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
0-19144
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CNL Income Fund VI, Ltd.
- -----------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Florida 59-2922954
- ---------------------------------- -----------------------------
(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 VI, LTD.
(A Florida Limited Partnership)
CONDENSED BALANCE SHEETS
June 30, December 31,
2002 2001
------------------ -------------------
ASSETS
Land and buildings on operating leases, net $ 15,832,620 $ 16,023,866
Net investment in direct financing leases 2,371,042 2,399,329
Investment in joint ventures 8,575,348 8,387,142
Cash and cash equivalents 773,763 1,126,921
Receivables, less allowance for doubtful accounts
of $142,767 and $150,802, respectively 33,444 124,865
Due from related parties -- 15,981
Accrued rental income, less allowance for doubtful
accounts of $47,718, in 2002 and 2001 625,992 590,190
Other assets 53,244 40,760
------------------ -------------------
$ 28,265,453 $ 28,709,054
================== ===================
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 17,922 $ 16,859
Real estate taxes payable 6,374 13,119
Due to related parties 22,745 11,507
Distributions payable 787,500 787,500
Rents paid in advance and deposits 6,743 37,389
------------------ -------------------
Total liabilities 841,284 866,374
Minority interest 138,777 137,143
Partners' capital 27,285,392 27,705,537
------------------ -------------------
$ 28,265,453 $ 28,709,054
================== ===================
See accompanying notes to condensed financial statements.
CNL INCOME FUND VI, 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 $ 514,447 $ 519,288 $ 1,054,370 $ 1,019,603
Earned income from direct financing leases 72,589 34,506 145,591 96,942
Interest and other income 5,258 11,106 9,051 73,639
-------------- --------------- -------------- ---------------
592,294 564,900 1,209,012 1,190,184
-------------- --------------- -------------- ---------------
Expenses:
General operating and administrative 61,050 76,652 137,166 206,780
Property expenses 18,637 57,427 23,831 74,421
State and other taxes 173 4,434 28,636 45,398
Depreciation and amortization 96,036 92,832 192,072 186,274
Provision for write-down of assets -- 263,344 -- 263,344
-------------- --------------- -------------- ---------------
175,896 494,689 381,705 776,217
-------------- --------------- -------------- ---------------
Income Before Loss on Sale of Assets, Minority
Interest in Income of Consolidated Joint Venture
and Equity in Earnings of Unconsolidated Joint
Ventures 416,398 70,211 827,307 413,967
Loss on sale of assets -- (14,008 ) -- (14,008 )
Minority Interest in Income of Consolidated
Joint Venture (6,566 ) (5,721 ) (12,879 ) (12,394 )
Equity in Earnings of Unconsolidated Joint Ventures 170,708 329,036 340,427 515,292
-------------- --------------- -------------- ---------------
Net Income $ 580,540 $ 379,518 $ 1,154,855 $ 902,857
============== =============== ============== ===============
Net Income Per Limited Partner Unit $ 8.29 $ 5.42 $ 16.50 $ 12.90
============== =============== ============== ===============
Weighted Average Number of Limited Partner
Units Outstanding 70,000 70,000 70,000 70,000
============== =============== ============== ===============
See accompanying notes to condensed financial statements.
CNL INCOME FUND VI, 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 $ 291,598 $ 291,598
Net income -- --
--------------------- ------------------
291,598 291,598
--------------------- ------------------
Limited partners:
Beginning balance 27,413,939 28,530,802
Net income 1,154,855 2,033,137
Distributions ($22.50 and $45.00 per
limited partner unit, respectively) (1,575,000 ) (3,150,000 )
--------------------- ------------------
26,993,794 27,413,939
--------------------- ------------------
Total partners' capital $ 27,285,392 $ 27,705,537
===================== ==================
See accompanying notes to condensed financial statements.
