FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT of 1934
For the quarterly period ended March 31, 2003
--------------------------------------------------------------------------
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
0-16824
---------------------------------------
CNL Income Fund II, Ltd.
- -----------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Florida 59-2733859
- --------------------------------- ------------------------------
(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 _____
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act): Yes___ No X
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 5-6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7-9
Item 3. Quantitative and Qualitative Disclosures About
Market Risk 9
Item 4. Controls and Procedures 9
Part II.
Other Information 10-11
CNL INCOME FUND II, LTD.
(A Florida Limited Partnership)
CONDENSED BALANCE SHEETS
March 31, December 31,
2003 2002
------------------- -------------------
ASSETS
Real estate properties with operating leases, net $ 6,701,461 $ 6,752,686
Investment in joint ventures 3,981,216 4,000,984
Cash and cash equivalents 710,830 1,193,910
Certificate of deposit 61,496 61,824
Receivables 15,983 43,505
Accrued rental income 184,070 182,640
Other assets 10,737 7,045
------------------- -------------------
$ 11,665,793 $ 12,242,594
=================== ===================
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable and accrued expenses $ 87,608 $ 71,100
Real estate taxes payable 14,620 8,720
Distributions payable 334,380 834,380
Due to related parties 201,018 200,536
Rents paid in advance and deposits 92,124 79,229
------------------- -------------------
Total liabilities 729,750 1,193,965
Commitments and Contingencies (Note 4)
Partners' capital 10,936,043 11,048,629
------------------- -------------------
$ 11,665,793 $ 12,242,594
=================== ===================
See accompanying notes to condensed financial statements.
CNL INCOME FUND II, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF INCOME
Quarter Ended
March 31,
2003 2002
--------------- ---------------
Revenues:
Rental income from operating leases $ 248,484 $ 270,120
Contingent rental income 2,256 10,299
Interest and other income 863 1,668
--------------- ---------------
251,603 282,087
--------------- ---------------
Expenses:
General operating and administrative 57,818 66,012
Property expenses 3,030 3,868
State and other taxes 6,163 13,669
Depreciation and amortization 51,354 48,780
--------------- ---------------
118,365 132,329
--------------- ---------------
Income Before Equity in Earnings of Joint Ventures 133,238 149,758
Equity in Earnings of Joint Ventures 88,556 94,335
--------------- ---------------
Income from Continuing Operations 221,794 244,093
--------------- ---------------
Discontinued Operations:
Income from discontinued operations -- 27,447
--------------- ---------------
Net Income $ 221,794 $ 271,540
=============== ===============
Income Per Limited Partner Unit:
Continuing Operations $ 4.44 $ 4.88
Discontinued Operations -- 0.55
--------------- ---------------
Total $ 4.44 $ 5.43
=============== ===============
Weighted Average Number of Limited Partner
Units Outstanding 50,000 50,000
=============== ===============
See accompanying notes to condensed financial statements.
CNL INCOME FUND II, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF PARTNERS' CAPITAL
Quarter Ended Year Ended
March 31, December 31,
2003 2002
----------------- ------------------
General partners:
Beginning balance $ 405,788 $ 405,788
Net income -- --
----------------- ------------------
405,788 405,788
----------------- ------------------
Limited partners:
Beginning balance 10,642,841 13,089,704
Net income 221,794 678,046
Distributions ($6.69 and $62.50 per
limited partner unit, respectively) (334,380 ) (3,124,909 )
----------------- ------------------
10,530,255 10,642,841
----------------- ------------------
Total partners' capital $ 10,936,043 $ 11,048,629
================= ==================
See accompanying notes to condensed financial statements.
CNL INCOME FUND II, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF CASH FLOWS
Quarter Ended
March 31,
2003 2002
--------------- --------------
Increase (Decrease) in Cash and Cash Equivalents
Net Cash Provided by Operating Activities $ 351,300 $ 347,974
--------------- --------------
Cash Flows from Investing Activities:
Insurance proceeds for casualty loss on building -- 138,802
--------------- --------------
Net cash provided by investing activities -- 138,802
--------------- --------------
Cash Flows from Financing Activities:
Distributions to limited partners (834,380 ) (423,496 )
--------------- --------------
Net cash used in financing activities (834,380 ) (423,496 )
--------------- --------------
Net Increase (Decrease) in Cash and Cash Equivalents (483,080 ) 63,280
Cash and Cash Equivalents at Beginning of Quarter 1,193,910 559,886
--------------- --------------
Cash and Cash Equivalents at End of Quarter $ 710,830 $ 623,166
=============== ==============
Supplemental Schedule of Non-Cash Financing Activities:
Distributions declared and unpaid at end of quarter $ 334,380 $ 423,496
=============== ==============
See accompanying notes to condensed financial statements.
