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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
(Mark One)
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-21558
CNL INCOME FUND XII, LTD.
(Exact name of registrant as specified in its charter)
Florida 59-3078856
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
450 South Orange Avenue
Orlando, Florida 32801
(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code: (407) 540-2000
Securities registered pursuant to Section 12(b) of the Act:
Title of each class: Name of exchange on which registered:
None Not Applicable
Securities registered pursuant to Section 12(g) of the Act:
Units of limited partnership interest ($10 per Unit)
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days: Yes X No __
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.
[x]
Aggregate market value of the voting stock held by nonaffiliates of the
registrant: The registrant registered an offering of 4,500,000 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 XII, Ltd. (the "Registrant" or the "Partnership") is a
limited partnership which was organized pursuant to the laws of the State of
Florida on August 20, 1991. 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 29, 1992, the
Partnership offered for sale up to $45,000,000 of limited partnership interests
(the "Units") (4,500,000 Units at $10 per Unit) pursuant to a registration
statement on Form S-11 under the Securities Act of 1933, as amended, effective
March 12, 1992. The offering terminated on March 15, 1993, at which date the
maximum offering proceeds of $45,000,000 had been received from investors who
were admitted to the Partnership as limited partners ("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, totalled
$39,615,456, and were used to acquire 48 Properties, including interests in
three Properties owned by joint ventures in which the Partnership is a
co-venturer, to loan $208,855 to the tenant of Kingsville Real Estate Joint
Venture and to establish a working capital reserve for Partnership purposes.
During the year ended December 31, 1996, the Partnership sold its
Property in Houston, Texas and reinvested the sales proceeds, along with
additional funds, in a joint venture arrangement, Middleburg Joint Venture with
CNL Income Fund VIII, Ltd., a Florida limited partnership and affiliate of the
General Partners. During the year ended December 31, 1998, the Partnership
entered into a joint venture arrangement, Columbus Joint Venture, with
affiliates of the General Partners, to construct and hold one restaurant
Property. During 1998, the Partnership sold its Property in Monroe, North
Carolina. During 1999, the Partnership sold its Property in Morganton, North
Carolina and reinvested the majority of the net sales proceeds, along with the
net sales proceeds from the 1998 sale of the Property in Monroe, North Carolina,
in a joint venture arrangement, Bossier City Joint Venture, with CNL Income Fund
VIII, Ltd. and CNL Income Fund XIV, Ltd., both Florida limited partnerships and
affiliates of the General Partners, to purchase and hold one restaurant
Property. During 2000, the Partnership sold its Property in Cleveland, Tennessee
and reinvested the majority of the net sales proceeds in a Krystal Property in
Pooler, Georgia. In addition, during 2000, the Partnership sold its Property in
Bradenton, Florida and reinvested the majority of the net sales proceeds in a
Property in Colorado Springs, Colorado as tenants-in-common with CNL Income Fund
VII, Ltd., a Florida limited partnership and an affiliate of the General
Partners. As a result of the above transactions, as of December 31, 2000, the
Partnership owned 48 Properties. The 48 properties include six Properties owned
by joint ventures in which the Partnership is a co-venturer and one Property
owned with an affiliate of the General Partners as tenants-in-common. The
Partnership generally leases the Properties on a triple-net basis with the
lessees responsible for all repairs and maintenance, property taxes, insurance
and utilities.
The Partnership will hold its Properties until the General Partners
determine that the sale or other disposition of the Properties is advantageous
in view of the Partnership's investment objectives. In deciding whether to sell
Properties, the General Partners will consider factors such as potential capital
appreciation, net cash flow and federal income tax considerations. Certain
lessees also have been granted options to purchase Properties, generally at the
Property's then fair market value after a specified portion of the lease term
has elapsed. The Partnership has no obligation to sell all or any portion of a
Property at any particular time, except as may be required under property
purchase options granted to certain lessees.
On March 11, 1999, the Partnership entered into an Agreement and Plan
of Merger with CNL American Properties Fund, Inc. ("APF"), pursuant to which the
Partnership would be merged with and into a subsidiary of APF (the "Termination
of Merger"). APF is a real estate investment trust whose primary business is the
ownership of restaurant properties leased on a long-term, "triple-net" basis to
operators of national and regional restaurant chains. Under the Agreement and
Plan of Merger, APF was to issue shares of its common stock as consideration for
the Merger. On March 1, 2000, the General Partners and CNL American Properties
Fund, Inc. ("APF") announced that they had mutually agreed to terminate the
Agreement and Plan of Merger entered into in March 1999. The agreement to
terminate the Agreement and Plan of Merger was based, in large part, on the
General Partners' concern that, in light of market conditions relating to
publicly traded real estate investment trusts, the value of the transaction had
diminished. As a result of such diminishment, the General Partner's ability to
unequivocally recommend voting for the transaction, in the exercise of their
fiduciary duties, had become questionable. The General Partners are continuing
to evaluate strategic alternatives for the Partnership, including alternatives
to provide liquidity to the Limited Partners.
Leases
Although there are variations in the specific terms of the leases, the
following is a summarized description of the general structure of the
Partnership's leases. The leases of the Properties owned by the Partnership and
the joint ventures in which the Partnership is a co-venturer provide for initial
terms ranging from 5 to 20 years (the average being 18 years), and expire
between 2004 and 2019. The leases are generally on a triple-net basis, with the
lessees responsible for all repairs and maintenance, property taxes, insurance
and utilities. The leases of the Properties provide for minimum base annual
rental payments (payable in monthly installments) ranging from approximately
$46,900 to $213,800. The majority of the leases provide for percentage rent,
based on sales in excess of a specified amount. In addition, some of the leases
provide that, commencing in specified lease years (generally 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 four
five-year renewal options subject to the same terms and conditions as the
initial lease. Lessees of 35 of the Partnership's 48 Properties also have been
granted options to purchase Properties at the Property's then fair market value
after a specified portion of the lease term has elapsed. Fair market value will
be determined through an appraisal by an independent appraisal firm. Under the
terms of certain leases, the option purchase price may equal the Partnership's
original cost to purchase the Property (including acquisition costs), plus a
specified percentage from the date of the lease or a specified percentage of the
Partnership's purchase price, if that amount is greater than the Property's fair
market value at the time the purchase option is exercised.
The leases also generally provide that, in the event the Partnership
wishes to sell the Property subject to that lease, the Partnership first must
offer the lessee the right to purchase the Property on the same terms and
conditions, and for the same price, as any offer which the Partnership has
received for the sale of the Property.
In August 1999, the tenant of the Property in Tucson, Arizona was
experiencing financial difficulties, and negotiated to defer a portion of its
1999 rental payments to a future period. In addition, due to the financial
difficulties Long John Silver's, Inc. was experiencing, as described above,
effective October 1, 1999, three of its remaining five leases were amended to
reflect rent reductions. As of December 31, 2000, one of these amended leases
had been assigned to another tenant. The General Partners do not believe that
the rent reductions will have a material adverse effect on the results of
operations of the Partnership.
Effective January 2000, the Partnership amended the lease relating to
the Property in St. Ann, Missouri to allow for the payment of reduced annual
base rent. In addition, in August 2000, the Partnership invested in a Property
in Colorado Springs, Colorado as tenants-in-common with CNL Income Fund VII,
Ltd., a Florida limited partnership and affiliate of the General Partners. The
lease terms for this Property are substantially the same as the Partnership's
other leases.
Major Tenants
During 2000, two lessees of the Partnership, Jack in the Box Inc. and
Flagstar Enterprises, Inc., each contributed more than ten percent of the
Partnership's total rental, earned and mortgage interest income (including the
Partnership's share of rental and earned income from six Properties owned by
joint ventures and one Property owned with an affiliate of the General Partners
as tenants-in-common). As of December 31, 2000, Jack in the Box Inc. was the
lessee under leases relating to ten restaurants and Flagstar Enterprises, Inc.
was the lessee under leases relating to 11 restaurants. It is anticipated that
based on the minimum rental payments required by the leases, these two lessees
each will continue to contribute more than ten percent of the Partnership's
total rental, earned and mortgage interest income in 2001. In addition, four
Restaurant Chains, Long John Silver's, Hardee's, Jack in the Box and Denny's,
each accounted for more than ten percent of the Partnership's total rental,
earned, and mortgage interest income during 2000 (including the Partnership's
share of rental and earned income from six Properties owned by joint ventures
and one Property owned with an affiliate of the General Partners as
tenants-in-common). In 2001, it is anticipated that these four Restaurant Chains
each will continue to account for more than ten percent of the Partnership's
total rental, earned and mortgage interest income to which the Partnership is
entitled under the terms of the leases. Any failure of these lessees or
Restaurant Chains could materially affect the Partnership's income if the
Partnership is not able to re-lease these Properties in a timely manner. As of
December 31, 2000, Jack in the Box Inc. leased Properties with an aggregate
carrying value in excess of 20 percent of the total assets of the Partnership.
Joint Venture and Tenancy in Common Arrangements
The Partnership has entered into the following separate joint venture
arrangements: Williston Real Estate Joint Venture with CNL Income Fund X, Ltd.;
Des Moines Real Estate Joint Venture with CNL Income Fund VII, Ltd. and CNL
Income Fund XI, Ltd.; Kingsville Real Estate Joint Venture with CNL Income Fund
IV, Ltd.; Middleburg Joint Venture with CNL Income Fund VIII, Ltd.; Columbus
Joint Venture with CNL Income Fund XVI, Ltd. and CNL Income Fund XVIII, Ltd.;
and Bossier City Joint Venture with CNL Income Fund VIII, Ltd. and CNL Income
Fund XIV, Ltd. Each of the CNL Income Funds is a limited partnership organized
pursuant to the laws of the state of Florida and an affiliate of the General
Partners. Each of the joint ventures was formed to purchase or construct and
hold one restaurant Property.
The joint venture arrangements provide for the Partnership and its
joint venture partners to share in all costs and benefits associated with the
joint ventures in accordance with their respective percentage interests in the
joint ventures. The Partnership has a 59.05% interest in Williston Real Estate
Joint Venture, an 18.61% interest in Des Moines Real Estate Joint Venture, a
31.13% interest in Kingsville Real Estate Joint Venture, an 87.54% interest in
Middleburg Joint Venture, a 27.72% interest in Columbus Joint Venture, and a 55
percent interest in Bossier City Joint Venture. The Partnership and its joint
venture partners are also jointly and severally liable for all debts,
obligations and other liabilities of the joint ventures.
Each joint venture has an initial term of 20 years and, after the
expiration of the initial term, continues in existence from year to year unless
terminated at the option of any of the joint venturers or by an event of
dissolution. Events of dissolution include the bankruptcy, insolvency or
termination of any joint venturer, sale of the Property owned by the joint
venture and mutual agreement of the Partnership and its joint venture partners
to dissolve the joint venture.
The Partnership shares management control equally with affiliates of
the General Partners for each joint venture. The joint venture agreements
restrict each venturer's ability to sell, transfer or assign its joint venture
interest without first offering it for sale to its joint venture partners,
either upon such terms and conditions as to which the venturers may agree or, in
the event the venturers cannot agree, on the same terms and conditions as any
offer from a third party to purchase such joint venture interest.
Net cash flow from operations of Williston Real Estate Joint Venture,
Des Moines Real Estate Joint Venture, Kingsville Real Estate Joint Venture,
Middleburg Joint Venture, Columbus Joint Venture, and Bossier City Joint Venture
is distributed 59.05%, 18.61%, 31.13%, 87.54%, 27.72%, and 55 percent,
respectively, to the Partnership and the balance is distributed to each of the
joint venture partners in accordance with its respective percentage interest in
the joint venture. Any liquidation proceeds, after paying joint venture debts
and liabilities and funding reserves for contingent liabilities, will be
distributed first to the joint venture partners with positive capital account
balances in proportion to such balances until such balances equal zero, and
thereafter in proportion to each joint venture partner's percentage interest in
the joint venture.
In addition, in August 2000, the Partnership entered into an agreement
to purchase and hold a Bennigan's Property in Colorado Springs, Colorado, as
tenants-in-common with CNL Income Fund VII, Ltd., an affiliate of the General
Partners and Florida limited partnership. The agreement provides for the
Partnership and the affiliate to share in the profits and losses of the Property
and net cash flow from the Property, in proportion to each co-tenant's
percentage interest. The Partnership owns a 57 percent interest in this
Property.
Each of the affiliates is a limited partnership organized pursuant to
the laws of the state of Florida. The tenancy in common agreement restricts each
co-tenant's ability to sell, transfer, or assign its interest in the tenancy in
common's Property without first offering for sale to the remaining co-tenant.
The use of joint venture arrangements 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.
Certain Management Services
CNL Fund Advisors, Inc., an affiliate of the General Partners, provides
certain services relating to management of the Partnership and its Properties
pursuant to a management agreement with the Partnership. Under this agreement,
CNL Fund Advisors, Inc. is responsible for collecting rental payments,
inspecting the Properties and the tenants' books and records, assisting the
Partnership in responding to tenant inquiries and notices and providing
information to the Partnership about the status of the leases and the
Properties. CNL Fund Advisors, Inc. also assists the General Partners in
negotiating the leases. For these services, the Partnership has agreed to pay
CNL Fund Advisors, Inc. an annual fee of one percent of the sum of gross rental
revenues from Properties wholly owned by the Partnership plus the Partnership's
allocable share of gross revenues of joint ventures in which the Partnership is
a co-venturer, but not in excess of competitive fees for comparable services.
The management agreement continues until the Partnership no longer owns
an interest in any Properties unless terminated at an earlier date upon 60 days'
prior notice by either party.
Competition
The fast-food and family-style restaurant business is characterized by
intense competition. The restaurants on the Partnership's Properties compete
with independently owned restaurants, restaurants which are part of local or
regional chains, and restaurants in other well-known national chains, including
those offering different types of food and service.
Employees
The Partnership has no employees. The officers of CNL Realty
Corporation and the officers and employees of APF, the parent company of CNL
Fund Advisors, Inc., perform certain services for the Partnership. In addition,
the General Partners have available to them the resources and expertise of the
officers and employees of CNL Financial Group, Inc., a diversified real estate
company, and its affiliates, who may also perform certain services for the
Partnership.
