FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(X) QUARTERLY REPORT PURSUANT TO SECTION
13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT of 1934
For the quarterly period ended September 30, 2004
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OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT of 1934
For the transition period from ______________________ to _______________________
Commission file number
0-21560
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CNL Income Fund XI, Ltd.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Florida 59-3078854
- --------------------------------- ----------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
450 South Orange Avenue
Orlando, Florida 32801
- ---------------------------------------- ----------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number
(including area code) (407) 540-2000
----------------------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No _________
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act): Yes___ No X
CONTENTS
Page
Part I.
Item 1. Financial Statements:
Condensed Balance Sheets 1
Condensed Statements of Income 2
Condensed Statements of Partners' Capital 3
Condensed Statements of Cash Flows 4
Notes to Condensed Financial Statements 5-6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7-10
Item 3. Quantitative and Qualitative Disclosures About
Market Risk 10
Item 4. Controls and Procedures 10
Part II.
Other Information 11-12
CNL INCOME FUND XI, LTD.
(A Florida Limited Partnership)
CONDENSED BALANCE SHEETS
September 30, December 31,
2004 2003
------------------- -------------------
ASSETS
Real estate properties with operating leases, net $ 20,107,217 $ 20,452,460
Net investment in direct financing leases 3,667,853 3,768,877
Real estate held for sale 671,330 3,101,531
Investment in joint ventures 4,001,893 3,885,112
Cash and cash equivalents 4,495,072 1,682,358
Receivables, less allowance for doubtful accounts
of $163,523 and $131,618, respectively 1,743 164,328
Due from related parties 240 --
Accrued rental income 1,312,198 1,351,304
Other assets 143,587 161,335
------------------- -------------------
$ 34,401,133 $ 34,567,305
=================== ===================
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable and accrued expenses $ 64,718 $ 8,301
Real estate taxes payable 35,898 25,656
Distributions payable 875,006 875,006
Due to related parties 34,885 16,161
Rents paid in advance and deposits 92,050 196,648
------------------- -------------------
Total liabilities 1,102,557 1,121,772
Minority interests 1,188,683 1,209,913
Commitment (Note 4)
Partners' capital 32,109,893 32,235,620
------------------- -------------------
$ 34,401,133 $ 34,567,305
=================== ===================
See accompanying notes to condensed financial statements.
1
CNL INCOME FUND XI, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF INCOME
Quarter Ended Nine Months Ended
September 30, September 30,
2004 2003 2004 2003
------------- -------------- ----------------- ---------------
Revenues:
Rental income from operating leases $ 641,156 $ 639,236 $ 1,893,557 $ 1,852,468
Earned income from direct financing leases 131,496 123,727 397,326 409,962
Contingent rental income 26,212 15,933 65,573 18,764
Interest and other income 11,897 1,019 28,549 9,329
------------- -------------- ----------------- ---------------
810,761 779,915 2,385,005 2,290,523
------------- -------------- ----------------- ---------------
Expenses:
General operating and administrative 108,920 56,961 295,435 195,310
Property related 10,934 18,834 31,931 36,401
Management fees to related party 9,246 9,118 27,781 28,608
State and other taxes -- 1,466 67,564 52,144
Depreciation and amortization 119,509 114,939 356,235 336,489
Provision for write-down of assets -- -- -- 67,694
------------- -------------- ----------------- ---------------
248,609 201,318 778,946 716,646
------------- -------------- ----------------- ---------------
Income before minority interests and equity in
earnings of unconsolidated joint ventures 562,152 578,597 1,606,059 1,573,877
Minority interests (35,609) (27,657) (92,269) (82,507)
Equity in earnings of unconsolidated joint
ventures 100,439 75,091 272,173 225,977
------------- -------------- ----------------- ---------------
Income from continuing operations 626,982 626,031 1,785,963 1,717,347
------------- -------------- ----------------- ---------------
Discontinued operations:
Income from discontinued operations 20,933 36,528 95,355 217,091
Gain on disposal of discontinued operations -- -- 617,973 377,961
------------- -------------- ----------------- ---------------
20,933 36,258 713,328 595,052
------------- -------------- ----------------- ---------------
Net income $ 647,915 $ 662,559 $ 2,499,291 $ 2,312,399
============= ============== ================= ===============
Income per limited partner unit:
Continuing operations $ 0.15 $ 0.16 $ 0.44 $ 0.43
Discontinued operations 0.01 0.01 0.18 0.15
------------- -------------- ----------------- ---------------
$ 0.16 $ 0.17 $ 0.62 $ 0.58
============= ============== ================= ===============
Weighted average number of limited partner
units outstanding 4,000,000 4,000,000 4,000,000 4,000,000
============= ============== ================= ===============
See accompanying notes to condensed financial statements.
