 1997. The
decrease during the nine months ended September 30, 1997, was also partially the
result of the sale of the Property in Appleton, Wisconsin, in April 1996. The
decrease during the nine months ended September 30, 1997, as compared to the
nine months ended September 30, 1996, was partially offset by the fact that
several Properties were operational for the full nine months ended September 30,
1997, as compared to a partial nine months ended September 30, 1996.
During the quarter and nine months ended September 30, 1997, the
Partnership also owned and leased one Property as tenants-in-common with an
affiliate of the general partners. In connection therewith, during the quarter
and nine months ended September 30, 1997, the Partnership earned $18,506 and
$55,126, respectively, attributable to net income earned by this joint venture
in which the Partnership acquired an interest with an affiliate as
tenants-in-common in October 1996.
Operating expenses, including depreciation and amortization expense,
were $606,602 and $619,795 for the nine months ended September 30, 1997 and
1996, respectively, of which $189,905 and $200,141 were incurred for the
quarters ended September 30, 1997 and 1996, respectively. The decrease in
operating expenses during the quarter and nine months ended September 30, 1997,
as compared to the quarter and nine months ended September 30, 1996, is
primarily attributable to a decrease in accounting and administrative expenses
associated with operating the Partnership and its Properties. The decrease in
operating expenses during the nine months ended September 30, 1997, as compared
to the nine months ended September 30, 1996, is partially offset by an increase
in depreciation expense as the result of the fact that Properties acquired
during the nine months ended September 30, 1996, were operational for the full
nine months ended September 30, 1997, as compared to a partial nine months ended
September 30, 1996.
As a result of the sale of the Property in Oviedo, Florida, as
described above in "Liquidity and Capital Resources," the Partnership recognized
a gain for financial reporting purposes of $41,148 during the nine months ended
September 30, 1997. The Partnership also recognized a gain for financial
reporting purposes of $124,305, during the nine months ended September 30, 1996,
as a result of the sale of the Property in Appleton, Wisconsin, in April 1996.
9
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings. Inapplicable.
Item 2. Changes in Securities. Inapplicable.
Item 3. Defaults upon Senior Securities. Inapplicable.
Item 4. Submission of Matters to a Vote of Security Holders.
Inapplicable.
Item 5. Other Information. Inapplicable.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits - None.
(b) No reports on Form 8-K were filed during the quarter
ended September 30, 1997.
10
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
DATED this 29th day of October, 1997.
CNL INCOME FUND XVI, LTD.
By: CNL REALTY CORPORATION
General Partner
By: /s/ James M. Seneff, Jr.
-------------------------------
JAMES M. SENEFF, JR.
Chief Executive Officer
(Principal Executive Officer)
By: /s/ Robert A. Bourne
--------------------------------
ROBERT A. BOURNE
President and Treasurer
(Principal Financial and
Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the balance
sheet of CNL Income Fund XVI, Ltd. at September 30, 1997, and its statement of
income for the nine months then ended and is qualified in its entirety by
reference to the Form 10Q of CNL Income Fund XVI, Ltd. for the nine months ended
September 30, 1997.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 2,327,584
<SECURITIES> 0
<RECEIVABLES> 52,646
<ALLOWANCES> 16,008
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 32,096,437
<DEPRECIATION> 1,297,026
<TOTAL-ASSETS> 41,013,429
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 39,897,840
<TOTAL-LIABILITY-AND-EQUITY> 41,013,429
<SALES> 0
<TOTAL-REVENUES> 3,263,569
<CGS> 0
<TOTAL-COSTS> 606,602
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,753,241
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,753,241
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,753,241
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>Due to the nature of its industry, CNL Income Fund XVI, Ltd. has an
unclassified balance sheet; therefore, no values are shown above for current
assets and current liabilities.
</FN>
</TABLE>