Item 2. Properties
As of December 31, 2000, the Partnership owned 48 Properties. Of the 48
Properties, 41 are owned by the Partnership in fee simple, six are owned through
joint venture arrangements and one is owned with an affiliate through a tenancy
in common arrangement. See Item 1. Business - Joint Venture and Tenancy in
Common Arrangements. The Partnership is not permitted to encumber its Properties
under the terms of its partnership agreement. Reference is made to the Schedule
of Real Estate and Accumulated Depreciation for a listing of the Properties and
their respective costs, including acquisition fees and certain acquisition
expenses.
Description of Properties
Land. The Partnership's Property sites range from approximately 9,200
to 142,500 square feet depending upon building size and local demographic
factors. Sites purchased by the Partnership are in locations zoned for
commercial use which have been reviewed for traffic patterns and volume.
The following table lists the Properties owned by the Partnership as of
December 31, 2000 by state. More detailed information regarding the location of
the Properties is contained in the Schedule of Real Estate and Accumulated
Depreciation for the year ended December 31, 2000.
State Number of Properties
Alabama 1
Arizona 5
California 2
Colorado 1
Florida 3
Georgia 6
Louisiana 2
Mississippi 2
Missouri 2
New Mexico 1
North Carolina 4
Ohio 3
South Carolina 2
Tennessee 4
Texas 9
Washington 1
------
TOTAL PROPERTIES 48
======
Buildings. Each of the Properties owned by the Partnership includes a
building that is one of a Restaurant Chain's approved designs. The buildings
generally are rectangular and are constructed from various combinations of
stucco, steel, wood, brick and tile. Building sizes range from approximately
2,100 to 11,400 square feet. All buildings on Properties are freestanding and
surrounded by paved parking areas. Buildings are suitable for conversion to
various uses, although modifications may be required prior to use for other than
restaurant operations. As of December 31, 2000, the Partnership had no plans for
renovation of the Properties. Depreciation expense is computed for buildings and
improvements using the straight-line method using a depreciable life of 40 years
for federal income tax purposes.
As of December 31, 2000, the aggregate cost of the Properties owned by
the Partnership and joint ventures (including the Property owned through a
tenancy in common arrangement) for federal income tax purposes was $34,243,130
and $8,846,564, respectively.
The following table lists the Properties owned by the Partnership as of
December 31, 2000 by Restaurant Chain.
Restaurant Chain Number of Properties
Arby's 1
Bennigan's 1
Burger King 2
Denny's 9
Golden Corral 2
Hardee's 11
IHOP 1
Jack in the Box 10
KFC 1
Krystal 1
Long John Silver's 6
Sports Rock Cafe 1
Other 2
-----
TOTAL PROPERTIES: 48
=====
The General Partners consider the Properties to be well-maintained and
sufficient for the Partnership's operations.
The General Partners believe that the Properties are adequately covered
by insurance. In addition, the General Partners have obtained contingent
liability and property coverage for the Partnership. This insurance is intended
to reduce the Partnership's exposure in the unlikely event a tenant's insurance
policy lapses or is insufficient to cover a claim relating to the Property.
Leases. The Partnership leases the Properties to operators of selected
national and regional fast-food restaurant chains. The leases are generally on a
long-term "triple net" basis, meaning that the tenant is responsible for
repairs, maintenance, property taxes, utilities and insurance. Generally, a
lessee is required, under the terms of its lease agreement, to make such capital
expenditures as may be reasonably necessary to refurbish buildings, premises,
signs and equipment so as to comply with the lessee's obligations, if
applicable, under the franchise agreement to reflect the current commercial
image of its Restaurant Chain. These capital expenditures are required to be
paid by the lessee during the term of the lease. The terms of the leases of the
Properties owned by the Partnership are described in Item 1. Business - Leases.
As of December 31, 2000, 1999, 1998, 1997 and 1996 the Properties were
100%, 100%, 96%, 100%, and 98%, occupied, respectively. The following is a
schedule of the average rent per property for the years ended December 31:
2000 1999 1998 1997 1996
------------ -------------- ------------- -------------- -----------
Rental Income (1) $4,102,805 $4,299,590 $4,247,369 $4,443,606 $4,442,092
Properties 48 48 48 48 48
Average Per Property $ 85,475 $ 89,575 $ 88,487 $ 92,575 $ 92,544
(1) Rental income includes the Partnership's share of rental income from
the Properties owned through joint venture arrangements and the
Property owned through a tenancy in common arrangement. Rental revenues
have been adjusted, as applicable, for any amounts for which the
Partnership has established an allowance for doubtful accounts.
The following is a schedule of lease expirations for leases in place as
of December 31, 2000 for the next ten years and thereafter.
Percentage of
Number Annual Rental Gross Annual
Expiration Year of Leases Revenues Rental Income
- -------------------- ----------------- ----------------- ------------------
2001 -- $ -- --
2002 -- -- --
2003 -- -- --
2004 1 48,000 1.12%
2005 -- -- --
2006 -- -- --
2007 2 256,416 5.98%
2008 -- -- --
2009 1 52,550 1.22%
2010 2 197,264 4.60%
Thereafter 42 3,730,493 87.08%
--------- ---------------- -----------------
Total 48 $ 4,284,723 100.00%
========= ================ =================
Leases with Major Tenants. The terms of each of the leases with the
Partnership's major tenants as of December 31, 2000 (see Item 1. Business -
Major Tenants), are substantially the same as those described in Item 1.
Business -Leases.
Flagstar Enterprises, Inc. leases 11 Hardee's restaurants. The initial
term of each lease is 20 years (expiring between 2012 and 2013) and the average
minimum base annual rent is approximately $68,600 (ranging from approximately
$51,400 to $83,300).
Jack in the Box Inc. leases ten Jack in the Box restaurants. The
initial term of each lease is 18 years (expiring between 2010 and 2011) and the
average minimum base annual rent is approximately $98,200 (ranging from
approximately $75,900 to $123,400).
Item 3. Legal Proceedings
Neither the Partnership, nor its General Partners or any affiliates of
the General Partners, nor any of their respective Properties, is party to, or
subject to, any material pending legal proceedings.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
(a) As of March 15, 2001, there were 3,478 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 2000, 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 had the right to prohibit transfers of Units. From
inception through December 31, 2000, the price for any Unit transferred pursuant
to the Plan was $9.50 per Unit. The price paid for any Unit transferred other
than pursuant to the Plan was subject to negotiation by the purchaser and the
selling Limited Partner. The Partnership will not redeem or repurchase Units.
The following table reflects, for each calendar quarter, the high, low
and average sales prices for transfers of Units during 2000 and 1999 other than
pursuant to the Plan, net of commissions.
2000 (1) 1999 (1)
---------------------------------- ------------------------------------
High Low Average High Low Average
--------- -------- ---------- --------- --------- ----------
First Quarter (2) (2) (2) $9.05 $ 7.60 $ 8.33
Second Quarter $9.00 $ 8.00 $ 8.50 9.50 9.33 9.40
Third Quarter 8.45 6.73 7.88 9.50 8.22 9.00
Fourth Quarter 7.01 6.98 6.99 10.00 7.83 8.91
(1) A total of 14,010 and 33,260 Units were transferred other than pursuant
to the Plan for the years ended December 31, 2000 and 1999,
respectively.
(2) No transfer of Units took place during the quarter other than pursuant
to the Plan.
The capital contribution per Unit was $10. All cash available for
distribution will be distributed to the partners pursuant to the provisions of
the Partnership Agreement.
For each of the years ended December 31, 2000 and 1999, the Partnership
declared cash distributions of $3,825,008, to the Limited Partners.
Distributions of $956,252 were declared to the Limited Partners at the close of
each of the Partnership's calendar quarters during 2000 and 1999. These amounts
include monthly distributions made in arrears for the Limited Partners electing
to receive such distributions on this basis. No amounts distributed to partners
for the years ended December 31, 2000 and 1999, are required to be or have been
treated by the Partnership as a return of capital for purposes of calculating
the Limited Partners' return on their adjusted capital contributions. No
distributions have been made to the General Partners to date.
The Partnership intends to continue to make distributions of cash
available for distribution to the Limited Partners on a quarterly basis,
although some Limited Partners, in accordance with their election, receive
monthly distributions, for an annual fee.
(b) Not applicable.
Item 6. Selected Financial Data
2000 1999 1998 1997 1996
--------------- -------------- -------------- --------------- --------------
Year ended December 31:
Revenues (1) $4,297,712 $4,423,599 $4,051,192 $4,522,216 $4,553,058
Net income (2) 3,820,216 3,645,043 2,933,537 3,952,214 3,943,043
Cash distributions
declared (3) 3,825,008 3,825,008 3,960,008 3,825,008 3,825,008
Net income per Unit (2) 0.85 0.80 0.65 0.87 0.87
Cash distributions
declared per Unit (3) 0.85 0.85 0.88 0.85 0.85
At December 31:
Total assets $40,319,220 $40,440,927 $40,634,898 $41,430,990 $41,343,138
Partners' capital 39,206,084 39,210,876 39,390,841 40,417,312 40,290,106
(1) Revenues include equity in earnings of joint ventures and adjustments
to accrued rental income due to the tenants of certain Properties
experiencing financial difficulties or filing for bankruptcy.
(2) Net income for the years ended December 31, 2000 and 1999, includes
$254,405 and $74,714 from gains on sales of assets. Net income for the
years ended December 31, 1998 and 1996, includes $104,374 and $15,355,
respectively, from a loss on sale of assets. Net income for the year
ended December 31, 1998, includes $206,535 for a provision for loss on
assets.
(3) Distributions for the year ended December 31, 1998, include a special
distribution to the Limited Partners of $135,000 which represented
cumulative excess operating reserves.
The above selected financial data should be read in conjunction with
the financial statements and related notes contained in Item 8 hereof.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The Partnership was organized on August 20, 1991, to acquire for cash,
either directly or through joint venture arrangements, both newly constructed
and existing restaurant Properties, as well as land upon which restaurant
Properties were to be constructed, to be leased primarily to operators of
selected national and regional fast-food and family-style Restaurant Chains. The
leases are generally triple-net leases, with the lessees responsible for all
repairs and maintenance, property taxes, insurance and utilities. As of December
31, 2000, the Partnership owned 48 Properties, either directly or through joint
venture or tenancy in common arrangements.
Capital Resources
The Partnership's primary source of capital for the years ended
December 31, 2000, 1999, and 1998, was cash from operations (which includes cash
received from tenants, distributions from joint ventures and interest received,
less cash paid for expenses). Cash from operations was $3,867,350, $3,920,030,
and $4,116,780, for the years ended December 31, 2000, 1999, and 1998,
respectively. The decrease in cash from operations during 2000 as compared to
1999 was primarily a result of changes in income and expenses as described in
"Results of Operations" below and the decrease during 1999, as compared to 1998,
was primarily a result of changes in the Partnership's working capital.
Other sources and uses of capital included the following during the
years ended December 31, 2000, 1999 and 1998. In August 1998, the Partnership
entered into a joint venture arrangement, Columbus Joint Venture, with
affiliates of the General Partners, to construct, own and lease one restaurant
Property. As of December 31, 1999, the Partnership had contributed approximately
$251,100, of which approximately $135,800 was contributed during 1999, to the
joint venture. The Partnership owns a 27.72% interest in the profits and losses
of this joint venture.
In December 1998, the Partnership sold its Property in Monroe, North
Carolina, to an unrelated third party and received net sales proceeds of
$483,549. As a result of this transaction, the Partnership recognized a loss of
$104,374 for financial reporting purposes. In November 1999, the Partnership
reinvested these net sales proceeds in Bossier City Joint Venture, as described
below.
In May 1999, the Partnership sold its Property in Morganton, North
Carolina, to an unrelated third party for $550,000, received $467,300 in cash
and accepted the remaining sales proceeds in the form of a promissory note in
the principal sum of $55,000. The Partnership had recorded an allowance for loss
on assets relating to this Property of $206,535 at December 31, 1998 due to the
tenant filing for bankruptcy. The allowance represented the difference between
the carrying value of the Property at December 31, 1998 and the estimated net
realizable value for this Property. During 1999, the Partnership recorded a gain
relating to the sale of this Property of $74,714 for financial reporting
purposes, resulting in an overall net loss relating to the sale of this Property
of approximately $131,800. The promissory note is collateralized by a mortgage
on the Property, bears interest at a rate of 10.25% per annum and is being
collected in 60 monthly installments of principal and interest. The net proceeds
of $467,300 received in cash were used to invest in Bossier City Joint Venture,
as described below. The Partnership distributed amounts sufficient to enable the
Limited Partners to pay federal and state income taxes, if any (at a level
reasonably assumed by the General Partners), resulting from the sale.
In July 1999, the Partnership entered into a new lease for the Property
in Statesville, North Carolina. In connection therewith, the Partnership
incurred $30,000 in renovation costs which were completed in August 1999.
In November 1999, the Partnership reinvested the majority of the
proceeds from the 1998 sale of the Property in Monroe, North Carolina, plus
proceeds from the 1999 sale of the Property in Morganton, North Carolina in a
joint venture, Bossier City Joint Venture, with CNL Income Fund VIII, Ltd. and
CNL Income Fund XIV, Ltd., both Florida limited partnerships and affiliates of
the General Partners, to purchase and hold one restaurant Property.
In March 2000, the Partnership sold its Property in Cleveland,
Tennessee to an unrelated third party for $806,460 and received net sales
proceeds of approximately $791,500, resulting in a gain of approximately
$147,600 for financial reporting purposes. This Property was originally acquired
by the Partnership in 1992 and had a cost of approximately $622,800 excluding
acquisition fees and miscellaneous acquisition expenses; therefore, the
Partnership sold the Property for approximately $168,700 in excess of its
original purchase price. In April 2000, the Partnership used these net sales
proceeds along with the net sales proceeds received from the 1999 sale of its
Property in Morganton, North Carolina to reinvest in a Property in Pooler,
Georgia. The transaction relating to the sale of the Property in Cleveland,
Tennessee and the reinvestment of the net sales proceeds qualified as a
like-kind exchange transaction for federal income tax purposes. However, the
Partnership distributed amounts sufficient to enable the Limited Partners to pay
federal and state income taxes, if any (at a level reasonably assumed by the
General Partners), resulting from the sale.
