FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT of 1934
For the quarterly period ended June 30, 2002
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OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT of 1934
For the transition period from ______________________ to ____________________
Commission file number
0-15666
---------------------------------------
CNL Income Fund, Ltd.
- -----------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Florida 59-2666264
- ----------------------------------- ----------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
450 South Orange Avenue
Orlando, Florida 32801
- ----------------------------------- ----------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number
(including area code) (407) 540-2000
----------------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No _________
CONTENTS
Page
Part I.
Item 1. Financial Statements:
Condensed Balance Sheets 1
Condensed Statements of Income 2
Condensed Statements of Partners' Capital 3
Condensed Statements of Cash Flows 4
Notes to Condensed Financial Statements 5-7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8-11
Item 3. Quantitative and Qualitative Disclosures About
Market Risk 11
Part II.
Other Information 12
CNL INCOME FUND, LTD.
(A Florida Limited Partnership)
CONDENSED BALANCE SHEETS
June 30, December 31,
2002 2001
------------------ -------------------
ASSETS
Land and buildings on operating leases, net $ 4,844,115 $ 5,580,917
Investment in joint ventures 437,982 787,721
Cash and cash equivalents 1,121,349 414,999
Receivables 659 34,841
Due from related parties 9,481 1,574
Accrued rental income 48,981 43,559
Other assets 3,808 21,104
------------------ -------------------
$ 6,466,375 $ 6,884,715
================== ===================
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable 2,159 $ 4,840
Real estate taxes payable 11,761 13,688
Distributions payable 818,777 207,167
Due to related parties 168,281 130,278
Rents paid in advance and deposits 38,744 46,590
------------------ -------------------
Total liabilities 1,039,722 402,563
Partners' capital 5,426,653 6,482,152
------------------ -------------------
$ 6,466,375 $ 6,884,715
================== ===================
See accompanying notes to condensed financial statements.
CNL INCOME FUND, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF INCOME
Quarter Ended Six Months Ended
June 30, June 30,
2002 2001 2002 2001
-------------- ------------- --------------- --------------
Revenues:
Rental income from operating leases $ 145,560 $ 186,133 $ 301,824 $ 372,662
Contingent rental income -- -- 16,602 9,270
Lease termination income -- 55,658 -- 55,658
Interest and other income 5,748 8,459 6,959 20,479
-------------- ------------- --------------- --------------
151,308 250,250 325,385 458,069
-------------- ------------- --------------- --------------
Expenses:
General operating and administrative 34,692 38,787 80,730 87,788
Property expenses 2,445 3,805 3,729 5,223
State and other taxes 659 1,112 3,652 11,089
Depreciation and amortization 34,716 39,149 70,909 78,298
-------------- ------------- --------------- --------------
72,512 82,853 159,020 182,398
-------------- ------------- --------------- --------------
Income Before Loss on Dissolution of Joint Venture,
Gain on Sale of Assets and Equity in Earnings of
Joint Ventures 78,796 167,397 166,365 275,671
Loss on Dissolution of Joint Venture (30,579 ) -- (30,579 ) --
Gain on Sale of Assets -- -- 348,026 --
Equity in Earnings of Joint Ventures 325,454 23,956 348,864 47,657
-------------- ------------- --------------- --------------
Net Income $ 373,671 $ 191,353 $ 832,676 $ 323,328
============== ============= =============== ==============
Net Income Per Limited Partner Unit $ 12.46 $ 6.38 $ 27.76 $ 10.78
============== ============= =============== ==============
Weighted Average Number of Limited Partner
Units Outstanding 30,000 30,000 30,000 30,000
============== ============= =============== ==============
See accompanying notes to condensed financial statements.
