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, 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 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) 650-1000
Securities registered pursuant to Section 12(b) of
the Act:
Title of each class: Name of exchange on which registered:
None Not Applicable
Securities registered pursuant to Section 12(g) of
the Act:
Units of limited partnership interest ($10 per Unit)
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days: Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [x]
Aggregate market value of the voting stock held by nonaffiliates of the
registrant: The registrant registered an offering of 4,500,000 units of limited
partnership interest (the "Units") on Form S-11 under the Securities Act of
1933, as amended. Since no established market for such Units exists, there is no
market value for such Units. Each Unit was originally sold at $10 per Unit.
DOCUMENTS INCORPORATED BY REFERENCE:
None
<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. During
the year ended December 31, 1997, the Partnership sold a Property in Oviedo,
Florida, and during 1998 the Partnership reinvested the net sales proceeds from
the sale of this Property in a Property in Memphis, Tennessee, as
tenants-in-common, with affiliates of the General Partners. In addition, during
1998, the Partnership received a reimbursement from the developer of the
Property in Farmington, New Mexico upon final reconciliation of total
construction costs. In August 1998, the Partnership used these proceeds to enter
into a joint venture arrangement, Columbus Joint Venture, with affiliates of the
General Partners, to construct and hold one restaurant Property. As a result of
the above transactions, as of December 31, 1998, the Partnership owned 44
Properties, including six Properties consisting of land only, interests in one
Property owned through a joint venture in which the Partnership is a co-venturer
and two Properties owned with affiliates 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 general, the Partnership leases
the Properties on a triple-net basis with the lessees responsible for all
repairs and maintenance, property taxes, insurance and utilities.
On March 11, 1999, the Partnership entered into an Agreement and Plan
of Merger with CNL American Properties Fund, Inc. ("APF"), pursuant to which the
Partnership would be merged with and into a subsidiary of APF (the "Merger").
APF is a real estate investment trust whose primary business is the ownership of
restaurant properties leased on a long-term, "triple-net" basis to operators of
national and regional restaurant chains. APF has agreed to issue shares of its
common stock, par value $0.01 per share (the "APF Shares"), as consideration for
the Merger. At a special meeting of the partners that is expected to be held in
the third quarter of 1999, Limited Partners holding in excess of 50% of the
Partnership's outstanding limited partnership interests must approve the Merger
prior to consummation of the transaction. If the Limited Partners at the special
meeting approve the Merger, APF will own the Properties and other assets of the
Partnership. See Item 8.
Financial Statements and Supplementary Data -- Note 11. Subsequent Event.
In the event that the Limited Partners vote against the Merger, the
Partnership will hold its Properties until the General Partners determine that
the sale or other disposition of the Properties is advantageous in view of the
Partnership's investment objectives. In deciding whether to sell Properties, the
General Partners will consider factors such as potential capital appreciation,
net cash flow and federal income tax considerations. Certain lessees also have
been granted options to purchase Properties, generally at the Property's then
fair market value after a specified portion of the lease term has elapsed. The
Partnership has no obligation to sell all or any portion of a Property at any
particular time, except as may be required under property purchase options
granted to certain lessees.
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 owned by the Partnership, the
Property owned by a joint venture in which the Partnership is a co-venturer and
Properties owned as tenants-in-common with affiliates of the General Partners
provide for initial terms ranging from 15 to 20 years (the average being 19
years) and expire between 2009 and 2018. 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 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.
During 1998, the tenant of the Properties in Madison and Chattanooga,
Tennessee exercised its option under the terms of its lease agreement, to
exchange the existing Property with a replacement Property. In conjunction
therewith, the Partnership exchanged the Boston Market Properties in Madison and
Chattanooga, Tennessee for a Boston Market Property in each of Lawrence, Kansas
and Indianapolis, Indiana. The leases for the original Properties were amended
to allow the new Properties to continue under the terms of the original leases;
therefore, all terms of the original leases remained unchanged.
In January 1998, the Partnership acquired a Property in Memphis,
Tennessee, as tenants-in-common with affiliates of the General Partners. In
August 1998, the Partnership entered into a joint venture arrangement, Columbus
Joint Venture, with affiliates of the General Partners, to construct and hold
one restaurant Property. The lease terms for these Properties are substantially
the same as the Partnership's other leases, as described above.
During 1998, three tenants, Long John Silver's, Inc., Finest
Foodservice, L.L.C., and Boston Chicken, Inc., filed for bankruptcy and rejected
the leases relating to four of their seven leases and ceased making rental
payments to the Partnership on the rejected leases. The Partnership will not
recognize rental and earned income from these four Properties until new tenants
for these Properties are located or until the Properties are sold and the
proceeds from such sales are reinvested in additional Properties. As of March
11, 1999, the Partnership has continued receiving rental payments relating to
the leases not rejected by the tenants. While the tenants have not rejected or
affirmed the remaining three leases, there can be no assurance that some or all
of these leases will not be rejected in the future. The lost revenues resulting
from the four leases that were rejected, as described above, and the possible
rejection of the three remaining leases could have an adverse effect on the
results of operations of the Partnership if the Partnership is unable to
re-lease the Properties in a timely manner. The General Partners are currently
seeking either new tenants or purchasers for the four Properties.
Major Tenants
During 1998, 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, 1998,
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 nine
restaurants. It is anticipated that based on the minimum rental payments
required by the leases, these three lessees each will continue to contribute
more than ten percent of the Partnership's total rental income in 1999. In
addition, four Restaurant Chains, Golden Corral Family Steakhouse Restaurants
("Golden Corral"), Jack in the Box, Boston Market and Denny's, each accounted
for more than ten percent of the Partnership's total rental income during 1998.
In 1999, it is anticipated that Golden Corral, Jack in the Box, and Denny's 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 if the Partnership is not able to re-lease the Properties
in a timely manner. As of December 31, 1998, 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
80.44% 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.
In addition, in August 1998, the Partnership entered into a joint
venture arrangement, Columbus Joint Venture, with affiliates of the General
Partners, to construct and hold one Property. The joint venture arrangement
provides for the Partnership and its joint venture partners to share in all
costs and benefits associated in the joint venture in proportion to each
partner's percentage interest in the joint venture. The Partnership and its
joint venture partners are also jointly and severally liable for all debts,
obligations and other liabilities of the joint venture. When funding is
complete, the Partnership expects to have an approximate 32 percent interest in
the profits and losses of this joint venture.
Certain Management Services
CNL Fund Advisors, Inc., an affiliate of the General Partners, provides
certain services relating to management of the Partnership and its Properties
pursuant to a management agreement with the Partnership. Under this agreement,
CNL Fund Advisors, Inc. is responsible for collecting rental payments,
inspecting the Properties and the tenants' books and records, assisting the
Partnership in responding to tenant inquiries and notices and providing
information to the Partnership about the status of the leases and the
Properties. CNL Fund Advisors, Inc. also assists the General Partners in
negotiating the leases. For these services, the Partnership has agreed to pay
CNL Fund Advisors, Inc. an annual fee of one percent of the sum of gross rental
revenues from Properties wholly owned by the Partnership plus the Partnership's
allocable share of gross revenues of joint ventures in which the Partnership is
a co-venturer, but not in excess of competitive fees for comparable services.
The management agreement continues until the Partnership no longer owns
an interest in any Properties unless terminated at an earlier date upon 60 days'
prior notice by either party.
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.
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, 1998, the Partnership owned, either directly or
indirectly through a joint venture arrangement, 44 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 six 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, 1998 (see Item 1. Business -
Major Tenants), are substantially the same as those described in Item 1.
Business - Leases.
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 $155,400 (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 $97,400 (ranging from approximately
$88,600 to $115,600).
DenAmerica Corp. leases nine Denny's restaurants. The initial term of
each lease is 20 years (expiring between 2014 and 2015) and the average minimum
base annual rent is approximately $111,200 (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 11, 1999 there were 3,022 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. From inception through
December 31, 1998, the price paid for any Unit transferred pursuant to the Plan
was $9.50 per Unit. The price paid for any Unit transferred other than pursuant
to the Plan was 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 1998 and 1997 other than
pursuant to the Plan, net of commissions.
<TABLE>
<CAPTION>
1998 (1) 1997 (1)
----------------------------------- -----------------------------------
High Low Average High Low Average
--------- -------- ---------- -------- -------- ----------
<S> <C>
First Quarter (2) (2) (2) $ 9.50 $ 8.03 $ 9.29
Second Quarter $10.00 $ 8.00 $9.01 10.00 8.75 9.40
Third Quarter 10.00 8.00 8.68 (2) (2) (2)
Fourth Quarter 9.50 8.12 8.75 8.80 7.93 8.45
</TABLE>
(1) A total of 11,350 and 32,120 Units were transferred other than pursuant
to the Plan for the years ended December 31, 1998 and 1997.
(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, 1998 and 1997, the Partnership
declared cash distributions of $3,690,000 and $3,600,000, respectively, to the
Limited Partners. During the quarter ended March 31, 1998, the Partnership
declared a special distribution of $90,000 which represented cumulative excess
operating reserves. No amounts distributed to partners for the years ended
December 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. 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.
<PAGE>
Quarter Ended 1998 1997
------------------------- ------------- -------------
March 31 $ 990,000 $ 900,000
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>
1998 1997 1996 1995 1994
-------------- --------------- -------------- --------------- ---------------
<S> <C>
Year ended December 31:
Revenues (1) $ 4,093,756 $ 4,455,994 $ 4,438,218 $ 3,023,641 $ 207,735
Net income (2) 2,976,998 3,660,327 3,748,198 2,430,841 187,577
Cash distributions
declared (3) 3,690,000 3,600,000 3,543,751 2,437,832 151,434
Net income per Unit (2) (4) 0.65 0.81 0.82 0.60 0.17
Cash distributions declared
per Unit (3) (4) 0.82 0.80 0.79 0.61 0.14
At December 31:
Total assets $40,188,641 $40,938,320 $40,955,642 $41,240,500 $19,310,413
Partners' capital 39,191,924 39,904,926 39,844,599 39,640,152 17,474,033
</TABLE>
(1) Revenues include equity in earnings of joint ventures and adjustments
to accrued rental income due to the tenants of certain Properties
filing for bankruptcy.