In July 2000, the Partnership sold its Property in Bradenton, Florida
to an unrelated third party and received net sales proceeds of approximately
$1,227,900, resulting in a gain of approximately $106,800 for financial
reporting purposes. The Property was originally acquired by the Partnership in
1992 and had a cost of approximately $1,000,000, excluding acquisition fees and
miscellaneous acquisition expenses; therefore, the Partnership sold the Property
for approximately $227,900 in excess of its original purchase price. In August
2000, the Partnership reinvested the net sales proceeds from the sale in an
additional Property in Colorado Springs, Colorado, as tenants-in-common with CNL
Income Fund VII, Ltd., a Florida limited partnership and an affiliate of the
General Partners. The Partnership owns a 57 percent interest in the profits and
losses of this Property. The transaction relating to the sale of the Property in
Bradenton, Florida and the reinvestment of the net sales proceeds qualified as a
like-kind exchange transaction for federal income tax purposes. The Partnership
distributed amounts sufficient to enable the Limited Partners to pay federal and
state income taxes, if any (at a level reasonably assumed by the General
Partners), resulting from the sale.
None of the Properties owned by the Partnership, or the joint ventures
or tenancy in common arrangement in which the Partnership owns an interest, is
or may be encumbered. Subject to certain restrictions on borrowing, however, the
Partnership may borrow funds but will not encumber any of the Properties in
connection with any such borrowing. The Partnership will not borrow for the
purpose of returning capital to the Limited Partners. The Partnership will not
borrow under arrangements that would make the Limited Partners liable to
creditors of the Partnership. The General Partners further have represented that
they will use their reasonable efforts to structure any borrowing so that it
will not constitute "acquisition indebtedness" for federal income tax purposes
and also will limit the Partnership's outstanding indebtedness to three percent
of the aggregate adjusted tax basis of its Properties. Affiliates of the General
Partners from time to time incur certain operating expenses on behalf of the
Partnership for which the Partnership reimburses the affiliates without
interest.
Currently, rental income from the Partnership's Properties and net
sales proceeds from the sale of Properties are invested in money market accounts
or other short-term highly liquid investments such as demand deposit accounts at
commercial banks, money market accounts and certificates of deposit with less
than a 30-day maturity date, pending the Partnership's use of such funds to pay
Partnership expenses, to make distributions to partners or to reinvest in
additional Properties. At December 31, 2000, the Partnership had $1,672,295
invested in such short-term investments (including certificates of deposit
totaling $511,277) as compared to $1,870,366 at December 31, 1999. The decrease
in cash and cash equivalents at December 31, 2000 was primarily due to the
reinvestment in a Property in Pooler, Georgia during 2000 of the net sales
proceeds from the 1999 sale of the Property in Morganton, North Carolina. As of
December 31, 2000, the average interest rate earned on the rental income
deposited in demand deposit accounts at commercial banks was approximately 3.9%
annually. The funds remaining at December 31, 2000, after payment of
distributions and other liabilities, will be used to meet the Partnership's
working capital, and other needs.
Short-Term Liquidity
The Partnership's short-term liquidity requirements consist primarily
of the operating expenses of the Partnership.
The Partnership's investment strategy of acquiring Properties for cash
and leasing them under triple-net leases to operators who generally meet
specified financial standards minimizes the Partnership's operating expenses.
The General Partners believe that the leases will continue to generate cash flow
in excess of operating expenses.
Due to low operating expenses and ongoing cash flow, the General
Partners believe that the Partnership has sufficient working capital reserves at
this time. In addition, because all leases of the Partnership's Properties are
on a triple-net basis, it is not anticipated that a permanent reserve for
maintenance and repairs will be established at this time. To the extent,
however, that the Partnership has insufficient funds for such purposes, the
General Partners will contribute to the Partnership an aggregate amount of up to
one percent of the offering proceeds for maintenance and repairs.
The General Partners have the right, but not the obligation, to make
additional capital contributions if they deem it appropriate in connection with
the operations of the Partnership.
The Partnership generally distributes cash from operations remaining
after the payment of the operating expenses of the Partnership, to the extent
that the General Partners determine that such funds are available for
distribution. Based on current cash from operations, and for the year ended
December 31, 1998, cumulative excess operating reserves, the Partnership
declared distributions to the Limited Partners of $3,825,008, for the years
ended December 31, 2000 and 1999, and $3,960,008, for the year ended December
31, 1998. Distributions for the year ended December 31, 1998 included a special
distribution to the Limited Partners of $135,000 which represented cumulative
excess operating reserves. This represents a distribution of $0.85 per Unit for
the years ended December 31, 2000 and 1999, and $0.88 per Unit for the year
ended December 31, 1998. No distributions were made to the General Partners
during the years ended December 31, 2000, 1999 and 1998, respectively. No
amounts distributed to the Limited Partners for the years ended December 31,
2000, 1999, and 1998, are required to be or have been treated by the Partnership
as a return of capital for purposes of calculating the Limited Partners' return
on their adjusted capital contributions. The Partnership intends to continue to
make distributions of cash available for distribution to the Limited Partners on
a quarterly basis.
During 2000, the General Partners waived their right to receive future
distributions from the Partnership, including both distributions of operating
cash flow and distributions of liquidation proceeds, to the extent that the
cumulative amount of such distributions would exceed the balance in the General
Partners' capital account as of December 31, 1999. Accordingly, the General
Partners were not allocated any net income and did not receive any distributions
during the year ended December 31, 2000.
As of December 31, 2000 and 1999, the Partnership owed $22,808 and
$74,909, respectively, to affiliates for operating expenses and accounting and
administrative services. As of March 15, 2001, the Partnership had reimbursed
the affiliates all such amounts. Other liabilities including distributions
payable decreased to $1,090,328 at December 31, 2000, from $1,155,142 at
December 31, 1999, primarily as the result of the Partnership paying transaction
costs accrued at December 31, 1999 relating to the proposed and terminated
Merger with APF, as described in "Termination of Merger." The decrease was
partially offset by an increase in rents paid in advance. The General Partners
believe that the Partnership has sufficient cash on hand to meet its current
working capital needs.
Long-Term Liquidity
The Partnership has no long-term debt or other long-term liquidity
requirements.
Results of Operations
During 1998, the Partnership owned and leased 44 wholly owned
Properties (including one Property which was sold in December 1998). During 1999
and 2000, the Partnership owned and leased 43 wholly owned Properties (including
one Property which was sold in 1999 and two Properties which were sold in 2000).
In addition, during 1998, the Partnership was a co-venturer in five separate
joint ventures that each owned and leased one Property, and during 1999 and
2000, the Partnership was a co-venturer in six separate joint ventures that each
owned and leased one Property. In addition, during 2000, the Partnership owned
and leased one Property with an affiliate as tenants-in-common. As of December
31, 2000, the Partnership owned, either directly or through joint venture
arrangements, or tenancy in common arrangements, 48 Properties which are, in
general, subject to long-term, triple-net leases. The leases of the Properties
provide for minimum base annual rental payments (payable in monthly
installments) ranging from approximately $46,900 to $213,800. The majority of
the leases provide for percentage rent based on sales in excess of a specified
amount. In addition, some of the leases provide that, commencing in specified
lease years (generally the sixth lease year), the annual base rent required
under the terms of the lease will increase. For a further description of the
Partnership's leases and Properties, see Item 1. Business - Leases and Item 2.
Properties, respectively.
During the years ended December 31, 2000, 1999, and 1998, the
Partnership earned $3,802,807, $3,964,818, and $3,862,390, respectively, in
rental income from operating leases (net of adjustments to accrued rental
income) and earned income from direct financing leases from its wholly owned
Properties. The decrease in rental and earned income during 2000, as compared to
1999, was partially due to the Partnership reserving approximately $152,900 of
accrued rental income amounts relating to two Denny's Properties. The accrued
rental income was the accumulated amount of non-cash accounting adjustments
previously recorded in order to recognize future scheduled rent increases as
income evenly over the term of the lease.
In addition, the decrease during 2000 was partially due to the sale of
two Properties during 2000, as described in "Capital Resources." This decrease
was partially offset by an increase in rental and earned income as a result of
the Partnership reinvesting net sales proceeds in a Property in Pooler, Georgia,
as described in "Capital Resources."
The decrease in rental and earned income during 2000, was also
partially a result of the Partnership amending the lease relating to the
Property in St. Ann, Missouri to provide for rent reductions from January 2000
through the end of the lease term. The General Partners do not believe that the
rent reductions will have a material adverse effect on the result of operations
of the Partnership.
Rental and earned income was lower during 1998, as compared to 1999,
primarily due to the fact that in June 1998, Long John Silver's, Inc. filed for
bankruptcy and rejected the leases relating to three of the eight Properties it
leased. As a result, the tenant ceased making rental payments on the three
rejected leases, and in addition, during 1998, the Partnership wrote off
$224,867 in accrued rental income relating to these Properties. The accrued
rental income was the accumulated amount of non-cash accounting adjustments
previously recorded in order to recognize future scheduled rent increases as
income evenly over the term of the lease. No amounts were written off during
1999. The effect of the write off of accrued rental income was partially offset
by the fact that the Partnership recorded rental and earned income during 1998
prior to the tenant vacating the Properties in June 1998. In December 1998 and
May 1999, the Partnership sold two of the vacant Properties and reinvested the
majority of the net sales proceeds in Bossier City Joint Venture, as described
in "Capital Resources." In July 1999, the Partnership entered into a lease with
a new tenant for the remaining vacant Property. In connection with the lease,
the Partnership agreed to pay up to $30,000 of the construction costs necessary
to convert the Property into a new concept. Conversion of this Property was
completed in August 1999, at which time rental payments commenced, causing a
slight increase in rental and earned income during 1999. In August 1999, Long
John Silver's, Inc. assumed and affirmed its five remaining leases, and the
Partnership has continued receiving rental payments relating to these five
leases. In addition, the Partnership granted Long John Silver's, Inc. rent
concessions on three of the affirmed leases, causing a decrease in rental and
earned income of approximately $26,000 during 2000. The decrease in rental and
earned income during 2000 was partially offset by the fact that during the year
ended December 31, 2000, the Partnership collected and recognized as income
approximately $122,800 in past due rental amounts relating to the Properties
whose leases were rejected. The General Partners do not anticipate receiving any
additional amounts but will apply such amounts, if received to income.
During the years ended December 31, 2000, 1999, and 1998, the
Partnership also earned $5,156, $16,994, and $23,433, respectively, in
contingent rental income. The decrease in contingent rental income during 2000
and 1999, each as compared to the previous year, was primarily attributable to
decreased gross sales of certain restaurant Properties requiring the payments of
contingent rental income.
In addition, for the years ended December 31, 2000, 1999, and 1998, the
Partnership earned $373,694, $344,964, and $95,142, respectively, attributable
to net income earned by joint ventures in which the Partnership is a
co-venturer. Net income earned by joint ventures increased during 2000, as
compared to 1999, partially attributable to the fact that in 1999, the
Partnership invested in Bossier City Joint Venture and in 2000, the Partnership
invested in a Property in Colorado Springs, Colorado with an affiliate of the
General Partners, as tenants-in-common, as described above in "Capital
Resources." The increase during 2000 was partially offset by the fact that
during 1999, Middleburg Joint Venture, in which the Partnership owns as 87.54%
interest, collected and recognized as income past due rental amounts for which
the joint venture had previously established an allowance for doubtful accounts.
The increase in net income earned by joint ventures during 1999, as compared to
1998, was also partially due to the fact that Columbus Joint Venture was
operational for a full year during 1999, as compared to a partial year during
1998. In addition, the increase during 1999 was partially attributable to the
Partnership investing in Bossier City Joint Venture in November 1999, as
described in "Capital Resources." Net income earned by joint ventures was lower
during 1998, as compared to 1999, primarily due to the fact that Kingsville Real
Estate Joint Venture, in which the Partnership owns a 31.13% interest,
established an allowance for doubtful accounts of approximately $87,800 during
1998, in accordance with its collection policy. No such allowance was
established during 1999. In addition, during 1998, Kingsville Real Estate Joint
Venture established a provision for loss on assets for its Property in
Kingsville, Texas for approximately $316,000. The allowance represented the
difference between the Property's carrying value at December 31, 1998 and the
estimated net realizable value of the Property. In January 1999, Kingsville Real
Estate Joint Venture entered into a new lease for this Property with a new
tenant and the General Partners ceased collection efforts on the past due
amounts.
During the year ended December 31, 2000, two of the Partnership's
lessees Jack in the Box Inc. and Flagstar Enterprises, Inc., each contributed
more than ten percent of the Partnership's total rental, earned and mortgage
interest income (including the Partnership's share of rental and earned income
from six Properties owned by joint ventures and one Property owned with an
affiliate of the General Partners as tenants-in-common). As of December 31,
2000, Jack in the Box Inc. was the lessee under leases relating to ten
restaurants and Flagstar Enterprises, Inc. was the lessee under leases relating
to 11 restaurants. It is anticipated that based on the minimum rental payments
required by the leases, that these tenants will each continue to contribute more
than ten percent of the Partnership's total rental, earned and mortgage interest
income during 2001. In addition, during the year ended December 31, 2000, four
Restaurant Chains, Long John Silver's, Hardee's, Jack in the Box, and Denny's,
each accounted for more than ten percent of the Partnership's total rental,
earned and mortgage interest income (including the Partnership's share of rental
and earned income from six Properties owned by joint ventures and one Property
owned with an affiliate of the General Partners as tenants-in-common). During
1998, Long John Silver's Inc. filed for bankruptcy, as described above. In 2001,
it is anticipated that these four Restaurant Chains each will continue to
account for more than ten percent of the Partnership's total rental, earned and
mortgage interest income to which the Partnership is entitled under the terms of
the leases. Any failure of these lessees or Restaurant Chains could materially
affect the Partnership's income if the Partnership is not able to re-lease the
Properties in a timely manner.
During the years ended December 31, 2000, 1999, and 1998, the
Partnership also earned $116,055, $96,823, and $70,227, respectively, in
interest and other income. The increase in interest and other income during 2000
as compared to 1999, was primarily attributable to interest income earned on the
net sales proceeds from the sale of two Properties during 2000. Interest and
other income was lower during 1998, as compared to 1999, primarily as a result
of the Partnership establishing an allowance for doubtful accounts during 1998
of approximately $17,300 for past due accrued interest income amounts relating
to the loan with the tenant of the Property in Kingsville Real Estate Joint
Venture who was experiencing financial difficulties. In January 1999, Kingsville
Real Estate Joint Venture entered into a new lease with a new tenant, and in
conjunction therewith, the General Partners agreed to cease collection efforts
on the past due amounts.