CNL INCOME FUND, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF PARTNERS' CAPITAL
Six Months Ended Year Ended
June 30, December 31,
2002 2001
-------------------- ------------------
General partners:
Beginning balance $ 340,768 $ 340,768
Net income -- --
-------------------- ------------------
340,768 340,768
-------------------- ------------------
Limited partners:
Beginning balance 6,141,384 6,943,735
Net income 832,676 626,317
Distributions ($62.94 and $47.62 per
limited partner unit, respectively) (1,888,175 ) (1,428,668 )
-------------------- ------------------
5,085,885 6,141,384
-------------------- ------------------
Total partners' capital $ 5,426,653 $ 6,482,152
==================== ==================
See accompanying notes to condensed financial statements.
CNL INCOME FUND, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF CASH FLOWS
Six Months Ended
June 30,
2002 2001
---------------- --------------
Increase (Decrease) in Cash and Cash Equivalents:
Net Cash Provided by Operating Activities $ 305,102 $ 422,560
---------------- --------------
Cash Flows from Investing Activities:
Proceeds from sale of assets 1,064,259 --
Liquidating distribution from joint venture 613,554 --
---------------- --------------
Net cash provided by investing activities 1,677,813
---------------- --------------
Cash Flows from Financing Activities:
Distributions to limited partners (1,276,565 ) (1,021,624 )
---------------- --------------
Net cash used in financing activities (1,276,565 ) (1,021,624 )
---------------- --------------
Net Increase (Decrease) in Cash and Cash Equivalents 706,350 (599,064 )
Cash and Cash Equivalents at Beginning of Period 414,999 1,019,821
---------------- --------------
Cash and Cash Equivalents at End of Period $ 1,121,349 $ 420,757
================ ==============
Supplemental Schedule of Non-Cash Investing and
Financing Activities:
Deferred real estate disposition fee incurred and
unpaid at end of period $ 32,215 $ --
================ ==============
Distributions declared and unpaid at end of
period $ 818,777 $ 207,167
================ ==============
See accompanying notes to condensed financial statements.
CNL INCOME FUND, LTD.
(A Florida Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS
Quarters and Six Months Ended June 30, 2002 and 2001
1. Basis of Presentation:
---------------------
The accompanying unaudited condensed financial statements have been
prepared in accordance with the instructions to Form 10-Q and do not
include all of the information and note disclosures required by generally
accepted accounting principles. The financial statements reflect all
adjustments, consisting of normal recurring adjustments, which are, in the
opinion of management, necessary to a fair statement of the results for the
interim periods presented. Operating results for the quarter and six months
ended June 30, 2002 may not be indicative of the results that may be
expected for the year ending December 31, 2002. Amounts as of December 31,
2001, included in the financial statements, have been derived from audited
financial statements as of that date.
These unaudited financial statements should be read in conjunction with the
financial statements and notes thereto included in Form 10-K of CNL Income
Fund, Ltd. (the "Partnership") for the year ended December 31, 2001.
Effective January 1, 2002, the Partnership adopted Statement of Financial
Accounting Standards No. 144 "Accounting for the Impairment or Disposal of
Long-Lived Assets." This statement requires that a long-lived asset be
tested for recoverability whenever events or changes in circumstances
indicate that its carrying amount may not be recoverable. The carrying
amount of a long-lived asset is not recoverable if it exceeds the sum of
the undiscounted cash flows expected to result from the use and eventual
disposition of the asset. The assessment is based on the carrying amount of
the asset at the date it is tested for recoverability. An impairment loss
is recognized when the carrying amount of a long-lived asset exceeds its
fair value. If an impairment is recognized, the adjusted carrying amount of
a long-lived asset is its new cost basis. The statement also requires that
the results of operations of a component of an entity that either has been
disposed of or is classified as held for sale be reported as a discontinued
operation if the disposal activity was initiated subsequent to the adoption
of the Standard.
2. Land and Building on Operating Leases:
-------------------------------------
During the six months ended June 30, 2002, the Partnership sold its
property in Mesquite, Texas for $1,073,828 and received net sales proceeds
of approximately $1,032,000, resulting in a gain of $348,026. In connection
with the sale, the Partnership incurred a deferred, subordinated, real
estate disposition fee of $32,215 (see Note 5). As of December 31, 2001,
this property had been identified for sale.
