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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, 2000
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 0-20016
CNL INCOME FUND X, LTD.
(Exact name of registrant as specified in its charter)
Florida 59-3004139
(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 ($10 per Unit)
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days: Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [x]
Aggregate market value of the voting stock held by nonaffiliates of the
registrant: The registrant registered an offering of 4,000,000 units of limited
partnership interest (the "Units") on Form S-11 under the Securities Act of
1933, as amended. Since no established market for such Units exists, there is no
market value for such Units. Each Unit was originally sold at $10 per Unit.
DOCUMENTS INCORPORATED BY REFERENCE:
None
PART I
Item 1. Business
CNL Income Fund X, Ltd. (the "Registrant" or the "Partnership") is a
limited partnership which was organized pursuant to the laws of the State of
Florida on April 16, 1990. The general partners of the Partnership are Robert A.
Bourne, James M. Seneff, Jr. and CNL Realty Corporation, a Florida corporation
(the "General Partners"). Beginning on September 9, 1991, the Partnership
offered for sale up to $40,000,000 of limited partnership interests (the
"Units") (4,000,000 Units at $10 per Unit) pursuant to a registration statement
on Form S-11 under the Securities Act of 1933, as amended, effective March 20,
1991. The offering terminated on March 18, 1992, at which date the maximum
offering proceeds of $40,000,000 had been received from investors who were
admitted to the Partnership as limited partners (the "Limited Partners").
The Partnership was organized to acquire both newly constructed and
existing restaurant properties, as well as properties upon which restaurants
were to be constructed (the "Properties"), which are leased primarily to
operators of national and regional fast-food and family-style restaurant chains
(the "Restaurant Chains"). Net proceeds to the Partnership from its offering of
Units, after deduction of organizational and offering expenses, totaled
$35,200,000, and were used to acquire 47 Properties, including interests in nine
Properties owned by joint ventures in which the Partnership is a co-venturer,
and to establish a working capital reserve for Partnership purposes.
During the year ended December 31, 1995, the Partnership sold its
Property in Denver, Colorado, and reinvested the majority of the net sales
proceeds in a Shoney's in Fort Myers Beach, Florida. During the year ended
December 31, 1996, the Partnership reinvested the remaining net sales proceeds
in a Golden Corral Property located in Clinton, North Carolina, with affiliates
of the General Partners as tenants-in-common. During the year ended December 31,
1997, the Partnership sold its Property in Fremont, California, and reinvested
the majority of the net sales proceeds in a Boston Market in Homewood, Alabama.
In addition, during 1997, the Partnership used approximately $130,400 that had
been previously reserved for working capital purposes to invest in a Chevy's
Fresh Mex Property located in Miami, Florida, with affiliates of the General
Partners as tenants-in-common. During the year ended December 31, 1998, the
Partnership sold its Properties in Sacramento, California and Billings, Montana.
During 1998, the Partnership reinvested the proceeds from the Sacramento,
California sale in a Property in San Marcos, Texas. During the year ended
December 31, 1999, the Partnership sold its Properties in Amherst, New York and
Fort Myers Beach, Florida. During 1999, the Partnership reinvested the proceeds
from the Amherst, New York sale in a Property in Fremont, Nebraska. During
January 1999, the Partnership reinvested the net sales proceeds from the sale of
its Property in Billings, Montana in a joint venture, Ocean Shores Joint
Venture, to purchase and hold one Property. In addition, during 1999, the
Partnership reinvested the majority of the net sales proceeds from the Fort
Myers Beach, Florida sale in a joint venture arrangement, Peoria Joint Venture,
with CNL Income Fund II, Ltd., an affiliate of the General Partners to purchase
and hold one Property. During 2000, the Partnership sold its Property in
Lancaster, New York.
As a result of the above transactions, as of December 31, 2000, the
Partnership owned 48 Properties. The 48 Properties include 11 Properties owned
by joint ventures in which the Partnership is a co-venturer and two Properties
owned with affiliates of the General Partners as tenants-in-common. The
Partnership generally leases the Properties on a triple-net basis with the
lessees responsible for all repairs and maintenance, property taxes, insurance
and utilities.
The Partnership will hold its Properties until the General Partners
determine that the sale or other disposition of the Properties is advantageous
in view of the Partnership's investment objectives. In deciding whether to sell
Properties, the General Partners will consider factors such as potential capital
appreciation, net cash flow and federal income tax considerations. Certain
lessees also have been granted options to purchase Properties, generally at the
Property's then fair market value after a specified portion of the lease term
has elapsed. The Partnership has no obligation to sell all or any portion of a
Property at any particular time, except as may be required under property
purchase options granted to certain lessees.
On March 11, 1999, the Partnership entered into an Agreement and Plan
of Merger with CNL American Properties Fund, Inc.("APF"), pursuant to which the
Partnership would be merged with and into a subsidiary of APF (the "Merger").
APF is a real estate investment trust whose primary business is the ownership of
restaurant properties leased on a long-term, "triple net" basis to operators of
national and regional restaurant chains. Under the Agreement and Plan of Merger,
APF was to issue shares of its common stock as consideration for the Merger. On
March 1, 2000, the General Partners and APF announced that they had mutually
agreed to terminate the Agreement and Plan of Merger entered into in March 1999.
The agreement to terminate the Agreement and Plan of Merger was based, in large
part, on the General Partners' concern that, in light of market conditions
relating to publicly traded real estate investment trusts, the value of the
transaction had diminished. As a result of such diminishment, the General
Partners, ability to unequivocally recommend voting for the transaction, in the
exercise of their fiduciary duties, had become questionable. The General
Partners are continuing to evaluate strategic alternatives for the Partnership,
including alternatives to provide liquidity to the Limited Partners.
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. Generally, the leases of the Properties owned by the
Partnership, the joint ventures in which the Partnership is a co-venturer and
the Properties owned as tenants-in-common with affiliates of the General
Partners provide for initial terms ranging from 14 to 20 years (the average
being 18 years) and expire between 2006 and 2019. The leases are generally on a
triple-net basis, with the lessee 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 $25,500 to $198,500. The majority of the leases
provide for percentage rent, based on sales in excess of a specified amount. In
addition, a majority of the leases provide that, commencing in specified lease
years (ranging from the second to the sixth lease year), the annual base rent
required under the terms of the lease will increase.
Generally, the leases of the Properties provide for two to five
five-year renewal options subject to the same terms and conditions as the
initial lease. Lessees of 34 of the Partnership's 48 Properties also have been
granted options to purchase Properties at the Property's then fair market value
after a specified portion of the lease term has elapsed. Fair market value will
be determined through an appraisal by an independent appraisal firm. Under the
terms of certain leases, the option purchase price may equal the Partnership's
original cost to purchase the Property (including acquisition costs), plus a
specified percentage from the date of the lease or a specified percentage of the
Partnership's purchase price, if that amount is greater than the Property's fair
market value at the time the purchase option is exercised.
The leases also generally provide that, in the event the Partnership
wishes to sell the Property subject to that lease, the Partnership first must
offer the lessee the right to purchase the Property on the same terms and
conditions, and for the same price, as any offer which the Partnership has
received for the sale of the Property.
During 1998, two tenants, Brambury Associates, Inc. and Boston Chicken,
Inc., filed for bankruptcy and rejected the leases relating to two of their
three Properties and ceased making rental payments to the Partnership on the
rejected leases. In January 2000, the Partnership re-leased one of the rejected
lease Properties to a new tenant, to operate a Kinko's Copies. The Partnership
continued receiving rental payments relating to the lease that was not rejected
until the Partnership sold this Property in March 1999. In March 1999, the
Partnership reinvested the net sales proceeds in a Golden Corral Property
located in Fremont, Nebraska. In December 2000, the Partnership sold the
remaining vacant Property and intends to reinvest the net sales proceeds in an
additional Property. The Partnership will not recognize rental an earned income
from the sold Property until the proceeds from the sale of the Property have
been reinvested in an additional Property.
In August 1999, the leases relating to the Long John Silver's
Properties in Alamogordo and Las Cruces, New Mexico were amended to provide rent
deferrals. The rent deferrals are payable by the tenant beginning in August
2001.
Major Tenants
During 2000, two lessees of the Partnership and its consolidated joint
venture, Golden Corral Corporation and Jack in the Box Inc., each contributed
more than ten percent of the Partnership's total rental and earned income
(including rental and earned income from the Partnership's consolidated joint
venture and the Partnership's share of rental and earned income from ten
Properties owned by unconsolidated joint ventures and two Properties owned with
affiliates of the General Partners as tenants-in-common). As of December 31,
2000, Golden Corral Corporation was the lessee under leases relating to five
restaurants and Jack in the Box 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 total rental and earned income in 2001. In
addition, four Restaurant Chains, Golden Corral Family Steakhouse Restaurants
("Golden Corral"), Hardee's, Burger King, and Jack in the Box, each accounted
for more than ten percent of the Partnership's total rental and earned income
during 2000 (including rental and earned income from the Partnership's
consolidated joint venture and the Partnership's share of rental and earned
income from ten Properties owned by unconsolidated joint ventures and two
Properties owned with affiliates of the General Partners as tenants-in-common).
In 2001, it is anticipated that these four Restaurant Chains each will continue
to account for more than ten percent of the total rental and earned income to
which the Partnership is entitled under the terms of the leases. Any failure of
these lessees or Restaurant Chains could have a material adverse affect on the
Partnership's income if the Partnership is not able to re-lease the Properties
in a timely manner. No single tenant or groups of affiliated tenants lease
Properties with an aggregate carrying value in excess of 20 percent of the total
assets of the Partnership.
Joint Venture and Tenancy in Common Arrangements
The Partnership has entered into a joint venture arrangement, Allegan
Real Estate Joint Venture, with an unaffiliated entity to purchase and hold one
Property. In addition, the Partnership has entered into five separate joint
venture arrangements: CNL Restaurant Investments III with CNL Income Fund IX,
Ltd., to purchase and hold six Properties; Ashland Joint Venture with CNL Income
Fund IX, Ltd. and CNL Income Fund XI, Ltd., to purchase and hold one Property;
Williston Real Estate Joint Venture with CNL Income Fund XII, Ltd., to purchase
and hold one Property; Ocean Shores Joint Venture, with CNL Income Fund XVII,
Ltd., to purchase and hold one restaurant Property; and Peoria Joint Venture,
with CNL Income Fund II, Ltd., to purchase and hold one restaurant Property.
Each of the CNL Income Funds is an affiliate of the General Partners and is a
limited partnership organized pursuant to the laws of the state of Florida.
The joint venture arrangements provide for the Partnership and its
joint venture partners to share in all costs and benefits associated with the
joint ventures in accordance with their respective percentage interests in the
joint ventures. The Partnership has an 88.26% interest in Allegan Real Estate
Joint Venture, a 50 percent interest in CNL Restaurant Investments III, a 10.51%
interest in Ashland Joint Venture, a 40.95% interest in Williston Real Estate
Joint Venture, a 69.06% interest in Ocean Shores Joint Venture, and a 52 percent
interest in Peoria Joint Venture. The Partnership and its joint venture partners
are also jointly and severally liable for all debts, obligations and other
liabilities of the joint ventures.
CNL Restaurant Investments III's joint venture agreement does not
provide for a fixed term, but continues in existence until terminated by either
of the joint venturers. Ashland Joint Venture has an initial term of 14 years
and Allegan Real Estate Joint Venture, Williston Real Estate Joint Venture and
Peoria Joint Venture each have an initial term of 20 years. After the expiration
of the initial term, each of the joint ventures continues in existence from year
to year unless terminated at the option of any of the joint venturers or 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 partners
to dissolve the joint venture.
The Partnership has management control of Allegan Real Estate Joint
Venture and shares management control equally with affiliates of the General
Partners for CNL Restaurant Investments III, Williston Real Estate Joint
Venture, Ashland Joint Venture, Ocean Shores Joint Venture and Peoria Joint
Venture. The joint venture agreements restrict each venturer's ability to sell,
transfer or assign its joint venture interest without first offering it for sale
to its joint venture partners, either upon such terms and conditions as to which
the venturers may agree or, in the event the venturers cannot agree, on the same
terms and conditions as any offer from a third party to purchase such joint
venture interest.
Net cash flow from operations of CNL Restaurant Investments III,
Allegan Real Estate Joint Venture, Ashland Joint Venture, Williston Real Estate
Joint Venture, Ocean Shores Joint Venture and Peoria Joint Venture is
distributed 50 percent, 88.26%, 10.51%, 40.95%, 69.06% and 52 percent,
respectively, to the Partnership and the balance is distributed to each of the
other joint venture partners in accordance with their respective percentage
interest in 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.
In addition to the above joint venture arrangements, the Partnership
entered into an agreement to hold a Property in Clinton, North Carolina, as
tenants-in-common with CNL Income Fund IV, Ltd., CNL Income Fund VI, Ltd. and
CNL Income Fund XV, Ltd. In addition, the Partnership entered into an agreement
to hold a Property in Miami, Florida, as tenants-in-common, with CNL Income Fund
III, Ltd., CNL Income Fund VII, Ltd., and CNL Income Fund XIII, Ltd. The
agreements provide for the Partnership and the other parties to share in the
profits and losses of the Properties in proportion to each party's percentage
interest. The Partnership owns a 13 percent and 6.69% interest, respectively in
these Properties. 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 tenancy in common agreement restricts each party's ability to sell,
transfer, or assign its interest in the tenancy in common's Property without
first offering it for sale to the remaining party.