Operating expenses, including depreciation and amortization expense,
were $731,901, $853,270, and $806,746, for the years ended December 31, 2000,
1999, and 1998, respectively. The decrease in operating expenses during 2000, as
compared to 1999, and the increase during 1999, as compared to 1998, was
partially due to the fact that the Partnership incurred $38,677, $218,853 and
$24,282 during 2000, 1999 and 1998, respectively, in transaction costs related
to the General Partners retaining financial and legal advisors to assist them in
evaluating and negotiating the proposed and terminated merger with APF, as
described in "Termination of Merger."
In addition, in 1999 and 1998, the Partnership incurred legal,
insurance and real estate tax expenses on the Properties for which the leases
were rejected and which were vacant during the 1999 and 1998, as a result of
Long John Silver's, Inc. filing for bankruptcy, as described above. The
Partnership sold two of the vacant Properties in December 1998 and May 1999, and
the Partnership entered into a long-term triple net lease with a new tenant for
the remaining vacant Property in July 1999. The new tenant is responsible for
real estate taxes, insurance and maintenance; therefore, the General Partners do
not anticipate that the Partnership will continue to incur these expenses. Due
to the fact that Long John Silver's, Inc. assumed and affirmed its remaining
leases, as described above, Long John Silver's, Inc. will be responsible for
such expenses relating to these Properties; therefore, the General Partners do
not anticipate that the Partnership will incur these expenses for these
Properties in the future. During 2000, the Partnership received settlement
amounts relating to the four Long John Silver's Properties whose leases were
rejected. As a result, during 2000, the Partnership reversed certain expenses
such as legal fees, real estate taxes, insurance, and maintenance, previously
incurred by the Partnership as a result of the tenant filing for bankruptcy. The
decrease in operating expenses during 2000 was partially offset by an increase
in depreciation expense as a result of several Properties being reclassified
from net investment in direct financing leases to land and building on operating
leases due to amendments to their leases.
Operating expenses were higher during 1998, as compared to 1999, due to
the fact that during 1998, the Partnership recorded bad debt expense of $188,990
for past due principal and interest amounts relating to a loan with the tenant
of the Property in Kingsville Real Estate Joint Venture due to financial
difficulties the tenant experienced. In January 1999, Kingsville Real Estate
Joint Venture entered into a new lease with a new tenant, and the General
Partners ceased collection efforts on the past due rental amounts.
As a result of the sales of the Properties in Cleveland, Tennessee and
Bradenton, Florida, during 2000, and the sales during 1999 and 1998 of the
Properties in Morganton and Monroe, North Carolina, as described above in
"Capital Resources," the Partnership recognized a gain of $254,405, and $74,714
and a loss of $104,374 for financial reporting purposes for the years ended
December 31, 2000, 1999 and 1998, respectively.
During the year ended December 31, 1998, the Partnership recorded a
provision for loss on assets in the amount of $206,535 for financial reporting
purposes relating to the Long John Silver's Property in Morganton, North
Carolina. The tenant of this Property filed for bankruptcy and ceased payment of
rents under the terms of its lease agreement, as described above. The allowance
represented the difference between the carrying value of the Property at
December 31, 1998 and the estimated net realizable value for this Property.
The Partnership's leases as of December 31, 2000, are generally
triple-net leases, and contain provisions that the General Partners believe
mitigate the adverse effect of inflation. Such provisions include clauses
requiring the payment of percentage rent based on certain restaurant sales above
a specified level and/or automatic increases in base rent at specified times
during the term of the lease. Management expects that increases in restaurant
sales volumes due to inflation and real sales growth should result in an
increase in rental income over time. Continued inflation also may cause capital
appreciation of the Partnership's Properties. Inflation and changing prices,
however, also may have an adverse impact on the sales of the restaurants and on
potential capital appreciation of the Properties.
In December 1999, the Securities and Exchange Commission released SAB
101, which provides the staff's view in applying generally accepted accounting
principles to selected revenue recognition issues. SAB 101 requires the
Partnership to defer recognition of certain percentage rental income until
certain defined thresholds are met. The Partnership adopted SAB 101 beginning
January 1, 2000. Implementation of SAB 101 did not have a material impact on the
Partnership results of operations.
In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities." The Statement establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments, embedded in other contracts (collectively referred to as
derivatives), and for hedging activities. The Statement requires that an entity
recognize all derivatives as either assets or liabilities in the balance sheet
and measure those instruments at fair value. In June 1999, the Financial
Accounting Standards Board issued Statement of Financial Accounting Standards
No. 137, "Accounting for Derivative Instruments and Hedging Activities -
Deferral of the Effective Date of FASB Statement No. 133, an Amendment of FASB
Statement No. 133." FAS 137 deferred the effective date of FAS 133 for one year.
FAS 133, as amended, is now effective for all fiscal quarters of all fiscal
years beginning after June 15, 2000. The Partnership has reviewed both
statements and has determined that both FAS 133 and FAS 137 do not apply to the
Partnership as of December 31, 2000.
Termination of Merger
On March 11, 1999, the Partnership entered into an Agreement and Plan
of Merger with APF, pursuant to which the Partnership would be merged with and
into a subsidiary of APF. Under the Agreement and Plan of Merger, APF was to
issue shares of its common stock as consideration for the Merger. On March 1,
2000, the General Partners and APF announced that they had mutually agreed to
terminate the Agreement and Plan of Merger entered into in March 1999. The
agreement to terminate the Agreement and Plan of Merger was based, in large
part, on the General Partners' concern that, in light of market conditions
relating to publicly traded real estate investment trusts, the value of the
transaction had diminished. As a result of such diminishment, the General
Partners' ability to unequivocally recommend voting for the transaction, in the
exercise of their fiduciary duties, had become questionable. The General
Partners are continuing to evaluate strategic alternatives for the Partnership,
including alternatives to provide liquidity to the Limited Partners.
Interest Rate Risk
The Partnership accepted a promissory note in conjunction with the sale
of a Property. The General Partners believe that the estimated fair value of the
mortgage note at December 31, 2000, approximated the outstanding principal
amount. The Partnership is exposed to equity loss in the event of changes in
interest rates. The following table presents the expected cash flows of
principals that are sensitive to these changes.
Mortgage Notes
Fixed Rates
-------------------
2001 $ 13,682
2002 11,554
2003 12,796
2004 5,728
2005 --
Thereafter --
--------------------- -------------------
$ 43,760
===================
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
The information is described above in Item 7. Management's Discussion
and Analysis of Financial Condition and Results of Operations-Interest Rate
Risk.
Item 8. Financial Statements and Supplementary Data
CNL INCOME FUND XII, LTD.
(A Florida Limited Partnership)
CONTENTS
Page
Report of Independent Certified Public Accountants 18
Financial Statements:
Balance Sheets 19
Statements of Income 20
Statements of Partners' Capital 21
Statements of Cash Flows 22-23
Notes to Financial Statements 24-40
Report of Independent Certified Public Accountants
To the Partners
CNL Income Fund XII, Ltd.
In our opinion, the financial statements listed in the index appearing under
item 14(a)(1) present fairly, in all material respects, the financial position
of CNL Income Fund XII, Ltd. (a Florida limited partnership) at December 31,
2000 and 1999, and the results of its operations and its cash flows for each of
the three years in the period ended December 31, 2000 in conformity with
accounting principles generally accepted in the United States of America. In
addition, in our opinion, the financial statement schedules listed in the index
appearing under item 14(a)(2) present fairly, in all material respects, the
information set forth therein when read in conjunction with the related
financial statements. These financial statements and financial statement
schedules are the responsibility of the Partnership's management; our
responsibility is to express an opinion on these financial statements and
financial statement schedules based on our audits. We conducted our audits of
these statements in accordance with auditing standards generally accepted in the
United States of America, which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
Orlando, Florida
February 2, 2001
CNL INCOME FUND XII, LTD.
(A Florida Limited Partnership)
BALANCE SHEETS
December 31,
2000 1999
------------------- ---------------------
ASSETS
Land and buildings on operating leases, less
accumulated depreciation $ 21,239,166 $ 20,780,828
Net investment in direct financing leases 9,740,755 11,441,924
Investment in joint ventures 4,673,593 3,415,888
Mortgage note receivable 45,375 51,301
Cash and cash equivalents 1,161,018 1,870,366
Certificates of deposit 511,277 --
Receivables, less allowance for doubtful accounts of $30,338
and $14,491, respectively 192,518 80,791
Due from related parties 28,054 5,222
Prepaid expenses 30,903 13,552
Lease costs, less accumulated amortization of $11,490 and
$6,142, respectively 50,933 56,281
Accrued rental income, less allowance for
doubtful accounts of $161,604 and $6,323,
respectively 2,645,628 2,724,774
------------------- ---------------------
$ 40,319,220 $ 40,440,927
=================== =====================
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 39,360 $ 136,006
Accrued and escrowed real estate taxes payable 8,853 11,897
Distributions payable 956,252 956,252
Due to related parties 22,808 74,909
Rents paid in advance and deposits 85,863 50,987
------------------- ---------------------
Total liabilities 1,113,136 1,230,051
Partners' capital 39,206,084 39,210,876
------------------- ---------------------
$ 40,319,220 $ 40,440,927
=================== =====================
See accompanying notes to financial statements.
CNL INCOME FUND XII, LTD.
(A Florida Limited Partnership)
STATEMENTS OF INCOME
Year Ended December 31,
2000 1999 1998
----------------- --------------- ----------------
Revenues:
Rental income from operating leases $ 2,796,165 $ 2,518,075 $ 2,515,351
Adjustments to accrued rental income (155,281 ) -- (224,867 )
Earned income from direct financing leases 1,161,923 1,446,743 1,571,906
Contingent rental income 5,156 16,994 23,433
Interest and other income 116,055 96,823 70,227
----------------- --------------- ----------------
3,924,018 4,078,635 3,956,050
----------------- --------------- ----------------
Expenses:
General operating and administrative 185,596 172,205 148,427
Professional services 41,191 46,920 32,758
Bad debt expense -- -- 188,990
Management fees to related parties 42,538 42,710 41,537
Real estate taxes -- 4,099 8,989
State and other taxes 20,833 22,880 17,653
Depreciation and amortization 403,066 345,603 344,110
Transaction costs 38,677 218,853 24,282
----------------- --------------- ----------------
731,901 853,270 806,746
----------------- --------------- ----------------
Income Before Equity in Earnings of Joint
Ventures, Gain (Loss) on Sale of Assets
and Provision for Loss on Assets 3,192,117 3,225,365 3,149,304
Equity in Earnings of Joint Ventures 373,694 344,964 95,142
Gain (Loss) on Sale of Assets 254,405 74,714 (104,374 )
Provision for Loss on Assets -- -- (206,535 )
----------------- --------------- ----------------
Net Income $ 3,820,216 $ 3,645,043 $ 2,933,537
================= =============== ================
Allocation of Net Income:
General partners $ -- $ 35,804 $
30,894
Limited partners 3,820,216 3,609,239 2,902,643
----------------- --------------- ----------------
$ 3,820,216 $ 3,645,043 $ 2,933,537
================= =============== ================
Net Income Per Limited Partner Unit $ 0.85 $ $
0.80 0.65
================= =============== ================
Weighted Average Number of Limited Partner Units
Outstanding 4,500,000 4,500,000 4,500,000
================= =============== ================
See accomapnying notes to financial statements.
CNL INCOME FUND XII, LTD.
(A Florida Limited Partnership)
STATEMENTS OF PARTNERS' CAPITAL
Years Ended December 31, 2000, 1999 and 1998
General Partners Limited Partners
----------------------------- -----------------------------------------------------------
Accumulated Accumulated Syndication
Contributions Earnings Contributions Distributions Earnings Costs Total
--------------- ------------ --------------- -------------- -------------- ------------- --------
Balance, December 31, 1997 $ 1,000 $ 191,411 $ 45,000,000 $ (18,340,035) $18,939,480 $(5,374,54 $40,417,312
Distributions to limited
partners ($0.88 per
limited partner unit) -- -- -- (3,960,008) -- -- (3,960,008)
Net income -- 30,894 -- -- 2,902,643 -- 2,933,537
------- -------------- ------------- ----------------- ------------- ------------- -----------
Balance, December 31, 1998 1,000 222,305 45,000,000 (22,300,043) 21,842,123 (5,374,544) 39,390,841
Distributions to limited
partners ($0.85 per
limited partner unit) -- -- -- (3,825,008) -- -- (3,825,008)
Net income -- 35,804 -- -- 3,609,239 -- 3,645,043
------- ------------- ------------- ----------------- ------------- ------------- ------------
Balance, December 31, 1999 1,000 258,109 45,000,000 (26,125,051) 25,451,362 (5,374,544) 39,210,876
Distributions to limited
partners ($0.85 per
limited partner unit) -- -- -- (3,825,008) -- -- (3,825,008)
Net income -- -- -- -- 3,820,216 -- 3,820,216
------- ------------- ------------- ----------------- ------------- ------------- ------------
Balance, December 31, 2000 $1,000 $ 258,109 $ 45,000,000 $ (29,950,059) $29,271,578 $5,374,544) $39,206,084
======= ============ ============ ================= ============ ============= =============
See accompanying notes to financial statements.
CNL INCOME FUND XII, LTD.
(A Florida Limited Partnership)
STATEMENTS OF CASH FLOWS
Years Ended December 31,
2000 1999 1998
---------------- ---------------- ---------------
Increase (Decrease) in Cash and Cash Equivalents:
Cash Flows from Operating Activities:
Cash received from tenants $ 3,901,717 $3,865,771 $ 4,094,016
Distributions from joint ventures 384,885 312,470 205,815
Cash paid for expenses (497,870) (344,114) (243,316)
Interest received 78,618 85,903 60,265
---------------- ---------------- ---------------
Net cash provided by operating activities 3,867,350 3,920,030 4,116,780
---------------- ---------------- ---------------
Cash Flows from Investing Activities:
Proceeds from sale of assets 2,019,357 467,300 483,549
Additions to land and buildings on operating
leases (1,009,067) (30,000) --
Investment in joint ventures (1,268,896) (861,390) (115,256)
Collection on mortgage note receivable 6,916 4,324 --
Investment in certificates of deposit (500,000) -- --
Payment of lease costs -- (32,870) (3,500)
---------------- ---------------- ---------------
Net cash provided by (used in) investing
activities (751,690) (452,636) 364,793
---------------- ---------------- ---------------
Cash Flows from Financing Activities:
Distributions to limited partners (3,825,008) (3,960,008) (3,825,008)
---------------- ---------------- ---------------
Net cash used in financing activities (3,825,008) (3,960,008) (3,825,008)
---------------- ---------------- ---------------
Net Increase (Decrease) in Cash and Cash Equivalents (709,348) (492,614) 656,565
Cash and Cash Equivalents at Beginning of Year 1,870,366 2,362,980 1,706,415
---------------- ---------------- ---------------
Cash and Cash Equivalents at End of Year $ 1,161,018 $ 1,870,366 $ 2,362,980
================ ================ ===============
See accompanying notes to financial statements.