(2) Net income for the year ended December 31, 1998 includes $266,257 for a
provision for loss on building. 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.
(3) Distributions for the year ended December 31, 1998 include a special
distribution to the Limited Partners of $90,000, which represented
cumulative excess operating reserves.
(4) Based on the weighted average number of Limited Partner Units
outstanding during the years ended December 31, 1998, 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.
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, 1998, the Partnership owned 44 Properties, either
directly or indirectly through a joint venture arrangement.
Liquidity and Capital Resources
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
operations was $3,623,694, $3,780,424, and $3,753,726 for the years ended
December 31, 1998, 1997, and 1996, respectively. The decrease in cash from
operations during 1998, as compared to 1997, and the increase during 1997, as
compared to 1996, 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.
Other sources and uses of capital included the following during the
years ended December 31, 1998, 1997, and 1996.
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 80.44%
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.
In April 1998, the Partnership received approximately $162,000 from the
developer of the Property in Farmington, New Mexico. This represents a
reimbursement from the developer upon final reconciliation of total construction
costs to the total construction costs funded by the Partnership in accordance
with the development agreement. In August 1998, the Partnership entered into a
joint venture arrangement, Columbus Joint Venture, with affiliates of the
General Partners, to construct and hold one restaurant Property. As of December
31, 1998, the Partnership had contributed approximately $134,500 to purchase
land and pay for construction costs relating to the joint venture for a 32.35%
interest in the profits and losses of the joint venture. When funding is
completed, the Partnership expects to have an approximate 32 percent interest in
the profits and losses of the joint venture.
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, 1998,
the Partnership had $1,603,589 invested in such short-term investments as
compared to $1,673,869 at December 31, 1997. The funds remaining at December 31,
1998, after payment of distributions and other liabilities, will be used to meet
the Partnership's working capital and other needs.
In addition, during 1996, the affiliates incurred on behalf of the
Partnership $9,356 for certain acquisition expenses and during the years ended
December 31, 1998, 1997, and 1996, the affiliates incurred $125,080, $84,319,
and $105,144, respectively, for certain operating expenses. As of December 31,
1998 and 1997, the Partnership owed $26,476 and $3,351, respectively, to related
parties for such amounts, accounting and administrative services and management
fees. As of March 11, 1999, the Partnership had reimbursed the affiliates all
such amounts. Other liabilities, including distributions payable, decreased to
$970,241 at December 31, 1998, from $1,030,043 at December 31, 1997, primarily
as a result of the payment during the year ended December 31, 1998, of
construction costs accrued for certain Properties at December 31, 1997.
Based on cash from operations, and for the year ended December 31,
1998, cumulative excess operating reserves, the Partnership declared
distributions to the Limited Partners of $3,690,000, $3,600,000, and $3,543,751
for the years ended December 31, 1998, 1997, and 1996, respectively. This
represents distributions of $0.82, $0.80, and $0.79 per Unit for the years ended
December 31, 1998, 1997, and 1996, respectively. No amounts distributed to the
Limited Partners for the years ended December 31, 1998, 1997, and 1996, are
required to be or have been treated by the Partnership as a return of capital
for purposes of calculating the Limited Partners' return on their adjusted
capital contributions. The Partnership intends to continue to make distributions
of cash available for distribution to Limited Partners on a quarterly basis.
The General Partners believe that the Properties are adequately covered
by insurance. In addition, the General Partners have obtained contingent
liability and property coverage for the Partnership. This insurance is intended
to reduce the Partnership's exposure in the unlikely event a tenant's insurance
policy lapses or is insufficient to cover a claim relating to the Property.
The Partnership's investment strategy of acquiring Properties for cash
and leasing them under triple-net leases to operators who generally meet
specified financial standards minimizes the Partnership's operating expenses.
The General Partners believe that the leases will continue to generate cash flow
in excess of operating expenses.
Due to low operating expenses and ongoing cash flow, the General
Partners believe that the Partnership has sufficient working capital reserves at
this time. In addition, because all leases of the Partnership's Properties are
on a triple-net basis, it is not anticipated that a permanent reserve for
maintenance and repairs will be established at this time. To the extent,
however, that the Partnership has insufficient funds for such purposes, the
General Partners will contribute to the Partnership an aggregate amount of up to
one percent of the offering proceeds for maintenance and repairs. 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.
On March 11, 1999, the Partnership entered into an Agreement and Plan
of Merger with APF, pursuant to which the Partnership would be merged with and
into a subsidiary of APF. As consideration for the Merger, APF has agreed to
issue 4,320,947 APF Shares which, for the purposes of valuing the merger
consideration, have been valued by APF at $10.00 per APF Share, the price paid
by APF investors in APF's most recent public offering. In order to assist the
General Partners in evaluating the proposed merger consideration, the General
Partners retained Valuation Associates, a nationally recognized real estate
appraisal firm, to appraise the Partnership's restaurant property portfolio.
Based on Valuation Associates' appraisal, the Partnership's property portfolio
and other assets were valued on a going concern basis (meaning the Partnership
continues unchanged) at $42,519,005 as of December 31, 1998. Legg Mason Wood
Walker, Incorporated has rendered a fairness opinion that the APF Share
consideration, payable by APF, is fair to the Partnership from a financial point
of view. The APF Shares are expected to be listed for trading on the New York
Stock Exchange concurrently with the consummation of the Merger, and, therefore,
would be freely tradable at the option of the former Limited Partners. At a
special meeting of the partners that is expected to be held in the third quarter
of 1999, Limited Partners holding in excess of 50% of the Partnership's
outstanding limited partnership interests must approve the Merger prior to
consummation of the transaction. The General Partners intend to recommend that
the Limited Partners of the Partnership approve the Merger. In connection with
their recommendation, the General Partners will solicit the consent of the
Limited Partners at the special meeting.
Results of Operations
The Partnership owned and leased 43 wholly owned Properties (including
one Property in Appleton, Wisconsin, which was sold in April 1996) during 1996,
42 wholly owned Properties (including one Property in Oviedo, Florida, which was
sold in March 1997) during 1997, and 43 wholly owned Properties (including two
Properties in Madison and Chattanooga, Tennessee exchanged for two Properties in
Lawrence, Kansas and Indianapolis, Indiana), during 1998. In addition, during
1997 and 1996, the Partnership owned and leased one Property with an affiliate,
as tenants-in-common, and during 1998, the Partnership was a co-venturer in a
joint venture arrangement that owned and leased one Property, and the
Partnership owned and leased two Properties with affiliates, as
tenants-in-common. As of December 31, 1998, the Partnership owned, either
directly, as tenants-in-common or through a joint venture arrangement, 44
Properties which are generally 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, 1998, 1997, and 1996, the
Partnership earned $3,864,121, $4,266,069, and $4,297,558, respectively, in
rental income from operating leases (net of adjustments to accrued rental
income) and earned income from direct financing leases from Properties wholly
owned by the Partnership. The decrease in rental and earned income during 1998,
as compared to 1997, is partially attributable to the fact that in July 1998,
the tenant of the Shoney's Property in Las Vegas, Nevada ceased restaurant
operations and vacated the Property. The Partnership established an allowance
for doubtful accounts during 1998 of approximately $82,500 for rental and earned
income amounts due from this tenant due to the fact that collection of such
amounts is questionable. The General Partners are pursuing collection of past
due amounts from the former tenant, and will recognize such amounts as income if
collected. In February 1999, the Partnership entered into a new lease with a new
tenant for this Property. In addition, during 1998, the Partnership wrote off
approximately $77,300 of accrued rental income (non-cash accounting adjustments
relating to the straight-lining of future scheduled rent increases over the
lease term in accordance with generally accepted accounting principles) relating
to this Property.
In addition, rental and earned income decreased approximately $110,500
during 1998 as a result of the fact that in 1998, three tenants, Long John
Silver's, Inc., Finest Foodservice, L.L.C., and Boston Chicken, Inc., filed for
bankruptcy and rejected the leases relating to four of the seven Properties
leased by these tenants. As a result, these tenants ceased making rental
payments on the four rejected leases. The Partnership has continued receiving
rental payments relating to the leases not rejected by the tenants. In
conjunction with the four rejected leases, during 1998 the Partnership wrote off
approximately $107,000 of accrued rental income (non-cash accounting adjustment
relating to the straight-lining of future scheduled rent increases over the
lease term in accordance with generally accepted accounting principles). The
General Partners are currently seeking either new tenants or purchasers for
these Properties. The Partnership will not recognize any rental and earned
income from these Properties until new tenants for these Properties are located
or until the Properties are sold and the proceeds from such sales are reinvested
in additional Properties. While the tenants have not rejected or affirmed the
remaining three leases, there can be no assurance that some or all of these
leases will not be rejected in the future. The lost revenues resulting from the
four leases that were rejected, as described above, and the possible rejection
of the three remaining leases could have an adverse effect on the results of
operations of the Partnership if the Partnership is not able to re-lease the
Properties in a timely manner.
In addition, the decrease in rental and earned income during 1998 and
1997, each as compared to the previous year, is partially the result of a
decrease in rental income due to the sale of the Property 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,
resulting in an increase in equity in earnings of joint venture, as described
below. In addition, the decrease in rental and earned income during 1997, as
compared to 1996, is a result of 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.
In addition, for the years ended December 31, 1998, 1997, and 1996, the
Partnership earned $132,002, $73,507, and $19,668, respectively, attributable to
net income earned by joint ventures. The increase in net income earned by joint
ventures during 1998, as compared to 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
Property in Memphis, Tennessee, with affiliates of the General Partners as
tenants-in-common. The increase during 1997, as compared to 1996, is primarily
attributable to the fact that in October 1996, the Partnership reinvested the
net sales proceeds it received from the sale of the Property in Appleton,
Wisconsin, in a Property in Fayetteville, North Carolina, with affiliates of the
General Partners. This Property was operational for a full year in 1997, as
compared to a partial year in 1996.