2
CNL INCOME FUND XI, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF PARTNERS' CAPITAL
Nine Months Ended Year Ended
September 30, December 31,
2004 2003
--------------------- ------------------
General partners:
Beginning balance $ 245,465 $ 242,465
Net income -- --
--------------------- ------------------
242,465 242,465
--------------------- ------------------
Limited partners:
Beginning balance 31,993,155 32,292,730
Net income 2,499,291 3,200,449
Distributions ($0.66 and $0.88 per
limited partner unit, respectively) (2,625,018) (3,500,024)
--------------------- ------------------
31,867,428 31,993,155
--------------------- ------------------
Total partners' capital $ 32,109,893 $ 32,235,620
===================== ==================
See accompanying notes to condensed financial statements.
3
CNL INCOME FUND XI, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF CASH FLOWS
Nine Months Ended
September 30,
2004 2003
--------------- ---------------
Net cash provided by operating activities $ 2,510,052 $ 2,925,434
--------------- ---------------
Cash flows from investing activities:
Proceeds from sale of assets 3,041,179 931,858
--------------- ---------------
Net cash provided by investing activities 3,041,179 931,858
--------------- ---------------
Cash flows from financing activities:
Distributions to limited partners (2,625,018) (2,825,018)
Distributions to holders of minority interests (113,499) (96,080)
--------------- ---------------
Net cash used in financing activities (2,738,517) (2,921,098)
--------------- ---------------
Net increase in cash and cash equivalents 2,812,714 936,194
Cash and cash equivalents at beginning of period 1,682,358 1,777,200
--------------- ---------------
Cash and cash equivalents at end of period $ 4,495,072 $ 2,713,394
=============== ===============
Supplemental schedule of non-cash financing activities:
Distributions declared and unpaid at end of
period $ 875,006 $ 875,006
=============== ===============
See accompanying notes to condensed financial statements.
4
CNL INCOME FUND XI, LTD.
(A Florida Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS
Quarters and Nine Months Ended September 30, 2004 and 2003
1. Basis of Presentation
The accompanying unaudited condensed financial statements have been
prepared in accordance with the instructions to Form 10-Q and do not
include all of the information and note disclosures required by
generally accepted accounting principles. The financial statements
reflect all adjustments, consisting of normal recurring adjustments,
which are, in the opinion of the general partners, necessary for a fair
statement of the results for the interim periods presented. Operating
results for the quarter and nine months ended September 30, 2004 may
not be indicative of the results that may be expected for the year
ending December 31, 2004. Amounts as of December 31, 2003, included in
the financial statements, have been derived from audited financial
statements as of that date.
These unaudited financial statements should be read in conjunction with
the financial statements and notes thereto included in Form 10-K of CNL
Income Fund XI, Ltd. (the "Partnership") for the year ended December
31, 2003.
The Partnership accounts for its 85% interest in Denver Joint Venture,
its 77.33% interest in CNL/Airport Joint Venture, its 62.16% interest
in Ashland Joint Venture, and its 76.60% interest in Des Moines Real
Estate Joint Venture using the consolidation method. Minority interests
represent the minority joint venture partners' proportionate share of
the equity in the joint ventures. All significant intercompany accounts
and transactions have been eliminated.