CNL INCOME FUND XII, LTD.
(A Florida Limited Partnership)
STATEMENTS OF CASH FLOWS - CONTINUED
Years Ended December 31,
2000 1999 1998
---------------- ---------------- ---------------
Reconciliation of Net Income to Net Cash Provided by
Operating Activities:
Net income $ 3,820,216 $ 3,645,043 $ 2,933,537
---------------- ---------------- ---------------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 397,718 342,717 342,161
Amortization 5,348 2,886 1,949
Equity in earnings of joint ventures, net of
distributions 11,191 (32,494) 110,673
Loss (gain) on sale of assets (254,405) (74,714) 104,374
Provisions for loss on assets -- -- 206,535
Bad debt expense -- -- 188,990
Decrease in net investment in direct financing
leases 197,885 192,256 164,614
Increase in receivables (118,217) (64,554) (3,380)
Decrease (increase) in prepaid expenses (17,351) (6,514) 178
Increase in accrued rental income (35,288) (200,368) (28,230)
Increase (decrease) in accounts payable and
accrued expenses (99,690) 116,571 17,530
Increase (decrease) in due to related parties (52,101) 50,884 17,138
Decrease in due from related parties (22,832) (5,222) --
Increase (decrease) in rents paid in advance and
deposits 34,876 (46,461) 60,711
---------------- ---------------- ---------------
Total adjustments 47,134 274,987 1,183,243
---------------- ---------------- ---------------
Net Cash Provided by Operating Activities $ 3,867,350 $ 3,920,030 $ 4,116,780
================ ================ ===============
Supplemental Schedule of Non-Cash Investing and
Financing Activities:
Mortgage note accepted in exchange for
sale of assets $ -- $ 55,000 $ --
================ ================ ===============
Distributions declared and unpaid at
December 31 $ 956,252 $ 956,252 $ 1,091,252
================ ================ ===============
See accomapnying notes to financial statements.
CNL INCOME FUND XII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
Years Ended December 31, 2000, 1999, and 1998
1. Significant Accounting Policies:
-------------------------------
Organization and Nature of Business - CNL Income Fund XII, 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 or franchisees of
national and regional fast-food and family-style restaurant chains.
The general partners of the Partnership are CNL Realty Corporation (the
"Corporate General Partner"), James M. Seneff, Jr. and Robert A.
Bourne. Mr. Seneff and Mr. Bourne are also 50 percent shareholders of
the Corporate General Partner. The general partners have responsibility
for managing the day-to-day operations of the Partnership.
Real Estate and Lease Accounting - The Partnership records the
acquisition of land and buildings at cost, including acquisition and
closing costs. Land and buildings are leased to unrelated third parties
on a triple-net basis, whereby the tenant is generally responsible for
all operating expenses relating to the property, including property
taxes, insurance, maintenance and repairs. The leases are accounted for
using either the direct financing or the operating methods. Such
methods are described below:
Direct financing method - The leases accounted for using the
direct financing method are recorded at their net investment
(which at the inception of the lease generally represents the
cost of the asset) (see Note 4). Unearned income is deferred
and amortized to income over the lease terms so as to produce
a constant periodic rate of return on the Partnership's net
investment in the leases.
Operating method - Land and building leases accounted for
using the operating method are recorded at cost, revenue is
recognized as rentals are earned and depreciation is charged
to operations as incurred. Buildings are depreciated on the
straight-line method over their estimated useful lives of 30
years. When scheduled rentals vary during the lease term,
income is recognized on a straight-line basis so as to produce
a constant periodic rent over the lease term commencing on the
date the property is placed in service.
CNL INCOME FUND XII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2000, 1999, and 1998
1. Significant Accounting Policies - Continued:
-------------------------------------------
Accrued rental income represents the aggregate amount of
income recognized on a straight-line basis in excess of
scheduled rental payments to date. Whenever a tenant defaults
under the terms of its lease, or events or changes in
circumstance indicate that the tenant will not lease the
property through the end of the lease term, the Partnership
either reserves or reverses the cumulative accrued rental
income balance.
When the properties are sold, the related cost and accumulated
depreciation for operating leases and the net investment for direct
financing leases, plus any accrued rental income, are removed from the
accounts and gains or losses from sales are reflected in income. The
general partners of the Partnership review properties for impairment
whenever events or changes in circumstances indicate that the carrying
amount of the assets may not be recoverable through operations. The
general partners determine whether an impairment in value has occurred
by comparing the estimated future undiscounted cash flows, including
the residual value of the property, with the carrying cost of the
individual property. If an impairment is indicated, the assets are
adjusted to their fair values. Although the general partners have made
their best estimate of these factors based on current conditions, it is
reasonably possible that changes could occur in the near term which
could adversely affect the general partners' estimate of net cash flows
expected to be generated from its properties and the need for asset
impairment write-downs.
When the collection of amounts recorded as rental or other income is
considered to be doubtful, an adjustment is made to increase the
allowance for doubtful accounts, which is netted against receivables,
and to decrease rental or other income or increase bad debt expense for
the current period, although the Partnership continues to pursue
collection of such amounts. If amounts are subsequently determined to
be uncollectible, the corresponding receivable and allowance for
doubtful accounts are decreased accordingly.
Investment in Joint Ventures - The Partnership's investments in Des
Moines Real Estate Joint Venture, Williston Real Estate Joint Venture,
Kingsville Real Estate Joint Venture, Middleburg Joint Venture,
Columbus Joint Venture, Bossier City Joint Venture and a property in
Colorado Springs, Colorado held as tenants-in-common with affiliates of
the General Partners are accounted for using the equity method since
the Partnership shares control with affiliates which have the same
general partners.
CNL INCOME FUND XII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2000, 1999, and 1998
1. Significant Accounting Policies - Continued:
-------------------------------------------
Cash and Cash Equivalents - The Partnership considers all highly liquid
investments with a maturity of three months or less when purchased to
be cash equivalents. Cash and cash equivalents consist of demand
deposits at commercial banks and money market funds (some of which are
backed by government securities). Cash equivalents are stated at cost
plus accrued interest, which approximates market value.
Cash accounts maintained on behalf of the Partnership in demand
deposits at commercial banks and money market funds may exceed
federally insured levels; however, the Partnership has not experienced
any losses in such accounts.
Lease Costs - Brokerage fees associated with negotiating a new lease
are amortized over the term of the new lease using the straight-line
method.
Income Taxes - Under Section 701 of the Internal Revenue Code, all
income, expenses and tax credit items flow through to the partners for
tax purposes. Therefore, no provision for federal income taxes is
provided in the accompanying financial statements. The Partnership is
subject to certain state taxes on its income and property.
Additionally, for tax purposes, syndication costs are included in
Partnership equity and in the basis of each partner's investment. For
financial reporting purposes, syndication costs are netted against
partners' capital and represent a reduction of Partnership equity and a
reduction in the basis of each partner's investment.
Use of Estimates - The general partners of the Partnership have made a
number of estimates and assumptions relating to the reporting of assets
and liabilities and the disclosure of contingent assets and liabilities
to prepare these financial statements in conformity with generally
accepted accounting principles. The more significant areas requiring
the use of management estimates relate to the allowance for doubtful
accounts and future cash flows associated with long-lived assets.
Actual results could differ from those estimates.
CNL INCOME FUND XII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2000, 1999, and 1998
1. Significant Accounting Policies - Continued:
-------------------------------------------
Staff Accounting Bulletin No. 101 ("SAB 101") - In December 1999, the
Securities and Exchange Commission released SAB 101, which provides the
staff's view in applying generally accepted accounting principles to
selected revenue recognition issues. SAB 101 requires the Partnership
to defer recognition of certain percentage rental income until certain
defined thresholds are met. The Partnership adopted SAB 101 beginning
January 1, 2000. Implementation of SAB 101 did not have a material
impact on the Partnership results of operations.
Statement of Financial Accounting Standards No. 133 ("FAS 133") and
Statement of Financial Accounting Standards No. 137 ("FAS 137") - In
June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities." The Statement establishes
accounting and reporting standards for derivative instruments,
including certain derivative instruments, embedded in other contracts
(collectively referred to as derivatives), and for hedging activities.
The Statement requires that an entity recognize all derivatives as
either assets or liabilities in the balance sheet and measure those
instruments at fair value. In June 1999, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards No.
137, "Accounting for Derivative Instruments and Hedging Activities -
Deferral of the Effective Date of FASB Statement No. 133, an Amendment
of FASB Statement No. 133." FAS 137 deferred the effective date of FAS
133 for one year. FAS 133, as amended, is now effective for all fiscal
quarters of all fiscal years beginning after June 15, 2000. The
Partnership has reviewed both statements and has determined that both
FAS 133 and FAS 137 do not apply to the Partnership as of December 31,
2000.
2. Leases:
------
The Partnership leases its land and buildings to operators of national
and regional fast-food and family-style restaurants. The leases are
accounted for under the provisions of Statement of Financial Accounting
Standards No. 13, "Accounting for Leases." Some of the leases have been
classified as operating leases and some of the leases have been
classified as direct financing leases. For the leases classified as
direct financing leases, the building portions of the property leases
are accounted for as direct financing leases while the land portions of
the leases are operating leases. Substantially all leases are for
CNL INCOME FUND XII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2000, 1999, and 1998
2. Leases - Continued:
------------------
14 to 20 years and provide for minimum and contingent rentals. In
addition, the tenant pays all property taxes and assessments, fully
maintains the interior and exterior of the building and carries
insurance coverage for public liability, property damage, fire and
extended coverage. The lease options generally allow tenants to renew
the leases for two to four successive five-year periods subject to the
same terms and conditions as the initial lease. Most leases also allow
the tenant to purchase the property at fair market value after a
specified portion of the lease has elapsed.
3. Land and Buildings on Operating Leases:
--------------------------------------
Land and buildings on operating leases consisted of the following at
December 31:
2000 1999
------------------- -------------------
Land $ 12,216,811 $ 12,262,712
Buildings 11,547,810 10,645,853
------------------- -------------------
23,764,621 22,908,565
Less accumulated depreciation (2,525,455) (2,127,737)
------------------- -------------------
$ 21,239,166 $ 20,780,828
=================== ===================
In 1998, the Partnership recorded an allowance for loss on building of
$206,535 relating to the property in Morganton, North Carolina, due to
the tenant filing for bankruptcy. The allowance represented the
difference between the carrying value of the property at December 31,
1998 and the estimated net realizable value for the property. In May
1999, the Partnership sold the property to an unrelated third party for
$550,000, received $467,300 in cash and accepted the remaining net
sales proceeds in the form of a promissory note (see Note 7), resulting
in a gain of $74,714 for financial reporting purposes. This gain, when
netted against the allowance recorded at December 31, 1998, resulted in
a total net loss of approximately $131,800. In November 1999, the
Partnership reinvested the majority of the remaining net sales proceeds
in Bossier City Joint Venture (see Note 5).
CNL INCOME FUND XII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2000, 1999, and 1998
3. Land and Buildings on Operating Leases - Continued:
--------------------------------------------------
In July 1999, the Partnership entered into a new lease for the property
in Statesville, North Carolina. In connection therewith, the
Partnership incurred $30,000 in renovation costs which were completed
in August 1999.
Effective January 2000, the Partnership amended the lease relating to
its property in St. Ann, Missouri, to allow for a rent reduction. As a
result, the Partnership reclassified the building portion of this asset
from net investment in direct financing lease to building on operating
lease. In accordance with Statement of Financial Accounting Standards
No. 13, "Accounting for Leases," the Partnership recorded the
reclassified asset at the lower of original cost, present fair value,
or present carrying value. No loss was recorded on the
reclassification.
In April 2000, the Partnership reinvested the net sales proceeds it
received from the sale of the property in Cleveland, Tennessee, along
with additional funds in a Krystal property located in Pooler, Georgia
(see Note 4). In connection therewith, the Partnership entered into a
long term, triple-net lease with terms substantially the same as its
other leases.
In July 2000, the Partnership sold its property in Bradenton, Florida,
to an unrelated third party for approximately $1,227,900 resulting in a
gain of approximately $106,800 for financial reporting purposes. This
property was originally acquired by the Partnership in 1992 and had
costs totaling approximately $1,000,000, excluding acquisition fees and
miscellaneous acquisition expenses; therefore, the Partnership sold
this property for approximately $227,900 in excess of its original
purchase price. The Partnership used the net sales proceeds to acquire
an interest in an additional property, with an affiliate of the general
partners, as tenants-in-common (see Note 5).
Some leases provide for escalating guaranteed minimum rents throughout
the lease term. Income from these scheduled rent increases is
recognized on a straight-line basis over the terms of the leases. For
the years ended December 31, 2000, 1999 and 1998, the Partnership
recognized income of $35,288 (net of $155,281 in reserves), $200,368,
$28,230 (net of $6,323 in reserves and $224,867 in reversals),
respectively, of such rental income.
CNL INCOME FUND XII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2000, 1999, and 1998
3. Land and Buildings on Operating Leases - Continued:
--------------------------------------------------
The following is a schedule of the future minimum lease payments to be
received on noncancellable operating leases at December 31, 2000:
2001 $2,474,235
2002 2,493,115
2003 2,742,343
2004 2,789,073
2005 2,809,565
Thereafter 18,265,471
----------------
$31,573,802
================
Since lease renewal periods are exercisable at the option of the
tenant, the above table only presents future minimum lease payments due
during the initial lease terms. In addition, this table does not
include any amounts for future contingent rentals which may be received
on the leases based on a percentage of the tenant's gross sales.