During the year ended December 31, 1998, 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
(including the Partnership's share of rental income from the Property owned by a
joint venture and the two Properties owned with affiliates as
tenants-in-common). As of December 31, 1998, 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 nine restaurants. It is anticipated that, based on the
minimum rental payments required by the leases, each of these lessees will
continue to contribute more than ten percent of the Partnership's total rental
income in 1999. In addition, during the year ended December 31, 1998, four
Restaurant Chains, Golden Corral, Jack in the Box, Boston Market, 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 by a joint venture and the two Properties owned with affiliates as
tenants-in-common). During 1998, the tenants of four Boston Market Properties
filed for bankruptcy as described below. In 1999, 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 if the Partnership is not able
to re-lease the Properties in a timely manner.
During 1998, the tenants of four Boston Market Properties filed for
bankruptcy and rejected the leases relating to two Properties. The Partnership
will not recognize any rental and earned income from these Properties until new
tenants for the Properties are located, or until the Properties are sold and the
proceeds from such sales are reinvested in additional Properties. While the
tenants have not rejected or affirmed the remaining two leases, there can be no
assurance that some or all of the leases will not be rejected in the future. The
lost revenues resulting from the two leases that were rejected, as described
above, and the possible rejection of the remaining two leases could have an
adverse effect on the results of operations of the Partnership if the
Partnership is not able to re-lease these Properties in a timely manner.
Operating expenses, including depreciation and amortization expense,
were $850,501, $836,815 and $814,325 for the years ended December 31, 1998,
1997, and 1996, respectively. The increase in operating expenses during 1998, as
compared to 1997, is primarily due to the fact that the Partnership incurred
$24,652 in transaction costs relating to the General Partners retaining
financial and legal advisors to assist them in evaluating and negotiating the
proposed Merger with APF, as described above in "Liquidity and Capital
Resources."
If the Limited Partners reject the Merger, the Partnership will bear the
portion of the transaction costs based upon the percentage of "For" votes and
the General Partners will bear the portion of such transaction costs based upon
the percentage of "Against" votes and abstentions.
<PAGE>
The increase in operating expenses during 1998 is partially offset by a
decrease in depreciation expense as a result of the reimbursement of
construction costs from the developer relating to the Property in Farmington,
New Mexico, which reduced the depreciable basis of land and building on
operating leases during 1998, as described above in "Liquidity and Capital
Resources."
During 1998, the Partnership incurred certain expenses, such as real
estate taxes, insurance, and maintenance relating to a Shoney's Property, two
Boston Market Properties and two Long John Silver's Properties which became
vacant, as described above. In February 1999, the Partnership entered into a new
lease with a new tenant for the Shoney's Property in Las Vegas, Nevada. The new
tenant is responsible for real estate taxes, insurance, and maintenance relating
to this Property; therefore, the General Partners do not anticipate that the
Partnership will incur these expenses for this Property in the future. However,
the Partnership will continue to incur certain expenses, such as real estate
taxes, insurance, and maintenance related to the four remaining vacant
Properties until new tenants for these Properties are located or until the
Properties are sold. The Partnership is currently seeking new tenants or buyers
for these Properties.
The increase in operating expenses during 1997, as compared to 1996, is
partially attributable to an increase in depreciation expense as the result of
the acquisition of additional Properties during 1996, and the fact that the
Properties acquired during 1996 were operational for a full year in 1997, as
compared to a partial year in 1996. Operating expenses also increased during
1997, as a result of the Partnership incurring additional taxes relating to the
filing of various state tax returns during 1997.
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 1998.
During the year ended December 31, 1998, the Partnership recorded a
provision for loss on building of $266,257 for financial reporting purposes
relating to a Long John Silver's Property in Celina, Ohio. The tenant of this
Property filed for bankruptcy and ceased payment of rents under the terms of its
lease agreement. The allowance represents the difference between the Property's
carrying value at December 31, 1998 and the estimated net realizable value for
this Property. No such allowance was established during the years ended December
31, 1997 and 1996.
The Partnership's leases as of December 31, 1998, 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.
Year 2000
The Year 2000 problem is the result of information technology systems
and embedded systems (products which are made with microprocessor (computer)
chips such as HVAC systems, physical security systems and elevators) using a
two-digit format, as opposed to four digits, to indicate the year. Such
information technology and embedded systems may be unable to properly recognize
and process date-sensitive information beginning January 1, 2000.
The Partnership currently does not have any information technology
systems. Affiliates of the General Partners provide all services requiring the
use of information technology systems pursuant to a management agreement with
the Partnership. The maintenance of embedded systems, if any, at the
Partnership's Properties is the responsibility of the tenants of the Properties
in accordance with the terms of the Partnership's leases. The General Partners
and affiliates have established a team dedicated to reviewing the internal
information technology systems used in the operation of the Partnership, and the
information technology and embedded systems and the Year 2000 compliance plans
of the Partnership's tenants, significant suppliers, financial institutions and
transfer agent.
The information technology infrastructure of the affiliates of the
General Partners consists of a network of personal computers and servers that
were obtained from major suppliers. The affiliates utilize various
administrative and financial software applications on that infrastructure to
perform the business functions of the Partnership. The inability of the General
Partners and affiliates to identify and timely correct material Year 2000
deficiencies in the software and/or infrastructure could result in an
interruption in, or failure of, certain of the Partnership's business activities
or operations. Accordingly, the General Partners and affiliates have requested
and are evaluating documentation from the suppliers of the software and
infrastructure of the affiliates regarding the Year 2000 compliance of their
products that are used in the business activities or operations of the
Partnership. The General Partners and affiliates have not yet received
sufficient certifications to be assured that the suppliers have fully considered
and mitigated any potential material impact of the Year 2000 deficiencies. The
costs expected to be incurred by the General Partners and affiliates to become
Year 2000 compliant will be incurred by the General Partners and affiliates;
therefore, these costs will have no impact on the Partnership's financial
position or results of operations.
The Partnership has material third party relationships with its
tenants, financial institutions and transfer agent. The Partnership depends on
its tenants for rents and cash flows, its financial institutions for
availability of cash and its transfer agent to maintain and track investor
information. If any of these third parties are unable to meet their obligations
to the Partnership because of the Year 2000 deficiencies, such a failure may
have a material impact on the Partnership. Accordingly, the General Partners
have requested and are evaluating documentation from the Partnership's tenants,
financial institutions, and transfer agent relating to their Year 2000
compliance plans. The General Partners have not yet received sufficient
certifications to be assured that the tenants, financial institutions, and
transfer agent have fully considered and mitigated any potential material impact
of the Year 2000 deficiencies. Therefore, the General Partners do not, at this
time, know of the potential costs to the Partnership of any adverse impact or
effect of any Year 2000 deficiencies by these third parties.
The General Partners currently expect that all year 2000 compliance
testing and any necessary remedial measures on the information technology
systems used in the business activities and operations of the Partnership will
be completed prior to June 30, 1999. Based on the progress the General Partners
and affiliates have made in identifying and addressing the Partnership's Year
2000 issues and the plan and timeline to complete the compliance program, the
General Partners do not foresee significant risks associated with the
Partnership's Year 2000 compliance at this time. Because the General Partners
and affiliates are still evaluating the status of the information technology
systems used in business activities and operations of the Partnership and the
systems of the third parties with which the Partnership conducts its business,
the General Partners have not yet developed a comprehensive contingency plan and
are unable to identify "the most reasonably likely worst case scenario" at this
time. If the General Partners identify significant risks related to the
Partnership's Year 2000 compliance or if the Partnership's Year 2000 compliance
program's progress deviates substantially from the anticipated timeline, the
General Partners will develop appropriate contingency plans.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
Item 8. Financial Statements and Supplementary Data
<PAGE>
CNL INCOME FUND XVI, LTD.
(A Florida Limited Partnership)
CONTENTS
Page
Report of Independent Accountants 14
Financial Statements:
Balance Sheets 15
Statements of Income 16
Statements of Partners' Capital 17
Statements of Cash Flows 18
Notes to Financial Statements 21
<PAGE>
Report of Independent Accountants
To the Partners
CNL Income Fund XVI, Ltd.
In our opinion, the financial statements listed in the index appearing under
item 14(a)(1) present fairly, in all material respects, the financial position
of CNL Income Fund XVI, Ltd. (a Florida limited partnership) at December 31,
1998 and 1997, and the results of its operations and its cash flows for each of
the three years in the period ended December 31, 1998 in conformity with
generally accepted accounting principles. In addition, in our opinion, the
financial statement schedules listed in the index appearing under item 14(a)(2)
present fairly, in all material respects, the information set forth therein when
read in conjunction with the related financial statements. These financial
statements and financial statement schedules are the responsibility of the
Partnership's management; our responsibility is to express an opinion on these
financial statements and financial statement schedules based on our audits. We
conducted our audits of these statements in accordance with generally accepted
auditing standards which 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, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
Orlando, Florida
January 26, 1999, except for Note 11 for which the date is March 11, 1999
<PAGE>
CNL INCOME FUND XVI, LTD.
(A Florida Limited Partnership)
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
1998 1997
----------------- ----------------
<S> <C>
ASSETS
Land and buildings on operating leases, less
accumulated depreciation and allowance
for loss on building $30,215,549 $30,658,994
Net investment in direct financing leases 5,361,848 5,968,812
Investment in joint ventures 1,504,465 771,684
Cash and cash equivalents 1,603,589 1,673,869
Restricted cash -- 627,899
Receivables, less allowance for doubtful
accounts of $89,822 and $879 63,214 31,946
Prepaid expenses 13,745 9,293
Organization costs, less accumulated
amortization of $8,550 and $6,550 1,450 3,450
Accrued rental income 1,424,781 1,192,373
----------------- ----------------
$40,188,641 $40,938,320
================= ================
LIABILITIES AND PARTNERS' CAPITAL
Acquisition and construction costs payable $ -- $ 53,278
Accounts payable 1,816 2,707
Accrued and escrowed real estate taxes
payable 7,163 4,353
Distributions payable 900,000 900,000
Due to related parties 26,476 3,351
Rents paid in advance and deposits 61,262 69,705
----------------- ----------------
Total liabilities 996,717 1,033,394
Partners' capital 39,191,924 39,904,926
----------------- ----------------
$40,188,641 $40,938,320
================= ================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
CNL INCOME FUND XVI, LTD.