In December 2003, the Financial Accounting Standards Board issued a
revision to FASB Interpretation No. 46 (originally issued in January
2003) ("FIN 46R"), "Consolidation of Variable Interest Entities"
requiring existing unconsolidated variable interest entities to be
consolidated by their primary beneficiaries. The primary beneficiary of
a variable interest entity is the party that absorbs a majority of the
entity's expected losses, receives a majority of its expected residual
returns, or both, as a result of holding variable interests, which are
the ownership, contractual, or other pecuniary interests in an entity
that change with changes in the fair value of the entity's net assets
excluding variable interests. Prior to FIN 46R, a company generally
included another entity in its financial statements only if it
controlled the entity through voting interests. Application of FIN 46R
is required in financial statements of public entities that have
interests in variable interest entities for periods ending after March
15, 2004. The Partnership adopted FIN 46R during the quarter ended
March 31, 2004, which resulted in the consolidation of previously
unconsolidated joint ventures, which were accounted for under the
equity method. FIN 46R does not require, but does permit restatement of
previously issued financial statements. The Partnership has restated
prior year's financial statements to maintain comparability between the
periods presented. Such consolidation resulted in certain assets and
minority interests, and revenues and expenses, of these entities being
reported on a gross basis in the Partnership's financial statements;
however, these restatements had no effect on partners' capital or net
income.
2. Discontinued Operations
During 2003, the Partnership identified four properties for sale that
were classified as discontinued operations in the accompanying
financial statements. The Partnership sold the property in Abilene,
Texas, during 2003. During the quarter ended March 31, 2004, the
Partnership sold its property in Lynchburg, Virginia to the tenant and
sold its Properties in Cullman, Alabama, and Huntersville, North
Carolina, to separate third parties, and received aggregate net sales
proceeds of approximately $3,041,000, resulting in a gain on disposal
of discontinued operations of approximately $618,000. The Partnership
recorded a provision for write-down of assets in a previous year
related to the property in Lynchburg, Virginia.
5
CNL INCOME FUND XI, LTD.
(A Florida Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS
Quarters and Nine Months Ended September 30, 2004 and 2003
2. Discontinued Operations - Continued
In May 2004, the Partnership identified for sale the property in
Dothan, Alabama and reclassified the asset to real estate held for
sale. Because the current carrying amount of this asset is less than
its fair value less cost to sell, no provision for the write-down of
assets was recorded.
The following presents the operating results of the discontinued
operations for these properties:
Quarter Ended
Nine Months Ended
September 30, September 30,
2004 2003 2004 2003
-------------- -------------- -------------- --------------
Rental revenues $ 21,183 $ 83,981 $ 95,605 $ 269,229
Expenses (250) (6,298) (250) (10,983)
Provision for the
writedown of assets -- (41,155) -- (41,155)
-------------- -------------- -------------- --------------
Income from discontinued
operations $ 20,933 $ 36,528 $ 95,355 $ 217,091
============== ============== ============== ==============
3. Merger Transaction
On August 9, 2004, the Partnership entered into a definitive Agreement
and Plan of Merger pursuant to which the Partnership will be merged
with a subsidiary of U.S. Restaurant Properties, Inc. (NYSE: USV). The
merger is one of multiple concurrent transactions pursuant to which 17
other affiliated limited partnerships also will be merged with a
subsidiary of U.S. Restaurant Properties, Inc. and in which CNL
Restaurant Properties, Inc., an affiliate, also will be merged with
U.S. Restaurant Properties, Inc. CNL Restaurant Properties, Inc.
currently provides property management and other services to the
Partnership. The merger of the Partnership (and each of the 17 other
affiliated mergers) is subject to certain conditions including approval
by a majority of the limited partners, consummation of a minimum number
of limited partnership mergers representing at least 75.0% in value (as
measured by the value of the merger consideration) of all limited
partnerships, consummation of the merger between U.S. Restaurant
Properties, Inc. and CNL Restaurant Properties, Inc., approval of the
shareholders of U.S. Restaurant Properties, Inc., and availability of
financing. The transaction is expected to be consummated in the first
quarter of 2005.
Under the terms of the merger agreement, if the transaction is
approved, the limited partners will receive total consideration of
approximately $39.66 million, consisting of approximately $33.16
million in cash and approximately $6.50 million in U.S. Restaurant
Properties, Inc. Series A Convertible Preferred Stock that is listed on
the New York Stock Exchange. The general partners will receive total
consideration of approximately $197,000 consisting of approximately
$165,000 in cash and approximately $32,000 in preferred stock.
