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, 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 jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
400 East South Street
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
<PAGE>
PART I
Item 1. Business
CNL Income Fund XVI, Ltd. (the "Registrant" or the "Partnership") is a
limited partnership which was organized pursuant to the laws of the State of
Florida on September 2, 1993. 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 2, 1994, 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
February 23, 1994. The offering terminated on June 12, 1995, 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 (the "Limited Partners").
The Partnership was organized to acquire both newly constructed and
existing restaurant properties, as well as properties upon which restaurants
were to be constructed (the "Properties"), which are leased primarily to
operators of national and regional fast-food and family-style restaurant chains
(the "Restaurant Chains"). Net proceeds to the Partnership from its offering of
Units, after deduction of organizational and offering expenses, totalled
$39,600,000 and were used to acquire 43 Properties, including seven Properties
consisting of land only. During the year ended December 31, 1996, the
Partnership sold a Property in Appleton, Wisconsin, and used the net sales
proceeds to acquire a Boston Market Property located in Fayetteville, North
Carolina, with an affiliate of the General Partners as tenants-in-common. In
addition, during the year ended December 31, 1997, the Partnership sold a
Property in Oviedo, Florida. As a result of the above transactions, as of
December 31, 1997, the Partnership owned 42 Properties, including six Properties
consisting of land only and one Property owned with an affiliate as
tenants-in-common. The lessee of the six Properties consisting of only land owns
the buildings currently on the land and has the right, if not in default under
the lease, to remove the buildings from the land at the end of the lease terms.
In January 1998, the Partnership reinvested the net sales proceeds from the sale
of the Property in Oviedo, Florida in a Property in Memphis, Tennessee, as
tenants-in-common, with affiliates of the General Partners. The Partnership
leases the Properties on a triple-net basis with the lessees responsible for all
repairs and maintenance, property taxes, insurance and utilities.
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 leases of the Properties provide for initial terms
ranging from 15 to 20 years (the average being 19 years) and expire between 2009
and 2016. All leases are on a triple-net basis, with the lessees responsible for
all repairs and maintenance, property taxes, insurance and utilities. The leases
of the Properties provide for minimum base annual rental payments (payable in
monthly installments) ranging from approximately $21,600 to $220,600. All of the
leases provide for percentage rent, based on sales in excess of a specified
amount. In addition, the majority of the leases provide that, commencing in
specified lease years (generally the sixth lease year), the annual base rent
required under the terms of the lease will increase.
Generally, the leases of the Properties provide for two to five
five-year renewal options subject to the same terms and conditions as the
initial lease. 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
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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 January 1998, the Partnership reinvested the net sales proceeds from
the sale of the Property in Oviedo, Florida in an IHOP Property in Memphis,
Tennessee, as tenants-in-common with affiliates of the General Partners. The
lease terms for this Property are substantially the same as the Partnership's
other leases as described above in the first three paragraphs of this section.
Major Tenants
During 1997, three lessees of the Partnership, Golden Corral
Corporation, Foodmaker, Inc., and DenAmerica Corp. each contributed more than
ten percent of the Partnership's total rental income. As of December 31, 1997,
Golden Corral Corporation was the lessee under leases relating to six
restaurants, Foodmaker, Inc. was the lessee under leases relating to five
restaurants, and DenAmerica Corp. was the lessee under leases relating to eight
restaurants. It is anticipated that based on the minimum rental payments
required by the leases, these three lesses each will continue to contribute more
than ten percent of the Partnership's total rental income in 1998 and subsequent
years. In addition, three Restaurant Chains, Golden Corral Family Steakhouse
Restaurants ("Golden Corral"), Jack in the Box and Denny's, each accounted for
more than ten percent of the Partnership's total rental income during 1997. In
subsequent years, it is anticipated that these three Restaurant Chains each will
continue to contribute more than ten percent of the Partnership's 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, 1997, Golden Corral Corporation and DenAmerica Corp.
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 Arrangement
In October 1996, the Partnership entered into an agreement to hold a
Boston Market Property as tenants-in-common with an affiliate of the General
Partners. The agreement provides for the Partnership and the affiliate to share
in the profits and losses of the Property and net cash flow from the Property,
in proportion to each co- venturer's percentage interest. The Partnership owns
an 80.27% interest in this Property.
In addition, in January 1998, the Partnership entered into an agreement
to hold an IHOP Property in Memphis, Tennessee, as tenants-in-common, with
affiliates of the General Partners. The agreement provides for the Partnership
and the affiliates to share in the profits and losses of the Property and net
cash flow from the Property, in proportion to each co-venturer's percentage
interest. The Partnership owns a 40.42% interest in this Property.
Certain Management Services
CNL Income Fund Advisors, Inc., 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
September 30, 1995. Under this agreement, CNL Income Fund Advisors, Inc. 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 Income Fund Advisors, Inc. also
assisted the General Partners in negotiating the leases. For these services, the
Partnership had agreed to pay CNL Income 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.
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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.
Item 2. Properties
As of December 31, 1997, the Partnership owned, either directly or
indirectly through a joint venture arrangement, 42 Properties, located in 17
states and the District of Columbia. 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 16,600
to 104,800 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. However, the
buildings located on the seven Checkers Properties are owned by the tenant while
the land parcels are owned by the Partnership. The buildings generally are
rectangular and are constructed from various combinations of stucco, steel,
wood, brick and tile. The sizes of the buildings owned by the Partnership range
from approximately 2,000 to 11,100 square feet. All buildings on Properties 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, 1997 (see Item 1. Business -
Major Tenants), are substantially the same as those described in Item 1.
Business - Leases.
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Golden Corral Corporation leases six Golden Corral restaurants. The
initial term of each lease is 15 years (expiring between 2009 and 2011) and the
average minimum base annual rent is approximately $158,300 (ranging from
approximately $113,300 to $192,900).
Foodmaker, Inc. leases five Jack in the Box restaurants. The initial
term of each lease is 18 years (expiring between 2011 and 2012) and the average
minimum base annual rent is approximately $96,700 (ranging from approximately
$87,500 to $115,600).
DenAmerica Corp. leases eight Denny's restaurants. The initial term of
each lease is 20 years (expiring in 2015) and the average minimum base annual
rent is approximately $114,700 (ranging from approximately $64,800 to $220,600).
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.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
As of March 13, 1998, there were 3,017 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 1997 and 1996 other than
pursuant to the Plan, net of commissions.
<TABLE>
<CAPTION>
1997 (1) 1996 (1)
--------------------------- -----------------
High Low Average High Low Average
<S> <C>
First Quarter $ 9.50 $ 8.03 $ 9.29 $10.00 $7.50 $8.75
Second Quarter 10.00 8.75 9.40 9.50 8.30 8.85
Third Quarter (2) (2) (2) 10.00 9.50 9.63
Fourth Quarter 8.80 7.93 8.45 10.00 9.50 9.63
</TABLE>
(1) A total of 32,120 and 15,283 Units were transferred other than pursuant
to the Plan for the years ended December 31, 1997 and 1996.
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(2) No transfer of Units took place during the quarter other than pursuant to
the Plan.
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, 1997 and 1996, the Partnership
declared cash distributions of $3,600,000 and $3,543,751, respectively, to the
Limited Partners. The General Partners anticipate that the Partnership will
declare a special distribution to the Limited Partners during the quarter ending
March 31, 1998, representing cumulative excess operating reserves. No amounts
distributed to partners for the years ended December 31, 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. 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 1997 1996
------------- ---------- ----------
March 31 $ 900,000 $ 843,751
June 30 900,000 900,000
September 30 900,000 900,000
December 31 900,000 900,000
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. Item 6. Selected Financial Data
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993 (1)
------------ ------------- ------------- ------------- ------------
<S> <C>
Year Ended December 31:
Revenues (2) $ 4,455,994 $ 4,438,218 $ 3,023,641 $ 207,735 $ -
Net income (3) 3,660,327 3,748,198 2,430,841 187,577 -
Cash distributions declared 3,600,000 3,543,751 2,437,832 151,434 -
Net income per Unit (3)(4) 0.81 0.82 0.60 0.17 -
Cash distributions declared
per Unit (4) 0.80 0.79 0.61 0.14 -
At December 31:
Total assets $40,938,320 $40,955,642 $41,240,500 $19,310,413 $1,000
Partners' capital 39,904,926 39,844,599 39,640,152 17,474,033 1,000
</TABLE>
(1) Selected financial data for 1993 represents the period September 2,
1993 (date of inception) through December 31, 1993.
