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, 2003
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-20016
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]
Indicate by check mark whether the registrant is an accelerated filer
(as defined in Exchange Act Rule 12b-2): Yes___ No X --
Aggregate market value of the voting stock held by nonaffiliates of the
registrant: The registrant registered an offering of 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.
As of December 31, 2000, the Partnership owned 35 Properties directly
and owned 13 Properties indirectly through joint venture or tenancy in common
arrangements. During 2001, the Partnership reinvested a portion of the net sales
proceeds from the 2000 sale of the Property in Lancaster, New York in a joint
venture arrangement, CNL VIII, X, XII Kokomo Joint Venture, with CNL Income Fund
VIII, Ltd. and CNL Income Fund XII, Ltd., each a Florida limited partnership and
an affiliate of the General Partners, to purchase and hold one Property. In
addition, during 2001, the Partnership and its joint venture partner liquidated
Peoria Joint Venture and the Partnership received its pro rata share of the
liquidation proceeds. During the year ended December 31, 2002, the Partnership
reinvested the majority of the liquidation proceeds from Peoria Joint Venture in
a Property in Austin, Texas, as tenants-in-common, with CNL Income Fund XVIII,
Ltd., which is a Florida limited partnership and an affiliate of the General
Partners. In addition, during 2002, the Partnership sold its Properties in San
Marcos, Texas and Ft. Pierce, Florida. Also during 2002, CNL Restaurant
Investments III, in which the Partnership owns a 50% interest, and Ashland Joint
Venture, in which the Partnership owns a 10.51% interest, sold their respective
Properties in Greensboro, North Carolina and Ashland, New Hampshire. The
Partnership used the proceeds from the sale of the Property in San Marcos, Texas
and the return of capital for its pro-rata share of the net sales proceeds
relating to the Property in Greensboro, North Carolina to acquire a Property in
Houston, Texas. Ashland Joint Venture used the proceeds from the sale of the
Property in Ashland, New Hampshire to reinvest in a Property in San Antonio,
Texas. During 2003, the Partnership used the majority of the proceeds from the
2002 sale of the Property in Ft. Pierce, Florida to invest in a Property in
Tucker, Georgia, as tenants-in-common, with CNL Income Fund XIII, Ltd., CNL
Income Fund XIV, Ltd., and CNL Income Fund XV, Ltd., affiliates of the General
Partners. In addition, during 2003, the Partnership and its joint venture
partner liquidated CNL Ocean Shores Joint Venture and the Partnership received
its pro rata share of the liquidation proceeds. The General Partners intend to
reinvest the liquidation proceeds in an additional Property. As of December 31,
2003, the Partnership owned 47 Properties, including interests in nine
Properties owned by joint ventures in which the Partnership is a co-venturer and
four Properties owned with affiliates as tenants-in-common. The Properties are,
in general, leased on a triple-net basis with the lessees responsible for all
repairs and maintenance, property taxes, insurance and utilities.
The Partnership holds its Properties until the General Partners
determine that the sale or other disposition of the Properties is advantageous
in view of the Partnership's investment objectives. In deciding whether to sell
Properties, the General Partners consider factors such as potential capital
appreciation, net cash flow and federal income taxes. 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.
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 10 to 20 years (the average
being 17 years) and expire between 2006 and 2023. 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 $28,800 to $218,200. Generally, 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
successive five-year renewal options subject to the same terms and conditions as
the initial lease. Lessees of 36 of the Partnership's 47 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 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 2003, the Partnership reinvested the majority of the net sales
proceeds from the 2002 sale of its Property in Ft. Pierce, Florida in a Property
in Tucker, Georgia, as tenants-in-common, with CNL Income Fund XIII, Ltd., CNL
Income Fund XIV, Ltd., and CNL Income Fund XV, Ltd. Each of the CNL Income Funds
is a Florida limited partnership and an affiliate of the General Partners. The
lease terms for this Property are substantially the same as the Partnership's
other leases, as described above.
Major Tenants
During 2003, three lessees (or groups of affiliated tenants) of the
Partnership and its consolidated joint venture, (i) Golden Corral Corporation,
(ii) Jack in the Box Inc. and Jack in the Box Eastern Division, L.P. (which are
affiliated entities under common control of Jack in the Box Inc.) (hereinafter
referred to as "Jack in the Box Inc."), and (iii) Carrols Corporation and Texas
Taco Cabana, LP (which are affiliated entities under common control)
(hereinafter referred to as ("Carrols Corp.")), each contributed more than 10%
of the Partnership's total rental revenues (including rental revenues from the
Partnership's consolidated joint venture and the Partnership's share of total
rental revenues from Properties owned by unconsolidated joint ventures and
Properties owned with affiliates of the General Partners as tenants-in-common).
As of December 31, 2003, Golden Corral Corporation was the lessee under leases
relating to six restaurants, Jack in the Box Inc. was the lessee under leases
relating to five restaurants and Carrols Corp. was the lessee under leases
related to six restaurants. It is anticipated that based on the minimum rental
payments required by the leases, these three lessees each will continue to
contribute more than 10% of the Partnership's total rental revenues in 2004. In
addition, four Restaurant Chains, Golden Corral Buffet and Grill ("Golden
Corral"), Hardee's, Burger King, and Jack in the Box, each accounted for more
than 10% of the Partnership's total rental revenues during 2003 (including
rental revenues from the Partnership's consolidated joint venture and the
Partnership's share of total rental revenues from Properties owned by
unconsolidated joint ventures and Properties owned with affiliates of the
General Partners as tenants-in-common). In 2004, it is anticipated that these
four Restaurant Chains each will continue to account for more than 10% of the
total rental revenues to which the Partnership is entitled under the terms of
the leases. Any failure of these lessees or Restaurant Chains will have a
material adverse affect on the Partnership's operating results if the
Partnership is not able to re-lease the Properties in a timely manner. As of
December 31, 2003, no single tenant or groups of affiliated tenants lease
Properties with an aggregate carrying value in excess of 20% of the total assets
of the Partnership.
Joint Venture and Tenancy in Common Arrangements
The Partnership has entered into the following joint venture and
tenancy in common arrangements as of December 31, 2003:
Entity Name Year Ownership Partners Property
CNL Restaurant Investments III 1992 50.00 % CNL Income Fund IX, Ltd. Dover, NH
Metrairie, LA
Lafayette, LA
Nashua, NH
Pontiac, IL
Allegan Real Estate Joint 1992 88.26% A third party partner Allegan, MI
Venture
Ashland Joint Venture 1992 10.51% CNL Income Fund IX, Ltd. San Antonio, TX
CNL Income Fund XI, Ltd.
Williston Real Estate Joint 1993 40.95% CNL Income Fund XII, Ltd. Williston, FL
Venture
CNL Income Fund IV, Ltd., CNL 1996 13.00% CNL Income Fund IV, Ltd. Clinton, NC
Income Fund VI, Ltd., CNL CNL Income Fund VI, Ltd.
Income Fund X, Ltd. and CNL CNL Income Fund XV, Ltd.
Income Fund XV, Ltd.,
Tenants in Common
CNL Income Fund III, Ltd., CNL 1997 6.69% CNL Income Fund III, Ltd. CNL Miami, FL
Income Fund VII, Ltd., CNL Income Fund VII, Ltd.
Income Fund X, Ltd. and CNL CNL Income Fund XIII, Ltd.
Income Fund XIII, Ltd.,
Tenants in Common
CNL VIII, X, XII Kokomo Joint 2001 10.00% CNL Income Fund VIII, Ltd. Kokomo, IN
Venture CNL Income Fund XII, Ltd.
CNL Income Fund X, Ltd. and CNL 2002 81.65% CNL Income Fund XVIII, Ltd. Austin, TX
Income Fund XVIII, Ltd.,
Tenants in Common
CNL Income Fund X, Ltd., CNL 2003 12.00% CNL Income Fund XIII, Ltd. Tucker, GA
Income Fund XIII, Ltd., CNL CNL Income Fund XIV, Ltd.
Income Fund XIV, Ltd., and CNL Income Fund XV, Ltd.
CNL Income Fund XV, Ltd.,
Tenants in Common
CNL Restaurant Investments III was formed to hold six Properties;
however, all other joint ventures or tenancies in common were formed to hold one
Property. CNL Restaurant Investments III sold its Property in Greensboro, North
Carolina. Each CNL Income Fund is an affiliate of the General Partners and is a
limited partnership organized pursuant to the laws of the state of Florida. The
Partnership has management control of Allegan Real Estate Joint Venture and
shares management control equally with the affiliates of the General Partners
for the other joint ventures.
The joint venture and tenancy in common arrangements provide for the
Partnership and its partners to share in all costs and benefits in proportion to
each partner's percentage interest in the entity or Property. The Partnership
and its partners are also jointly and severally liable for all debts,
obligations and other liabilities of the joint venture or tenancy in common. Net
cash flow from operations is distributed to each joint venture or tenancy in
common partner in accordance with its respective percentage interest in the
entity or Property.
The joint venture agreement for CNL Restaurant Investments III 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 CNL VIII, X, XII Kokomo Joint Venture has an initial term of 30 years. Each
of the other joint ventures has an initial term of 20 years and, after the
expiration of the initial term, continues in existence from year to year unless
terminated at the option of either joint venturer 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 partner to dissolve the joint
venture. Any liquidation proceeds, after paying joint venture debts and
liabilities and funding reserves for contingent liabilities, will be distributed
first to the joint venture partners with positive capital account balances in
proportion to such balances until such balances equal zero, and thereafter in
proportion to each joint venture partner's percentage interest in the joint
venture.
The joint venture and tenancy in common agreements restrict each
party's ability to sell, transfer or assign its interest without first offering
it for sale to its partner, either upon such terms and conditions as to which
the parties may agree or, in the event the parties cannot agree, on the same
terms and conditions as any offer from a third party to purchase such joint
venture or tenancy in common interest.
During 2003, the Partnership reinvested the majority of the net sales
proceeds from the 2002 sale of its Property in Ft. Pierce, Florida in a Property
in Tucker, Georgia, as tenants-in-common, with CNL Income Fund XIII, Ltd., CNL
Income Fund XIV, Ltd., and CNL Income Fund XV, Ltd. Each of the CNL Income Funds
is a Florida limited partnership and an affiliate of the General Partners. In
addition, during 2003, CNL Ocean Shores Joint Venture, in which the Partnership
owned a 69.06% interest, sold its Property in Ocean Shores, Washington to a
third party. CNL Ocean Shores Joint Venture was liquidated and the Partnership
received its pro rata share of the liquidation proceeds.
The use of joint venture and tenancy in common arrangements allows the
Partnership to fully invest its available funds at times at which it would not
have sufficient funds to purchase an additional property, or at times when a
suitable opportunity to purchase an additional property is not available. The
use of joint venture and tenancy in common arrangements also provides the
Partnership with increased diversification of its portfolio among a greater
number of properties. In addition, tenancy in common arrangements may allow the
Partnership to defer the gain for federal income tax purposes upon the sale of
the property if the proceeds are reinvested in an additional property.
Certain Management Services
RAI Restaurants, Inc. (the "Advisor"), 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, the Advisor is responsible for collecting rental payments,
inspecting the Properties and the tenants' books and records, assisting the
Partnership in responding to tenant inquiries and notices, and providing
information to the Partnership about the status of the leases and the
Properties. The Advisor also assists the General Partners in negotiating the
leases. For these services, the Partnership has agreed to pay the Advisor an
annual fee of one percent of the sum of gross rental revenues from Properties
wholly owned by the Partnership plus the Partnership's allocable share of gross
revenues of joint ventures in which the Partnership is a co-venturer, but not in
excess of competitive fees for comparable services. Under the management
agreement, the management fee is subordinated to receipt by the Limited Partners
of an aggregate, ten percent, cumulative, noncompounded annual return on their
adjusted capital contributions (the "10% Preferred Return"), calculated in
accordance with the Partnership's limited partnership agreement (the
"Partnership Agreement").
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.
During 2003, CNL Capital Management, Inc., ("CCM"), a wholly owned
subsidiary of CNL Financial Group, Inc., began providing certain strategic
advisory services to the General Partners relative to the Partnership's
business. CCM is not reimbursed for these services by the Partnership. CCM also
began providing some accounting and portfolio management services to the
Partnership during 2003, through a subcontract with the Advisor.
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, the officers and employees of CNL Restaurant Properties, Inc.
(formerly CNL American Properties Fund, Inc.), the parent company of the
Advisor, and the officers and employees of CCM 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, 2003, the Partnership owned 47 Properties. Of the 47
Properties, 34 are owned by the Partnership in fee simple, nine are owned
indirectly through joint venture arrangements and four are owned indirectly
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.
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, either directly or
indirectly, by the Partnership as of December 31, 2003 by state.