CNL INCOME FUND VI, 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 $ 1,480,524 $ 1,474,458
-------------- ---------------
Cash Flows from Investing Activities:
Additions to land and building on operating lease -- (2,098,366 )
Investment in joint ventures (247,437 ) --
Liquidating distribution from joint venture -- 1,273,773
Proceeds from sale of assets -- 83,000
Decrease in restricted cash -- 787,787
-------------- ---------------
Net cash provided by (used in) investing activities (247,437 ) 46,194
-------------- ---------------
Cash Flows from Financing Activities:
Distributions to limited partners (1,575,000 ) (1,575,000 )
Distributions to holder of minority interest (11,245 ) --
-------------- ---------------
Net cash used in financing activities (1,586,245 ) (1,575,000 )
-------------- ---------------
Net Decrease in Cash and Cash Equivalents (353,158 ) (54,348 )
Cash and Cash Equivalents at Beginning of Period 1,126,921 868,873
-------------- ---------------
Cash and Cash Equivalents at End of Period $ 773,763 $ 814,525
============== ===============
Supplemental Schedule of Non-Cash Financing
Activities:
Distributions declared and unpaid at end of
period $ 787,500 $ 787,500
============== ===============
See accompanying notes to condensed financial statements.
CNL INCOME FUND VI, 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 VI, Ltd. (the "Partnership") for the year ended December 31, 2001.
The Partnership accounts for its approximate 66.14% interest in the
accounts of Caro Joint Venture using the consolidation method. Minority
interest represents the minority joint venture partner's proportionate
share of the equity in the Partnership's consolidated joint venture. All
significant intercompany accounts and transactions have been eliminated.
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. Reclassification:
----------------
Certain items in the prior year's financial statements have been
reclassified to conform to 2002 presentation. These reclassifications had
no effect on total partners' capital or net income.
3. Investment in Joint Ventures:
----------------------------
In June 2002, the Partnership and CNL Income Fund XI, Ltd., an affiliate of
the general partners, invested in two properties, one in Universal City,
Texas and one in Schertz, Texas, each as a separate tenancy in common
arrangement. The Partnership and CNL Income Fund XI, Ltd. acquired these
properties from CNL Funding 2001-A, LP, an affiliate of the general
partners (see Note 4). The Partnership and CNL Income Funds XI, Ltd.
entered into agreements whereby each co-tenant will share in the profits
and losses of each property in proportion to its applicable percentage
interest. As of June 30, 2002, the Partnership contributed approximately
$148,500 and $98,900 for a 14.2% and 9.5% interest, respectively, in these
properties.
CNL INCOME FUND VI, 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:
----------------------------------------
During 2002, the Partnership and CNL Income Fund XV, Ltd. entered into an
agreement with an unrelated third party to sell the Bennigan's property in
Fort Myers, Florida. The Partnership owns an 85% interest in this property.
CNL Income Fund XV, Ltd. is an affiliate of the general partners. As a
result, the tenancy in common reclassified the asset from land and building
on operating leases and net investment in direct financing leases to real
estate held for sale. The reclassified asset was recorded at the lower of
its carrying amount or fair value, less cost to sell. In addition, the
tenancy in common stopped recording depreciation and accrued rental income
once the property was identified for sale. The financial results for this
property are reflected as Discontinued Operations in the condensed
financial information presented below.