(2) Revenues include equity in earnings of joint venture.
(3) Net income for the years ended December 31, 1997 and 1996, include
$41,148 and $124,305, respectively, from gains on sales of land and
building.
(4) Based on the weighted average number of Limited Partner Units
outstanding during the years ended December 31, 1997, 1996 and 1995,
and the period September 23, 1994 through December 31, 1994.
The above selected financial data should be read in conjunction with
the financial statements and related notes contained in Item 8 hereof.
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Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The Partnership 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
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 lessees generally
responsible for all repairs and maintenance, property taxes, insurance and
utilities. As of December 31, 1997, the Partnership owned 42 Properties, either
directly or indirectly through a joint venture arrangement.
Liquidity and Capital Resources
On September 2, 1994, the Partnership commenced an offering to the
public of up to 4,500,000 Units of limited partnership interest. The
Partnership's offering of Units terminated on June 12, 1995, at which time the
maximum proceeds of $45,000,000 (4,500,000 Units) had been received from
investors. The Partnership, therefore, will derive no additional capital
resources from the offering.
Net proceeds to the Partnership from its offering of Units, after
deduction of organizational and offering expenses, totalled $39,600,000. As of
December 31, 1994, approximately $16,300,000 had been used to invest in 22
Properties (seven of which were undeveloped land on which restaurants were being
constructed as of December 31, 1994) and to pay acquisition fees and certain
acquisition expenses. During the year ended December 31, 1995, the Partnership
completed construction of the seven Properties acquired in 1994, and acquired 19
additional Properties at a cost of approximately $20,900,000 including
acquisition fees and miscellaneous acquisition expenses. As a result of the
above transactions, as of December 31, 1995, the Partnership had acquired 41
Properties and had paid acquisition fees totalling $2,475,000 to an affiliate of
the General Partners. During the year ended December 31, 1996, the Partnership
used its remaining net offering proceeds to acquire two additional Properties
(one of which was undeveloped land on which a restaurant was constructed), and
to establish a working capital reserve of approximately $60,000 for Partnership
purposes.
As a result of the Partnership's tenant selling its restaurant business
located on the Partnership's Property in Appleton, Wisconsin, in April 1996, the
Partnership sold its Property for $775,000, resulting in a gain for financial
reporting purposes of $124,305. This Property was originally acquired by the
Partnership in February 1995 and had a cost of approximately $595,100, excluding
acquisition fees and miscellaneous acquisition expenses; therefore, the
Partnership sold the Property for approximately $179,900 in excess of its
original purchase price. In October 1996, the Partnership reinvested the net
sales proceeds in a Boston Market Property in Fayetteville, North Carolina, as
tenants-in-common with an affiliate of the General Partners. In connection
therewith, the Partnership and its affiliate entered into an agreement whereby
each co-venturer will share in the profits and losses of the Property in
proportion to each co-venturer's interest. The Partnership owns an 80.27%
interest in the Property. The sale of the Property in Appleton, Wisconsin, was
structured to qualify as a like-kind exchange transaction in accordance with
Section 1031 of the Internal Revenue Code. As a result, no gain was recognized
for federal income tax purposes. Therefore, the Partnership was not required to
distribute any of the net sales proceeds from the sale of this Property to
Limited Partners for the purpose of paying federal and state income taxes.
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. In January 1998, the Partnership reinvested the net
sales proceeds in an IHOP Property in Memphis, Tennessee, as tenants-in-common
with affiliates of the General Partners. In connection therewith, the
Partnership and its affiliates entered into an agreement whereby each
co-venturer will share in the profits and losses of the Property in proportion
to each co-venturer's interest. The Partnership owns a 40.42% interest in the
Property.
Currently, the Partnership's primary source of capital is cash from
operations (which includes cash received from tenants, distributions from the
joint venture and interest received, less cash paid for expenses). Cash from
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operations was $3,780,424, $3,753,726 and $2,481,395 for the years ended
December 31, 1997, 1996 and 1995, respectively. The increase in cash from
operations during 1997 and 1996, each as compared to the previous year, is
primarily a result of changes in income and expenses as described in "Results of
Operations" below and changes in the Partnership's working capital.
None of the Properties owned by the Partnership 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. In addition, the
Partnership will not borrow unless it first obtains an opinion of counsel that
such borrowing will not constitute acquisition indebtedness. 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, 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 Partnership's use of such funds to pay
Partnership expenses or to make distributions to partners. At December 31, 1997,
the Partnership had $1,673,869 invested in such short-term investments as
compared to $1,546,203 at December 31, 1996. The funds remaining at December 31,
1997, after payment of distributions and other liabilities, will be used to meet
the Partnership's working capital and other needs.
During 1995, affiliates of the General Partners incurred on behalf of
the Partnership $258,466 for certain organizational and offering expenses. In
addition, during 1996 and 1995, the affiliates incurred on behalf of the
Partnership $9,356 and $97,589, respectively, for certain acquisition expenses
during the years ended December 31, 1997, 1996 and 1995, the affiliates incurred
and $84,319, $105,144 and $131,272, respectively, for certain operating
expenses. As of December 31, 1997 and 1996, the Partnership owed $3,351 and
$2,292, respectively, to related parties for such amounts, accounting and
administrative services and management fees. As of February 28, 1998, the
Partnership had reimbursed the affiliates all such amounts. Other liabilities,
including distributions payable, decreased to $1,030,043 at December 31, 1997,
from $1,108,751 at December 31, 1996, primarily as a result of the payment
during the year ended December 31, 1997, of construction costs accrued for
certain Properties at December 31, 1996. Other liabilities also decreased due to
a decrease in rents paid in advance at December 31, 1997.
Based on cash from operations, the Partnership declared distributions
to the Limited Partners of $3,600,000, $3,543,751 and $2,437,832 for the years
ended December 31, 1997, 1996 and 1995, respectively. This represents
distributions of $0.80, $0.79 and $0.61 per Unit for the years ended December
31, 1997, 1996 and 1995, respectively. The General Partners anticipate that the
Partnership will declare a special distribution to the Limited Partners during
the quarter ending March 31, 1998, representing cumulative excess operating
reserves. No amounts distributed to the Limited Partners for the years ended
December 31, 1997, 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. The Partnership
intends to continue to make distributions of cash available for distribution to
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
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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. The General
Partners have the right to cause the Partnership to maintain additional reserves
if, in their discretion, they determine such reserves are required to meet the
Partnership's working capital needs.
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
The Partnership owned and leased 41 wholly owned Properties during
1995, 43 wholly owned Properties (including one Property in Appleton, Wisconsin,
which was sold in April 1996) during 1996, and 42 wholly owned Properties
(including one Property in Oviedo, Florida, which was sold in March 1997) during
1997. In addition, during 1997 and 1996, the Partnership owned and leased one
Property with an affiliate, as tenants-in-common. As of December 31, 1997, the
Partnership owned, either directly or through a joint venture arrangement, 42
Properties which are subject to long-term, triple-net leases that provide for
minimum base annual rental amounts (payable in monthly installments) ranging
from approximately $21,600 to $220,600. All of the leases provide for percentage
rent based on sales in excess of a specified amount. In addition, the majority
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 a 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, 1997, 1996 and 1995, the
Partnership earned $4,266,069, $4,297,558 and $2,698,956, 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 1997, as compared to 1996, is primarily attributable to
the sale of the Property in Oviedo, Florida in March 1997 and the sale of the
Property in Appleton Wisconsin in April 1996. The decrease during 1997 as
compared to 1996 is partially offset by the acquisition of two additional
Properties in 1996 that were operational for a full year in 1997, as compared to
a partial year in 1996. The increase in rental and earned income during 1996, as
compared to 1995, is primarily attributable to the acquisition of additional
Properties in 1995, and the fact that, with the exception of one Property sold
in April 1996, the Properties owned at December 31, 1995, were operational for a
full year in 1996, as compared to a partial year in 1995.
