FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
--------------------------
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 (I.R.S. Employer
of incorporation or organiza- Identification No.)
tion)
400 E. South Street
Orlando, Florida 32801
- ---------------------------- -----------------
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number
(including area code) (407) 422-1574
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Sections 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes X No
<PAGE>
CONTENTS
Part I Page
Item 1. Financial Statements:
Condensed Balance Sheets 1
Condensed Statements of Income 2
Condensed Statements of Partners' Capital 3
Condensed Statements of Cash Flows 4
Notes to Condensed Financial Statements 5-6
Item 2. Management's Discussion and Analysis
of Financial Condition and
Results of Operations 7-9
Part II
Other Information 10
<PAGE>
CNL INCOME FUND XVI, LTD.
(A Florida Limited Partnership)
CONDENSED BALANCE SHEETS
March 31, December 31,
ASSETS 1998 1997
----------- -----------
Land and buildings on operating
leases, less accumulated
depreciation of $1,577,859
and $1,437,443 $30,518,578 $30,658,994
Net investment in direct financing
leases 5,958,509 5,968,812
Investment in joint ventures 1,378,585 771,684
Cash and cash equivalents 1,867,427 1,673,869
Restricted cash - 627,899
Receivables - 31,946
Prepaid expenses 8,548 9,293
Organization costs, less accumu-
lated amortization of $7,050
and $6,550 2,950 3,450
Accrued rental income 1,302,452 1,192,373
----------- -----------
$41,037,049 $40,938,320
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Construction costs payable $ 53,278 $ 53,278
Accounts payable 2,825 2,707
Escrowed real estate taxes payable 3,955 4,353
Distributions payable 990,000 900,000
Due to related parties 15,852 3,351
Rents paid in advance and deposits 159,518 69,705
----------- -----------
Total liabilities 1,225,428 1,033,394
Partners' capital 39,811,621 39,904,926
----------- -----------
$41,037,049 $40,938,320
=========== ===========
See accompanying notes to condensed financial statements.
1
<PAGE>
CNL INCOME FUND XVI, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF INCOME
Quarter Ended
March 31,
1998 1997
---------- -----------
Revenues:
Rental income from operating leases $ 888,095 $ 898,227
Earned income from direct financing
leases 175,047 176,211
Interest and other income 14,761 18,565
---------- ----------
1,077,903 1,093,003
---------- ----------
Expenses:
General operating and administrative 33,021 41,140
Professional services 9,440 5,713
Management fees to related parties 9,963 9,902
State and other taxes 19,302 20,382
Depreciation and amortization 140,916 141,134
---------- ----------
212,642 218,271
---------- ----------
Income Before Equity in Earnings of
Joint Ventures and Gain on Sale of
Land 865,261 874,732
Equity in Earnings of Joint Ventures 31,434 18,325
Gain on Sale of Land - 41,148
---------- ----------
Net Income $ 896,695 $ 934,205
========== ==========
Allocation of Net Income:
General partners $ 8,967 $ 8,930
Limited partners 887,728 925,275
---------- ----------
$ 896,695 $ 934,205
========== ==========
Net Income Per Limited Partner Unit $ 0.20 $ 0.21
========== ==========
Weighted Average Number of Limited
Partner Units Outstanding 4,500,000 4,500,000
========== ==========
See accompanying notes to condensed financial statements.
2
<PAGE>
CNL INCOME FUND XVI, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF PARTNERS' CAPITAL
Quarter Ended Year Ended
March 31, December 31,
1998 1997
------------- -----------
General partners:
Beginning balance $ 99,615 $ 63,423
Net income 8,967 36,192
----------- -----------
108,582 99,615
----------- -----------
Limited partners:
Beginning balance 39,805,311 39,781,176
Net income 887,728 3,624,135
Distributions ($0.22 and $0.80
per limited partner unit,
respectively) (990,000) (3,600,000)
----------- -----------
39,703,039 39,805,311
----------- -----------
Total partners' capital $39,811,621 $39,904,926
=========== ===========
See accompanying notes to condensed financial statements.
3
<PAGE>
CNL INCOME FUND XVI, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF CASH FLOWS
Quarter Ended
March 31,
1998 1997
----------- -----------
Increase (Decrease) in Cash and Cash
Equivalents:
Net Cash Provided by Operating
Activities $ 1,091,044 $ 1,034,288
----------- -----------
Cash Flows From Investing
Activities:
Proceeds from sale of land - 610,384
Investment in direct
financing leases - (29,257)
Investment in joint venture (607,896) -
Decrease (increase) in
restricted cash 610,410 (610,384)
----------- -----------
Net cash provided by
(used in) investing
activities 2,514 (29,257)
----------- -----------
Cash Flows From Financing
Activities:
Distributions to limited
partners (900,000) (900,000)
----------- -----------
Net cash used in
financing activities (900,000) (900,000)
----------- -----------
Net Increase in Cash and Cash
Equivalents 193,558 105,031
Cash and Cash Equivalents at
Beginning of Quarter 1,673,869 1,546,203
----------- -----------
Cash and Cash Equivalents at End
of Quarter $ 1,867,427 $ 1,651,234
=========== ===========
Supplemental Schedule of Non-Cash
Investing and Financing Activities:
Distributions declared and
unpaid at end of quarter $ 990,000 $ 900,000
=========== ===========
See accompanying notes to condensed financial statements.