3. Investment in Joint Ventures:
----------------------------
In June 2002, Sand Lake Road Joint Venture, in which the Partnership owned
a 50% interest, in accordance with the option under the lease agreement
sold its property to the tenant for $1,231,000 and received net sales
proceeds of approximately $1,227,100, resulting in a gain of approximately
$604,000. The Partnership and the outside joint venture partner dissolved
the joint venture in accordance with the joint venture agreement and as a
result, the Partnership received $613,554 representing its pro-rata share
of the liquidation proceeds. The Partnership recognized a $30,579 loss on
the dissolution. The financial results for this property are reflected as
Discontinued Operations in the condensed financial information presented
below.
CNL INCOME FUND, LTD.
(A Florida Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS
Quarters and Six Months Ended June 30, 2002 and 2001
3. Investment in Joint Ventures - Continued:
----------------------------------------
As of June 30, 2002, Orange Avenue Joint Venture and the Partnership and
affiliates, as tenants-in-common, each owned and leased one property to
operators of fast-food or family-style restaurants. The following presents
the combined, condensed financial information for the joint ventures at:
June 30, December 31,
2002 2001
-------------- ---------------
Land and buildings on operating leases, net $ 2,371,650 $ 2,398,707
Real estate held for sale -- 630,814
Cash 4,847 3,232
Receivables 623 1,539
Accrued rental income 103,630 92,131
Other assets -- 335
Liabilities 3,507 3,110
Partners' capital 2,477,243 3,123,648
Quarter Ended June 30, Six Months Ended June 30,
2002 2001 2002 2001
------------ ------------- -------------- ---------------
Revenues $ 75,695 $ 75,701 $ 151,389 $ 151,402
Expenses (13,798 ) (13,869 ) (28,196 ) (27,980 )
------------ ------------- -------------- ---------------
Income from continuing operations 61,897 61,832 123,193 123,422
------------ ------------- -------------- ---------------
Discontinued operations:
Revenues 25,669 29,294 54,963 58,603
Expenses (3,181 ) (5,759 ) (9,525 ) (11,777 )
Gain on disposal of assets 604,015 -- 604,015 --
------------ ------------- -------------- ---------------
626,503 23,535 649,453 46,826
------------ ------------- -------------- ---------------
Net Income $ 688,400 $ 85,367 $ 772,646 $ 170,248
============ ============= ============== ===============
The Partnership recognized income of $348,864 and $47,657 during the six
months ended June 30, 2002 and 2001, respectively, of which $325,454 and
$23,956 was earned during the quarters ended June 30, 2002 and 2001,
respectively, from these joint ventures.
CNL INCOME FUND, LTD.
(A Florida Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS
Quarters and Six Months Ended June 30, 2002 and 2001
4. Concentration of Credit Risk:
----------------------------
The following schedule presents total rental revenues from individual
lessees, each representing more than 10% of the Partnership's total rental
revenues (including the Partnership's share of rental revenues from joint
ventures and the property held as tenants-in-common with affiliates of the
general partners) for each of the six months ended June 30:
2002 2001
------------- --------------
The Ground Round, Inc. $ 44,261 $ 44,261
AJZ, Inc. 42,387 N/A
Wendy's Old Fashioned Hamburgers
of New York, Inc. 41,056 N/A
Wen-Atlanta, Inc. 40,267 N/A
Golden Corral Corporation N/A 132,709
Wendy's International, Inc. N/A 48,093
In addition, the following schedule presents total rental revenues from
individual restaurant chains, each representing more than 10% of the
Partnership's total rental revenues (including the Partnership's share of
rental revenues from joint ventures and the property held as
tenants-in-common with affiliates of the general partners) for each of the
six months ended June 30:
2002 2001
------------- --------------
Wendy's $ 162,926 $ 180,321
The Ground Round 44,261 44,261
A.J. Gators 42,387 N/A
Golden Corral Family
Steakhouse Restaurants N/A 132,709
The information denoted by N/A indicates that for each period presented,
the tenant or the chain did not represent more than 10% of the
Partnership's total rental revenues.