During the years ended December 31, 1997 and 1996, the Partnership
earned $35,604 and $37,600 in contingent rental income as a result of the gross
sales of three restaurant Properties meeting the threshold during 1997 and 1996,
under the terms of their leases requiring payment of contingent rental income.
In addition, for the years ended December 31, 1997 and 1996, the
Partnership earned $73,507 and $19,668 attributable to net income earned by a
joint venture as a result of the Partnership reinvesting the net sales proceeds
it received from the sale of the Property in Appleton, Wisconsin, in a Property
in Fayetteville, North Carolina, in October 1996, with an affiliate, as
tenants-in-common. The increase in net income earned by this joint venture
during 1997, as compared to 1996, is primarily attributable to the fact that the
Property was operational for a full year in 1997, as compared to a partial year
in 1996.
During at least one of the years ended December 31, 1997, 1996 and
1995, four lessees of the Partnership, Golden Corral Corporation, Foodmaker,
Inc., Checkers Drive-In Restaurants, Inc. and DenAmerica Corp. each contributed
more than ten percent of the Partnership's total rental income (including the
Partnership's share of rental income from the Property owned with an affiliate
as tenants-in-common). As of December 31, 1997, Golden Corral Corporation was
the lessee under leases relating to six restaurants, Foodmaker, Inc. was the
lessee under leases relating to five restaurants, Checkers Drive-In Restaurants,
Inc. was the lessee under leases relating to seven restaurants, and DenAmerica
Corp. was the lessee under leases relating to eight restaurants. It is
anticipated that, based on the minimum rental payments required by the leases,
Golden Corral Corporation, Foodmaker, Inc. and DenAmerica Corp. each will
continue to contribute more than ten percent of the Partnership's total rental
income in 1998 and subsequent years. In addition, during at least one of the
years ended December 31, 1997, 1996 and 1995, five Restaurant Chains, Golden
Corral, Jack in the Box, Checkers Drive-In Restaurants, Long John Silver's
8
<PAGE>
and Denny's each accounted for more than ten percent of the Partnership's total
rental income (including the Partnership's share of rental income from the
Property owned with an affiliate as tenants-in-common). In subsequent years, it
is anticipated that Golden Corral, Jack in the Box and Denny's each will
continue to account for more than ten percent of the 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.
During the years ended December 31, 1997, 1996 and 1995, the
Partnership also earned $73,634, $75,160 and $321,137, respectively, in interest
income from investments in money market accounts or other short-term, highly
liquid investments. The decrease in interest income during 1996, as compared to
1995, is primarily attributable to the decrease in the amount of funds invested
in short-term liquid investments as a result of the acquisition of additional
Properties during 1995 and the payment during 1996 of construction costs accrued
for certain Properties at December 31, 1995.
Operating expenses, including depreciation and amortization expense,
were $836,815, $814,325 and $592,800 for the years ended December 31, 1997, 1996
and 1995, respectively. The increase in operating expenses during 1997 and 1996,
each as compared to the previous year, is partially attributable to an increase
in depreciation expense as the result of the acquisition of additional
Properties during 1996 and 1995, and the fact that the Properties acquired
during 1996 and 1995 were operational for a full year in 1997 and 1996,
respectively, as compared to a partial year in 1996 and 1995, respectively.
Operating expenses also increased during 1997 and 1996, each as compared to the
previous year, as a result of the Partnership incurring additional taxes
relating to the filing of various state tax returns during 1997 and 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 of $41,148 for financial reporting purposes, for the year ended December
31, 1997. As a result of the sale of the Property in Appleton, Wisconsin, as
described in "Liquidity and Capital Resources," the Partnership recognized a
gain for financial reporting purposes of $124,305 for the year ended December
31, 1996. No Properties were sold during 1995.
The General Partners of the Partnership are in the process of assessing
and addressing the impact of the year 2000 on their computer package software.
The hardware and built-in software are believed to be year 2000 compliant.
Accordingly, the General Partners do not expect this matter to materially impact
how the Partnership conducts business nor its current or future results of
operations or financial position.
The Partnership's leases as of December 31, 1997, 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
<PAGE>
CNL INCOME FUND XVI, LTD.
(A Florida Limited Partnership)
CONTENTS
Page
Report of Independent Accountants 12
Financial Statements:
Balance Sheets 13
Statements of Income 14
Statements of Partners' Capital 15
Statements of Cash Flows 16
Notes to Financial Statements 19
10
<PAGE>
Report of Independent Accountants
To the Partners
CNL Income Fund XVI, Ltd.
We have audited the financial statements and the financial statement schedule of
CNL Income Fund XVI, 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 provide 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 XVI, Ltd. as of
December 31, 1997 and 1996, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1997, 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 26, 1998
11
<PAGE>
CNL INCOME FUND XVI, LTD.
(A Florida Limited Partnership)
BALANCE SHEETS
December 31,
ASSETS 1997 1996
------ ----------- -------
Land and buildings on operating
leases, less accumulated
depreciation $30,658,994 $31,766,349
Net investment in direct financing
leases 5,968,812 6,006,496
Investment in joint venture 771,684 774,389
Cash and cash equivalents 1,673,869 1,546,203
Restricted cash 627,899 -
Receivables, less allowance for
doubtful accounts of $879
and $9,875 31,946 76,094
Prepaid expenses 9,293 9,174
Organization costs, less
accumulated amortization of
$6,550 and $4,550 3,450 5,450
Accrued rental income 1,192,373 771,487
----------- -----------
$40,938,320 $40,955,642
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Acquisition and construction costs
payable $ 53,278 $ 106,036
Accounts payable 2,707 2,262
Escrowed real estate taxes payable 4,353 3,343
Distributions payable 900,000 900,000
Due to related parties 3,351 2,292
Rents paid in advance and deposits 69,705 97,110
----------- -----------
Total liabilities 1,033,394 1,111,043
Partners' capital 39,904,926 39,844,599
----------- -----------
$40,938,320 $40,955,642
=========== ===========
See accompanying notes to financial statements.
12
<PAGE>
CNL INCOME FUND XVI, LTD.
(A Florida Limited Partnership)
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Year Ended December 31,
1997 1996 1995
---------- ---------- -------
<S> <C>
Revenues:
Rental income from
operating leases $3,562,920 $3,571,244 $2,209,434
Earned income from direct
financing leases 703,149 726,314 489,522
Contingent rental income 35,604 37,600 -
Interest 73,634 75,160 321,137
Other income 7,180 8,232 3,548
---------- ---------- ----------
4,382,487 4,418,550 3,023,641
---------- ---------- ----------
Expenses:
General operating and
administrative 186,934 183,734 187,800
Professional services 25,352 26,569 59,526
Management fees to related
parties 40,087 39,206 24,128
State and other taxes 20,559 12,369 3,141
Depreciation and
amortization 563,883 552,447 318,205
---------- ---------- ----------
836,815 814,325 592,800
---------- ---------- ----------
Income Before Equity in
Earnings of Joint Venture
and Gain on Sale of Land
and Buildings 3,545,672 3,604,225 2,430,841
Equity in Earnings of Joint
Venture 73,507 19,668 -
Gain on Sale of Land and
Buildings 41,148 124,305 -
---------- ---------- ---------
Net Income $3,660,327 $3,748,198 $2,430,841
========== ========== ==========
Allocation of Net Income:
General partners $ 36,192 $ 36,239 $ 24,308
Limited partners 3,624,135 3,711,959 2,406,533
---------- ---------- ----------
$3,660,327 $3,748,198 $2,430,841
========== ========== ==========
Net Income Per Limited Partner
Unit $ 0.81 $ 0.82 $ 0.60
========== ========== ==========
Weighted Average Number of
Limited Partner Units
Outstanding 4,500,000 4,500,000 4,010,281
========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
13
<PAGE>
CNL INCOME FUND XVI, LTD.
