UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
(Mark One)
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 2002
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
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 Identification No.)
incorporation or organization)
450 South Orange Avenue
Orlando, Florida 32801
(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code: (407) 540-2000
Securities registered pursuant to Section 12 (b) of the Act:
Title of each class: Name of exchange on which registered:
None Not Applicable
Securities registered pursuant to Section 12(g) of the Act:
Units of limited partnership interest ($500 per Unit)
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days: Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [x]
Indicate by check mark whether the registrant is an accelerated filer
(as defined in Exchange Act Rule 12b-2): Yes___ No X
Aggregate market value of the voting stock held by nonaffiliates of the
registrant: The registrant registered an offering of 70,000 units of limited
partnership interest (the "Units") on Form S-11 under the Securities Act of
1933, as amended. Since no established market for such Units exists, there is no
market value for such Units. Each Unit was originally sold at $500 per Unit.
DOCUMENTS INCORPORATED BY REFERENCE:
None
PART I
Item 1. Business
CNL Income Fund VI, Ltd. (the "Registrant" or the "Partnership") is a
limited partnership which was organized pursuant to the laws of the State of
Florida on August 17, 1988. The general partners of the Partnership are Robert
A. Bourne, James M. Seneff, Jr. and CNL Realty Corporation, a Florida
corporation (the "General Partners"). Beginning on June 8, 1989, the Partnership
offered for sale up to $35,000,000 in limited partnership interests (the
"Units") (70,000 Units at $500 per Unit) pursuant to a registration statement on
Form S-11 under the Securities Act of 1933, as amended, effective December 16,
1988. The offering terminated on January 22, 1990, at which date the maximum
offering proceeds of $35,000,000 had been received from investors who were
admitted to the Partnership as limited partners (the "Limited Partners").
The Partnership was organized to acquire both newly constructed and
existing restaurant properties, as well as properties upon which restaurants
were to be constructed (the "Properties"), which are leased primarily to
operators of selected national and regional fast-food and family-style
restaurant chains (the "Restaurant Chains"). Net proceeds to the Partnership
from its offering of Units, after deduction of organizational and offering
expenses, totaled $30,975,000, and were used to acquire 42 Properties, including
interests in four Properties owned by joint ventures in which the Partnership is
a co-venturer.
As of December 31, 1999, the Partnership owned 27 Properties directly
and 14 Properties indirectly through joint venture and tenancy in common
arrangements. In 2000, the Partnership reinvested a portion of the net sales
proceeds from the 1999 sales of several Properties in a Property in Niles,
Illinois, as tenants-in-common with an affiliate of the General Partners. During
2000, the Partnership sold four of its Popeye's Properties all located in
Florida. In 2001, the Partnership reinvested the net sales proceeds from the
2000 sale of the four Properties in Florida in a Property in Burley, Idaho and a
Property in Cleburne, Texas. During 2001, the Partnership sold its Properties in
Chester, Pennsylvania and Cheyenne, Wyoming and the Properties in Dublin,
California and Round Rock, Texas, each of which was held with an affiliate of
the General Partners as tenants-in-common. The Partnership reinvested the
majority of the sales proceeds from the sales of the Properties in Chester,
Pennsylvania, Dublin, California and Round Rock, Texas in a Property in Houston,
Texas and a Property in Waldorf, Maryland with CNL Income Fund IX, Ltd. and CNL
Income Fund XVII, Ltd., each of which is a Florida limited partnership and an
affiliate of the General Partners. During 2002, reinvested the remaining sales
proceeds from the 2001 sales of several Properties in two Properties, one in
Universal City, Texas and one in Schertz, Texas, each as a separate tenancy in
common arrangement with CNL Income Fund XI, Ltd., a Florida limited partnership
and an affiliate of the General Partners. During 2002, Caro Joint Venture, in
which the Partnership owned a 66.14%, sold its Property in Caro, Michigan. As of
December 31, 2002, the Partnership owned 24 Properties directly and 15
Properties indirectly through joint venture and tenancy in common arrangements.
Generally, the Properties are leased on a triple-net basis with the lessees
responsible for all repairs and maintenance, property taxes, insurance and
utilities.
The Partnership holds its Properties until the General Partners
determine that the sale or other disposition of the Properties is advantageous
in view of the Partnership's investment objectives. In deciding whether to sell
Properties, the General Partners consider factors such as potential capital
appreciation, net cash flow and federal income tax considerations. Certain
lessees also have been granted options to purchase Properties, generally at the
Property's then fair market value after a specified portion of the lease term
has elapsed. The Partnership has no obligation to sell all or any portion of a
Property at any particular time, except as may be required under property or
joint venture purchase options granted to certain lessees.
Leases
Although there are variations in the specific terms of the leases, the
following is a summarized description of the general structure of the
Partnership's leases. The leases of the Properties owned by the Partnership, the
joint ventures in which the Partnership is a co-venturer and the Properties
owned with affiliates as tenants-in-common provide for initial terms, ranging
from 10 to 20 years (the average being 17 years), and expire between 2004 and
2020. The leases generally are on a triple-net basis, with the lessees
responsible for all repairs and maintenance, property taxes, insurance and
utilities. The leases of the Properties provide for minimum base annual rental
payments (payable in monthly installments) ranging from approximately $39,500 to
$246,400. Generally, the leases provide for percentage rent based on sales in
excess of a specified amount. In addition, some of the leases provide that,
commencing in the fourth to sixth lease year, the percentage rent will be an
amount equal to the greater of the percentage rent calculated under the lease
formula or a specified percentage (ranging from one to five percent) of the
purchase price or gross sales.
Generally, the leases of the Properties provide for two to four
five-year renewal options subject to the same terms and conditions as the
initial lease. Lessees of 30 of the Partnership's 39 Properties also have been
granted options to purchase Properties at the Property's then fair market value,
or pursuant to a formula based on the original purchase price of the Property,
after a specified portion of the lease term has elapsed. Fair market value will
be determined through an appraisal by an independent appraisal firm.
The leases generally provide that, in the event the Partnership wishes
to sell the Property subject to that lease, the Partnership first must offer the
lessee the right to purchase the Property on the same terms and conditions, and
for the same price, as any offer which the Partnership has received for the sale
of the Property.
In January 2002, Houlihan's Restaurant, Inc., the tenant of the
Property owned by Show Low Joint Venture, filed for bankruptcy and rejected the
lease relating to the Property in Greensboro, North Carolina. The lost revenues
resulting from the rejection of this lease will have an adverse effect on the
results of operations of the joint venture if the joint venture is unable to
re-lease the Property in a timely manner. The joint venture is currently seeking
a new tenant for this Property.
In July 2002, Loco Lupe's of Hermitage, Inc., a tenant of one of the
Partnership's Properties, filed for bankruptcy. As of March 10, 2003, the
Partnership has continued receiving rental payments relating to this lease.
While the tenant has neither rejected nor affirmed the one lease it has with the
Partnership, there can be no assurance that the lease will not be rejected in
the future. The lost revenues that would result if the tenant rejects this lease
will have an adverse effect on the results of operations of the Partnership if
the Partnership is unable to re-lease the Property in a timely manner.
During 2002, the Partnership reinvested a portion of the net sales
proceeds from the 2001 sale of several Properties in two Properties, one in
Universal City, Texas and one in Schertz, Texas, each as a separate tenancy in
common arrangement with CNL Income Fund XI, Ltd., a Florida limited partnership
and an affiliate of the General Partners. The lease terms for these Properties
are substantially the same as the Partnership's other leases. In October 2002,
the Property in Marietta, Georgia was destroyed by fire and the tenant
terminated its lease relating to this Property.
The tenant of the Property in Detroit, Michigan exercised its option to
extend the lease for an additional five years beginning in January 2003. All
other lease terms remained unchanged and are substantially the same as the
Partnership's other leases as described above.
Major Tenants
During 2002, two lessees of the Partnership and its consolidated joint
venture, Golden Corral Corporation and IHOP Properties, Inc., each contributed
more than ten percent of the Partnership's rental revenues (including rental
revenues from the Partnership's consolidated joint venture in which the
Partnership was a co-venturer prior to its dissolution, and the Partnership's
share of the rental revenues from the Properties owned by unconsolidated joint
ventures and the Properties owned with affiliates of the General Partners as
tenants-in-common). As of December 31, 2002, Golden Corral Corporation was the
lessee under leases relating to five restaurants and IHOP Properties, Inc. was
the lessee under leases relating to six restaurants. It is anticipated that,
based on the minimum rental payments required by the leases, these two lessees
each will continue to contribute more than ten percent of the Partnership's
rental revenues in 2003. In addition, two Restaurant Chains, Golden Corral
Family Steakhouse Restaurants ("Golden Corral") and IHOP, each accounted for
more than ten percent of the Partnership's rental revenues in 2002 (including
rental revenues from the Partnership's consolidated joint venture and the
Partnership's share of the rental revenues from the Properties owned by
unconsolidated joint ventures in which the Partnership is a co-venturer and the
Properties owned with affiliates of the General Partners as tenants-in-common).
In 2003, it is anticipated that these two Restaurant Chains each will continue
to account for more than ten percent of the rental revenues to which the
Partnership is entitled under the terms of the leases. Any failure of these
lessees or Restaurant Chains could materially affect the Partnership's income if
the Partnership is not able to re-lease the Properties in a timely manner. As of
December 31, 2002, no single tenant or group of affiliated tenants leased
Properties with an aggregate carrying value in excess of 20% of the total assets
of the Partnership.
Joint Venture and Tenancy in Common Arrangements
The Partnership has entered into the following joint venture and
tenancy in common arrangements as of December 31, 2002:
Entity Name Year Ownership Partners Property
Show Low Joint Venture 1987 36.00% CNL Income Fund II, Ltd. Greensboro, NC
Auburn Joint Venture 1989 3.90% CNL Income Fund IV, Ltd. Auburn, MA
Asheville Joint Venture 1991 14.46% CNL Income Fund VIII, Ltd. Asheville, NC
CNL Income Fund IV, Ltd., CNL 1996 18.00% CNL Income Fund IV, Ltd. CNL Clinton, NC
Income Fund VI, Ltd., Income Fund X, Ltd.
CNL Income Fund X, Ltd., CNL Income Fund XIV, Ltd.
and CNL Income Fund XIV,
Ltd. Tenants in Common
CNL Income Fund, Ltd., CNL 1997 23.04% CNL Income Fund, Ltd. Vancouver, WA
Income Fund II, Ltd., CNL Income Fund II, Ltd.
CNL Income Fund V, Ltd., CNL Income Fund V, Ltd.
and CNL Income Fund VI,
Ltd., Tenants in Common
CNL Income Fund II, Ltd., CNL 1998 34.74% CNL Income Fund II, Ltd. Overland Park, KS
Income Fund III, Ltd., CNL Income Fund III, Ltd.
and CNL Income Fund VI,
Ltd., Tenants in Common
CNL Income Fund II, Ltd., CNL 1998 46.20% CNL Income Fund II, Ltd. Memphis, TN
Income Fund VI, Ltd., CNL Income Fund XVI, Ltd.
and CNL Income Fund XVI,
Ltd., Tenants in Common
Melbourne Joint Venture 1998 50.00% CNL Income Fund XIV, Ltd. Melbourne, FL
CNL Income Fund VI, Ltd., and 1998 85.00% CNL Income Fund XV, Ltd. Ft. Myers, FL
CNL Income Fund XV,
Ltd., Tenants in Common
Warren Joint Venture 1998 64.29% CNL Income Fund IV, Ltd. Warren, MI
CNL Income Fund III, Ltd., 1999 80.00% CNL Income Fund III, Ltd. Baytown, TX
and CNL Income
Fund VI, Ltd., Tenants
in Common
CNL Income Fund VI, Ltd., and 2000 74.00% CNL Income Fund XIV, Ltd. Niles, IL
CNL Income Fund XIV,
Ltd., Tenants in Common
CNL Income Fund VI, Ltd., CNL 2001 60.00% CNL Income Fund IX, Ltd. CNL Waldorf, MD
Income Fund IX, Ltd. and Income Fund XVII, Ltd.
CNL Income Fund XVII,
Ltd., Tenants in Common
CNL Income Fund VI, Ltd. and 2002 14.20% CNL Income Fund XI, Ltd. Universal City, TX
CNL Income Fund XI,
Ltd., Tenants in Common
CNL Income Fund VI, Ltd. and 2002 9.50% CNL Income Fund XI, Ltd. Schertz, TX
CNL Income Fund XI,
Ltd., Tenants in Common
Each joint venture and tenancy in common was formed to hold one
Property. Each CNL Income Fund is an affiliate of the General Partners and is a
limited partnership organized pursuant to the laws of the state of Florida. The
Partnership shares management control equally with the affiliates of the General
Partners
The joint venture and tenancy in common arrangements provide for the
Partnership and its joint venture or tenancy in common partners to share in all
costs and benefits in proportion to each partner's percentage interest in the
business entity. The Partnership and its partners are also jointly and severally
liable for all debts, obligations and other liabilities of the joint venture or
tenancy in common. Net cash flow from operations is distributed to each joint
venture or tenancy in common partner in accordance with its respective
percentage interest in the business entity.
Each joint venture has an initial term of 20 years and, after the
expiration of the initial term, continues in existence from year to year unless
terminated at the option of either joint venturer by an event of dissolution.
Events of dissolution include the bankruptcy, insolvency or termination of any
joint venturer, sale of the Property owned by the joint venture and mutual
agreement of the Partnership and its joint venture partner to dissolve the joint
venture. Any liquidation proceeds, after paying joint venture debts and
liabilities and funding reserves for contingent liabilities, will be distributed
first to the joint venture partners with positive capital account balances in
proportion to such balances until such balances equal zero, and thereafter in
proportion to each joint venture partner's percentage interest in the joint
venture.
The joint venture and tenancy in common agreements restrict each
party's ability to sell, transfer to assign its joint venture or tenancy in
common interest without first offering it for sale to its partner, either upon
such terms and conditions as to which the parties may agree or, in the event the
parties cannot agree, on the same terms and conditions as any offer from a third
party to purchase such joint venture or tenancy in common interest.
The Partnership had entered into a joint venture arrangement, Caro
Joint Venture, with an unaffiliated entity to purchase and hold a Property.
During 2002, Caro Joint Venture was liquidated upon the sale of the Property
held by the joint venture and the net sales proceeds were distributed to each
joint venture partner in accordance with the terms of the joint venture
agreement.
The use of joint venture and tenancy in common arrangements allows the
Partnership to fully invest its available funds at times at which it would not
have sufficient funds to purchase an additional property, or at times when a
suitable opportunity to purchase an additional property is not available. The
use of joint venture and tenancy in common arrangements also provides the
Partnership with increased diversification of its portfolio among a greater
number of properties. In addition, tenancy in common arrangements may allow the
Partnership to defer the gain for federal income tax purposes upon the sale of
the property if the proceeds are reinvested in an additional property.
Certain Management Services
RAI Restaurants, Inc. (formerly known as CNL Restaurants XVIII, Inc.),
an affiliate of the General Partners, provides certain services relating to
management of the Partnership and its Properties pursuant to a management
agreement with the Partnership. CNL APF Partners, LP assigned its rights in, and
its obligations under, the management agreement with the Partnership to RAI
Restaurants, Inc. ("Advisor") effective January 1, 2002. All of the terms and
conditions of the management agreement, including the payment of fees, remained
unchanged. Under this agreement, the Advisor is responsible for collecting
rental payments, inspecting the Properties and the tenants' books and records,
assisting the Partnership in responding to tenant inquiries and notices, and
providing information to the Partnership about the status of the leases and the
Properties. The Advisor also assists the General Partners in negotiating the
leases. For these services, the Partnership had agreed to pay the Advisor an
annual fee of one percent of the sum of gross rental revenues from Properties
wholly owned by the Partnership plus the Partnership's allocable share of gross
revenues of joint ventures in which the Partnership is a co-venturer, but not in
excess of competitive fees for comparable services. Under the management
agreement, the management fee is subordinated to receipt by the Limited Partners
of an aggregate, ten percent, cumulative, noncompounded annual return on their
adjusted capital contributions (the "10% Preferred Return"), calculated in
accordance with the Partnership's limited partnership agreement (the
"Partnership Agreement"). In any year in which the Limited Partners have not
received the 10% Preferred Return, no property management fee will be paid.
The management agreement continues until the Partnership no longer owns
an interest in any Properties unless terminated at an earlier date upon 60 days'
prior notice by either party.
Competition
The fast-food and family-style restaurant business is characterized by
intense competition. The restaurants on the Partnership's Properties compete
with independently owned restaurants, restaurants which are part of local or
regional chains, and restaurants in other well-known national chains, including
those offering different types of food and service.