Auburn Joint Venture, Show Low Joint Venture, Asheville Joint Venture,
Melbourne Joint Venture, Warren Joint Venture, own and lease one property
to an operator of national fast-food and family-style restaurants. In
addition, the Partnership an affiliates as tenants-in-common in ten
separate tenancy in common arrangements each own and lease one property to
an operator of national fast-food and family-style restaurants. The
following presents the combined, condensed financial information for the
joint ventures and the properties held as tenants-in-common with affiliates
at:
June 30, December 31,
2002 2001
-------------- ---------------
Land and buildings on operating leases, net $15,134,234 $13,179,127
Net investment in direct financing leases 1,948,605 1,956,723
Real estate held for sale 1,520,850 1,516,369
Cash 55,130 86,895
Receivables less, allowance for doubtful
accounts 16,238 31,451
Accrued rental income 470,312 411,987
Other assets 1,032 3,412
Liabilities 32,377 1,057
Partners' capital 19,114,024 17,184,907
Quarter Ended June 30, Six Months Ended June 30,
2002 2001 2002 2001
------------ ------------- -------------- --------------
Revenues $ 384,415 $ 438,007 $ 770,929 $ 862,462
Expenses (73,229 ) (71,581 ) (155,883 ) (172,492 )
Gain on sale of assets - 158,119 - 158,119
------------ ------------- -------------- --------------
Income from continuing operations 311,186 524,545 615,046 848,089
------------ ------------- -------------- --------------
Discontinued operations:
Revenues 39,419 40,670 79,806 81,422
Expenses (55 ) (377 ) (367 ) (704 )
------------ ------------- -------------- --------------
39,364 40,293 79,439 80,718
------------ ------------- -------------- --------------
Net Income $350,550 $ 564,838 $ 694,485 $928,807
============ ============= ============== ==============
CNL INCOME FUND VI, 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:
----------------------------------------
The Partnership recognized income of $340,427 and $515,292 during the six
months ended June 30, 2002 and 2001, respectively, from these joint
ventures and properties held as tenants-in-common with affiliates, of which
$170,708 and $329,036 were earned during the quarters ended June 30, 2002
and 2001, respectively.
4. Related Party Transactions:
--------------------------
In June 2002, the Partnership and CNL Income Fund XI, Ltd. acquired a
property in Universal City, Texas and one in Schertz, Texas, each as a
separate tenancy-in-common arrangement. The Partnership and CNL Income Fund
XI, Ltd. acquired these properties from CNL Funding 2001-A, LP, for a total
purchase price of approximately $2,087,200 (see Note 3). CNL Funding
2001-A, LP is an affiliate of the general partners. CNL Funding 2001-A, LP
had purchased and temporarily held title to the properties in order to
facilitate the acquisition of the properties by the Partnership. The
purchase price paid by the Partnership and CNL Income Fund XI, Ltd.
represented the costs incurred by CNL Funding 2001-A, LP to acquire and
carry the properties, including closing costs.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
CNL Income Fund VI, Ltd. (the "Partnership") is a Florida limited
partnership that was organized on August 17, 1988 to acquire for cash, either
directly or through joint venture arrangements, both newly constructed and
existing restaurant properties, as well as land upon which restaurants were to
be constructed (the "Properties"), which are leased primarily to operators of
selected national and regional fast-food and family-style restaurant chains
(collectively, the "Properties"). The leases are triple-net leases, with the
lessees generally responsible for all repairs and maintenance, property taxes,
insurance, and utilities. As of June 30, 2001, the Partnership owned 24
Properties directly and 14 Properties indirectly through joint venture or
tenancy in common arrangements. As of June 30, 2002, the Partnership owned 25
Properties directly and 15 Properties indirectly through joint venture or
tenancy in common arrangements.
Capital Resources
The Partnership's primary source of capital for the six months ended
June 30, 2002 and 2001 was 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). Cash from operating activities
was $1,480,524 and $1,474,458 for the six months ended June 30, 2002 and 2001,
respectively. The increase in cash from operating activities for the six months
ended June 30, 2002 was primarily a result of changes in the Partnership's
working capital.
Other sources and uses of capital included the following during the six
months ended June 30, 2002 and 2001.
In June 2002, the Partnership reinvested a portion of the net sales
proceeds from the 2001 sales of the Properties in Round Rock, Texas and
Cheyenne, Wyoming in a Property in Universal City, Texas and a Property in
Schertz, Texas, each as a separate tenants-in-common arrangement with CNL Income
Fund XI, Ltd., a Florida limited partnership and affiliate of the general
partners. The Partnership and CNL Income Fund XI, Ltd. entered into separate
agreements for each Property, whereby each co-tenant will share in the profits
and losses of each property in proportion to its applicable percentage interest.