(A Florida Limited Partnership)
STATEMENTS OF PARTNERS' CAPITAL
Years Ended December 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
General Partners Limited Partners
Accumu- Accumu-
Contri- lated Contri- Distri- lated Syndication
butions Earnings butions butions Earnings Costs Total
------- -------- ----------- ----------- ---------- ----------- --------
<S> <C>
Balance, December 31, 1994 $ 1,000 $ 1,876 $20,174,172 $ (151,434) $ 185,701 $(2,737,282) $17,474,033
Contributions from
limited partners - - 24,825,828 - - - 24,825,828
Distributions to limited
partners ($0.61 per limited
partner unit) - - - (2,437,832) - - (2,437,832)
Syndication costs - - - - - (2,652,718) (2,652,718)
Net income - 24,308 - - 2,406,533 - 2,430,841
------- ------- ----------- ----------- ---------- ----------- -----------
Balance, December 31, 1995 1,000 26,184 45,000,000 (2,589,266) 2,592,234 (5,390,000) 39,640,152
Distributions to limited
partners ($0.79 per limited
partner unit) - - - (3,543,751) - - (3,543,751)
Net income - 36,239 - - 3,711,959 - 3,748,198
------- ------- ----------- ----------- ---------- ----------- -----------
Balance, December 31, 1996 1,000 62,423 45,000,000 (6,133,017) 6,304,193 (5,390,000) 39,844,599
Distributions to limited
partners ($0.80 per limited
partner unit) - - - (3,600,000) - - (3,600,000)
Net income - 36,192 - - 3,624,135 - 3,660,327
------- ------- ----------- ----------- ---------- ----------- -----------
Balance, December 31, 1997 $ 1,000 $98,615 $45,000,000 $(9,733,017) $9,928,328 $(5,390,000) $39,904,926
======= ======= =========== =========== ========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
14
<PAGE>
CNL INCOME FUND XVI, LTD.
(A Florida Limited Partnership)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31,
1997 1996 1995
------------ ------------ --------
<S> <C>
Increase (Decrease) in Cash and
Cash Equivalents:
Cash Flows From Operating
Activities:
Cash received from tenants $ 3,881,005 $ 4,007,432 $ 2,353,106
Distributions from joint
venture 76,212 20,279 -
Cash paid for expenses (231,712) (349,145) (194,749)
Interest received 54,919 75,160 323,038
------------ ------------ ------------
Net cash provided by
operating activities 3,780,424 3,753,726 2,481,395
------------ ------------ ------------
Cash Flows From Investing
Activities:
Proceeds from sale of land
and buildings 610,384 775,000 -
Additions to land and
buildings on operating
leases (23,501) (2,355,627) (16,012,458)
Investment in direct
financing leases (29,257) (405,937) (5,595,236)
Investment in joint
venture - (775,000) -
Increase in restricted
cash (610,384) - -
Increase in other assets - (58,720)
Other - - 20,714
------------ ------------ ------------
Net cash used in
investing activities (52,758) (2,761,564) (21,645,700)
------------ ------------ ------------
Cash Flows From Financing
Activities:
Reimbursement of acqui-
sition and syndication
costs paid by related
parties on behalf of
the Partnership - (2,494) (405,569)
Contributions from limited
partners - - 24,825,828
Distributions to limited
partners (3,600,000) (3,431,251) (1,798,921)
Payment of syndication
costs - - (2,452,743)
------------ ------------ ------------
Net cash provided by
(used in) financing
activities (3,600,000) (3,433,745) 20,168,595
------------ ------------ ------------
Net Increase (Decrease) in Cash
and Cash Equivalents 127,666 (2,441,583) 1,004,290
Cash and Cash Equivalents at
Beginning of Year 1,546,203 3,987,786 2,983,496
------------ ------------ ------------
Cash and Cash Equivalents at
End of Year $ 1,673,869 $ 1,546,203 $ 3,987,786
============ ============ ============
</TABLE>
See accompanying notes to financial statements.
15
<PAGE>
CNL INCOME FUND XVI, LTD.
(A Florida Limited Partnership)
STATEMENTS OF CASH FLOWS - CONTINUED
<TABLE>
<CAPTION>
Year Ended December 31,
1997 1996 1995
------------ ------------ --------
<S> <C>
Reconciliation of Net Income to
Net Cash Provided by Operating
Activities:
Net income $ 3,660,327 $ 3,748,198 $ 2,430,841
------------ ------------ ------------
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation 561,883 550,447 316,205
Amortization 2,000 2,000 2,000
Equity in earnings of
joint venture, net of
distributions 2,705 611 -
Gain on sale of land and
buildings (41,148) (124,305) -
Decrease (increase) in
receivables 26,633 58,396 (83,993)
Decrease in net investment
in direct financing
leases 37,684 29,269 16,003
Increase in prepaid
expenses (119) (8,514) (660)
Increase in accrued rental
income (444,650) (468,201) (299,090)
Increase in accounts
payable and accrued
expenses 1,455 517 4,036
Increase (decrease) in due
to related parties,
excluding reimbursement
of acquisition and
syndication costs paid
on behalf of the
Partnership 1,059 (76,259) 76,682
Increase (decrease) in
rents paid in advance
and deposits (27,405) 41,567 19,371
------------ ------------ ------------
Total adjustments 120,097 5,528 50,554
------------ ------------ ------------
Net Cash Provided by Operating
Activities $ 3,780,424 $ 3,753,726 $ 2,481,395
============ ============ ============
</TABLE>
See accompanying notes to financial statements.
16
<PAGE>
CNL INCOME FUND XVI, LTD.
(A Florida Limited Partnership)
STATEMENTS OF CASH FLOWS - CONTINUED
<TABLE>
<CAPTION>
Year Ended December 31,
1997 1996 1995
------------ ------------ --------
<S> <C>
Supplemental Schedule of Non-Cash
Investing and Financing
Activities:
Related parties paid certain
acquisition and syndication
costs on behalf of
the Partnership as follows:
Acquisition costs $ - $ 9,356 $ 97,589
Syndication costs - - 258,466
------------ ------------ ------------
$ - $ 9,356 $ 356,055
============ ============ ============
Distributions declared and
unpaid at December 31 $ 900,000 $ 900,000 $ 787,500
============ ============ ============
</TABLE>
See accompanying notes to financial statements.
17
<PAGE>
CNL INCOME FUND XVI, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
Years Ended December 31, 1997, 1996 and 1995
1. Significant Accounting Policies:
Organization and Nature of Business - CNL Income Fund XVI, 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 of national and
regional fast-food and family-style restaurant chains. Under the terms
of a registration statement filed with the Securities and Exchange
Commission, the Partnership is authorized to sell a maximum of
4,500,000 units ($45,000,000) of limited partnership interest. A total
of 4,500,000 units ($45,000,000) of limited partnership interest was
sold.
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.
18
<PAGE>
CNL INCOME FUND XVI, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1997, 1996 and 1995
1. Significant Accounting Policies - Continued:
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.
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, the assets are
adjusted to their fair 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.
19
<PAGE>
CNL INCOME FUND XVI, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1997, 1996 and 1995
1. Significant Accounting Policies - Continued:
Investment in Joint Venture - The Partnership accounts for its interest
in a property in Fayetteville, North Carolina, held as
tenants-in-common with an affiliate, using the equity method since the
Partnership shares control with an affiliate which has 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.
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 (Note 6).
20
<PAGE>
CNL INCOME FUND XVI, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1997, 1996 and 1995
1. Significant Accounting Policies - Continued:
Weighted Average Number of Limited Partner Units Outstanding Net income
and distributions per limited partner unit are calculated based upon
the weighted average number of units of limited partnership interest
outstanding during the period the Partnership was operational.
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. The more significant areas requiring
the use of management estimates relate to the allowance for doubtful
accounts and future cash flows associated with long-lived assets.
Actual results could differ from those estimates.
2. Leases:
The Partnership leases its land or land and buildings primarily 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." Some of the leases are classified as operating leases and some
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 portion of some of the leases are operating leases. All leases
are for 15 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 five 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.
21
<PAGE>
CNL INCOME FUND XVI, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1997, 1996 and 1995
3. Land and Buildings on Operating Leases:
Land and buildings on operating leases consisted of the following at
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 (1,437,443) (875,560)
----------- -----------
$30,658,994 $31,766,349
=========== ===========
In April 1996, the Partnership sold its property in Appleton,
Wisconsin, and received net sales proceeds of $775,000, resulting in a
gain of $124,305 for financial reporting purposes. This property was
originally acquired by the Partnership in February 1995 and had a cost
of approximately $595,100, excluding acquisition fees and miscellaneous
acquisition expenses; therefore, the Partnership sold the property for
approximately $179,900 in excess of its original purchase price.