Employees
The Partnership has no employees. The officers of CNL Realty
Corporation and the officers and employees of CNL American Properties Fund, Inc.
("APF"), the parent company of the Advisor, perform certain services for the
Partnership. In addition, the General Partners have available to them the
resources and expertise of the officers and employees of CNL Financial Group,
Inc., a diversified real estate company, and its affiliates, who may also
perform certain services for the Partnership.
Item 2. Properties
As of December 31, 2002, the Partnership owned 39 Properties. Of the 39
Properties, 24 are owned by the Partnership in fee simple, five are owned
through joint venture arrangements and ten owned through tenancy in common
arrangements. See Item 1. Business - Joint Venture and Tenancy in Common
Arrangements. The Partnership is not permitted to encumber its Properties under
the terms of its partnership agreement. Reference is made to the Schedule of
Real Estate and Accumulated Depreciation for a listing of the Properties and
their respective costs, including acquisition fees and certain acquisition
expenses.
Description of Properties
Land. The Partnership's Property sites range from approximately 11,500
to 115,100 square feet depending upon building size and local demographic
factors. Sites purchased by the Partnership are in locations zoned for
commercial use which have been reviewed for traffic patterns and volume.
The following table lists the Properties owned by the Partnership,
either directly or indirectly through joint venture or tenancy in common
arrangements, as of December 31, 2002, by state. More detailed information
regarding the location of the Properties is contained in the Schedule of Real
Estate and Accumulated Depreciation for the year ended December 31, 2002.
State Number of Properties
Florida 7
Georgia 1
Idaho 1
Illinois 2
Indiana 1
Kansas 1
Maryland 1
Massachusetts 1
Michigan 2
New Mexico 1
North Carolina 3
Ohio 1
Oklahoma 2
Tennessee 4
Texas 8
Virginia 2
Washington 1
-------------
TOTAL PROPERTIES 39
=============
Buildings. Each of the Properties owned by the Partnership, either
directly or indirectly through joint venture or tenancy in common arrangements,
includes a building that is one of a Restaurant Chain's approved designs. The
buildings generally are rectangular and are constructed from various
combinations of stucco, steel, wood, brick and tile. Building sizes range from
approximately 1,200 to 10,700 square feet. All buildings on Properties are
freestanding and surrounded by paved parking areas. Buildings are suitable for
conversion to various uses, although modifications may be required prior to use
for other than restaurant operations. As of December 31, 2002, the Partnership
had no plans for renovation of the Properties. Depreciation expense is computed
for buildings and improvements using the straight-line method using depreciable
lives of 31.5 and 39 years for federal income tax purposes.
As of December 31, 2002, the aggregate cost of the Properties owned by
the Partnership (including its consolidated joint venture) and joint ventures
(including Properties owned through tenancy in common arrangements) for federal
income tax purposes was $20,099,697 and $19,665,534, respectively.
The following table lists the Properties owned by the Partnership,
either directly or indirectly through joint venture or tenancy in common
arrangements, as of December 31, 2002 by Restaurant Chain.
Restaurant Chain Number of Properties
Arby's 1
Baker's Square 1
Bennigan's 2
Burger King 1
Chevy's Fresh Mex 1
Church's 2
Darryl's 1
Denny's 2
Golden Corral 5
Hardee's 2
IHOP 6
Jack in the Box 3
KFC 2
Shoney's 1
Taco Bell 1
Taco Cabana 3
Waffle House 3
Other 2
-----------------
TOTAL PROPERTIES 39
=================
The General Partners consider the Properties to be well-maintained and
sufficient for the Partnership's operations.
The General Partners believe that the Properties are adequately covered
by insurance. In addition, the General Partners have obtained contingent
liability and property coverage for the Partnership. This insurance is intended
to reduce the Partnership's exposure in the unlikely event a tenant's insurance
policy lapses or is insufficient to cover a claim relating to the Property.
Leases. The Partnership leases the Properties to operators of selected
national and regional fast-food restaurant chains. The leases are generally on a
long-term "triple net" basis, meaning that the tenant is responsible for
repairs, maintenance, property taxes, utilities and insurance.
At December 31, 2002, 2001, 2000, 1999, and 1998, the Properties were
95%, 100%, 97%, 100%, and 95%, occupied, respectively. The following is a
schedule of the average rent per Property for the years ended December 31:
2002 2001 2000 1999 1998
-------------- ------------- -------------- -------------- --------------
Rental Revenues (1)(2) $ 3,157,653 $ 3,311,674 $ 3,456,021 $ 3,417,147 $ 3,342,220
Properties (2) 37 38 37 41 42
Average rent per
property $ 85,342 $ 87,149 $ 93,406 $ 83,345 $ 79,577
(1) Rental revenues includes the Partnership's share of rental revenues
from the Properties owned through joint venture arrangements and the
Properties owned through tenancy in common arrangements.
(2) Excludes Properties that were vacant at December 31, and that did not
generate rental revenues during the year ended December 31.
The following is a schedule of lease expirations for leases in place as
of December 31, 2002 for the next ten years and thereafter.
Percentage of
Expiration Year Number Annual Rental Gross Annual
of Leases Revenues Rental Income
----------------- ---------------- --------------------- --------------------------
2003 -- -- --
2004 3 $ 515,141 16.30%
2005 3 314,800 9.96%
2006 -- -- --
2007 -- -- --
2008 4 178,077 5.63%
2009 2 91,413 2.89%
2010 5 350,109 11.08%
2011 2 27,259 0.86%
2012 1 56,643 1.79%
Thereafter 17 1,627,621 51.49%
---------- ------------- -------------
Total (1) 37 $ 3,161,063 100.00%
========== ============= =============
(1) Excludes two Properties which were vacant at December 31, 2002.
Leases with Major Tenants. The terms of each of the leases with the
Partnership's major tenants as of December 31, 2002 (see Item 1. Business -
Major Tenants) are substantially the same as those described in Item 1. Business
- - Leases.
Golden Corral Corporation leases five Golden Corral restaurants. The
initial term of each lease is 15 years (expiring between 2004 and 2011) and the
average minimum base annual rent is approximately $152,900 (ranging from
approximately $88,000 to $185,700).
IHOP Corp. leases six IHOP restaurants. The initial term of each lease
is 20 years (expiring between 2017 and 2019) and the average minimum base annual
rent is approximately $138,000 (ranging from approximately $114,500 to
$163,200).
Item 3. Legal Proceedings
Neither the Partnership, nor its General Partners or any affiliate of
the General Partners, nor any of their respective Properties, is party to, or
subject to, any material pending legal proceedings.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
(a) As of March 10, 2003, there were 2,950 holders of record of the
Units. There is no public trading market for the Units, and it is not
anticipated that a public market for the Units will develop. During 2002,
Limited Partners who wished to sell their Units may have offered the Units for
sale pursuant to the Partnership's distribution reinvestment plan (the "Plan"),
and Limited Partners who wished to have their distributions used to acquire
additional Units (to the extent Units were available for purchase), may have
done so pursuant to such Plan. The General Partners have the right to prohibit
transfers of Units. The price paid for any Unit transferred pursuant to the Plan
was $475 per Unit. The price paid for any Unit transferred other than pursuant
to the Plan was subject to negotiation by the purchaser and the selling Limited
Partner. The Partnership will not redeem or repurchase Units.
The following table reflects, for each calendar quarter, the high, low
and average sales prices for transfers of Units during 2002 and 2001 other than
pursuant to the Plan, net of commissions.
2002 (1) 2001 (1)
----------------------------------- -----------------------------------
High Low Average High Low Average
--------- -------- ---------- --------- -------- -----------
First Quarter $ 500 $305 $ 330 $ 475 $ 370 $ 423
Second Quarter 366 300 323 475 179 337
Third Quarter 405 138 292 351 328 339
Fourth Quarter 404 305 370 350 331 341
(1) A total of 670 and 319 Units were transferred other than pursuant to
the Plan for the years ended December 31, 2002 and 2001, respectively.
The capital contribution per Unit was $500. All cash available for
distribution will be distributed to the partners pursuant to the provisions of
the Partnership Agreement.
For each of the years ended December 31, 2002 and 2001, the Partnership
declared cash distributions of $3,150,000 to the Limited Partners. Distributions
of $787,500 were declared at the close of each of the Partnership's calendar
quarter during 2002 and 2001 to the Limited Partners. No amounts distributed to
partners for the years ended December 31, 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. No distributions have been made to the General Partners to date.
These amounts include monthly distributions made in arrears for the Limited
Partners electing to receive distributions on this basis.
The Partnership intends to continue to make distributions of cash
available for distribution to the Limited Partners on a quarterly basis,
although some Limited Partners, in accordance with their election, receive
monthly distributions, for an annual fee.
(b) Not applicable.
Item 6. Selected Financial Data
The following selected financial data should be read in conjunction
with the financial statements and related notes in Item 8. hereof.
2002 2001 2000 1999 1998
---------------- --------------- --------------- -------------- ----------------
Year ended December 31:
Continuing Operations(4):
Revenues $ 2,408,181 $ 2,349,897 $ 2,645,013 $ 2,848,202 $ 3,102,995
Equity in earnings of
unconsolidated joint
ventures 673,970 987,886 672,749 524,643 323,105
Income from continuing
operations(1)(2) 2,172,614 1,965,208 2,936,557 3,401,052 2,893,528
Discontinued Operations (4):
Revenues 79,582 90,264 95,914 125,645 143,088
Income from
discontinued operations (3) 299,702 67,929 80,239 109,422 127,353
Net income 2,472,316 2,033,137 3,016,796 3,510,474 3,020,881
Net income per Unit:
Continuing operations $ 31.04 $ 28.07 $ 41.95 $ 48.59 $ 41.34
Discontinued operations 4.28 0.97 1.15 1.56 1.82
---------------- --------------- --------------- -------------- ----------------
Total $ 35.32 $ 29.04 $ 43.10 $ 50.15 $ 43.16
================ =============== =============== ============== ================
Cash distributions $ 3,150,000 $ 3,150,000 $ 3,150,000 $ 3,150,000 $ 3,220,000
declared (5)
Cash distributions
declared per
Unit (5) 45.00 45.00 45.00 45.00 46.00
At December 31:
Total assets $27,918,964 $28,709,054 $29,820,589 $30,120,859 $29,655,896
Total partners' capital 27,027,853 27,705,537 28,822,400 28,955,604 28,595,130
(1) Income from continuing operations for the years ended December 31,
2002, 2001, 2000, and 1998, includes provisions for write-down of
assets of $106,437, $565,061, $368,430, and $155,528, respectively.
(2) Income from continuing operations for the years ended December 31,
2000, 1999, and 1998 includes gains on sale of assets of $639,806,
$848,303, and $345,122, respectively and a loss of $11,897 for the year
ended December 31, 2001.
(3) Income from discontinued operations for the year ended December 31,
2002 includes gain on sale of assets of $234,297.
(4) Certain items in prior years' financial statements have been
reclassified to conform to 2002 presentation. These reclassifications
had no effect on total income. The results of operations relating to
properties that were either disposed of or were classified as held for
sale as of December 31, 2002 are reported as discontinued operations.
The results of operations relating to properties that were identified
for sale as of December 31, 2001 but sold subsequently are reported as
continuing operations.
(5) Distributions for the year ended December 31, 1998, include a special
distribution to the Limited Partners of $70,000, which represented
cumulative excess operating reserves.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The Partnership 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 restaurant
Properties were to be constructed, which are leased primarily to operators of
selected national and regional fast-food and family-style Restaurant Chains. The
leases are generally triple-net leases, with the lessees responsible for all
repairs and maintenance, property taxes, insurance and utilities. The leases of
the Properties provide for minimum base annual rental amounts (payable in
monthly installments) ranging from approximately $39,500 to $246,400. Generally,
the leases provide for percentage rent based on sales in excess of a specified
amount. In addition, some of the leases provide that, commencing in the fourth
to sixth lease year, the percentage rent will be an amount equal to the greater
of the percentage rent calculated under the lease formula or a specified
percentage (ranging from one to five percent) of the purchase price or gross
sales. As of December 31, 2000, the Partnership owned 23 Properties directly and
15 Properties indirectly through joint venture or tenancy in common
arrangements. As of December 31, 2001, the Partnership owned 24 Properties
directly and 14 Properties indirectly through joint venture or tenancy in common
arrangements. As of December 31, 2002, the Partnership owned 24 Properties
directly and 15 Properties indirectly through joint venture or tenancy in common
arrangements.
Capital Resources
Cash from operating activities was $3,071,594, $2,900,366, and
$3,136,299, during the years ended December 31, 2002, 2001 and 2000,
respectively. The increase in cash from operating activities during the year
ended December 31, 2002 was a result of changes in the Partnership's working
capital. The decrease in cash from operating activities during the year ended
December 31, 2001 was a result of changes in income and expenses.
Other sources and uses of cash included the following during the years
ended December 31, 2002, 2001, and 2000.
During 2000, the Partnership received payments of $55,800 related to a
1996 deferred rental payment agreement with one tenant of several Properties.
During 2000, the Partnership terminated the lease with the tenant of the
Property located in Chester, Pennsylvania due to financial difficulties the
tenant was experiencing. The Partnership received $175,000 in consideration for
the Partnership releasing the tenant from its obligations under the lease terms.
In May 2001, the Partnership sold this Property to a third party and received
net sales proceeds of approximately $83,000. The Partnership had previously
recorded provisions for write-down of assets of approximately $368,400 in a
prior year relating to this Property. The Partnership recorded an additional
loss of approximately $14,000 when the Property was sold in 2001.
During 2000, the Partnership invested net sales proceeds from the 1999
sale of a Property, in a Property in Niles, Illinois, with CNL Income Fund XIV,
Ltd., a Florida limited partnership and an affiliate of the General Partners, as
tenants-in-common. The Partnership owns a 74% interest in this Property. The
Partnership acquired the Property from an affiliate of the General Partners. The
affiliate had purchased and temporarily held title to the Property in order to
facilitate the acquisition of the Property by the Partnership. The purchase
price paid by the Partnership represented the costs incurred by the affiliate to
acquire the Property.
During 2000, the Partnership sold four of its Popeyes Properties, three
in Jacksonville, Florida and one in Tallahassee, Florida, to a third party and
received net sales proceeds totaling approximately $2,071,800, resulting in
gains totaling approximately $639,800. In January 2001, the Partnership invested
a portion of these net sales proceeds in a Property in Burley, Idaho and one in
Cleburne, Texas. The Partnership acquired these 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. The purchase price paid by the Partnership represented the costs
incurred by CNL Funding 2001-A, LP to acquire and carry the Properties.
During 2001, the Partnership and CNL Income Fund XI, Ltd., as
tenants-in-common, sold the Property in Round Rock, Texas, and received net
sales proceeds of approximately $1,510,700, resulting in a gain, to the
tenancy-in-common, of approximately $123,900. The Partnership received
approximately $1,156,300 as a liquidating distribution for its pro-rata share of
the net sales proceeds. The Partnership owned a 77% interest in this Property.
During 2001, the Partnership reinvested the majority of these proceeds in a
Property in Houston, Texas. The Partnership acquired this Property 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 Property in order to facilitate the acquisition of the Property by
the Partnership. The purchase price paid by the Partnership represented the
costs incurred by CNL Funding 2001-A, LP to acquire and carry the Property.
During 2001, the Partnership and CNL Income Fund IX, Ltd., as
tenants-in-common, sold the Property in Dublin, California, and received net
sales proceeds of approximately $1,699,600, resulting in a gain, to the
tenancy-in-common, of approximately $158,100. The Partnership received
approximately $1,273,800 as a liquidating distribution for its pro-rata share of
the net sales proceeds. The Partnership owned a 75% interest in this Property.
During 2001, the Partnership reinvested these proceeds and the net sales
proceeds from the sale of the Property in Chester, Pennsylvania in a Property in
Waldorf, Maryland, as tenants-in-common, with CNL Income Fund IX, Ltd. and CNL
Income Fund XVII, Ltd., each of which is an affiliate of the General Partners
and a Florida limited partnership. The Partnership and the affiliates entered
into an agreement whereby each co-tenant will share in the profits and losses of
the Property in proportion to its applicable percentage interest. The
Partnership contributed approximately $1,368,300 to acquire the Property. The
Partnership owns a 60% interest in the profits and losses of the Property.
During 2001, the Partnership entered in a promissory note with the
corporate General Partner for a loan in the amount of $75,000 in connection with
the operations of the partnership. The loan was uncollateralized, non-interest
bearing and due on demand. As of December 31, 2001, the Partnership had repaid
the loan in full to the corporate General Partner.