State Number of Properties
Alabama 2
Florida 4
Georgia 1
Idaho 1
Illinois 1
Indiana 1
Louisiana 2
Michigan 2
Missouri 1
Montana 5
Nebraska 1
New Hampshire 2
New Mexico 3
New York 1
North Carolina 3
Ohio 3
Pennsylvania 1
South Carolina 1
Tennessee 3
Texas 9
------
TOTAL PROPERTIES 47
======
Buildings. Each of the Properties includes a building that is one of a
Restaurant Chain's approved designs. The Partnership's 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, 2003, 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, 2003, 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 $27,602,038 and
$14,738,476, respectively.
The following table lists the Properties owned, either directly or
indirectly, by the Partnership as of December 31, 2003 by Restaurant Chain.
Restaurant Chain Number of Properties
Burger King 10
Chevy's Fresh Mex 1
Denny's 3
Golden Corral 6
Hardee's 7
Jack in the Box 5
Long John Silver's 2
O'Charley's 1
Pizza Hut 5
Shoney's 2
Taco Cabana 3
Other 2
-----
TOTAL PROPERTIES 47
=====
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
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.
The following is a schedule of the average rent per Property and
occupancy rates for the years ended December 31:
2003 2002 2001 2000 1999
-------------- ------------- -------------- ------------- -------------
Rental Revenues (1)(2) $ 3,353,490 $ 3,453,753 $ 3,345,782 $3,462,549 $3,490,765
Properties (2) 47 46 47 47 47
Average Rent Per Property $ 71,351 $ 75,082 $ 71,187 $ 73,671 $ 74,272
Occupancy Rate 100% 98% 98% 98% 96%
(1) Rental revenues includes the Partnership's share of rental income from
the Properties owned through joint venture and tenancy in common
arrangements.
(2) Excludes Properties that were vacant at December 31, which did not
generate rental revenues.
The following is a schedule of lease expirations for leases in place as
of December 31, 2003 for the next ten years and thereafter.
Percentage of
Number Annual Rental Gross Annual
Expiration Year of Leases Revenues Rental Income
- -------------------- -------------- ----------------- ------------------
2004 -- $ -- --
2005 -- -- --
2006 8 599,919 16.45%
2007 3 538,740 14.78%
2008 -- -- --
2009 4 416,729 11.43%
2010 1 107,505 2.95%
2011 5 325,225 8.92%
2012 20 1,268,394 34.78%
2013 -- -- --
Thereafter 6 389,738 10.69%
--------- ---------------- -----------------
Total 47 $ 3,646,250 100.00%
========= ================ =================
Leases with Major Tenants. The terms of the leases with the
Partnership's major tenants as of December 31, 2003 (see Item 1. Business -
Major Tenants), are substantially the same as those described in Item 1.
Business - Leases.
Golden Corral Corporation leases six Golden Corral restaurants. The
initial term of each lease is 15 years (expiring between 2007 and 2016) and the
average minimum base rent is approximately $163,400 (ranging from approximately
$88,000 to $218,200).
Jack in the Box Inc. leases five Jack in the Box restaurants. The
initial term of each lease is 18 years (expiring between 2009 and 2012) and the
average minimum base rent is approximately $100,000 (ranging from approximately
$74,800 to $120,200).
Carrols Corp. leases three Burger King restaurants and three Taco
Cabana restaurants. The initial term of each lease is 18 to 20 years (expiring
between 2011 and 2020) and the average minimum base rent is approximately
$107,500 (ranging from approximately $83,100 to $138,000).
Item 3. Legal Proceedings
Neither the Partnership, nor its General Partners, nor any affiliate of
the Partnership, 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 12, 2004, there were 3,460 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 2003, 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 2003 and 2002 other than
pursuant to the Plan, net of commissions.
2003 (1) 2002 (1)
---------------------------------- ----------------------------------
High Low Average High Low Average
--------- -------- ---------- --------- -------- -----------
First Quarter $9.50 $ 6.02 $ 8.87 $7.99 $ 6.02 $ 7.31
Second Quarter 9.50 7.50 8.42 7.40 7.32 7.36
Third Quarter 9.50 7.60 9.05 9.50 6.02 8.08
Fourth Quarter 9.50 9.50 9.50 8.65 7.94 8.30
(1) A total of 47,327 and 22,690 Units were transferred other than pursuant
to the Plan for the years ended December 31, 2003 and 2002, respectively.
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, 2003 and 2002, the Partnership
declared cash distributions of $3,600,004 to the Limited Partners. Distributions
of $900,001 were declared to the Limited Partners at the close of each of the
Partnership's calendar quarters during 2003 and 2002. 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, 2003 and 2002 are required to be or have been
treated by the Partnership as a return of capital for purposes of calculating
the Limited Partners' return on their adjusted capital contributions. 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
Year ended December 31: 2003 2002 2001 2000 1999
------------- ------------- ------------- ------------- -------------
Continuing Operations (3):
Revenues $ 2,799,244 $ 2,835,750 $ 2,736,506 $ 2,736,891 $ 2,810,236
Equity in earnings
(loss)of unconsolidated joint
ventures 616,705 578,394 (88,921 ) 449,576 380,616
Income from continuing
operations (1) 2,743,885 2,743,225 1,886,764 2,606,091 2,085,480
Discontinued Operations (3):
Revenues 100,097 157,668 206,796 208,694 235,119
Income (loss) from and
gain on disposal of dis-
continued operations (2) 99,785 283,927 (154,110 ) (140,303 ) 183,921
Net income 2,843,670 3,027,152 1,732,654 2,465,788 2,269,401
Income (loss) per Unit:
Continuing operations $ 0.69 $ 0.69 $ 0.47 $ 0.65 $ 0.52
Discontinued operations 0.02 0.07 (0.04 ) (0.03 ) 0.05
------------- ------------- ------------- ------------- -------------
$ 0.71 $ 0.76 $ 0.43 $ 0.62 $ 0.57
============= ============= ============= ============= =============
Cash distributions declared $ 3,600,004 $ 3,600,004 $ 3,600,004 $ 3,600,004 $ 3,600,004
Cash distributions declared
per 0.90 0.90 0.90 0.90 0.90
Unit (2)
At December 31:
Total assets $ 28,849,846 $ 29,592,357 $ 30,087,645 $ 32,124,183 $ 33,248,120
Total partners' capital 27,691,542 28,447,876 29,020,728 30,888,078 32,022,294
(1) Income from continuing operations for the years ended December 31, 2000
and 1999, includes $50,755 and $32,499, respectively, from gains on
sale of assets. Income from continuing operations for the years ended
December 31, 2001 and 1999, includes $84,527 and $377,266,
respectively, from provisions for write-down of assets.
(2) Income (loss) from and gain on disposal of discontinued operations for
the year ended December 31, 2002, includes $167,189 from a gain on
disposal of discontinued operations and for the years ended December
31, 2001 and 2000 includes $306,659 and $287,275, respectively, from
provisions for write-down of assets.
(3) Certain items in the prior years' financial data have been reclassified
to conform to 2003 presentation. These reclassifications had no effect
on net income. The results of operations relating to Properties that
were either identified for sale and disposed of subsequent to January
1, 2002 or were classified as held for sale as of December 31, 2003 are
reported as discontinued operations for all periods presented. The
results of operations relating to Properties that were identified for
sale as of December 31, 2001 but sold subsequently are reported as
continuing operations.
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
Restaurant Chains. The leases are generally triple-net leases, with the lessees
responsible for all repairs and maintenance, property taxes, insurance and
utilities. The leases of the Properties provide for minimum base annual rental
amounts (payable in monthly installments) ranging from approximately $28,800 to
$218,200. Generally, 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 third to the sixth
lease year), the annual base rent required under the terms of the lease will
increase. As of December 31, 2001, the Partnership owned 35 Properties directly
and 13 Properties indirectly through joint venture or tenancy in common
arrangements. As of December 31, 2002 and 2003, the Partnership owned 34
Properties directly and 13 Properties indirectly through joint venture or
tenancy in common arrangements.
Capital Resources
Cash from operating activities was $3,421,945, $3,465,982, and
$3,127,850, for the years ended December 31, 2003, 2002, and 2001, respectively.
Cash from operating activities during 2003, as compared to each of the previous
years remained relatively constant.
Other sources and uses of cash included the following during the years
ended December 31, 2003, 2002, and 2001.
In April 2001, the Partnership reinvested a portion of the proceeds
from the 2000 sale of the Property in Lancaster, New York in a joint venture
arrangement, CNL VIII, X, XII Kokomo Joint Venture, with CNL Income Fund VIII,
Ltd. and CNL Income Fund XII, Ltd., each of which is a Florida limited
partnership pursuant to the laws of the state of Florida and an affiliate of the
General Partners, to purchase and hold one restaurant Property. The joint
venture acquired this Property from CNL BB Corp., an affiliate of the General
Partners. The affiliate had purchased and temporarily held title to the Property
in order to facilitate the acquisition of the Property by the joint venture. The
Partnership contributed approximately $211,200 and has a 10% interest in the
profits and losses of the joint venture.
In August 2001, Peoria Joint Venture, in which the Partnership owned a
52% interest, sold its Property to a third party for approximately $1,786,900,
resulting in a gain of approximately $136,700. As a result, the Partnership
received approximately $899,500 representing its pro-rata share of the
liquidation proceeds. In September 2001, Peoria Joint Venture was dissolved in
accordance with the joint venture agreement. No gain or loss on the dissolution
of the joint venture was recorded. In January 2002, the Partnership reinvested
the majority of the liquidation proceeds in a Property in Austin, Texas, as
tenants-in-common with CNL Income Fund XVIII, Ltd., which is a Florida limited
partnership and an affiliate of the General Partners. The Partnership
contributed $915,171 for an 81.65% interest in this Property. The Partnership
acquired the Property from CNL Funding 2001-A, LP, a Delaware limited
partnership and an affiliate of the General Partners. CNL Funding 2001-A, LP had
purchased and temporarily held title to the Property in order to facilitate the
acquisition of the Property by the tenancy in common. The purchase price paid by
the tenancy in common represented the costs incurred by CNL Funding 2001-A, LP
to acquire and carry the Property.
In April 2002, the Partnership sold its Property in San Marcos, Texas
to a third party and received net sales proceeds of approximately $1,161,100,
resulting in a gain on disposal of discontinued operations of approximately
$169,400. In May 2002, CNL Restaurant Investments III, in which the Partnership
owns a 50% interest, sold its Property in Greensboro, North Carolina to the
tenant and received net sales proceeds of approximately $1,143,500, resulting in
a gain to the joint venture of approximately $371,500. The Partnership received
approximately $571,700 as a return of capital from the joint venture. In
addition, in June 2002, Ashland Joint Venture, in which the Partnership owns a
10.51% interest, sold its Property in Ashland, New Hampshire to the tenant and
received net sales proceeds of $1,472,900, resulting in a gain to the joint
venture of approximately $500,900. The Partnership reinvested the majority of
the net sales proceeds from the sale of the Property in San Marcos, Texas and a
portion of the return of capital received from CNL Restaurant Investments III in
a Property in Houston, Texas at an approximate cost of $1,281,500. Ashland Joint
Venture used the majority of the proceeds to invest in a Property in San
Antonio, Texas at an approximate cost of $1,343,000. The Partnership and joint
venture acquired these Properties from CNL Funding 2001-A, LP, a Delaware
limited partnership and an affiliate of the General Partners. CNL Funding
2001-A, LP had purchased and temporarily held title to the Properties in order
to facilitate the acquisition of the Properties by the Partnership and joint
venture. The purchase price paid by the Partnership and joint venture
represented the costs incurred by CNL Funding 2001-A, LP to acquire and carry
the Properties. In December 2002, the Partnership sold its Property in Ft.
Pierce, Florida to a third party and received net sales proceeds of
approximately $329,200, resulting in a loss on disposal of discontinued
operations of approximately $2,200. The Partnership had recorded provisions for
write-down of assets totaling $593,934 in previous years. In November 2003, the
Partnership reinvested the remaining net sales proceeds received from the sale
of the Property in Ft. Pierce, Florida in a Property in Tucker, Georgia with CNL
Income Fund XIII, Ltd., CNL Income Fund XIV, Ltd., and CNL Income Fund XV, Ltd.
as tenants in common. Each of the CNL Income Funds is an affiliate of the
General Partners. The Partnership and affiliates entered into an agreement
whereby each co-venturer will share in the profits and losses of the property in
proportion to its applicable percentage interest. The Partnership contributed
approximately $184,400 for a 12% interest in the Property.
In September 2003, CNL Ocean Shores Joint Venture, in which the
Partnership owned a 69.06% interest, sold its Property to a third party for
$824,600, resulting in a gain of approximately $413,700. As a result, the
Partnership received approximately $541,900, representing its pro-rata share of
the liquidation proceeds. The joint venture was dissolved in accordance with the
joint venture agreement and no gain or loss was recognized on the dissolution.
The General Partners intend to reinvest the liquidation proceeds in an
additional property or will use the proceeds to meet working capital needs.
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.