As of June 30, 2002, the Partnership contributed approximately $148,500 and
$98,900 for a 14.2% and 9.5% interest, in the Property in Universal City, Texas
and Schertz, Texas, respectively. The Partnership and CNL Income Fund XI, Ltd.
acquired Properties from CNL Funding 2001-A, LP, a Delaware limited partnership
and an affiliate of the general partners. CNL Funding 2001-A, LP had purchased
and temporarily held title to the Properties in order to facilitate the
acquisition of the Properties by the Partnership and CNL Income Fund XI, Ltd.
The purchase prices paid by the Partnership and CNL Income Fund XI, Ltd.
represented the costs incurred by CNL Funding 2001-A, LP to acquire and carry
the Properties, including closing costs. 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 transactions.
Currently, rental income from the Partnership's Properties and any net
sales proceeds from the sale of Properties pending reinvestment in additional
Properties 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
$773,763 invested in such short-term investments as compared to $1,126,921 at
December 31, 2001. The decrease in cash and cash equivalents at June 30, 2002
was primarily due to the fact that in June 2002, the Partnership reinvested the
net sales proceeds from the 2001 sale of the Property in Cheyenne, Wyoming. The
funds remaining at June 30, 2002, will be used to pay distributions and other
liabilities of the Partnership.
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.
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, the Partnership
declared distributions to the limited partners of $1,575,000 for each of the six
months ended June 30, 2002 and 2001, ($787,500 for each of the quarters ended
June 30, 2002 and 2001). This represents distributions of $22.50 per unit for
each of the six months ended June 30, 2002 and 2001, ($11.25 per unit for each
applicable quarter). No distributions were made to the general partners for the
quarters and six months ended June 30, 2002 and 2001. No amounts distributed to
the limited partners for the six months ended June 30, 2002 and 2001, 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 to the limited partners on a quarterly basis.
Total liabilities of the Partnership, including distributions payable,
were $841,284 at June 30, 2002 as compared to $866,374 at December 31, 2001. The
decrease in liabilities at June 30, 2002, was primarily a result of a decrease
in rents paid in advance and deposits at June 30, 2002, as compared to December
31, 2001. Total liabilities at June 30, 2002, to the extent they exceed cash and
cash equivalents at June 30, 2002, will be paid from future cash from
operations, and in the event the general partners elect to make additional loans
or contributions, from general partners' loans or contributions.
Long-Term Liquidity
The Partnership has no long-term debt or other long-term liquidity
requirements.
Results of Operations
Total rental revenues were $1,199,961 for the six months ended June 30,
2002, as compared to $1,116,545 in the same period of 2001, of which $587,036
and $553,794 were earned during the second quarter of 2002 and 2001,
respectively. Rental revenues increased during the quarter and six months ended
June 30, 2002, as compared to the same periods of 2001, as a result of the
Partnership reinvesting a portion of the net sales proceeds from the sales of
several Properties in three additional Properties during 2001.
In addition, the increase in rental revenues during the quarter and six
months ended June 30, 2002, as compared to the same periods of 2001, was
partially due to the fact that Phoenix Restaurant Group, Inc. ("PRG"), the
tenant of two of the Partnership's Properties, experienced financial
difficulties during 2000. As a result, during the six months ended June 30,
2001, the Partnership stopped recording rental revenue relating to these two
Properties. In October 2001, PRG filed for bankruptcy and rejected one of the
two leases it had with the Partnership. In December 2001, the Partnership sold
the vacant Property, and reinvested the net sales proceeds in an additional
Property. In addition, the increase in rental revenues was partially
attributable to the fact that since the bankruptcy date, the Partnership has
received rental payments relating to the one Property not rejected by the
tenant. In May 2002, the Partnership assigned the lease relating to the one
Property not rejected by PRG to a new tenant; all lease terms remained the same.