4. Net Investment in Direct Financing Leases:
------------------------------------------
The following lists the components of the net investment in direct
financing leases at December 31:
2000 1999
--------------- -------------
Minimum lease payments receivable $17,040,423 $21,395,698
Estimated residual values 3,179,130 3,695,228
Less unearned income (10,478,798) (13,649,002)
--------------- -------------
Net investment in direct financing
leases $ 9,740,755 $11,441,924
=============== =============
CNL INCOME FUND XII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2000, 1999, and 1998
4. Net Investment in Direct Financing Leases - Continued:
------------------------------------------------------
The following is a schedule of future minimum lease payments to be
received on the direct financing leases at December 31, 2000:
2001 $1,325,951
2002 1,325,951
2003 1,366,665
2004 1,382,563
2005 1,382,563
Thereafter 10,256,730
----------------
$17,040,423
================
The above table does not include future minimum lease payments for
renewal periods or for contingent rental payments that may become due
in future periods (see Note 3).
In March 2000, the Partnership sold its property in Cleveland,
Tennessee, for which the land and building had been classified as a
direct financing lease, to an unrelated third party for $806,460 and
received net sales proceeds of approximately $791,500, resulting in a
gain of approximately $147,600 for financial reporting purposes. The
property was originally acquired by the Partnership in 1992 and had a
cost of approximately $622,800, excluding acquisition fees and
miscellaneous acquisition expenses; therefore, the Partnership sold the
property for approximately $168,700 in excess of its original purchase
price. In April 2000, the Partnership used the net sales proceeds from
the sale of this property and a portion of the net sales proceeds
received from the 1999 sale of its property in Morganton, North
Carolina in a Krystal property in Pooler, Georgia (see Note 3).
5. Investment in Joint Ventures:
----------------------------
As of December 31, 2000, the Partnership had a 59.05%, an 18.61%, a
31.13%, an 87.54% and a 27.72% interest in the profits and losses of
Williston Real Estate Joint Venture, Des Moines Real Estate Joint
Venture, Kingsville Real Estate Joint Venture, Middleburg Joint
Venture, and Columbus Joint Venture, respectively. The remaining
interests in these joint ventures are held by affiliates of the
Partnership which have the same general partners.
CNL INCOME FUND XII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2000, 1999, and 1998
5. Investment in Joint Ventures - Continued:
-----------------------------------------
In November 1999, the Partnership used the majority of the proceeds
from the sales of the properties in Monroe and Morganton, North
Carolina, to enter into a joint venture arrangement, Bossier City Joint
Venture, with CNL Income Fund VIII, Ltd. and CNL Income Fund XIV, Ltd.,
both Florida limited partnerships and affiliates of the general
partners, to purchase and hold one restaurant property. The Partnership
contributed approximately $730,000 to the joint venture and owns a 55
percent interest in the profits and losses of the joint venture.
In August 2000, the Partnership reinvested the net sales proceeds from
the sale of its property in Bradenton, Florida in a property in
Colorado Springs, Colorado as tenants-in-common with CNL Income Fund
VII, Ltd. ("CNL VII"), a Florida limited partnership and an affiliate
of the general partners. In connection therewith, the Partnership and
the affiliate entered into an agreement whereby each co-tenant will
share in the profits and losses of the property in proportion to its
applicable percentage interest. The Partnership and CNL VII acquired
this property from CNL BB Corp., an affiliate of the general partners
(see Note 9). The Partnership will account for its investment in this
property using the equity method since the Partnership will share
control with the affiliate. The Partnership owns a 57 percent interest
in this property.
Williston Real Estate Joint Venture, Des Moines Real Estate Joint
Venture, Kingsville Real Estate Joint Venture, Middleburg Joint
Venture, Columbus Joint Venture, Bossier City Joint Venture and the
Partnership and affiliates, in a tenancy in common arrangement, each
own and lease one property to an operator of national fast-food or
family-style restaurants.
CNL INCOME FUND XII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2000, 1999, and 1998
5. Investment in Joint Ventures - Continued:
-----------------------------------------
The following presents the joint ventures' combined, condensed
financial information at December 31:
2000 1999
------------ -------------
Land and buildings on operating
leases, less accumulated
depreciation and allowance
for loss on assets $ 6,153,743 $ 4,030,064
Net investment in direct financing
leases, less allowance for loss on
assets 1,926,938 1,953,200
Cash 85,033 40,636
Receivables, less allowance for
doubtful accounts 193 34,276
Accrued rental income 294,356 219,436
Other assets 741 732
Liabilities 54,005 40,517
Partners' capital 8,406,999 6,237,827
Revenues 779,865 645,168
Net income 658,303 568,191
The Partnership recognized income totaling $373,694, $344,964, and
$95,142 for the years Ended December 31, 2000, 1999, and 1998,
respectively, from these joint ventures.
6. Mortgage Note Receivable:
------------------------
In connection with the sale of the property in Morganton, North
Carolina, in May 1999, the Partnership accepted a promissory note in
the principal sum of $55,000 collateralized by a mortgage on the
property. The promissory note bears interest at a rate of 10.25% per
annum and is being collected in 60 monthly installments of principal
and interest. The mortgage note receivable consisted of outstanding
principal of $43,760 and accrued interest receivable of $1,615 as of
December 31, 2000.
CNL INCOME FUND XII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2000, 1999, and 1997
6. Mortgage Note Receivable- Continued:
-----------------------------------
The general partners believe that the estimated fair value of mortgage
note receivable at December 31, 2000, approximates the outstanding
principal amount based on estimated current rates at which similar
loans would be made to borrowers with similar credit and for similar
maturities.
7. Allocations and Distributions:
------------------------------
From inception through December 31, 1999, generally, all net income and
net losses of the Partnership, excluding gains and losses from the sale
of properties, were allocated 99 percent to the limited partners and
one percent to the general partners. Distributions of net cash flow
were made 99 percent to the limited partners and one percent to the
general partners; provided, however, that the one percent of net cash
flow to be distributed to the general partners is subordinated to
receipt by the limited partners of an aggregate, ten percent,
cumulative, noncompounded annual return on their invested capital
contributions (the " Limited Partners' 10% 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 Limited Partners'
10% 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 distributed 95 percent to
the limited partners and five percent to the general partners. Any gain
from the sale of a property not in liquidation of the Partnership was,
in general, allocated in the same manner as net sales proceeds are
distributable. Any loss from the sale of a property was, in general,
allocated first, on a pro rata basis, to partners with positive
balances in their capital accounts; and thereafter, 95 percent to the
limited partners and five percent to the general partners.
Generally, net sales proceeds from a liquidating sale of properties,
will be used in the following order: (i) first to pay and discharge all
of the Partnership's liabilities to creditors, (ii) second, to
establish reserves that may be deemed necessary for any anticipated or
unforeseen liabilities or obligations of the Partnership, (iii) third,
to pay all of the Partnership's liabilities, if any, to the general and
limited partners, (iv) fourth, after allocations of net income, gains
and/or losses, to distribute to the partners with positive
CNL INCOME FUND XII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2000, 1999, and 1997
7. Allocations and Distributions - Continued:
-----------------------------------------
capital accounts balances, in proportion to such balances, up to
amounts sufficient to reduce such positive balances to zero, and (v)
thereafter, any funds remaining shall then be distributed 95 percent to
the limited partners and five percent to the general partners.
Effective January 1, 2000, the general partners waived their right to
receive future distributions from the Partnership, including both
distributions of operating cash flow and distributions of liquidation
proceeds, to the extent that the cumulative amount of such
distributions would exceed the balance in the general partners' capital
account as of December 31, 1999. Accordingly, for years commencing
January 1, 2000 and after, the Partnership's net income will be
allocated entirely among the limited partners. However, if losses are
allocated to the general partners in a year, an amount of income equal
to the sum of such losses may be allocated to the general partners in
succeeding years. Accordingly, the general partners were not allocated
any net income and did not receive any distributions during the year
ended December 31, 2000.
The Partnership declared distributions to the limited partners of
$3,825,008, during the years ended December 31, 2000 and 1999 and
$3,960,008 during the year ended December 31, 1998. No distributions
have been made to the general partners to date.
CNL INCOME FUND XII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2000, 1999, and 1997
8. Income Taxes:
-------------
The following is a reconciliation of net income for financial reporting
purposes to net income for federal income tax purposes for the years
ended December 31:
2000 1999 1998
--------------- --------------- -------------
Net income for financial reporting purposes $ 3,820,216 $ 3,645,043 $ 2,933,537
Depreciation for tax reporting purposes in
excess of depreciation for financial
reporting purposes (146,845) (210,176) (224,652)
Direct financing leases recorded as
operating leases for tax reporting
purposes 197,885 192,255 164,614
Provision for loss on assets -- -- 206,535
Gain/Loss on sale of assets for
tax reporting purposes in excess of (less
than) gain/loss for financial reporting
purposes (254,405) (181,362) 25,699
Capitalization (Deduction) of transaction costs
for tax reporting purposes (243,135) 218,853 24,282
Equity in earnings of joint ventures for tax
reporting purposes in excess of (less than)
equity in earnings of joint ventures for
financial reporting purposes (55,273) (126,086) 138,311
Allowance for doubtful accounts 15,847 (200,142) 207,151
Accrued rental income (35,288) (200,368) (28,230)
Rents paid in advance 34,376 (47,461) 60,711
--------------- --------------- -------------
Net income for federal income tax purposes $ 3,333,378 $ 3,090,556 $ 3,507,958
=============== =============== =============
CNL INCOME FUND XII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2000, 1999, and 1998
9. Related Party Transactions:
---------------------------
One of the individual general partners, James M. Seneff, Jr., is one of
the principal shareholders of CNL Holdings, Inc. The other individual
general partner, Robert A. Bourne, serves as President and Treasurer of
CNL Financial Group, Inc., a wholly owned subsidiary of CNL Holdings,
Inc. CNL Fund Advisors, Inc. (the "Advisor") was a majority owned
subsidiary of CNL Financial Group, Inc. until it merged with CNL
American Properties Fund, Inc. ("APF"), effective September 1, 1999.
The individual general partners are stockholders and directors of APF.
The Advisor provides certain services relating to management of the
Partnership and its properties pursuant to a management agreement with
the Partnership. In connection therewith, the Partnership agreed to pay
the Advisor a management fee of one percent of the sum of gross
revenues from properties owned by the Partnership and the Partnership's
allocable share of gross revenues from joint ventures. The management
fee, which will not exceed fees which are competitive for similar
services in the same geographic area, may or may not be taken, in whole
or in part as to any year, in the sole discretion of the Advisor. The
Partnership incurred management fees of $42,538, $42,710, and $41,537,
for the years ended December 31, 2000, 1999, and 1998, respectively.
The Advisor is also entitled to receive a deferred, subordinated real
estate disposition fee, payable upon the sale of one or more properties
based on the lesser of one-half of a competitive real estate commission
or three percent of the sales price if the Advisor provides a
substantial amount of services in connection with the sale. However, if
the 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. The payment of the real estate disposition fee is
subordinated to receipt by the Limited Partners of their aggregate 10%
Preferred Return, plus their adjusted capital contributions. No
deferred, subordinated real estate disposition fees have been incurred
since inception.
During the years ended December 31, 2000, 1999, and 1998, the Advisor
and its affiliates provided accounting and administrative services to
the Partnership on a day-to-day basis including services relating to
the proposed and terminated merger. The Partnership incurred $107,794,
$139,857, and $107,911 for the years ended December 31, 2000, 1999, and
1998, respectively, for such services.
CNL INCOME FUND XII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2000, 1999, and 1998
9. Related Party Transactions - Continued:
--------------------------------------
During 2000, the Partnership and CNL VII, as tenants-in-common,
acquired an interest in a Bennigan's property from CNL BB Corp., an
affiliate of the general partners, for a purchase price of $2,226,134.
CNL BB Corp. had purchased and temporarily held title to this property
in order to facilitate the acquisition of the property by the
Partnership. The purchase price paid represents the costs incurred by
CNL BB Corp. to acquire and carry the property including closing costs.
In accordance with the State of Policy of Real Estate Programs for the
North American Securities Administrators Association, Inc., all income,
expenses, profits and losses generated by or associated with the
property were treated as belonging to the Partnership and CNI VII, as
tenants-in-common. For the year ended December 31, 2000, other income
of the tenants-in-common included $3,693 of such amounts.
The amounts due to related parties at December 31, 2000 and 1999,
totaled $22,808 and $74,909, respectively.
10. Concentration of Credit Risk:
-----------------------------
The following schedule presents rental, earned, and mortgage interest
income from individual lessees, or affiliated groups of lessees, each
representing more than ten percent of the Partnership's total rental,
earned and mortgage interest income (including the Partnership's share
of rental and earned income from joint ventures and the property held
with an affiliate as tenants-in-common) for each of the years ended
December 31:
2000 1999 1998
---------------- ---------------- ---------------
Jack in the Box Inc. (formerly Foodmaker,
Inc.) $1,024,667 $1,024,667 $1,023,630
Flagstar Enterprises, Inc. 766,823 775,075 784,922
Long John Silver's, Inc. N/A N/A 508,351
Advantica Restaurant Group,
Inc. N/A N/A 424,742
CNL INCOME FUND XII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2000, 1999, and 1998
10. Concentration of Credit Risk - Continued:
-----------------------------------------
In addition, the following schedule presents total rental, earned, and
mortgage interest income from individual restaurant chains, each
representing more than ten percent of the Partnership's total rental,
earned and mortgage interest income (including the Partnership's share
of rental and earned income from joint ventures and the property owned
with an affiliate as tenants-in-common), for each of the years ended
December 31:
2000 1999 1998
-------------- ------------- ------------
Jack in the Box $ 1,024,667 $ 1,024,667 $1,023,630
Hardee's 766,823 775,075 784,922
Denny's 570,046 799,567 782,486
Long John Silver's 429,275 479,814 574,044
Golden Corral N/A 446,595 N/A
The information denoted by N/A indicates that for each period
presented, the tenant or group of affiliated tenants and the chain did
not represent more than ten percent of the Partnership's total rental,
earned and mortgage interest income.
In June 1998, Long John Silver's, Inc. filed for bankruptcy and
rejected the leases relating to three of its eight Properties and
ceased making rental payments to the Partnership on the three rejected
leases. In December 1998 and May 1999, the Partnership sold two of the
vacant properties. In July 1999, the Partnership entered into a new
lease with a new tenant for the remaining vacant property for which
rental payments commenced in August of 1999. In August 1999, Long John
Silver's, Inc. assumed and affirmed its five remaining leases.
Although the Partnership's properties are geographically diverse
throughout the United States and the Partnership's lessees operate a
variety of restaurant concepts, default by any one of these lessees or
restaurant chains could significantly impact the results of operations
of the Partnership if the Partnership is not able to re-lease the
properties in a timely manner.