At December 31, 2003, the Partnership had $1,457,105 invested in cash
and cash equivalents as compared to $1,287,619 at December 31, 2002. At December
31, 2003, these funds were held in demand deposit and money market accounts at
commercial banks. The increase in cash and cash equivalents during 2003 was
primarily attributable to the fact that in 2003, the Partnership received its
pro rata share of the liquidation proceeds from the dissolution of CNL Ocean
Shores Joint Venture. The increase in cash and cash equivalents was partially
offset because during 2003, the Partnership reinvested the sales proceeds
received from the sale of the Property in Ft. Pierce, Florida in a Property in
Tucker, Georgia as tenants-in-common with affiliates of the general partners. As
of December 31, 2003, the average interest rate earned on rental income held in
demand deposit and money market accounts at commercial banks was less than one
percent annually. The funds remaining at December 31, 2003, after payment of
distributions and other liabilities, will be used to invest in an additional
Property and to meet the Partnership's working capital needs.
Short-Term Liquidity
The Partnership's investment strategy of acquiring Properties for cash
and leasing them under triple-net leases to operators who generally meet
specified financial standards minimizes the Partnership's operating expenses.
The General Partners believe that the leases will continue to generate cash flow
in excess of operating expenses.
The Partnership's short-term liquidity requirements consist primarily
of the operating expenses of the Partnership.
The General Partners have the right, but not the obligation, to make
additional capital contributions if they deem it appropriate in connection with
the operations of the Partnership.
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 Partnership generally distributes cash from operating activities
remaining after the payment of the operating expenses of the Partnership, to the
extent that the General Partners determine that such funds are available for
distribution. Based on current and anticipated future cash from operations, the
Partnership declared distributions to the Limited Partners of $3,600,004, for
the years ended December 31, 2003, 2002 and 2001. This represents distributions
of $0.90 per Unit for each year. No distributions were made to the General
Partners during the years ended December 31, 2003, 2002 and 2001, respectively.
No amounts distributed to the Limited Partners for the years ended December 31,
2003, 2002 and 2001, are required to be or have been treated by the Partnership
as a return of capital for purposes of calculating the Limited Partners' return
on their adjusted capital contributions. The Partnership intends to continue to
make distributions of cash available 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 years ended December 31, 2003, 2002 and 2001.
As of December 31, 2003 and 2002, the Partnership owed $14,269 and
$17,330, respectively, to affiliates for accounting and administrative services.
As of March 12, 2004, the Partnership had reimbursed the affiliates for these
amounts. Other liabilities, including distributions payable, increased to
$1,082,940 at December 31, 2003, from $1,064,171 at December 31, 2002, primarily
as a result of an increase in rents paid in advance and deposits. The General
Partners believe that the Partnership has sufficient cash on hand to meet its
current working capital needs.
Off-Balance Sheet Transactions
The Partnership holds interests in various unconsolidated joint venture
and tenancy in common arrangements that are accounted for using the equity
method. The General Partners do not believe that any such interest would
constitute an off-balance sheet arrangement requiring any additional disclosures
under the provisions of the Sarbanes-Oxley Act of 2002.
Contractual Obligations, Contingent Liabilities, and Commitments
The Partnership has no contractual obligations, contingent liabilities,
or commitments as of December 31, 2003.
Long-Term Liquidity
The Partnership has no long-term debt or other long-term liquidity
requirements.
Critical Accounting Policies
The Partnership's leases are accounted for under the provisions of
Statement of Financial Accounting Standards No. 13, "Accounting for Leases"
("FAS 13"), and have been accounted for using either the direct financing or the
operating method. FAS 13 requires management to estimate the economic life of
the leased property, the residual value of the leased property and the present
value of minimum lease payments to be received from the tenant. In addition,
management assumes that all payments to be received under its leases are
collectible. Changes in management's estimates or assumptions regarding
collectibility of lease payments could result in a change in accounting for the
lease.
The Partnership accounts for its unconsolidated joint ventures using
the equity method of accounting. Under generally accepted accounting principles,
the equity method of accounting is appropriate for entities that are partially
owned by the Partnership, but for which operations of the investee are shared
with other partners. The Partnership's joint venture agreements require the
consent of all partners on all key decisions affecting the operations of the
underlying Property.
Management reviews the Partnership's Properties and investments in
unconsolidated entities for impairment at least once a year or whenever events
or changes in circumstances indicate that the carrying amount of an asset may
not be recoverable. The assessment is based on the carrying amount of the
Property or investment at the date it is tested for recoverability compared to
the sum of the estimated future cash flows expected to result from its operation
and sale through the expected holding period. If an impairment is indicated, the
asset is adjusted to its estimated fair value.
Effective January 1, 2002, the Partnership adopted Statement of
Financial Accounting Standards No. 144 "Accounting for the Impairment or
Disposal of Long-Lived Assets." Accordingly, when the Partnership makes the
decision to sell or commits to a plan to sell a Property within one year, its
operating results are reported as discontinued operations.
Results of Operations
Comparison of year ended December 31, 2003 to year ended December 31, 2002
Rental revenues from continuing operations were $2,751,881 during the
year ended December 31, 2003 as compared to $2,740,102 for the same period of
2002. The increase in rental revenues from continuing operations during 2003 was
due to the acquisition of a Property in Houston, Texas in June 2002. The
increase was partially offset by the fact that during 2002, the Partnership
collected amounts related to the Properties in Las Cruces and Albuquerque, New
Mexico, which had been reserved in a prior year.
The Partnership earned $40,324 in contingent rental income for the year
ended December 31, 2003 as compared to $89,619 for the same period of 2002. The
decrease in contingent rental income during 2003 was primarily due to lower
reported sales and due to a decrease in contingent rental income relating to the
Property in Las Cruces, New Mexico as a result of a lease amendment.
During the year ended December 31, 2003, the Partnership earned
$616,705 in net income earned by unconsolidated joint ventures as compared to
$578,394 for the same period of 2002. Net income earned by unconsolidated joint
ventures was higher during 2003, as compared to 2002, because in September 2003,
CNL Ocean Shores Joint Venture, in which the Partnership owned a 69.06%
interest, sold its vacant Property in Ocean Shores, Washington to a third party
and recorded a gain of approximately $413,700. The Partnership recorded its
pro-rata share of this gain as equity in earnings of unconsolidated joint
ventures. In October 2003, the joint venture was liquidated. In addition, net
income earned by unconsolidated joint ventures was higher during 2003 due to the
fact that in November 2003, the Partnership invested in a Property in Tucker,
Georgia, with CNL Income Fund XIII, Ltd., CNL Income Fund XIV, Ltd. and CNL
Income Fund XV, Ltd. as tenants-in-common. Each of the CNL Income Funds is a
Florida limited partnership and an affiliate of the General Partners. The
increase in net income earned by unconsolidated joint ventures during 2003 was
partially offset by the fact that in May 2002 CNL Restaurant Investments III, in
which the Partnership owns a 50% interest, sold its Property in Greensboro,
North Carolina to the tenant. In addition, in June 2002, Ashland Joint Venture,
in which the Partnership owns a 10.51% interest, sold its Property in Ashland,
New Hampshire to the tenant. These sales resulted in a net gain of $872,400 to
these joint ventures. The Partnership recorded its pro-rata share of this gain
as equity in earnings of joint ventures. During 2002, the Partnership received a
return of capital from CNL Restaurant Investments III and reinvested these
proceeds in a wholly owned Property in Houston, Texas. As a result, rental
revenues increased while income earned by unconsolidated joint ventures
decreased.
During the year ended December 31, 2003, three lessees (or groups of
affiliated tenants) of the Partnership and its consolidated joint venture, (i)
Golden Corral Corporation, (ii) Jack in the Box Inc. and Jack in the Box Eastern
Division, L.P. (which are affiliated entities under common control of Jack in
the Box Inc.) (hereinafter referred to as "Jack in the Box Inc."), and (iii)
Carrols Corporation and Texas Taco Cabana, LP (which are affiliated entities
under common control) (hereinafter referred to as ("Carrols Corp.")), each
contributed more than 10% of the Partnership's total rental revenues (including
total rental revenues from the Partnership's consolidated joint venture and the
Partnership's share of total rental revenues from Properties owned by
unconsolidated joint ventures and Properties owned with affiliates of the
General Partners as tenants-in-common). As of December 31, 2003, Golden Corral
Corporation was the lessee under leases relating to six restaurants, Jack in the
Box Inc. was the lessee under leases relating to five restaurants and Carrols
Corp. was the lessee under leases related to six restaurants. It is anticipated
that based on the minimum rental payments required by the leases, these three
lessees will continue to contribute more than 10% of the Partnership's total
rental revenues during 2004. In addition, during the year ended December 31,
2003, four Restaurant Chains, Golden Corral, Hardee's, Burger King, and Jack in
the Box, each accounted for more than 10% of the Partnership's total rental
revenues (including total rental revenues from the Partnership's consolidated
joint venture and the Partnership's share of total rental revenues from
Properties owned by unconsolidated joint ventures and Properties owned with
affiliates as tenants-in-common). In 2004, it is anticipated that these four
Restaurant Chains will continue to account for more than 10% of the
Partnership's total rental revenues to which the Partnership is entitled under
the terms of the leases. Any failure of these lessees or Restaurant Chains will
materially affect the Partnership's operating results if the Partnership is not
able to re-lease the Properties in a timely manner.
Operating expenses, including depreciation and amortization expense,
were $663,923 for the year ended December 31, 2003, as compared to $662,657 for
the same period of 2002. While operating expenses in total remained constant
during 2003, there was an increase in state tax expense relating to several
states in which the Partnership conducts business. In addition, depreciation
expense increased during 2003 as a result of the acquisition of the Property in
Houston, Texas during 2002. These increases were partially offset by a decrease
in the costs incurred for administrative expenses for servicing the Partnership
and its Properties.
During 2002, the Partnership identified and sold two Properties located
in San Marcos, Texas and Ft. Pierce, Florida. The Partnership recognized a gain
of approximately $169,400 on the sale of the Property in San Marcos, Texas and a
loss of approximately $2,200 on the sale of the Property in Ft. Pierce, Florida.
The Partnership had recorded provisions for write-down of assets totaling
$593,934 in previous years relating to the Property in Ft. Pierce, Florida
because the tenant vacated the Property and ceased payment of rents to the
Partnership in 1999. The provisions represented the difference between the
carrying value of the property and its estimated fair value. The Partnership
reinvested the proceeds from the sales in additional Properties. During 2003,
the Partnership identified for sale its Property in Romulus, Michigan. These
Properties are classified as discontinued operations in the accompanying
financial statements. The Partnership recognized net rental income (rental
revenues less Property related expenses and provision for write-down of assets)
of $99,785 and $116,738 during the years ended December 31, 2003 and 2002,
respectively, relating to these Properties.
Comparison of year ended December 31, 2002 to year ended December 31, 2001
Rental revenues from continuing operations were $2,740,102 during the
year ended December 31, 2002 as compared to $2,652,704 for the same period of
2001. The increase in rental revenues from continuing operations during 2002 was
due to the acquisition of a Property in Houston, Texas. Although this Property
replaced a Property that was sold, the rental revenues and expenses related to
disposed Properties are reported as discontinued operations in the financial
statements as required by Statement of Financial Accounting Standards No. 144
"Accounting for the Impairment or Disposal of Long-Lived Assets."
The Partnership earned $89,619 in contingent rental income for the year
ended December 31, 2002 as compared to $51,376 for the same period of 2001.
Contingent rental income was higher during 2002 because the Partnership deferred
the recognition of certain percentage rental income during 2001 until the
tenants' gross sales met certain thresholds in 2002.
During the year ended December 31, 2002, the Partnership earned $6,029
as compared to $32,426 for the same period of 2001 in interest and other income.
Interest and other income was lower during 2002 due to a decrease in the average
cash balance as a result of the reinvestment of sales proceeds received in 2001
and due to a decline in interest rates.
For the years ended December 31, 2002 and 2001, the Partnership
recorded income of $578,394 and a loss of $88,921, respectively, attributable to
the net operating results reported by unconsolidated joint ventures in which the
Partnership is a co-venturer. The income recognized during 2002, as compared to
the losses for the same period of 2001, was primarily attributable to net gains
of $872,385 recognized by joint ventures on sales of Properties in 2002. In May
2002, CNL Restaurant Investments III, in which the Partnership owns a 50%
interest, sold its Property in Greensboro, North Carolina to the tenant. In
addition, in June 2002, Ashland Joint Venture, in which the Partnership owns a
10.51% interest, sold its Property in Ashland, New Hampshire to the tenant.