During 2001, the Partnership also sold its Property in Cheyenne,
Wyoming to a third party and received net sales proceeds of approximately
$290,800, resulting in a gain of approximately $2,100. During 2002, the
Partnership reinvested a portion of these net sales proceeds and the remaining
proceeds from the 2001 sale of the Property in Round Rock, Texas 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., an affiliate of the
General Partners. Each co-tenant will share in the profits and losses of each
property in proportion to its applicable percentage interest. As of December 31,
2002, the Partnership had 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, 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.
During 2002, Caro Joint Venture, in which the Partnership owned a
66.14% interest and accounted for under the consolidation method, entered into
an agreement with a third party to sell its Property in Caro, Michigan. During
2002, the joint venture sold this property and received net sales proceeds of
approximately $600,000, resulting in a gain on sale of assets of approximately
$216,100 to the joint venture. As a result of the sale of the Property, the
joint venture was dissolved in accordance with the joint venture agreement and
the Partnership received approximately $441,100 representing its pro-rata share
of liquidating distributions from the joint venture and recorded a gain on sale
of discontinued operations of approximately $18,200 during the year ended
December 31, 2002.
During 2002, the Property in Marietta, Georgia was destroyed by fire.
The Property is covered by insurance held by the tenant. The Partnership
anticipates that the insurance proceeds will exceed the net carrying value of
the building.
None of the Properties owned by the Partnership, or the joint venture
or tenancy in common arrangements in which the Partnership owns an interest, is
or may be encumbered. Under its partnership agreement, the Partnership is
prohibited from borrowing for any purpose; provided, however, that the General
Partners or their affiliates are entitled to reimbursement, at cost, for actual
expenses incurred by the General Partners or their affiliates on behalf of the
Partnership. Affiliates of the General Partners from time to time incur certain
operating expenses on behalf of the Partnership for which the Partnership
reimburses the affiliates without interest.
Currently, rental income from the Partnership's Properties and 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 reinvestment in additional Properties, paying Partnership
expenses, or making distributions to the partners. At December 31, 2002, the
Partnership had $1,168,450 invested in such short-term investments, as compared
to $1,126,921 at December 31, 2001. The increase in cash and cash equivalents
during 2002 was primarily a result of the Partnership receiving and holding a
portion of the liquidity distribution from Caro Joint Venture at December 31,
2002. For the year ending December 31, 2002, the average interest rate earned on
the rental income deposited in demand deposit accounts at commercial banks was
approximately one percent annually. The funds remaining at December 31, 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 net 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.
Due to low operating expenses and ongoing cash flow, the General
Partners do not believe that working capital reserves are necessary at this
time. In addition, because the leases of the Partnership's Properties are on a
triple-net basis, it is not anticipated that a permanent reserve for maintenance
and repairs will be established at this time. To the extent, however, that the
Partnership has insufficient funds for such purposes, the General Partners will
contribute to the Partnership an aggregate amount of up to one percent of the
offering proceeds for maintenance and repairs.
The Partnership generally distributes cash from operations remaining
after the payment of the 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 $3,150,000 for
each of the years ended December 31, 2002, 2001, and 2000. This represents
distributions of $45.00 per Unit for each of the years ended December 31, 2002,
2001, and 2000. No distributions were made to the General Partners during the
years ended December 31, 2002, 2001, and 2000. No amounts distributed to the
Limited Partners for the years ended December 31, 2002, 2001, and 2000, 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.
During 2000, the General Partners waived their right to receive future
distributions from the Partnership, including both distributions of operating
cash flow and distributions of liquidation proceeds, to the extent that the
cumulative amount of such distributions would exceed the balance in the General
Partners' capital account as of December 31, 1999. Accordingly, the General
Partners were not allocated any net income during the years ended December 31,
2002, 2001 and 2000.
As of December 31, 2002 and 2001, the Partnership owed $14,423 and
$11,507, respectively, to affiliates for operating expenses and accounting and
administrative services and other amounts. As of March 10, 2003, the Partnership
had reimbursed the affiliates for these amounts. Other liabilities of the
Partnership, including distributions payable were $876,688 at December 31, 2002,
as compared to $854,867 at December 31, 2001. The General Partners believe that
the Partnership has sufficient cash on hand to meet its current working capital
needs.
Long-Term Liquidity
The Partnership has no long-term debt or other long-term liquidity
requirements.
Critical Accounting Policies
The Partnership's leases are accounted for under the provisions of
Statement of Accounting Standard No. 13, "Accounting for Leases" ("FAS 13"), and
have been accounted for using either the direct financing or the operating
method. FAS 13 requires management to estimate the economic life of the leased
property, the residual value of the leased property and the present value of
minimum lease payments to be received from the tenant. In addition, management
assumes that all payments to be received under its leases are collectible.
Changes in management's estimates or assumption regarding collectibility of
lease payments could result in a change in accounting for the lease at the
inception of the lease.
The Partnership accounts for its unconsolidated joint ventures using
the equity method of accounting. Under generally accepted accounting principles,
the equity method of accounting is appropriate for entities that are partially
owned by the Partnership, but for which operations of the investee are shared
with other partners. The Partnership's joint venture agreements require the
consent of all partners on all key decisions affecting the operations of the
underlying Property.
Management reviews the Partnership's Properties and investments in
unconsolidated entities periodically for impairment at least once a year or
whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. The assessment is based on the carrying amount
of the Property or investment at the date it is tested for recoverability
compared to the sum of the estimated future cash flows expected to result from
its operation and sale through the expected holding period. If an impairment is
indicated, the asset is adjusted to its estimated fair value.
When the Partnership makes the decision to sell or commits to a plan to
sell a Property within one year, its operating results are reported as
discontinued operations.
Results of Operations
Comparison of year ended December 31, 2002 to year ended December 31, 2001
Total rental revenues were $2,266,672 during the year ended December
31, 2002, as compared to $2,119,666 for the same period of 2001. Rental revenues
increased during the year ended December 31, 2002, because during 2001 the
Partnership reinvested a portion of the net sales proceeds from the sales of
several Properties in three additional Properties .
Phoenix Restaurant Group, Inc. ("PRG"), the tenant of two of the
Partnership's Properties, experienced financial difficulties during 2000. As a
result, during 2001, the Partnership stopped recording rental revenue relating
to 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. Rental revenues were higher during 2002 partially because the
Partnership has received rental payments relating to the one Property not
rejected by the tenant since the bankruptcy date. 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.
During 2002, a tenant, Loco Lupe's of Hermitage, Inc., filed for
bankruptcy. As of March 10, 2003, the Partnership has continued receiving rental
payments relating to this lease. While the tenant has neither rejected nor
affirmed the one lease it has with the Partnership, there can be no assurance
that the lease will not be rejected in the future. The lost revenues that would
result if the tenant rejects this lease will have an adverse effect on the
results of operations of the Partnership if the Partnership is unable to lease
the Property in a timely manner.
During 2002, the Property in Marietta, Georgia was destroyed by fire
and the tenant terminated its lease relating to this Property. The Partnership
anticipates that the insurance proceeds will exceed the net carrying value of
the building and intends to reinvest the proceeds. The lost revenues from this
vacant Property will have an adverse effect on the results of operations of the
Partnership until the Partnership is able to re-lease the Property.
The Partnership also earned $131,860 in contingent rental income during
the year ended December 31, 2002, as compared to $149,069 during the same period
of 2001. Contingent rental income was higher during 2001 because the Partnership
defers the recognition of certain percentage rental income until the tenants'
gross sales meet certain defined thresholds.
The Partnership earned $673,970, attributable to net income earned by
unconsolidated joint ventures during the year ended December 31, 2002, as
compared to $987,886 during the same period of 2001. Net income earned by joint
ventures was higher during 2001 because during 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. The tenancy in common
recognized a gain of approximately $158,000 during 2001 relating to this sale.
In addition, during 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. The tenancy in common recognized a gain of
approximately $123,900 during 2001 relating to this sale. 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. During 2001, the Partnership
reinvested a portion of these liquidating distributions in a Property in
Waldorf, Maryland, as tenants-in-common with CNL Income Fund IX, Ltd. and CNL
Income Fund XVII, Ltd. During 2002, the Partnership reinvested the remaining
portion of the net sales proceeds from the 2001 sales of two Properties in two
additional Properties, each as tenants-in-common with CNL Income Fund XI, Ltd.
Net income earned by joint ventures was lower during 2002 because 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 revenues relating to 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.
During 2002, two lessees of the Partnership and its consolidated joint
venture, Golden Corral Corporation and IHOP Properties, Inc., each contributed
more than ten percent of the Partnership's rental revenues (including rental
revenues from the Partnership's consolidated joint venture in which the
Partnership was a co-venturer prior to its dissolution, and the Partnership's
share of the rental revenues from the Properties owned by unconsolidated joint
ventures and the Properties owned with affiliates of the General Partners as
tenants-in-common). As of December 31, 2002, Golden Corral Corporation was the
lessee under leases relating to five restaurants and IHOP Properties, Inc. was
the lessee under leases relating to six restaurants. It is anticipated that,
based on the minimum rental payments required by the leases, these two lessees
each will continue to contribute more than ten percent of the Partnership's
rental revenues in 2003. In addition, two Restaurant Chains, Golden Corral
Family Steakhouse Restaurants ("Golden Corral") and IHOP, each accounted for
more than ten percent of the Partnership's rental revenues in 2002 (including
rental revenues from the Partnership's consolidated joint venture and the
Partnership's share of the rental revenues from the Properties owned by
unconsolidated joint ventures in which the Partnership is a co-venturer and the
Properties owned with affiliates of the General Partners as tenants-in-common).
In 2003, it is anticipated that these two Restaurant Chains each will continue
to account for more than ten percent of the rental revenues to which the
Partnership is entitled under the terms of the leases. Any failure of these
lessees or Restaurant Chains could materially affect the Partnership's income if
the Partnership is not able to re-lease the Properties in a timely manner.
The Partnership earned $9,649 in interest and other income during the
year ended December 31, 2002, as compared to $81,162 during the same period of
2001. Interest and other income were higher during 2001 due to higher average
cash balances as a result of net sales proceeds being held in interest bearing
accounts until they were reinvested in additional Properties and higher average
interest rates during 2001.
Operating expenses, including depreciation and amortization expense,
and provision for write-down of assets were $814,221 during the year ended
December 31, 2002, as compared to $1,337,677 during the same period of 2001.
Operating expenses were higher during 2001 because the Partnership recorded
provisions for doubtful accounts of approximately $33,100, relating to two
Properties leased by PRG. During 2001, the Partnership also recorded a provision
for write-down of assets of approximately $565,100 relating to these Properties.
During 2002, the Partnership recorded an additional provision for write-down of
assets of approximately $32,800 relating to one of the Properties leased by PRG.
The provisions represented the difference between each Property's net carrying
value and their estimated fair value. During 2002, the Partnership also recorded
a provision for write-down of assets of approximately $73,600 relating to the
Property in Marietta, Georgia which was destroyed by fire. The provision
represented the difference between the Property's net carrying value and its
fair value. The Partnership also incurred Property related expenses, such as
legal fees, repairs and maintenance, insurance and real estate taxes relating to
the vacant Properties. In December 2001 the Partnership sold one of its two PRG
Properties and in May 2002 the Partnership assigned the lease relating to the
remaining PRG 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. The Partnership will continue to
incur these expenses relating to the vacant Property in Marietta, Georgia, until
the Partnership re-leases or sells the Property.
Operating expenses were lower during 2002 because of a decrease during
2002 in state tax expense and a decrease in the costs incurred for
administrative expenses for servicing the Partnership and its Properties. The
decrease in operating expenses during 2002 was offset by the Partnership
electing to reimburse the tenant of the Properties in El Paso and Amarillo,
Texas for certain renovation costs.
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 on sale of assets of approximately $12,000 during
the year ended December 31, 2001.
During the year ended December 31, 2002, the Partnership identified and
sold one Property, owned by Caro Joint Venture, in which the Partnership owned a
66.14% interest and accounted for under the consolidation method, that met the
criteria of this standard and was classified as Discontinued Operations in the
accompanying financial statements. During 2002, the joint venture sold its
Property and received net sales proceeds of approximately $600,000, resulting in
a gain on sale of assets of approximately $216,100 to the joint venture. As a
result of the sale of the Property, the joint venture was dissolved in
accordance with the joint venture agreement and the Partnership received
approximately $441,100 representing its pro-rata share of liquidating
distributions from the joint venture and recorded a gain on sale of discontinued
operations of approximately $18,200 during the year ended December 31, 2002.The
Partnership intends to reinvest these sales proceeds in an additional Property.
Comparison of year ended December 31, 2001 to year ended December 31, 2000
Total rental revenues were $2,119,666 during the year ended December
31, 2001, as compared to $2,266,920 during the same period of 2000. Rental
revenues were lower during 2001 because the Partnership sold several Properties
during 2001 and 2000. The decrease in rental revenues was partially offset by an
increase caused by the Partnership reinvesting a portion of these net sales
proceeds in additional Properties. The Partnership reinvested the remaining
proceeds in joint ventures or in Properties with affiliates, as tenants in
common. As a result, the Partnership's rental revenues are expected to remain at
reduced amounts while equity in earnings of joint ventures is expected to
increase.
During 2000 the Partnership collected and recognized as revenues
approximately $53,700 in deferred rental payments for two Properties leased by
the same tenant in Chester, Pennsylvania and Orlando, Florida. These amounts
were collected in accordance with a 1996 agreement made with the tenant. During
2000, the Partnership also received $175,000 in lease termination income in
consideration for the Partnership releasing this tenant from its obligations
under the lease relating to the Property in Chester, Pennsylvania. In May 2001,
the Partnership sold this Property. In July 2001, the Partnership reinvested
these net sales proceeds in a Property in Waldorf, Maryland, as
tenants-in-common, with CNL Income Fund IX, Ltd. and CNL Income Fund XVII, Ltd.,
as described above.
The Partnership also earned $987,886 attributable to net income earned
by unconsolidated joint ventures during the year ended December 31, 2001, as
compared to $672,749 during the same period of 2000. Net income earned by joint
ventures was higher during 2001 because the Partnership sold the Properties in
Dublin, California and Round Rock, Texas, each held as a separate tenancy in
common with affiliates of the General Partners. In these sales the tenancies in
common recognized approximately $282,000 in gains. The Partnership recorded its
pro-rata share of these gains in equity of earnings of joint ventures. The
tenancies in common distributed to the Partnership its pro-rata share of the net
sales proceeds from these sales as a liquidating distribution and the
Partnership reinvested these proceeds in a Property in Houston, Texas, as
described above. The Partnership reinvested these proceeds in a Property in
Houston, Texas. In January 2002, Houlihan's Restaurant, Inc., which leases the
Property owned by Show Low Joint Venture, filed for bankruptcy and rejected the
lease relating to this Property. As a result, the increase in net income earned
by joint ventures during 2001 was partially offset by the joint venture
recording a provision for write-down of assets of approximately $56,400 during
2001. The provision represented the difference between the net carrying value of
the Property and its fair value. Net income earned by joint ventures was lower
during 2000, as compared to 2001, partially because the lease relating to the
Property owned by Melbourne Joint Venture, in which the Partnership owns a 50%
interest, was amended to provide for rent reductions starting in February 2000.
The joint venture stopped recording rental revenue relating to this Property in
June 2000, when the operator of this Property vacated the Property and
discontinued operations. In addition, during 2000, the joint venture established
a provision for write-down of assets for this Property of approximately
$271,000. The provision represented the difference between the Property's net
carrying value and its estimated fair value. The joint venture did not recognize
any rental income relating to this Property until June 2001, at which time the
joint venture re-leased this Property to a new tenant. The lease terms for this
Property are substantially the same as the Partnership's other leases.
The Partnership earned $81,162 in interest and other income during the
year ended December 31, 2001, as compared to $55,576 during the same period of
2000. Interest and other income was higher during 2001 due to higher average
cash balances as a result of net sales proceeds being held in interest bearing
accounts until they were reinvested in additional Properties.
Operating expenses, including depreciation and amortization expense and
provisions for losses on assets, were $1,337,677 during the year ended December
31, 2001, as compared to $993,842 during the same period of 2000. Operating
expenses were higher during 2001 because the Partnership recorded a provision
for write-down of assets of approximately $565,100 relating to the Properties in
Broken Arrow, Oklahoma and Cheyenne, Wyoming. PRG, the tenant, of these
Properties, filed for bankruptcy, as described above. In addition, the
Partnership recorded a provision for doubtful accounts of approximately $33,100
and incurred Property expenses, such as legal fees, repairs and maintenance and
real estate taxes relating to these Properties during 2001.