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.
Generally, the 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, 1997, 1996 and 1995, the Partnership
recognized $444,650, $468,201 and $299,090, respectively, of such
rental income.
22
<PAGE>
CNL INCOME FUND XVI, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1997, 1996 and 1995
3. Land and Buildings on Operating Leases - Continued:
The following is a schedule of the future minimum lease payments to be
received on noncancellable operating leases at December 31, 1997:
1998 $ 3,128,262
1999 3,177,377
2000 3,309,707
2001 3,378,687
2002 3,401,533
Thereafter 38,510,788
-----------
$54,906,354
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.
4. Net Investment in Direct Financing Leases:
The following lists the components of the net investment in direct
financing leases at December 31:
1997 1996
------------ -----------
Minimum lease payments
receivable $ 13,526,299 $ 14,267,132
Estimated residual
values 1,932,560 1,932,560
Less unearned income (9,490,047) (10,193,196)
------------ ------------
Net investment in
direct financing
leases $ 5,968,812 $ 6,006,496
============ ============
23
<PAGE>
CNL INCOME FUND XVI, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1997, 1996 and 1995
4. Net Investment in Direct Financing Leases - Continued:
The following is a schedule of future minimum lease payments to be
received on direct financing leases at December 31, 1997:
1998 $ 741,451
1999 742,074
2000 755,382
2001 759,526
2002 765,536
Thereafter 9,762,330
-----------
$13,526,299
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).
5. Investment in Joint Venture:
In October 1996, the Partnership acquired a property in Fayetteville,
North Carolina, with an affiliate of the Partnership that has the same
general partners, as tenants-in-common. In connection therewith, the
Partnership contributed $775,000 for a 80.27% interest in such
property. The Partnership accounts for its investment in this property
using the equity method since the Partnership shares control with an
affiliate. Amounts relating to this investment are presented as an
investment in joint venture.
24
<PAGE>
CNL INCOME FUND XVI, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1997, 1996 and 1995
5. Investment in Joint Venture - Continued:
The Partnership and an affiliate, as tenants-in-common, own and lease
one Boston Market property. The following presents the combined,
condensed financial information for the property held as
tenants-in-common with an affiliate at December 31:
1997 1996
-------- --------
Land and building on
operating lease,
less accumulated
depreciation $941,142 $960,732
Cash 8,190 100
Prepaid expenses 29 -
Accrued rental income 20,171 3,929
Liabilities 8,163 23
Partners' capital 961,369 964,738
Revenues 112,744 29,293
Net income 91,575 24,502
The Partnership recognized income totalling $73,507 and $19,668 for the
years ended December 31, 1997 and 1996, respectively, from this
property held as tenants-in-common with an affiliate.
6. Restricted Cash:
As of December 31, 1997, the net sales proceeds of $610,384 from the
sale of the property in Oviedo, Florida, plus accrued interest of
$17,515, were being held in an interest-bearing escrow account pending
the release of funds by the escrow agent to acquire an additional
property.
7. Syndication Costs:
Syndication costs consisting of legal fees, commissions, the marketing
support and due diligence expense reimbursement fee, printing and other
expenses incurred in connection with the offering totalled $5,390,000.
These offering expenses were charged to the limited partners' capital
accounts to reflect the net capital proceeds of the offering.
25
<PAGE>
CNL INCOME FUND XVI, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1997, 1996 and 1995
8. Allocations and Distributions:
Generally, net income and 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
shall be subordinated to receipt by the limited partners of an
aggregate, eight percent, cumulative, noncompounded annual return on
their invested capital contributions (the "Limited Partners' 8%
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' 8%
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, 1997, 1996 and 1995, the
Partnership declared distributions to the limited partners of
$3,600,000, $3,543,751 and $2,437,832, respectively. No distributions
have been made to the general partners to date.
26
<PAGE>
CNL INCOME FUND XVI, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1997, 1996 and 1995
9. 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:
<TABLE>
<CAPTION>
1997 1996 1995
---------- ---------- -------
<S> <C>
Net income for financial
reporting purposes $3,660,327 $3,748,198 $2,430,841
Depreciation for tax
reporting purposes
less than (in excess
of) depreciation for
financial reporting
purposes 3,576 (1,943) (13,929)
Direct financing leases
recorded as operating
leases for tax
reporting purposes 37,684 29,269 16,003
Equity in earnings of joint
venture for financial
reporting purposes in
excess of equity in
earnings of joint venture
for tax reporting purposes (477) (1,330) -
Gain on sale of land and
buildings for financial
reporting purposes less
than (in excess of) gain
for tax reporting purposes 23,764 (124,305) -
Allowance for doubtful
accounts (8,996) 6,913 2,962
Accrued rental income (444,650) (468,201) (299,090)
Rents paid in advance (27,405) 47,221 2,595
Other - 4,008 -
---------- ---------- ---------
Net income for federal
income tax purposes $3,243,823 $3,239,830 $2,139,382
========== ========== ==========
</TABLE>
27
<PAGE>
CNL INCOME FUND XVI, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1997, 1996 and 1995
10. 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. and CNL Fund Advisors, Inc. The other individual
general partner, Robert A. Bourne, is president of CNL Securities Corp.
and served as president of CNL Fund Advisors, Inc. through October
1997. 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, 1997, 1996 and
1995, CNL Income Fund Advisors, Inc. and CNL Fund Advisors, Inc.
(hereinafter referred to collectively as the "Affiliates") and CNL
Securities Corp. each performed certain services for the Partnership,
as described below.
For the year ended December 31, 1995, the Partnership incurred
$2,110,195 in syndication costs due to CNL Securities Corp. for
services in connection with selling limited partnership interests. A
substantial portion of these amounts ($1,991,106) was paid as
commissions to other broker-dealers.
In addition, for the year ended December 31, 1995, the Partnership
incurred $124,129 as a marketing support and due diligence expense
reimbursement fee due to CNL Securities Corp. This fee equals 0.5% of
the limited partner contributions of $24,825,828 received during the
year ended December 31, 1995. A portion of this fee has been reallowed
to other broker-dealers and all due diligence expenses were paid from
such fee.
Additionally, the Partnership incurred $1,365,421 for the year ended
December 31, 1995 in acquisition fees due to the Affiliates for
services in finding, negotiating and acquiring properties on behalf of
the Partnership. These fees represent 5.5% of the limited partner
capital contributions of $24,825,828 received during the year ended
December 31, 1995.
During the years ended December 31, 1997, 1996 and 1995, 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 an annual, noncumulative,
subordinated management fee of one percent of the sum of gross revenues
from properties wholly owned by the Partnership and the Partnership's
allocable share of gross revenues from joint
28
<PAGE>
CNL INCOME FUND XVI, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1997, 1996 and 1995
10. Related Party Transactions - Continued:
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. All or any portion of the management fee
not taken as to any fiscal year shall be deferred without interest and
may be taken in such other fiscal year as the Affiliates shall
determine. The Partnership incurred management fees of $40,087, $39,206
and $24,128 for the years ended December 31, 1997, 1996 and 1995,
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 Limited Partners' 8% Return, plus their invested capital
contributions. No deferred, subordinated real estate disposition fees
have been incurred since inception.
During the years ended December 31, 1997, 1996 and 1995, Affiliates
provided accounting and administrative services to the Partnership
(including accounting and administrative services in connection with
the offering of units) on a day-to-day basis. The expenses incurred for
these services were classified as follows:
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- ------
<S> <C>
Syndication costs $ - $ - $159,928
General operating
and administrative
expenses 89,270 118,677 114,317
-------- -------- --------
$ 89,270 $118,677 $274,245
======== ======== ========
</TABLE>
29
<PAGE>
CNL INCOME FUND XVI, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1997, 1996 and 1995
10. Related Party Transactions - Continued:
During 1996, the Partnership acquired one property from an affiliate of
the general partners, for a purchase price of $775,000. The property is
being held as tenants-in-common, with another affiliate of the general
partners. The affiliates had purchased and temporarily held title to
these properties in order to facilitate the acquisition of the
properties by the Partnership. The purchase prices paid by the
Partnership represented the costs incurred by the affiliates to acquire
the properties, including closing costs.
The due to related parties at December 31, 1997 and 1996 totalled
$3,351 and $2,292, respectively.