The increase in net income earned from joint ventures during 2002 was
also due to the fact that in April 2001, the Partnership used a portion of the
net sales proceeds received from the 2000 sale of its Property in Lancaster, New
York to invest in a joint venture arrangement, CNL VIII, X, XII Kokomo Joint
Venture, with CNL Income Fund VIII, Ltd. and CNL Income Fund XII, Ltd., each of
which is an affiliate of the General Partners, to purchase and hold one
restaurant Property. Net income earned from the joint ventures also increased
because, in January 2002, the Partnership used the majority of the liquidation
proceeds received from the 2001 dissolution of Peoria Joint Venture to invest in
a Property in Austin, Texas with CNL Income Fund XVIII, Ltd., an affiliate of
the General Partners, as tenants-in-common. The net losses experienced by joint
ventures in 2001 was mainly due to the fact that, during 2001, the tenant of the
Property owned by CNL Ocean Shores Joint Venture, in which the Partnership owned
a 69.06% interest, experienced financial difficulties, ceased operations and
vacated the Property. As a result, during 2001 the joint venture stopped
recording rental revenue and recorded a provision for write-down of assets of
approximately $781,700. The provision represented the difference between the
carrying value of the Property and its fair value. The joint venture sold the
Property in September 2003.
Operating expenses, including depreciation and amortization expense and
provision for write-down of assets, were $662,657 for the year ended December
31, 2002 as compared to $752,126 for the same period of 2001. Operating expenses
were higher during 2001, as compared to the same period of 2002, because the
Partnership recorded a provision for write-down of assets in the amount of
$84,527 in connection with the anticipated sale of the Property in North
Richland Hills, Texas. The contract for the sale of this Property was
subsequently terminated. In addition, the Partnership incurred higher
administrative expenses for servicing the Partnership and its Properties during
2001. The decrease in operating expenses during 2002, as compared to 2001, was
partially offset by an increase in depreciation expense as a result of the
acquisition of the Property in Houston, Texas.
During the year ended December 31, 2002, the Partnership identified and
sold two Properties that were classified as discontinued operations in the
accompanying financial statements. The Partnership recognized an aggregate net
gain on disposal of discontinued operations of approximately $167,200 relating
to these Properties. The Partnership recognized net rental income (rental
revenues less Property related expenses and provision for write-down on assets)
of $ 116,738 and a net rental loss of $154,110 during the years ended December
31, 2002 and 2001, respectively, relating to these Properties.
In addition, during 2002, CNL Restaurant Investments III and Ashland
Joint Venture each identified and sold a Property. The joint ventures recognized
gains of $872,385 from the sales of the Properties in Greensboro, North Carolina
and Ashland, New Hampshire. The financial results of these Properties are
reflected as discontinued operations in the condensed joint venture financial
information presented in the footnotes to the accompanying financial statements.
The tenants exercised their option to purchase the Properties under the terms of
their respective leases and the proceeds from the sales were reinvested in
additional Properties.
The General Partners continuously evaluate strategic alternatives for
the Partnership, including alternatives to provide liquidity to the Limited
Partners.
The Partnership's leases as of December 31, 2003, are generally
triple-net leases and contain provisions that the General Partners believe
mitigate the adverse effect of inflation. Such provisions include clauses
requiring the payment of percentage rent based on certain restaurant sales above
a specified level and/or automatic increases in base rent at specified times
during the term of the lease. Inflation, overall, has had a minimal effect on
results of operations of the Partnership. 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 January 2003, the Financial Accounting Standards Board ("FASB")
issued FASB Interpretation No. 46 ("FIN 46"), "Consolidation of Variable
Interest Entities" to expand upon and strengthen existing accounting guidance
that addresses when a company should include the assets, liabilities and
activities of another entity in its financial statements. To improve financial
reporting by companies involved with variable interest entities, FIN 46 requires
that a variable interest entity be consolidated by a company if that company is
subject to a majority risk of loss from the variable interest entity's
activities or entitled to receive a majority of the entity's residual returns or
both. Prior to FIN 46, a company generally included another entity in its
consolidated financial statements only if it controlled the entity through
voting interests. In December 2003, the FASB issued FASB Interpretation No. 46R
("FIN 46R"), to clarify some of the provisions of FIN 46. Under FIN 46R, special
effective date provisions apply to entities that have fully or partially applied
FIN 46 prior to issuance of FIN 46R. Otherwise, application of FIN 46R is
required in financial statements of public entities that have interests in
structures that are commonly referred to as special-purpose entities for periods
ending after December 15, 2003. Application by public entities, other than small
business issuers, for all other types of variable interest entities is required
in financial statements for periods ending after March 15, 2004. The Partnership
did not fully or partially apply FIN 46 prior to the issuance of FIN 46R. Also,
the Partnership does not have interests in structures commonly referred to as
special-purpose entities. Therefore, application of FIN 46R is required in the
Partnership's financial statements for periods ending after March 15, 2004. The
General Partners believe adoption of this standard may result in either
consolidation or additional disclosure requirements of the Partnership's
unconsolidated joint ventures, which are currently accounted for under the
equity method. However, such consolidation is not expected to significantly
impact the Partnership's results of operations.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
Item 8. Financial Statements and Supplementary Data
CNL INCOME FUND 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 accompanying balance sheets and the related statements of
income, of partners' capital and of cash flows present fairly, in all material
respects, the financial position of CNL Income Fund X, Ltd. (a Florida limited
partnership) at December 31, 2003 and 2002, and the results of its operations
and its cash flows for each of the three years in the period ended December 31,
2003 in conformity with accounting principles generally accepted in the United
States of America. In addition, in our opinion, the financial statement
schedules listed in the index appearing under item 15(a)(2) present fairly, in
all material respects, the information set forth therein when read in
conjunction with the related financial statements. These financial statements
and financial statement schedules are the responsibility of the Partnership's
management; our responsibility is to express an opinion on these financial
statements and financial statement schedules based on our audits. We conducted
our audits of these statements in accordance with auditing standards generally
accepted in the United States of America, which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
As described in Note 1 to the financial statements, on January 1, 2002, the
Partnership adopted Statement of Financial Accounting Standards No. 144
"Accounting for the Impairment or Disposal of Long-Lived Assets."
/s/ PricewaterhouseCoopers LLP
Orlando, Florida
March 24, 2004
CNL INCOME FUND X, LTD.
(A Florida Limited Partnership)
BALANCE SHEETS
December 31,
2003 2002
------------------- --------------------
ASSETS
Real estate properties with operating leases, net $ 13,544,970 $ 13,848,029
Net investment in direct financing leases 7,666,525 8,006,351
Real estate held for sale 938,167 966,101
Investment in joint ventures 3,960,989 4,117,921
Cash and cash equivalents 1,457,105 1,287,619
Receivables 20,513 47,784
Due from related parties 619 --
Accrued rental income, less allowance for
doubtful accounts of $4,841 in 2003 and 2002 1,174,958 1,226,029
Other assets 86,000 92,523
------------------- --------------------
$ 28,849,846 $ 29,592,357
=================== ====================
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable and accrued expenses $ 6,802 $ 4,532
Real estate taxes payable 13,589 12,836
Distributions payable 900,001 900,001
Due to related parties 14,269 17,330
Rents paid in advance and deposits 162,548 146,802
------------------- --------------------
Total liabilities 1,097,209 1,081,501
Minority interest 61,095 62,980
Partners' capital 27,691,542 28,447,876
------------------- --------------------
$ 28,849,846 $ 29,592,357
=================== ====================
See accompanying notes to financial statements.
CNL INCOME FUND X, LTD.
(A Florida Limited Partnership)
STATEMENTS OF INCOME
Year Ended December 31,
2003 2002 2001
----------------- ---------------- -----------------
Revenues:
Rental income from operating leases $ 1,911,538 $ 1,849,351 $ 1,752,675
Earned income from direct financing leases 840,343 890,751 900,029
Contingent rental income 40,324 89,619 51,376
Interest and other income 7,039 6,029 32,426
----------------- ---------------- -----------------
2,799,244 2,835,750 2,736,506
----------------- ---------------- -----------------
Expenses:
General operating and administrative 279,000 310,106 345,566
Property related 27,310 22,279 15,462
State and other taxes 49,502 31,076 36,829
Depreciation and amortization 308,111 299,196 269,742
Provision for write-down of assets -- -- 84,527
----------------- ---------------- -----------------
663,923 662,657 752,126
----------------- ---------------- -----------------
Income before minority interest and equity in earnings
(loss) of unconsolidated joint ventures 2,135,321 2,173,093 1,984,380
Minority interest (8,141 ) (8,262 ) (8,695 )
Equity in earnings (loss) of unconsolidated joint ventures 616,705 578,394 (88,921 )
----------------- ---------------- -----------------
Income from continuing operations 2,743,885 2,743,225 1,886,764
----------------- ---------------- -----------------
Discontinued Operations
Income (loss) from discontinued operations 99,785 116,738 (154,110 )
Gain on disposal of discontinued operations -- 167,189 --
----------------- ---------------- -----------------
99,785 283,927 (154,110 )
----------------- ---------------- -----------------
Net income $ 2,843,670 $ 3,027,152 $ 1,732,654
================= ================ =================
Net Income (loss) per limited partner unit
Continuing operations $ 0.69 $ 0.69 $ 0.47
Discontinued operations 0.02 0.07 (0.04 )
----------------- ---------------- -----------------
$ 0.71 $ 0.76 $ 0.43
================= ================ =================
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, 2003, 2002 and 2001
General Partners Limited Partners
------------------------------------- -------------------------------------------------
Accumulated Accumulated
Contributions Earnings Contributions Distributions Earnings
------------------ ----------------- ----------------- ----------------- ------------------
Balance, December 31, 2000 $ 1,000 $ 251,935 $ 40,000,000 $ (31,843,151 ) $ 27,268,294
Distributions to limited
partners ($0.90 per
limited partner unit) -- -- -- (3,600,004 ) --
Net income -- -- -- -- 1,732,654
--------------- ----------------- ----------------- ----------------- ------------------
Balance, December 31, 2001 1,000 251,935 40,000,000 (35,443,155 ) 29,000,948
Distributions to limited
partners ($0.90 per
limited partner unit) -- -- -- (3,600,004 ) --
Net income -- -- -- -- 3,027,152
--------------- ----------------- ----------------- ----------------- ------------------
Balance, December 31, 2002 1,000 251,935 40,000,000 (39,043,159 ) 32,028,100
Distributions to limited
partners ($0.90 per
limited partner unit) -- -- -- (3,600,004 ) --
Net income -- -- -- -- 2,843,670
--------------- ----------------- ----------------- ----------------- ------------------
Balance, December 31, 2003 $ 1,000 $ 251,935 $ 40,000,000 $ (42,643,163) $ 34,871,770
=============== ================= ================= ================= ==================
See accompanying notes to financial statements.
- ----------------------------------------
Syndication
Costs Total
- ---------------- ------------------
$ (4,790,000) $ 30,888,078
-- (3,600,004 )
-- 1,732,654
- ---------------- ------------------
(4,790,000) 29,020,728
-- (3,600,004 )
-- 3,027,152
- ---------------- ------------------
(4,790,000) 28,447,876
-- (3,600,004 )
-- 2,843,670
- ---------------- ------------------
$ (4,790,000) $ 27,691,542
================ ==================
See accompanying notes to financial statements.
CNL INCOME FUND X, LTD.
(A Florida Limited Partnership)
STATEMENTS OF CASH FLOWS
Year Ended December 31,
2003 2002 2001
--------------- ---------------- ---------------
Cash Flows from Operating Activities:
Net income $ 2,843,670 $ 3,027,152 $ 1,732,654
--------------- ---------------- ---------------
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation 303,059 315,589 297,383
Amortization of net investment in direct financing
lease 364,694 318,245 253,736
Amortization 5,052 5,055 5,025
Minority interest 8,141 8,262 8,695
Equity in earnings of unconsolidated joint
ventures, net of distributions (200,639) (110,209) 577,013
Gain on sale of assets -- (167,189) --
Provision for write-down of assets -- -- 391,186
Decrease (increase) in receivables 27,220 (17,803) 19,048
Decrease (increase) in due from related parties (568) 309 12,703
Decrease (increase) in accrued rental income 54,137 18,100 (7,388)
Decrease (increase) in other assets 1,471 (10,369) 7,141
Increase (decrease) in accounts payable and accrued
expenses and real estate taxes payable 3,023 (1,993) (26,225)
Increase (decrease) in due to related parties (3,061) 11,791 (141,560)
Increase in rents paid in advance and deposits 15,746 69,042 6,342
Decrease in deferred rental income -- -- (7,903)
--------------- ---------------- ---------------
Total adjustments 578,275 438,830 1,395,196
--------------- ---------------- ---------------
Net cash provided by operating activities $ 3,421,945 $ 3,465,982 $ 3,127,850
--------------- ---------------- ---------------
--------------- ---------------- ---------------
Cash Flows from Investing Activities:
Proceeds from sale of real estate properties -- 1,490,229 --
Additions to real estate properties with operating leases -- (1,281,467) --
Liquidating distribution from joint venture 541,935 -- 899,452
Investment in joint ventures (184,364) (915,171) (211,201)
Return of capital from joint venture -- 571,700 --
Payment of lease costs -- -- (3,324)
--------------- ---------------- ---------------
Net cash provided by (used in) investing activities 357,571 (134,709) 684,927
--------------- ---------------- ---------------
Cash Flows from Financing Activities:
Distributions to limited partners (3,600,004) (3,600,004) (3,600,004)
Distributions to holder of minority interest (10,026) (9,538) (8,537)
--------------- ---------------- ---------------
Net cash used in financing activities (3,610,030) (3,609,542) (3,608,541)
--------------- ---------------- ---------------
Net increase (decrease) in cash and cash equivalents 169,486 (278,269) 204,236
Cash and cash equivalents at beginning of year 1,287,619 1,565,888 1,361,652
--------------- ---------------- ---------------
Cash and cash equivalents at end of year $ 1,457,105 $ 1,287,619 $ 1,565,888
=============== ================ ===============
See accompanying notes to financial statements.