Operating expenses were also higher during 2001 due to an increase in
the costs incurred for administrative expenses for servicing the Partnership and
its Properties and higher state taxes due to changes in tax laws of a state in
which the Partnership conducts business.
During 2000, the Partnership recorded a provision for write-down of
assets of approximately $368,400, relating to the Property in Chester,
Pennsylvania because the lease was terminated. The provision represented the
difference between the Property's net carrying value and its estimated fair
value. In May 2001, the Partnership sold this Property, as described above.
During 2000 the Partnership incurred transaction costs relating to the
General Partners retaining financial and legal advisors to assist them in
evaluating and negotiating a proposed merger with APF. On March 1, 2000, the
merger discussions were terminated.
As a result of the sales of four Popeye's Properties during 2000 the
Partnership recognized gains of approximately $639,800 during the year ended
December 31, 2000.
The restaurant industry has been relatively resilient during this
volatile time with steady performance during 2002. However, the industry remains
in a state of cautious optimism. Restaurant operators expect their business to
be better in 2003, according to a nationwide survey conducted by the National
Restaurant Association, but are concerned by the budget deficits being
experienced by many states and the potential of new taxes on the industry to
alleviate the situation.
The Partnership's leases as of December 31, 2002, are generally
triple-net leases and contain provisions that the General Partners believe
mitigate the adverse effect of inflation. Such provisions include clauses
requiring the payment of percentage rent based on certain restaurant sales above
a specified level and/or automatic increases in base rent at specified times
during the term of the lease. Inflation, overall, has had a minimal effect on
the results of operations of the Partnership. Continued inflation may cause
capital appreciation of the Partnership's Properties. Inflation and changing
prices, however, also may have an adverse impact on the sales of the restaurants
and on potential capital appreciation of the Properties.
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 considered 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
interests 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. Management believes
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 7A. Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
Item 8. Financial Statements and Supplementary Data
CNL INCOME FUND VI, LTD.
(A Florida Limited Partnership)
CONTENTS
Page
Report of Independent Certified Public Accountants 20
Financial Statements:
Balance Sheets 21
Statements of Income 22
Statements of Partners' Capital 23
Statements of Cash Flows 24-25
Notes to Financial Statements 26-39
Report of Independent Certified Public Accountants
To the Partners
CNL Income Fund VI, Ltd.
In our opinion, the accompanying balance sheets and the related statements of
income, of partners' capital and of cash flows present fairly, in all material
respects, the financial position of CNL Income Fund VI, Ltd. (a Florida limited
partnership) at December 31, 2002 and 2001, and the results of its operations
and its cash flows for each of the three years in the period ended December 31,
2002 in conformity with accounting principles generally accepted in the United
States of America. In addition, in our opinion, the financial statement
schedules listed in the index appearing under item 15(a)(2) present fairly, in
all material respects, the information set forth therein when read in
conjunction with the related financial statements. These financial statements
and financial statement schedules are the responsibility of the Partnership's
management; our responsibility is to express an opinion on these financial
statements and financial statement schedules based on our audits. We conducted
our audits of these statements in accordance with auditing standards generally
accepted in the United States of America, which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
As described in Note 1 to the financial statements, on January 1, 2002, the
Partnership adopted Statement of Financial Accounting Standard No. 144
"Accounting for the Impairment or Disposal of Long-Lived Assets."
/s/ PricewaterhouseCoopers LLP
Orlando, Florida
January 31, 2003
CNL INCOME FUND VI, LTD.
(A Florida Limited Partnership)
BALANCE SHEETS
December 31,
2002 2001
------------------ --------------------
ASSETS
Real estate properties with operating leases, net $ 14,701,960 $ 15,645,815
Net investment in direct financing leases 2,308,195 2,399,329
Real estate held for sale -- 393,000
Investment in joint ventures 8,483,605 8,387,142
Cash and cash equivalents 1,168,450 1,126,921
Receivables, less allowance for doubtful accounts of $9,774
and $150,802, respectively 676,352 124,865
Due from related parties 109 15,981
Accrued rental income, less allowance for doubtful accounts
of $9,697 in 2002 and 2001 550,037 575,241
Other assets 30,256 40,760
------------------ --------------------
$ 27,918,964 $ 28,709,054
================== ====================
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 34,851 $ 16,859
Real estate taxes payable 13,010 13,119
Distributions payable 787,500 787,500
Due to related parties 14,423 11,507
Rents paid in advance and deposits 41,327 37,389
------------------ --------------------
Total liabilities 891,111 866,374
Minority interest -- 137,143
Partners' capital 27,027,853 27,705,537
------------------ --------------------
$ 27,918,964 $ 28,709,054
================== ====================
See accompanying notes to financial statements.
CNL INCOME FUND VI, LTD.
(A Florida Limited Partnership)
STATEMENTS OF INCOME
Year Ended December 31,
2002 2001 2000
------------------ --------------- ---------------
Revenues:
Rental income from operating leases $ 1,977,189 $ 1,915,760 $ 1,847,409
Earned income from direct financing leases 289,483 203,906 419,511
Contingent rental income 131,860 149,069 147,517
Lease termination income -- -- 175,000
Interest and other income 9,649 81,162 55,576
---------------
------------------ ---------------
2,408,181 2,349,897 2,645,013
------------------ --------------- ---------------
Expenses:
General operating and administrative 250,024 282,197 180,698
Property expenses 61,518 54,671 35,181
Provision for doubtful accounts -- 33,147 --
State and other taxes 28,513 42,557 18,720
Depreciation and amortization 367,729 360,044 356,526
Provision for write-down of assets 106,437 565,061 368,430
Transaction costs -- -- 34,287
------------------ --------------- ---------------
814,221 1,337,677 993,842
------------------ --------------- ---------------
Income Before Gain (Loss) on Sale of Assets, Minority
Interest in Income of Consolidated Joint Venture and
Equity in Earnings of Unconsolidated Joint Ventures 1,593,960 1,012,220 1,651,171
Gain (Loss) on Sale of Assets -- (11,897 ) 639,806
Minority Interest in Income of Consolidated Joint Venture (95,316 ) (23,001 ) (27,169 )
Equity in Earnings of Unconsolidated Joint Ventures 673,970 987,886 672,749
--------------- ------------------ ---------------
Income from Continuing Operations 2,172,614 1,965,208 2,936,557
------------------ --------------- ---------------
Discontinued Operations (Note 5):
Income from discontinued operations 65,405 67,929 80,239
Gain on disposal of discontinued operations 234,297 -- --
------------------ --------------- ---------------
299,702 67,929 80,239
------------------ --------------- ---------------
Net Income $ 2,472,316 2,033,137 $ 3,016,796
================ =============== ==============
Income Per Limited Partner Unit
Continuing Operations $ 31.04 $ 28.07 $ 41.95
Discontinued Operations 4.28 0.97 1.15
------------------ --------------- ---------------
Total $ 35.32 $ 29.04 $ 43.10
================== =============== ===============
Weighted Average Number of Limited Partner Units
Outstanding 70,000 70,000 70,000
================== =============== ===============
See accompanying notes to financial statements.
CNL INCOME FUND VI, LTD.
(A Florida Limited Partnership)
STATEMENTS OF PARTNERS' CAPITAL
Years Ended December 31, 2001, 2000 and 1999
General Partners Limited Partners
------------------------------------ ---------------------------------------------------
Accumulated Accumulated
Contributions Earnings Contributions Distributions Earnings
-------------------- ------------ ------------- ---------------- -----------------
Balance, December 31, 1999 $ 1,000 $ 290,598 $ 35,000,000 $ (31,954,226 ) $ 29,633,232
Distributions to limited
partners ($45.00 per
limited partner unit) -- -- -- (3,150,000 ) --
Net income -- -- -- -- 3,016,796
-------------- ------------ -------------- ---------------- -----------------
Balance, December 31, 2000 1,000 290,598 35,000,000 (35,104,226 ) 32,650,028
Distributions to limited
partners ($45.00 per
limited partner unit) -- -- -- (3,150,000 ) --
Net income -- -- -- -- 2,033,137
-------------- ------------ -------------- ---------------- -----------------
Balance, December 31, 2001 35,000,000 (38,254,226 ) 34,683,165
1,000 290,598
Distributions to limited
partners ($45.00 per
limited partner unit) -- -- -- (3,150,000 ) --
Net income -- -- -- -- 2,472,316
-------------- ------------ -------------- ---------------- -----------------
Balance, December 31, 2002 $ 1,000 $ 290,598 $ 35,000,000 $ (41,404,226 ) $ 37,155,481
============== ============ ============== ================ =================
Syndication
Costs Total
-------------- --------------
$ (4,015,000 ) $28,955,604
-- (3,150,000 )
-- 3,016,796
-------------- --------------
(4,015,000 ) 28,822,400
-- (3,150,000 )
-------------- --------------
(4,015,000 ) 27,705,537
-- (3,150,000 )
-- 2,472,316
-------------- --------------
$ (4,015,000 ) $27,027,853
============== ==============
See accompanying notes to financial statements.
CNL INCOME FUND VI, LTD.
(A Florida Limited Partnership)
STATEMENTS OF CASH FLOWS
Year Ended December 31,
2002 2001 2000
--------------- --------------- ---------------
Increase (Decrease) in Cash and Cash Equivalents
Cash Flows from Operating Activities:
Net Income $ 2,472,316 $ 2,033,137 $ 3,016,796
----------------- ----------------- ------------------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 375,418 370,848 367,328
Amortization of investment in direct financing
leases 58,275 71,787 68,794
Amortization 1,650 1,648 1,650
Minority interest in income of consolidated
joint venture 95,316 23,001 27,169
Equity in earnings of unconsolidated joint
ventures, net of distributions 152,860 (168,113) 209,194
Loss (gain) on sale of assets (216,094) 11,897 (639,806)
Provision for write-down of assets 106,437 565,061 368,430
Provision for doubtful accounts -- 33,147 --
Decrease (increase) in receivables 26,288 (12,951) (10,584)
Decrease (increase) in due from related party 14,317 (2,388) 5,518
Increase in accrued rental income (48,618) (56,778) (97,498)
Decrease (increase) in other assets 8,854 21,552 (27,163)
Increase (decrease) in accounts payable and
real estate taxes payable 17,883 (22,863) (89,824)
Increase (decrease) in due to related parties 2,916 6,111 (59,824)
Increase (decrease) rents paid in advance and
deposits 3,776 25,270 (3,881)
----------------- ----------------- ------------------
Total adjustments 599,278 867,229 119,503
----------------- ----------------- ------------------
Net Cash Provided by Operating Activities 3,071,594 2,900,366 3,136,299
----------------- ----------------- ------------------
Cash Flows from Investing Activities:
Proceeds from sale of assets 441,126 373,800 2,071,847
Additions to real estate properties with operating -- (3,063,219) --
leases
Investment in joint ventures (247,437) (1,368,300) (1,112,500)
Liquidating distribution from joint ventures -- 2,430,032 --
Redemption of (investment in) certificate of deposit -- 100,000 (100,000)
Decrease (increase) in restricted cash -- 2,061,560 (2,061,560)
----------------- ----------------- ------------------
Net cash provided by (used in) investing activities 193,689 533,873 (1,202,213)
----------------- ----------------- ------------------
Cash Flows from Financing Activities:
Proceeds from loan from corporate General Partner -- 75,000 --
Repayment of loan from corporate General Partner -- (75,000) --
Distributions to limited partners (3,150,000) (3,150,000) (3,150,000)
Distributions to holder of minority interest (73,754) (26,191) (40,706)
----------------- ----------------- ------------------
Net cash used in financing activities (3,223,754) (3,176,191) (3,190,706)
----------------- ----------------- ------------------
Net Increase (Decrease) in Cash and Cash Equivalents 41,529 258,048 (1,256,620)
Cash and Cash Equivalents at Beginning of Year 1,126,921 868,873 2,125,493
----------------- ----------------- ------------------
Cash and Cash Equivalents at End of Year $ 1,168,450 $ 1,126,921 $ 868,873
================= ================= ==================
See accompanying notes to financial statements.
CNL INCOME FUND VI, LTD.
(A Florida Limited Partnership)
STATEMENTS OF CASH FLOWS - CONTINUED
Year Ended December 31,
2002 2001 1999
--------------- --------------- ---------------
Supplemental Schedule of Non-Cash Investing and Financing
Activities:
Insurance proceeds receivable $ 577,775 $ -- $ --
=============== =============== ===============
Distributions declared and unpaid at December 31 $ 787,500 $ 787,500 $ 787,500
=============== =============== ===============
CNL INCOME FUND VI, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
Years Ended December 31, 2002, 2001, and 2000
1. Significant Accounting Policies:
Organization and Nature of Business - CNL Income Fund VI, Ltd. (the
"Partnership") is a Florida limited partnership that was organized for
the purpose of acquiring both newly constructed and existing restaurant
properties, as well as properties upon which restaurants were to be
constructed, which are leased primarily to operators of national and
regional fast-food and family-style restaurant chains.
The general partners of the Partnership are CNL Realty Corporation (the
"Corporate General Partner"), James M. Seneff, Jr. and Robert A.
Bourne. Mr. Seneff and Mr. Bourne are also 50% shareholders of the
Corporate General Partner. The general partners have responsibility for
managing the day-to-day operations of the Partnership.
Real Estate and Lease Accounting - The Partnership records real estate
property acquisitions at cost, including acquisition and closing costs.
Real estate properties are leased to third parties generally on a
triple-net basis, whereby the tenant is responsible for all operating
expenses relating to the property, including property taxes, insurance,
maintenance and repairs. During the years ended December 31, 2002,
2001, and 2000, tenants paid directly to real estate taxing authorities
approximately $315,800, $295,600, and $247,700, respectively, in real
estate taxes in accordance with the terms of their triple net leases
with the Partnership.
The leases of the Partnership provide for base minimum annual rental
payments payable in monthly installments. In addition, certain leases
provide for contingent rental revenues based on the tenants' gross
sales in excess of a specified threshold. The Partnership defers
recognition of the contingent rental revenues until the defined
thresholds are met. The leases are accounted for using either the
direct financing or the operating methods. Such methods are described
below:
Direct financing method - Leases accounted for using the direct
financing method are recorded at their net investment (which at the
inception of the lease generally represents the cost of the asset).
Unearned income is deferred and amortized to income over the lease
terms so as to produce a constant periodic rate of return on the
Partnership's net investment in the leases. For the leases classified
as direct financing leases, the building portions of the property
leases are accounted for as direct financing leases while the land
portions of some of these leases are operating leases.
Operating method - Land and building leases accounted for using the
operating method are recorded at cost, revenue is recognized as rentals
are earned and depreciation is charged to operations as incurred.
Buildings are depreciated on the straight-line method over their
estimated useful lives of 30 years. When scheduled rentals vary during
the lease term, income is recognized on a straight-line basis so as to
produce a constant periodic rent over the lease term commencing on the
date the property is placed in service.
Accrued rental income represents the aggregate amount of income
recognized on a straight-line basis in excess of scheduled rental
payments to date.
CNL INCOME FUND VI, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2002, 2001, and 2000
1. Significant Accounting Policies - Continued:
Substantially all leases are for 15 to 20 years and provide for minimum
and contingent rentals. The lease options generally allow tenants to
renew the leases for two to four successive five-year periods subject
to the same terms and conditions as the initial lease. Most leases also
allow the tenant to purchase the property at fair market value after a
specified portion of the lease has elapsed.
When the properties are sold, the related cost and accumulated
depreciation for operating leases and the net investment for direct
financing leases, plus any accrued rental income, are removed from the
accounts and gains or losses from sales are reflected in income. The
general partners of the Partnership review properties for impairment
whenever events or changes in circumstances indicate that the carrying
amount of the assets may not be recoverable through operations. The
general partners determine whether an impairment in value has occurred
by comparing the estimated future undiscounted cash flows, including
the residual value of the property, with the carrying cost of the
individual property. If an impairment is indicated, the assets are
adjusted to the fair value.
When the collection of amounts recorded as rental or other income is
considered to be doubtful, a provision is made to increase the
allowance for doubtful accounts. If amounts are subsequently determined
to be uncollectible, the corresponding receivable and allowance for
doubtful accounts are decreased accordingly.