11. Concentration of Credit Risk:
The following schedule presents total rental and earned income from
individual lessees, each representing more than ten percent of the
Partnership's total rental and earned income (including the
Partnership's share of total rental and earned income from the property
held as tenants-in-common with an affiliate) for at least one of the
years ended December 31:
1997 1996 1995
---------- ---------- ----------
DenAmerica
Corp. $1,046,845 $1,051,328 $ 361,810
Golden Corral
Corporation 979,009 954,476 663,648
Foodmaker, Inc. 556,610 556,610 557,877
Checkers Drive-
In Restaur-
ants, Inc. 237,152 290,041 290,041
30
<PAGE>
CNL INCOME FUND XVI, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1997, 1996 and 1995
10. Concentration of Credit Risk - Continued:
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 total rental and earned income
from the property held as tenants-in-common with an affiliate) for at
least one of the years ended December 31:
1997 1996 1995
---------- ---------- ---------
Denny's $1,164,928 $1,163,621 $ 461,380
Golden Corral
Family Steak-
house Restau-
rants 979,009 954,476 663,648
Jack in the Box 556,610 556,610 557,877
Long John
Silver's 406,033 432,495 331,094
Checkers Drive-In
Restaurants 237,152 290,041 290,041
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 one 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.
11. Subsequent Event:
In January 1998, the Partnership acquired a property in Memphis,
Tennessee, as tenants-in-common with affiliates of the general
partners. In connection therewith, the Partnership contributed $607,896
for a 40.42% interest in such property. The Partnership will account
for its investment in this property using the equity method since the
Partnership will share control with affiliates.
31
<PAGE>
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 51, 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., CNL Real Estate 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 through December 31, 1997, at which time CNL Realty Advisors,
Inc. merged with Commercial Net Lease Realty, Inc., 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 a director, 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 a director,
Chairman of the Board and Chief Executive Officer of CNL American Properties
Fund, Inc. since 1994, and has served as a director, 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 $60 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 XII, Ltd., CNL Income Fund XIII, Ltd., CNL Income
Fund XIV, Ltd., CNL Income Fund XV, 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.
32
<PAGE>
Robert A. Bourne, age 50, 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, and prior to its merger with
CNL Fund Advisors, Inc., effective January 1, 1996, CNL Income Fund Advisors,
Inc., and Chief Investment Officer, Vice Chairman of the Board of Directors, a
director and Treasurer of CNL Institutional Advisors, Inc., a registered
investment advisor. Mr. Bourne served as President of CNL Institutional
Advisors, Inc. from the date of its inception through June 30, 1997 and served
as President of CNL Fund Advisors, Inc. from the date of its inception through
October 1997. Mr. Bourne also has served as a director since 1992, as President
from July 1992 to February 1996, as Secretary and Treasurer from February 1996
through December 1997, and since February 1996, served as Vice Chairman of the
Board of Directors 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, served as Treasurer and Vice Chairman of CNL Realty Advisors, Inc. through
December 31, 1997, at which time CNL Realty Advisors, Inc. merged with
Commercial Net Lease Realty, 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, 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., was organized in 1980 under the laws of the State of Florida. CNL Group,
Inc. is a diversified real estate company which provides a wide range of real
estate, development and financial services to companies in the United States
through the activities of its subsidiaries. These activities are primarily
focused on the franchised restaurant and hospitality industries. 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.
33
<PAGE>
Curtis B. McWilliams, age 42, joined CNL Fund Advisors, Inc. in April
1997 and currently serves as President of CNL Fund Advisors, Inc. and as
Executive Vice President of CNL American Properties Fund, Inc. In addition, Mr.
McWilliams serves as Executive Vice President of CNL Group, Inc. and as
President of CNL Financial Services, Inc. and certain other subsidiaries of CNL
Group, Inc. From September 1983 through March 1997, Mr. McWilliams was employed
by Merrill Lynch. From January 1991 to August 1996, Mr. McWilliams was a
managing director in the corporate banking group of Merrill Lynch's investment
banking division. During this time, he was a senior relationship manager with
Merrill Lynch and as such was responsible for a number of the firm's larger
clients. From February 1990 to February 1993, he also served as co-head of one
of the Industrial Banking Groups within Merrill Lynch's investment banking
division and had administrative responsibility for a group of bankers and client
relationships, including the firm's transportation group. From September 1996 to
March 1997, Mr. McWilliams served as Chairman of Merrill Lynch's Private
Advisory Services. Mr. McWilliams received a B.S.E. in Chemical Engineering from
Princeton University in 1977 and a Masters of Business Administration with a
concentration in finance from the University of Chicago in 1983.
John T. Walker, age 39, is 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 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 49, 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, served as a director and Secretary of CNL Realty Advisors, Inc. since its
inception in 1991 through December 31, 1997, at which time CNL Realty Advisors,
Inc. merged with Commercial Net Lease Realty, Inc., 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 300 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. She was licensed as a certified public accountant in 1979.
34
<PAGE>
Jeanne A. Wall, age 39, has served as Chief Operating Officer of CNL
Investment Company and of CNL Securities Corp. since November 1994 and has
served as Executive Vice President of CNL Investment Company since January 1991.
In 1984, Ms. Wall joined CNL Securities Corp. In 1985, Ms. Wall became Vice
President of CNL Securities Corp., in 1987, she became Senior Vice President and
in July 1997, she became Executive 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 product development, partnership administration and
investor services for programs offered through participating brokers, and
corporate communications for CNL Group, Inc. and Affiliates. 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 through 1997, as Vice
President of Commercial Net Lease Realty, Inc. from 1992 through 1997, 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 34, has served as Chief Financial Officer of
CNL Fund Advisors, Inc. since September 1996 and as Chief Financial Officer of
CNL American Properties Fund, Inc. since January 1997. 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 audit 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.
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 March 13, 1998, 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 March 13, 1998, the beneficial
ownership interests of the General Partners in the Registrant.
<TABLE>
<CAPTION>
Title of Class Name of Partner Percent of Class
<S> <C>
General Partnership Interests James M. Seneff, Jr. 45%
Robert A. Bourne 45%
CNL Realty Corporation 10%
----
100%
</TABLE>
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.
35
<PAGE>
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, 1997, exclusive of any distributions to which the General
Partners or their affiliates may be entitled by reason of their purchase and
ownership of Units.
<TABLE>
<CAPTION>
==========================================================================================================================
Amount Incurred
Type of Compensation For the Year
and Recipient Method of Computation Ended December 31, 1997
----------------------- --------------------- ------------------------
<S> <C>
Reimbursement to affiliates for Operating expenses are reimbursed Operating expenses incurred
operating expenses at the lower of cost or 90 percent on behalf of the Partnership:
of the prevailing rate at which $84,319
comparable services could have
been obtained in the same Accounting and administra-
geographic area. Affiliates of the tive services: $89,270
General Partners from time to
time incur certain operating
expenses on behalf of the
Partnership for which the
Partnership reimburses the
affiliates without interest.
Annual management fee to One percent of the sum of gross $40,087
affiliates revenues from Properties wholly
owned by the Partnership plus the
Partner-ship's allocable share of gross
revenues of joint ventures in which the
Part-nership is a co-venturer. The
manage-ment 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. All or any
portion of the management fee not taken
as to any fiscal year shall be deferred
without interest and may be taken in
such other fiscal year as the
affiliates shall determine.
==========================================================================================================================
</TABLE>
36
<PAGE>
<TABLE>
<CAPTION>
==========================================================================================================================
Amount Incurred
Type of Compensation For the Year
and Recipient Method of Computation Ended December 31, 1997
----------------------- --------------------- ------------------------
<S> <C>
Deferred, subordinated real estate A deferred, subordinated real $ -0-
disposition fee payable to estate disposition fee, payable
affiliates 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' deferred, sub- A deferred, subordinated share $ -0-
ordinated share of Partnership net equal to one percent of
cash flow Partnership distributions of net
cash flow, subordinated to certain
minimum returns to the Limited
Partners.
General Partners' deferred, sub- A deferred, subordinated share $ -0-
ordinated share of Partnership net equal to five percent of
sales proceeds from a sale or Partnership distributions of such
sales net sales proceeds, subordi-nated
to certain minimum returns to the
Limited Partners.