CNL INCOME FUND XII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2000, 1999, and 1998
11. Selected Quarterly Financial Data:
----------------------------------
The following table presents selected unaudited quarterly financial
data for each full quarter during the years ended December 31, 2000 and
1999.
2000 Quarter First Second Third Fourth Year
------------------------ --------------- -------------- -------------- --------------- --------------
Revenues (1) $1,126,566 $1,102,495 $1,022,198 $1,046,453 $4,297,712
Net income 1,036,139 893,042 944,221 946,814 3,820,216
Net income per
limited partner
unit 0.23 0.20 0.21 0.21 0.85
1999 Quarter First Second Third Fourth Year
------------------------ --------------- -------------- -------------- --------------- --------------
Revenues (1) 1,074,482 1,148,547 1,087,669 1,112,901 4,423,599
Net income 862,513 991,599 874,000 916,931 3,645,043
Net income per
limited partner
unit 0.19 0.22 0.19 0.20 0.80
(1) Revenues include equity in earnings of joint ventures and
adjustments to accrued rental income due to the tenants of certain
Properties experiencing financial difficulties or filing for
bankruptcy.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
The General Partners of the Registrant are James M. Seneff, Jr., Robert
A. Bourne and CNL Realty Corporation, a Florida corporation. The General
Partners manage and control the Partnership's affairs and have general
responsibility and the ultimate authority in all matters affecting the
Partnership's business. The Partnership has available to it the services,
personnel and experience of CNL Fund Advisors, Inc., CNL Financial Group, Inc.
and their affiliates, all of which are affiliates of the General Partners.
James M. Seneff, Jr., age 54. Since 1971, Mr. Seneff has been active in
the acquisition, development, and management of real estate projects and,
directly or through an affiliated entity, has served as a general partner or
co-venturer in over 100 real estate ventures. These ventures have involved the
financing, acquisition, construction, and leasing of restaurants, office
buildings, apartment complexes, hotels, and other real estate. Mr. Seneff has
served as Director and Chairman of the Board of CNL American Properties Fund,
Inc. ("APF"), a public, unlisted real estate investment trust, since 1994. Mr.
Seneff served as Chief Executive Officer of APF from 1994 through August 1999
and has served as Co-Chief Executive Officer of APF since December 2000. Mr.
Seneff served as Chairman of the Board and Chief Executive Officer of CNL Fund
Advisors (the "Advisor") until it merged with APF in September 1999, and in June
2000, was re-elected to those positions of the Advisor. Mr. Seneff is a
principal stockholder of CNL Holdings, Inc., the parent company of CNL Financial
Group, Inc. (formerly CNL Group, Inc.), a diversified real estate company, and
has served as a director, Chairman of the Board and Chief Executive Officer of
CNL Financial Group, Inc. since its formation in 1980. CNL Financial Group, Inc.
is the parent company, either directly or indirectly through subsidiaries, of
CNL Real Estate Services, Inc., CNL Capital Markets, Inc., CNL Investment
Company and CNL Securities Corp. Mr. Seneff also serves as a Director, Chairman
of the Board and Chief Executive Officer of CNL Hospitality Properties, Inc., a
public, unlisted real estate investment trust, as well as, CNL Hospitality
Corp., its advisor. In addition, he serves as a Director, Chairman of the Board
and Chief Executive Officer of CNL Retirement Properties, Inc., a public,
unlisted real estate investment trust and its advisor, CNL Retirement Corp.
Since 1992, Mr. Seneff has also served as a Director, Chairman of the Board and
Chief Executive Officer of Commercial Net Lease Realty, Inc., a public real
estate investment trust that is listed on the New York Stock Exchange. Mr.
Seneff has also served as a Director, Chairman of the Board and Chief Executive
Officer of CNL Securities Corp. since 1979; CNL Investment Company since 1990;
and CNL Institutional Advisors, Inc., a registered investment advisor for
pension plans, since 1990. Mr. Seneff formerly served as a Director of First
Union National Bank of Florida, N.A., and currently serves as the Chairman of
the Board of CNL Bank. Mr. Seneff previously served on the Florida State
Commission on Ethics and is a former member and past Chairman of the State of
Florida Investment Advisory Council, which recommends to the Florida Board of
Administration investments for various Florida employee retirement funds. The
Florida Board of Administration, Florida's principal investment advisory and
money management agency, oversees the investment of more than $60 billion of
retirement funds. Mr. Seneff received his degree in Business Administration from
Florida State University in 1968.
Robert A. Bourne, age 53. Mr. Bourne has participated as a general
partner or co-venturer in over 100 real estate ventures involved in the
financing, acquisition, construction, and leasing of restaurants, office
buildings, apartment complexes, hotels, and other real estate. Mr. Bourne is
Director and Vice Chairman of the Board of Directors of APF. Mr. Bourne served
as President of APF from 1994 through February 1999. He also served as Treasurer
from February 1999 through August 1999 and from May 1994 through December 1994.
He also served in various executive positions with the Advisor prior to its
merger with APF including, President from 1994 through September 1997, and
Director from 1994 through August 1999. Mr. Bourne serves as President and
Treasurer of CNL Financial Group, Inc. (formerly CNL Group, Inc.); Director,
Vice Chairman of the Board and President of CNL Hospitality Properties, Inc., a
public, unlisted real estate investment trust; as well as, Director and
President of CNL Hospitality Corp., its advisor. In addition, Mr. Bourne serves
as Director and President of CNL Retirement Properties, Inc., a public, unlisted
real estate investment trust; as well as, a Director and President of its
advisor, CNL Retirement Corp. Mr. Bourne also serves as a Director of CNL Bank.
He has served as a Director since 1992, Vice Chairman of the Board since
February 1996, Secretary and Treasurer from February 1996 through 1997, and
President from July 1992 through February 1996, of Commercial Net Lease Realty,
Inc., a public real estate investment trust listed on the New York Stock
Exchange. Mr. Bourne also serves as Director, President and Treasurer for
various affiliates of CNL Financial Group, Inc. including, CNL Investment
Company, CNL Securities Corp. and CNL Institutional Advisors, Inc., a registered
investment advisor for pension plans. Mr. Bourne began his career as a certified
public accountant employed by Coopers & Lybrand, Certified Public Accountants,
from 1971 through 1978, where he attained the position of Tax Manager in 1975.
Mr. Bourne graduated from Florida State University in 1970 where he received a
B.A. in Accounting, with honors.
Curtis B. McWilliams, age 45. Mr. McWilliams has served as Co-Chief
Executive Officer of APF since December 2000 and previously served as Chief
Executive Officer from September 1999 through December 2000. Prior to the
acquisition of the Advisor, Mr. McWilliams served as President of APF from
February 1999 until September 1999. From April 1997 to February 1999, he served
as Executive Vice President of APF. Mr. McWilliams joined CNL Financial Group,
Inc. (formerly CNL Group, Inc.) in April 1997 and served as an Executive Vice
President until September 1999. In addition, Mr. McWilliams served as President
of the Advisor and CNL Financial Services, Inc. from April 1997 until the
acquisition of such entities by APF in September 1999. From September 1983
through March 1997, Mr. McWilliams was employed by Merrill Lynch & Co. The
majority of his career at Merrill Lynch & Co. was in the Investment Banking
division where he served as a Managing Director. Mr. McWilliams received a
B.S.E. in Chemical Engineering from Princeton University in 1977 and a Master of
Business Administration degree with a concentration in finance from the
University of Chicago in 1983.
John T. Walker, age 42. Mr. Walker has served as President of APF since
September 1999 and as Chief Operating Officer since March 1995. Mr. Walker also
served as a board member of CNL Restaurant Property Services, Inc., a subsidiary
of APF from December 1999 until December 2000. Previously, he served as
Executive Vice President of APF from January 1996 to September 1999. Mr. Walker
joined the Advisor in September 1994, as Senior Vice President responsible for
Research and Development. He served as the Chief Operating Officer of the
Advisor from April 1995 until September 1999 and as Executive Vice President
from January 1996 until September 1999, at which time it merged with APF. Mr.
Walker also served as Executive Vice President of CNL Hospitality Properties,
Inc. and CNL Hospitality Corp. (formerly CNL Hospitality Advisors, Inc.) from
1997 to October 1998. From May 1992 to May 1994, he was Executive Vice President
for Finance and Administration and Chief Financial Officer of Z Music, Inc., a
cable television network which was subsequently acquired by Gaylord
Entertainment, where he was responsible for overall financial and administrative
management and planning. From January 1990 through April 1992, Mr. Walker was
Chief Financial Officer of the First Baptist Church in Orlando, Florida. From
April 1984 through December 1989, he was a partner in the accounting firm of
Chastang, Ferrell & Walker, P.A., where he was the partner in charge of audit
and consulting services, and from 1981 to 1984, Mr. Walker was a Senior
Consultant/Audit Senior at Price Waterhouse. Mr. Walker is a cum laude graduate
of Wake Forest University with a Bachelor of Science degree in Accountancy and
is a certified public accountant.
Steven D. Shackelford, age 37. Mr. Shackelford was promoted to Executive Vice
President and Chief Financial Officer of APF in July 2000. He served as Senior
Vice President and Chief Financial Officer of APF since January 1997. Mr.
Shackelford also served as Secretary and Treasurer of APF since September 1999.
He also served as Chief Financial Officer of the Advisor from September 1996 to
September 1999. From March 1995 to July 1996, Mr. Shackelford was a senior
manager in the national office of Price Waterhouse LLP where he was responsible
for advising foreign clients seeking to raise capital and a public listing in
the United States. From August 1992 to March 1995, he was a manager in the
Paris, France office of Price Waterhouse, serving several multi-national
clients. Mr. Shackelford was an audit staff and senior from 1986 to 1992 in the
Orlando, Florida office of Price Waterhouse. Mr. Shackelford received a Bachelor
of Arts degree in Accounting, with honors, and a Master of Business
Administration degree from Florida State University and is a certified public
accountant.
Item 11. Executive Compensation
Other than as described in Item 13, the Partnership has not paid and
does not intend to pay any executive compensation to the General Partners or any
of their affiliates. There are no compensatory plans or arrangements regarding
termination of employment or change of control.
Item 12. Security Ownership of Certain Beneficial Owners and Management
As of March 15, 2001, no person was known to the Registrant to be a
beneficial owner of more than five percent of the Units.
The following table sets forth, as of March 15, 2001, the beneficial
ownership interests of the General Partners in the Registrant.
Title of Class Name of Partner Percent of Class
-------------- --------------- ----------------
General Partnership Interests James M. Seneff, Jr. 45%
Robert A. Bourne 45%
CNL Realty Corporation 10%
--------
100%
========
Neither the General Partners, nor any of their affiliates, owns any
interest in the Registrant, except as noted above.
Item 13. Certain Relationships and Related Transactions
The table below summarizes the types, recipients, methods of
computation and amounts of compensation, fees and distributions paid or payable
by the Partnership to the General Partners and their affiliates for the year
ended December 31, 2000, exclusive of any distributions to which the General
Partners or their affiliates may be entitled by reason of their purchase and
ownership of Units.
Amount Incurred
Type of Compensation For the Year
and Recipient Method of Computation Ended December 31, 2000
- ---------------------------------- -------------------------------------- --------------------------------
Reimbursement to affiliates for Operating expenses are reimbursed at Accounting and administrative
operating expenses the lower of cost or 90 percent of services: $107,794
the prevailing rate at which
comparable services could have been
obtained in the same geographic
area. Affiliates of the General
Partners from time to time incur
certain operating expenses on behalf
of the Partnership for which the
Partnership reimburses the
affiliates without interest.
Annual management fee One percent of the sum of gross $ 42,538
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. The management fee,
which will not exceed competitive
fees for comparable services in the
same geographic area, may or may not
be taken, in whole or in part as to
any year, in the sole discretion of
affiliates.
Amount Incurred
Type of Compensation For the Year
and Recipient Method of Computation Ended December 31, 2000
- --------------------------------- -------------------------------------- ------------------------------
Deferred, subordinated real A deferred, subordinated real estate $-0-
estate disposition fee payable disposition fee, payable upon sale
to affiliates of one or more Properties, in an
amount equal to the lesser of (i)
one-half of a competitive real
estate commission, or (ii) three
percent of the sales price of such
Property or Properties. Payment of
such fee shall be made only if
affiliates of the General Partners
provide a substantial amount of
services in connection with the sale
of a Property or Properties and
shall be subordinated to certain
minimum returns to the Limited
Partners. However, if the net sales
proceeds are reinvested in a
replacement Property, no such real
estate disposition fee will be
incurred until such replacement
Property is sold and the net sales
proceeds are distributed.
General Partners' deferred, A deferred, subordinated share equal $-0-
subordinated share of to one percent of Partnership
Partnership net cash flow distributions of net cash flow,
subordinated to certain minimum
returns to the Limited Partners.
General Partners' deferred, A deferred, subordinated share equal $-0-
subordinated share of to five percent of Partnership
Partnership net sales proceeds distributions of such net sales
from a sale or sales not in proceeds, subordinated to certain
liquidation of the Partnership minimum returns to the Limited
Partners.
Amount Incurred
Type of Compensation For the Year
And Recipient Method of Computation Ended December 31, 2000
- --------------------------------- -------------------------------------- ------------------------------
General Partners' share of Distributions of net sales proceeds $-0-
Partnership net sales proceeds from a sale or sales of
from a sale or sales in substantially all of the
liquidation of the Partnership Partnership's assets will be
distributed in the following order
or priority: (i) first, to pay all
debts and liabilities of the
Partnership and to establish
reserves; (ii) second, to Partners
with positive capital account
balances, determined after the
allocation of net income, net loss,
gain and loss, in proportion to such
balances, up to amounts sufficient
to reduce such balances to zero; and
(iii) thereafter, 95% to the Limited
Partners and 5% to the General
Partners.
The Partnership, with CNL Income Fund VII, Ltd., an affiliate of the General
Partners, acquired an interest in a Bennigan's Property from CNL BB Corp., an
affiliate of the General Partners, for a purchase price of $2,226,134. CNL BB
Corp. had purchased and temporarily held title to this Property in order to
facilitate the acquisition of the Property by the Partnership. The purchase
price paid by the Partnership represents the costs incurred by CNL BB Corp. to
acquire and carry the Property, including closing costs.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) The following documents are filed as part of this report.