Investment in Joint Ventures - Prior to the liquidation of Caro Joint
Venture, a Florida limited partnership, in November 2002, the
Partnership accounted for its 66% interest in the joint venture using
the consolidation method. Minority interest represented the minority
joint venture partners' proportionate share of equity in the
Partnership's consolidated joint venture. All significant intercompany
accounts and transactions have been eliminated. The Partnership's
investments in Auburn Joint Venture, Show Low Joint Venture, Asheville
Joint Venture, Warren Joint Venture, and Melbourne Joint Venture and
properties in Clinton, North Carolina; Vancouver, Washington; Overland
Park, Kansas; Memphis, Tennessee; Fort Myers, Florida; Baytown, Texas;
Waldorf, Maryland; Niles, Illinois; Universal City, Texas; and Schertz,
Texas, each of which is held as tenants-in-common with affiliates of
the general partners, are accounted for using the equity method since
the joint venture agreement requires the consent of all partners on all
key decisions affecting the operations of the underlying property.
Cash and Cash Equivalents - The Partnership considers all highly liquid
investments with a maturity of three months or less when purchased to
be cash equivalents. Cash and cash equivalents consist of demand
deposits at commercial banks and money market funds (some of which are
backed by government securities). Cash equivalents are stated at cost
plus accrued interest, which approximates market value.
Cash accounts maintained on behalf of the Partnership in demand
deposits at commercial banks and money market funds may exceed
federally insured levels; however, the Partnership has not experienced
any losses in such accounts.
Lease Costs - Other assets include brokerage fees and lease incentive
costs incurred in finding new tenants and negotiating leases and are
amortized over the terms of the new leases using the straight-line
method.
Income Taxes - Under Section 701 of the Internal Revenue Code, all
income, expenses and tax credit items flow through to the partners for
tax purposes. Therefore, no provision for federal income taxes is
provided in the accompanying financial statements. The Partnership is
subject to certain state taxes on its income and property.
CNL INCOME FUND VI, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2002, 2001, and 2000
1. Significant Accounting Policies - Continued:
Additionally, for tax purposes, syndication costs are included in
Partnership equity and in the basis of each partner's investment. For
financial reporting purposes, syndication costs represent a reduction
of Partnership equity and a reduction in the basis of each partner's
investment.
Use of Estimates - The general partners of the Partnership have made a
number of estimates and assumptions relating to the reporting of assets
and liabilities and the disclosure of contingent assets and liabilities
to prepare these financial statements in conformity with generally
accepted accounting principles. The more significant areas requiring
the use of management estimates relate to the allowance for doubtful
accounts and future cash flows associated with long-lived assets.
Actual results could differ from those estimates.
Reclassification - Certain items in the prior years' financial
statements have been reclassified to conform to 2002 presentation,
including a change in presentation of the statement of cash flows from
the direct to the indirect method. These reclassifications had no
effect on total partners' capital, net income or cash flows.
Statement of Financial Accounting Standards No. 144 ("FAS 144") -
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.
FASB Interpretation No. 46 ("FIN 46") - 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 considered 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 interests 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. Management believes 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.
CNL INCOME FUND VI, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2002, 2001, and 2000
2. Real Estate Properties With Operating Leases:
Real estate properties with operating leases consisted of the following
at December 31:
2002 2001
------------------- ------------------
Land $ 7,984,328 $ 7,984,328
Buildings 10,330,088 11,042,851
------------------- ------------------
18,314,416 19,027,179
Less accumulated depreciation (3,612,456 ) (3,381,364 )
------------------- ------------------
$ 14,701,960 $ 15,645,815
=================== ==================
In February 2001, the Partnership reinvested the net sales proceeds
from the 2000 sale of several properties in two additional properties
one in Burley, Idaho and one in Cleburne, Texas. The Partnership
acquired these properties from CNL Funding 2001-A, LP, an affiliate of
the general partners.
In May 2001, the Partnership sold its property in Chester, Pennsylvania
to a third party and received net sales proceeds of approximately
$83,000. The Partnership had recorded provisions for write-down of
assets in prior years. During 2001, the Partnership recorded an
additional loss of $14,008 upon the sale of the property.
In December 2001, the Partnership reinvested the net sales proceeds
from the sale of the property in Round Rock, Texas, which the
Partnership held as tenants-in-common with CNL Income Fund XI, Ltd., in
a property in Houston, Texas. The Partnership acquired this property
from CNL Funding 2001-A, LP, an affiliate of the general partners.
In October 2002, the property in Marietta, Georgia was destroyed by
fire and the tenant terminated its lease relating to this property. As
a result, the Partnership recorded a provision for write-down of assets
of approximately $73,600. The property is covered by insurance held by
the tenant. The expected insurance proceeds of approximately $577,800
were included in receivables. In November 2002, Caro Joint Venture, the
Partnership's consolidated joint venture, sold its property to a third
party.
The following is a schedule of the future minimum lease payments to be
received on noncancellable operating leases at December 31, 2002:
2003 $ 1,863,615
2004 1,855,970
2005 1,189,617
2006 1,072,455
2007 1,072,455
Thereafter 7,466,877
----------------
$ 14,520,989
================
CNL INCOME FUND VI, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2002, 2001, and 2000
3. Net Investment in Direct Financing Leases:
The following lists the components of the net investment in direct
financing leases at December 31:
2002 2001
---------------- -----------------
Minimum lease payments receivable $ 3,922,057 $ 4,302,673
Estimated residual values 920,662 920,662
Less unearned income (2,534,524 ) (2,824,006 )
----------------- ----------------
Net investment in direct financing leases $ 2,308,195 $ 2,399,329
================ =================
The following is a schedule of future minimum lease payments to be
received on direct financing leases at December 31, 2002:
2003 $ 347,756
2004 347,756
2005 350,645
2006 365,875
2007 365,875
Thereafter 2,144,150
---------------
---------------
$ 3,922,057
===============
During 2001, the Partnership recorded provisions for write-down of
assets of approximately $565,100 relating to its properties in Broken
Arrow, Oklahoma and Cheyenne, Wyoming. In December 2001, the
Partnership sold the property in Cheyenne, Wyoming for which the real
estate property was classified as a direct financing lease. In
connection with the sale, the gross investment (minimum lease payments
receivable and the estimated residual value) and unearned income
relating to the assets classified as a direct financing lease, were
removed from the accounts. The Partnership sold this property to a
third party and received net sales proceeds of approximately $290,800,
resulting in a gain of approximately $2,100. In January 2003, the
Partnership entered into a contract with a third party to sell the
property in Broken Arrow, Oklahoma. The Partnership recorded an
additional provision for write-down of assets relating to this property
of approximately $32,900 as of December 31, 2002. The provisions
represented the difference between the properties' net carrying value
and its estimated fair value.
4. Investment in Joint Ventures:
The Partnership has a 3.9%, a 36%, a 14.46%, a 64.29%, and a 50%,
interest in the profits and losses of Auburn Joint Venture, Show Low
Joint Venture, Asheville Joint Venture, Warren Joint Venture, and
Melbourne Joint Venture. In addition, the Partnership has a 23.04%, an
18%, a 34.74%, a 46.2%, an 85%, an 80%, and a 74% interest in a
property in Vancouver, Washington; a property in Clinton, North
Carolina; a property in Overland Park, Kansas; a property in Memphis,
Tennessee; a property in Fort Myers, Florida; a property in Baytown,
Texas; and a property in Niles, Illinois, each held as
tenants-in-common, respectively. The remaining interests in these joint
ventures and the properties held as tenants in common are held by
affiliates of the Partnership which have the same general partners.
CNL INCOME FUND VI, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2002, 2001, and 2000
4. Investment in Joint Ventures - Continued:
In June 2001, the Partnership and CNL Income Fund IX, Ltd. sold the
property in Dublin, California and received net sales proceeds of
approximately $1,699,600, resulting in a gain, to the
tenancy-in-common, of approximately $158,100. The Partnership received
approximately $1,273,800 as a liquidating distribution for its pro-rata
share of the net sales proceeds. In July 2001, the Partnership
reinvested these net sales proceeds in a property in Waldorf, Maryland,
as tenants-in-common with CNL Income Fund IX, Ltd. and CNL Income Fund
XVII, Ltd., each of which is an affiliate of the general partners. As
of December 31, 2002, the Partnership had contributed approximately
$1,368,300 for a 60% interest in the property. In October 2001, the
Partnership and CNL Income Fund XI, Ltd. sold the property in Round
Rock, Texas and received net sales proceeds of approximately
$1,510,700, resulting in a gain, to the tenancy-in-common, of
approximately $123,900. The Partnership received approximately
$1,156,300 as a liquidating distribution for its pro-rata share of the
net sales proceeds. In December 2001, the Partnership reinvested the
majority of these proceeds in a property in Houston, Texas.
During 2000, the lease associated with the property owned by Melbourne
Joint Venture had been amended to provide for rent reductions due to
financial difficulties the tenant was experiencing and the joint
venture recorded a provision for write-down of assets of approximately
$271,000. The provision represented the difference between the
property's net carrying value at December 31, 2000 and its estimated
fair value. In June 2001, the Partnership re-leased this property to a
new tenant.
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, at December 31, 2001, the
joint venture reclassified the building portion of the property from
net investment in direct financing lease to real estate property with
an operating lease. No loss on termination of direct financing leases
was recorded. In addition, during the year ended December 31, 2001, the
Partnership recorded a provision for write-down of assets of
approximately $56,400. The provision represented the difference between
the net carrying value of the property and its estimated fair value.
Based on a pending contract to sell the property, the joint venture
recorded an additional provision for write-down of assets of
approximately $172,200 during the year ended December 31, 2002. The
contract for the sale of the property was subsequently terminated and
the Partnership is currently seeking a new tenant.
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. The Partnership and CNL Income Fund
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 December 31, 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 FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2002, 2001, and 2000
4. Investment in Joint Ventures - Continued:
Auburn Joint Venture, Show Low Joint Venture, Asheville Joint Venture,
Melbourne Joint Venture, Warren Joint Venture, and the Partnership and
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:
December 31, December 31,
2002 2001
-------------------- ------------------
Real estate properties with operating
leases, net $ 15,447,473 $ 13,817,152
Net investment in direct financing leases 2,719,398 2,750,031
Cash 34,613 86,895
Receivables, less allowance for doubtful
accounts 30,855 31,451
Accrued rental income 635,573 497,023
Other assets 444 3,412
Liabilities 3,519 1,057
Partners' capital 18,864,837 17,184,907
Year Ended December 31,
2002 2001 2000
-------------------- ------------------ ------------------
Revenues $ 1,904,597 $ 1,925,303 $ 1,913,667
Expenses (326,506 ) (346,507 ) (321,656 )
Provision for write-down of assets (172,165 ) (56,398 ) (271,043 )
Gain on sale of assets -- 282,012 --
-------------------- ------------------ ------------------
Net Income $ 1,405,926 $ 1,804,410 $1,320,968
==================== ================== ==================
The Partnership recognized income of $673,970, $987,886, and $672,749
during the years ended December 31, 2002, 2001 and 2000, respectively,
from these joint ventures and tenancy in common arrangements.
5. Discontinued Operations:
During 2002, Caro Joint Venture, in which the Partnership owned a
66.14% interest and accounted for under the consolidation method,
entered into an agreement with a third party to sell its property in
Caro, Michigan. During 2002, the joint venture sold this property and
received net sales proceeds of approximately $600,000, resulting in a
gain on sale of assets of approximately $216,100 to the joint venture.
As a result of the sale of the property, the joint venture was
dissolved in accordance with the joint venture agreement and the
Partnership received approximately $441,100 representing its pro-rata
share of liquidating distributions from the joint venture and recorded
a gain on sale of discontinued operations of approximately $18,200
during the year ended December 31, 2002. The financial results relating
to this property are reflected as Discontinued Operations in the
accompanying financial statements.
CNL INCOME FUND VI, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2002, 2001, and 2000
5. Discontinued Operations - Continued:
The operating results of the discontinued operations for the above
properties are as follows:
Year Ended December 31,
2002 2001 2000
----------------- ---------------- ------------------
Rental revenues $ 79,582 $ 90,264 95,914
Expenses (14,177 ) (22,335 ) (15,675 )
Gain on disposal of assets 234,297 -- --
----------------- ---------------- ------------------
Income from discontinued
Operations $ 299,702 $ 67,929 $ 80,239
================= ================ ==================
6. Receivables:
During 1997, the Partnership terminated the lease with the tenant of
the property in Greensburg, Indiana. In connection therewith, the
Partnership accepted a promissory note from the former tenant for
$13,077 for past due amounts. The promissory note, which was
uncollateralized, bore interest at a rate of ten percent per annum and
was being collected in 36 monthly installments. These amounts were
fully collected by December 31, 2001.
7. Allocations and Distributions:
From inception through December 31, 1999, generally, all net income and
net losses of the Partnership, excluding gains and losses from the sale
of properties, were allocated 99% to the limited partners and one
percent to the general partners. From inception through December 31,
1999 distributions of net cash flow were made 99% to the limited
partners and one percent to the general partners. However, the one
percent of net cash flow to be distributed to the general partners was
subordinated to receipt by the limited partners of an aggregate, ten
percent, cumulative, noncompounded annual return on their adjusted
capital contributions (the "10% Preferred Return").
From inception through December 31, 1999, generally, net sales proceeds
from the sale of properties not in liquidation of the Partnership, to
the extent distributed, were distributed first to the limited partners
in an amount sufficient to provide them with their 10% Preferred
Return, plus the return of their adjusted capital contributions. The
general partners then received, to the extent previously subordinated
and unpaid, a one percent interest in all prior distributions of net
cash flow and a return of their capital contributions. Any remaining
sales proceeds were distributed 95% to the limited partners and five
percent to the general partners. Any gain from the sale of a property
not in liquidation of the Partnership was, in general, allocated in the
same manner as net sales proceeds are distributable. Any loss from the
sale of a property was, in general, allocated first, on a pro rata
basis, to partners with positive balances in their capital accounts;
and thereafter, 95% to the limited partners and five percent to the
general partners.
CNL INCOME FUND VI, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2002, 2001, and 2000
7. Allocations and Distributions - Continued:
Generally, net sales proceeds from a liquidating sale of properties,
will be used in the following order: (i) first to pay and discharge all
of the Partnership's liabilities to creditors, (ii) second, to
establish reserves that may be deemed necessary for any anticipated or
unforeseen liabilities or obligations of the Partnership, (iii) third,
to pay all of the Partnership's liabilities, if any, to the general and
limited partners, (iv) fourth, after allocations of net income, gains
and/or losses, to distribute to the partners with positive capital
accounts balances, in proportion to such balances, up to amounts
sufficient to reduce such positive balances to zero, and (v)
thereafter, any funds remaining shall then be distributed 95% to the
limited partners and five percent to the general partners.
Effective January 1, 2000, the general partners waived their right to
receive future distributions from the Partnership, including both
distributions of operating cash flow and distributions of liquidation
proceeds, to the extent that the cumulative amount of such
distributions would exceed the balance in the general partners' capital
account as of December 31, 1999. Accordingly, for years commencing
January 1, 2000 and after, the Partnership's net income will be
allocated entirely among the limited partners. However, if losses are
allocated to the general partners in a year, an amount of income equal
to the sum of such losses may be allocated to the general partner in
succeeding years. Accordingly, the general partners were not allocated
any net income during the years ended December 31, 2002, 2001 or 2000.
During each of the years ended December 31, 2002, 2001, and 2000, the
Partnership declared distributions to the limited partners of
$3,150,000. No distributions have been made to the general partners to
date.
CNL INCOME FUND VI, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2002, 2001, and 2000
8. Income Taxes:
The following is a reconciliation of net income for financial reporting
purposes to net income for federal income tax purposes for the years
ended December 31:
2002 2001 2000
--------------- ---------------- ---------------
Net income for financial reporting purposes $ 2,472,316 $ 2,033,137 $ 3,016,796
Effect of timing differences relating to depreciation (9,349) (31,672) (57,187)
Provision for write-down of assets 106,437 565,061 368,430
Direct financing leases recorded as operating leases for
tax reporting purposes 58,274 71,806 68,794
Effect of timing differences relating to gains/losses on
real estate property sales (261,029) (216,733) (639,806)
Effect of timing differences relating to equity in earning
of unconsolidated joint ventures 13,662 (264,234) 4,976
Effect of timing differences relating to allowance for
doubtful accounts (141,028) (43,067) (46,628)
Accrued rental income (48,618) (56,778) (97,498)
Rents paid in advance 4,438 25,270 (4,381)
Deduction of transaction costs for tax reporting purposes -- -- (194,444)
Effect of timing differences relating to minority interest
of consolidated joint venture 217,376 (267) 3,761
--------------- ---------------- ---------------
Net income for federal income tax purposes $ 2,412,479 $ 2,082,523 $ 2,422,813
=============== ================ ===============
CNL INCOME FUND VI, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2002, 2001, and 2000
9. Related Party Transactions:
One of the individual general partners, James M. Seneff, Jr., is one of
the principal shareholders of CNL Holdings, Inc. The other individual
general partner, Robert A. Bourne, serves as President and Treasurer of
CNL Financial Group, Inc., a wholly owned subsidiary of CNL Holdings,
Inc. CNL APF Partners, LP, a wholly owned subsidiary of CNL American
Properties Fund, Inc. ("APF") served as the Partnership's advisor until
January 1, 2002, when it assigned its rights and obligations under a
management agreement to RAI Restaurants, Inc. (formerly known as CNL
Restaurants XVIII, Inc.). RAI Restaurants, Inc. ("the Advisor") is a
wholly owned subsidiary of APF. The individual general partners are
stockholders and directors of APF.