==========================================================================================================================
</TABLE>
37
<PAGE>
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, 1997 and 1996
Statements of Income for the years ended December 31, 1997,
1996 and 1995
Statements of Partners' Capital for the years ended December
31, 1997, 1996 and 1995
Statements of Cash Flows for the years ended December 31,
1997, 1996 and 1995
Notes to Financial Statements
2. Financial Statement Schedule
Schedule III - Real Estate and Accumulated Depreciation at
December 31, 1997
Notes to Schedule III - Real Estate and Accumulated
Depreciation at December 31, 1997
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 XVI, Ltd. (Included as Exhibit 3.2 to
Registration Statement No. 33-69968-01 on Form S-11
and incorporated herein by reference.)
4.1 Affidavit and Certificate of Limited Partnership of
CNL Income Fund XVI, Ltd. (Included as Exhibit 3.2 to
Registration Statement No. 33-69968-01 on Form S-11
and incorporated herein by reference.)
4.2 Amended and Restated Agreement of Limited Partnership
of CNL Income Fund XVI, Ltd. (Included as Exhibit 4.2
to Form 10-K filed with the Securities and Exchange
Commission on March 30, 1995, and incorporated herein
by reference.)
10.1 Management Agreement between CNL Income Fund XVI,
Ltd. and CNL Investment Company (Included as Exhibit
10.1 to Form 10-K filed with the Securities and
Exchange Commission on March 30, 1995, 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 30, 1995,
and incorporated herein by reference.)
38
<PAGE>
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, 1997 through December 31, 1997.
(c) Not applicable.
(d) Other Financial Information
The Partnership is required to file audited financial
information of two of its tenants (DenAmerica Corp. and Golden
Corral Corporation) as a result of these two tenants each
leasing more than 20 percent of the Partnership's total assets
for the year ended December 31, 1997. DenAmerica Corp. is a
public company and as of the date hereof, had not filed their
Form 10-K; therefore, the financial statements are not
available to the Partnership to include in this filing. The
Partnership will file this financial information under cover
of a Form 10-K/A as soon as it is available. Golden Corral
Corporation is a privately-held company and its financial
information is not publicly available.
39
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on the 24th day of
March, 1998.
CNL INCOME FUND XVI, LTD.
By: CNL REALTY CORPORATION
General Partner
/s/ Robert A. Bourne
--------------------------
ROBERT A. BOURNE, President
By: ROBERT A. BOURNE
General Partner
/s/ Robert A. Bourne
--------------------------
ROBERT A. BOURNE
By: JAMES M. SENEFF, JR.
General Partner
/s/ James M. Seneff, Jr.
--------------------------
JAMES M. SENEFF, JR.
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
==========================================================================================================================
Signature Title Date
<S> <C>
/s/ Robert A. Bourne President, Treasurer and Director March 24, 1998
- ---------------------------------- (Principal Financial and
Robert A. Bourne Accounting Officer)
/s/ James M. Seneff, Jr. Chief Executive Officer and March 24, 1998
- ---------------------------------- Director (Principal Executive
James M. Seneff, Jr. Officer)
==========================================================================================================================
</TABLE>
<PAGE>
CNL INCOME FUND XVI, LTD.
(A Florida Limited Partnership)
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1997
<TABLE>
<CAPTION>
Costs Capitalized
Subsequent
Initial Cost To Acquisition
Buildings
Encum- and Improve- Carrying
brances Land Improvements ments Costs
<S> <C>
Properties the Partnership
has Invested in Under
Operating Leases:
Arby's Restaurant:
Indianapolis, Indiana - $ 315,276 $ 591,993 $ - $ -
Boston Market Restaurants:
St. Cloud, Minnesota - 502,786 645,127 - -
Columbia Heights, Minnesota - 277,576 725,953 - -
Madison, Tennessee (i) - 343,367 484,422 - -
Checkers Drive-In Restaurants:
Conyers, Georgia - 363,553 - - -
Lake Worth, Florida - 325,302 - - -
Ocala, Florida - 289,578 - - -
Pompano Beach, Florida - 373,491 - - -
Tampa, Florida - 372,177 - - -
Tampa, Florida - 221,715 - - -
Denny's Restaurants:
Tucson, Arizona - 218,353 - - -
Idaho Falls, Idaho - 552,186 - 692,274 -
Branson, Missouri - 1,160,979 - 1,010,688 -
Dover, Ohio - 266,829 - - -
Salina, Kansas - 260,711 - - -
Moab, Utah - 432,825 - - -
Mesquite, Texas - 403,548 650,659 - -
Temple, Texas - 306,866 677,659 - -
Golden Corral Family
Steakhouse Restaurants:
Fort Collins, Colorado - 566,943 - 1,122,500 -
Hickory, North Carolina - 761,108 - 1,001,893 -
Independence, Missouri - 781,761 - 1,147,538 -
Baytown, Texas - 446,240 - 971,766 -
Rosenburg, Texas - 320,133 - 804,428 -
Farmington, New Mexico - 517,495 - 1,037,873 -
IHOP Restaurant:
Ft. Worth, Texas - 364,634 554,302 - -
Jack in the Box Restaurants:
Brownsville, Texas - 553,671 - 658,282 -
Grand Prairie, Texas - 439,950 - 636,524 -
Rancho Cordova, California - 401,302 595,722 - -
Temple City, California - 744,493 225,404 - -
Texas City, Texas - 403,476 568,053 - -
KFC Restaurant:
Concordia, Missouri - 188,759 - 434,369 -
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Life
on Which
Gross Amount at Which Carried Depreciation
at Close of Period (g) in Latest
Buildings Date Income
and Accumulated of Con- Date Statement is
Land Improvements Total Depreciation struction Acquired Computed
----------- ------------ ----------- ------------ --------- -------- ----------
<S> <C>
$ 315,276 $ 591,993 $ 907,269 $ 46,778 1978 08/95 (c)
502,786 645,127 1,147,913 49,327 1995 09/95 (c)
277,576 725,953 1,003,529 49,391 1995 12/95 (c)
343,367 484,422 827,789 42,890 1995 05/95 (c)
363,553 - 363,553 (b) - 12/94 (b)
325,302 - 325,302 (b) - 12/94 (b)
289,578 - 289,578 (b) - 12/94 (b)
373,491 - 373,491 (b) - 12/94 (b)
372,177 - 372,177 (b) - 12/94 (b)
221,715 - 221,715 (b) - 12/94 (b)
218,353 (d) 218,353 (e) 1995 10/94 (e)
552,186 692,274 1,244,460 58,134 1995 01/95 (c)
1,160,979 1,010,688 2,171,667 68,242 1995 03/95 (c)
266,829 (d) 266,829 (e) 1971 03/95 (e)
260,711 (d) 260,711 (e) 1995 04/95 (e)
432,825 (d) 432,825 (e) 1995 06/95 (e)
403,548 650,659 1,054,207 50,642 1995 08/95 (c)
306,866 677,659 984,525 52,743 1975 08/95 (c)
566,943 1,122,500 1,689,443 104,844 1995 10/94 (c)
761,108 1,001,893 1,763,001 100,281 1994 11/94 (c)
781,761 1,147,538 1,929,299 114,859 1994 11/94 (c)
446,240 971,766 1,418,006 88,764 1995 01/95 (c)
320,133 804,428 1,124,561 65,095 1995 05/95 (c)
517,495 1,037,873 1,555,368 62,154 1996 01/96 (c)
364,634 554,302 918,936 33,701 1994 03/96 (c)
553,671 658,282 1,211,953 65,152 1995 10/94 (c)
439,950 636,524 1,076,474 58,988 1995 10/94 (c)
401,302 595,722 997,024 62,945 1985 10/94 (c)
744,493 225,404 969,897 23,817 1984 10/94 (c)
403,476 568,053 971,529 60,022 1991 10/94 (c)
188,759 434,369 623,128 30,981 1995 09/95 (c)
</TABLE>
F-1
<PAGE>
CNL INCOME FUND XVI, LTD.