CNL INCOME FUND X, LTD.
(A Florida Limited Partnership)
STATEMENTS OF CASH FLOWS - CONTINUED
Year Ended December 31,
2003 2002 2001
--------------- ---------------- ----------------
Supplemental Schedule of Non-Cash Financing Activities:
Distributions declared and unpaid at December 31 $ 900,001 $ 900,001 $ 900,001
=============== ================ ================
See accompanying notes to financial statements.
CNL INCOME FUND X, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
Years Ended December 31, 2003, 2002, and 2003
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% 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 property
acquisitions of real estate properties at cost, including acquisition
and closing costs. Real estate properties 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. During
the years ended December 31, 2003, 2002 and 2001, tenants paid, or are
expected to pay, directly to real estate taxing authorities
approximately $448,900, $392,300 and $409,200, respectively, in
estimated real estate taxes in accordance with the terms of their
leases.
The leases of the Partnership provide for base minimum annual rental
payments payable in monthly installments. In addition, certain leases
provide for contingent rental revenues based on the tenants' gross
sales in excess of a specified threshold. The partnership defers
recognition of the contingent rental revenues until the defined
thresholds are met. The leases are accounted for using either the
operating or the direct financing methods.
Operating method - Property 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.
Direct financing method - Leases accounted for using the
direct financing method are recorded at their net investment
(which at the inception of the lease generally represents the
cost of the asset). Unearned income is deferred and amortized
to income over the lease terms so as to produce a constant
periodic rate of return on the Partnership's net investment in
the leases. For the leases classified as direct financing
leases, the building portions of the property leases are
accounted for as direct financing leases while a majority of
the land portion of these leases are operating leases.
Accrued rental income represents the aggregate amount of income
recognized on a straight-line basis in excess of scheduled rental
payments to date.
Substantially all leases are for 15 to 20 years and provide for minimum
and contingent rentals. The lease options generally allow tenants to
renew the leases for two to 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
Years Ended December 31, 2003, 2002, and 2001
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.
When the collection of amounts recorded as rental or other income is
considered to be doubtful, a provision is made to increase the
allowance for doubtful accounts, 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 four joint ventures and the properties
in Clinton, North Carolina; Miami, Florida; Austin, Texas; and Tucker,
Georgia, for which each property is held as tenants-in-common with
affiliates, are accounted for using the equity method since each joint
venture agreement requires the consent of all partners on all key
decisions affecting the operations of the underlying property.
Cash and Cash Equivalents - The Partnership considers all highly liquid
investments with a maturity of three months or less when purchased to
be cash equivalents. Cash and cash equivalents consist of demand
deposits at commercial banks and money market funds. Cash equivalents
are stated at cost plus accrued interest, which approximates market
value.
Cash accounts maintained on behalf of the Partnership in demand
deposits at commercial banks and money market funds may exceed
federally insured levels; however, the Partnership has not experienced
any losses in such accounts.
Lease Costs - Other assets include lease costs incurred in negotiating
new leases and are amortized over the terms of the new leases using the
straight-line method.
Rents Paid in Advance - Rents paid in advance by lessees for future
periods are deferred upon receipt and are recognized as revenues during
the period in which the rental income is earned.
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 represent a reduction
of Partnership equity and a reduction in the basis of each partner's
investment.
CNL INCOME FUND X, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
Years Ended December 31, 2003, 2002, and 2001
1. Significant Accounting Policies - Continued
Use of Estimates - The general partners of the Partnership have made a
number of estimates and assumptions relating to the reporting of assets
and liabilities and the disclosure of contingent assets and liabilities
to prepare these financial statements in conformity with generally
accepted accounting principles. The more significant areas requiring
the use of management estimates relate to the allowance for doubtful
accounts and future cash flows associated with long-lived assets.
Actual results could differ from those estimates.
Reclassification - Certain items in the prior years' financial
statements have been reclassified to conform to 2003 presentation.
These reclassifications had no effect on total partners' capital, net
income or cash flows.
Statement of Financial Accounting Standards No. 144 - Effective January
1, 2002, the Partnership adopted Statement of Financial Accounting
Standards No. 144 "Accounting for the Impairment or Disposal of
Long-Lived Assets." This statement requires that a long-lived asset be
tested for recoverability whenever events or changes in circumstances
indicate that its carrying amount may not be recoverable. The carrying
amount of a long-lived asset is not recoverable if it exceeds the sum
of the undiscounted cash flows expected to result from the use and
eventual disposition of the asset. The assessment is based on the
carrying amount of the asset at the date it is tested for
recoverability. An impairment loss is recognized when the carrying
amount of a long-lived asset exceeds its fair value. If an impairment
is recognized, the adjusted carrying amount of a long-lived asset is
its new cost basis. The statement also requires that the results of
operations of a component of an entity that either has been disposed of
or is classified as held for sale be reported as a discontinued
operation if the disposal activity was initiated subsequent to the
adoption of the Standard.
FASB Interpretation No. 46 - In January 2003, the Financial Accounting
Standards Board ("FASB") issued FASB Interpretation No. 46 ("FIN 46"),
"Consolidation of Variable Interest Entities" to expand upon and
strengthen existing accounting guidance that addresses when a company
should include the assets, liabilities and activities of another entity
in its financial statements. To improve financial reporting by
companies involved with variable interest entities, FIN 46 requires
that a variable interest entity be consolidated by a company if that
company is subject to a majority risk of loss from the variable
interest entity's activities or entitled to receive a majority of the
entity's residual returns or both. Prior to FIN 46, a company generally
included another entity in its consolidated financial statements only
if it controlled the entity through voting interests. In December 2003,
the FASB issued FASB Interpretation No. 46R ("FIN 46R"), to clarify
some of the provisions of FIN 46. Under FIN 46R, special effective date
provisions apply to entities that have fully or partially applied FIN
46 prior to issuance of FIN 46R. Otherwise, application of FIN 46R is
required in financial statements of public entities that have interests
in structures that are commonly referred to as special-purpose entities
for periods ending after December 15, 2003. Application by public
entities, other than small business issuers, for all other types of
variable interest entities is required in financial statements for
periods ending after March 15, 2004. The Partnership did not fully or
partially apply FIN 46 prior to the issuance of FIN 46R. Also, the
Partnership does not have interests in structures commonly referred to
as special-purpose entities. Therefore, application of FIN 46R is
required in the Partnership's financial statements for periods ending
after March 15, 2004. The general partners believe adoption of this
standard may result in either consolidation or additional disclosure
requirements of the Partnership's unconsolidated joint ventures, which
are currently accounted for under the equity method. However, such
consolidation is not expected to significantly impact the Partnership's
results of operations.
CNL INCOME FUND X, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
Years Ended December 31, 2003, 2002, and 2001
2. Real Estate Properties with Operating Leases
Real estate properties with operating leases consisted of the following
at December 31:
2003 2002
------------------- ------------------
Land $ 8,019,375 $ 8,019,375
Building 8,141,147 8,141,147
------------------ -------------------
16,160,522 16,160,522
Less accumulated depreciation (2,615,552 ) (2,312,493 )
------------------- ------------------
$ 13,544,970 $ 13,848,029
=================== ==================
In June 2002, the Partnership reinvested the majority of the proceeds
from the sale of the property in San Marcos, Texas and a portion of the
return of capital received from CNL Restaurant Investments III from the
sale of its property in Greensboro, North Carolina in a property in
Houston, Texas at an approximate cost of $1,281,500. The Partnership
acquired this property from CNL Funding 2001-A, LP, an affiliate of the
general partners.
The following is a schedule of the future minimum lease payments to be
received on non-cancellable operating leases at December 31, 2003:
2004 $ 2,002,335
2005 2,016,183
2006 1,982,223
2007 1,321,369
2008 1,216,660
Thereafter 4,770,163
---------------
$ 13,308,933 (1)
===============
(1) Excludes one property which was classified as real estate held for sale.
CNL INCOME FUND X, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
Years Ended December 31, 2003, 2002, and 2001
3. Net Investment in Direct Financing Leases
The following lists the components of the net investment in direct
financing leases at December 31:
2003 2002
----------------- ----------------
Minimum lease payments receivable $ 9,297,085 $ 10,477,254
Estimated residual values 3,040,968 3,040,968
Less unearned income (4,671,528 ) (5,511,871 )
----------------- ----------------
Net investment in direct financing leases $ 7,666,525 $ 8,006,351
================= ================
The following is a schedule of future minimum lease payments to be
received on the direct financing leases at December 31, 2003:
2004 $1,190,953
2005 1,192,288
2006 1,192,608
2007 1,235,510
2008 1,248,167
Thereafter 3,237,559
-------------
$9,297,085 (1)
=============
(1) Excludes one property which was classified as real estate held for sale.
4. Investment in Joint Ventures
The Partnership has a 50%, a 10.51%, a 40.95%, a 10%, a 13% and a 6.69%
interest in the profits and losses of CNL Restaurant Investments III,
Ashland Joint Venture, Williston Real Estate Joint Venture, CNL VIII,
X, XII Kokomo 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 2002, the Partnership reinvested a portion of the
liquidation proceeds received during 2001 from Peoria Joint Venture, in
which the Partnership owned a 52% interest, in a property in Austin,
Texas, as tenants-in-common, with CNL Income Fund XVIII, Ltd., an
affiliate of the general partners. The Partnership acquired this
property from CNL Funding 2001-A, LP, an affiliate of the general
partners. The Partnership and CNL Income Fund XVIII, Ltd. entered into
an agreement whereby each co-venturer will share in the profits and
losses of the property in proportion to its applicable percentage
interest. The Partnership contributed approximately $915,200 for an
81.65% interest in this property.
CNL INCOME FUND X, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
Years Ended December 31, 2003, 2002, and 2001
4. Investment in Joint Ventures - Continued
In May 2002, CNL Restaurant Investments III, in which the Partnership
owns a 50% interest, sold its property in Greensboro, North Carolina to
the tenant and received net sales proceeds of $1,143,500, resulting in
a gain to the joint venture of approximately $371,500. The Partnership
received approximately $571,700 as a return of capital from the joint
venture. In addition, in June 2002, Ashland Joint Venture, in which the
Partnership owns a 10.51% interest, sold its property in Ashland, New
Hampshire to the tenant and received net sales proceeds of $1,472,900,
resulting in a gain of approximately $500,900. Ashland Joint Venture
used the majority of the proceeds to invest in a property in San
Antonio, Texas at an approximate cost of $1,343,000. The Partnership
and joint venture acquired these properties from CNL Funding 2001-A,
LP, an affiliate of the general partners. The financial results
relating to the properties in Greensboro, North Carolina and Ashland,
New Hampshire are reflected as discontinued operations in the combined
condensed financial information below.
In September 2003, CNL Ocean Shores Joint Venture, in which the
Partnership owned a 69.06% interest, sold its property to a third party
for $824,600 resulting in a gain of approximately $413,700. The joint
venture recorded provisions for write-down of assets in previous years
relating to this property. The Partnership and the joint venture
partner dissolved the joint venture in accordance with the joint
venture agreement and did not recognize a gain or loss on the
dissolution. The Partnership received approximately $541,900
representing its pro rata share of the liquidation proceeds. The
General Partners intend to reinvest the liquidation proceeds in an
additional property. The financial results relating to this property
are reflected as discontinued operations in the combined condensed
financial information below.
In November 2003, the Partnership and CNL Income Fund XIII, Ltd, CNL
Income Fund XIV, Ltd., and CNL Income Fund XV, Ltd., as
tenants-in-common, invested in a property in Tucker, Georgia. Each of
the CNL Income Funds is an affiliate of the general partners. The
Partnership and affiliates entered into an agreement whereby each
co-venturer will share in the profits and losses of the property in
proportion to its applicable percentage interest. The Partnership
contributed approximately $184,400 for a 12% interest in the property.
CNL Restaurant Investments III owns five properties. Ashland Joint
Venture, Williston Real Estate Joint Venture, CNL VIII, X, XII Kokomo
Joint Venture and the Partnership and affiliates as tenants-in-common
in four separate tenancy-in-common arrangements, each own one property.