The Advisor provides services pursuant to a management agreement with
the Partnership. In connection therewith, the Partnership agreed to pay
the Advisor a management fee of one percent of the sum of gross
revenues from properties wholly owned by the Partnership and the
Partnership's allocable share of gross revenues from joint ventures and
the property held as tenants-in-common with an affiliate, but not in
excess of competitive fees for comparable services. These fees are
payable only after the limited partners receive their 10% Preferred
Return. Due to the fact that these fees are noncumulative, if the
limited partners have not received their 10% Preferred Return in any
particular year, no management fees will be due or payable for such
year. As a result of such threshold, no management fees were incurred
during the years ended December 31, 2002 and 2001.
The Advisor is also entitled to receive a deferred, subordinated real
estate disposition fee, payable upon the sale of one or more properties
based on the lesser of one-half of a competitive real estate commission
or three percent of the sales price if the Advisor provides a
substantial amount of services in connection with the sale. However, if
the sales proceeds are reinvested in a placement property, no such real
estate disposition fees will be incurred until such replacement
property is sold and the net sales proceeds are distributed. The
payment of the real estate disposition fee is subordinated to the
receipt by the limited partners of their aggregate 10% Preferred
Return, plus their adjusted capital contributions. No deferred,
subordinated real estate disposition fees have been incurred since
inception.
During 2001, the Partnership acquired three properties, one in Burley,
Idaho, one in Cleburne, Texas, and one in Houston, Texas, from CNL
Funding 2001-A, LP. In June 2002, the Partnership and CNL Income Fund
XI, Ltd. acquired one 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. 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 represented the costs incurred by CNL Funding 2001-A, LP to
acquire and carry the properties.
During the years ended December 31, 2002, 2001, and 2000, the
Partnership's Advisor and its affiliates provided accounting and
administrative services. The Partnership incurred $177,297, $198,307
and $97,772 for the years ended December 31, 2002, 2001, and 2000,
respectively, for such services.
The due to related parties at December 31, 2002 and 2001, totaled
$14,423 and $11,507, respectively.
CNL INCOME FUND VI, LTD. (A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2002, 2001, and 2000
10. Concentration of Credit Risk:
The following schedule presents rental revenues from individual
lessees, each representing more than ten percent of the Partnership's
rental revenues (including the Partnership's share of rental revenues
from joint ventures and the properties held as tenants-in-common with
affiliates of the general partners) for each of the years ended
December 31:
2002 2001 2000
-------------- ---------------- ---------------
Golden Corral Corporation $ 787,090 $ 779,116 $ 771,099
IHOP Properties, Inc. 621,599 772,413 864,889
In addition, the following schedule presents rental revenues from
individual restaurant chains, each representing more than ten percent
of the Partnership's rental revenues (including the Partnership's share
of rental revenues from joint ventures and the properties held as
tenants-in-common with affiliates of the general partners) for each of
the years ended December 31:
2002 2001 2000
---------------- ---------------- -----------------
Golden Corral Family Steakhouse Restaurants $ 787,090 $779,116 $ 771,099
IHOP 621,599 772,413 864,889
Although the Partnership's properties are geographically diverse
throughout the United States and the Partnership's lessees operate a
variety of restaurant concepts, default by any one of these lessees or
restaurant chains could significantly impact the results of operations
of the Partnership if the Partnership is not able to re-lease the
properties in a timely manner.
CNL INCOME FUND VI, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2002, 2001, and 2000
11. Selected Quarterly Financial Data:
The following table presents selected unaudited quarterly financial
data for each full quarter during the years ended December 31, 2002 and
2001.
2002 Quarter First Second Third Fourth Year
------------------------------- ---------- ------------- ------------ --------------- ---------------
Continuing Operations (1):
Revenues $593,748 $ 569,324 $ 601,134 $ 643,975 $ 2,408,181
Equity in earnings of
unconsolidated joint
ventures 169,719 170,708 198,605 134,938 673,970
Income from
continuing
operations 555,671 561,148 615,514 440,281 2,172,614
Discontinued operations (1):
Revenues 22,970 22,970 22,970 10,672 79,582
Income from
discontinued
operations 18,644 19,392 16,744 244,922 299,702
Net Income 574,315 580,540 632,258 685,203 2,472,316
Net Income per limited
partner unit:
Continuing operations $ 7.93 $ 8.01 $ 8.79 $ 6.31 $ 31.04
Discontinued operations 0.27 0.28 0.24 3.49 4.28
---------- ------------- ------------ --------------- ---------------
Total $ 8.20 $ 8.29 $ 9.03 $ 9.80 $ 35.32
========== ============= ============ =============== ===============
CNL INCOME FUND VI, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2002, 2001, and 2000
11. Selected Quarterly Financial Data - Continued:
2001 Quarter First Second Third Fourth Year
------------------------------- ---------- ------------- ------------ --------------- ---------------
Continuing Operations (1):
Revenues $601,991 $ 542,644 $ 535,626 $ 669,636 $ 2,349,897
Equity in earnings of
unconsolidated joint
ventures 186,256 329,036 222,171 250,423 987,886
Income from
continuing
operations 503,632 362,623 315,305 783,648 1,965,208
Discontinued operations (1):
Revenues 23,293 22,256 23,638 21,077 90,264
Income from
discontinued
operations 19,707 16,895 18,486 12,841 67,929
Net Income 523,339 379,518 333,791 796,489 2,033,137
Net Income per Limited
Partner unit:
Continuing operations $ 7.20 $ 5.18 $ 4.51 $ 11.18 $ 28.07
Discontinued operations 0.28 0.24 0.26 0.19 0.97
---------- ------------- ------------ --------------- ---------------
Total $ 7.48 $ 5.42 $ 4.77 $ 11.37 $ 29.04
========== ============= ============ =============== ===============
(1) Certain items in selected quarterly financial data have been
reclassified to conform to the 2002 presentation. These
reclassifications had no effect on total net income. The results
of operations relating to properties that were either disposed of
or were classified as held for sale as of December 31, 2002 are
reported as discontinued operations for all periods presented. The
results of operations relating to properties that were identified
for sale as of December 31, 2001 but sold subsequently are
reported as continuing operations.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
The General Partners of the Registrant are James M. Seneff, Jr., Robert
A. Bourne and CNL Realty Corporation, a Florida corporation. The General
Partners manage and control the Partnership's affairs and have general
responsibility and the ultimate authority in all matters affecting the
Partnership's business. The Partnership has available to it the services,
personnel and experience of CNL American Properties Fund, Inc. ("APF"), CNL Fund
Advisors, Inc., CNL Financial Group, Inc. and their affiliates, all of which are
affiliates of the General Partners.
James M. Seneff, Jr., age 56. Since 1971, Mr. Seneff has been active in
the acquisition, development, and management of real estate projects and,
directly or through an affiliated entity, has served as a general partner or
co-venturer in over 100 real estate ventures. These ventures have involved the
financing, acquisition, construction, and leasing of restaurants, office
buildings, apartment complexes, hotels, and other real estate. Mr. Seneff has
served as Director and Chairman of the Board of APF, a public, unlisted real
estate investment trust, since 1994. Mr. Seneff served as Chief Executive
Officer of APF from 1994 through August 1999, and has served as co-Chief
Executive Officer of APF since December 2000. Mr. Seneff served as Chairman of
the Board and Chief Executive Officer of CNL Fund Advisors, Inc., formerly the
Partnership's advisor, until it merged with a wholly-owned subsidiary of APF in
September 1999, and in June 2000, was re-elected to those positions of CNL Fund
Advisors, Inc. Mr. Seneff is a principal stockholder of CNL Holdings, Inc., the
parent company of CNL Financial Group, Inc. (formerly CNL Group, Inc.), a
diversified real estate company, and has served as a Director, Chairman of the
Board and Chief Executive Officer of CNL Financial Group, Inc. since its
formation in 1980. CNL Financial Group, Inc. is the parent company, either
directly or indirectly through subsidiaries, of CNL Real Estate Services, Inc.,
CNL Capital Markets, Inc., CNL Investment Company and CNL Securities Corp., all
of which are engaged in the business of real estate finance. Mr. Seneff also
serves as a Director, Chairman of the Board and Chief Executive Officer of CNL
Hospitality Properties, Inc., a public, unlisted real estate investment trust,
as well as, CNL Hospitality Corp., its advisor. In addition, he serves as a
Director, Chairman of the Board and Chief Executive Officer of CNL Retirement
Properties, Inc., a public, unlisted real estate investment trust and its
advisor, CNL Retirement Corp. Since 1992, Mr. Seneff has also served as a
Director, Chairman of the Board and Chief Executive Officer of Commercial Net
Lease Realty, Inc., a public real estate investment trust that is listed on the
New York Stock Exchange. Mr. Seneff has also served as a Director, Chairman of
the Board and Chief Executive Officer of CNL Securities Corp. since 1979; CNL
Investment Company since 1990; and CNL Institutional Advisors, Inc., a
registered investment advisor for pension plans, since 1990. Mr. Seneff formerly
served as a Director of First Union National Bank of Florida, N.A., and
currently serves as the Chairman of the Board of CNL Bank, an independent,
state-chartered commercial bank. Mr. Seneff previously served on the Florida
State Commission on Ethics and is a former member and past Chairman of the State
of Florida Investment Advisory Council, which recommends to the Florida Board of
Administration investments for various Florida employee retirement funds. The
Florida Board of Administration, Florida's principal investment advisory and
money management agency, oversees the investment of more than $60 billion of
retirement funds. Mr. Seneff received his degree in Business Administration from
Florida State University in 1968.
Robert A. Bourne, age 55. Mr. Bourne has participated as a general
partner or co-venturer in over 100 real estate ventures involved in the
financing, acquisition, construction, and leasing of restaurants, office
buildings, apartment complexes, hotels, and other real estate. Mr. Bourne is a
Director of APF. Mr. Bourne served as President of APF from 1994 through
February 1999. He also served as Treasurer from February 1999 through August
1999 and from May 1994 through December 1994. He also served in various
executive positions with CNL Fund Advisors, Inc. prior to its merger with a
wholly-owned subsidiary of APF including, President from 1994 through September
1997, and Director from 1994 through August 1999. Mr. Bourne serves as President
and Treasurer of CNL Financial Group, Inc.; Director, Vice Chairman of the
Board, and Treasurer , and from 1997 until June 2002 served as President, of CNL
Hospitality Properties, Inc., a public, unlisted real estate investment trust;
as well as, Director, Vice Chairman of the Board, and Treasurer, and from 1997
until June 2002 served as President, of CNL Hospitality Corp., its advisor. In
addition, Mr. Bourne serves as Director, Vice Chairman of the Board, and
Treasurer, and from 1997 until June 2002 served as President, of CNL Retirement
Properties, Inc., a public, unlisted real estate investment trust; as well as, a
Director, Vice Chairman of the Board, and Treasurer, and from 1997 until June
2002 served as President, of its advisor, CNL Retirement Corp. Mr. Bourne also
serves as a Director of CNL Bank. He has served as a Director since 1992, Vice
Chairman of the Board since February 1996, Secretary and Treasurer from February
1996 through 1997, and President from July 1992 through February 1996, of
Commercial Net Lease Realty, Inc., a public real estate investment trust listed
on the New York Stock Exchange. Mr. Bourne also serves as Director, President
and Treasurer for various affiliates of CNL Financial Group, Inc. including, CNL
Investment Company, CNL Securities Corp. and CNL Institutional Advisors, Inc., a
registered investment advisor for pension plans. Mr. Bourne began his career as
a certified public accountant employed by Coopers & Lybrand, Certified Public
Accountants, from 1971 through 1978, where he attained the position of Tax
Manager in 1975. Mr. Bourne graduated from Florida State University in 1970
where he received a B.A. in Accounting, with honors.
Curtis B. McWilliams, age 47. Mr. McWilliams has served as Co-Chief
Executive Officer of APF since December 2000 and previously served as Chief
Executive Officer from September 1999 through December 2000. Prior to the
acquisition of CNL Fund Advisors, Inc., Mr. McWilliams served as President of
APF from February 1999 until September 1999. From February 1998 to February
1999, he served as Executive Vice President of APF. Mr. McWilliams joined CNL
Financial Group, Inc. in April 1997 and served as an Executive Vice President
from October 1997 until September 1999. In addition, Mr. McWilliams served as
President of CNL Fund Advisors, Inc. and CNL Financial Services, Inc., a
corporation engaged in the business of real estate financing, from April 1997
until the acquisition of such entities by wholly-owned subsidiaries of APF in
September 1999. From September 1983 through March 1997, Mr. McWilliams was
employed by Merrill Lynch & Co. The majority of his career at Merrill Lynch &
Co. was in the Investment Banking division where he served as a Managing
Director. Mr. McWilliams received a B.S.E. in Chemical Engineering from
Princeton University in 1977 and a Master of Business Administration degree with
a concentration in finance from the University of Chicago in 1983.
Steven D. Shackelford, age 39. Mr. Shackelford was promoted to
Executive Vice President of APF in June 2000. He served as Senior Vice President
from September 1999 until his promotion in June 2000. Mr. Shackelford has served
as Chief Financial Officer since January 1997 and has served as Secretary and
Treasurer of APF since September 1999. He also served as Chief Financial Officer
of CNL Fund Advisors, Inc. from September 1996 to September 1999. From March
1995 to July 1996, Mr. Shackelford was a senior manager in the national office
of Price Waterhouse LLP where he was responsible for advising foreign clients
seeking to raise capital and a public listing in the United States. From August
1992 to March 1995, he was a manager in the Paris, France office of Price
Waterhouse, serving several multi-national clients. Mr. Shackelford was an audit
staff and senior from 1986 to 1992 in the Orlando, Florida office of Price
Waterhouse. Mr. Shackelford received a Bachelor of Arts degree in Accounting,
with honors, and a Master of Business Administration degree from Florida State
University and is a certified public accountant.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires the General Partners, the
officers of the corporate General Partner, and persons who own more than ten
percent of a registered class of the Partnership's equity securities
(collectively, the "Reporting Persons"), to file reports of ownership and
changes in ownership on Forms 3, 4 and 5 with the SEC. Reporting Persons are
required by SEC regulation to furnish the Partnership with copies of all Forms
3, 4 and 5 that they file.
Based solely on the General Partners' review of the copies of such
forms the Partnership has received and written representations from certain
Reporting Persons that they were not required to file Forms 5 for the last
fiscal year, the General Partners believe that all Reporting Persons complied
with all filing requirements applicable to them with respect to transactions
during fiscal 2002.
Item 11. Executive Compensation
Other than as described in Item 13, the Partnership has not paid and
does not intend to pay any executive compensation to the General Partners or any
of their affiliates. There are no compensatory plans or arrangements regarding
termination of employment or change of control.
Item 12. Security Ownership of Certain Beneficial Owners and Management
As of March 10, 2003, no person was known to the Registrant to be a
beneficial owner of more than five percent of the Units.
The following table sets forth, as of March 10, 2003, the beneficial
ownership interests of the General Partners in the Registrant.
Title of Class Name of Partner Percent of Class
General Partnership Interests James M. Seneff, Jr. 45%
Robert A. Bourne 45%
CNL Realty Corporation 10%
--------
100%
========
Neither the General Partners, nor any of their affiliates, owns any
interest in the Registrant, except as noted above.
The Partnership does not have any equity compensation plans.
Item 13. Certain Relationships and Related Transactions
The table below summarizes the types, recipients, methods of
computation and amounts of compensation, fees and distributions paid or payable
by the Partnership to the General Partners and their affiliates for the year
ended December 31, 2002, exclusive of any distributions to which the General
Partners or their affiliates may be entitled by reason of their purchase and
ownership of Units.
Amount Incurred
Type of Compensation For the Year
and Recipient Method of Computation Ended December 31, 2002
- ---------------------------------- -------------------------------------- ------------------------------
Reimbursement to affiliates for Operating expenses are reimbursed at Accounting and
operating expenses the lower of cost or 90% of the administra-tive services:
prevailing rate at which comparable $177,297
services could have been obtained in
the same geographic area.