(A Florida Limited Partnership)
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Year Ended December 31,
1998 1997 1996
-------------- -------------- --------------
<S> <C>
Revenues:
Rental income from operating leases $3,446,902 $3,562,920 $3,571,244
Adjustments to accrued rental income (184,368 ) -- --
Earned income from direct financing leases 601,587 703,149 726,314
Contingent rental income 35,860 35,604 37,600
Interest income 60,199 73,634 75,160
Other income 1,574 7,180 8,232
-------------- -------------- --------------
3,961,754 4,382,487 4,418,550
-------------- -------------- --------------
Expenses:
General operating and administrative 158,519 186,934 183,734
Professional services 40,471 25,352 26,569
Management fees to related parties 38,570 40,087 39,206
Real estate taxes 9,060 -- --
State and other taxes 19,398 20,559 12,369
Loss on termination of direct financing lease 4,471 -- --
Depreciation and amortization 555,360 563,883 552,447
Transaction costs 24,652 -- --
-------------- -------------- --------------
850,501 836,815 814,325
-------------- -------------- --------------
Income Before Equity in Earnings of Joint
Ventures, Gain on Sale of Land and
Buildings, and Provision for Loss on Building 3,111,253 3,545,672 3,604,225
Equity in Earnings of Joint Ventures 132,002 73,507 19,668
Gain on Sale of Land and Buildings -- 41,148 124,305
Provision for Loss on Building (266,257 ) -- --
-------------- -------------- --------------
Net Income $2,976,998 $3,660,327 $3,748,198
============== ============== ==============
Allocation of Net Income:
General partners $ 31,685 $ 36,192 $ 36,239
Limited partners 2,945,313 3,624,135 3,711,959
-------------- -------------- --------------
$2,976,998 $3,660,327 $3,748,198
============== ============== ==============
Net Income Per Limited Partner Unit $ 0.65 $ 0.81 $ 0.82
============== ============== ==============
Weighted Average Number of
Limited Partner Units Outstanding 4,500,000 4,500,000 4,500,000
============== ============== ==============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
CNL INCOME FUND XVI, LTD.
(A Florida Limited Partnership)
STATEMENTS OF PARTNERS' CAPITAL
Years Ended December 31, 1998, 1997, and 1996
<S> <C>
General Partners Limited Partners
-------------------------- ----------------------------------------------------
Accumulated Accumulated Syndication
Contributions Earnings Contributions Distributions Earnings Costs Total
------------- ------------ ------------- ------------- ------------- ----------- --------------
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
Distributions to limited
partners ($0.82 per
limited partner unit) -- -- -- (3,690,000 ) -- -- (3,690,000 )
Net income -- 31,685 -- -- 2,945,313 -- 2,976,998
------------- ------------ ------------- ------------- ------------ ------------- ------------
Balance, December 31, 1998 $ 1,000 $ 130,300 $ 45,000,000 $(13,423,017 ) $ 12,873,641 $ (5,390,000 ) $39,191,924
============= ============ ============= ============= ============ ============= ============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
CNL INCOME FUND XVI, LTD.
(A Florida Limited Partnership)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31,
1998 1997 1996
---------------- --------------- ----------------
<S> <C>
Increase (Decrease) in Cash and Cash Equivalents:
Cash Flows from Operating Activities:
Cash received from tenants $ 3,675,430 $ 3,881,005 $ 4,007,432
Distributions from joint venture 143,279 76,212 20,279
Cash paid for expenses (273,929 ) (231,712 ) (349,145)
Interest received 78,914 54,919 75,160
---------------- --------------- ----------------
Net cash provided by operating activities 3,623,694 3,780,424 3,753,726
---------------- --------------- ----------------
Cash Flows from Investing Activities:
Proceeds from sale of land and buildings -- 610,384 775,000
Reimbursement of construction costs from
developer 161,648 -- --
Additions to land and buildings on operating
leases (3,545 ) (23,501 ) (2,355,627)
Investment in direct financing leases (28,403 ) (29,257 ) (405,937)
Investment in joint ventures (744,058 ) -- (775,000)
Decrease (increase) in restricted cash 610,384 (610,384 ) --
---------------- --------------- ----------------
Net cash used in investing activities (3,974 ) (52,758 ) (2,761,564)
---------------- --------------- ----------------
Cash Flows from Financing Activities:
Reimbursement of acquisition costs paid by
related parties on behalf of the Partnership -- -- (2,494)
Distributions to limited partners (3,690,000 ) (3,600,000 ) (3,431,251)
---------------- --------------- ----------------
Net cash used in financing activities (3,690,000 ) (3,600,000 ) (3,433,745)
---------------- --------------- ----------------
Net Increase (Decrease) in Cash and Cash Equivalents (70,280 ) 127,666 (2,441,583)
Cash and Cash Equivalents at Beginning of Year 1,673,869 1,546,203 3,987,786
---------------- --------------- ----------------
Cash and Cash Equivalents at End of Year $ 1,603,589 $ 1,673,869 $ 1,546,203
================ =============== ================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
CNL INCOME FUND XVI, LTD.
(A Florida Limited Partnership)
STATEMENTS OF CASH FLOWS - CONTINUED
<TABLE>
<CAPTION>
Year Ended December 31,
1998 1997 1996
--------------- ---------------- ---------------
<S> <C>
Reconciliation of Net Income to Net Cash
Provided by Operating Activities:
Net income $ 2,976,998 $3,660,327 $3,748,198
--------------- ---------------- ---------------
Adjustments to reconcile net income to
net cash provided by operating
activities:
Loss on termination of direct
financing lease 4,471 -- --
Depreciation 553,360 561,883 550,447
Amortization 2,000 2,000 2,000
Equity in earnings of joint ventures,
net of distributions 11,277 2,705 611
Gain on sale of land and buildings -- (41,148 ) (124,305 )
Provision for loss on building 266,257 -- --
Decrease (increase) in receivables (13,753 ) 26,633 58,396
Decrease in net investment in direct
financing leases 43,343 37,684 29,269
Increase in prepaid expenses (4,452 ) (119 ) (8,514 )
Increase in accrued rental income (232,408 ) (444,650 ) (468,201 )
Increase in accounts payable and
accrued expenses 1,919 1,455 517
Increase (decrease) in due to related
parties, excluding reimbursement
of acquisition costs paid on behalf
of the Partnership 23,125 1,059 (76,259 )
Increase (decrease) in rents paid in
advance and deposits (8,443 ) (27,405 ) 41,567
--------------- ---------------- ---------------
Total adjustments 646,696 120,097 5,528
--------------- ---------------- ---------------
Net Cash Provided by Operating Activities $ 3,623,694 $3,780,424 $3,753,726
=============== ================ ===============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
CNL INCOME FUND XVI, LTD.
(A Florida Limited Partnership)
STATEMENTS OF CASH FLOWS - CONTINUED
<TABLE>
<CAPTION>
Year Ended December 31,
1998 1997 1996
--------------- --------------- ----------------
<S> <C>
Supplemental Schedule of Non-Cash Investing
and Financing Activities:
Related parties paid certain acquisition
costs on behalf of the Partnership as
follows: $ -- $ -- $ 9,356
=============== =============== ===============
Land and building under operating lease
exchanged for land and building under
operating lease $ 779,181 $ -- $ --
=============== =============== ================
Land and building under direct financing
lease exchanged for land and building
under direct financing lease $ 761,334 $ -- $ --
=============== =============== ================
Distributions declared and unpaid at
December 31 $ 900,000 $ 900,000 $ 900,000
=============== =============== ================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
CNL INCOME FUND XVI, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
Years Ended December 31, 1998, 1997, and 1996
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.
The general partners of the Partnership are CNL Realty Corporation (the
"Corporate General Partner"), James M. Seneff, Jr. and Robert A.
Bourne. Mr. Seneff and Mr. Bourne are also 50 percent shareholders of
the Corporate General Partner. The general partners have responsibility
for managing the day-to-day operations of the Partnership.
Real Estate and Lease Accounting - The Partnership records the
acquisition of land and buildings at cost, including acquisition and
closing costs. Land and buildings are leased to unrelated third parties
on a triple-net basis, whereby the tenant is generally responsible for
all operating expenses relating to the property, including property
taxes, insurance, maintenance and repairs. The leases are accounted for
using either the direct financing or the operating methods. Such
methods are described below:
Direct financing method - The leases accounted for using the
direct financing method are recorded at their net investment
(which at the inception of the lease generally represents the
cost of the asset) (Note 4). Unearned income is deferred and
amortized to income over the lease terms so as to produce a
constant periodic rate of return on the Partnership's net
investment in the leases.
Operating method - Land and building leases accounted for
using the operating method are recorded at cost, revenue is
recognized as rentals are earned and depreciation is charged
to operations as incurred. Buildings are depreciated on the
straight-line method over their estimated useful lives of 30
years. When scheduled rentals vary during the lease term,
income is recognized on a straight-line basis so as to produce
a constant periodic rent over the lease term commencing on the
date the property is placed in service.
<PAGE>
CNL INCOME FUND XVI, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1998, 1997, and 1996
1. Significant Accounting Policies - Continued:
Accrued rental income represents the aggregate amount of
income recognized on a straight-line basis in excess of
scheduled rental payments to date. Whenever a tenant defaults
under the terms of its lease, or events or changes in
circumstance indicate that the tenant will not lease the
property through the end of the lease term, the Partnership
either reserves or writes-off the cumulative accrued rental
income balance.
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. Although the general partners have made
their best estimate of these factors based on current conditions, it is
reasonably possible that changes could occur in the near term which
could adversely affect the general partners' best estimate of net cash
flows expected to be generated from its properties and the need for
asset impairment write downs.
When the collection of amounts recorded as rental or other income is
considered to be doubtful, an adjustment is made to increase the
allowance for doubtful accounts, which is netted against receivables,
and to decrease rental or other income or increase bad debt expense for
the current period, although the Partnership continues to pursue
collection of such amounts. If amounts are subsequently determined to
be uncollectible, the corresponding receivable and allowance for
doubtful accounts are decreased accordingly.
Investment in Joint Ventures - The Partnership's investments in
Columbus Joint Venture and the properties in Corpus Christi, Texas and
Memphis, Tennessee, each of which is held as tenants-in-common with
affiliates, are accounted for using the equity method since the
Partnership shares control with affiliates which have the same general
partners.