CNL INCOME FUND II, LTD.
(A Florida Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS
Quarters Ended March 31, 2003 and 2002
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 the general partners, necessary to a fair
statement of the results for the interim periods presented. Operating
results for the quarter ended March 31, 2003, may not be indicative of
the results that may be expected for the year ending December 31, 2003.
Amounts as of December 31, 2002, 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 II, Ltd. (the "Partnership") for the year ended December
31, 2002.
In January 2003, FASB issued FASB Interpretation No. 46 ("FIN 46"),
"Consolidation of Variable Interest Entities" to expand upon and
strengthen existing accounting guidance that addresses when a company
should include the assets, liabilities and activities of another entity
in its financial statements. To improve financial reporting by
companies involved with variable interest entities (more commonly
referred to as special-purpose entities or off-balance sheet
structures), FIN 46 requires that a variable interest entity be
consolidated by a company if that company is subject to a majority risk
of loss from the variable interest entity's activities or entitled to
receive a majority of the entity's residual returns or both. Prior to
FIN 46, a company generally included another entity in its consolidated
financial statements only if it controlled the entity through voting
interests. Consolidation of variable interest entities will provide
more complete information about the resources, obligations, risks and
opportunities of the consolidated company. The consolidation
requirements of FIN 46 apply immediately to variable interest entities
created after January 31, 2003, and to older entities, in the first
fiscal year or interim period beginning after June 15, 2003. The
general partners believe adoption of this standard may result in either
consolidation or additional disclosure requirements with respect to the
Partnership's unconsolidated joint ventures or properties held with
affiliates of the general partners as tenants-in-common, which are
currently accounted for under the equity method. However, such
consolidation is not expected to significantly impact the Partnership's
results of operations.
2. Reclassification:
----------------
Certain items in the prior year's financial statements have been
reclassified to conform to 2003 presentation. These reclassifications
had no effect on total partners' capital or net income.
3. Concentration of Credit Risk:
----------------------------
The following schedule presents total rental revenues from individual
lessees, each representing more than ten percent of rental revenues
(including the Partnership's share of rental revenues from the joint
ventures and the properties held as tenants-in-common with affiliates
of the general partners), for each of the years ended December 31:
2003 2002
------------- ------------
Wend Vail Partnership, Ltd. $ 37,500 N/A
Golden Corral Corporation N/A $ 83,424
CNL INCOME FUND II, LTD.
(A Florida Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS
Quarters Ended March 31, 2003 and 2002
3. Concentration of Credit Risk - Continued:
----------------------------------------
In addition, the following schedule presents total rental revenues from
individual restaurant chains, each representing more than ten percent
of rental revenues (including the Partnership's share of rental
revenues from the joint ventures and the properties held as
tenants-in-common with affiliates of the general partners), for each of
the quarters ended March 31:
2003 2002
------------- ------------
Wendy's Old Fashioned
Hamburger Restaurants $ 53,298 $ 53,298
Golden Corral Family
Steakhouse Restaurants 39,835 83,424
The information denoted by N/A indicates that for each period
presented, the tenant did not represent more than ten percent of the
Partnership's total rental revenues.
Although the Partnership's properties have some geographical diversity
in the United States and the Partnership's lessees operate a variety of
restaurant concepts, default by any 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.
4. Commitments and Contingencies:
-----------------------------
Underground petroleum contamination was discovered in 2000 relating to
a property in Ocala, Florida. The Partnership applied to and qualified
for assistance from a state funded clean-up program. Under this
program, the Partnership is responsible for 25% of the actual clean-up
costs and is receiving assistance for the remaining 75% of the costs.
The Partnership anticipated that future clean-up costs would be
approximately $300,000 and accrued in 2000, as a liability, the $75,000
of the estimated clean-up costs. The project is expected to be
completed in five phases. During the year ended December 31, 2002,
phase one of the clean-up work commenced at the site and payment of the
first installment was made. The work for this phase was finalized, and
the Department of Environmental Protection approved the conclusions.
During the first quarter of 2003, phase two of the clean-up work
commenced.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
CNL Income Fund II, Ltd. (the "Partnership") is a Florida limited
partnership that was organized on November 13, 1986 to acquire for cash, either
directly or through joint venture arrangements, both newly constructed and
existing restaurant properties, as well as land upon which restaurants were to
be constructed, 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. The Partnership owned
17 and 22 Properties directly as of March 31, 2003 and 2002, respectively. The
Partnership also owned nine Properties indirectly through joint venture or
tenancy in common arrangements as of March 31, 2003 and 2002.