Affiliates of the General Partners
from time to time incur certain
operating expenses on behalf of the
Partnership for which the
Partnership reimburses the
affiliates without interest.
Annual, subordinated One percent of the sum of gross $-0-
management fee to affiliates operating revenues from Properties
wholly owned by the Partnership plus
the Partnership's allocable share of
gross revenues of joint ventures in
which the Partnership is a
co-venturer and the Property owned
with an affiliate as
tenants-in-common, subordinated to
certain minimum returns to the
Limited Partners. The management
fee will not exceed competitive fees
for comparable services. Due to the
fact that these fees are
noncumulative, if the Limited
Partners have not received their 10%
Preferred Return in any particular
year, no management fees will be due
or payable for such year.
Amount Incurred
Type of Compensation For the Year
and Recipient Method of Computation Ended December 31, 2002
- --------------------------------- -------------------------------------- ------------------------------
Deferred, subordinated real A deferred, subordinated real estate $-0-
estate disposition fee payable disposition fee, payable upon sale
to affiliates of one or more Properties, in an
amount equal to the lesser of (i)
one-half of a competitive real
estate commission, or (ii) three
percent of the sales price of such
Property or Properties. Payment of
such fee shall be made only if
affiliates of the General Partners
provide a substantial amount of
services in connection with the sale
of a Property or Properties and
shall be subordinated to certain
minimum returns to the Limited
Partners. However, if the net sales
proceeds are reinvested in a
replacement Property, no such real
estate disposition fee will be
incurred until such replacement
Property is sold and the net sales
proceeds are distributed.
General Partners' deferred, A deferred, subordinated share equal $-0-
subordinated share of to one percent of Partnership
Partnership net cash flow distributions of net cash flow,
subordinated to certain minimum
returns to the Limited Partners.
General Partners' deferred, A deferred, subordinated share equal $-0-
subordinated share of to five percent of Partnership
Partnership net sales proceeds distributions of such net sales
from a sale or sales not in proceeds, subordinated to certain
liquidation of the Partnership minimum returns to the Limited
Partners.
Amount Incurred
Type of Compensation For the Year
And Recipient Method of Computation Ended December 31, 2002
- --------------------------------- -------------------------------------- ------------------------------
General Partners' share of Distributions of net sales proceeds $-0-
Partnership net sales proceeds from a sale or sales of
from a sale or sales in substantially all of the
liquidation of the Partnership Partnership's assets will be
distributed in the following order
or priority: (i) first, to pay all
debts and liabilities of the
Partnership and to establish
reserves; (ii) second, to Partners
with positive capital account
balances, determined after the
allocation of net income, net loss,
gain and loss, in proportion to such
balances, up to amounts sufficient
to reduce such balances to zero; and
(iii) thereafter, 95% to the Limited
Partners and 5% to the General
Partners.
In addition, during 2002, the Partnership and an affiliate, as
tenants-in-common, acquired two Properties from CNL Funding 2001-A, LP, an
affiliate of the General Partners for an aggregate cost of approximately
$2,087,200. CNL Funding 2001-A, LP had purchased and temporarily held title to
these Properties in order to facilitate the acquisition of the Properties by the
Partnership. The purchase price paid by the Partnership represents the costs
incurred by CNL Funding 2001-A, LP to acquire and carry the Properties.
Item 14. 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 Annual Report on Form 10-K 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 IV
Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) The following documents are filed as part of this report.
1. Financial Statements
Report of Independent Certified Public Accountants
Balance Sheets at December 31, 2002 and 2001
Statements of Income for the years ended December 31, 2002, 2001, and 2000
Statements of Partners' Capital for the years ended December 31, 2002, 2001, and 2000
Statements of Cash Flows for the years ended December 31, 2002, 2001, and 2000
Notes to Financial Statements
2. Financial Statement Schedule
Schedule II -Valuation and Qualifying Accounts for the years ended December 31, 2002, 2001 and 2000
Schedule III - Real Estate and Accumulated Depreciation at December 31, 2002
Notes to Schedule III - Real Estate and Accumulated Depreciation at December 31, 2002
All other Schedules are omitted as the required information is
inapplicable or is presented in the financial statements or notes
thereto.
3. Exhibits
3.1 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. (Included
as Exhibit 10.3 to Form 10-Q filed with the
Securities and Exchange Commission on August 13,
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) The Registrant filed no reports on Form 8-K during the period
October 1, 2002 through December 31, 2002.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on the 24th day of
March, 2003.
CNL INCOME FUND VI, LTD.
By: CNL REALTY CORPORATION
General Partner
/s/ Robert A. Bourne
ROBERT A. BOURNE, President
By: ROBERT A. BOURNE
General Partner
/s/ Robert A. Bourne
ROBERT A. BOURNE
By: JAMES M. SENEFF, JR.
General Partner
/s/ James M. Seneff, Jr.
JAMES M. SENEFF, JR.
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signature Title Date
/s/ Robert A. Bourne President, Treasurer and Director March 24, 2003
Robert A. Bourne (Principal Financial and Accounting
Officer)
/s/ James M. Seneff, Jr. Chief Executive Officer and Director March 24, 2003
James M. Seneff, Jr. (Principal Executive 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 VI, Ltd. (the
"registrant"), certify that:
1. I have reviewed this annual report on Form 10-K of the registrant;
2. Based on my knowledge, this annual 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 annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual 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 annual 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
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 annual 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 annual report (the "Evaluation Date");
and
c. presented in this annual 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 functions):
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 annual 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: March 24, 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 VI, Ltd. (the "registrant")
certify that:
1. I have reviewed this annual report on Form 10-K of the registrant;
2. Based on my knowledge, this annual 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 annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual 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 annual 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
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 annual 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 annual report (the "Evaluation Date");
and
c. presented in this annual 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 functions):
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 annual 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: March 24, 2003
/s/ Robert A. Bourne
Robert A. Bourne
President and Treasurer
CNL INCOME FUND VI, LTD.
(A Florida Limited Partnership)
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
Years Ended December 31, 2002, 2001, and 2000
Additions Deductions
------------------------------------------------- --------------------------------
Collected
or Deter-
Balance at Charged to Charged to Deemed mined to Balance
Beginning Costs and Other Uncollec- be Col- at End
Year Description of Year Expenses Accounts tible lectible of Year
- ---------- ----------------- -------------- --------------- ---------------- ------------- -------------- -----------
2000 Allowance for
doubtful
accounts (a) $ 288,215 $ -- $ 37,003 (b) $ -- $ 83,631 $ 241,587
============== =============== ================ ============= ============== ===========
2001 Allowance for
doubtful
accounts (a) $ 241,587 $ 44,987 $ 164,929 (b) $ 243,222 (c) $ 9,761 $ 198,520
============== =============== ================ ============= ============== ===========
2002 Allowance for
doubtful
accounts (a) $ 198,520 $ -- $ 22,127 $ 188,872 (c) $ 12,304 $ 19,471
============== =============== ================ ============= ============== ===========
(a) Deducted from receivables and accrued rental income on the balance
sheet.
(b) Reduction of rental and other income.
(c) Amounts written off as uncollectible.
CNL INCOME FUND VI, LTD.
(A Florida Limited Parnership)
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION - CONTINUED
December 31, 2002
Costs Capitalized
Subsequent to
Initial Cost Acquisition
------------------------ -------------------
Encum- Buildings anImprove- Carrying
brances Land Improvements ments Costs
---------- ----------- ----------- ---------- -------
Properties the Partnership
has Invested in Under
Operating Leases:
Arby's Restaurants:
Greensburg, Indiana - $222,558 - $640,529 -
Church's Fried Chicken
Restaurants:
Gainesville, Florida- 83,542 208,564 192,227 -
Orlando,Florida - 177,440 270,985 - -
Golden Corral Family
Steakhouse Restaurants:
Albuquerque, New Mex-co 717,708 1,018,823 - -
Amarillo, Texas - 773,627 908,171 - -
Lawton, Oklahoma - 559,095 838,642 - -
El Paso, Texas - 670,916 - 837,317 -
Hardee's Restaurants:
Springfield, Tennessee - 203,159 413,221 - -
IHOP Restaurants:
Elgin, Illinois - 426,831 - - -
Manassas, Virginia - 366,992 759,788 - -
Jack in the Box Restaurants:
San Antonio, Texas - 272,300 - - -
Cleburne, Texas - 516,894 620,888 - -
Burley, Idaho - 453,108 507,477 - -
KFC Restaurant:
Gainesville, Florida - 321,789 287,429 - -
Shoney's Restaurant:
Goodlettsville, Tennesse- 320,540 531,507 - -
Taco Bell Restaurant:
Detroit, Michigan - 171,240 - 385,709 -
Taco Cabana Restaurant:
Houston, Texas - 543,888 420,965 - -
Waffle House Restaurants:
Clearwater Florida - 130,499 268,580 - -
Roanoke, Virginia - 119,533 236,219 - -
Atlantic Beach, Florida - 141,627 263,021 - -
Costs Capitalized
Subsequent to
Initial Cost Acquisition
------------------------ -------------------
Encum- Buildings anImprove- Carrying
brances Land Improvements ments Costs
---------- ----------- ----------- ---------- -------
Other:
Hermitage, Tennessee - 391,157 - 720,026 -
Marietta, Georgia (n) - 399,885 - - -
----------- ----------- ---------- -------
$7,984,328 $7,554,280 $2,775,808 -
=========== =========== ========== =======
Property of Joint Venture
in Which the Partnership
has a 36% Interest and has
Invested in Under an
Operating Lease:
Darryl's Restaurant:
Greensboro, North Caroli-a (j) $199,033 - $379,572 -
=========== =========== ========== =======
Property of Joint Venture
in Which the Partnership
has a 3.9% Interest and has
Invested in Under an
Operating Lease:
KFC Restaurant:
Auburn, Massachusetts - $484,362 - - -
=========== =========== ========== =======
Property of Joint Venture
in Which the Partnership
has a 14.46% Interest and has
Invested in Under an
Operating Lease:
Burger King Restaurant:
Asheville, North Carolin- $438,695 $450,432 - -
=========== =========== ========== =======
Property in Which the Partner-
ship has a 18% Interest
as Tenants-in-Common and
has Invested in Under an
Operating Lease:
Golden Corral Family
Steakhouse Restaurant:
Clinton, North Carol-na $138,382 $676,588 - -
=========== =========== ========== =======
Property in Which the Partner-
ship has a 23.04% Interest
as Tenants-in-Common and
has Invested in Under an
Operating Lease:
Chevy's Fresh Mex Restaurant:
Vancouver, Washington - $875,659 $1,389,366 - -
=========== =========== ========== =======
Costs Capitalized
Subsequent to
Initial Cost Acquisition
------------------------ -------------------
Encum- Buildings anImprove- Carrying
brances Land Improvements ments Costs
---------- ----------- ----------- ---------- -------
Property in Which Partnership
has a 46.20% Interest as
Tenants-in-Common has
Invested in Under an
Operating Lease:
IHOP Restaurant:
Memphis, Tennessee - $678,890 $825,076 - -
=========== =========== ========== =======
Property of Joint Venture
in Which the Partnership
has a 50% Interest and
has Invested in Under an
Operating Lease:
Denny's Restaurant:
Melbourne, Florida (i) - $438,972 $639,141 - -
=========== =========== ========== =======
Property in Which the Partnership
has a 85% Interest as
Tenants-in-Common and
has Invested in Under an
Operating Lease:
Bennigan's Restaurant:
Fort Myers, Florida - $638,026 - - -
=========== =========== ========== =======
Property of Joint Venture
in Which the Partnership
has a 64.29% Interest and
has Invested in Under an
Operating Lease:
IHOP Restaurant:
Warren,nMichiganan - $507,965 $889,080 - -
=========== =========== ========== =======
Property in Which
the Partnership has a 80% as
Tenants-in-Common Interest
and has Invested in Under
an Operating Lease:
IHOP Restaurant:
Baytown,,Texasigan - $495,847 $799,469 - -
=========== =========== ========== =======
Property in Which
the Partnership has a 60% as
Tenants-in-Common Interest
and has Invested in Under
an Operating Lease:
Bennigan's Restaurant:
Waldorf,,Marylandn - $968,984 $1,311,515 - -
=========== =========== ========== =======
Costs Capitalized
Subsequent to
Initial Cost Acquisition
------------------------ -------------------
Encum- Buildings anImprove- Carrying
brances Land Improvements ments Costs
---------- ----------- ----------- ---------- -------
Property in Which
the Partnership has a 74% as
Tenants-in-Common Interest
and has Invested in Under
an Operating Lease:
Baker's Square Restaurant:
Niles, Illinois (o) - $664,944 $838,434 - -
=========== =========== ========== =======
Property in Which
the Partnership has a 14.2% as
Tenants-in-Common Interest
and has Invested in Under
an Operating Lease:
Taco Cabana Restaurant:
Universal City, Texas (l) - $355,448 $690,296 - -
=========== =========== ========== =======
Property in Which
the Partnership has a 9.5% as
Tenants-in-Common Interest
and has Invested in Under
an Operating Lease:
Taco Cabana Restaurant:
Shertz, Texas (m) - $449,091 $592,400 - -
=========== =========== ========== =======
Properties the Partnership
has Invested in Under
Direct Financing Leases:
Denny's Restaurant:
Broken Arrow, Oklahoma - 164,640 559,972 - -
IHOP Restaurant:
Elgin, Illinois - - 1,057,282 - -
Hardee's Restaurant:
Waynesburg, Ohio - 136,242 441,299 - -
Jack in the Box Restaurant:
San Antonio, Texas - - 420,568 - -
----------- ----------- ---------- -------
- $300,882 $2,479,121 - -
=========== =========== ========== =======
Costs Capitalized
Subsequent to
Initial Cost Acquisition
------------------------ -------------------
Encum- Buildings anImprove- Carrying
brances Land Improvements ments Costs
---------- ----------- ----------- ---------- -------
Property of Joint Venture in
Which the Partnership has a
3.9% Interest and has
Invested in Under a Direct
Financing Lease:
KFC Restaurant:
Auburn, Massachusetts - - - $434,947 -
=========== =========== ========== =======
Property in Which the Partnerhsip
has a 34.74% Interest as
Tenants-in-Common and
has Invested in Under
a Direct Financing Lease:
IHOP Restaurant:
Overland Park, Kansas - $335,374 $1,273,134 - -
=========== =========== ========== =======
Property in Which the Partnership
has a 85% Interest as
Tenants-in-Common and
has Invested in Under
a Direct Financing Lease:
Bennigan's Restaurant:
Fort Myers, Florida - - $831,741 - -
=========== =========== ========== =======
Life on Which
Net Cost Basis at Which Depreciation in
Carried at Close of Period (c) Date Latest Income
- --------------------------------------
Buildings and Accumulated of Con- Date Statement is
Land Improvements Total DepreciationstructioAcquired Computed
- ------------ ----------- ----------- ---------- ------- ------- ------------
$222,558 $640,529 $863,087 $255,125 1989 07/89 (b)
83,542 400,791 484,333 165,560 1990 04/90 (b)
177,440 270,985 448,425 114,507 1985 04/90 (b)
717,708 1,018,823 1,736,531 442,054 1989 12/89 (b)
773,627 908,171 1,681,798 394,035 1989 12/89 (b)
559,095 838,642 1,397,737 363,871 1989 12/89 (b)
670,916 837,317 1,508,233 346,626 1990 04/90 (b)
203,159 413,221 616,380 166,873 1990 11/90 (b)
426,831 (f) 426,831 (d) 1997 12/97 (d)
366,992 759,788 1,126,780 126,767 1986 12/97 (b)
272,300 (f) 272,300 (d) 1990 08/90 (d)
516,894 620,888 1,137,782 41,393 2000 01/01 (b)
453,108 507,477 960,585 33,832 2000 01/01 (b)
321,789 287,429 609,218 116,573 1985 11/90 (b)
320,540 531,507 852,047 235,490 1988 09/89 (b)
171,240 385,709 556,949 166,260 1990 01/89 (b)
543,888 420,965 964,853 15,202 1990 12/01 (b)
130,499 268,580 399,079 116,115 1988 01/90 (b)
119,533 236,219 355,752 102,124 1987 01/90 (b)
141,627 263,021 404,648 113,423 1986 01/90 (b)
Life on Which
Net Cost Basis at Which Depreciation in
Carried at Close of Period (c) Date Latest Income
- --------------------------------------
Buildings and Accumulated of Con- Date Statement is
Land Improvements Total DepreciationstructioAcquired Computed
- ------------ ----------- ----------- ---------- ------- ------- ------------
391,157 720,026 1,111,183 296,626 1990 02/90 (b)
399,885 - 399,885 (n) 1993 02/97 (n)
- ------------ ----------- ----------- ----------
$7,984,328 $10,330,088 $18,314,416 $3,612,456
============ =========== =========== ==========
$199,033 $379,572 $578,605 $16,005 1974 06/97 (b)
============ =========== =========== ==========
$484,362 (f) $484,362 (d) 1989 01/90 (d)
============ ===========
$438,695 $450,432 $889,127 $177,007 1986 03/91 (b)
============ =========== =========== ==========
$138,382 $676,588 $814,970 $156,486 1996 01/96 (b)
============ =========== =========== ==========
$875,659 $1,389,366 $2,265,025 $231,685 1994 12/97 (b)
============ =========== =========== ==========
Life on Which
Net Cost Basis at Which Depreciation in
Carried at Close of Period (c) Date Latest Income
- --------------------------------------
Buildings and Accumulated of Con- Date Statement is
Land Improvements Total DepreciationstructioAcquired Computed
- ------------ ----------- ----------- ---------- ------- ------- ------------
$678,890 $825,076 $1,503,966 $136,654 1997 01/98 (b)
============ =========== =========== ==========
$438,972 $420,088 $859,060 $44,368 1998 04/98 (i)
============ =========== =========== ==========
$638,026 (f) $638,026 (d) - 06/98 (d)
============ ===========
$507,965 $889,080 $1,397,045 $127,310 - 09/98 (b)
============ =========== =========== ==========
$495,847 $799,469 $1,295,316 $85,265 1998 10/99 (b)
============ =========== =========== ==========
$968,984 $1,311,515 $2,280,499 $65,576 2001 07/01 (b)
============ =========== =========== ==========
Life on Which
Net Cost Basis at Which Depreciation in
Carried at Close of Period (c) Date Latest Income
- --------------------------------------
Buildings and Accumulated of Con- Date Statement is
Land Improvements Total DepreciationstructioAcquired Computed
- ------------ ----------- ----------- ---------- ------- ------- ------------
$664,944 $838,434 $1,503,378 $83,844 2000 01/00 (b)
============ =========== =========== ==========
$355,448 690,296 $1,045,744 $13,422 1995 06/02 (b)
============ =========== =========== ==========
$449,091 592,400 $1,041,491 $11,519 1998 06/02 (b)
============ =========== =========== ==========
(f) (f) (f) (e) 1982 08/95 (e)
- (f) (f) (e) 1997 12/97 (e)
(f) (f) (f) (e) 1990 11/90 (e)
- (f) (f) (d) 1990 08/90 (d)
- ------------
-
============
Life on Which
Net Cost Basis at Which Depreciation in
Carried at Close of Period (c) Date Latest Income
- --------------------------------------
Buildings and Accumulated of Con- Date Statement is
Land Improvements Total DepreciationstructioAcquired Computed
- ------------ ----------- ----------- ---------- ------- ------- ------------
- (f) (f) (d) 1989 01/90 (d)
============
(f) (f) (f) (d) - 01/98 (d)
- (f) (f) (d) - 06/98 (d)
============
CNL INCOME FUND VI, LTD.