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 a
Property if the proceeds are reinvested in an additional Property.
Certain Management Services
CNL Fund Advisors, Inc., an affiliate of the General Partners, provides
certain services relating to management of the Partnership and its Properties
pursuant to a management agreement with the Partnership. Under this agreement,
CNL Fund Advisors, Inc. is responsible for collecting rental payments,
inspecting the Properties and the tenants' books and records, assisting the
Partnership in responding to tenant inquiries and notices and providing
information to the Partnership about the status of the leases and the
Properties. CNL Fund Advisors, Inc. also assists the General Partners in
negotiating the leases. For these services, the Partnership has agreed to pay
CNL Fund Advisors, Inc. an annual fee of one percent of the sum of gross rental
revenues from Properties wholly owned by the Partnership plus the Partnership's
allocable share of gross revenues of joint ventures in which the Partnership is
a co-venturer, but not in excess of competitive fees for comparable services.
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").
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 APF, the parent company of CNL
Fund Advisors, Inc., perform certain services for the Partnership. In addition,
the General Partners have available to them the resources and expertise of the
officers and employees of CNL 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, 2000, the Partnership owned 48 Properties. Of the 48
Properties, 35 are owned by the Partnership in fee simple, 11 are owned through
joint venture arrangements and two are 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 15,700
to 200,900 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 as of
December 31, 2000 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, 2000.
State Number of Properties
Alabama 2
Arizona 1
Florida 5
Idaho 1
Illinois 1
Louisiana 2
Michigan 2
Missouri 1
Montana 5
Nebraska 1
New Hampshire 3
New Mexico 3
New York 1
North Carolina 4
Ohio 3
Pennsylvania 1
South Carolina 1
Tennessee 3
Texas 7
Washington 1
------
TOTAL PROPERTIES 48
======
Buildings. Each of the Properties owned by the Partnership 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
1,800 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, 2000, the Partnership had no plans for
renovation of the Properties. Depreciation expense is computed for buildings and
improvements using the straight line method using a depreciable life of 40 years
for federal income tax purposes.
As of December 31, 2000, the aggregate cost of the Properties owned by
the Partnership (including its consolidated joint venture) and the
unconsolidated joint ventures (including Properties owned through tenancy in
common arrangements) for federal income tax purposes was $28,408,360 and
$14,018,133, respectively.
The following table lists the Properties owned by the Partnership as of
December 31, 2000 by Restaurant Chain. Restaurant Chain Number of Properties
Burger King 13
Chevy's Fresh Mex 1
Denny's 3
Golden Corral 5
Hardee's 7
IHOP 1
Jack in the Box 6
Long John Silver's 2
Perkins 1
Pizza Hut 5
Shoney's 2
Other 2
-----
TOTAL PROPERTIES 48
=====
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. Generally, a
lessee is required, under the terms of its lease agreement, to make such capital
expenditures as may be reasonably necessary to refurbish restaurant buildings,
premises, signs and equipment so as to comply with the lessee's obligations, if
applicable, under the franchise agreement to reflect the current commercial
image of its Restaurant Chain. These capital expenditures are required to be
paid by the lessee during the term of the lease. The terms of the leases of the
Properties owned by the Partnership are described in Item 1. Business - Leases.
At December 31, 2000, 1999, 1998, 1997, and 1996, the Properties were
97%, 96%, 96%, 100%, and 100% occupied, respectively. The following is a
schedule of the average rent per Property for the years ended December 31:
---------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996
- --------------------------------- -------------- ------------- -------------- ------------- -------------
Rental Revenues (1) $3,462,549 $3,490,765 $3,163,838 $3,823,808 $3,894,384
Properties (2) 47 47 47 49 48
Average Rent Per Property $ 73,671 $ 74,272 $ 67,316 $ 78,037 $ 81,133
(1) Rental income includes the Partnership's share of rental income from
the Properties owned through joint venture arrangements and the
Properties owned through tenancy in common arrangements. Rental
revenues have been adjusted, as applicable, for any amounts for which
the Partnership has established an allowance for doubtful accounts.
(2) Excludes Properties that were vacant at December 31, which did not
generate any rental revenues during the year ended December 31.
The following is a schedule of lease expirations for leases in place as
of December 31, 2000, for the next ten years and thereafter.
Percentage of
Number Annual Rental Gross Annual
Expiration Year of Leases Revenues Rental Income
- -------------------- -------------- ----------------- ------------------
2001 -- $ -- --
2002 -- -- --
2003 -- -- --
2004 -- -- --
2005 -- -- --
2006 10 1,068,982 25.91%
2007 3 538,740 13.06%
2008 -- -- --
2009 4 315,359 7.64%
2010 1 71,948 1.74%
Thereafter 29 2,130,406 51.65%
--------- ---------------- -----------------
Total (1) 47 $ 4,125,435 100.00%
========= ================ =================
(1) Excludes one Property which was vacant at December 31, 2000.
Leases with Major Tenants. The terms of the leases with the
Partnership's major tenants as of December 31, 2000 (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 2007 and 2014) and the
average minimum base rent is approximately $152,430 (ranging from approximately
$88,047 to $198,500).
Jack in the Box Inc. leases six Jack in the Box restaurants. The
initial term of each lease is between 18 and 20 years (expiring between 2009 and
2016) and the average minimum base rent is approximately $80,374 (ranging from
approximately $63,000 to $92,600).
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 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 15, 2001, there were 3,505 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 1999, 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. From
inception, the price for any Unit transferred pursuant to the Plan was $9.50 per
Unit. The price paid for any Unit transferred other than pursuant to the Plan
was subject to negotiation by the purchaser and the selling Limited Partner. The
Partnership will not redeem or repurchase Units.
The following table reflects, for each calendar quarter, the high, low
and average sales prices for transfers of Units during 2000 and 1999 other than
pursuant to the Plan, net of commissions.
2000 (1) 1999 (1)
---------------------------------- ----------------------------------
High Low Average High Low Average
--------- -------- ---------- --------- -------- -----------
First Quarter 7.64 7.41 7.54 (2) (2) (2)
Second Quarter 7.85 7.85 7.85 (2) (2) (2)
Third Quarter 8.26 6.42 7.52 $9.50 $7.83 $8.58
Fourth Quarter 8.00 6.30 7.43 8.42 7.27 7.78
(1) A total of 15,966 and 5,600 Units were transferred other than pursuant
to the Plan for the years ended December 31, 2000 and 1999,
respectively.
(2) No transfer of Units took place during the quarter other than pursuant
to the Plan.
The capital contribution per Unit was $10. All cash available for
distribution will be distributed to the partners pursuant to the provisions of
the partnership agreement.
For the years ended December 31, 2000 and 1999, the Partnership
declared cash distributions of $3,600,004 to the Limited Partners. Distributions
of $900,001 were declared at the close of each of the Partnership's calendar
quarters during 2000 and 1999 to the Limited Partners. These amounts include
monthly distributions made in arrears for the Limited Partners electing to
receive such distributions on this basis. No amounts distributed to partners for
the years ended December 31, 2000 and 1999 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.
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
2000 1999 1998 1997 1996
--------------- -------------- -------------- --------------- --------------
Year ended December 31:
Revenues (1) $3,386,608 $3,417,506 $3,169,493 $3,813,248 $3,871,869
Net income (2) 2,465,788 2,269,401 1,878,858 3,531,381 3,461,812
Cash distributions
declared (3) 3,600,004 3,600,004 3,680,004 3,600,003 3,640,003
Net income per Unit (2) 0.62 0.56 0.46 0.87 0.86
Cash distributions
declared per Unit (3) 0.90 0.90 0.92 0.90 0.91
At December 31:
Total assets $32,124,183 $33,248,120 $34,480,865 $36,289,727 $36,437,560
Partners' capital 30,888,078 32,022,294 33,352,897 35,154,043 35,222,665
(1) Revenues include equity in earnings of unconsolidated joint ventures,
minority interest in income of the consolidated joint venture, and
adjustments to accrued rental income as a result of certain tenants
filing for bankruptcy and rejecting the leases relating to these
Properties.
(2) Net income for the years ended December 31, 2000, 1999, 1998, and 1997,
includes $50,755, $32,499, $218,960, and $132,238, respectively, from
gains on sale of assets. Net income for the years ended December 31,
2000, 1999 and 1998, includes $287,275, $357,760 and $1,001,846,
respectively, from provision for loss on assets.
(3) Distributions for the years ended December 31, 1998 and 1996, include a
special distribution to the Limited Partners of $80,000 and $40,000,
respectively, which represented cumulative excess operating reserves.
The above selected financial data should be read in conjunction with
the financial statements and related notes contained in Item 8 hereof.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The Partnership was organized on April 16, 1990, 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, to be 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. As of December
31, 2000, the Partnership owned 48 Properties, either directly or indirectly
through joint venture or tenancy in common arrangements.
Capital Resources
The Partnership's primary source of capital for the years ended
December 31, 2000, 1999, and 1998, was cash from operations (which includes cash
received from tenants, distributions from joint ventures and interest received,
less cash paid for expenses). Cash from operations was $3,298,666, $3,182,882,
and $3,604,438, for the years ended December 31, 2000, 1999, and 1998,
respectively. The increase in cash from operations during 2000 as compared to
1999, and the decrease during 1999, as compared to 1998, was primarily a result
of changes in income and expenses as described in "Results of Operations" below
and changes in the Partnership's working capital.
Other sources and uses of capital included the following during the
years ended December 31, 2000, 1999, and 1998.
In January 1998, the Partnership sold its Property in Sacramento,
California, to the tenant for $1,250,000 and received net sales proceeds of
$1,230,672, resulting in a gain of $163,350 for financial reporting purposes.
This Property was originally acquired by the Partnership in December 1991 and
had a cost of approximately $969,400, excluding acquisition fees and
miscellaneous acquisition expenses; therefore, the Partnership sold the Property
for approximately $261,300 in excess of its original purchase price. In November
1998, the Partnership reinvested the majority of the net sales proceeds in a
Jack in the Box Property located in San Marcos, Texas. The Partnership
distributed amounts sufficient to enable the Limited Partners to pay federal and
state income taxes, if any (at a level reasonably assumed by the General
Partners), resulting from the sale.
In October 1995, the tenant of the Partnership's Property located in
Austin, Texas, entered into a sublease agreement for a vacant parcel of land
under which the subtenant has the option to purchase such land. The subtenant
exercised the purchase option and in accordance with the terms of the sublease
agreement, the tenant assigned the purchase contract, together with the purchase
contract payment of $69,000 (less closing costs of $1,000 that were incurred in
anticipation of the sale) from the subtenant, to the Partnership. In March 1998,
the sale for the vacant parcel of land was consummated and the Partnership
recorded the net sales proceeds of $68,434 ($68,000 of which had been received
as a deposit in 1995), resulting in a gain of $7,810 for financial reporting
purposes.
In October 1998, the Partnership sold its Property in Billings, Montana
to the tenant for $362,000 and received net sales proceeds of $360,688,
resulting in a gain of $47,800 for financial reporting purposes. This Property
was originally acquired by the Partnership in April 1992 and had a cost of
approximately $302,000, excluding acquisition fees and miscellaneous acquisition
expenses; therefore, the Partnership sold the Property for approximately $58,700
in excess of its original purchase price. In January 1999, the Partnership
reinvested the majority of these proceeds plus remaining net proceeds from other
sales of properties in a joint venture, Ocean Shores Joint Venture, with an
affiliate of the General Partners, to purchase and hold one restaurant property.
The Partnership owns a 69.06% interest in the profits and losses of the joint
venture. The Partnership distributed amounts sufficient to enable the Limited
Partners to pay federal and state income taxes, if any (at a level reasonably
assumed by the General Partners), resulting from the sale.
In March 1999, the Partnership sold its Property in Amherst, New York
to a third party and received net sales proceeds of $1,150,000. The Partnership
had recorded an allowance for impairment in the carrying value relating to this
Property of $93,328 at December 31, 1998 due to the tenant filing for
bankruptcy. The allowance represented the difference between the carrying value
of the Property at December 31, 1998 and the estimated net realizable value for
the Property. During 1999, the Partnership recorded a gain relating to the sale
of this Property of $74,640 for financial reporting purposes, resulting in an
aggregate net loss of approximately $18,700. In March 1999, the Partnership
reinvested the net sales proceeds plus additional funds, totaling approximately
$1,257,200 in a Golden Corral Property in Fremont, Nebraska. The Partnership
distributed amounts sufficient to enable the Limited Partners to pay federal and
state income taxes, if any (at a level reasonably assumed by the General
Partners), resulting from the sale.