Capital Resources
Cash from operating activities was $351,300 and $347,974 for the
quarters ended March 31, 2003 and 2002, respectively. The increase in cash from
operating activities for the quarter ended March 31, 2003, as compared to the
quarter ended March 31, 2002, was a result of changes in the Partnership's
working capital.
Cash and cash equivalents of the Partnership decreased to $710,830 at
March 31, 2003, from $1,193,910 at December 31, 2002 primarily as a result of
the Partnership paying a special distribution to the limited partners during the
quarter ended March 31, 2003, which was declared at December 31, 2002, of sales
proceeds that were held at December 31, 2002. The funds remaining at March 31,
2003 will be used to pay distributions and other liabilities of the Partnership.
Short-Term Liquidity
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 generate net cash flow in
excess of operating expenses.
The Partnership's short-term liquidity requirements consist primarily
of the operating expenses of the Partnership.
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.
The Partnership generally distributes cash from operations remaining
after the payment of operating expenses of the Partnership, to the extent that
the general partners determine that such funds are available for distribution.
Based on current and anticipated future cash from operations, and for the
quarter ended March 31, 2002, insurance proceeds, relating to the 2002 loss due
to fire, received in March 2002, the Partnership declared distributions to
limited partners of $334,380 and $423,496 for the quarters ended March 31, 2003
and 2002, respectively. This represents distributions of $6.69 and $8.47 per
unit, respectively. As a result of the sales of Properties in 2002, the
Partnership's total revenues have declined and are expected to remain reduced in
subsequent periods, while the majority of the Partnership's operating expenses
have remained and are expected to remain fixed. Due to the sales of Properties
mentioned above, and due to current and anticipated cash from operations,
distributions of net cash flow have been adjusted during the quarters ended
September 30 and December 31, 2002. No distributions were made to the general
partners for the quarters ended March 31, 2003 and 2002. No amounts distributed
to the limited partners for the quarters ended March 31, 2003 and 2002 are
required to be or have been treated by the Partnership as a return of capital
for purposes of calculating the limited partners' return on their adjusted
capital contributions. The Partnership intends to continue to make distributions
of cash available for distribution to the limited partners on a quarterly basis.
Total liabilities of the Partnership, including distributions payable,
decreased to $729,750 at March 31, 2003 from $1,193,965 at December 31, 2002,
primarily as a result of the Partnership paying a special distribution to the
limited partners that had been declared at December 31, 2002. Total liabilities
at March 31, 2003, to the extent they exceed cash and cash equivalents, will be
paid from anticipated future cash from operations, or in the event the general
partners elect to make additional capital contributions or loans, from the
future general partners' capital contributions or loans.
Underground petroleum contamination was discovered in 2000 relating to
a Property in Ocala, Florida. The Partnership applied to and qualified for
assistance from a state funded clean-up program. Under this program, the
Partnership is responsible for 25% of the actual clean-up costs and is receiving
assistance for the remaining 75% of the costs. The Partnership anticipated that
future clean-up costs would be approximately $300,000 and accrued in 2000, as a
liability, the $75,000 of the estimated clean-up costs. The project is expected
to be completed in five phases. During the year ended December 31, 2002, phase
one of the clean-up work commenced at the site and payment of the first
installment was made. The work for this phase was finalized, and the Department
of Environmental Protection approved the conclusions. During the first quarter
of 2003, phase two of the clean-up work commenced.
Long-Term Liquidity
The Partnership has no long-term debt or other long-term liquidity
requirements.
Results of Operations
Total rental revenues were $248,484 for the quarter ended March 31,
2003 as compared to $270,120 in the same period in 2002. The decrease in rental
revenues during the quarter ended March 31, 2003 was primarily due to the 2002
sale of the Property in San Antonio, Texas. Rental revenues earned from wholly
owned Properties are expected to remain at reduced amounts as a result of the
Partnership distributing net sales proceeds relating to this Property to the
limited partners during 2002.
During the quarters ended March 31, 2003 and 2002, the Partnership also
earned $2,256 and $10,299, respectively, in contingent rental revenues. The
decrease during the quarter ended March 31, 2003, was primarily attributable to
the Partnership recognizing percentage rental income when the tenants met the
defined thresholds under their lease agreements.