Cash and Cash Equivalents - The Partnership considers all highly liquid
investments with a maturity of three months or less when purchased to
be cash equivalents. Cash and cash equivalents consist of demand
deposits at commercial banks and money market funds (some of which are
backed by government securities). Cash equivalents are stated at cost
plus accrued interest, which approximates market value.
<PAGE>
CNL INCOME FUND XVI, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1998, 1997, and 1996
1. Significant Accounting Policies - Continued:
Cash accounts maintained on behalf of the Partnership in demand
deposits at commercial banks and money market funds may exceed
federally insured levels; however, the Partnership has not experienced
any losses in such accounts. The Partnership limits investment of
temporary cash investments to financial institutions with high credit
standing; therefore, the Partnership believes it is not exposed to any
significant credit risk on cash and cash equivalents.
Organization Costs - Organization costs are being amortized over five
years using the straight-line method.
Income Taxes - Under Section 701 of the Internal Revenue Code, all
income, expenses and tax credit items flow through to the partners for
tax purposes. Therefore, no provision for federal income taxes is
provided in the accompanying financial statements. The Partnership is
subject to certain state taxes on its income and property.
Additionally, for tax purposes, syndication costs are included in
Partnership equity and in the basis of each partner's investment. For
financial reporting purposes, syndication costs are netted against
partners' capital and represent a reduction of Partnership equity and a
reduction in the basis of each partner's investment.
Use of Estimates - The general partners of the Partnership have made a
number of estimates and assumptions relating to the reporting of assets
and liabilities and the disclosure of contingent assets and liabilities
to prepare these financial statements in conformity with generally
accepted accounting principles. 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.
<PAGE>
CNL INCOME FUND XVI, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1998, 1997, and 1996
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.
3. Land and Buildings on Operating Leases:
Land and buildings on operating leases consisted of the following at
December 31:
<TABLE>
<CAPTION>
1998 1997
----------------- -----------------
<S> <C>
Land $15,378,217 $ 15,259,455
Buildings 17,045,781 16,836,982
----------------- -----------------
32,423,998 32,096,437
Less accumulated depreciation (1,942,192 ) (1,437,443 )
----------------- -----------------
30,481,806 30,658,994
Less allowance for loss on
building (266,257 ) --
----------------- -----------------
$30,215,549 $ 30,658,994
================= =================
</TABLE>
<PAGE>
CNL INCOME FUND XVI, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1998, 1997, and 1996
3. Land and Buildings on Operating Leases - Continued:
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 May 1998, the tenant of the property in Madison, Tennessee exercised
its option under the terms of its lease agreement, to exchange one
existing property with a replacement property. In conjunction
therewith, the Partnership exchanged the Boston Market property in
Madison, Tennessee for a Boston Market property in Lawrence, Kansas.
The lease for the property in Madison, Tennessee was amended to allow
the property in Lawrence, Kansas to continue under the terms of the
original lease. All closing costs were paid by the tenant. The
Partnership accounted for this as a nonmonetary exchange of similar
assets and recorded the acquisition of the property in Lawrence, Kansas
at the net book value of the property in Madison, Tennessee. No gain or
loss was recognized due to this being accounted for as a monetary
exchange of similar assets.
During the year ended December 31, 1998, the Partnership recorded a
provision for loss on building of $266,257, relating to the Long John
Silver's property located in Celina, Ohio. The tenant of this Property
filed for bankruptcy and ceased payment of rents under the terms of its
lease agreement. The allowance represents the difference between the
carrying value of the property at December 31, 1998, and the current
estimate of net realizable value for this property.
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, 1998, 1997, and 1996, the Partnership
recognized $232,408 (net of $184,368 in write-offs), $444,650, and
$468,201, respectively, of such rental income.
<PAGE>
CNL INCOME FUND XVI, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1998, 1997, and 1996
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, 1998:
1999 $2,903,108
2000 3,029,386
2001 3,085,219
2002 3,102,234
2003 3,110,316
Thereafter 31,971,152
-----------------
$47,201,415
=================
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:
1998 1997
---------------- ----------------
Minimum lease payments
receivable $ 11,674,487 $ 13,526,299
Estimated residual values 1,710,925 1,932,560
Less unearned income (8,023,564 ) (9,490,047 )
--------------- ----------------
Net investment in direct
financing leases $ 5,361,848 $ 5,968,812
================ ================
<PAGE>
CNL INCOME FUND XVI, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1998, 1997, and 1996
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, 1998:
1999 $ 684,769
2000 692,689
2001 695,755
2002 701,765
2003 706,248
Thereafter 8,193,261
-----------------
$11,674,487
=================
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).
In June 1998, the tenant of the property in Chattanooga, Tennessee
exercised its option under the terms of its lease agreement, to
exchange one existing property with a replacement property. In
conjunction therewith, the Partnership exchanged the Boston Market
property in Chattanooga, Tennessee for a Boston Market property in
Indianapolis, Indiana. The lease for the property in Chattanooga,
Tennessee was amended to allow the property in Indianapolis, Indiana to
continue under the terms of the original lease. All closing costs were
paid by the tenant. The Partnership accounted for this as a nonmonetary
exchange of similar assets and recorded the acquisition of the property
in Indianapolis, Indiana at the net book value of the property in
Chattanooga, Tennessee. No gain or loss was recognized due to this
being accounted for as a nonmonetary exchange of similar assets.
During the year ended December 31, 1998, one of the Partnership's
leases with Long John Silver's, Inc. was rejected in connection with
the tenant filing for bankruptcy. As a result, the Partnership
reclassified the asset from net investment in direct financing leases
to land and buildings on operating leases. In accordance with Statement
of Financial Accounting Standards No. 13, "Accounting for Leases," the
Partnership recorded the reclassified asset at the lower of original
cost, present fair value, or present carrying amount, which resulted in
a loss on the termination of a direct financing lease of $4,471 for
financial reporting purposes.
<PAGE>
CNL INCOME FUND XVI, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1998, 1997, and 1996
5. Investment in Joint Ventures:
The Partnership owns a property in Fayetteville, North Carolina, as
tenants-in-common with an affiliate of the general partners. The
Partnership accounts for its investment in this property using the
equity method since the Partnership shares control with an affiliate.
As of December 31, 1998, the Partnership owned an 80.44% interest in
this property.
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.
In August 1998, the Partnership entered into a joint venture
arrangement, Columbus Joint Venture, with affiliates of the general
partners, to construct and hold one restaurant property. As of December
31, 1998, the Partnership had contributed approximately $134,500, to
purchase land and pay construction costs relating to the joint venture.
The Partnership has agreed to contribute additional amounts to the
joint venture relating to $182,900 in additional construction costs to
the joint venture. As of December 31, 1998, the Partnership owned a
32.35% interest in this joint venture. When funding is completed, the
Partnership expects to have an approximate 32 percent interest in the
profits and losses of the joint venture. The Partnership accounts for
its investment in this joint venture under the equity method since the
Partnership shares control with affiliates.
<PAGE>
CNL INCOME FUND XVI, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1998, 1997, and 1996
5. Investment in Joint Ventures - Continued:
Columbus Joint Venture and the Partnership and affiliates, as
tenants-in-common in two separate tenancy-in-common arrangements, each
own and lease one property to operators of national fast-food and
family-style restaurants. The following presents the combined,
condensed financial information for the joint venture and the
properties held as tenants-in-common with affiliates at December 31:
<TABLE>
<CAPTION>
1998 1997
--------------- ---------------
<S> <C>
Land and buildings on operating
lease, less accumulated
depreciation $3,274,577 $941,142
Cash 4,825 8,190
Prepaid expenses 197 29
Accrued rental income 56,105 20,171
Liabilities 477,951 8,163
Partners' capital 2,857,753 961,369
Revenues 284,333 112,744
Net income 235,485 91,575
</TABLE>
The Partnership recognized income totalling $132,002, $73,507, and
$19,668 for the years ended December 31, 1998, 1997, and 1996,
respectively, from this joint venture and the properties held as
tenants-in-common with an affiliates.
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. In January 1998, the funds were released from escrow and the
Partnership acquired a 40.42% interest in an IHOP property in Memphis,
Tennessee, as tenants-in-common with affiliates of the general partners
(see Note 5).
<PAGE>
CNL INCOME FUND XVI, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1998, 1997, and 1996
7. 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 not in
liquidation of the Partnership, 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, not in liquidation of the
Partnership 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.
Generally, net sales proceeds from a sale of properties in liquidation
of the Partnership, will be used in the following order: i) first to
pay and discharge all of the Partnership's liabilities to creditors,
ii) second, to establish reserves that may be deemed necessary for any
anticipated or unforeseen liabilities or obligations of the
Partnership, iii) third, to pay all of the Partnership's liabilities,
if any, to the general and limited partners, iv) fourth, after
allocations of net income, gains and/or losses, to the partners with
positive capital account balances, in proportion to such balances, up
to amounts sufficient to reduce such positive balances to zero, and v)
thereafter, any funds remaining shall then be distributed 95 percent to
the limited partners and five percent to the general partners.
During the years ended December 31, 1998, 1997, and 1996, the
Partnership declared distributions to the limited partners of
$3,690,000, $3,600,000, and $3,543,751, respectively. No distributions
have been made to the general partners to date.