4. Commitment
In September 2004, the Partnership entered into an agreement with a
third party to sell the property in Dothan, Alabama.
6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
CNL Income Fund XI, Ltd. (the "Partnership," which may be referred to
as "we," "us," or "our") is a Florida limited partnership that was organized on
August 20, 1991 to acquire for cash, either directly or through joint venture
arrangements, both newly constructed and existing restaurants, 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 leases are, in general, triple-net leases,
with the lessees responsible for all repairs and maintenance, property taxes,
insurance, and utilities. We owned 28 and 31 Properties directly as of September
30, 2004 and 2003, respectively. We also owned ten and eight Properties
indirectly through joint venture or tenancy in common arrangements as of
September 30, 2004 and 2003, respectively.
Merger Transaction
The general partners believe their primary objective is to maintain
current operations with restaurant operators as successfully as possible, while
evaluating strategic alternatives, including alternatives that may provide
liquidity to the limited partners. Real estate markets are strong throughout
much of the nation, and the performance of restaurants has generally improved
after several challenging years. As a result, the general partners believe that
this is an attractive period for a strategic event to monetize the interests of
the limited partners.
In furtherance of this, on August 9, 2004, we entered into a definitive
Agreement and Plan of Merger pursuant to which we will be merged with a
subsidiary of U.S. Restaurant Properties, Inc. (NYSE: USV). The merger is one of
multiple concurrent transactions pursuant to which 17 other affiliated limited
partnerships also will be merged with a subsidiary of U.S. Restaurant
Properties, Inc. and in which CNL Restaurant Properties, Inc., an affiliate,
also will be merged with U.S. Restaurant Properties, Inc. Our merger (and each
of the 17 other affiliated mergers) is subject to certain conditions including
approval by a majority of the limited partners, consummation of a minimum number
of limited partnership mergers representing at least 75.0% in value (as measured
by the value of the merger consideration) of all limited partnerships,
consummation of the merger between U. S. Restaurant Properties, Inc. and CNL
Restaurant Properties, Inc., approval of the shareholders of U.S. Restaurant
Properties, Inc., and availability of financing. U.S. Restaurant Properties,
Inc. is a real estate investment trust (REIT) that focuses primarily on
acquiring, owning and leasing restaurant properties. The transaction is expected
to be consummated in the first quarter of 2005.
Under the terms of the merger agreement, if the transaction is
approved, our limited partners will receive total consideration of approximately
$39.66 million, consisting of approximately $33.16 million in cash and
approximately $6.50 million in U.S. Restaurant Properties, Inc. Series A
Convertible Preferred Stock that is listed on the New York Stock Exchange. The
general partners will receive total consideration of approximately $197,000
consisting of approximately $165,000 in cash and approximately $32,000 in
preferred stock.
We received an opinion from Wachovia Capital Markets, LLC that as of
August 9, 2004 the merger consideration to be received by the holders of our
general and limited partnership interests is fair, from a financial point of
view, to such holders.
As reflected above, the contemplated transactions are complex, and
contingent upon certain conditions. The restaurant marketplace, the real estate
industry, and the equities markets, all individually or taken as a whole, could
impact the economics of this transaction. As a result, there is no assurance
that we will be successful in completing the contemplated transaction.
Capital Resources
Net cash provided by operating activities was $2,510,052 and $2,925,434
for the nine months ended September 30, 2004 and 2003, respectively. The
decrease in net cash provided by operating activities during the nine months
ended September 30, 2004, was a result of changes in our working capital, such
as the timing of transactions relating to the collection of receivables and the
payment of expenses, and changes in income and expenses, such as changes in
rental revenues and changes in operating and property related expenses.
7
Other sources and uses of cash included the following during the nine
months ended September 30, 2004.