CNL INCOME FUND X, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
Years Ended December 31, 2003, 2002, and 2001
4. Investment in Joint Ventures - Continued
The following presents the joint ventures' combined, condensed
financial information at December 31:
December 31, December 31,
2003 2002
--------------- ---------------
Real estate properties with operating leases, net $ 12,361,495 $ 11,096,447
Net investment in direct financing leases 615,982 633,362
Real estate held for sale -- 377,303
Cash 71,873 31,871
Receivables 18,000 20,476
Accrued rental income 82,525 79,333
Other assets 42,889 27,511
Liabilities 10,004 11,670
Partners' capital 13,182,760 12,254,633
Years Ended December 31,
2003 2002 2001
--------------- -------------- --------------
Continuing Operations:
Revenues $ 1,399,225 $ 1,315,445 $ 1,135,785
Expenses (319,278 ) (303,587 ) (250,811 )
--------------- -------------- --------------
Income from continuing operations 1,079,947 1,011,858 884,974
Discontinued Operations:
Revenues -- 83,519 254,185
Expenses (15,827 ) (46,147 ) (73,210 )
Provision for write-down of assets -- -- (781,741 )
Gain on disposal of real estate properties 413,665 872,385 --
--------------- -------------- --------------
397,838 909,757 (600,766 )
Net income $ 1,477,785 $ 1,921,615 $ 284,208
=============== ============== ==============
The Partnership recognized income of $616,705, $578,394 and a loss of
$88,921 for the years ended December 31, 2003, 2002 and 2001,
respectively, from these joint ventures.
5. Discontinued Operations
During 2002, the Partnership sold its property in San Marcos, Texas to
a third party and received net sales proceeds of approximately
$1,161,100, resulting in a gain of approximately $169,400. In addition,
the Partnership sold its property in Ft. Pierce, Florida to a third
party and received net sales proceeds of approximately $329,200,
resulting in a loss of approximately $2,200. The Partnership had
recorded provisions for write-down of assets of approximately $593,900
in previous years because the tenant vacated the property in Ft.
Pierce, Florida and the Partnership had not been able to re-lease the
property. The
CNL INCOME FUND X, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
Years Ended December 31, 2003, 2002, and 2001
5. Discontinued Operations - Continued
provisions represented the difference between the carrying value of the
property and its estimated fair value. During 2003, the Partnership
identified an additional property for sale. As a result, the property
was reclassified from real estate properties with operating leases and
net investment in direct financing leases to real estate held for sale.
The reclassified assets were recorded at the lower of their carrying
amounts or fair value, less cost to sell. The financial results
relating to these properties are reflected as discontinued operations
in the accompanying financial statements.
The operating results of the discontinued operations for these
properties are as follows:
Year Ended December 31,
2003 2002 2001
------------- ------------- ---------------
Rental revenues $ 100,097 $ 157,668 $ 206,796
Expenses (312 ) (40,930 ) (54,247 )
Provision for write-down of assets -- -- (306,659 )
------------- ------------- ---------------
Income (loss) from discontinued
operations $ 99,785 $ 16,738 (154,110 )
============= ============= ===============
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% to the limited partners and one percent
to the general partners. From inception through December 31, 1999,
distributions of net cash flow were made 99% to the limited partners
and one percent to the general partners. However, the one percent of
net cash flow to be distributed to the general partners was
subordinated to receipt by the limited partners of an aggregate, 10%,
cumulative, noncompounded annual return on their adjusted capital
contributions (the "10% Preferred Return").
From inception through December 31, 1999, generally, net sales proceeds
from the sale of properties not in liquidation of the Partnership, to
the extent distributed, were distributed first to the limited partners
in an amount sufficient to provide them with their 10% Preferred
Return, plus the return of their adjusted capital contributions.
The general partners then received, to the extent previously
subordinated and unpaid, a one percent interest in all prior
distributions of net cash flow and a return of their capital
contributions. Any remaining sales proceeds were distributed 95% to the
limited partners and five percent to the general partners. Any gain
from the sale of a property not in liquidation of the Partnership was,
in general, allocated in the same manner as net sales proceeds are
distributable. Any loss from the sale of a property was, in general,
allocated first, on a pro rata basis, to partners with positive
balances in their capital accounts; and thereafter, 95% to the limited
partners and 5% to the general partners.
CNL INCOME FUND X, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
Years Ended December 31, 2003, 2002, and 2001
6. Allocations and Distributions - Continued
Generally, net sales proceeds from a liquidating sale of properties,
will be used in the following order: (i) first to pay and discharge all
of the Partnership's liabilities to creditors, (ii) second, to
establish reserves that may be deemed necessary for any anticipated or
unforeseen liabilities or obligations of the Partnership, (iii) third,
to pay all of the Partnership's liabilities, if any, to the general and
limited partners, (iv) fourth, after allocations of net income, gains
and/or losses, to distribute to the partners with positive capital
accounts balances, in proportion to such balances, up to amounts
sufficient to reduce such positive balances to zero, and (v)
thereafter, any funds remaining shall then be distributed 95% to the
limited partners and 5% 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 any distributions during the years
ended December 31, 2003, 2002 and 2001.
During the years ended December 31, 2003, 2002 and 2001, the
Partnership declared distributions to the limited partners of
$3,600,004. No distributions have been made to the general partners to
date.
CNL INCOME FUND X, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
Years Ended December 31, 2003, 2002, and 2001
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:
2003 2002 2001
-------------- -------------- --------------
Net income for financial reporting purposes $ 2,843,670 $ 3,027,152 $ 1,732,654
Effect of timing differences relating to depreciation (138,015) (126,906) (159,214)
Direct financing leases recorded as operating
leases for tax reporting purposes 364,695 308,494 253,735
Effect of timing differences relating to equity
in earnings of unconsolidated joint ventures (617,784) 41,104 635,668
Effect of timing differences relating to gain on
sale of -- (562,039) --
real estate properties
Provision for write-down of assets -- 391,186
--
Effect of timing differences relating to
allowance for doubtful accounts -- (24,814) (259,699)
Accrued rental income 54,137 43,062 (32,350)
Deferred rental income -- (24,962) (1,645)
Rents paid in advance 15,746 68,542 25,046
Effect of timing differences relating to minority (500 ) (634) 1,089
interest
Other (385) -- --
-------------- -------------- --------------
Net income for federal income tax purposes $ 2,521,564 $ 2,748,999 $ 2,586,470
< ============== ============== ==============
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 APF Partners, LP, a wholly owned subsidiary of CNL Restaurant
Properties, Inc. (formerly known as CNL American Properties Fund, Inc.)
served as the Partnership's advisor until January 1, 2002, when it
assigned its rights and obligations under a management agreement to RAI
Restaurants, Inc. (the "Advisor"). The Advisor is a wholly owned
subsidiary of CNL Restaurant Properties, Inc. ("CNL-RP"). The
individual general partners are stockholders and directors of CNL-RP.
CNL INCOME FUND X, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
Years Ended December 31, 2003, 2002, and 2001
8. Related Party Transactions - Continued
The Advisor provides services 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, 2003, 2002, and 2001.
The Advisor is also entitled to receive a deferred, subordinated real
estate disposition fee, payable upon the sale of one or more properties
based on the lesser of one-half of a competitive real estate commission
or 3% 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.
In January 2002, the Partnership and CNL Income Fund XVIII, Ltd., as
tenants-in-common, acquired a property, in Austin, Texas, for a
purchase price of approximately $1,120,800. In addition, in June 2002,
the Partnership acquired a property in Houston, Texas for a purchase
price of approximately $1,281,500 and, in a separate transaction,
Ashland Joint Venture acquired a property in San Antonio, Texas for an
approximate cost of $1,343,000. The Partnership acquired these
Properties from CNL Funding 2001-A, LP, an affiliate of the general
partners. CNL Funding 2001-A, LP had purchased and temporarily held
title to the properties in order to facilitate the acquisition of the
properties by the Partnership and the joint ventures. The respective
purchase prices paid by the Partnership and the joint ventures
represented the costs incurred by CNL Funding 2001-A, LP to acquire and
carry the properties.
During the years ended December 31, 2003, 2002, and 2001, the
Partnership's advisor and its affiliates provided accounting and
administrative services. The Partnership incurred $164,623, $209,751
and $204,843 for the years ended December 31, 2003, 2002, and 2001,
respectively, for such services.
The amounts due to related parties at December 31, 2003 and 2002,
totaled $14,269 and $17,330, respectively.
CNL INCOME FUND X, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
Years Ended December 31, 2003, 2002, and 2001
9. Concentration of Credit Risk
The following schedule presents total rental revenues from individual
lessees, or affiliated groups of lessees, each representing more than
10% of the Partnership's total rental revenues (including the
Partnership's share of total rental revenues 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:
2003 2002 2001
--------------- --------------- ---------------
Golden Corral Corporation $ 725,103 $ 743,095 $ 702,567
Jack in the Box Inc. 375,721 450,222 506,446
Carrols Corp. 461,486 412,820 N/A
Burger King Corporation N/A N/A 339,808
In addition, the following schedule presents total rental revenues from
individual restaurant chains, each representing more than 10% of the
Partnership's total rental revenues (including the Partnership's share
of total rental revenues 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:
2003 2002 2001
---------------- ---------------- ---------------
Golden Corral Buffet and Grill $ 725,103 $ 743,095 $ 702,567
Burger King 623,288 678,506 741,334
Jack in the Box 375,721 450,222 506,446
Hardee's 367,274 378,031 384,914
The information denoted by N/A indicates that for each period
presented, the tenant did not represent more than 10% of the
Partnership's total rental revenues.
Although the Partnership's properties have some geographic diversity in
the United States and the Partnership's lessees operate a variety of
restaurant concepts, default by any lessee or restaurant chain
contributing more than 10% of the Partnership's revenues will
significantly impact the results of operations of the Partnership if
the Partnership is not able to re-lease the properties in a timely
manner.
CNL INCOME FUND X, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
Years Ended December 31, 2003, 2002, and 2001
10. Selected Quarterly Financial Data
The following table presents selected unaudited quarterly financial
data for each full quarter during the years ended December 31, 2003 and
2002:
2003 Quarter First Second Third Fourth Year
------------------------------- ----------- ------------- ------------ ------------- ---------------
Continuing Operations (1):
Revenues $ 690,040 $ 691,845 $ 691,245 $ 726,114 $ 2,799,244
Equity in earnings of
unconsolidated joint
ventures 74,890 79,616 370,078 92,121 616,705
Income from continuing
operations 557,425 612,748 910,333 663,379 2,743,885
Discontinued operations (1):
Revenues 24,629 24,452 24,270 26,746 100,097
Income from discontinued
operations 24,417 24,452 24,170 26,746 99,785
Net income 581,842 637,200 934,503 690,125 2,843,670
Income per limited partner unit:
Continuing operations $ 0.14 $ 0.15 $ 0.23 $ 0.17 $ 0.69
Discontinued operations 0.01 0.01 -- -- 0.02
----------- ------------- ------------ ------------- ---------------
$ 0.15 $ 0.16 $ 0.23 $ 0.17 $ 0.71
=========== ============= ============ ============= ===============
CNL INCOME FUND X, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
Years Ended December 31, 2003, 2002, and 2001
10. Selected Quarterly Financial Data - Continued
2002 Quarter First Second Third Fourth Year
------------------------------- ----------- ------------- ------------ ------------- ---------------
Continuing Operations (1):
Revenues $ 693,193 $ 669,899 $ 726,128 $ 746,530 $ 2,835,750
Equity in earnings of
unconsolidated joint
ventures 82,433 329,671 89,270 77,020 578,394
Income from continuing
operations 585,344 826,560 661,356 669,965 2,743,225
Discontinued operations (1):
Revenues 50,331 57,568 24,969 24,800 157,668
Income from and gain on
disposal of discontinued
operations 41,622 211,128 15,724 15,453 283,927
Net income 626,966 1,037,688 677,080 685,418 3,027,152
Income per limited partner unit:
Continuing operations $ 0.15 $ 0.21 $ 0.16 $ 0.17 $ 0.69
Discontinued operations 0.01 0.05 0.01 -- 0.07
----------- ------------- ------------ ------------- ---------------
$ 0.16 $ 0.26 $ 0.17 $ 0.17 $ 0.76
=========== ============= ============ ============= ===============
(1) Certain items in the quarterly financial data have been reclassified to
conform to 2003 presentation. This reclassification had no effect on
net income. The results of operations relating to properties that were
identified for sale as of December 31, 2001 but sold subsequently are
reported as continuing operations. The results of operations relating
to properties that were either identified for sale and disposed of
subsequent to January 1, 2002 or were classified as held for sale as of
December 31, 2003 are reported as discontinued operations for all
periods presented.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
Item 9A. Controls and Procedures
The General Partners maintain a set of disclosure controls and
procedures designed to ensure that information required to be disclosed in the
Partnership's filings under the Securities Exchange Act of 1934 is recorded,
processed, summarized and reported within the time periods specified in the
Securities and Exchange Commission's rules and forms. The principal executive
and financial officers of the corporate general partner have evaluated the
Partnership's disclosure controls and procedures as of the end of the period
covered by this Annual Report on Form 10-K and have determined that such
disclosure controls and procedures are effective.