In addition, in August 1999, the Partnership sold its Property in Fort
Myers Beach, Florida for $931,725, resulting in a loss of $42,141 for financial
reporting purposes. In November 1999, the Partnership reinvested the majority of
these proceeds in a joint venture arrangement, Peoria Joint Venture, with CNL
Income Fund II, Ltd., a Florida limited partnership and an affiliate of the
General Partners, to purchase and hold one restaurant Property. The Partnership
contributed approximately $825,700 and had a 52 percent interest in the profits
and losses of the joint venture as of December 31, 1999. The Partnership
distributed amounts sufficient to enable the Limited Partners to pay federal and
state income taxes, if any (at a level reasonably assumed by the General
Partners) resulting from the sale.
In December 2000, the Partnership sold its Property in Lancaster, New
York to a third party and received net sales proceeds of $749,675. The
Partnership had recorded an allowance for loss on assets relating to this
Property of $387,202 at December 31, 1998 due to the tenant filing for
bankruptcy. The allowance represented the difference between the carrying value
of the Property at December 31, 1998 and the estimated net realizable value for
the Property. During 2000, the Partnership recorded a gain relating to the sale
of this Property of $50,755 for financial reporting purposes, resulting in an
aggregate net loss of approximately $336,400. The Partnership distributed
amounts sufficient to enable the Limited Partners to pay federal and state
income taxes, if any (at a level reasonably assumed by the General Partners),
resulting from the sale. The Partnership intends to reinvest a portion of these
net sales proceeds in an additional Property and to pay Partnership liabilities.
In addition, during 2000, the Partnership entered into a promissory
note with the corporate General Partner for a loan in the amount of $125,000 in
connection with the operations of the Partnership. The note was
uncollateralized, non-interest bearing and due on demand. As of December 31,
2000, the Partnership had repaid the loan in full to the corporate General
Partner.
None of the Properties owned by the Partnership, or the joint ventures
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 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 30-day maturity date, pending the Partnership's use of such funds to pay
Partnership expenses, to make distributions to partners or to reinvest in
additional Properties. At December 31, 2000, the Partnership had $1,361,652,
invested in such short-term investments as compared to $967,094 at December 31,
1999. The increase in cash and cash equivalents during 2000 was primarily
attributable to the Partnership receiving net sales proceeds relating to the
sale of its Property in Lancaster, New York, as described above. As of December
31, 2000, the average interest rate earned on the rental income deposited in
demand deposit accounts at commercial banks was approximately 3% annually. The
funds remaining at December 31, 2000, after payment of distributions and other
liabilities, will be used to meet the Partnership's working capital and other
needs.
Short-Term Liquidity
The Partnership's short-term liquidity requirements consist primarily
of the operating expenses of the Partnership.
The Partnership's investment strategy of acquiring Properties for cash
and leasing them under triple-net leases to operators who generally meet
specified financial standards minimizes the Partnership's operating expenses.
The General Partners believe that the leases will continue to generate cash flow
in excess of operating expenses.
Due to low operating expenses and ongoing cash flow, the General
Partners believe that the Partnership has sufficient working capital reserves at
this time. In addition, because all leases of the Partnership's Properties are
on a triple-net basis, it is not anticipated that a permanent reserve for
maintenance and repairs will be established at this time. To the extent,
however, that the Partnership has insufficient funds for such purpose, the
General Partners will contribute to the Partnership an aggregate amount of up to
one percent of the offering proceeds for maintenance and repairs.
The General Partners have the right, but not the obligation, to make
additional capital contributions if they deem it appropriate in connection with
the operations of the Partnership.
The Partnership generally distributes cash from operations remaining
after the payment of 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, and
during the year ended December 31, 1998, cumulative excess operating reserves,
the Partnership declared distributions to the Limited Partners of $3,600,004,
for the years ended December 31, 2000 and 1999 and $3,680,004, for the year
ended December 31, 1998. This represents distributions of $0.90 per Unit for the
years ended December 31, 2000 and 1999 and $0.92 per Unit for the year ended
December 31, 1998. No distributions were made to the General Partners during the
years ended December 31, 2000, 1999 and 1998, respectively. No amounts
distributed to the Limited Partners for the years ended December 31, 2000, 1999,
and 1998, 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 and did not receive any distributions
during the year ended December 31, 2000.
As of December 31, 2000 and 1999, the Partnership owed $147,099 and
$60,116, respectively, to affiliates for accounting and administrative services.
As of March 15, 2001, the Partnership had reimbursed the affiliates $32,273 of
such amounts. Other liabilities, including distributions payable, decreased to
$1,024,908 at December 31, 2000, from $1,100,659 at December 31, 1999, primarily
as a result of the fact that during 2000, the Partnership paid amounts accrued
at December 31, 2000 relating to the proposed and terminated merger with APF, as
described in "Termination of Merger." The decrease was partially offset by an
increase of rents paid in advance as of December 31, 2000. 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.
Results of Operations
During 2000, the Partnership and its consolidated joint venture,
Allegan Real Estate Joint Venture, owned and leased 36 wholly owned Properties
(including one Property which was sold in December 2000). During 1999, the
Partnership owned and leased 39 wholly owned Properties (including two
Properties sold in 1999) and during 1998 the Partnership owned and leased 40
wholly owned Properties (including two properties sold in 1998). In addition,
during 2000, 1999, and 1998, the Partnership was a co-venturer in two separate
joint ventures that each owned and leased one Property and one joint venture
which owned and leased six Properties. During 2000 and 1999, the Partnership was
a co-venturer in two additional joint ventures that each owned and leased one
Property. In addition, during 2000, 1999 and 1998, the Partnership owned and
leased two Properties with affiliates as tenants-in-common. As of December 31,
2000, the Partnership owned, either directly or through joint venture
arrangements, 48 Properties which are generally subject to long-term, triple-net
leases. The leases of the Properties provide for minimum base annual rental
amounts (payable in monthly installments) ranging from approximately $25,500 to
$198,500. The majority of the leases provide for percentage rent based on sales
in excess of a specified amount. In addition, a majority of the leases provide
that, commencing in specified lease years (ranging from the second to the sixth
lease year), the annual base rent required under the terms of the lease will
increase. For further description of the Partnership's leases and Properties,
see Item 1. Business - Leases and Item 2. Properties, respectively.
During the years ended December 31, 2000, 1999, and 1998, the
Partnership and its consolidated joint venture, earned $2,849,565, $2,899,879,
and $2,710,790, respectively, in rental income from operating leases (net of
adjustments to accrued rental income) and earned income from direct financing
leases.
The decrease in rental and earned income during 2000 was partially due
to, and the increase in rental income during 1999, was partially offset by, a
decrease of approximately $99,900 and $80,000 during 2000 and 1999,
respectively, as a result of the sale of several Properties during 1998, 1999,
and 2000. This decrease was partially offset by an increase of approximately
$48,800 and $188,200 during 2000 and 1999, respectively, due to the reinvestment
of the majority of net sales proceeds received in additional Properties, as
described in "Capital Resources." The increase during the year ended December
31, 1999, as compared to 1998, was partially offset by, a decrease in rental and
earned income of approximately $138,900 during 1999, due to the fact that during
1998, the tenant of the Properties in Lancaster and Amherst, New York, Brambury
Associates, Inc., filed for bankruptcy and rejected the lease relating to the
Property in Lancaster, New York. As a result, the tenant ceased making rental
payments on this Property. Additionally, the Partnership continued receiving
rental payments relating to the lease that was not rejected until the
Partnership sold this Property in March 1999, as described above in "Capital
Resources," which further offset the increase in rental and earned income during
1999, as compared to 1998. Rental and earned income were lower during 1998, as
compared to 1999, due to the fact that as a result of the bankruptcy, during
1998, the Partnership reversed approximately $292,600 of accrued rental income
relating to both Properties. The accrued rental income was the accumulated
amount of non-cash accounting adjustments primarily recorded in order to
recognize future scheduled rent increases as income evenly over the life of the
lease. No such amounts were reversed during 1999. In December 2000, the
Partnership sold the Property in Lancaster, New York, as described in "Capital
Resources." As a result, the General Partners ceased collection efforts of past
due amounts and wrote off such amounts as uncollectible. The Partnership intends
to reinvest a portion of these net sales proceeds in an additional Property and
to pay Partnership liabilities.
Rental and earned income were lower during 1998, as compared to 1999
due to the fact that during 1997 the lease relating to the Perkins Property in
Ft. Pierce, Florida, was amended to provide for rent reductions from May 1997
through December 31, 1998. Due to the lease amendment and questionable
collectibility of future scheduled rent increases from this tenant, during 1998,
the Partnership increased its reserve for accrued rental income (non-cash
accounting adjustment relating to the straight-lining of future scheduled rent
increases over the lease term in accordance with generally accepted accounting
principles) by approximately $151,800. In September 1999, the tenant vacated the
Property and ceased making rental payments to the Partnership, resulting in a
decrease in rental and earned income of approximately $40,500 and $23,300 during
2000 and 1999, respectively. The General Partners will continue to pursue
collection of these past due amounts and will recognize such amounts as income
if collected. The General Partners are currently seeking either a new tenant or
purchaser for this Property. The lost revenues resulting from this vacated
Property could have an adverse affect on the results of operations of the
partnership if the Partnership is unable to re-lease or sell this property in a
timely manner.
In addition, the increase in rental and earned income during 1999, as
compared to 1998, was partially offset by a decrease of approximately $138,800
during 1999, due to the fact that in October 1998, Boston Chicken, Inc., the
tenant of the Boston Market Property in Homewood, Alabama, filed for bankruptcy
and rejected the lease relating to this Property and ceased making payments to
the Partnership. In conjunction with the rejected lease, during 1998, the
Partnership reversed approximately $13,200 of accrued rental income that it had
previously recorded (non-cash accounting adjustments relating to the
straight-lining of future scheduled rent increases over the lease term in
accordance with generally accepted accounting principles). The decrease in
rental and earned income during 2000 was partially offset by an increase of
approximately $71,900 as a result of the fact that in January 2000, the
Partnership entered into a new lease with a new tenant to operate the location
as a Kinko's Copies. In connection therewith, the Partnership agreed to remove
the old building so the tenant could construct a new building. As a result, the
Partnership recorded a loss representing the undepreciated cost of the building
as of December 31, 1999.
The increase in rental and earned income during 1999, as compared to
1998, was partially offset by a decrease of approximately $52,900 during 1999
due to the fact that the leases relating to the Burger King Properties in
Irondequoit, New York; Ashland, Ohio; and Henderson, North Carolina were amended
to provide for rent reductions from August 1998 through the end of the lease
term. The General Partners do not anticipate that any decrease in rental income
relating to the amendments will have a material adverse affect on the
Partnership's financial position or results of operations.
During the years ended December 31, 2000, 1999, and 1998, the
Partnership also earned $65,717, $96,541, and $67,511, respectively, in
contingent rental income. The decrease in contingent rental income during 2000
as compared to 1999 was primarily attributable to a decrease in gross sales
relating to certain restaurant properties whose leases require the payment of
contingent rent and the increase during 1999 as compared to 1998, was primarily
attributable to an increase in gross sales relating to certain restaurant
properties whose leases require the payment of contingent rent.
For the years ended December 31, 2000, 1999, and 1998, the Partnership
also earned $449,576, $380,616, and $292,013, respectively, attributable to net
income earned by unconsolidated joint ventures in which the Partnership is a
co-venturer. The increase in net income earned by unconsolidated joint ventures
during 2000 and 1999, each as compared to the previous year, was primarily
attributable to the fact that the Partnership invested in Ocean Shores Joint
Venture in January 1999 and Peoria Joint Venture in December 1999, as described
above in "Capital Resources."
During the years ended December 31, 2000, 1999, and 1998, the
Partnership also earned $30,303, $48,935, and $108,481, respectively, in
interest and other income. The decrease in interest and other income during 2000
and 1999, each as compared to the previous year, was primarily attributable to
the fact that during 1999 and 1998, the Partnership earned interest on the net
sales proceeds relating to the sales of several Properties, pending the
reinvestment of the net sales proceeds in additional Properties.
During the year ended December 31, 2000, two lessees of the Partnership
and its consolidated joint venture, Golden Corral Corporation and Jack in the
Box Inc., each contributed more than ten percent of the Partnership's total
rental and earned income (including rental and earned income from the
Partnership's consolidated joint venture and the Partnership's share of rental
and earned income from ten Properties owned by unconsolidated joint ventures and
two Properties owned with affiliates of the General Partners as
tenants-in-common). As of December 31, 2000, Golden Corral Corporation was the
lessee under leases relating to five restaurants and Jack in the Box 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
will continue to contribute more than ten percent of the Partnership's total
rental and earned income during 2001. In addition, during the year ended
December 31, 2000, four Restaurant Chains, Golden Corral, Hardee's, Burger King,
and Jack in the Box, each accounted for more than ten percent of the
Partnership's total rental and earned income (including rental and earned income
from the Partnership's consolidated joint venture and the Partnership's share of
rental and earned income from ten Properties owned by unconsolidated joint
ventures and two Properties owned with affiliates as tenants-in-common). In
2001, it is anticipated that these four Restaurant Chains will continue to
account for more than ten percent of the Partnership's total rental and earned
income to which the Partnership is entitled under the terms of the leases. Any
failure of these lessees or Restaurant Chains could materially affect the
Partnership's income if the Partnership is not able to re-lease the Properties
in a timely manner.