4
<PAGE>
CNL INCOME FUND XVI, LTD.
(A Florida Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS
Quarters Ended March 31, 1998 and 1997
1. Basis of Presentation:
The accompanying unaudited condensed financial statements have been
prepared in accordance with the instructions to Form 10-Q and do not
include all of the information and note disclosures required by
generally accepted accounting principles. The financial statements
reflect all adjustments, consisting of normal recurring adjustments,
which are, in the opinion of management, necessary to a fair statement
of the results for the interim periods presented. Operating results for
the quarter ended March 31, 1998, may not be indicative of the results
that may be expected for the year ending December 31, 1998. Amounts as
of December 31, 1997, included in the financial statements, have been
derived from audited financial statements as of that date.
These unaudited financial statements should be read in conjunction with
the financial statements and notes thereto included in Form 10-K of CNL
Income Fund XVI, Ltd. (the "Partnership") for the year ended December
31, 1997.
2. Investment in Joint Ventures:
In January 1998, the Partnership acquired a 40.42% interest in an IHOP
property in Memphis, Tennessee, as tenants-in-common with affiliates of
the general partners. The Partnership accounts for its investment in
this property using the equity method since the Partnership shares
control with affiliates, and amounts relating to its investment are
included in investment in joint ventures.
The following presents the combined, condensed financial information
for all of the Partnership's investments in joint ventures at:
March 31, December 31,
1998 1997
Land and buildings on
operating leases, less
accumulated depreciation $2,434,194 $941,142
Cash 8,375 8,190
Prepaid expenses 23 29
Accrued rental income 29,559 20,171
Liabilities 8,498 8,163
Partners' capital 2,463,653 961,369
Revenues 66,925 112,744
Net income 55,028 91,575
<PAGE>
CNL INCOME FUND XVI, LTD.
(A Florida Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS
Quarters Ended March 31, 1998 and 1997
2. Investment in Joint Ventures - Continued:
The Partnership recognized income totalling $31,434 and $18,325 for the
quarters ended March 31, 1998 and 1997, respectively, from these joint
ventures and Properties held as tenants-in-common with affiliates of
the general partners.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
CNL Income Fund XVI, Ltd. (the "Partnership") is a Florida limited
partnership that was organized on September 2, 1993, to acquire for cash, either
directly or through joint venture arrangements, both newly constructed and
existing restaurant properties, as well as land upon which restaurants were to
be constructed (the "Properties"), which are leased primarily to operators of
national and regional fast-food and family-style restaurant chains. The leases
are triple-net leases, with the lessee responsible for all repairs and
maintenance, property taxes, insurance and utilities. As of March 31, 1998, the
Partnership owned 43 Properties, including two Properties owned with affiliates
as tenants-in-common.
Liquidity and Capital Resources
The Partnership's primary source of capital for the quarters ended
March 31, 1998 and 1997, was cash from operations (which includes cash received
from tenants, distributions from the joint venture, and interest and other
income received, less cash paid for expenses). Cash from operations was
$1,091,044 and $1,034,288 for the quarters ended March 31, 1998 and 1997,
respectively. The increase in cash from operations for the quarter ended March
31, 1998, as compared to the quarter ended March 31, 1997, is primarily a result
of changes in the Partnership's working capital.
Other sources and uses of capital included the following during the
quarter ended March 31, 1998.
In January 1998, the Partnership reinvested the net sales proceeds it
received from the sale, in March 1997, of the Property in Oviedo, Florida, in a
Property located in Memphis, Tennessee, with affiliates of the general partners
as tenants-in-common. In connection therewith, the Partnership and the
affiliates entered into an agreement whereby each co-venturer will share in the
profits and losses of the Property in proportion to its applicable percentage
interest. As of March 31, 1998, the Partnership owned a 40.42% interest in this
Property.
Currently, cash reserves and rental income from the Partnership's
Properties are invested in money market accounts or other short-term, highly
liquid investments pending the use of such funds to pay Partnership expenses or
to make distributions to partners. At March 31, 1998, the Partnership had
$1,867,427 invested in such short-term investments, as compared to $1,673,869 at
December 31, 1997. The funds remaining at March 31, 1998, after the payment of
distributions and other liabilities, will be used to meet the Partnership's
working capital and other needs.
7
<PAGE>
Liquidity and Capital Resources - Continued
Total liabilities of the Partnership, including distributions payable,
increased to $1,225,428 at March 31, 1998, from $1,033,394 at December 31, 1997,
partially as a result of the Partnership's accruing a special distribution of
accumulated, excess operating reserves payable to the limited partners of
$90,000 at March 31, 1998. The increase was also partially a result of an
increase in rents paid in advance at March 31, 1998, as compared to December 31,
1997. The general partners believe that the Partnership has sufficient cash on
hand to meet its current working capital needs.