There was no change in internal control over financial reporting that
occurred during the most recent fiscal quarter that has materially affected, or
is reasonably likely to materially affect, internal control over financial
reporting.
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-RP, CCM, CNL Financial Group, Inc. and their
affiliates, all of which are affiliates of the General Partners.
James M. Seneff, Jr., age 57. 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-RP, a public, unlisted real
estate investment trust since 1994. Mr. Seneff served as Chief Executive Officer
of CNL-RP from 1994 through August 1999 and as Co-Chief Executive Officer from
December 2000 through September 2003. Mr. Seneff served as Chairman of the Board
and Chief Executive Officer of CNL Fund Advisors, Inc., formerly the
Partnership's advisor, from its inception in 1990 until it merged with a
wholly-owned subsidiary of CNL-RP in September 1999, and in June 2000, was
re-elected to those positions of CNL Fund Advisors, Inc. CNL Fund Advisors,
Inc., formerly CNL Institutional Advisors, Inc., is a registered investment
advisor. Mr. Seneff is a principal stockholder of CNL Holdings, Inc., the parent
company of CNL Financial 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 1973. CNL Financial Group, Inc. is and is the parent
company, either directly or indirectly through subsidiaries, of CNL Real Estate
Services, Inc., CNL Capital Markets, Inc., CNL Investment Company and CNL
Securities Corp., all of which are engaged in the business of real estate
finance. Mr. Seneff also serves as a Director and Chairman of the Board of CNL
Hospitality Properties, Inc., a public, unlisted real estate investment trust;
and served as Chief Executive Officer of CNL Hospitality Properties, Inc. from
its inception in 1997 until 2003 and served as Co-Chief Executive Officer from
February 2003 until May 1, 2003. Mr. Seneff has served as Chairman of the Board
of CNL Hospitality Corp., the advisor to CNL Hospitality Properties, Inc., since
its inception in 1997. Mr. Seneff also served as Chief Executive Officer from
its inception in 1997 through February 2003, and currently serves as Co-Chief
Executive Officer of CNL Hospitality Corp. Mr. Seneff has served as Director and
Chairman of the Board of CNL Retirement Corp. since 1997 and served as Chief
Executive Officer of CNL Retirement Corp. from 1997 through 2003. CNL Retirement
Corp. is the advisor to CNL Retirement Properties, Inc., a public, unlisted real
estate investment trust. Mr. Seneff has also served as Director and Chairman of
the Board of Commercial Net Lease Realty, Inc., a public real estate investment
trust that is listed on the New York Stock Exchange, since 1992 and served as
Chief Executive Officer of Commercial Net Lease Realty, Inc. from 1992 through
February 2004. Mr. Seneff has served as a Director, Chairman of the Board, and
Chief Executive Officer of CNL Securities Corp. since its formation in 1979; CNL
Investment Company since 1990; and CNL Institutional Advisors, Inc., a
registered investment advisor for pension plans, since 1990. Mr. Seneff has
served as Chairman of the Board and Chief Executive Officer of CNL Commercial
Finance, Inc. since 2000. Mr. Seneff also serves as Chairman of the Board of
CNLBank, an independent, state-chartered commercial bank. Mr. Seneff previously
served on the Florida State Commission on Ethics and is a former member and past
Chairman of the State of Florida Investment Advisory Council, which recommends
to the Florida Board of Administration investments for various Florida employee
retirement funds. The Florida Board of Administration, Florida's principal
investment advisory and money management agency, oversees the investment of the
Florida state retirement plan. Mr. Seneff received his degree in Business
Administration from Florida State University in 1968.
Robert A. Bourne, age 56. 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 has
served as a Director and Vice Chairman of the Board of CNL-RP since 1994. Mr.
Bourne also served as President of CNL-RP from 1994 through February 1999 and
served as Treasurer from February 1999 through August 1999 and from May 1994
through December 1994. Mr. Bourne served in various executive positions with CNL
Fund Advisors, Inc. prior to its merger with a wholly-owned subsidiary of CNL-RP
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. Mr. Bourne serves as Director, Vice Chairman of the Board
and Treasurer and from 1997 until June 2002 served as President of CNL
Hospitality Properties, Inc. and as Director, President and Treasurer of CNL
Hospitality Corp. Mr. Bourne also serves as Director and Treasurer of CNL
Retirement Properties, Inc. and as Director and Treasurer of CNL Retirement
Corp. Mr. Bourne serves as a Director of CNLBank. Mr. Bourne has also 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. Mr. Bourne 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. 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 48. Mr. McWilliams has served as President of
CNL-RP since May 2001 and as Chief Executive Officer of CNL-RP since September
2003. Mr. McWilliams served as Co-Chief Executive Officer of CNL-RP from
December 2000 through September 2003 and served as Chief Executive Officer from
September 1999 through December 2000. Mr. McWilliams also served as President
and Chief Executive Officer of CNL Franchise Network Corp., a wholly owned
subsidiary of CNL-RP since August 2002 and served as President of CNL-RP from
February 1999 until September 1999 and as Executive Vice President of CNL-RP
from 1997 through February 1999. Mr. McWilliams served as an Executive Vice
President of CNL Financial Group, Inc. from the time he joined the company in
April 1997 until September 1999. Mr. McWilliams served as President of CNL Fund
Advisors, Inc. and CNL Financial Services, Inc., a corporation engaged in the
business of real estate financing, from April 1997 until the acquisition of such
entities by wholly owned subsidiaries of CNL-RP in September 1999. From
September 1983 through March 1997, Mr. McWilliams was employed by Merrill Lynch
& Co. The majority of his career at Merrill Lynch & Co. was in the Investment
Banking division where he served as a Managing Director. Mr. McWilliams received
a B.S.E. in Chemical Engineering from Princeton University in 1977 and a Master
of Business Administration degree with a concentration in finance from the
University of Chicago in 1983.
Steven D. Shackelford, age 40. Mr. Shackelford was promoted to
Executive Vice President and Chief Operating Officer of CNL-RP in September
2003. Mr. Shackelford has also served as Chief Financial Officer since January
1997. He served as Senior Vice President of CNL-RP from January 1997 through
July 2000, when he was promoted to Executive Vice President. Mr. Shackelford has
also served as Secretary and Treasurer of CNL-RP since September 1999. He also
served as Chief Financial Officer of CNL Fund Advisors, Inc. from September 1996
to September 1999. From March 1995 to July 1996, Mr. Shackelford was a senior
manager in the national office of Price Waterhouse LLP where he was responsible
for advising foreign clients seeking to raise capital and a public listing in
the United States. From August 1992 to March 1995, he was a manager in the
Paris, France office of Price Waterhouse, serving several multi-national
clients. Mr. Shackelford was an audit staff and senior from 1986 to 1992 in the
Orlando, Florida office of Price Waterhouse. Mr. Shackelford received a Bachelor
of Arts degree in Accounting, with honors, and a Master of Business
Administration degree from Florida State University and is a certified public
accountant.
Thomas Arasi, age 46. Mr. Arasi has served as President of CCM since it
was formed in July 2003 to provide strategic advisory services to the General
Partners. He has served in various consulting capacities to CNL Hospitality Corp
and other CNL affiliates since January 2003. Since November 2001 he has been an
independent consultant working for a variety of operating and investment
companies in the hospitality industry. Until October 2001, Mr. Arasi was
President & Chief Executive Officer, and a member of the Board of Directors of
Lodgian, Inc., a New York Stock Exchange traded company, one of the largest
independent hotel owner/operators in North America, with hotel properties under
most brand names including Marriott, Courtyard by Marriott, Fairfield Inn by
Marriott, Crowne Plaza, Holiday Inn, Hilton, and Radisson. From June 1997
through November 2000, Mr. Arasi was a member of the Management Committee and
held several top operating positions with Bass Hotels & Resorts, one of the
leading international owners, operators and franchisors of hotels, most recently
serving as President, Bass Hotels & Resort--The Americas. Mr. Arasi was formerly
President of Tishman Hotel Corporation, Vice President of Salomon Brothers,
Inc., in New York, Tokyo and Los Angeles and held positions with Sheraton,
Westin and HVS International. Mr. Arasi graduated from Cornell University in
January 1981, where he received a Bachelor's degree in Hotel and Restaurant
Administration.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires the General Partners, the
officers of the corporate General Partner, and persons who own more than ten
percent of a registered class of the Partnership's equity securities
(collectively, the "Reporting Persons"), to file reports of ownership and
changes in ownership on Forms 3, 4 and 5 with the SEC. Reporting Persons are
required by SEC regulation to furnish the Partnership with copies of all Forms
3, 4 and 5 that they file.
Based solely on the General Partners' review of the copies of such
forms the Partnership has received and written representations from certain
Reporting Persons that they were not required to file Forms 5 for the last
fiscal year, the General Partners believe that all Reporting Persons complied
with all filing requirements applicable to them with respect to transactions
during fiscal 2003.
Code of Business Conduct
The Partnership does not have employees and, accordingly, has not
adopted a code of business conduct applicable exclusively to the Partnership.
However, employees of the General Partners or their affiliates, including the
individual General Partners, are bound by the Code of Business Conduct adopted
November 11, 2003 by CNL Holdings, Inc. Separately, the employees of the Advisor
are bound by the similar Code of Business Conduct adopted by CNL Restaurant
Properties, Inc. Each of these codes of business conduct will be made available
to any person who writes the Partnership requesting a copy.
Audit Committee Financial Expert
Due to its organization as a limited partnership, the Partnership does
not have an audit committee that is responsible for supervising the
Partnership's relationship with its independent auditors. For the Partnership,
this role is performed by the General Partners. Based on his previous service as
the principal financial officer of companies with businesses similar to that of
the Partnership, Robert A. Bourne, one of the General Partners, has the
requisite experience to be considered an "audit committee financial expert" as
defined in the rules under the Securities Exchange Act of 1934, if the
Partnership had an audit committee. As a General Partner, Mr. Bourne is not
independent of the Partnership.
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 and
Related Stockholder Matters
As of March 12, 2004, no person was known to the Registrant to be a
beneficial owner of more than 5% of the Units.
The following table sets forth, as of March 12, 2004, the beneficial
ownership interests of the General Partners in the Registrant.
Title of Class Name of Partner Percent of Class
General Partnership Interests James M. Seneff, Jr. 45%
Robert A. Bourne 45%
CNL Realty Corporation 10%
--------
100%
========
Neither the General Partners, nor any of their affiliates, owns any
interest in the Registrant, except as noted above.
The Partnership has no equity compensation plans.
Item 13. Certain Relationships and Related Transactions
The table below summarizes the types, recipients, methods of
computation and amounts of compensation, fees and distributions paid or payable
by the Partnership to the General Partners and their affiliates for the year
ended December 31, 2003, 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, 2003
- ---------------------------------- -------------------------------------- ------------------------------
Reimbursement to affiliates for Operating expenses are reimbursed at Accounting and
operating expenses the lower of cost or 90% of the administrative services:
prevailing rate at which comparable $164,623
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, 2003
- --------------------------------- -------------------------------------- ------------------------------
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) 3% 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 5% of Partnership distributions
Partnership net sales proceeds of such net sales proceeds,
from a sale or sales not in subordinated to certain minimum
liquidation of the Partnership returns to the Limited Partners.
Amount Incurred
Type of Compensation For the Year
And Recipient Method of Computation Ended December 31, 2003
- --------------------------------- -------------------------------------- ------------------------------
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.
Item 14. Principal Accountant Fees and Services
The following table outlines the only fees paid or accrued by the Partnership
for the audit and other services provided by the Partnership's independent
certified public accountants, PricewaterhouseCoopers LLP, for the years ended
December 31:
2003 2002
--------------------- ---------------------
Audit Fees (1) $ 15,456 $ 12,600
Tax Fees (2) 8,135 7,125
--------------------- ---------------------
Total $ 23,591 $ 19,725
===================== =====================
(1) Audit services of PricewaterhouseCoopers LLP for 2003 and 2002
consisted of the examination of the financial statements of the
Partnership and quarterly review of financial statements.
(2) Tax Fees relates to tax consulting and compliance services.
Each of the non-audit services described above was approved by the General
Partners. Due to its organization as a limited partnership, the Partnership does
not have an audit committee.
PART IV
Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) The following documents are filed as part of this report.