Operating expenses, including depreciation and amortization expense,
were $684,300, $822,844, and $507,749, for the years ended December 31, 2000,
1999, and 1998, respectively. The decrease in operating expenses during 2000, as
compared to 1999, and the increase during 1999, as compared to 1998, was
primarily due to the fact that the Partnership incurred $38,333, $195,746, and
$23,779 during 2000, 1999 and 1998, respectively, in transaction costs related
to the General Partners retaining financial and legal advisors to assist them in
evaluating and negotiating the proposed and terminated merger with APF, as
described in "Termination of Merger."
The decrease in operating expenses during 2000, as compared to 1999 was
partially offset by, and the increase during 1999 as compared to 1998 was
partially due to the fact that during 1999 the Partnership recorded legal
expenses, real estate taxes, insurance and maintenance relating to the
Properties in Lancaster, New York and Homewood, Alabama due to the fact that the
tenants of these Properties filed for bankruptcy, and the Property in Ft.
Pierce, Florida, due to the tenant vacating the Property. In January 2000, the
Partnership re-leased the Property in Homewood, Alabama to a new tenant who is
responsible for such expenses in the future, based on the terms of the lease
agreement. In December 2000, the Partnership sold the Property in Lancaster, New
York. The Partnership expects to continue to incur such expenses relating to the
remaining vacant Property, until a replacement tenant or purchaser is located.
The Partnership is currently seeking either a replacement tenant or purchaser
for this Property.
The increase in operating expenses during the year ended December 31,
1999, was partially the result of an increase in depreciation expense due to the
purchase of several Properties during 1998 and 1999 and the fact that during
1998, the Partnership reclassified the leases relating to the Properties in
Irondequoit, New York, Ashland, Ohio and Henderson, North Carolina from direct
financing leases to operating leases due to lease amendments.
As a result of the sale of the Property in Lancaster, New York, the
Partnership recorded a gain of $50,755 for financial reporting purposes, during
the year ended December 31, 2000. As a result of the sale of the Properties in
Amherst, New York and Fort Myers Beach, Florida, the Partnership recorded a gain
of $74,640 and a loss of $42,141, respectively, for financial reporting
purposes, during the year ended December 31, 1999. As a result of the sale of
the Properties in Sacramento, California and Billings, Montana, and the sale of
the parcel of land in Austin, Texas, the Partnership recognized a gain of
$218,960 for financial reporting purposes during the year ended December 31,
1998. For additional information on the sales of these Properties, see "Capital
Resources."
During the year ended December 31, 1998, the Partnership recorded a
provision for loss on assets totaling $1,001,846 relating to the Properties in
Lancaster, New York; Amherst, New York and Homewood, Alabama. The tenants of
these Properties filed for bankruptcy during 1998, and rejected two of the three
leases related to these Properties. The allowance represented the difference
between the carrying value of the Properties at December 31, 1998, and the
estimated net realizable value for these Properties. In March 1999 and December
2000, the Partnership sold the Properties in Amherst and Lancaster, New York,
respectively, as described above in "Capital Resources." In connection with the
Property in Homewood, Alabama, in January 2000, the Partnership entered into a
new lease with a new tenant for a Kinko's Copies store. In connection therewith,
the Partnership agreed to remove the old building from the Property so the new
tenant can construct a new building. Therefore, at December 31, 1999, the
Partnership recorded an allowance for loss on assets of $357,760, representing
the undepreciated cost of the old building for financial reporting purposes. As
of December 31, 2000, the building was demolished and the total undepreciated
cost of the building of $629,785, for which the Partnership had recorded
impairments in 1999 and 1998, was removed. No gain or loss on demolition
relating to the building was recorded. During the year ended December 31, 2000,
the Partnership recorded a provision for loss on assets in the amount of
$287,275, for financial reporting purposes relating to the Property in Ft.
Pierce, Florida. The allowance represented the difference between the carrying
value of the Property at December 31, 2000 and the estimated net realizable
value of the Property.
The Partnership's leases as of December 31, 2000, 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. Management expects that increases in restaurant
sales volumes due to inflation and real sales growth should result in an
increase in rental income over time. Continued inflation also may cause capital
appreciation of the Partnership's Properties. Inflation and changing prices,
however, also may have an adverse impact on the sales of the restaurants and on
potential capital appreciation of the Properties.
In December 1999, the Securities and Exchange Commission released SAB
101, which provides the staff's view in applying generally accepted accounting
principles to selected revenue recognition issues. SAB 101 requires the
Partnership to defer recognition of certain percentage rental income until
certain defined thresholds are met. The Partnership adopted SAB 101 beginning
January 1, 2000. Implementation of SAB 101 did not have a material impact on the
partnership's result of operations.
In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 13, "Accounting for Derivative Instruments
and Hedging Activities." The Statement establishes accounting and reporting
standards for derivative instruments, including certain derivative instruments,
embedded in other contracts (collectively referred to as derivatives), and for
hedging activities. The Statement requires that an entity recognize all
derivatives as either assets or liabilities in the balance sheet and measure
those instruments at fair value. In June 1999, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards No. 137,
"Accounting for Derivative Instruments and Hedging Activities Deferral of the
Effective Date of FASB Statement No. 133, an amendment of FASB Statement No.
133." FAS 137 deferred the effective date of FAS 133 for one year. FAS 133, as
amended, is now effective for all fiscal quarters of all fiscal years beginning
after June 15, 2000. The partnership has reviewed both statements and has
determined that both FAS 133 and FAS 137 do not apply to the Partnership as of
December 31, 2000.
Termination of Merger
On March 11, 1999, the Partnership entered into an Agreement and Plan
of Merger with CNL American Properties Fund, Inc. ("APF"), pursuant to which the
Partnership would be merged with and into a subsidiary of APF (the "Merger").
APF is a real estate investment trust whose primary business is the ownership of
restaurant properties leased on a long term, "triple net" basis to operators of
national and regional restaurant chains. Under the Agreement and Plan of Merger,
APF was to issue shares of its common stock as consideration for the Merger. On
March 1, 2000, the General Partners and APF announced that they had mutually
agreed to terminate the Agreement and Plan of Merger entered into in March 1999.
The agreement to terminate the Agreement and Plan of Merger was based, in large
part, on the General Partners' concern that, in light of market conditions
relating to publicly traded real estate investment trusts, the value of the
transaction had diminished. As a result of such diminishment, the General
Partners' ability to unequivocally recommend voting for the transaction, in the
exercise of their fiduciary duties, had become questionable. The General
Partners are continuing to evaluate strategic alternatives for the Partnership,
including alternatives to provide liquidity to the limited partners.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
Item 8. Financial Statements and Supplementary Data
CNL INCOME FUND X, LTD.
(A Florida Limited Partnership)
CONTENTS
Page
Report of Independent Certified Public Accountants 19
Financial Statements:
Balance Sheets 20
Statements of Income 21
Statements of Partners' Capital 22
Statements of Cash Flows 23-24
Notes to Financial Statements 25-38
Report of Independent Certified Public Accountants
To the Partners
CNL Income Fund X, Ltd.
In our opinion, the financial statements listed in the index appearing under
item 14(a)(1) present fairly, in all material respects, the financial position
of CNL Income Fund X, Ltd. (a Florida limited partnership) at December 31, 2000
and 1999, and the results of its operations and its cash flows for each of the
three years in the period ended December 31, 2000 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 14(a)(2) present fairly, in all material respects, the information
set forth therein when read in conjunction with the related financial
statements. These financial statements and financial statement schedules are the
responsibility of the Partnership's management; our responsibility is to express
an opinion on these financial statements and financial statement schedules based
on our audits. We conducted our audits of these statements in accordance with
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.
/s/ PricewaterhouseCoopers LLP
Orlando, Florida
February 2, 2001
CNL INCOME FUND X, LTD.
(A Florida Limited Partnership)
BALANCE SHEETS
December 31,
2000 1999
------------------- --------------------
ASSETS
Land and buildings on operating leases, less
accumulated depreciation and allowance
for loss on assets $ 15,078,329 $ 16,391,447
Net investment in direct financing leases,
less allowance for loss on assets 9,164,968 9,391,291
Investment in joint ventures 4,929,505 4,989,209
Cash and cash equivalents 1,361,652 967,094
Receivables, less allowance for doubtful accounts of
$284,513 and $122,914, respectively
48,978 100,952
Due from related parties 13,063 --
Prepaid expenses 19,274 19,283
Lease costs, less accumulated amortization
of $1,000 in 2000 43,273 --
Accrued rental income, less allowance for
doubtful accounts of $3,388 and $1,210,
respectively 1,431,637 1,353,160
Other assets 33,504 35,684
------------------- --------------------
--------------------
$ 32,124,183 $ 33,248,120
=================== ====================
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 35,472 $ 119,660
Escrowed real estate taxes payable 10,114 9,364
Distributions payable 900,001 900,001
Due to related parties 147,099 60,116
Rents paid in advance 79,321 71,634
------------------- --------------------
Total liabilities 1,172,007 1,160,775
Minority interest 64,098 65,051
Partners' capital 30,888,078 32,022,294
------------------- --------------------
$ 32,124,183 $ 33,248,120
=================== ====================
See accompanying notes to financial statements.
CNL INCOME FUND X, LTD.
(A Florida Limited Partnership)
STATEMENTS OF INCOME
Year Ended December 31,
2000 1999 1998
----------------- ---------------- -----------------
Revenues:
Rental income from operating leases $ 1,870,934 $ 1,773,037 $ 1,886,761
Adjustments to accrued rental income (2,178 ) (19,506 ) (457,567)
Earned income from direct financing leases 980,809 1,146,348 1,281,596
Contingent rental income 65,717 96,541 67,511
Interest and other income 30,303 48,935 108,481
----------------- ---------------- -----------------
2,945,585 3,045,355 2,886,782
----------------- ---------------- -----------------
Expenses:
General operating and administrative 206,381 182,554 163,189
Bad debt expense -- -- 5,887
Professional services 44,002 64,806 44,309
Real estate taxes 54,513 39,219 199
State and other taxes 22,580 15,457 10,520
Depreciation and amortization 318,491 325,062 259,866
Transaction costs 38,333 195,746 23,779
----------------- ---------------- -----------------
684,300 822,844 507,749
----------------- ---------------- -----------------
Income Before Minority Interest in Income of
Consolidated Joint Venture, Equity in
Earnings of Unconsolidated Joint Ventures,
Gain on Sale of Assets and Provision for Loss
on Assets 2,261,285 2,222,511 2,379,033
Minority Interest in Income of Consolidated
Joint Venture (8,553 ) (8,465 ) (9,302)
Equity in Earnings of Unconsolidated Joint Ventures 449,576 380,616 292,013
Gain on Sale of Assets 50,755 32,499 218,960
Provision for Loss on Assets (287,275 ) (357,760 ) (1,001,846)
----------------- ---------------- -----------------
Net Income $ 2,465,788 $ 2,269,401 $ 1,878,858
================= ================ =================
Allocation of Net Income
General partners $ -- $ 23,210 $ 21,016
Limited partners 2,465,788 2,246,191 1,857,842
----------------- ---------------- -----------------
$ 2,465,788 $ $ 1,878,858
2,269,401
================= ================ =================
Net Income Per Limited Partner Unit $ 0.62 $ $
0.56 0.46
================= ================ =================
Weighted Average Number of Limited Partner Units
Outstanding 4,000,000 4,000,000 4,000,000
================= ================ =================
See accompanying notes to financial statements.
CNL INCOME FUND X, LTD.
(A Florida Limited Partnership)
STATEMENTS OF PARTNERS' CAPITAL
Years Ended December 31, 2000, 1999 and 1998
General Partners
------------------------------------- -
Accumulated
Contributions Earnings
------------------ ----------------- -
Balance, December 31, 1997 $ 1,000 $ 207,709
Distributions to limited
partners ($0.92 per
limited partner unit) -- --
Net income -- 21,016
------------------ ----------------- -
Balance, December 31, 1998 1,000 228,725
Distributions to limited
partners ($0.90 per
limited partner unit) -- --
Net income -- 23,210
------------------ ----------------- -
Balance, December 31, 1999 1,000 251,935
Distributions to limited
partners ($0.90 per
limited partner unit) -- --
Net income -- --
------------------ ----------------- -
Balance, December 31, 2000 $ 1,000 $ 251,935
================== ================= =
Limited Partners
- ----------------- -------------------------------------------------------------------------
Accumulated Syndication
Contributions Distributions Earnings Costs Total
- ---------------- ----------------- ------------------ ---------------- ------------------
$ 40,000,000 $ (20,963,139 ) $ 20,698,473 $ (4,790,000) $ 35,154,043
-- (3,680,004 ) -- -- (3,680,004 )
-- -- 1,857,842 -- 1,878,858
- ---------------- ----------------- ------------------ ---------------- ------------------
40,000,000 (24,643,143 ) 22,556,315 (4,790,000) 33,352,897
-- (3,600,004 ) -- -- (3,600,004 )
-- -- 2,246,191 -- 2,269,401
- ---------------- ----------------- ------------------ ---------------- ------------------
40,000,000 (28,243,147 ) 24,802,506 (4,790,000) 32,022,294
-- (3,600,004 ) -- -- (3,600,004 )
-- -- 2,465,788 -- 2,465,788
- ---------------- ----------------- ------------------ ---------------- ------------------
$ 40,000,000 $ (31,843,151 ) $ 27,268,294 $ (4,790,000) $ 30,888,078
================ ================= ================== ================ ==================
CNL INCOME FUND X, LTD.