The increase in rental revenues during the quarters and six months
ended June 30, 2002, as compared to the same periods of 2001, was partially
offset by the fact that the tenant for the Properties in El Paso, and Amarillo,
Texas exercised its lease option for a contingent rent reduction to be applied
towards Property renovations. In addition, the increase in rental revenues
during the quarters and six months ended June 30, 2002, was partially offset by
a decrease in gross sales of certain restaurant Properties with leases requiring
the payment of contingent rental income.
During the six months ended June 30, 2002 and 2001, the Partnership
earned $340,427 and $515,292, respectively, attributable to net income earned by
joint ventures, of which $170,708 and $329,036 was earned during the quarters
ended June 30, 2002 and 2001, respectively. The decrease 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 partially due to the fact that in June
2001, the Partnership and CNL Income Fund IX, Ltd., as tenants-in-common, sold
the Property in Dublin, California, in which the Partnership owned a 75%
interest. In connection with this sale, the tenancy in common recognized a gain
of approximately $158,000 during the quarter and six months ended June 30, 2001.
In addition, the decrease in net income earned by joint ventures during the
quarter and six months ended June 30, 2002, was partially due to the fact that
in October 2001, the Partnership and CNL Income Fund XI, Ltd., as
tenants-in-common, sold the Property in Round Rock, Texas, in which the
Partnership owned a 77% interest. Each tenancy in common distributed to the
Partnership its pro-rata share of the net sales proceeds from the respective
sales as a liquidating distribution. The decrease in net income earned by joint
ventures was partially offset by the fact that in July 2001, the Partnership
reinvested a portion of these liquidating distributions in an additional
Property, as tenants-in-common with CNL Income Fund IX, Ltd. and CNL Income Fund
XVII, Ltd. The decrease in net income earned by joint ventures was also
partially offset by the fact that in June 2002, the Partnership reinvested a
portion of the net sales proceeds from 2001 sale of two Properties in two
additional Properties, each as tenants-in-common with CNL Income Fund XI, Ltd.,
as described above in "Capital Resources." Each of the CNL Income Funds is a
Florida limited partnership and an affiliate of the general partners.
The decrease in net income earned by joint ventures during the quarter
and six months ended June 30, 2002, was also partially due to the fact that in
January 2002, Houlihan's Restaurant, Inc., which leased the Property owned by
Show Low Joint Venture, filed for bankruptcy and rejected the lease relating to
this Property. As a result, the joint venture, in which the Partnership owns a
36% interest, stopped recording rental income relating to this Property. The
joint venture will not recognize any rental revenues from this Property until
the Property is re-leased or the Property is sold and the proceeds are
reinvested in an additional Property. The joint venture is currently seeking a
replacement tenant for this Property. The lost revenues resulting from the
vacant Property will 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 in a
timely manner.
In June 2002, the Partnership and CNL Income Fund XV, Ltd. a Florida
limited partnership and affiliate of the general partners, entered into an
agreement with an unrelated third party to sell the Bennigan's Property in Fort
Myers, Florida, as described below.
During the six months ended June 30, 2002 and 2001, the Partnership
also earned $9,051 and $73,639, respectively, in interest and other income, of
which $5,258 and $11,106 was earned during the quarters ended June 30, 2002 and
2001, respectively. Interest and other income were higher during the six months
ended June 30, 2001, as compared to the same period of 2002, primarily due to
higher average cash balances during the six months ended June 30, 2001, and due
to the Partnership holding net sales proceeds received from the 2000 sales of
several Properties until such proceeds were reinvested in additional Properties.
Operating expenses, including depreciation and amortization expense,
and provision for write-down of assets were $381,705 and $776,217 for the six
months ended June 30, 2002 and 2001, respectively, of which $175,896 and
$494,689 were 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
partially attributable to a decrease in state tax expense and 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, as compared to the same periods of 2002, as the Partnership
recorded provisions for write-down of assets of $263,344 relating to the
Property leased by PRG. The provision represented the difference between the
Property's carrying value and its fair value. In December 2001, the Partnership
sold the Property.