(A Florida Limited Partnership)
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 2002
(a) Transactions in real estate and accumulated are summarized below.
The balances in 1999, 2000 and 2001 have been adjusted to reflect the
reclassification of properties accounted for as discontinued operations.
Accumulated
Cost Depreciation
---------------------- ---------------------
Properties the Partnership has invested in Under
Operating leases:
Balance, December 31, 1999 $ 17,803,108 $ 3,136,259
Dispositions (1,839,149 ) (462,810 )
Reclassified from capital lease (h) 470,795 --
Provision for write-down of assets (368,430 ) --
Depreciation expense -- 354,876
---------------------- ---------------------
Balance, December 31, 2000 16,066,324 3,028,325
Dispositions (102,365 ) (5,357 )
Acquisitions 3,063,220 --
Depreciation expense -- 358,396
---------------------- ---------------------
Balance, December 31, 2001 19,027,179 3,381,364
Loss from casualty on assets (n) (712,763 ) (134,987 )
Depreciation expense -- 366,079
---------------------- ---------------------
Balance, December 31, 2002 $ 18,314,416 $ 3,612,456
====================== =====================
Property of Joint Venture in Which the Partnership has
a 36% Interest and has Invested in Under an
Operating Lease:
Balance, December 31, 1999 $ 261,013 $ --
Depreciation expense (d) -- --
---------------------- ---------------------
Balance, December 31, 2000 261,013 --
Reclassified from capital lease (j) 489,757 --
Depreciation expense -- 9,603
---------------------- ---------------------
Balance, December 31, 2001 750,770 9,603
Provision for write down of assets (j) (172,165 ) --
Depreciation expense -- 6,402
---------------------- ---------------------
Balance, December 31, 2002 $ 578,605 $ 16,005
====================== =====================
CNL INCOME FUND VI, LTD.
(A Florida Limited Partnership)
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED
DEPRECIATION - CONTINUED
December 31, 2002
Accumulated
Cost Depreciation
--------------------- --------------------
Properties of Joint Venture in Which the Partnership
has a 3.9% Interest and has Invested in Under an
Operating Lease:
Balance, December 31, 1999 $ 484,362 $ --
Depreciation expense (d) -- --
--------------------- --------------------
Balance, December 31, 2000 484,362 --
Depreciation expense (d) -- --
--------------------- --------------------
Balance, December 31, 2001 484,362 --
Depreciation expense (d) -- --
--------------------- --------------------
Balance, December 31, 2002 $ 484,362 --
===================== ====================
Properties of Joint Venture in Which the Partnership
has a 14.46% Interest and has Invested in Under an
Operating Lease:
Balance, December 31, 1999 $ 889,127 $ 131,962
Depreciation expense -- 15,015
--------------------- --------------------
Balance, December 31, 2000 889,127 146,977
Depreciation expense -- 15,015
--------------------- --------------------
Balance, December 31, 2001 889,127 161,992
Depreciation expense -- 15,015
--------------------- --------------------
Balance, December 31, 2002 $ 889,127 $ 177,007
===================== ====================
CNL INCOME FUND VI, LTD.
(A Florida Limited Partnership)
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED
DEPRECIATION - CONTINUED
December 31, 2002
Accumulated
Cost Depreciation
--------------------- ------------------
Properties of Joint Venture in Which the Partnership
has a 64.29% Interest and has Invested in Under an
Operating Lease:
Balance, December 31, 1999 $ 1,397,045 $ 38,405
Depreciation expense -- 29,635
---------------------- -------------------
Balance, December 31, 2000 1,397,045 68,040
Depreciation expense -- 29,635
---------------------- -------------------
Balance, December 31, 2001 1,397,045 97,675
Depreciation expense -- 29,635
---------------------- -------------------
Balance, December 31, 2002 $ 1,397,045 $ 127,310
====================== ===================
Properties in Which the Partnership has an 18% Interest
as Tenants-in-Common and has Invested in Under an
Operating Lease:
Balance, December 31, 1999 $ 814,970 $ 88,827
Depreciation expense -- 22,553
---------------------- -------------------
Balance, December 31, 2000 814,970 111,380
Depreciation expense -- 22,553
---------------------- -------------------
Balance, December 31, 2001 814,970 133,933
Depreciation expense -- 22,553
---------------------- -------------------
Balance, December 31, 2002 $ 814,970 $ 156,486
====================== ===================
CNL INCOME FUND VI, LTD.
(A Florida Limited Partnership)
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED
DEPRECIATION - CONTINUED
December 31, 2002
Accumulated
Cost Depreciation
---------------------- --------------------
Properties in Which the Partnership has a 23.04%
Interest as Tenants-in-Common and has Invested in
Under an Operating Lease:
Balance, December 31, 1999 $ 2,265,025 $ 92,749
Depreciation expense -- 46,312
---------------------- --------------------
Balance, December 31, 2000 2,265,025 139,061
Depreciation expense -- 46,312
---------------------- --------------------
Balance, December 31, 2001 2,265,025 185,373
Depreciation expense -- 46,312
---------------------- --------------------
Balance, December 31, 2002 $ 2,265,025 $ 231,685
====================== ====================
Property in Which the Partnership has a 46.20% Interest
as Tenants-in-Common and has Invested in Under an
Operating Lease:
Balance, December 31, 1999 $ 1,503,966 $ 54,145
Depreciation expense -- 27,503
---------------------- --------------------
Balance, December 31, 2000 1,503,966 81,648
Depreciation expense -- 27,503
---------------------- --------------------
Balance, December 31, 2001 1,503,966 109,151
Depreciation expense -- 27,503
---------------------- --------------------
Balance, December 31, 2002 $ 1,503,966 $ 136,654
< ====================== ====================
CNL INCOME FUND VI, LTD.
(A Florida Limited Partnership)
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED
DEPRECIATION - CONTINUED
December 31, 2002
Accumulated
Cost Depreciation
---------------------- --------------------
Property of Joint Venture in Which the Partnership has
a 50% Interest and has Invested in Under an
Operating Lease:
Balance, December 31, 1999 $ 438,972 $ --
Reclassified from capital lease (i) 639,141 --
Provision for loss (219,053 ) --
Depreciation expense -- 16,220
---------------------- --------------------
Balance, December 31, 2000 859,060 16,220
Depreciation expense -- 14,074
---------------------- --------------------
Balance, December 31, 2001 859,060 30,294
Depreciation expense -- 14,074
---------------------- --------------------
Balance, December 31, 2002 $ 859,060 $ 44,368
====================== ====================
Property in Which the Partnership has a 85% Interest as
Tenants-in-Common and has Invested in Under an
Operating Lease:
Balance, December 31, 1999 $ 638,026 $ --
Depreciation expense (d) -- --
---------------------- --------------------
Balance, December 31, 2000 638,026 --
Depreciation expense (d) -- --
---------------------- --------------------
Balance, December 31, 2001 638,026 --
Depreciation expense (d) -- --
---------------------- --------------------
Balance, December 31, 2002 $ 638,026 $ --
====================== ====================
CNL INCOME FUND VI, LTD.
(A Florida Limited Partnership)
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED
DEPRECIATION - CONTINUED
December 31, 2002
Accumulated
Cost Depreciation
---------------------- --------------------
Property of Joint Venture in Which the Partnership has
a 80% Interest as Tenants-in-Common and has Invested
in Under an Operating Lease:
Balance, December 31, 1999 $ 1,295,316 $ 5,318
Depreciation expense -- 26,649
---------------------- --------------------
Balance, December 31, 2000 1,295,316 31,967
Depreciation expense -- 26,649
---------------------- --------------------
Balance, December 31, 2001 1,295,316 58,616
Depreciation expense -- 26,649
---------------------- --------------------
Balance, December 31, 2002 $ 1,295,316 $ 85,265
====================== ====================
Property in Which the Partnership has a 60% Interest as
Tenants-in-Common and has Invested in Under an
Operating Lease:
Balance, December 31, 2000 $ -- $ --
Acquisition 2,280,499 --
Depreciation expense -- 21,859
---------------------- --------------------
Balance, December 31, 2001 2,280,499 21,859
Depreciation expense -- 43,717
---------------------- --------------------
Balance, December 31, 2002 $ 2,280,499 $ 65,576
====================== ====================
CNL INCOME FUND VI, LTD.
(A Florida Limited Partnership)
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED
DEPRECIATION - CONTINUED
December 31, 2002
Accumulated
Cost Depreciation
---------------------- --------------------
Property in Which the Partnership has a 74% Interest as
Tenants-in-Common and has Invested in Under an
Operating Lease:
Balance, December 31, 1999 $ -- $ --
Acquisition 1,503,378 --
Depreciation expense -- 27,948
---------------------- --------------------
Balance, December 31, 2000 1,503,378 27,948
Depreciation expense -- 27,948
---------------------- --------------------
Balance, December 31, 2001 1,503,378 55,896
Depreciation expense -- 27,948
---------------------- --------------------
Balance, December 31, 2002 $ 1,503,378 $ 83,844
====================== ====================
Property in Which the Partnership has a 14.2% Interest
as Tenants-in-Common and has Invested in Under an
Operating Lease:
Balance, December 2001 $ -- $ --
Acquisition (l) 1,045,744 --
Depreciation expense -- 13,422
---------------------- --------------------
Balance, December 2002 $ 1,045,744 $ 13,422
====================== ====================
Property in Which the Partnership has a 9.5% Interest
as Tenants-in-Common and has Invested in Under an
Operating Lease:
Balance, December 2001 $ -- $ --
Acquisition (m) 1,041,491 --
Depreciation expense -- 11,519
---------------------- --------------------
Balance, December 2002 $ 1,041,491 $ 11,519
====================== ====================
(b) Depreciation expense is computed for buildings and improvements based
upon estimated lives of 30 years.
(c) As of December 31, 2002, the aggregate cost of the Properties owned by
the Partnership and its consolidated joint venture, and the
unconsolidated joint ventures (including the two Properties held as
tenants-in-common) for federal income tax purposes was $20,099,697 and
$19,665,534, respectively. All of the leases are treated as operating
leases for federal income tax purposes.
CNL INCOME FUND VI, LTD.
(A Florida Limited Partnership)
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED
DEPRECIATION - CONTINUED
December 31, 2002
(d) The portion of the lease relating to the building has been recorded as
a direct financing lease. The cost of the building has been included in
net investment in direct financing leases; therefore, depreciation is
not applicable.
(e) The lease for the land and building has been recorded as a direct
financing lease. The cost of the land and building has been included in
net investment in direct financing leases; therefore, depreciation is
not applicable.
(f) Certain components of the lease relating to land and building have been
recorded as a direct financing lease. Accordingly, costs relating to
these components of this lease are not shown.
(g) Effective September 24, 1999, the lease for this Property was amended
resulting in the reclassification of the building portion of the lease
as a capital lease.
(h) The undepreciated cost of the Property in Chester, Pennsylvania, was
written down to net realizable value due to an impairment in value. The
Partnership recognized the impairment by recording a provision for
write-down of assets of approximately $368,400 at December 31, 2000.
The impairment represented the difference between the Property's
carrying value and the estimated net realizable value of the Property
at December 31, 2000. In May 2001, the Partnership sold this Property
to a third party.
(i) During 2000, the undepreciated cost of the Property in Melbourne,
Florida, was reduced to its estimated net realizable value due to an
impairment in value. The tenant of this Property vacated the Property
and ceased restaurant operations, resulting in a reclassification of
the building portion of the lease to an operating lease. The building
was recorded at net book value and depreciated over its remaining
estimated life of approximately 29 years.
(j) In January 2002, the tenant of this Property filed for bankruptcy and
rejected the lease relating to this Property, resulting in the
reclassification of the building portion of the lease to an operating
lease, effective December 2001. The building was recorded at net book
value and is being depreciated over its remaining estimated life of
approximately 25.5 years. During 2002, the undepreciated cost of this
Property was written down to it estimated fair value due to an
impairment in value. The joint venture recognized the impairment by
recording a provision for write-down of assets of approximately
$172,200 during the year ended December 31, 2002. The provision
represented the difference between the Property's net carrying value
and its estimated fair value. The cost of the Property presented on
this schedule is the net amount at which the Property was carried at
December 31, 2002, including the provision for write-down of assets.
(k) During the year ended December 31, 2001, the Partnership purchased a
real estate property from CNL Funding 2001-A, LP, an affiliate of the
General Partners, for an aggregate cost of approximately $3,063,300.
(l) During the year ended December 31, 2002, the Partnership and an
affiliate of the General Partners, as tenant-in-common, purchased a
real estate property from CNL Funding 2001-A, LP., an affiliate of the
General Partners, for an aggregate cost of approximately $1,045,700.
(m) During the year ended December 31, 2002, the Partnership and an
affiliate of the General Partners, as tenant-in-common, purchased a
real estate property from CNL Funding 2001-A, LP., an affiliate of the
General Partners, for an aggregate cost of approximately $1,041,500.
CNL INCOME FUND VI, LTD. (A Florida Limited Partnership)
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED
DEPRECIATION - CONTINUED
December 31, 2002
(n) In October 2002, the Property in Marietta, Georgia was destroyed by
fire. As of December 31, 2002, the total undepreciated cost of the
building was removed from the accounts; therefore, depreciation is not
applicable.
(o) During the year ended December 31, 2000, the Partnership and an
affiliate of the General Partners, as tenant-in-common, purchased a
real estate property from CNL BB Corp., an affiliate of the General
Partners, for an aggregate cost of approximately $1,112,500.
EXHIBIT INDEX
Exhibit Number
(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. (Included as Exhibit 10.3 to
Form 10-Q filed with the Securities and Exchange Commission
on August 13, 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