<PAGE>
CNL INCOME FUND XVI, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1998, 1997, and 1996
8. Income Taxes:
The following is a reconciliation of net income for financial reporting
purposes to net income for federal income tax purposes for the years
ended December 31:
<TABLE>
<CAPTION>
1998 1997 1996
------------ ------------- ------------
<S> <C>
Net income for financial reporting purposes $ 2,976,998 $ 3,660,327 $ 3,748,198
Depreciation for tax reporting purposes
less than (in excess of) depreciation for
financial reporting purposes 809 3,576 (1,943 )
Allowance for loss on building 266,257 -- --
Direct financing leases recorded as
operating leases for tax reporting purposes 43,343 37,684 29,269
Loss on termination of direct financing leases 4,471 -- --
Equity in earnings of joint ventures for
financial reporting purposes in excess
of equity in earnings of joint ventures
for tax reporting purposes (11,217 ) (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 88,943 (8,996 ) 6,913
Accrued rental income (232,408 ) (444,650 ) (468,201 )
Rents paid in advance (8,443 ) (27,405 ) 47,221
Capitalization of transaction costs for tax
reporting purposes 24,652 -- --
Other 212 -- 4,008
------------ ------------- ------------
Net income for federal income tax purposes $3,153,617 $3,243,823 $ 3,239,830
============ ============= ============
</TABLE>
<PAGE>
CNL INCOME FUND XVI, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1998, 1997, and 1996
9. Related Party Transactions:
One of the individual general partners, James M. Seneff, Jr., is one of
the principal shareholders of CNL Group, Inc., the majority stockholder
of CNL Fund Advisors, Inc. The other individual general partner, Robert
A. Bourne, serves as treasurer, director, and vice chairman of the
board of directors of CNL Fund Advisors. During the years ended
December 31, 1998, 1997, and 1996, CNL Fund Advisors, Inc. (hereinafter
referred to as the "Affiliate") performed certain services for the
Partnership, as described below.
During the years ended December 31, 1998, 1997, and 1996, the Affiliate
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 Affiliate 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 ventures.
The management fee, which will not exceed fees which are competitive
for similar services in the same geo-graphic area, may or may not be
taken, in whole or in part as to any year, in the sole discretion of
the Affiliate. 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 Affiliate shall determine. The
Partnership incurred management fees of $38,570, $40,087, and $39,206
for the years ended December 31, 1998, 1997, and 1996, respectively.
The Affiliate is 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 Affiliate
provides 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, 1998, 1997, and 1996, the Affiliate
provided accounting and administrative services to the Partnership on a
day-to-day basis. The Partnership incurred $102,840, $89,270, and
$118,677 for the years ended December 31, 1998, 1997, and 1996,
respectively, for such services.
<PAGE>
CNL INCOME FUND XVI, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1998, 1997, and 1996
9. 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 affiliate had purchased and temporarily held title to
this property in order to facilitate the acquisition of the property by
the Partnership. The purchase price paid by the Partnership represented
the costs incurred by the affiliate to acquire the property, including
closing costs.
The due to related parties at December 31, 1998 and 1997 totalled
$26,476 and $3,351, respectively.
10. 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 income from the joint venture and
the properties held as tenants-in-common with affiliates) for each of
the years ended December 31:
<TABLE>
<CAPTION>
1998 1997 1996
---------------- ---------------- ----------------
<S> <C>
DenAmerica Corp. $1,164,160 $1,046,845 $1,051,328
Golden Corral Corporation 971,344 979,009 954,476
Foodmaker, Inc. 558,466 556,610 556,610
</TABLE>
<PAGE>
CNL INCOME FUND XVI, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1998, 1997, and 1996
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 income from the
joint venture and the properties held as tenants-in-common with
affiliates) for each of the years ended December 31:
<TABLE>
<CAPTION>
1998 1997 1996
---------------- ---------------- ----------------
<S> <C>
Denny's $1,164,160 $1,164,928 $1,163,621
Golden Corral Family
Steakhouse Restaurants 971,344 979,009 954,476
Jack in the Box 558,466 556,610 556,610
Boston Market 467,043 329,300 260,756
</TABLE>
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 if the Partnership is not able to re-lease the
properties in a timely manner.
In October 1998, Finest Foodservice, L.L.C. and Boston Chicken, Inc.,
the tenants of four Boston Market properties filed for bankruptcy and
rejected the leases relating to two properties. The Partnership will
not recognize any rental and earned income from these properties until
new tenants for the properties are located, or until the properties are
sold and the proceeds from such sales are reinvested in additional
properties. While the tenants have not rejected or affirmed the
remaining two leases, there can be no assurance that some or all of the
leases will not be rejected in the future. The lost revenues resulting
from the two leases that were rejected, as described above, and the
possible rejection of the remaining two leases could have an adverse
effect on the results of operations of the Partnership if the
Partnership is not able to re-lease these properties in a timely
manner.
11. Subsequent Event:
On March 11, 1999, the Partnership entered into an Agreement and Plan
of Merger with CNL American Properties Fund, Inc. ("APF"), pursuant to
which the Partnership would be merged with and into a subsidiary of APF
(the "Merger"). As consideration for the Merger, APF has agreed to
issue 4,320,947 shares of its common stock, par value $0.01 per shares
(the "APF Shares") which, for the purposes of valuing the merger
consideration, have been valued by APF at $10.00 per APF Share, the
price paid by APF
<PAGE>
CNL INCOME FUND XVI, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1998, 1997, and 1996
11. Subsequent Event - Continued:
investors in APF's most recent public offering. In order to assist the
general partners in evaluating the proposed merger consideration, the
general partners retained Valuation Associates, a nationally recognized
real estate appraisal firm, to appraise the Partnership's restaurant
property portfolio. Based on Valuation Associates' appraisal, the
Partnership's property portfolio and other assets were valued on a
going concern basis (meaning the Partnership continues unchanged) at
$42,519,005 as of December 31, 1998. Legg Mason Wood Walker,
Incorporated has rendered a fairness opinion that the APF Share
consideration, payable by APF, is fair to the Partnership from a
financial point of view. The APF Shares are expected to be listed for
trading on the New York Stock Exchange concurrently with the
consummation of the Merger, and, therefore, would be freely tradable at
the option of the former limited partners. At a special meeting of the
partners that is expected to be held in the third quarter of 1999,
limited partners holding in excess of 50% of the Partnership's
outstanding limited partnership interests must approve the Merger prior
to consummation of the transaction. The general partners intend to
recommend that the limited partners of the Partnership approve the
Merger. In connection with their recommendation, the general partners
will solicit the consent of the limited partners at the special
meeting. If the limited partners reject the Merger, the Partnership
will bear the portion of the transaction costs based upon the
percentage of "For" votes and the general partners will bear the
portion of such transaction costs based upon the percentage of
"Against" votes and abstentions.
<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 52, is a principal stockholder of CNL Group,
Inc., a diversified real estate company, and has served as its Chairman of the
Board of Directors, a director and Chief Executive Officer since its formation
in 1980. Mr. Seneff has been Chairman of the Board of Directors, director, and
Chief Executive Officer of CNL Securities Corp. since its formation in 1979. Mr.
Seneff also has held the position of Chairman of the Board of Directors, Chief
Executive Officer, President and director of CNL Management Company, a
registered investment advisor, since its formation in 1976, has served as Chief
Executive Officer, Chairman of the Board and a director of CNL Investment
Company, has served as Chief Executive Officer, a director and Chairman of the
Board of Directors of Commercial Net Lease Realty, Inc., a publicly-traded REIT,
listed on the NYSE, since 1992, served as Chief Executive Officer, a director
and Chairman of the Board of Directors of CNL Realty Advisors, Inc. from its
inception in May 1992 through December 1997, at which time such company merged
with Commercial Net Lease Realty, Inc., and has held the position of Chief
Executive Officer, Chairman of the Board and a director of CNL Institutional
Advisors, Inc., a registered investment advisor, since its inception in December
1990. Mr. Seneff has served as Chairman of the Board of Directors of CNL
American Properties Fund, Inc. since December 1994 and as a director and Chief
Executive Officer since May 1994. Mr. Seneff has served as Chairman of the
Board, Chief Executive Officer and a director of CNL Fund Advisors, Inc. since
March 1994. Mr. Seneff has served as Chairman of the Board, Chief Executive
Officer and a director of CNL Hospitality Properties, Inc. since June 1996 and
of CNL Hospitality Advisors, Inc. since January 1997. Mr. Seneff has also served
as Chairman of the Board, Chief Executive Officer and a director of CNL Health
Care Properties, Inc. since December 1997 and CNL Health Care Advisors, Inc.
since July 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 advises 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 then $60 billion of retirement funds.
Mr. Seneff has served as a member of the board of directors of First Union
National Bank of Florida since May 1998 and has served as a member of the
Orlando Advisory Board of First Union National Bank of Florida since March 1994.
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 restaurants, office buildings, apartment complexes, 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.
Robert A. Bourne, age 51, is President and Treasurer of CNL Group,
Inc., President, Treasurer, a director, and a registered principal of CNL
Securities Corp., President, Treasurer, and a director of CNL Investment
Company, and Chief Investment Officer, a director and Treasurer of CNL
Institutional Advisors, Inc., a registered investment advisor. Mr. Bourne served
as President of CNL Institutional Advisor, Inc. from the date of its inception
through July 1997. Mr. Bourne served as President of Commercial Net Lease
Realty, Inc. from July 1992 through February 1996, served as Secretary and
Treasurer from February 1996 through December 1997, and has served as a director
since July 1992 and as Vice Chairman of the Board of Directors since February
1996. In addition, Mr. Bourne served as President of CNL Realty Advisors, Inc.
from May 1992 through February 1996, served as Treasurer from February 1996
through December 1997, served as a director from May 1992 through December 31,
1997 and served as Vice Chairman from February 1996 through December 1997, at
which time such company merged with Commercial Net Lease Realty, Inc. Mr. Bourne
has served as a Vice Chairman of the Board of Directors and Treasurer of CNL
American Properties Fund, Inc. since February 1999, has served as a director
since May 1994 and previously served as President from May 1994 through February
1999. Mr. Bourne has served as a director of CNL Fund Advisors, Inc. since March
1994, has served as Treasurer and Vice Chairman of the Board of Directors since
September 1997, and previously served as President from March 1994 through
September 1997. Mr. Bourne has served as President and a director of CNL
Hospitality Properties, Inc. since June 1996 and of CNL Hospitality Advisors,
Inc. since January 1997. Mr. Bourne has served as President and director of CNL
Health Care Properties, Inc. since December 1997 and CNL Health Care Advisors,
Inc. since July 1997. 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
restaurants, office buildings, apartment complexes, 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. Mr. Bourne formerly was a
certified public accountant with Coopers & Lybrand and a partner in the firm of
Bourne & Rose, P.A. Mr. Bourne received a B.A. in Accounting, with honors, from
Florida State University in 1970.
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 majority 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.