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 lessee or restaurant chain contributing
more than 10% of the Partnership's revenues will significantly impact the
results of operations of the Partnership if the Partnership is not able to
re-lease the properties in a timely manner.
5. Related Party Transactions:
--------------------------
An affiliate of the Partnership is 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 dispositions 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 10% preferred return, plus their
adjusted capital contributions. During the six months ended June 30, 2002,
the Partnership incurred a deferred, subordinated real estate disposition
fee of $32,215 as a result of the sale of a property (see Note 2).
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
CNL Income Fund, Ltd. (the "Partnership") is a Florida limited
partnership that was organized on November 26, 1985 to acquire for cash, either
directly or through joint venture and tenancy in common arrangements, both newly
constructed and existing restaurant properties, as well as land upon which
restaurants were to be constructed, which are leased primarily to operators of
national and regional fast-food restaurant chains (collectively, the
"Properties"). The leases generally are triple-net leases, with the lessees
responsible for all repairs and maintenance, property taxes, insurance and
utilities. As of June 30, 2001, the Partnership owned 11 Properties directly and
owned three Properties indirectly through joint venture or tenancy in common
arrangements. As of June 30, 2002, the Partnership owned 10 Properties directly.
In addition, the Partnership owned two Properties indirectly through joint
venture or tenancy in common arrangements.
Capital Resources
For the six months ended June 30, 2002 and 2001, the Partnership
generated cash from operating activities (which includes cash received from
tenants, distributions from joint ventures, and interest and other income
received, less cash paid for expenses) of $305,102 and $422,560, respectively.
The decrease in cash from operating activities for the six months ended June 30,
2002 was primarily a result of changes in income and expenses, as described
below.
Other sources and uses of capital included the following during the six
months ended June 30, 2002.
During the six months ended June 30, 2002, the Partnership sold its
Property in Mesquite, Texas to an unrelated third party for $1,073,828 and
received net sales proceeds of approximately $1,032,000, resulting in a gain of
$348,026. The Partnership distributed the net sales proceeds as a special
distribution to the limited partners, as described below. The Partnership
anticipates that its distributions will be sufficient to enable the limited
partners to pay federal and state income taxes, if any (at a level reasonably
assumed by the general partners), resulting from the sale.
In June 2002, Sand Lake Road Joint Venture, in which the Partnership
owned a 50% interest, in accordance with the purchase option under the lease
agreement sold its Property to the tenant for $1,231,000, and received net sales
proceeds of approximately $1,227,100 resulting in a gain of approximately
$604,000. Sand Lake Road Joint Venture was dissolved in accordance with the
joint venture agreement. As a result, the Partnership received $613,554
representing its pro-rata share of the liquidation proceeds and recognized a
loss of $30,579 on the dissolution. The Partnership intends to use the
liquidation proceeds it received to make distributions to the limited partners.
Currently, rental income from the Partnership's Properties and any net
sales proceeds held by the Partnership are invested in money market accounts or
other short-term, highly liquid investments such as demand deposit accounts at
commercial banks, money market accounts and certificates of deposit with less
than a 90-day maturity date, pending the Partnership's use of such funds to pay
Partnership expenses or to make distributions to the partners. At June 30, 2002,
the Partnership had $1,121,349 invested in such short-term investments, as
compared to $414,999 at December 31, 2001. The increase in cash and cash
equivalents at June 30, 2002, was primarily the result of the fact that the
Partnership received its pro-rata share of the liquidation proceeds from the
dissolution of Sand Lake Road Joint Venture, as described above. The funds
remaining at June 30, 2002, after payment of distributions and other
liabilities, will be used to meet the Partnership's working capital needs.