(A Florida Limited Partnership)
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1997
<TABLE>
<CAPTION>
Costs Capitalized
Subsequent
Initial Cost To Acquisition
Buildings
Encum- and Improve- Carrying
brances Land Improvements ments Costs
<S> <C>
Long John Silver's Restaurants:
Charlotte, North Carolina - 313,200 - 415,695 -
Copperas Cove, Texas - 162,000 - - -
Kansas City, Missouri - 370,204 - 433,058 -
Silver City, New Mexico - 116,767 183,174 - -
Shoney's Restaurant:
Las Vegas, Nevada - 426,238 - - -
Wendy's Old Fashioned Hamburgers
Restaurant:
Washington, District of
Columbia - 393,963 567,626 - -
----------- ---------- ----------- ------
$15,259,455 $6,470,094 $10,366,888 $ -
=========== ========== =========== ======
Property of Joint Venture in Which the
Partnership has an 80.27% Interest and
has Invested in Under an Operating Lease:
Boston Market Restaurant:
Fayetteville, North Carolina - $ 377,800 $ 587,700 $ - $ -
=========== ========== =========== ======
Properties the Partnership
has Invested in Under
Direct Financing Leases:
Boston Market Restaurant:
Chattanooga, Tennessee (i) - 184,014 577,320 - -
Denny's Restaurants:
Tucson, Arizona - $ - $ - $ 539,769 $ -
Bucyrus, Ohio - 139,003 155,194 273,858 -
Dover, Ohio - - 200,612 236,270 -
Salina, Kansas - - - 693,781 -
Moab, Utah - - - 727,211 -
Long John Silver's Restaurants:
Celina, Ohio - 109,129 - 425,145 -
Clovis, New Mexico - 127,607 425,282 - -
Copperas Cove, Texas - - 424,319 - -
Shoney's Restaurant:
Las Vegas, Nevada - - 812,466 - -
----------- ---------- ----------- ------
$ 559,753 $2,595,193 $ 2,896,034 $ -
=========== ========== =========== ======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Life
on Which
Gross Amount at Which Carried Depreciation
at Close of Period (g) in Latest
Buildings Date Income
and Accumulated of Con- Date Statement is
Land Improvements Total Depreciation struction Acquired Computed
----------- ------------ ----------- ------------ --------- -------- ----------
<S> <C>
313,200 415,695 728,895 37,299 1995 12/94 (c)
162,000 (d) 162,000 (e) 1994 12/94 (e)
370,204 433,058 803,262 40,172 1995 12/94 (c)
116,767 183,174 299,941 12,630 1982 12/95 (c)
426,238 (d) 426,238 (e) 1992 05/95 (e)
393,963 567,626 961,589 57,592 1983 12/94 (c)
----------- ----------- ----------- ----------
$15,259,455 $16,836,982 $32,096,437 $1,437,443
=========== =========== =========== ==========
$ 377,800 $ 587,700 $ 965,500 $ 24,358 1996 10/96 (c)
=========== =========== =========== ==========
(d) (d) (d) (f) 1995 05/95 (f)
- (d) (d) (e) 1995 10/94 (e)
(d) (d) (d) (f) 1973 03/95 (f)
- (d) (d) (e) 1971 03/95 (e)
- (d) (d) (e) 1995 04/95 (e)
- (d) (d) (e) 1995 06/94 (e)
(d) (d) (d) (f) 1995 10/94 (f)
(d) (d) (d) (f) 1976 12/94 (f)
- (d) (d) (e) 1994 12/94 (e)
- (d) (d) (e) 1992 05/95 (e)
</TABLE>
F-2
<PAGE>
CNL INCOME FUND XVI, LTD.
(A Florida Limited Partnership)
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1997
(a) Transactions in real estate and accumulated depreciation during 1997,
1996 and 1995 are summarized as follows:
<TABLE>
<CAPTION>
Accumulated
Cost Depreciation
<S> <C>
Properties the Partnership
has Invested in Under
Operating Leases:
Balance, December 31, 1994 $14,697,306 $ 8,908
Acquisitions 15,418,316 -
Reclassified to net invest-
ment in direct financing
lease (649,736) -
Depreciation expense - 316,205
----------- ----------
Balance, December 31, 1995 29,465,886 325,113
Acquisitions 3,488,522 -
Dispositions (312,499) -
Depreciation expense - 550,447
----------- ----------
Balance, December 31, 1996 32,641,909 875,560
Dispositions (545,472) -
Depreciation expense - 561,883
----------- ----------
Balance, December 31, 1997 $32,096,437 $1,437,443
=========== ==========
Property of Joint Venture in Which
the Partnership has an 80.27%
Interest and has Invested in Under
and Operating Lease:
Balance, December 31, 1995 $ - $ -
Acquisition 965,500 -
Depreciation expense - 4,768
----------- ----------
Balance, December 31, 1996 965,500 4,768
Depreciation expense - 19,590
----------- ----------
Balance, December 31, 1997 $ 965,500 $ 24,358
=========== ==========
</TABLE>
(b) The building portion of this Property is owned by the tenant;
therefore, depreciation is not applicable.
(c) Depreciation expense is computed for buildings and improvements based
upon estimated lives of 30 years.
(d) 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.
(e) 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.
F-3
<PAGE>
CNL INCOME FUND XVI, LTD.
(A Florida Limited Partnership)
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED
DEPRECIATION - CONTINUED
December 31, 1997
(f) 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 net investment in direct financing
leases; therefore, depreciation is not applicable.
(g) As of December 31, 1997, the aggregate cost of the Properties owned by
the Partnership and the joint venture for federal income tax purposes
was $38,151,418 and $775,000, respectively. All of the leases are
treated as operating leases for federal income tax purposes.
(h) During the years ended December 31, 1996 and 1994, the Partnership, and
an affiliate as tenants-in-common, purchased land and buildings from
CNL BB Corp., an affiliate of the General Partners, for an aggregate
cost of $775,000 and $4,094,922, respectively.
(i) The restaurants in Madison, Tennessee and Chattanooga, Tennessee were
converted from Kenny Rogers Roasters restaurants to Boston Market
restaurants in 1996.
F-4
<PAGE>
EXHIBITS
<PAGE>
EXHIBIT INDEX
Exhibit Number Page
3.1 Affidavit and Certificate of Limited Partnership of CNL Income
Fund XVI, Ltd. (Included as Exhibit 3.2 to Registration
Statement No. 33-69968-01 on Form S- 11 and incorporated
herein by reference.)
4.1 Affidavit and Certificate of Limited Partnership of CNL Income
Fund XVI, Ltd. (Included as Exhibit 3.2 to Registration
Statement No. 33-69968-01 on Form S- 11 and incorporated
herein by reference.)
4.2 Amended and Restated Agreement of Limited Partnership of CNL
Income Fund XVI, Ltd. (Included as Exhibit 4.2 to Form 10-K
filed with the Securities and Exchange Commission on March 30,
1995, and incorporated herein by reference.)
10.1 Management Agreement between CNL Income Fund XVI, Ltd. and CNL
Investment Company (Included as Exhibit 10.1 to Form 10-K
filed with the Securities and Exchange Commission on March 30,
1995, 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 30, 1995, and incorporated herein by reference.)
10.3 Assignment of Management Agreement from CNL Income Fund
Advisors, Inc. to CNL Fund Advisors, Inc. (Included as Exhibit
10.3 to Form 10-K filed with the Securities and Exchange
Commission on April 1, 1996, and incorporated herein by
reference.)
27 Financial Data Schedule (Filed herewith.)
i
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the balance
sheet of CNL Income Fund XVI, Ltd. at December 31, 1997, and its statement of
income for the year then ended and is qualified in its entirety by reference to
the Form 10K of CNL Income Fund XVI, Ltd. for the year ended December 31, 1997.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 2,301,768<F2>
<SECURITIES> 0
<RECEIVABLES> 32,825
<ALLOWANCES> 879
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 32,096,437
<DEPRECIATION> 1,437,443
<TOTAL-ASSETS> 40,938,320
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 39,904,926
<TOTAL-LIABILITY-AND-EQUITY> 40,938,320
<SALES> 0
<TOTAL-REVENUES> 4,382,487
<CGS> 0
<TOTAL-COSTS> 836,815
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 3,660,327
<INCOME-TAX> 0
<INCOME-CONTINUING> 3,660,327
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,660,327
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F2>Cash balance includes $627,899 in restricted cash.
<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>