Curtis B. McWilliams, age 43, joined CNL Group, Inc. in April 1997 and
currently serves as an Executive Vice President. In addition, Mr. McWilliams has
served as President of CNL Fund Advisors, Inc. and as President of the
Restaurant and Financial Services Groups within CNL Group, Inc. since April
1997. Mr. McWilliams has served as President of CNL American Properties Fund,
Inc. since February 1999 and previously served as Executive Vice President from
February 1998 through February 1999. From September 1983 through March 1997, Mr.
McWilliams was employed by Merrill Lynch & Co., most recently as Chairman of
Merrill Lynch's Private Advisory Services until March 1997. 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.
<PAGE>
John T. Walker, age 40, has served as Executive Vice President of CNL
American Properties Fund, Inc. since January 1996, as Chief Operating Officer
since March 1995, and previously served as Senior Vice President since December
1994. In addition, Mr. Walker has served as Executive Vice President of CNL Fund
Advisors, Inc. since January 1996, Chief Operating Officer since April 1995, and
previously served as Senior Vice President from November 1994 through January
1996. In addition, Mr. Walker previously served as Executive Vice President of
CNL Hospitality Properties, Inc. and CNL Hospitality Advisors, Inc. From May
1992 to May 1994, Mr. Walker, a certified public accountant, was Executive Vice
President for Finance and Administration and Chief Financial Officer of Z Music,
Inc., a cable television network (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 50, a certified public accountant, has served as
Secretary of CNL American Properties Fund, Inc. since December 1994 and served
as Treasurer from December 1994 through February 1999. Ms. Rose has served as a
director and Secretary of CNL Fund Advisors, Inc. since March 1994, and as
Treasurer from the date of its inception through June 30, 1997. Ms. Rose has
served as Secretary of CNL Group, Inc. since 1987, as Chief Financial Officer of
CNL Group, Inc. since December 1993, 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, as Treasurer of CNL Realty Advisors, Inc. from 1991 to February 1996, and
as Secretary and a director of CNL Realty Advisors, Inc. since its inception in
1991 until December 31, 1997, at which time CNL Realty Advisors, Inc. merged
with Commercial Net Lease Realty, Inc. In addition, Ms. Rose served as Secretary
and Treasurer of Commercial Net Lease Realty, Inc. from 1992 to February 1996.
Ms. Rose also serves as Secretary and Treasurer of CNL Hospitality Properties,
Inc. and CNL Health Care Properties, Inc. and as Secretary, Treasurer and a
director of CNL Hospitality Advisors, Inc. and CNL Health Care Advisors, Inc.
Ms. Rose also currently serves as Secretary for approximately 50 additional
corporations. Ms. Rose oversees the legal compliance, accounting, tenant
compliance, and reporting for over 250 corporations, partnerships and joint
ventures. Prior to joining CNL, Ms. Rose was a partner with Robert A. Bourne in
the accounting firm of Bourne & Rose, P.A., Certified Public Accountants. Ms.
Rose holds a B.A. in Sociology from the University of Central Florida.
Jeanne A. Wall, age 40, has served as Executive Vice President of CNL
American Properties Fund, Inc. since December 1994. Ms. Wall has served as
Executive Vice President of CNL Fund Advisors, Inc. since November 1994, and
previously served as Vice President from March 1994 through November 1994. Ms.
Wall 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. Ms. Wall joined CNL Securities
Corp. in 1984. 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 its 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 until December 31, 1997, at which time CNL Realty Advisors,
Inc. merged with Commercial Net Lease Realty, Inc., and served as Vice President
of Commercial Net Lease Realty, Inc. from 1992 through December 31, 1997. In
addition, Ms. Wall serves as Executive Vice President of CNL Hospitality
Properties, Inc., CNL Hospitality Advisors, Inc., CNL Health Care Properties,
Inc. and CNL Health Care Advisors, Inc. 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).
<PAGE>
Steven D. Shackelford, age 35, a certified public accountant, has
served as Chief Financial Officer of CNL American Properties Fund, Inc. since
January 1997 and as Chief Financial Officer of CNL Fund Advisors, Inc. since
September 1996. From March 1995 to July 1996, Mr. Shackelford 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.
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 11, 1999, 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 11, 1999, 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. On March 11, 1999, the
Registrant entered into an Agreement and Plan of Merger with CNL American
Properties Fund, Inc. ("APF") pursuant to which the Registrant would be merged
with and into a subsidiary of APF (the "Merger"). For further discussion, see
Item 8. Financial Statements and Supplementary Data -- Note 11.
Subsequent Event.
<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, 1998, 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, 1998
----------------------- --------------------- ------------------------
<S> <C>
Reimbursement to affiliates for Operating expenses are reimbursed at Operating expenses
operating expenses the lower of cost or 90 percent of the incurred on behalf of the
prevailing rate at which comparable Partnership: $125,080
services could have been obtained in
the same geographic area. Affiliates Accounting and
of the General Partners from time to administrative
time incur certain operating expenses services: $102,840
on behalf of the Partnership for which
the Partnership reimburses the
affiliates without interest.
Annual management fee to affiliates One percent of the sum of gross $38,570
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>
<PAGE>
<TABLE>
<CAPTION>
Amount Incurred
Type of Compensation For the Year
and Recipient Method of Computation Ended December 31, 1998
----------------------- --------------------- ------------------------
<S> <C>
Deferred, subordinated real estate A deferred, subordinated real estate $ -0-
disposition fee payable to affiliates disposition fee, payable upon sale of
one or more Properties, in an
amount equal to the lesser of (i)
one-half of a competitive real
estate commission, or (ii) three
percent of the sales price of such
Property or Properties. Payment of
such fee shall be made only if
affiliates of the General Partners
provide a substantial amount of
services in connection with the
sale of a Property or Properties
and shall be subordinated to
certain minimum returns to the
Limited Partners. However, if the
net sales proceeds are reinvested
in a replacement Property, no such
real estate disposition fee will be
incurred until such replacement
Property is sold and the net sales
proceeds are distributed.
General Partners' deferred, A deferred, subordinated share equal $ -0-
sub-ordinated share of Partnership to one percent of Partnership
net cash flow distributions of net cash flow,
subordinated to certain minimum
returns to the Limited Partners.
General Partners' deferred, A deferred, subordinated share equal $ -0-
sub-ordinated share of Partnership to five percent of Partnership
net sales proceeds from a sale or distributions of such net sales
sales of Properties not in proceeds, subordi-nated to certain
liquidation of the Partnership minimum returns to the Limited
Partners.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Amount Incurred
Type of Compensation For the Year
and Recipient Method of Computation Ended December 31, 1998
----------------------- --------------------- ------------------------
<S> <C>
General Partners' share of Distributions of net sales proceeds $ -0-
Partnership net sales proceeds from a from a sale or sales of substantially
sale or sales in liquidation of the all of the Partnership's assets will
Partnership be distributed in the following order
or priority: (i) first, to pay all
debts and liabilities of the
Partnership and to establish
reserves; (ii) second, to Partners
with positive capital account
balances, determined after the
allocation of net income, net loss,
gain and loss, in proportion to
such balances, up to amounts
sufficient to reduce such balances
to zero; and (iii) thereafter, 95%
to the Limited Partners and 5% to
the General Partners.
</TABLE>
As discussed above in Item 8. Financial Statements and Supplementary
Data -- Note 11. Subsequent Event, the Registrant has entered into an Agreement
and Plan of Merger, dated March 11, 1999, with APF pursuant to which the
Registrant would be merged with and into a subsidiary of APF in exchange for the
issuance of APF Shares. The APF Shares are expected to be listed for trading on
the New York Stock Exchange concurrently with the consummation of the Merger. If
the Merger is approved by Limited Partners holding units greater than 50% of the
outstanding units of the Registrant, the General Partners of the Registrant
would receive certain benefits. For instance, following the Merger, James M.
Seneff, Jr. and Robert A. Bourne, the individual General Partners, will continue
to serve as directors of APF, with Mr. Seneff serving as Chairman and Mr. Bourne
serving as Vice Chairman. As APF directors, they may also be entitled to receive
stock options under any stock option plan adopted by APF.
<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, 1998 and 1997
Statements of Income for the years ended December 31, 1998,
1997, and 1996
Statements of Partners' Capital for the years ended December
31, 1998, 1997, and 1996
Statements of Cash Flows for the years ended December 31,
1998, 1997, and 1996
Notes to Financial Statements
2. Financial Statement Schedules
Schedule II - Valuation and Qualifying Accounts for the years
ended December 31, 1998, 1997, and 1996
Schedule III - Real Estate and Accumulated Depreciation at
December 31, 1998
Notes to Schedule III - Real Estate and Accumulated
Depreciation at December 31, 1998
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.)
<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, 1998 through December 31, 1998.
(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, 1998. 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.
<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 27th day of
March, 1999.
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 27, 1999
- ---------------------------
Robert A. Bourne (Principal Financial and Accounting
Officer)
/s/ James M. Seneff, Jr. Chief Executive Officer and Director March 27, 1999
- ---------------------------
James M. Seneff, Jr. (Principal Executive Officer)
</TABLE>
<PAGE>
CNL INCOME FUND XVI, LTD.
(A Florida Limited Partnership)
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
Years Ended December 31, 1998, 1997, and 1996
<TABLE>
<CAPTION>
Additions Deductions
------------------------------- ----------------------------
Collected
or Deter-
Balance at Charged to Charged to Deemed mined to Balance
Beginning Costs and Other Uncollec- be Col- at End
Year Description of Year Expenses Accounts tible lectible of Year
-------- ----------------- -------------- -------------- --------------- ------------ ------------ -----------
<S> <C>
1996 Allowance for
doubtful
accounts (a) $ 2,962 $ -- $ 6,913 (b) $ -- (c) $ -- $ 9,875
============== ============== =============== ============ ============ ===========
1997 Allowance for
doubtful
accounts (a) $ 9,875 $ -- $ 7,918 (b) $ 16,693 (c) $ 221 $ 879
============== ============== =============== ============ ============ ===========
1998 Allowance for
doubtful
accounts (a) $ 879 $ -- $ 89,822 (b) $ 879 (c) $ -- $ 89,822
============== ============== =============== ============ ============ ===========
</TABLE>
(a) Deducted from receivables on the balance sheet.