Based on cash from operations, and for the quarter ended March 31,
1998, accumulated excess operating reserves, the Partnership declared
distributions to the limited partners of $990,000 and $900,000 for the quarters
ended March 31, 1998 and 1997, respectively. This represents distributions of
$0.22 and $0.20 per unit for the quarters ended March 31, 1998 and 1997,
respectively. No distributions were made to the general partners for the
quarters ended March 31, 1998 and 1997. No amounts distributed to the limited
partners for the quarters ended March 31, 1998 and 1997, are required to be or
have been treated by the Partnership as a return of capital for purposes of
calculating the limited partners' return on their adjusted capital
contributions. The Partnership intends to continue to make distributions of cash
available for distribution to the limited partners on a quarterly basis.
The Partnership's investment strategy of acquiring Properties for cash
and leasing them under triple-net leases to operators who generally meet
specified financial standards minimizes the Partnership's operating expenses.
The general partners believe that the leases will continue to generate cash flow
in excess of operating expenses.
The general partners have the right, but not the obligation, to make
additional capital contributions if they deem it appropriate in connection with
the operations of the Partnership.
Results of Operations
During the quarter ended March 31, 1997, the Partnership owned and
leased 42 wholly owned Properties (including one Property in Oviedo, Florida,
which was sold in March 1997), and during the quarter ended March 31, 1998, the
Partnership owned and leased 41 wholly owned Properties, to operators of
fast-food and family-style restaurant chains. In connection therewith, during
the quarters ended March 31, 1998 and 1997, the Partnership earned $1,063,142
and $1,074,438, respectively, in rental income from operating leases and earned
income from direct financing leases from these Properties. The decrease in
rental and earned income during the quarter ended March 31, 1998, as compared to
the quarter ended March 31, 1997, is primarily the result of the sale of the
Property
8
<PAGE>
Results of Operations - Continued
in Oviedo, Florida, in March 1997. The net sales proceeds were reinvested in a
Property in Memphis, Tennessee, with affiliates of the general partners as
tenants-in-common, as described below.
During the quarter ended March 31, 1997, the Partnership also owned and
leased one Property as tenants-in-common with an affiliate of the general
partners and during the quarter ended March 31, 1998, the Partnership owned and
leased two Properties with affiliates of the general partners as
tenants-in-common. In connection therewith, during the quarters ended March 31,
1998 and 1997, the Partnership earned $31,434 and $18,325, respectively,
attributable to net income earned by joint ventures. The increase in net income
earned by joint ventures during the quarter ended March 31, 1998, as compared to
the quarter ended March 31, 1997, is primarily attributable to the fact that in
January 1998, the Partnership reinvested the net sales proceeds it received from
the 1997 sale of the Property in Oviedo, Florida, in an IHOP in Memphis,
Tennessee, with affiliates of the general partners as tenants in common.
Operating expenses, including depreciation and amortization expense,
were $212,642 and $218,271 for the quarters ended March 31, 1998 and 1997,
respectively.
As a result of the sale of the Property in Oviedo, Florida, as
described above in "Liquidity and Capital Resources," the Partnership recognized
a gain for financial reporting purposes of $41,148 during the quarter ended
March 31, 1997. No Properties were sold during the quarter ended March 31, 1998.
9
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings. Inapplicable.
Item 2. Changes in Securities. Inapplicable.
Item 3. Defaults upon Senior Securities. Inapplicable.
Item 4. Submission of Matters to a Vote of Security Holders.
Inapplicable.
Item 5. Other Information. Inapplicable.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits - None.
(b) No reports on Form 8-K were filed during the quarter
ended March 31, 1998.
10
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
DATED this 8th day of May, 1998.
CNL INCOME FUND XVI, LTD.
By: CNL REALTY CORPORATION
General Partner
By: /s/ James M. Seneff, Jr.
----------------------------
JAMES M. SENEFF, JR.
Chief Executive Officer
(Principal Executive Officer)
By: /s/ Robert A. Bourne
-----------------------------
ROBERT A. BOURNE
President and Treasurer
(Principal Financial and
Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule constains summary financial information extracted from the balance
sheet of CNL Income Fund XVI, Ltd. at March 31, 1998, and its statement of
income for the three months then ended and is qualified in its entirety by
reference to the Form 10Q of CNL Income Fund XVI, Ltd. for the three months
ended March 31, 1998.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 1,867,427
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 32,096,437
<DEPRECIATION> 1,577,859
<TOTAL-ASSETS> 41,037,049
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 39,811,621
<TOTAL-LIABILITY-AND-EQUITY> 41,037,049
<SALES> 0
<TOTAL-REVENUES> 1,077,903
<CGS> 0
<TOTAL-COSTS> 212,642
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 896,695
<INCOME-TAX> 0
<INCOME-CONTINUING> 896,695
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 896,695
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>Due to the nature of its industry, CNL Income Fund XVI, Ltd. has an
unclassified balance sheet; therefore no values are shown above for current
assets and current liabilities.
</FN>
</TABLE>