1. Financial Statements
Report of Independent Certified Public Accountants
Balance Sheets at December 31, 2003 and 2002
Statements of Income for the years ended December 31, 2003,
2002, and 2001
Statements of Partners' Capital for the years ended December
31, 2003, 2002, and 2001
Statements of Cash Flows for the years ended December 31,
2003, 2002, and 2001
Notes to Financial Statements
2. Financial Statement Schedules
Schedule II -Valuation and Qualifying Accounts for the years
ended December 31, 2003, 2002, and 2001
Schedule III - Real Estate and Accumulated Depreciation at
December 31, 2003
Notes to Schedule III - Real Estate and Accumulated
Depreciation at December 31, 2003
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.)
10.4 Assignment of Management Agreement from CNL Fund
Advisors, Inc. to CNL APF Partners, LP. (Included as
Exhibit 10.4 to Form 10-Q filed with the Securities
and Exchange Commission on August 13, 2001, and
incorporated herein by reference.)
10.5 Assignment of Management Agreement from CNL APF
Partners, LP to CNL Restaurants XVIII, Inc. (Included
as Exhibit 10.5 to Form 10-Q filed with the
Securities and Exchange Commission on August 13,
2002, and incorporated herein by reference.)
31.1 Certification of Chief Executive Officer of Corporate
General Partner Pursuant to Rule 13a-14 as Adopted
Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002. (Filed herewith.)
31.2 Certification of Chief Financial Officer of Corporate
General Partner Pursuant to Rule 13a-14 as Adopted
Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002. (Filed herewith.)
32.1 Certification of Chief Executive Officer of Corporate
General Partner Pursuant to 18 U.S.C. Section 1350 as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002. (Filed herewith.)
32.2 Certification of Chief Financial Officer of Corporate
General Partner Pursuant to 18 U.S.C. Section 1350 as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002. (Filed herewith.)
(b) The Registrant filed no reports on Form 8-K during the period
October 1, 2003 through December 31, 2003.
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 25th day of
March, 2004.
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 25, 2004
- ------------------------------------
Robert A. Bourne (Principal Financial and Accounting
Officer)
/s/ James M. Seneff, Jr. Chief Executive Officer and Director March 25, 2004
- ------------------------------------
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, 2003, 2002, and 2001
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
- ---------- ----------------- -------------- --------------- ---------------- ------------- ------------ ------------
2001 Allowance for
doubtful
accounts (a) $ 287,901 $ -- $ 86,387 (b) $ 343,554 (c) $ 1,079 $ 29,655
============== =============== ================ ============= ============ ============
2002 Allowance for
doubtful
accounts (a) $ 29,655 $ -- $ -- $ -- $ 24,814 $ 4,841
============== =============== ================ ============= ============ ============
2003 Allowance for
doubtful
accounts (a) $ 4,841 $ -- $ -- $ -- $ -- $ 4,841
============== =============== ================ ============= ============ ============
(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.
CNL INCOME FUND X, LTD.
(A Florida Limited Partnership)
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 2003
Subsequent To Net Cost Basis at Which
Initial Cost Acquisition Carried at Close of Period (c)
---------------------------- -------------------- ---------------------------------------
Encum- Buildings and Improve- Carrying Buildings and
brances Land Improvements ments Costs Land Improvements Total
---------- ------------ ------------ ---------- -------- ------------ ------------ ---------
Properties the Partnership
has Invested in Under
Operating Leases:
Burger King Restaurants:
Hendersonville, North Carol-na 222,632 568,573 - - 222,632 568,573 791,205
Irondequoit, New York - 383,359 554,084 - - 383,359 554,084 937,443
Denny's Restaurants:
Fremont, Ohio - 160,896 - 273,700 - 160,896 273,700 434,596
Spartanburg, South Carolina- 287,959 - - - 287,959 (f) 287,959
Golden Corral Buffet and Grill:
Austin, Texas - 592,837 - 1,106,384 - 592,837 1,106,384 1,699,221
Austin, Texas - 711,354 - 1,124,040 - 711,354 1,124,040 1,835,394
Las Cruces, New Mexico - 580,655 920,521 - - 580,655 920,521 1,501,176
Freemont, Nebraska 203,166 1,054,051 - - 203,166 1,054,051 1,257,217
Hardee's Restaurants:
Pace, Florida - 174,850 - - - 174,850 (f) 174,850
Jacksonville, Florida - 326,972 - - - 326,972 (f) 326,972
Centerville, Tennnessee - 130,494 - - - 130,494 (f) 130,494
Jack in the Box Restaurants:
Desloge, Missouri - 276,701 - - - 276,701 (f) 276,701
San Antonio, Texas - 327,322 - - - 327,322 (f) 327,322
Missouri City, Texas - 348,646 - - - 348,646 (f) 348,646
Pasadena, Texas - 202,393 - - - 202,393 (f) 202,393
Long John Silver's Restaurants:
Alamogordo, New Mexico - 157,401 - - - 157,401 (f) 157,401
Las Cruces, New Mexico - 222,778 - - - 222,778 (f) 222,778
Pizza Hut Restaurants:
Bozeman, Montana - 99,879 224,614 - - 99,879 224,614 324,493
Sidney, Montana 101,690 - - - 101,690 (f) 101,690
Livingston, Montana - 71,989 161,211 - - 71,989 161,211 233,200
Laurel, Montana 109,937 255,060 - - 109,937 255,060 364,997
Shoney's Restaurants:
North Richland Hills, Texas-(i) 528,465 - 404,786 - 513,032 404,786 917,818
Pelham, Alabama 410,448 - 427,317 - 410,448 427,317 837,765
Taco Cabana Restaurant:
Houston, Texas - 729,796 551,672 - - 729,796 551,672 1,281,468
Other:
Homewood, Alabama - 597,907 - - - 348,616 - 348,616
Greenville, North Carolina - 323,573 515,134 - - 323,573 515,134 838,707
------------ ------------ --------- -------- ------------ ------------ ------------
$8,284,099 $4,804,920 $3,336,227 - $8,019,375 $8,141,147 $16,160,522
============ ============ ========== ======== ============ ============ ============
Properties the Partnership
has Invested in Under
Direct Financing Leases:
Burger King Restaurants:
Ashland, Ohio - $190,695 $724,348 - - (f) (f) (f)
Allegan, Michigan - 91,238 - 418,782 - (f) (f) (f)
New Bethlehem, Pennsylvan-a 135,929 452,507 - - (f) (f) (f)
Denny's Restaurants:
Spartanburg,
South Carolina - - 529,410 - - - (f) (f)
Hardee's Restaurants:
Pace, Florida - - 467,272 - - - (f) (f)
Jacksonville, Florida - - 405,985 - - - (f) (f)
Hohenwald, Tennessee - 49,201 376,415 - - (f) (f) (f)
Ravenna, Ohio - 114,244 496,032 - - (f) (f) (f)
Morristown, Tennessee - 131,289 456,925 - - (f) (f) (f)
Centerville, Tennessee - - 348,032 - - - (f) (f)
Jack in the Box Restaurants:
Desloge, Missouri - - 630,981 - - - (f) (f)
San Antonio, Texas - - - 206,031 - - (f) (f)
Nampa, Idaho - 151,574 584,533 - - (f) (f) (f)
Missouri City, Texas - - 619,686 - - - (f) (f)
Pasadena, Texas - - 575,429 - - - (f) (f)
Long John Silver's Restaurants:
Alamogordo, New Mexico - - 275,270 20,204 - - (f) (f)
Las Cruces, New Mexico - - 318,378 57,828 - - (f) (f)
Pizza Hut Restaurants:
Glasgow, Montana - 57,482 266,726 - - (f) (f) (f)
Sidney, Montana - - 291,238 - - - (f) (f)
---------- ------------ ----------
$921,652 $7,819,167 $702,845 -
========== ============ ========== --------
Life on Which
Depreciation in
Date Latest Income
Accumulated of Con- Date Statement is
Depreciation structionAcquired Computed
- ------------ ------- ---------- -------------
132,347 1986 11/91 (h)
128,974 1986 11/91 (h)
97,575 1992 12/91 (g)
- 1992 03/92 (d)
462,539 1992 12/91 (b)
446,768 1992 12/91 (b)
357,532 1992 05/92 (b)
167,085 1998 03/99 (b)
- 1992 01/92 (d)
- 1990 02/92 (d)
- 1991 02/92 (d)
- 1991 12/91 (d)
- 1992 02/92 (d)
- 1991 04/92 (d)
- 1991 04/92 (d)
- 1977 03/92 (d)
- 1975 03/92 (d)
87,693 1976 03/91 (b)
- 1985 03/91 (d)
62,941 1979 03/91 (b)
99,572 1985 03/91 (b)
163,791 1992 12/91 (b)
170,888 1992 01/92 (b)
29,111 1999 06/02 (b)
- 1997 10/97 (b)
208,736 1987 11/91 (b)
- ------------
$2,615,552
============
- 1988 11/91 (e)
- 1992 04/92 (e)
- 1991 04/92 (e)
- 1992 03/92 (d)
- 1992 01/92 (d)
- 1990 02/92 (d)
- 1991 02/92 (e)
- 1991 04/92 (e)
- 1991 04/92 (e)
- 1991 02/92 (d)
- 1991 12/91 (d)
- 1992 12/91 (d)
- 1991 12/92 (e)
- 1991 04/92 (d)
- 1991 04/92 (d)
- 1977 03/92 (d)
- 1975 03/92 (d)
- 1985 03/91 (e)
- 1985 03/91 (d)
CNL INCOME FUND X, LTD.
(A Florida Limited Partnership)
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED
DEPRECIATION
December 31, 2003
(a) Transactions in real estate and accumulated depreciation are summarized
below. The balances in 2001, 2002 and 2003 have been adjusted to
reflect the reclassification of properties accounted for as
discontinued operations.
Accumulated
Cost Depreciation
----------------- ----------------
Properties the Partnership has Invested in
Under Operating Leases:
Balance, December 31, 2000 $ 15,201,145 $ 1,720,970
Provision for write-down of assets (322,092 ) --
Depreciation expense -- 297,383
----------------- ----------------
Balance, December 31, 2001 14,879,053 2,018,353
Acquisition 1,281,469 --
Depreciation expense -- 294,140
----------------- ----------------
Balance, December 31, 2002 16,160,522 2,312,493
Depreciation expense -- 303,059
----------------- ----------------
Balance, December 31, 2003 $ 16,160,522 $ 2,615,552
================= ================
(b) Depreciation expense is computed for buildings and improvements based
upon estimated lives of 30 years.
(c) As of December 31, 2003, the aggregate cost of the Partnership's wholly
owned Properties and the Property owned by the consolidated joint
venture was $27,602,038 for federal income tax purposes. All of the
leases are treated as operating leases for federal income tax purposes.
(d) The portion of the lease relating to the building has been recorded as
a direct financing lease. The cost of the building has been included in
net investment in direct financing leases; therefore, depreciation is
not applicable.
(e) The lease for the land and building has been recorded as a direct
financing lease. The cost of the land and building has been included in
net investment in direct financing leases; therefore, depreciation is
not applicable.
(f) Certain components of the lease relating to land and building have been
recorded as a direct financing lease. Accordingly, costs relating to
these components of this lease are not shown.
(g) Effective 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.
CNL INCOME FUND X, LTD.
(A Florida Limited Partnership)
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED
DEPRECIATION - CONTINUED
December 31, 2003
(h) Effective August 1, 1998, 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 23
years.
(i) The undepreciated cost of the Property in North Richland Hills, Texas
was reduced to its estimated fair value due to an impairment in value.
The Partnership recognized the impairment by recording a provision for
write-down of assets in the amount of $15,433 at December 31, 2001. The
impairment at December 31, 2001 represented the difference between the
Property's carrying value and the estimated fair value of the Property.
The cost of the Property presented on this schedule is the net amount
at which the Property was carried at December 31, 2003, including the
provision for write-down of assets.
EXHIBIT INDEX
Exhibit Number
(a) 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.)
10.4 Assignment of Management Agreement from CNL Fund
Advisors, Inc. to CNL APF Partners, LP (Included
as Exhibit 10.4 to Form 10-Q filed with the
Securities and Exchange Commission on August 13,
2001, and incorporated herein by reference.)
10.5 Assignment of Management Agreement from CNL APF
Partners, LP to CNL Restaurants XVIII, Inc.
(Included as Exhibit 10.5 to Form 10-Q filed with
the Securities and Exchange Commission on August
13, 2002, and incorporated herein by reference.)
31.1 Certification of Chief Executive Officer of
Corporate General Partner Pursuant to Rule 13a-14
as Adopted Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002. (Filed herewith.)
31.2 Certification of Chief Financial Officer of
Corporate General Partner Pursuant to Rule 13a-14
as Adopted Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002. (Filed herewith.)
32.1 Certification of Chief Executive Officer of
Corporate General Partner Pursuant to 18 U.S.C.
Section 1350 as Adopted Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002. (Filed
herewith.)
32.2 Certification of Chief Financial Officer of
Corporate General Partner Pursuant to 18 U.S.C.
Section 1350 as Adopted Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002. (Filed
herewith.)
EXHIBIT 31.1
EXHIBIT 31.2
EXHIBIT 32.1
EXHIBIT 32.2