In 2004, we sold our Property in Lynchburg, Virginia to the tenant and
sold our Properties in Cullman, Alabama, and Huntersville, North Carolina, to
separate third parties, and received aggregate net sales proceeds of
approximately $3,041,000 resulting in a gain on disposal of discontinued
operations of approximately $618,000. We recorded a provision for write-down of
assets in a previous year related to the Property in Lynchburg, Virginia. The
general partners intend to reinvest the net sales proceeds in additional
Properties or to pay liabilities.
Cash and cash equivalents increased to $4,495,072 at September 30,
2004, from $1,682,358 at December 31, 2003. At September 30, 2004, these funds
were held in demand deposit accounts at a commercial bank and a certificate of
deposit with a 90-day or less maturity date. The increase in cash and cash
equivalents at September 30, 2004, was primarily a result of holding sales
proceeds from the current year sales. The funds remaining at September 30, 2004,
after the payment of distributions and other liabilities, may be used to invest
in additional Properties and to meet our working capital needs.
Short-Term Liquidity
Our investment strategy of acquiring Properties for cash and leasing
them under triple-net leases to operators who generally meet specified financial
standards minimizes our operating expenses. The general partners believe that
the leases will generate net cash flow in excess of operating expenses.
Our short-term liquidity requirements consist primarily of our
operating expenses.
The general partners have the right, but not the obligation, to make
additional capital contributions if they deem it appropriate in connection with
our operations.
We generally distribute cash from operations remaining after the
payment of operating expenses, to the extent that the general partners determine
that such funds are available for distribution. Based on current and anticipated
future cash from operations, we declared distributions to limited partners of
$2,625,018 for each of the nine months ended September 30, 2004 and 2003
($875,006 for each of the quarters ended September 30, 2004 and 2003). This
represents distributions of $0.66 per unit for each of the nine months ended
September 30, 2004 and 2003 ($0.22 for each applicable quarter). No
distributions were made to the general partners for quarters and nine months
ended September 30, 2004 and 2003. No amounts distributed to the limited
partners for the nine months ended September 30, 2004 and 2003 are required to
be or have been treated as a return of capital for purposes of calculating the
limited partners' return on their adjusted capital contributions. We intend to
continue to make distributions of cash to the limited partners on a quarterly
basis.
Total liabilities, including distributions payable, decreased to
$1,102,557 at September 30, 2004 from $1,121,772 at December 31, 2003. The
decrease in total liabilities was due to a decrease in rents paid in advance and
deposits and was partially offset by an increase in accounts payable and accrued
expenses and amounts due to related parties. The general partners believe that
we have sufficient cash on hand to meet our current working capital needs.
Contractual Obligations, Contingent Liabilities, and Commitments
In September 2004, we entered into an agreement with a third party to
sell the Property in Dothan, Alabama. As of November 5, 2004, the sale had not
occurred.
Long Term Liquidity
We have no long-term debt or other long-term liquidity requirements.
8
Results of Operations
Rental revenues from continuing operations were $2,290,883 for the nine
months ended September 30, 2004, as compared to $2,262,430 for the same period
in 2003, of which $772,652 and $762,963 were earned during the third quarters of
2004 and 2003, respectively. Rental revenues from continuing operations were
higher during the quarter and nine months ended September 30, 2004 because we
provided a rent reduction to the tenant of the Property in Yelm, Washington when
the tenant experienced financial difficulties in 2002. In March 2003, we
executed a termination of the tenant's lease rights, and the tenant surrendered
the premises. The restaurant operated under a temporary lease agreement with a
new tenant until October 2003 when we entered into a new lease with terms
substantially the same as our other leases. The increase during the nine months
ended September 30, 2004 was partially offset due to the fact that during 2003
we stopped recording rental revenues relating to the Property in Dayton, Ohio
when the tenant experienced financial difficulties. During March 2004, the
tenant vacated the Property. In July 2004, we entered into a new lease with a
new tenant for the Property. We began receiving rental payments in August 2004.
In April 2003, a tenant, The Melodie Corporation, filed for bankruptcy.
The tenant has neither affirmed nor rejected the one lease it has with us.
Subsequent to the tenant filing for bankruptcy, we have continued receiving
rental payments relating to this lease. The lost revenues that would result if
the lease were to be rejected will have an adverse effect on the results of
operations if we are not able to re-lease the Property in a timely manner.