(A Florida Limited Partnership)
STATEMENTS OF CASH FLOWS
Year Ended December 31,
2000 1999 1998
---------------- ---------------- ---------------
Increase (Decrease) in Cash and Cash Equivalents:
Cash Flows from Operating Activities:
Cash received from tenants $ 3,130,836 $ 3,049,409 $ 3,382,562
Distributions from unconsolidated
joint venture 509,280 440,831 373,004
Cash paid for expenses (365,756) (355,273) (221,284)
Interest received 24,306 47,915 70,156
---------------- ---------------- ---------------
Net cash provided by operating activities 3,298,666 3,182,882 3,604,438
---------------- ---------------- ---------------
Cash Flows from Investing Activities:
Proceeds from sale of assets 749,675 2,081,725 1,591,794
Additions to land and buildings on operating
leases -- (1,257,217) (1,020,329)
Investment in joint ventures -- (1,628,095) --
Decrease (increase) in restricted cash -- 359,990 (237,758)
Payment of lease costs (44,273) -- --
Other -- -- 3,006
---------------- ---------------- ---------------
---------------- ---------------- ---------------
Net cash provided by (used in)
Investing activities 705,402 (443,597) 336,713
---------------- ---------------- ---------------
Cash Flows from Financing Activities:
Proceeds from loan from corporate general
partners 125,000 -- --
Repayment of loan from corporate general
partners (125,000) -- --
Distributions to limited partners (3,600,004) (3,600,004) (3,680,004)
Distributions to holder of minority interest (9,506) (8,159) (9,058)
---------------- ---------------- ---------------
Net cash used in financing activities (3,609,510) (3,608,163) (3,689,062)
---------------- ---------------- ---------------
Net Increase (Decrease) in Cash and Cash Equivalents 394,558 (868,878) 252,089
Cash and Cash Equivalents at Beginning of Year 967,094 1,835,972 1,583,883
---------------- ---------------- ---------------
Cash and Cash Equivalents at End of Year $ 1,361,652 $ 967,094 $ 1,835,972
================ ================ ===============
CNL INCOME FUND X, LTD.
(A Florida Limited Partnership)
STATEMENTS OF CASH FLOWS - CONTINUED
Year Ended December 31,
2000 1999 1998
--------------- ---------------- ----------------
Reconciliation of Net Income to Net Cash Provided by
Operating Activities:
Net income $ 2,465,788 $ 2,269,401 $ 1,878,858
--------------- ---------------- ----------------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 317,491 325,062 259,866
Amortization 1,000 -- --
Minority interest in income of consolidated joint
venture 8,553 8,465 9,302
Equity in earnings of unconsolidated joint
ventures, net of distributions 59,704 60,215 80,991
Gain on sale of assets (50,755) (32,499) (218,960)
Provision for loss on assets 287,275 357,760 1,001,846
Bad debt expense -- -- 5,887
Decrease (increase) in receivables 51,974 (18,439) 8,312
Increase in due from related parties (3,635) -- --
Decrease (increase) in prepaid expenses 9 (14,054) 648
Decrease in net investment in direct financing 226,323 209,710 219,237
leases
Decrease (increase) in accrued rental income (78,477) (80,091) 300,791
Decrease (increase) in other assets 2,180 (200) (2,380)
Increase (decrease) in accounts payable and accrued
expenses (74,006) 99,203 (3,996)
Increase in due to related parties 77,555 30,129 25,041
Increase (decrease) in rents paid in advance and
deposits 7,687 (31,780) 38,995
--------------- ---------------- ----------------
Total adjustments 832,878 913,481 1,725,580
--------------- ---------------- ----------------
Net Cash Provided by Operating Activities $ 3,298,666 $ 3,182,882 $ 3,604,438
=============== ================ ================
Supplemental Schedule of Non-Cash Financing Activities:
Distributions declared and unpaid at December 31 $ 900,001 $ 900,001 $ 900,001
=============== ================ ================
See accompanying notes to condensed financial statements.
CNL INCOME FUND X, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
Years Ended December 31, 2000, 1999, and 1998
1. Significant Accounting Policies:
-------------------------------
Organization and Nature of Business - CNL Income Fund X, Ltd. (the
"Partnership") is a Florida limited partnership that was organized for
the purpose of acquiring both newly constructed and existing restaurant
properties, as well as properties upon which restaurants were to be
constructed, which are leased primarily to operators of national and
regional fast-food and family-style restaurant chains.
The general partners of the Partnership are CNL Realty Corporation (the
"Corporate General Partner"), James M. Seneff, Jr. and Robert A.
Bourne. Mr. Seneff and Mr. Bourne are also 50 percent shareholders of
the Corporate General Partner. The general partners have responsibility
for managing the day-to-day operations of the Partnership.
Real Estate and Lease Accounting - The Partnership records the
acquisition of land and buildings at cost, including acquisition and
closing costs. Land and buildings are leased to unrelated third parties
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. The leases are accounted for
using either the direct financing or the operating methods. Such
methods are described below:
Direct financing method - The leases accounted for using the
direct financing method are recorded at their net investment
(which at the inception of the lease generally represents the
cost of the asset) (see Note 4). Unearned income is deferred
and amortized to income over the lease terms so as to produce
a constant periodic rate of return on the Partnership's net
investment in the leases.
Operating method - Land and building leases accounted for
using the operating method are recorded at cost, revenue is
recognized as rentals are earned and depreciation is charged
to operations as incurred. Buildings are depreciated on the
straight-line method over their estimated useful lives of 30
years. When scheduled rentals vary during the lease term,
income is recognized on a straight-line basis so as to produce
a constant periodic rent over the lease term commencing on the
date the property is placed in service.
Accrued rental income represents the aggregate amount of
income recognized on a straight-line basis in excess of
scheduled rental payments to date. Whenever a tenant defaults
under the terms of its lease, or events or changes in
circumstance indicate that the tenant will not lease the
property through the end of the lease term, the Partnership
either reserves or reverses the cumulative accrued rental
income balance.
CNL INCOME FUND X, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2000, 1999, and 1998
1. Significant Accounting Policies - Continued:
-------------------------------------------
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. Although the general partners have made their best
estimate of these factors based on current conditions, it is reasonably
possible that changes could occur in the near term which could
adversely affect the general partners' estimate of net cash flows
expected to be generated from its properties and the need for asset
impairment write-downs. If an impairment is indicated, the assets are
adjusted to their fair value.
When the collection of amounts recorded as rental or other income is
considered to be doubtful, an adjustment is made to increase the
allowance for doubtful accounts, which is netted against receivables,
and to decrease rental or other income or increase bad debt expense for
the current period, although the Partnership continues to pursue
collection of such amounts. If amounts are subsequently determined to
be uncollectible, the corresponding receivable and allowance for
doubtful accounts are decreased accordingly.
Investment in Joint Ventures - The Partnership accounts for its 88.26%
interest in Allegan Real Estate Joint Venture using the consolidation
method. Minority interest represents the minority joint venture
partner's proportionate share of the equity in the Partnership's
consolidated joint venture. All significant intercompany accounts and
transactions have been eliminated.
The Partnership's investments in CNL Restaurant Investments III,
Williston Real Estate Joint Venture, Ashland Joint Venture, Ocean
Shores Joint Venture and Peoria Joint Venture, and the properties in
Clinton, North Carolina, and Miami, Florida, for which each property is
held as tenants-in-common with affiliates, are accounted for using the
equity method since the Partnership shares control with affiliates
which have the same general partners.
Cash and Cash Equivalents - The Partnership considers all highly liquid
investments with a maturity of three months or less when purchased to
be cash equivalents. Cash and cash equivalents consist of demand
deposits at commercial banks and money market funds (some of which are
backed by government securities). Cash equivalents are stated at cost
plus accrued interest, which approximates market value.
CNL INCOME FUND X, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2000, 1999, and 1998
1. Significant Accounting Policies - Continued:
-------------------------------------------
Cash accounts maintained on behalf of the Partnership in demand
deposits at commercial banks and money market funds may exceed
federally insured levels; however, the Partnership has not experienced
any losses in such accounts.
Lease Costs - Brokerage fees and lease incentive costs incurred in
negotiating new leases for the Partnership's properties 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.
Additionally, for tax purposes, syndication costs are included in
Partnership equity and in the basis of each partner's investment. For
financial reporting purposes, syndication costs are netted against
partners' capital and represent a reduction of Partnership equity and a
reduction in the basis of each partner's investment.
Use of Estimates - The general partners of the Partnership have made a
number of estimates and assumptions relating to the reporting of assets
and liabilities and the disclosure of contingent assets and liabilities
to prepare these financial statements in conformity with generally
accepted accounting principles. The more significant areas requiring
the use of management estimates relate to the allowance for doubtful
accounts and future cash flows associated with long-lived assets.
Actual results could differ from those estimates.
Staff Accounting Bulleting No. 101 ("SAB 101") - In December 1999, the
Securities and Exchange Commission released SAB 101, which provides the
staff's view in applying generally accepted accounting principles to
selected revenue recognition issues. SAB 101 requires the Partnership
to defer recognition of certain percentage rental income until certain
defined thresholds are met. The Partnership adopted SAB 101 beginning
January 1, 2000. Implementation of SAB 101 did not have a material
impact on the partnership's result of operations.
CNL INCOME FUND X, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2000, 1999, and 1998
1. Significant Accounting Policies - Continued:
-------------------------------------------
Statement of Financial Accounting Standards No 133 ("FAS 133") and
Statement of Financial Accounting Standards No. 137 ("FAS 137") - In
June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 13, "Accounting for Derivative
Instruments and Hedging Activities." The Statement establishes
accounting and reporting standards for derivative instruments,
including certain derivative instruments, embedded in other contracts
(collectively referred to as derivatives), and for hedging activities.
The Statement requires that an entity recognize all derivatives as
either assets or liabilities in the balance sheet and measure those
instruments at fair value. In June 1999, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards No.
137, "Accounting for Derivative Instruments and Hedging Activities
Deferral of the Effective Date of FASB Statement No. 133, an amendment
of FASB Statement No. 133." FAS 137 deferred the effective date of FAS
133 for one year. FAS 133, as amended, is now effective for all fiscal
quarters of all fiscal years beginning after June 15, 2000. The
partnership has reviewed both statements and has determined that both
FAS 133 and FAS 137 do not apply to the Partnership as of December 31,
2000.
2. Leases:
- ---------------
The Partnership leases its land and buildings to operators of national
and regional fast-food and family-style restaurants. The leases are
accounted for under the provisions of Statement of Financial Accounting
Standards No. 13, "Accounting for Leases." Some of the leases have been
classified as operating leases and some of the leases have been
classified as direct financing leases. For the leases classified as
direct financing leases, the building portions of the Property leases
are accounted for as direct financing leases while the land portions of
the majority of these leases are operating leases. Substantially all
leases are for 15 to 25 years and provide for minimum and contingent
rentals. In addition, the tenant generally pays all property taxes and
assessments, fully maintains the interior and exterior of the building
and carries insurance coverage for public liability, property damage,
fire and extended coverage. The lease options generally allow tenants
to renew the leases for two to five successive five-year periods
subject to the same terms and conditions as the initial lease. Most
leases also allow the tenant to purchase the property at fair market
value after a specified portion of the lease has elapsed.
CNL INCOME FUND X, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2000, 1999, and 1998
3. Land and Buildings on Operating Leases:
--------------------------------------
Land and buildings on operating leases consisted of the following at
December 31:
2000 1999
------------------- ------------------
Land $ 8,739,850 $ 9,076,722
Building 8,765,774 10,235,897
------------------- ------------------
17,505,624 19,312,619
Less accumulated depreciation (1,890,727 ) (1,654,894 )
------------------- ------------------
15,614,897 17,657,725
Less allowance for loss on
land and building (536,568 ) (1,266,278 )
------------------- ------------------
$ 15,078,329 $ 16,391,447
=================== ==================
During the year ended December 31, 1998, the Partnership recorded a
provision for loss on land and building totaling $908,518 for financial
reporting purposes relating to the properties in Lancaster, New York,
and Homewood, Alabama. The tenants of these properties filed for
bankruptcy during 1998, and rejected the leases related to these two
properties. The allowance represented the difference between the
carrying value of the properties at December 31, 1999 and 1998 and the
estimated net realizable value for these properties, respectively. In
connection with the property in Homewood, Alabama, in January 2000, the
Partnership entered into a new lease with a new tenant for a Kinko's
Copies store. In connection therewith, the Partnership agreed to remove
the old building from the Property so the new tenant could construct a
new building. Therefore, at December 31, 1999, the Partnership recorded
an impairment for $357,760, representing the undepreciated cost of the
old building, for financial reporting purposes. As of December 31,
2000, the building was demolished and the total undepreciated cost of
the old building of $629,785, for which the Partnership had recorded
impairments during 1999 and 1998, was removed from the accounts and no
loss on demolition relating to the building was reflected in income.