Short-Term Liquidity
The Partnership's short-term liquidity requirements consist primarily
of the operating expenses of the Partnership.
The Partnership's investment strategy of acquiring Properties for cash
and leasing them under triple-net leases to operators who generally meet
specified financial standards minimizes the Partnership's operating expenses.
The general partners believe that the leases will continue to generate cash flow
in excess of operating expenses.
The general partners have the right, but not the obligation, to make
additional capital contributions if they deem it appropriate in connection with
the operations of the Partnership.
Total liabilities of the Partnership, including distributions payable,
were $1,039,722 at June 30, 2002, as compared to $402,563 at December 31, 2001,
primarily as a result of the Partnership accruing a special distribution of net
sales proceeds of $650,000 from the 2002 sale by Sand Lake Road Joint Venture of
the Property in Orlando, Florida, payable to the limited partners. The increase
was partially offset by a decrease in accounts payable, real estate taxes
payable and rents paid in advance and deposits. The general partners believe
that the Partnership has sufficient cash on hand to meet current working capital
needs.
The Partnership generally distributes cash from operations remaining
after the payment of operating expenses of the Partnership, to the extent the
general partners determine that such funds are available for distribution. Based
on current and anticipated future cash from operations and for the six months
ended June 30, 2002, net proceeds from the sales of the Properties described
above, and for the six months ended June 30, 2001, net sales proceeds from the
2000 sale of the Property in Salisbury, Maryland, the Partnership declared
distributions to limited partners of $1,888,175 and $1,014,334 for the six
months ended June 30, 2002 and 2001, respectively, ($818,777 and $207,167 for
the quarters ended June 30, 2002 and 2001, respectively.) This represents
distributions of $62.94 and $33.81 per unit for the six months ended June 30,
2002 and 2001, respectively, ($27.29 and $6.91 per unit for the quarters ended
June 30, 2002 and 2001, respectively.) The distribution for the six months ended
June 30, 2002, included $1,550,000 of net sales proceeds from the 2002 sales of
the Properties in Mesquite, Texas, and Orlando, Florida and the distribution for
the six months ended June 30, 2001, included $600,000 of net sales proceeds from
the 2000 sale of the Property in Salisbury, Maryland. These special
distributions during 2002 and 2001, were effectively a return of a portion of
the limited partners investment; although, in accordance with the Partnership
agreement, $468,077 and $183,820, respectively, were applied towards the 10%
Preferred Return, on a cumulative basis, and the balance of $1,081,923 and
$416,180, respectively, were treated as a return of capital for purposes of
calculating the 10% Preferred Return. As a result of the return of capital, the
amount of the limited partners' invested capital contributions (which generally
is the limited partners' capital contributions, less distributions from the sale
of a property that are considered to be a return of capital) was decreased;
therefore, the amount of the limited partners' invested capital contributions on
which the 10% Preferred Return is calculated was lowered accordingly. As a
result of the sales of the Properties, the Partnership's total revenue was
reduced and is expected to remain reduced in subsequent periods, while the
majority of the Partnership's operating expenses remained and are expected to
remain fixed. Therefore, distributions of net cash flow were adjusted commencing
during the six months ended June 30, 2002 and 2001. No distributions were made
to the general partners for the six months ended June 30, 2002 and 2001. The
Partnership intends to continue to make distributions of cash available for
distribution to the limited partners on a quarterly basis.
Long-Term Liquidity
The Partnership has no long-term debt or other long-term liquidity
requirements.
Results of Operations
Total rental revenues were $301,824 for the six months ended June 30,
2002, as compared to $372,662, in the comparable period of 2001, of which
$145,560 and $186,133 were earned during the quarters ended June 30, 2002 and
2001, respectively. Rental revenue decreased during the quarter and six months
ended June 30, 2002, as compared to the same periods of 2001, due to the fact
that during 2001 the Partnership re-leased the Properties in Virginia Beach,
Virginia; Jasper, Alabama and Eunice, Louisiana to three new tenants. Rents
under the new leases are lower than rents due under the previous leases;
therefore, the Partnership expects that rental revenue in future periods will
remain at reduced amounts. However, the general partners do not anticipate that
the decrease in rental revenue will have a material adverse affect on the
Partnership's financial position or results of operations. In addition, the
decrease in rental revenue during the quarter and six months ended June 30, 2002
was partially due to the sale of the Mesquite, Texas Property in February 2002.