During the nine months ended September 30, 2004 and 2003, we earned
$65,573 and $18,764, respectively, in contingent rental income from our
Properties and our consolidated joint ventures, of which $26,212 and $15,933
were earned during the third quarters of 2004 and 2003, respectively. The
increase in contingent rental income during 2004 was due to an increase in
reported gross sales of certain restaurants with leases that require the payment
of contingent rental income.
During the nine months ended September 30, 2004 and 2003, we earned
$272,173 and $225,977, respectively, attributable to net income earned by
unconsolidated joint ventures, of which $100,439 and $75,091 were earned during
the third quarters of 2004 and 2003, respectively. The increase in 2004 is
primarily the result of an investment in an additional tenancy in common
relationship in November 2003. Rental payments relating to this Property
commenced at the time of acquisition.
Operating expenses, including depreciation and amortization and
provision for write-down of assets, were $778,946 and $716,646 during the nine
months ended September 30, 2004 and 2003, respectively, of which $248,609 and
$201,318 were incurred during the third quarters of 2004 and 2003, respectively.
The increase in operating expenses during the quarter and nine months ended
September 30, 2004 was primarily due to an increase in general operating and
administrative expenses including, primarily, legal fees incurred in connection
with the merger transaction described above. The increase for the nine months
ended September 30, 2004 was also due to an increase in state tax expense
relating to several states in which we conduct business, partially offset by a
provision for the write-down of assets recorded in 2003.
We recognized income from discontinued operations (rental revenues less
property related expenses) of $217,091 and $36,528 during the nine months and
quarter ended September 30, 2003, respectively, relating to the Properties in
Abilene, Texas; Lynchburg, Virginia; Cullman, Alabama; Huntersville, North
Carolina; and Dothan, Alabama. We sold the Property in Abilene, Texas in March
2003 resulting in a gain on the disposal of discontinued operations of
approximately $378,000. During the nine months and quarter ended September 30,
2004, we recognized income from discontinued operations of $95,355 and $20,933,
respectively, relating to the Properties in Lynchburg, Virginia; Cullman,
Alabama; Huntersville, North Carolina; and Dothan, Alabama. In 2004, we sold the
Property in Lynchburg, Virginia, to the tenant and the Properties in Cullman,
Alabama, and Huntersville, North Carolina, to separate third parties resulting
in a gain on disposal of discontinued operations of approximately $618,000. As
of November 5, 2004, the sale of the Property in Dothan, Alabama, had not
occurred.
9
In December 2003, the Financial Accounting Standards Board issued a
revision to FASB Interpretation No. 46 (originally issued in January 2003) ("FIN
46R"), "Consolidation of Variable Interest Entities," requiring existing
unconsolidated variable interest entities to be consolidated by their primary
beneficiaries. The primary beneficiary of a variable interest entity is the
party that absorbs a majority of the entity's expected losses, receives a
majority of its expected residual returns, or both, as a result of holding
variable interests, which are the ownership, contractual, or other pecuniary
interests in an entity that change with changes in the fair value of the
entity's net assets excluding variable interests. Prior to FIN 46R, a company
generally included another entity in its financial statements only if it
controlled the entity through voting interests. Application of FIN 46R is
required in financial statements of public entities that have interests in
variable interest entities for periods ending after March 15, 2004. We adopted
FIN 46R during the quarter ended March 31, 2004, which resulted in the
consolidation of previously unconsolidated joint ventures, Ashland Joint Venture
and Des Moines Real Estate Joint Venture, both of which were accounted for under
the equity method. FIN 46R does not require, but does permit restatement of
previously issued financial statements. We restated prior year's financial
statements to maintain comparability between the periods presented. Such
consolidation resulted in certain assets and minority interests, and revenues
and expenses, of these entities being reported on a gross basis in our financial
statements; however, these restatements had no effect on partner's capital or
net income.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 4. CONTROLS AND PROCEDURES
The general partners maintain a set of disclosure controls and
procedures designed to ensure that information required to be disclosed in our
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 our disclosure controls
and procedures as of the end of the period covered by this Quarterly Report on
Form 10-Q 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.