In addition, the decrease in operating expenses during the quarter and
six months ended June 30, 2002, was partially due to the fact that during 2002
and 2001, the Partnership incurred certain Property related expenses, such as
legal fees, repairs and maintenance, insurance and real estate taxes relating to
vacant PRG Properties. In December 2001 the Partnership sold one of its two
vacant Properties and in May 2002 the Partnership assigned the lease relating to
the remaining vacant Property to a new tenant. The Partnership did not incur any
additional expenses relating to these Properties after the sale of the Property
and the assignment of the lease had occurred.
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.
As a result of the sale of the Property in Chester, Pennsylvania, the
Partnership recognized a loss of $14,008 during the quarter and six months ended
June 30, 2001.
In June 2002, the Partnership and CNL Income Fund XV, Ltd. entered into
an agreement with an unrelated third party to sell the Bennigan's Property in
Fort Myers, Florida. The Partnership owns an 85% interest in this Property. The
Partnership expects to use the proceeds from the sale to reinvest in an
additional Property. In accordance with Statement of Financial Accounting
Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived
Assets," the tenancy in common reclassified this asset from land and building on
operating leases and net investment in direct financing leases to real estate
held for sale. The tenancy in common recorded the reclassified asset at the
lower of its carrying amount or fair value, less cost to sell. In addition,
during the six months ended June 30, 2002, the tenancy in common stopped
recording accrued rental income once the Property was identified for sale. The
tenancy in common recognized net rental income (rental revenues less Property
related expenses) of $79,439 and $80,718 during the six months ended June 30,
2002 and 2001, respectively, of which $39,364 and $40,293 was earned during the
quarters ended June 30, 2002 and 2001, respectively. The Partnership's pro-rata
share of these amounts are included in equity in earnings of unconsolidated
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 VI, Ltd. (Included as Exhibit 3.3 to
Registration Statement No. 33-23892 on Form S-11
and incorporated herein by reference.)
4.1 Certificate of Limited Partnership of CNL Income
Fund VI, Ltd. (Included as Exhibit 4.2 to
Registration Statement No. 33-23892 on Form S-11
and incorporated herein by reference.)
4.2 Agreement and Certificate of Limited Partnership
of CNL Income Fund VI, Ltd. (Included as Exhibit
4.2 to Form 10-K filed with the Securities and
Exchange Commission on April 1, 1996, and
incorporated herein by reference.)
10.1 Management Agreement (Included as Exhibit 10.1 to
Form 10-K filed with the Securities and Exchange
Commission on March 31, 1994, 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.)
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 Exchange Commission on August 9, 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 6th day of August, 2002.
CNL INCOME FUND VI, 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 VI, 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 6, 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 VI, 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 6, 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 VI,
Ltd. (Included as Exhibit 3.3 to Registration Statement No.
33-23892 on Form S-11 and incorporated herein by reference.)
4.1 Certificate of Limited Partnership of CNL Income Fund VI,
Ltd. (Included as Exhibit 4.2 to Registration Statement No.
33-23892 on Form S-11 and incorporated herein by reference.)
4.2 Agreement and Certificate of Limited Partnership of CNL
Income Fund VI, Ltd. (Included as Exhibit 4.2 to Form 10-K
filed with the Securities and Exchange Commission on April
1, 1996, and incorporated herein by reference.)
10.1 Management Agreement (Included as Exhibit 10.1 to Form 10-K
filed with the Securities and Exchange Commission on March
31, 1994, 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.)
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 Exchange Commission on
August 9, 2001, and incorporated herein by reference).
10.5 Assignment of Management Agreement from CNL APF Partners, LP
to CNL Restaurants XVIII, Inc. (Filed herewith.)