During the six months ended June 30, 2002 and 2001, the Partnership
also earned $16,602 and $9,270, respectively, in contingent rental income. The
increase in contingent rental income during the six months ended June 30, 2002,
was attributable to an increase in gross sales of certain restaurant Properties,
the leases of which require the payment of contingent rent.
During the six months ended June 30, 2001, the Partnership recognized
$55,658 in lease termination income from former tenants as consideration for the
Partnership releasing the former tenants from their obligations under the terms
of their respective leases.
During the six months ended June 30, 2002 and 2001, the Partnership
earned $6,959 and $20,479, respectively, in interest and other income, $5,748
and $8,459 of which was earned during the quarters ended June 30, 2002 and 2001,
respectively. The decrease in interest and other income during the quarter and
six months ended June 30, 2002 was primarily due to a decrease in the average
cash balance due to the payment of a special distribution to the limited
partners during 2001 of $600,000 of net sales proceeds from the sale of the
Property in Salisbury, Maryland in 2000.
During the six months ended June 30, 2002, four lessees, Wen-Atlanta
Inc., The Ground Round, Inc., AJZ, Inc., and Wendy's Old Fashioned Hamburgers of
New York, Inc. each contributed more than 10% of the Partnership's total rental
revenues (including the Partnership's share of rental revenues from Properties
owned by joint ventures and a Property owned with affiliates of the general
partners as tenants-in-common). It is anticipated that based on the minimum
rental payments required by the leases, these four lessees will continue to
contribute more than 10% of the Partnership's total rental revenues. In
addition, during the six months ended June 30, 2002, three restaurant chains,
Wendy's, The Ground Round, and A.J. Gators each accounted for more than 10% of
the Partnership's total rental revenues (including the Partnership's share of
rental revenues from Properties owned by joint ventures and a Property owned
with affiliates as tenants-in-common). It is anticipated that these three
restaurant chains will each continue to account for more than 10% of the total
rental revenues to which the Partnership is entitled under the terms of the
leases. Any failure of these lessees or restaurant chains will materially affect
the Partnership's income if the Partnership is not able to re-lease the
Properties in a timely manner.
During the six months ended June 30, 2002 and 2001, the Partnership
earned $348,864 and $47,657, respectively, attributable to net income earned by
joint ventures, $325,454 and $23,956 of which was earned during the quarters
ended June 30, 2002 and 2001, respectively. The increase in net income earned by
joint ventures during the quarter and six months ended June 30, 2002, as
compared to the same periods of 2001, was due to the fact that in June 2002,
Sand Lake Road Joint Venture, in which the Partnership owned a 50% interest,
sold its Property to the tenant in accordance with the purchase option under the
lease agreement, as described below.
Operating expenses, including depreciation and amortization expense,
were $159,020 and $182,398 for the six months ended June 30, 2002 and 2001,
respectively, $72,512 and $82,853 of which was incurred during the quarters
ended June 30, 2002 and 2001, respectively. The decrease in operating expenses
during the quarter and six months ended June 30, 2002, as compared to the same
periods of 2001, was primarily due to a decrease in the costs incurred for
administrative expenses for servicing the Partnership and its Properties.
Operating expenses were higher during the quarter and six months ended June 30,
2001 due to the fact that the Partnership incurred state taxes related to the
2000 sale of its Property in Salisbury, Maryland. In addition, the decrease in
operating expenses during the quarter and six months ended June 30, 2002, as
compared to the same periods of 2001, was partially attributable to the
Partnership incurring less depreciation expense during 2002 as the result of the
sale of the Property in Mesquite, Texas, as described above.