10
PART II. OTHER INFORMATION
Item 1. Legal Proceedings. Inapplicable.
-----------------
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
------------------------------------------------------------
Inapplicable.
Item 3. Defaults upon Senior Securities. Inapplicable.
-------------------------------
Item 4. Submission of Matters to a Vote of Security Holders. Inapplicable.
---------------------------------------------------
Item 5. Other Information. Inapplicable.
-----------------
Item 6. Exhibits and Reports on Form 8-K.
---------------------------------
(a) Exhibits
2.1 Agreement and Plan of Merger among U.S. Restaurant
Properties, Inc., Ivanhoe Acquisition XI, LLC, and CNL
Income Fund XI, Ltd., dated as of August 9, 2004.
(Included as Exhibit 99.2 to Form 8-K filed with the
Securities and Exchange Commission on August 9, 2004,
and incorporated herein by reference.)
3.1 Affidavit and Certificate of Limited Partnership of CNL
Income Fund XI, Ltd. (Included as Exhibit 3.2 to
Registration Statement No. 33-43278 on Form S-11 and
incorporated herein by reference.)
4.1 Affidavit and Certificate of Limited Partnership of CNL
Income Fund XI, Ltd. (Included as Exhibit 3.2 to
Registration Statement No. 33-43278 on Form S-11 and
incorporated herein by reference.)
4.2 Amended and Restated Agreement of Limited Partnership of
CNL Income Fund XI, Ltd. (Included as Exhibit 4.2 to
Form 10-K filed with the Securities and Exchange
Commission on April 15, 1993, and incorporated herein by
reference.)
10.1 Management Agreement between CNL Income Fund XI, Ltd.
and CNL Investment Company. (Included as Exhibit 10.1 to
Form 10-K filed with the Securities and Exchange
Commission on April 15, 1993, 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 14, 2001, and incorporated
herein by reference.)
11
10.5 Assignment of Management Agreement from CNL APF
Partners, LP to CNL Restaurants XVIII, Inc. (Included as
Exhibit 10.5 to Form 10-Q filed with the Securities and
Exchange Commission on August 14, 2002, and incorporated
herein by reference.)
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.)
12
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
DATED this 10th day of November 2004.
CNL INCOME FUND XI, LTD.
By: CNL REALTY CORPORATION
General Partner
By: /s/ James M. Seneff, Jr.
-------------------------------------
JAMES M. SENEFF, JR.
Chief Executive Officer
(Principal Executive Officer)
By: /s/ Robert A. Bourne
-------------------------------------
ROBERT A. BOURNE
President and Treasurer
(Principal Financial and
Accounting Officer)
EXHIBIT INDEX
Exhibit Number
Exhibits
2.1 Agreement and Plan of Merger among U.S. Restaurant
Properties, Inc., Ivanhoe Acquisition XI, LLC, and CNL
Income Fund XI, Ltd., dated as of August 9, 2004.
(Included as Exhibit 99.2 to Form 8-K filed with the
Securities and Exchange Commission on August 9, 2004,
and incorporated herein by reference.)
3.1 Affidavit and Certificate of Limited Partnership of CNL
Income Fund XI, Ltd. (Included as Exhibit 3.2 to
Registration Statement No. 33-43278 on Form S-11 and
incorporated herein by reference.)
4.1 Affidavit and Certificate of Limited Partnership of CNL
Income Fund XI, Ltd. (Included as Exhibit 3.2 to
Registration Statement No. 33-43278 on Form S-11 and
incorporated herein by reference.)
4.2 Amended and Restated Agreement of Limited Partnership of
CNL Income Fund XI, Ltd. (Included as Exhibit 4.2 to
Form 10-K filed with the Securities and Exchange
Commission on April 15, 1993, and incorporated herein by
reference.)
10.1 Management Agreement between CNL Income Fund XI, Ltd.
and CNL Investment Company. (Included as Exhibit 10.1 to
Form 10-K filed with the Securities and Exchange
Commission on April 15, 1993, 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 14, 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 14, 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