In March 1999, the Partnership sold its property in Amherst, New York
and received net sales proceeds of $1,150,000, resulting in a total
gain of $74,640 for financial reporting purposes (see Note 4). In March
1999, the Partnership reinvested the net sales proceeds, plus
additional funds, totaling approximately $1,257,200, in a Golden Corral
property in Fremont, Nebraska (see Note 5).
CNL INCOME FUND X, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2000, 1999, and 1998
3. Land and Buildings on Operating Leases - Continued:
--------------------------------------------------
In August 1999, the Partnership sold its property in Fort Myers Beach,
Florida for $931,725 and recorded a loss of $42,141 for financial
reporting purposes. In November 1999, the Partnership reinvested the
majority of the net sales proceeds in Peoria Joint Venture, with CNL
Income Fund II, Ltd., an affiliate of the general partners (see Note
5).
In December 2000, the Partnership sold its Property in Lancaster, New
York and received net sales proceeds of $749,675 resulting in a total
gain of $50,755 for financial reporting purposes. During the year ended
December 31, 2000, the Partnership recorded a provision for loss on
assets in the amount of $287,275, for financial reporting purposes
relating to the property in Ft. Pierce, Florida. The allowance
represented the difference between the carrying value of the property
at December 31, 2000 and the estimated net realizable value of the
property.
Some leases provide for escalating guaranteed minimum rents throughout
the lease term. Income from these scheduled rent increases is
recognized on a straight-line basis over the terms of the leases. For
the years ended December 31, 2000 and 1999, the Partnership recognized
income of $78,477 (net of reserves of $2,178) and $80,091 (net of
reserves of $1,210 and net of reversals of $18,296), respectively. For
the year ended December 31, 1998, the Partnership recognized a loss of
$300,791 (net of $151,828 in reserves and $305,739 in reversals). The
following is a schedule of the future minimum lease payments to be
received on noncancellable operating leases at December 31, 2000:
2001 $1,863,794
2002 1,946,866
2003 1,955,645
2004 2,011,730
2005 2,025,579
Thereafter 8,777,558
----------------
$18,581,172
================
Since lease renewal periods are exercisable at the option of the
tenant, the above table only presents future minimum lease payments due
during the initial lease terms. In addition, this table does not
include any amounts for future contingent rentals which may be received
on the leases based on a percentage of the tenant's gross sales. These
amounts do not include minimum lease payments that will become due when
the property under development is completed.
CNL INCOME FUND X, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2000, 1999, and 1998
4. Net Investment in Direct Financing Leases:
- --------------------------------------------------
The following lists the components of the net investment in direct
financing leases at December 31:
2000 1999
----------------- ----------------
Minimum lease payments receivable $13,727,040 $ 14,942,831
Estimated residual values 3,229,175 3,229,175
Less unearned income (7,791,247 ) (8,780,715 )
----------------- ----------------
----------------- ----------------
Net investment in direct financing leases $ 9,164,968 $ 9,391,291
================= ================
At December 31, 1998, the Partnership had recorded a provision for loss
on assets of $93,328 relating to the Property in Amherst, New York, due
to the tenant filing for bankruptcy. The allowance represented the
difference between the carrying value of the property at December 31,
1998 and the estimated net realizable value for this property. In March
1999, the Partnership sold this property, received net sales proceeds
of $1,150,000 and recorded a gain of $74,640 for financial reporting
purposes, resulting in an aggregate net loss of approximately $18,700.
The building portion of this property had been classified as a direct
financing lease. In connection therewith, the gross investment (minimum
lease payments receivable and the estimated residual value), unearned
income, and the provision for loss on assets relating to the building
were removed from the accounts and the gain from the sale of the
property was reflected in income (see Note 3).
In August 1999, the Partnership sold its property in Fort Myers Beach,
Florida, for which the building portion had been classified as a direct
financing lease. In connection therewith, the gross investment (minimum
lease payments receivable and the estimated residual value) and
unearned income relating to the building were removed from the accounts
and the loss from the sale of the property was reflected in income (see
Note 3).
CNL INCOME FUND X, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2000, 1999, and 1998
4, Net Investment in Direct Financing Leases - Continued:
-----------------------------------------------------
The following is a schedule of future minimum lease payments to be
received on the direct financing leases at December 31, 1999:
2001 $1,223,235
2002 1,253,431
2003 1,264,941
2004 1,275,724
2005 1,277,059
Thereafter 7,432,650
----------------
$13,727,040
================
The above table does not include future minimum lease payments for
renewal periods or for contingent rental payments that may become due
in future periods (see Note 3).
5. Investment in Joint Ventures:
- -------------------------------------
The Partnership has a 50 percent, a 10.51%, a 40.95%, a 13 percent, and
6.69% interest in the profits and losses of CNL Restaurant Investments
III, Ashland Joint Venture, Williston Real Estate Joint Venture, and a
property in Clinton, North Carolina, and a property in Miami, Florida,
held as tenants-in-common with affiliates of the general partners. The
remaining interests in these joint ventures are held by affiliates of
the Partnership which have the same general partners.
In January 1999, the Partnership entered into a joint venture
arrangement, Ocean Shores Joint Venture, with CNL Income Fund XVII,
Ltd., an affiliate of the general partners, to own and lease one
restaurant property. The Partnership contributed approximately $802,400
to the joint venture and as of December 31, 2000, owned a 69.06%
interest in the profits and losses of the joint venture.
In addition, in November 1999, the Partnership entered into a joint
venture arrangement, Peoria Joint Venture, with CNL Income Fund II,
Ltd., an affiliate of the general partners, to own and lease one
restaurant property. The Partnership contributed approximately $825,700
to the joint venture and as of December 31, 2000, owned a 52 percent
interest in the profits and losses of the joint venture.
CNL INCOME FUND X, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2000, 1999, and 1998
5. Investment in Joint Ventures - Continued:
- -------------------------------------------------
CNL Restaurant Investments III owns and leases six properties to an
operator of national fast-food restaurants. Ashland Joint Venture,
Williston Real Estate Joint Venture, Ocean Shores Joint Venture, Peoria
Joint Venture, and the Partnership and affiliates as tenants-in-common
in two separate tenancy-in-common arrangements, each own and lease one
property to an operator of national fast-food or family-style
restaurants. The following presents the joint ventures' combined,
condensed financial information at December 31:
2000 1999
------------------ -------------------
Land and buildings on operating
leases, less accumulated
depreciation $ 9,693,530 $ 9,925,836
Net investment in direct financing
leases 2,546,467 2,575,174
Cash 57,379 70,698
Receivables 3,100 27,948
Prepaid expenses 33,863 21,674
Accrued rental income 120,282 59,081
Liabilities 7,375 71,721
Partners' capital 12,447,246 12,608,690
Revenues 1,404,081 1,266,458
Net income 1,126,840 996,372
The Partnership recognized income totaling $449,576, $380,616, and
$292,013 for the years ended December 31, 2000, 1999, and 1998,
respectively, from these joint ventures.
6. Allocations and Distributions:
- --------------------------------------
From inception through December 31, 1999, all net income and net losses
of the Partnership, excluding gains and losses from the sale of
properties, were allocated 99 percent 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 percent to the
limited partners and one percent to the general partners; provided,
however, that the one percent of net cash flow to be distributed to the
general partners 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").
CNL INCOME FUND X, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2000, 1999, and 1998
6. Allocations and Distributions - Continued:
- --------------------------------------------------
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 percent
to the limited partners and five percent to the general partners. Any
gain from the sale of a property not in liquidation of the Partnership
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 percent to the
limited partners and five percent to the general partners.
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 percent 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 partners in
succeeding years. Accordingly, the general partners were not allocated
any net income and did not receive and distributions during the year
ended December 31, 2000.
During the years ended December 31, 2000 and 1999, the Partnership
declared distributions to the limited partners of $3,600,004, and
during the year ended December 31, 1998, the Partnership declared
distributions to the Limited Partners of $3,680,004. No distributions
have been made to the general partners to date.
CNL INCOME FUND X, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2000, 1999, and 1998
7. 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:
2000 1999 1998
-------------- -------------- --------------
Net income for financial reporting purposes $ 2,465,788 $ 2,269,401 $ 1,878,858
Depreciation for tax reporting purposes in excess
of depreciation for financial reporting (159,851) (171,877) (228,986)
purposes
Direct financing leases recorded as operating
leases for tax reporting purposes 226,323 209,517 219,237
Equity in earnings of unconsolidated joint
ventures
for tax reporting purposes in excess of (less
than) (47,498) 20,342 12,612
equity in earnings of unconsolidated joint
ventures
for financial reporting purposes
Gain on sale of assets for financial reporting
purposes (less than) in excess of gain for
tax reporting purposes (308,959) 138,449 65,474
Allowance for loss on assets 287,275 357,760 1,001,846
Allowance for doubtful accounts 161,599 (113,896) 98,954
Accrued rental income (78,478) (80,091) 300,791
Rents paid in advance 7,687 (31,780) 38,995
Minority interest in timing differences of
consolidated joint venture 1,108 1,846 413
Capitalization (Deduction) of transaction costs
for tax (219,525) 195,746 23,779
reporting purposes
Other 9,432 -- --
-------------- -------------- --------------
Net income for federal income tax purposes $ 2,344,901 $ 2,795,417 $ 3,411,973
============== ============== ==============
CNL INCOME FUND X, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2000, 1997, and 1998
8. 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 Fund Advisors, Inc. (the "Advisor") was a majority owned
subsidiary of CNL Financial Group, Inc. until it merged with CNL
American Properties Fund, Inc. ("APF"), effective September 1, 1999.
The individual general partners are stockholders and directors of APF.
The Advisor provides certain services relating to management of the
Partnership and its properties pursuant to a management agreement with
the Partnership. In connection therewith, the Partnership has agreed to
pay the Advisor an annual, noncumulative, subordinated management fee
of one percent of the sum of gross revenues from properties wholly
owned by the Partnership and the Partnership's allocable share of gross
revenues from joint ventures, but not in excess of competitive fees for
comparable services. These fees will be incurred and will be payable
only after the limited partners receive their 10% Preferred Return. Due
to the fact that these fees are noncumulative, if the limited partners
do not receive 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, 2000, 1999, and 1998.
The Advisor is are 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 net sales proceeds are reinvested in a replacement property, no
such real estate disposition fees will be incurred until such
replacement property is sold and the net sales proceeds are
distributed. In addition, 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.
CNL INCOME FUND X, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2000, 1999, and 1998
8. Related Party Transactions - Continued:
--------------------------------------
During the years ended December 31, 2000, 1999, and 1998, the Advisor
and its affiliates provided accounting and administrative services to
the Partnership on a day-to-day basis including services relating to
the proposed and terminated merger. The Partnership incurred $100,929,
$129,209, and $105,445, for the years ended December 31, 2000, 1999,
and 1998, respectively, for such services.
The amounts due to related parties at December 31, 2000 and 1999,
totaled $147,099 and $60,116, respectively.
9. Concentration of Credit Risk:
- -------------------------------------
The following schedule presents total rental and earned income from
individual lessees, or affiliated groups of lessees, each representing
more than ten percent of the Partnership's total rental and earned
income (including the Partnership's share of total rental and earned
income from unconsolidated joint ventures and the properties held as
tenants-in-common with affiliates of the general partners) for each of
the years ended December 31:
2000 1999 1998
--------------- --------------- ---------------
Golden Corral Corporation $707,882 $686,144 $578,430
Jack in the Box Inc. 517,974 514,747 436,577
In addition, the following schedule presents total rental and earned
income from individual restaurant chains, each representing more than
ten percent of the Partnership's total rental and earned income
(including the Partnership's share of total rental and earned income
from unconsolidated joint ventures and the properties held as
tenants-in-common with affiliates of the general partners) for each of
the years ended December 31:
2000 1999 1998
---------------- ---------------- ---------------
Burger King $791,749 $797,192 $758,178
Golden Corral Family
Steakhouse Restaurant 707,882 686,144 578,430
Jack in the Box 517,974 514,747 436,577
Hardee's 390,528 395,902 400,716
Shoney's N/A 398,103 440,333
CNL INCOME FUND X, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2000, 1999, and 1998
9. Concentration of Credit Risk - Continued:
- -------------------------------------------------
The information denoted by N/A indicates that for each period
presented, the tenant and the chains did not represent more than ten
percent of the Partnership's total rental and earned income.
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.