As a result of the sale of the Property in Mesquite, Texas, as
described above in "Capital Resources," the Partnership recognized a gain of
$348,026 during the six months ended June 30, 2002.
Effective January 1, 2002, the Partnership adopted Statement of
Financial Accounting Standards No. 144 "Accounting for the Impairment or
Disposal of Long-Lived Assets." This statement requires that a long-lived asset
be tested for recoverability whenever events or changes in circumstances
indicate that its carrying amount may not be recoverable. The carrying amount of
a long-lived asset is not recoverable if it exceeds the sum of the undiscounted
cash flows expected to result from the use and eventual disposition of the
asset. The assessment is based on the carrying amount of the asset at the date
it is tested for recoverability. An impairment loss is recognized when the
carrying amount of a long-lived asset exceeds its fair value. If an impairment
is recognized, the adjusted carrying amount of a long-lived asset is its new
cost basis. The statement also requires that the results of operations of a
component of an entity that either has been disposed of or is classified as held
for sale be reported as a discontinued operation if the disposal activity was
initiated subsequent to the adoption of the Standard.
In June 2002, Sand Lake Road Joint Venture, in which the Partnership
owned a 50% interest, sold its Property to the tenant for $1,231,000 in
accordance with the purchase option under the lease agreement and received net
sales proceeds of approximately $1,227,100 resulting in a gain of approximately
$604,000. The Partnership and the outside joint venture partner dissolved the
joint venture in accordance with the joint venture agreement and recorded a loss
of $30,579 on the dissolution. The joint venture recognized net rental income
(rental revenues less Property related expenses) of $45,438 and $46,826 during
the six months ended June 30, 2002 and 2001, respectively, of which $22,488 and
$23,535 was earned during the quarters ended June 30, 2002 and 2001,
respectively. The Partnership's pro-rata share of these amounts are included as
equity in earnings of joint ventures in the accompanying financial statements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings. Inapplicable.
-----------------
Item 2. Changes in Securities. Inapplicable.
---------------------
Item 3. Defaults upon Senior Securities. Inapplicable.
-------------------------------
Item 4. Submission of Matters to a Vote of Security Holders. Inapplicable.
---------------------------------------------------
Item 5. Other Information. Inapplicable.
-----------------
Item 6. Exhibits and Reports on Form 8-K.
--------------------------------
(a) Exhibits
3.1 Certificate of Limited Partnership of CNL Income
Fund, Ltd., as amended. (Included as Exhibit 3.1 to
Amendment No. 1 to Registration Statement No.
33-2850 on Form S-11 and incorporated herein by
reference.)
3.2 Amended and Restated Certificate and Agreement of
Limited Partnership of CNL Income Fund, Ltd.
(Included as Exhibit 3.2 to Form 10-K filed with
the Securities and Exchange Commission on March 27,
1998, and incorporated herein by reference.)
4.1 Certificate of Limited Partnership of CNL Income
Fund, Ltd., as amended. (Included as Exhibit 4.1 to
Amendment No. 1 to Registration Statement No.
33-2850 on Form S-11 and incorporated herein by
reference.)
4.2 Amended and Restated Certificate and Agreement of
Limited Partnership of CNL Income Fund, Ltd.
(Included as Exhibit 3.2 to Form 10-K filed with
the Securities and Exchange Commission on March 27,
1998, and incorporated herein by reference.)
10.1 Property Management Agreement. (Included as Exhibit
10.1 to Form 10-K filed with the Securities and
Exchange Commission on March 27, 1998, and
incorporated herein by reference.)
10.2 Assignment of Property 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 Property 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 March 29, 1996, and incorporated
herein by reference.)
10.4 Assignment of Management Agreement from CNL Fund
Advisors, Inc. to CNL APF Partners, LP. (Included
as Exhibit 10.4 to Form 10-Q filed with the
Securities and Exchange Commission on August 10,
2001, and incorporated herein by reference.)