During the quarters ended March 31, 2003 and 2002, the Partnership
earned $88,556 and $94,335, respectively, attributable to net income earned by
joint ventures. The decrease in net income earned by joint ventures during the
quarter ended March 31, 2003 was primarily due to the fact that, Houlihan's
Restaurant, Inc., which leases the Property owned by Show Low Joint Venture, in
which the Partnership owns an approximate 64% interest, was experiencing
financial difficulties and in January 2002, filed for bankruptcy and rejected
the lease relating to this Property. The joint venture will not recognize any
rental revenues from this Property until the Property is re-leased. The joint
venture is currently seeking a replacement tenant. The lost revenues resulting
from the vacant Property will continue to have an adverse effect on the equity
in earnings of joint ventures, if the joint venture is not able to re-lease or
sell the Property.
During the quarter ended March 31, 2003, one of the Partnership's
lessees, Wend Vail Partnership, Ltd., 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 Properties owned with
affiliates of the general partners as tenants-in-common). It is anticipated that
based on the minimum annual rental payments required by the leases, this lessee
will continue to contribute more than ten percent of the Partnership's total
rental revenues. In addition, during the quarter ended March 31, 2003, two
restaurant chains, Wendy's and Golden Corral, each accounted for more than 10%
of the Partnership's total rental revenues (including the Partnership's share of
the rental revenues from Properties owned by joint ventures and Properties owned
with affiliates of the general partners as tenants-in-common). It is anticipated
that these two restaurant chains each will continue to account for more than 10%
of the total rental revenues to which the Partnership is entitled under the
terms of its leases. A failure of this lessee or two restaurant chains could
materially affect the Partnership's revenues if the Partnership is not able to
re-lease the Properties in a timely manner.
Operating expenses, including depreciation and amortization, were
$118,365 and $132,329 for the quarters ended March 31, 2003 and 2002,
respectively. The decrease in operating expenses during the quarter ended March
31, 2003, as compared to the same period in 2002, was partially due to a
decrease in the costs incurred for administrative expenses for servicing the
Partnership and its Properties and a decrease in the amount of state tax expense
relating to several states in which the Partnership conducts business.
During the year ended December 31, 2002, the Partnership identified and
sold four Properties which were classified as discontinued Operations in the
accompanying financial statements. The Partnership recognized net rental income
(rental revenues less Property related expenses) of $27,447 during the quarter
ended March 31, 2002 relating to the Properties in Casper and Rock Springs,
Wyoming; Pineville, Louisiana and Tomball, Texas. No such amounts were
recognized in the quarter ended March 31, 2003 since all Properties were sold in
2002.
In January 2003, FASB issued FASB Interpretation No. 46 ("FIN 46"),
"Consolidation of Variable Interest Entities" to expand upon and strengthen
existing accounting guidance that addresses when a company should include the
assets, liabilities and activities of another entity in its financial
statements. To improve financial reporting by companies involved with variable
interest entities (more commonly referred to as special-purpose entities or
off-balance sheet structures), FIN 46 requires that a variable interest entity
be consolidated by a company if that company is subject to a majority risk of
loss from the variable interest entity's activities or entitled to receive a
majority of the entity's residual returns or both. Prior to FIN 46, a company
generally included another entity in its consolidated financial statements only
if it controlled the entity through voting interests. Consolidation of variable
interest entities will provide more complete information about the resources,
obligations, risks and opportunities of the consolidated company. The
consolidation requirements of FIN 46 apply immediately to variable interest
entities created after January 31, 2003, and to older entities, in the first
fiscal year or interim period beginning after June 15, 2003. The general
partners believe adoption of this standard may result in either consolidation or
additional disclosure requirements with respect to the Partnership's
unconsolidated joint ventures or properties held with affiliates of the general
partners as tenants-in-common, which are currently accounted for under the
equity method. However, such consolidation is not expected to significantly
impact the Partnership's results of operations.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 4. CONTROLS AND PROCEDURES
The general partners maintain a set of disclosure controls and
procedures designed to ensure that information required to be disclosed in the
Partnership's filings under the Securities Exchange Act of 1934 is recorded,
processed, summarized and reported within the time periods specified in the
Securities and Exchange Commission's rules and forms. The principal executive
and financial officers of the corporate general partner have evaluated the
Partnership's disclosure controls and procedures within 90 days prior to the
filing of this Quarterly Report on Form 10-Q and have determined that such
disclosure controls and procedures are effective.
Subsequent to the above evaluation, there were no significant changes
in internal controls or other factors that could significantly affect these
controls, including any corrective actions with regard to significant
deficiencies and material weaknesses.
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 II, Ltd. (Included as Exhibit 3.1 to Amendment
No. 1 to Registration Statement No. 33-10351 on
Form S-11 and incorporated herein by reference.)
3.2 Amended and Restated Agreement and Certificate of
Limited Partnership of CNL Income Fund II, Ltd.
(Included as Exhibit 3.2 to Form 10-K filed with
the Securities and Exchange Commission on April 2,
1993, and incorporated herein by reference.)