10. Selected Quarterly Financial Data:
---------------------------------
The following table presents selected unaudited quarterly financial
data for each full quarter during they years ended December 31, 2000
and 1999:
2000 Quarter First Second Third Fourth Year
---------------------- --------------- ------------- -------------- ------------ --------------
Revenues (1) $ 806,164 $840,735 $ 873,727 $ 865,982 $3,386,608
Net Income 271,897 642,974 718,302 832,615 2,465,788
Net income per
limited partner
unit 0.07 0.16 0.18 0.21 0.62
1999 Quarter First Second Third Fourth Year
--------------- ------------- -------------- ------------ --------------
Revenues (1) $ 818,554 $904,699 $ 803,341 $ 890,912 $3,417,506
Net Income 700,531 667,970 550,144 350,756 2,269,401
Net income per
limited partner
unit 0.17 0.17 0.14 0.08 0.56
(1) Revenues include equity in earning of unconsolidated joint
ventures, minority interest in income of the consolidated joint
venture, and adjustments to accrued rental income as a result of
certain tenants filing for bankruptcy and rejecting the leases relating
to these Properties.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
The General Partners of the Registrant are James M. Seneff, Jr., Robert
A. Bourne and CNL Realty Corporation, a Florida corporation. The
General Partners manage and control the Partnership's affairs and have
general responsibility and the ultimate authority in all matters
affecting the Partnership's business. The Partnership has available to
it the services, personnel and experience of CNL Fund Advisors, Inc.,
CNL Financial Group, Inc. and their affiliates, all of which are
affiliates of the General Partners.
James M. Seneff, Jr., age 54. 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 CNL American Properties Fund, Inc. ("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 (the "Advisor") until it merged with APF in September 1999,
and in June 2000, was re-elected to those positions of the Advisor. 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. 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. 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 53. 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 Director and Vice Chairman of the Board of Directors 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 the Advisor prior to its merger with 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. (formerly CNL Group, Inc.);
Director, Vice Chairman of the Board and President of CNL Hospitality
Properties, Inc., a public, unlisted real estate investment trust; as
well as, Director and President of CNL Hospitality Corp., its advisor.
In addition, Mr. Bourne serves as Director and President of CNL
Retirement Properties, Inc., a public, unlisted real estate investment
trust; as well as, a Director and 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 45. 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 the Advisor, Mr. McWilliams served as
President of APF from February 1999 until September 1999. From April
1997 to February 1999, he served as Executive Vice President of APF.
Mr. McWilliams joined CNL Financial Group, Inc. (formerly CNL Group,
Inc.) in April 1997 and served as an Executive Vice President until
September 1999. In addition, Mr. McWilliams served as President of the
Advisor and CNL Financial Services, Inc. from April 1997 until the
acquisition of such entities by 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.
John T. Walker, age 42. Mr. Walker has served as President of APF since
September 1999 and as Chief Operating Officer since March 1995. Mr.
Walker also served as a board member of CNL Restaurant Property
Services, Inc., a subsidiary of APF from December 1999 until December
2000. Previously, he served as Executive Vice President of APF from
January 1996 to September 1999. Mr. Walker joined the Advisor in
September 1994, as Senior Vice President responsible for Research and
Development. He served as the Chief Operating Officer of the Advisor
from April 1995 until September 1999 and as Executive Vice President
from January 1996 until September 1999, at which time it merged with
APF. Mr. Walker also served as Executive Vice President of CNL
Hospitality Properties, Inc. and CNL Hospitality Corp. (formerly CNL
Hospitality Advisors, Inc.) from 1997 to October 1998. From May 1992 to
May 1994, he was Executive Vice President for Finance and
Administration and Chief Financial Officer of Z Music, Inc., a cable
television network which was subsequently acquired by Gaylord
Entertainment, where he was responsible for overall financial and
administrative management and planning. From January 1990 through April
1992, Mr. Walker was Chief Financial Officer of the First Baptist
Church in Orlando, Florida. From April 1984 through December 1989, he
was a partner in the accounting firm of Chastang, Ferrell & Walker,
P.A., where he was the partner in charge of audit and consulting
services, and from 1981 to 1984, Mr. Walker was a Senior
Consultant/Audit Senior at Price Waterhouse. Mr. Walker is a cum laude
graduate of Wake Forest University with a Bachelor of Science degree in
Accountancy and is a certified public accountant.
Steven D. Shackelford, age 37. Mr. Shackelford was promoted to
Executive Vice President and Chief Financial Officer of APF in July
2000. He served as Senior Vice President and Chief Financial Officer of
APF since January 1997. Mr. Shackelford also served as Secretary and
Treasurer of APF since September 1999. He also served as Chief
Financial Officer of the Advisor 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.
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 15, 2001, 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 15, 2001, 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.
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, 2000, 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, 2000
- ---------------------------------- -------------------------------------- ------------------------------
Reimbursement to affiliates for Operating expenses are reimbursed at Accounting and
operating expenses the lower of cost or 90 percent of administra-tive services:
the prevailing rate at which $100,929
comparable 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 manage- One percent of the sum of gross $-0-
ment 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, 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, 2000
- --------------------------------- -------------------------------------- ------------------------------
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, 2000
- --------------------------------- -------------------------------------- ------------------------------
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.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) The following documents are filed as part of this report.
1. Financial Statements
Report of Independent Certified Public Accountants
Balance Sheets at December 31, 2000 and 1999
Statements of Income for the years ended December 31, 2000,
1999, and 1998
Statements of Partners' Capital for the years ended December
31, 2000, 1999, and 1998
Statements of Cash Flows for the years ended December 31,
2000, 1999, and 1998
Notes to Financial Statements
2. Financial Statement Schedule
Schedule II -Valuation and Qualifying Accounts for the years
ended December 31, 2000, 1999, and 1998
Schedule III - Real Estate and Accumulated Depreciation at
December 31, 2000
Notes to Schedule III - Real Estate and Accumulated
Depreciation at December 31, 2000
All other Schedules are omitted as the required information is
inapplicable or is presented in the financial statements or
notes thereto.
3. Exhibits
3.1 Affidavit and Certificate of Limited Partnership of CNL Income Fund X,
Ltd. (Included as Exhibit 3.2 to Registration Statement No. 33-35049 on
Form S-11 and incorporated herein by reference.)
4.1 Affidavit and Certificate of Limited Partnership of CNL Income Fund X,
Ltd. (Included as Exhibit 3.2 to Registration Statement No. 33-35049 on
Form S-11 and incorporated herein by reference.)
4.2 Amended and Restated Agreement of Limited Partnership of CNL Income
Fund X, Ltd. (Included as Exhibit 3.3 to Post-Effective Amendment No. 4
to Registration Statement No. 33-35049 on Form S-11 and incorporated
herein by reference.)
10.1 Management Agreement between CNL Income Fund X, Ltd. and CNL Investment
Company (Included as Exhibit 10.1 to Form 10-K filed with the
Securities and Exchange Commission on March 17, 1998, 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.)
(b) The Registrant filed no reports on Form 8-K during the period October
1, 2000 through December 31, 2000.
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 29th day of
March, 2001.
CNL INCOME FUND X, 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 29, 2001
- ------------------------------------
Robert A. Bourne (Principal Financial and Accounting
Officer)
/s/ James M. Seneff, Jr. Chief Executive Officer and Director March 29, 2001
- ------------------------------------
James M. Seneff, Jr. (Principal Executive Officer)
CNL INCOME FUND X, LTD.
(A Florida Limited Partnership)
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
Years Ended December 31, 2000, 1999, and 1998
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
- ---------- ----------------- -------------- --------------- ---------------- ------------- ------------ ------------
- ----------
1998 Allowance for
doubtful
accounts (a) $ $ $ $ (c) $ $
255,449 -- 290,844 (b) 38,727 1,335 506,231
- ---------- ============== =============== ================ ============= ============ ============
- ----------
1999 Allowance for
doubtful
accounts (a) $ $ $ (b) $ (c) $ $
506,231 -- 138,445 482,523 38,029 124,124
- ---------- ============== =============== ================ ============= ============ ============
- ----------
2000 Allowance for
doubtful
accounts (a) $ 124,124 $ -- $ 182,864 (b) $ 1,989 (c) $ 17,098 $ 287,901
- ---------- ============== =============== ================ ============= ============ ============
(a) Deducted from receivables and accrued rental income on the balance
sheet.
(b) Reduction of rental, earned and other income.
(c) Amounts written off as uncollectible.
Costs Capitalized
Subsequent To
Initial Cost Acquisition
----------------------------- --------------------
Encum- Buildings and Improve- Carrying
brances Land Improvements ments Costs
----------- --------------- ------------ ----------- -------
Properties the Partnership
has Invested in Under
Operating Leases:
Boston Market:
Homewood, Alabama - $597,907 - - -
Burger King Restaurants:
Hendersonville, North Caro-ina 222,632 568,573 - -
Irondequoit, New York - 383,359 554,084 - -
Denny's Restaurants:
Fremont, Ohio - 160,896 - 273,700 -
Detroit, Michigan - 285,842 - - -
Spartanburg, South Carolin- 287,959 - - -
Golden Corral Family
Steakhouse Restaurants:
Austin, Texas - 592,837 - 1,106,384 -
Austin, Texas - 711,354 - 1,124,040 -
Las Cruces, New Mexico- 580,655 920,521 - -
Freemont, Nebraska 203,166 1,054,051 - -
Hardee's Restaurants:
Pace, Florida - 174,850 - - -
Jacksonville, Florida - 326,972 - - -
Centerville, Tennnessee - 130,494 - - -
Jack in the Box Restaurants:
Desloge, Missouri - 276,701 - - -
San Antonio, Texas - 327,322 - - -
San Marcos, Texas - 427,386 - 592,943 -
Missouri City, Texas - 348,646 - - -
Pasadena, Texas - 202,393 - - -
Long John Silver's Restaurants:
Alamogordo, New Mexico - 157,401 - - -
Las Cruces, New Mexico - 222,778 - - -
Perkins Restaurant:
Ft. Pierce, Florida (k) - 487,752 - 567,923 -
Pizza Hut Restaurants:
Bozeman, Montana - 99,879 224,614 - -
Sidney, Montana 101,690 - - -
Livingston, Montana - 71,989 161,211 - -
Laurel, Montana 109,937 255,060 - -
Shoney's Restaurants:
Greenville, North Carolina- 323,573 515,134 - -
North Richland Hills, Texa- 513,032 - 420,219 -
Pelham, Alabama 410,448 - 427,317 -
--------------- -------
------------ -----------
$8,739,850 $4,253,248 $4,512,526 -
=============== ============ =========== =======
Properties of Joint Venture in
Which the Partnership has a
50% Interest and has Invested
in Under Operating Leases:
Burger King Restaurants:
Greensboro, North Carolina- $338,800 $650,109 - -
Metairie, Louisiana - 429,883 342,455 - -
Lafayette, Louisiana - 350,932 773,129 - -
Nashua, New Hampshire - 514,815 838,536 - -
Pontiac, Illinois - 203,095 719,226 - -
Dover, New Hampshire - 406,259 998,023 - -
--------------- -------
------------ -----------
$2,243,784 $4,321,478 - -
=============== ============ =========== =======
Property of Joint Venture in
Which the Partnership has a
10.51% Interest and has
Invested in Under an Operating
Lease:
Burger King Restaurant:
Ashland, New Hampshire - $293,478 $997,104 - -
=============== ============ =========== =======
Property in Which the Partnership
has a 13% Interest as Tenants-
in-Common and has Invested in
Under an Operating Lease:
Golden Corral Family
Steakhouse Restaurant:
Clinton, North Carolin- $138,382 $676,588 - -
=============== ============ =========== =======
Property in Which the Parner-
ship has a 6.69% Interest as
Tenants-in-Common and has
Invested in Under an Operating
Lease:
Chevy's Fresh Mex
Miami, Florida - $976,357 $974,016 - -
=============== ============ =========== =======
Property of Joint Venture in
Which the Partnership has a
69.06% Interest and has
Invested in Under an Operating
Lease:
Burger King Restaurant:
Ocean Shores, Washington - $351,015 - - -
=============== ============ =========== =======
Property of Joint Venture in
Which the Partnership has a
52% Interest and has Invested