(b) Reduction of rental and other income.
(c) Amounts written off as uncollectible.
<PAGE>
<TABLE>
<CAPTION>
CNL INCOME FUND XVI, LTD.
(A Florida Limited Partnership)
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1998
<S> <C>
Costs Capitalized
Subsequent To
Initial Cost Acquisition
------------------------- -------------------------
Encum- Buildings and Improve- Carrying
brances Land Improvements ments Costs
------- -------- ------------- --------- --------
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 - -
Lawrence, Kansas (i) - 343,367 435,813 - -
Checkers Drive-In Restaurants:
Conyers, Georgia - 363,553 - - -
Lake Worth, Florida - 325,301 - - -
Ocala, Florida - 289,578 - - -
Pompano Beach, Florida - 373,491 - - -
Tampa, Florida - 372,176 - - -
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 - 261,154 - - -
Moab, Utah - 435,927 - - -
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 - 523,584 - 870,136 -
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 -
Long John Silver's Restaurants:
Celina, Ohio (l) - 109,130 - 425,145 -
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 - -
----------- ---------- ----------- -----
$15,378,217 $6,421,485 $10,624,296 -
=========== ========== =========== =====
Property in Which the Partnership
has an 80.44% Interest as
Tenants-in-Common and has
Invested in Under an Operating
Lease:
Boston Market Restaurant:
Fayetteville, North Carolina - $377,800 $587,700 - -
=========== ========= =========== =====
Property in Which the Partnership
has a 40.42% Interest as Tenants-
in-Common and has Invested in Under
an Operating Lease:
IHOP Restaurant:
Memphis, Tennessee - $678,890 $825,076 - -
========== ========= =========== =====
Property of Joint Venture in
Which the Partnership has a
32.35% Interest
Arby's Restaurant:
Columbus, Ohio - $406,976 - $468,725 -
========== ========= =========== =====
Properties the Partnership has
Invested in Under Direct
Financing Leases:
Boston Market Restaurant:
Indianapolis, Indiana - $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 - - - 677,539 -
Moab, Utah - - - 718,578 -
Long John Silver's Restaurants:
Clovis, New Mexico - 127,607 425,282 - -
Copperas Cove Texas - - 424,319 - -
Shoney's Restaurant:
Las Vegas, Nevada - - 812,466 - -
-------- ---------- ----------- -----
$450,624 $2,595,193 $2,446,014 -
======== ========== =========== =====
Gross Amount at Which Life on Which
Carried at Close of Period (g) Depreciation in
------------------------------------- Date Latest Income
Buildings and Accumulated of Con- Date Statement is
Land Improvements Total Depreciation struction Acquired Computed
-------- ------------- -------- ------------ --------- --------- ----------------
$315,276 $591,993 $907,269 $66,511 1978 08/95 (c)
502,786 645,127 1,147,913 70,832 1995 09/95 (c)
277,576 725,953 1,003,529 73,590 1995 12/95 (c)
343,367 435,813 779,180 10,430 1997 05/98 (c)
363,553 - 363,553 (b) - 12/94 (b)
325,301 - 325,301 (b) - 12/94 (b)
289,578 - 289,578 (b) - 12/94 (b)
373,491 - 373,491 (b) - 12/94 (b)
372,176 - 372,176 (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 81,210 1995 01/95 (c)
1,160,979 1,010,688 2,171,667 102,361 1995 03/95 (c)
266,829 (d) 266,829 (e) 1971 03/95 (e)
261,154 (d) 261,154 (e) 1995 04/95 (e)
435,927 (d) 435,927 (e) 1995 06/95 (e)
403,548 650,659 1,054,207 72,330 1995 08/95 (c)
306,866 677,659 984,525 75,332 1975 08/95 (c)
566,943 1,122,500 1,689,443 142,260 1995 10/94 (c)
761,108 1,001,893 1,763,001 133,677 1994 11/94 (c)
781,761 1,147,538 1,929,299 153,110 1994 11/94 (c)
446,240 971,766 1,418,006 121,156 1995 01/95 (c)
320,133 804,428 1,124,561 91,909 1995 05/95 (c)
523,584 870,136 1,393,720 81,119 1996 01/96 (c)
364,634 554,302 918,936 52,178 1994 03/96 (c)
553,671 658,282 1,211,953 87,095 1995 10/94 (c)
439,950 636,524 1,076,474 80,205 1995 10/94 (c)
401,302 595,722 997,024 82,803 1985 10/94 (c)
744,493 225,404 969,897 31,330 1984 10/94 (c)
403,476 568,053 971,529 78,957 1991 10/94 (c)
188,759 434,369 623,128 45,460 1995 09/95 (c)
109,130 425,145 534,275 7,326 1995 10/94 (k)
313,200 415,695 728,895 51,155 1995 12/94 (c)
162,000 (d) 162,000 (e) 1994 12/94 (e)
370,204 433,058 803,262 54,607 1995 12/94 (c)
116,767 183,174 299,941 18,736 1982 12/95 (c)
426,238 (d) 426,238 (e) 1992 05/95 (e)
393,963 567,626 961,589 76,513 1983 12/94 (c)
- ----------- ----------- ----------- -------
$15,378,217 $17,045,781 $32,423,998 $1,942,192
=========== =========== =========== ==========
$377,800 $587,700 $965,500 $43,948 1996 10/96 (c)
=========== ========== ========== =======
$678,890 $825,076 $1,503,966 $26,642 1997 01/98 (c)
=========== ========== ========== =======
$406,976 $468,725 $875,701 (n) (m) 08/98 (n)
=========== ========= ==========
(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) 1976 12/94 (f)
- (d) (d) (e) 1994 12/94 (e)
- (d) (d) (e) 1992 05/95 (e)
</TABLE>
<PAGE>
CNL INCOME FUND XVI, LTD.
(A Florida Limited Partnership)
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1998
(a) Transactions in real estate and accumulated depreciation during 1998,
1997 and 1996, are summarized as follows:
<TABLE>
<CAPTION>
Accumulated
Cost Depreciation
----------------- ---------------
<S> <C>
Properties the Partnership has Invested
in Under Operating Leases:
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
Reclassified from direct financing leases 534,275 --
Acquisitions 3,545
Reimbursement of construction costs (o) (210,259) (48,611 )
Depreciation expense -- 553,360
----------------- ---------------
Balance, December 31, 1998 $ 32,423,998 $ 1,942,192
================= ===============
Property in Which the Partnership has an
80.44% Interest as Tenants-in-Common and
has Invested in Under an 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
Depreciation expense -- 19,590
----------------- ---------------
Balance, December 31, 1998 $ 965,500 $ 43,948
================= ===============
</TABLE>
<PAGE>
CNL INCOME FUND XVI, LTD.
(A Florida Limited Partnership)
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED
DEPRECIATION - CONTINUED
December 31, 1998
<TABLE>
<CAPTION>
Accumulated
Cost Depreciation
------------- -----------------
<S> <C>
Property in Which the Partnership
has a 40.42% Interest as
Tenants-in-Common and has Invested
in Under an Operating Lease:
Balance, December 31, 1997 $ -- $ --
Acquisition 1,503,966 --
Depreciation expense -- 26,642
------------- -----------------
Balance, December 31, 1998 $ 1,503,966 $ 26,642
============= =================
Property of Joint Venture in Which the
Partnership has a 32.35% Interest and
has Invested in Under an Operating Lease:
Balance, December 31, 1997 $ -- $ --
Acquisition 875,701 --
Depreciation (n) -- --
------------- -----------------
Balance, December 31, 1998 $ 875,701 $ --
============= =================
</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) 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, 1998, the aggregate cost of the Properties owned
by the Partnership and the joint venture for federal income tax
purposes was $37,887,606 and $3,344,166, 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.
<PAGE>
CNL INCOME FUND XVI, LTD.
(A Florida Limited Partnership)
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED
DEPRECIATION - CONTINUED
December 31, 1998
(i) This Property was exchanged for a Boston Market Property previously
owned and located in Madison, Tennessee, during 1998.
(j) This Property was exchanged for a Boston Market Property previously
owned and located in Chattanooga, Tennessee.
(k) Effective June 1998, the lease for this Property was terminated,
resulting in the reclassification of the building portion of the
lease as an operating lease. The building was recorded at net book
value as of June 11, 1998 and depreciated over its remaining
estimated life of approximately 26 years.
(l) For financial reporting purposes the undepreciated cost of the
Property in Celina, Ohio, was written down to net realizable value
due to an anticipated impairment in value. The Partnership
recognized the impairment by recording an allowance for loss on
building in the amount of $266,257 at December 31, 1998. The tenant
of this Property experienced financial difficulties and ceased
payments of rents under the terms of its lease agreement. The
impairment at December 31, 1998 represents the difference between
the Property's carrying value at December 31, 1998, and the
estimated net realizable value of the Property. The cost of the
Property presented on this schedule is the gross amount at which
the Property was carried at December 31, 1998, excluding the
allowance for loss on building.
(m) Scheduled for completion in 1999.
(n) Property was not placed in service as of December 31, 1998;
therefore, no depreciation was taken.
(o) During the year ended December 31, 1998, the Partnership received
reimbursements from the developer upon final construction costs
reconciliation. In connection therewith, the land and building
values were adjusted down accordingly.
<PAGE>
EXHIBITS
<PAGE>
EXHIBIT INDEX
Exhibit Number
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.)
<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, 1998, and its statement of
income for the year then ended and is qualified in its entirety by reference to
the Form 10-K of CNL Income Fund XVI, Ltd. for the year ended December 31, 1998.
</LEGEND>
<S> <C>
<PERIOD-TYPE> year
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 1,603,589
<SECURITIES> 0
<RECEIVABLES> 153,036
<ALLOWANCES> 89,822
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 32,157,741
<DEPRECIATION> 1,942,192
<TOTAL-ASSETS> 40,188,641
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 39,191,924
<TOTAL-LIABILITY-AND-EQUITY> 40,188,641
<SALES> 0
<TOTAL-REVENUES> 3,961,754
<CGS> 0
<TOTAL-COSTS> 850,501
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,976,998
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,976,998
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,976,998
<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>