4.1 Certificate of Limited Partnership of CNL Income
Fund II, Ltd. (Included as Exhibit 4.1 to Amendment
No. 1 to Registration Statement No. 33-10351 on
Form S-11 and incorporated herein by reference.)
4.2 Amended and Restated Agreement and Certificate of
Limited Partnership of CNL Income Fund II, Ltd.
(Included as Exhibit 3.2 to Form 10-K filed with
the Securities and Exchange Commission on April 2,
1993, 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 April 2, 1993, 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 April 1, 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 13,
2001, and incorporated herein be reference.)
10.5 Assignment of Management Agreement from CNL APF
Partners, LP to CNL Restaurants XVIII, Inc.
(Included as Exhibit 10.5 to Form 10-Q filed with
the Securities and Exchange Commission on August
14, 2002, and incorporated herein by reference.)
99.1 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. (Filed herewith.)
99.2 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. (Filed herewith.)
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the
quarter ended March 31, 2003.
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 9th day of May, 2003.
CNL INCOME FUND II, 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 RULE 13a-14 AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, James M. Seneff, Jr., the Chief Executive Officer of CNL Realty
Corporation, the corporate general partner of CNL Income Fund II, Ltd. (the
"registrant"), certify that:
1. I have reviewed this quarterly report on Form 10-Q of the
registrant;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect
to the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented
in this quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
and we have:
a. designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b. evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "Evaluation
Date"); and
c. presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures
based on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed,
based on our most recent evaluation, to the registrant's auditors
and the audit committee of registrant's board of directors (or
persons performing the equivalent function):
a. all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and
report financial data and have identified for the
registrant's auditors any material weaknesses in internal
controls; and
b. any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officer and I have indicated in
this quarterly report whether or not there were significant changes
in internal controls or in other factors that could significantly
affect internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
Date: May 9, 2003
/s/ James M. Seneff, Jr.
- ---------------------------
James M. Seneff, Jr.
Chief Executive Officer
CERTIFICATION OF CHIEF FINANCIAL OFFICER
OF CORPORATE GENERAL PARTNER
PURSUANT TO RULE 13a-14 AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Robert A. Bourne, President and Treasurer of CNL Realty Corporation,
the corporate general partner of CNL Income Fund II, Ltd. (the "registrant")
certify that:
1. I have reviewed this quarterly report on Form 10-Q of the
registrant;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect
to the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented
in this quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
and we have:
a. designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b. evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "Evaluation
Date"); and
c. presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures
based on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed,
based on our most recent evaluation, to the registrant's auditors
and the audit committee of registrant's board of directors (or
persons performing the equivalent function):
a. all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and
report financial data and have identified for the
registrant's auditors any material weaknesses in internal
controls; and
b. any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officer and I have indicated in
this quarterly report whether or not there were significant changes
in internal controls or in other factors that could significantly
affect internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
Date: May 9, 2003
/s/ Robert A. Bourne
- -----------------------
Robert A. Bourne
President and Treasurer
EXHIBIT INDEX
Exhibit Number
(c) Exhibits
3.1 Certificate of Limited Partnership of CNL Income Fund II,
Ltd. (Included as Exhibit 3.1 to Amendment No. 1 to
Registration Statement No. 33-10351 on Form S-11 and
incorporated herein by reference.)
3.2 Amended and Restated Agreement and Certificate of Limited
Partnership of CNL Income Fund II, Ltd. (Included as
Exhibit 3.2 to Form 10-K filed with the Securities and
Exchange Commission on April 2, 1993, and incorporated
herein by reference.)
4.1 Certificate of Limited Partnership of CNL Income Fund II,
Ltd. (Included as Exhibit 4.1 to Amendment No. 1 to
Registration Statement No. 33-10351 on Form S-11 and
incorporated herein by reference.)
4.2 Amended and Restated Agreement and Certificate of Limited
Partnership of CNL Income Fund II, Ltd. (Included as
Exhibit 3.2 to Form 10-K filed with the Securities and
Exchange Commission on April 2, 1993, 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 April 2, 1993, 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 April 1, 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 13, 2001, and incorporated herein be
reference.)
10.5 Assignment of Management Agreement from CNL APF Partners,
LP to CNL Restaurants XVIII, Inc. (Included as Exhibit
10.5 to Form 10-Q filed with the Securities and Exchange
Commission on August 14, 2002, and incorporated herein by
reference.)
99.1 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. (Filed herewith.)
99.2 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. (Filed herewith.)
EXHIBIT 99.1
EXHIBIT 99.2