in Under an Operating Lease:
IHOP Restaurant:
Peoria, Arizona - $466,182 - - -
=============== ============ =========== =======
Properties the Partnership
has Invested in Under
Direct Financing Leases:
Burger King Restaurants:
Ashland Ohio - $190,695 $724,348 - -
Allegan, Michigan - 91,238 - 418,782 -
Denny's Restaurants:
Detroit, Michigan - - 752,829 - -
Spartanburg,
South Carolina - - 529,410 - -
Hardee's Restaurants:
Pace, Florida - - 467,272 - -
Jacksonville, Florida - - 405,985 - -
Hohenwald, Tennessee - 49,201 376,415 - -
Ravenna, Ohio - 114,244 496,032 - -
New Bethlehem, Pennsylva-ia 135,929 452,507 - -
Morristown, Tennessee - 131,289 456,925 - -
Centerville, Tennessee - - 348,032 - -
Jack in the Box Restaurants:
Desloge, Missouri - - 630,981 - -
San Antonio, Texas - - - 206,031 -
Nampa, Idaho - 151,574 584,533 - -
Missouri City, Texas - - 619,686 - -
Pasadena, Texas - - 575,429 - -
Long John Silver's Restaurants:
Alamogordo, New Mexico - - 275,270 20,204 -
Las Cruces, New Mexico - - 318,378 57,828 -
Pizza Hut Restaurants:
Glasgow, Montana - 57,482 266,726 - -
Sidney, Montana - - 291,238 - -
--------------- ------------ -----------
$921,652 $8,571,996 $702,845 -
=============== ============ =========== -------
Property of Joint Venture in
Which the Partnership has
a 40.95% Interest and has Invested
in Under Direct Financing Lease:
Hardee's Restaurant:
Williston, Florida - $150,143 - $499,071 -
=============== ============ =========== =======
Property of Joint Venture in
Which the Partnership has
a 69.06% Interest and has Invested
in Under Direct Financing Lease:
Burger King Restaurant:
Ocean Shores, Washington - - $810,902 - -
=============== ============ =========== =======
Property of Joint Venture in
Which the Partnership has
a 52% Interest and has Invested
in Under Direct Financing Lease:
IHOP Restaurant:
Peoria, Arizona - - $1,121,633 - -
=============== ============ =========== =======
Life on Which
Gross Amount at Which Depreciation in
Carried at Close of Period (c) Date Latest Income
- -----------------------------------------
Buildings and Accumulated of Con- Date Statement is
Land Improvements Total Depreciation structionAcquired Computed
- ------------- ------------ ------------ ----------- ------- --------- -------------
(b)
$597,907 - $597,907 - 1997 10/97 (l)
222,632 568,573 791,205 59,048 1986 11/91 (j)
383,359 554,084 937,443 57,543 1986 11/91 (j)
160,896 273,700 434,596 68,303 1992 12/91 (g)
285,842 (f) 285,842 - 1992 02/92 (d)
287,959 (f) 287,959 - 1992 03/92 (d)
592,837 1,106,384 1,699,221 324,337 1992 12/91 (b)
711,354 1,124,040 1,835,394 322,636 1992 12/91 (b)
580,655 920,521 1,501,176 265,480 1992 05/92 (b)
203,166 1,054,051 1,257,217 61,679 1998 03/99 (b)
174,850 (f) 174,850 - 1992 01/92 (d)
326,972 (f) 326,972 - 1990 02/92 (d)
130,494 (f) 130,494 - 1991 02/92 (d)
276,701 (f) 276,701 - 1991 12/91 (d)
327,322 (f) 327,322 - 1992 02/92 (d)
427,386 592,943 1,020,329 36,159 1998 10/98 (b)
348,646 (f) 348,646 - 1991 04/92 (d)
202,393 (f) 202,393 - 1991 04/92 (d)
157,401 (f) 157,401 - 1977 03/92 (d)
222,778 (f) 222,778 - 1975 03/92 (d)
487,752 567,923 1,055,675 100,934 1992 01/92 (h)
99,879 224,614 324,493 65,230 1976 03/91 (b)
101,690 (f) 101,690 - 1985 03/91 (d)
71,989 161,211 233,200 46,817 1979 03/91 (b)
109,937 255,060 364,997 74,072 1985 03/91 (b)
323,573 515,134 838,707 157,222 1987 11/91 (b)
513,032 420,219 933,251 123,111 1992 12/91 (b)
410,448 427,317 837,765 128,156 1992 01/92 (b)
- ------------- ------------ ------------ -----------
$8,739,850 $8,765,774 $17,505,624 $1,890,727
============= ============ ============ ===========
$338,800 $650,109 $988,909 $189,808 1990 03/92 (b)
429,883 342,455 772,338 99,984 1990 03/92 (b)
350,932 773,129 1,124,061 225,725 1989 03/92 (b)
514,815 838,536 1,353,351 244,822 1987 03/92 (b)
203,095 719,226 922,321 209,988 1988 03/92 (b)
406,259 998,023 1,404,282 291,385 1987 03/92 (b)
- -------------
- ------------- ------------ ------------ -----------
$2,243,784 $4,321,478 $6,565,262 $1,261,712
============= ============ ============ ===========
$293,478 $997,104 $1,290,582 $274,271 1987 10/92 (b)
============= ============ ============ ===========
$138,382 $676,588 $814,970 $111,380 1996 01/96 (b)
============= ============ ============ ===========
$976,357 $974,016 $1,950,373 $97,491 1995 12/97 (b)
============= ============ ============ ===========
$351,015 (f) $351,015 - 1998 01/99 (d)
============= ============ ============ ===========
$466,182 (f) $466,182 - 1998 11/99 (d)
============= ============ ============ ===========
(f) (f) (f) - 1988 11/91 (e)
(f) (f) (f) - 1992 04/92 (e)
- (f) (f) - 1992 02/92 (d)
- (f) (f) - 1992 03/92 (d)
- (f) (f) - 1992 01/92 (d)
- (f) (f) - 1990 02/92 (d)
(f) (f) (f) - 1991 02/92 (e)
(f) (f) (f) - 1991 04/92 (e)
(f) (f) (f) - 1991 04/92 (e)
(f) (f) (f) - 1991 04/92 (e)
- (f) (f) - 1991 02/92 (d)
- (f) (f) - 1991 12/91 (d)
- (f) (f) - 1992 12/91 (d)
(f) (f) (f) - 1991 12/92 (e)
- (f) (f) - 1991 04/92 (d)
- (f) (f) - 1991 04/92 (d)
- (f) (f) - 1977 03/92 (d)
- (f) (f) - 1975 03/92 (d)
(f) (f) (f) - 1985 03/91 (e)
- (f) (f) - 1985 03/91 (d)
(f) (f) (f) - 1993 12/92 (e)
(f) (f) (f) - 1998 01/99 (d)
(f) (f) (f) - 1998 11/99 (d)
CNL INCOME FUND X, LTD.
(A Florida Limited Partnership)
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED
DEPRECIATION
December 31, 2000
(a) Transactions in real estate and accumulated depreciation during 2000,
1999, and 1998, are summarized as follows:
Accumulated
Cost Depreciation
----------------- ----------------
Properties the Partnership has
Invested in Under Operating Leases:
Balance, December 31, 1997 $ 16,823,146 $ 1,113,247
Acquisitions 1,020,329 --
Dispositions (833,323 ) (43,281 )
Reclassify as operating lease 1,913,380 --
Depreciation expense (k)(l) -- 259,866
----------------- ----------------
Balance, December 31, 1998 18,923,532 1,329,832
Acquisition 1,257,217 --
Disposition (868,130 ) --
Depreciation expense -- 325,062
----------------- ----------------
Balance, December, 31 1999 19,312,619 1,654,894
Disposition (1,806,995 ) (81,658 )
Depreciation expense -- 317,491
----------------- ----------------
Balance, December, 31 2000 $ 17,505,624 $ 1,890,727
================= ================
Properties of Joint Venture in Which
the Partnership has a 50% Interest
and has Invested in Under Operating
Leases:
Balance, December 31, 1997 $ 6,565,262 $ 829,564
Depreciation expense -- 144,050
----------------- ----------------
Balance, December 31, 1998 6,565,262 973,614
Depreciation expense -- 144,049
----------------- ----------------
----------------
Balance, December 31, 1999 6,565,262 1,117,663
Depreciation expense -- 144,049
-----------------
----------------
Balance, December 31, 2000 $ 6,565,262 $ 1,261,712
================= ================
CNL INCOME FUND X, LTD.
(A Florida Limited Partnership)
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED
DEPRECIATION - CONTINUED
December 31, 2000
Accumulated
Cost Depreciation
----------------- ----------------
Property of Joint Venture in Which
the Partnership has a 10.51%
Interest and has Invested in
Under an Operating Lease:
Balance, December 31, 1997 $ 1,290,582 $ 174,472
Depreciation expense -- 33,327
----------------- ----------------
Balance, December 31, 1998 1,290,582 207,799
Depreciation expense -- 33,236
----------------- ----------------
Balance, December 31, 1999 1,290,582 241,035
Depreciation expense -- 33,236
----------------- ----------------
Balance, December 31, 2000 $ 1,290,582 $ 274,271
================= ================
Property of Joint Venture in Which
the Partnership has a 69.06%
Interest and has Invested in
Under an Operating Lease:
Balance, December 31, 1998 $ -- $ --
Acquisition 351,015 --
Depreciation expense (d) -- --
======================================= ---------------- ---------------
Balance, December 31, 1999 351,015 --
Depreciation expense (d) -- --
======================================= ---------------- ---------------
Balance, December 31, 2000 $ 351,015 $ --
======================================= ================ ===============
Property of Joint Venture in Which
the Partnership has a 52%
Interest and has Invested in
Under Operating Leases:
Balance, December 31, 1998 $ -- $ --
=======================================
Acquisition 466,182 --
Depreciation (d) -- --
======================================= ---------------- ---------------
Balance, December 31, 1999 466,182 --
Depreciation expense (d) -- --
======================================= ---------------- ---------------
Balance, December 31, 2000 $ 466,182 $ --
======================================= ================ ===============
CNL INCOME FUND X, LTD.
(A Florida Limited Partnership)
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED
DEPRECIATION - CONTINUED
December 31, 2000
Accumulated
Cost Depreciation
---------------- -----------------
Property in Which the Partnership has
a 13% Interest as Tenants-in-
Common and has Invested in Under
an Operating Lease:
Balance, December 31, 1997 $ 814,970 $ 43,721
Depreciation expense -- 22,553
----------------- ------------------
Balance, December 31, 1998 814,970 66,274
Depreciation expense -- 22,553
----------------- ------------------
Balance, December 31, 1999 814,970 88,827
Depreciation expense -- 22,553
----------------- ------------------
Balance, December 31, 2000 $ 814,970 $ 111,380
================= ==================
Property in Which the Partnership has
a 6.69% Interest as Tenants-in-
Common and has Invested in Under
an Operating Lease:
Balance, December 31, 1997 $ 1,950,373 $ 89
Depreciation expense -- 32,467
----------------- ------------------
Balance, December 31, 1998 1,950,373 32,556
Depreciation expense -- 32,467
----------------- ------------------
Balance, December 31, 1999 1,950,373 65,023
Depreciation expense -- 32,468
----------------- ------------------
Balance, December 31, 2000 $ 1,950,373 $ 97,491
================= ==================
(b) Depreciation expense is computed for buildings and improvements based
upon estimated lives of 30 years.
(c) As of December 31, 2000, the aggregate cost of the Properties owned by
the Partnership and its consolidated joint venture, and the
unconsolidated joint ventures for federal income tax purposes was
$28,408,360 and $14,018,133, respectively. All of the leases are
treated as operating leases for federal income tax purposes.
(d) For financial reporting purposes, the portion of the lease relating to
the building has been recorded as a direct financing lease. The cost of
the building has been included in net investment in direct financing
leases; therefore, depreciation is not applicable.
CNL INCOME FUND X, LTD.
(A Florida Limited Partnership)
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED
DEPRECIATION - CONTINUED
December 31, 2000
(e) For financial reporting purposes, the lease for the land and building
has been recorded as a direct financing lease. The cost of the land and
building has been included in net investment in direct financing
leases; therefore, depreciation is not applicable.
(f) For financial reporting purposes, certain components of the lease
relating to land and building have been recorded as a direct financing
lease. Accordingly, costs relating to these components of this lease
are not shown.
(g) Effective January 1, 1994, the lease for this Property was amended,
resulting in the 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 28
years.
(h) Effective March 1, 1996, the lease for this Property was amended,
resulting in the 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 life of approximately 26 years.
(i) Effective October 1, 1998, the lease for this Property was terminated,
resulting in the 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 useful life of approximately 23 years.
(j) Effective August 1, 1998, the lease for this Property was amended,
resulting in the reclassification of the building portion of the lease
as an operating lease. The building was recorded at net book value and
depreciated over its remaining estimate life of approximately 23 years.
(k) For financial reporting purposes the undepreciated cost of the Property
in Ft. Pierce, Florida, was reduced to its estimated net realizable
value due to an impairment in value. The Partnership recognized the
impairment by recording an allowance for loss on assets in the amount
of $287,275 at December 31, 2000. The impairment at December 31, 2000
represented the difference between the Property's carrying value and
the net realizable value of the Property at December 31, 2000. The cost
of the Property presented on this schedule is the gross amount at which
the Property was carried at December 31, 2000, excluding the allowance
for loss on assets.
EXHIBITS
EXHIBIT INDEX
Exhibit Number
3.1 Affidavit and Certificate of Limited Partnership of CNL Income Fund X,
Ltd. (Included as Exhibit 3.2 to Registration Statement No. 33-35049 on
Form S-11 and incorporated herein by reference.)
4.1 Affidavit and Certificate of Limited Partnership of CNL Income Fund X,
Ltd. (Included as Exhibit 3.2 to Registration Statement No. 33-35049 on
Form S-11 and incorporated herein by reference.)
4.2 Amended and Restated Agreement of Limited Partnership of CNL Income
Fund X, Ltd. (Included as Exhibit 3.3 to Post-Effective Amendment No. 4
to Registration Statement No. 33-35049 on Form S-11 and incorporated
herein by reference.)
10.1 Management Agreement between CNL Income Fund X, Ltd. and CNL Investment
Company (Included as Exhibit 10.1 to Form 10-K filed with the
Securities and Exchange Commission on March 17, 1998, 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.)