10.5 Assignment of Management Agreement from CNL APF
Partners, LP to CNL Restaurants XVIII, Inc. (Filed
herewith.)
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the
quarter ended June 30, 2002.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
DATED this 7th day of August, 2002.
CNL INCOME FUND, LTD.
By: CNL REALTY CORPORATION
General Partner
By:/s/ James M. Seneff, Jr.
---------------------------------
JAMES M. SENEFF, JR.
Chief Executive Officer
(Principal Executive Officer)
By: /s/ Robert A. Bourne
-------------------------------
ROBERT A. BOURNE
President and Treasurer
(Principal Financial and
Accounting Officer)
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
OF CORPORATE GENERAL PARTNER
PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
The undersigned, James M. Seneff, Jr., the Chief Executive Officer of CNL Realty
Corporation, the corporate general partner of CNL Income Fund, Ltd. (the
"Partnership"), has executed this certification in connection with the filing
with the Securities and Exchange Commission of the Partnership's Quarterly
Report on Form 10-Q for the period ending June 30, 2002 (the "Report"). The
undersigned hereby certifies that:
(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of
the Securities Exchange Act of 1934; and
(2) the information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Partnership.
Date: August 7, 2002 /s/ James M. Seneff, Jr.
--------------------- -------------------------------------
Name: James M. Seneff, Jr.
Title: Chief Executive Officer
CERTIFICATION OF CHIEF FINANCIAL OFFICER
OF CORPORATE GENERAL PARTNER
PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
The undersigned, Robert A. Bourne, the President and Treasurer of CNL Realty
Corporation, the corporate general partner of CNL Income Fund, Ltd. (the
"Partnership"), has executed this certification in connection with the filing
with the Securities and Exchange Commission of the Partnership's Quarterly
Report on Form 10-Q for the period ending June 30, 2002 (the "Report"). The
undersigned hereby certifies that:
(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of
the Securities Exchange Act of 1934; and
(2) the information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Partnership.
Date: August 7, 2002 /s/ Robert A. Bourne
---------------- -----------------------------------
Name: Robert A. Bourne
Title: President and Treasurer
EXHIBIT INDEX
Exhibit Number
3.1 Certificate of Limited Partnership of CNL Income Fund,
Ltd., as amended. (Included as Exhibit 3.1 to Amendment
No. 1 to Registration Statement No. 33-2850 on Form S-11
and incorporated herein by reference.)
3.2 Amended and Restated Certificate and Agreement of Limited
Partnership of CNL Income Fund, Ltd. (Included as Exhibit
3.2 to Form 10-K filed with the Securities and Exchange
Commission on March 27, 1998, and incorporated herein by
reference.)
4.1 Certificate of Limited Partnership of CNL Income Fund,
Ltd., as amended. (Included as Exhibit 4.1 to Amendment
No. 1 to Registration Statement No. 33-2850 on Form S-11
and incorporated herein by reference.)
4.2 Amended and Restated Certificate and Agreement of Limited
Partnership of CNL Income Fund, Ltd. (Included as Exhibit
3.2 to Form 10-K filed with the Securities and Exchange
Commission on March 27, 1998, and incorporated herein by
reference.)
10.1 Property Management Agreement. (Included as Exhibit 10.1
to Form 10-K filed with the Securities and Exchange
Commission on March 27, 1998, and incorporated herein by
reference.)
10.2 Assignment of Property 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 Property 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 March 29, 1996, and
incorporated herein by reference.)
10.4 Assignment of Management Agreement from CNL Fund Advisors,
Inc. to CNL APF Partners, LP. (Included as Exhibit 10.4 to
Form 10-Q filed with the Securities and Exchange
Commission on August 10, 2001, and incorporated herein by
reference.)
10.5 Assignment of Management Agreement from CNL APF Partners,
LP to CNL Restaurants XVIII, Inc. (Filed herewith.)