1. Financial Statements
Report of Independent Certified Public Accountants
Balance Sheets at December 31, 2000 and 1999
Statements of Income for the years ended December 31, 2000,
1999, and 1998
Statements of Partners' Capital for the years ended December
31, 2000, 1999, and 1998
Statements of Cash Flows for the years ended December 31,
2000, 1999, and 1998
Notes to Financial Statements
2. Financial Statement Schedules
Schedule II -Valuation and Qualifying Accounts for the years
ended December 31, 2000, 1999 and 1998
Schedule III - Real Estate and Accumulated Depreciation at
December 31, 2000
Notes to Schedule III - Real Estate and Accumulated
Depreciation at December 31, 2000
Schedule IV - Mortgage Loan on Real Estate at December31, 2000
All other Schedules are omitted as the required information is
inapplicable or is presented in the financial statements or
notes thereto.
3. Exhibits
3.1 Affidavit and Certificate of Limited Partnership of
CNL Income Fund XII, Ltd. (Included as Exhibit 3.2 to
Registration Statement No. 33-43278-01 on Form S-11
and incorporated herein by reference.)
4.1 Affidavit and Certificate of Limited Partnership of
CNL Income Fund XII, Ltd. (Included as Exhibit 3.2 to
Registration Statement No. 33-43278-01 on Form S-11
and incorporated herein by reference.)
4.2 Amended and Restated Agreement of Limited Partnership
of CNL Income Fund XII, 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 XII,
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 31, 1995,
and incorporated herein by reference.)
10.3 Assignment of Management Agreement from CNL Income
Fund Advisors, Inc. to CNL Fund Advisors, Inc.
(Included as Exhibit 10.3 to Form 10-K filed with the
Securities and Exchange Commission on April 1, 1996,
and incorporated herein by reference.)
(b) The Registrant filed no reports on Form 8-K during the period October
1, 2000 through December 31, 2000.
(c) Not applicable.
(d) The Partnership is required to file audited financial information of
its tenant, Jack in the Box Inc. (formerly Foodmaker, Inc.), and
subsidiaries as a result of the fact that this tenant leased more than
20 percent of the Partnership's total assets for the year ended
December 31, 2000. The summarized financial information presented for
Jack in the Box Inc. and Subsidiaries as of October 1, 2000 and October
3, 1999, and for the fifty-two weeks ended October 1, 2000, the
fifty-three weeks ended October 3, 1999, and the fifty-two weeks ended
September 27, 1998 was obtained from the Form 10-K filed by Jack in the
Box Inc., and Subsidiaries, with the Securities and Exchange
Commission.
Jack in the Box Inc. and Subsidiaries
Selected Financial Data
(In Thousands)
Consolidated Balance Sheet Data: October 1, 2000 October 3, 1999
- ---------------------------------
----------------------- -----------------------
Current Assets $ 99,409 $ 97,234
Noncurrent Assets 807,419 736,410
Current Liabilities 208,472 229,026
Noncurrent Liabilities 382,004 386,781
Fifty-two Weeks Ended Fifty-three Weeks Ended Fifty-two Weeks Ended
Consolidated Statements of Operations
Data: October 1, 2000 October 3, 1999 September 27, 1998
-------------------------- --------------------------- -------------------------
Gross Revenues $ 1,633,312 $ 1,456,899 $ 1,224,056
Costs and Expenses (including taxes) 1,533,048 (1,380,441 ) (1,153,003 )
Extraordinary Item, net of taxes -- -- (4,378 )
-------------------------- --------------------------- -------------------------
Net Earnings $ 100,264 $ 76,458 $ 66,675
========================== =========================== =========================
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on the 29th day of
March, 2001.
CNL INCOME FUND XII, LTD.
By: CNL REALTY CORPORATION
General Partner
/s/ Robert A. Bourne
-----------------------------------
ROBERT A. BOURNE, President
By: ROBERT A. BOURNE
General Partner
/s/ Robert A. Bourne
-----------------------------------
ROBERT A. BOURNE
By: JAMES M. SENEFF, JR.
General Partner
/s/ James M. Seneff, Jr.
-----------------------------------
JAMES M. SENEFF, JR.
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signature Title Date
/s/ Robert A. Bourne President, Treasurer and Director March 29, 2001
- ------------------------------------
Robert A. Bourne (Principal Financial and Accounting
Officer)
/s/ James M. Seneff, Jr. Chief Executive Officer and Director March 29, 2001
- ------------------------------------
James M. Seneff, Jr. (Principal Executive Officer)
CNL INCOME FUND XII, LTD.
(A Florida Limited Partnership)
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
Years Ended December 31, 2000, 1999, and 1998
Additions Deductions
--------------------------------- -------------------------------
Collected
or Deter-
Balance at Charged to Charged to Deemed mined to Balance
Beginning Costs and Other Uncollec- be Col- at End
Year Description of Year Expenses Accounts tible lectible of Year
- ---------- ----------------- -------------- --------------- ---------------- ------------- ------------ ------------
1998 Allowance for
doubtful
accounts (a) $7,482 $ 188,990 $ 36,045 (b) $ -- (c) $ 11,561 $220,956
============== =============== ================ ============= ============ ============
1999 Allowance for
doubtful
accounts (a) $220,956 $ -- $ 14,490 (b) $ 208,727 (c) $ 5,905 $20,814
============== =============== ================ ============= ============ ============
2000 Allowance for
doubtful
accounts (a $ 20,814 $ -- $ 264,253 (b) $ -- (c) $ 93,125 $191,942
============== =============== ================ ============= ============ ============
(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 XII, LTD.
(A Florida Limited Partnership)
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 2000
Costs Capitalized
Subsequent to
Initial Cost Acquisition
----------------------- ------------------
Encum- Buildings and Improve- Carrying
brances Land Improvements ments Costs
--------- ----------- ------------- --------- -------
Properties the Partnership
has Invested in Under
Operating Leases:
Burger King Restaurants:
Valdosta, Georgia - $238,891 $316,670 - -
Natchitoches, Louisiana - 152,329 - 489,366 -
Denny's Restaurants:
St. Ann, Missouri (l) - 338,826 302,975 - -
Phoenix, Arizona - 456,306 - - -
Black Mountain, North Carolina - 260,493 - - -
Blue Springs, Missouri - 497,604 - - -
Columbus, Georgia - 125,818 314,690 - -
Tempe, Arizona - 709,275 - - -
Winter Haven, Florida - 475,084 - - -
Golden Corral Family
Steakhouse Restaurant:
Arlington, Texas - 711,558 1,159,978 - -
Hardee's Restaurants:
Crossville, Tennessee - 290,136 334,350 - -
Toccoa, Georgia - 208,847 - - -
Columbia, Mississippi - 134,810 - - -
Pensacola, Florida - 277,236 - - -
Columbia, South Carolina - 325,674 - - -
Simpsonville, South Carolina - 239,494 - - -
Indian Trail, North Carolina - 298,938 - - -
Clarksville, Georgia - 160,478 415,540 - -
Jack in the Box Restaurants:
Spring, Texas - 564,164 510,639 - -
Houston, Texas - 360,617 659,805 - -
Arlington, Texas - 329,226 716,600 - -
Grapevine, Texas - 471,367 590,988 - -
Rialto, California - 524,251 595,226 - -
Phoenix, Arizona - 294,773 527,466 - -
Petaluma, California - 534,076 800,780 - -
Willis, Texas - 569,077 427,381 - -
Houston, Texas - 368,758 663,022 - -
KFC Restaurant:
Las Cruces, New Mexico - 175,905 - - -
Krystal Restaurant:
Pooler, Georgia - 410,085 598,982 - -
Long John Silver's Restaurants:
Clarksville, Tennessee (k) - 166,283 384,574 - -
El Paso, Texas - 314,270 - - -
Tucson, Arizona - 277,378 245,385 - -
Asheville, North Carolina - 213,536 453,223 - -
Sports Rock Cafe Restaurant:
Tempe, Arizona - 121,831 620,527 55,000 -
Other:
Albany, Georgia - 378,547 - - -
Statesville, North Carolina - 240,870 334,643 30,000 -
----------- ----------- --------- -------
$12,216,811 $10,973,444 $574,366 -
=========== =========== ========= =======
Property of Joint Venture in Which the
Partnership has an 18.61% Interest and
has Invested in Under an Operating Lease:
Jack in the Box Restaurant:
Des Moines, Washington - $322,726 $791,658 - -
=========== =========== ========= =======
Property of Joint Venture in Which the
Partnership has a 31.13% Interest and has
Invested in Under an Operating Lease:
Denny's Restaurant:
Kingsville, Texas (j) - $171,061 $243,326 $99,128 -
=========== =========== ========= =======
Property of Joint Venture in Which the
Partnership has a 87.54% Interest and has
Invested in Under an Operating Lease:
Golden Corral Family
Steakhouse Restaurant:
Middleburg Heights, Ohio - $521,571 - - -
=========== =========== ========= =======
Property of Joint Venture in
Which the Partnership has a
27.72% Interest in Under an
Operating Lease:
Arby's Restaurant:
Columbus, Ohio - $407,096 - $498,684 -
=========== =========== ========= =======
Property of Joint Venture in
Which the Partnership has a
55% Interest in Under an
Operating Lease:
IHOP Restaurant:
Bossier City, Louisiana - $453,016 866,192 - -
=========== =========== ========= =======
Property in Which the Partnership has a
57% Interest and has Invested in as
Tenants-in-Common Under an Operating Lease:
Bennigan's Restaurant:
Colorado Springs, Colorado - $947,120 1,279,013 - -
=========== =========== ========= =======
Properties the Partnership has
Invested in Under Direct
Financing Leases:
Denny's Restaurants:
Phoenix, Arizona - - - 467,545 -
Black Mountain, North Carolina - - 696,851 - -
Blue Springs, Missouri - - - 485,945 -
Cleveland, Tennessee - 158,300 510,479 - -
Tempe, Arizona - - - 491,258 -
Amherst, Ohio - 127,672 169,928 316,796 -
Hardee's Restaurants:
Toccoa, Georgia - - 437,938 - -
Fultondale, Alabama - 173,016 - 636,480 -
Poplarville, Mississippi - 138,020 - 444,485 -
Columbia, Mississippi - - 367,836 - -
Pensacola, Florida - - - 450,193 -
Columbia, South Carolina - - 452,333 - -
Simpsonville, South Carolina - - 517,680 - -
Indian Trail, North Carolina - - 496,110 - -
KFC Restaurant:
Las Cruces, New Mexico - - 224,790 - -
Long John Silver's Restaurants:
Murfreesboro, Tennessee - 174,746 555,186 - -
El Paso, Texas - - - 371,286 -
Chattanooga, Tennessee - 142,627 584,320 - -
Quincy's Restaurant:
Albany, Georgia - - 880,338 - -
Shoney's Restaurants:
Bradenton, Florida - - - 596,374 -
Winter Haven, Florida - - - 758,986 -
----------- ----------- --------- -------
$914,381 $5,893,789 $5,019,348 -
=========== =========== ========= =======
Property of Joint Venture in Which the
Partnership has a 59.05% Interest and has
Invested in Under a Direct Financing Lease:
Hardee's Restaurant:
Williston, Florida - $150,143 - $499,071 -
=========== =========== ========= =======
Property of Joint Venture in Which the
Partnership has an 87.54% Interest and
has Invested in Under a Direct Financing Lease:
Golden Corral Family
Steakhouse Restaurant:
Middleburg Heights, Ohio - - $1,357,288 - -
=========== =========== ========= =======
Gross Amount at Which Life on Which
Carried at Close of Period (c) Depreciation in
- ------------------------------------- Date Latest Income
Buildings and Accumulated of Con- Date Statement is
Land Improvements Total Depreciation struction Acquired Computed
- ------------ ------------- ----------- ------------ --------- -------- -------------
$238,891 $316,670 $555,561 $77,649 1990 08/92 (b)
152,329 489,366 641,695 126,922 1993 12/92 (b)
338,826 302,975 641,801 13,173 1993 11/92 (l)
456,306 (f) 456,306 (f) 1993 11/92 (d)
260,493 (f) 260,493 (f) 1992 12/92 (d)
497,604 (f) 497,604 (f) 1993 12/92 (d)
125,818 314,690 440,508 75,855 1980 01/93 (g)
709,275 (f) 709,275 (f) 1982 02/93 (d)
475,084 (f) 475,084 (f) 1993 05/93 (d)
711,558 1,159,978 1,871,536 312,294 1992 12/92 (b)
290,136 334,350 624,486 89,435 1992 12/92 (b)
208,847 (f) 208,847 (f) 1992 12/92 (d)
134,810 (f) 134,810 (f) 1991 01/93 (d)
277,236 (f) 277,236 (f) 1993 03/93 (d)
325,674 (f) 325,674 (f) 1991 05/93 (d)
239,494 (f) 239,494 (f) 1992 06/93 (d)
298,938 (f) 298,938 (f) 1992 07/93 (d)
160,478 415,540 576,018 102,841 1992 07/93 (b)
564,164 510,639 1,074,803 135,517 1993 01/93 (b)
360,617 659,805 1,020,422 175,105 1993 01/93 (b)
329,226 716,600 1,045,826 190,177 1992 01/93 (b)
471,367 590,988 1,062,355 156,841 1992 01/93 (b)
524,251 595,226 1,119,477 157,966 1992 01/93 (b)
294,773 527,466 822,239 140,513 1992 01/93 (b)
534,076 800,780 1,334,856 212,518 1993 01/93 (b)
569,077 427,381 996,458 112,758 1993 02/93 (b)
368,758 663,022 1,031,780 174,929 1993 02/93 (b)
175,905 (f) 175,905 (f) 1990 03/93 (d)
410,085 598,982 1,009,067 14,143 2000 04/00 (b)
166,283 384,574 550,857 20,561 1993 03/93 (k)
314,270 (f) 314,270 (f) 1993 06/93 (d)
277,378 245,385 522,763 61,223 1992 07/93 (b)
213,536 453,223 666,759 23,684 1993 08/93 (m)
121,831 675,527 797,358 113,047 1988 04/93 (h)
378,547 (f) 378,547 (f) 1991 12/92 (d)
240,870 364,643 605,513 38,304 1993 04/93 (i)
- ------------ ---------- ----------- ----------
$12,216,811 $11,547,810 $23,764,621 $2,525,455
============ ========== =========== ==========
$322,726 $791,658 $1,114,384 $216,673 1992 12/92 (b)
============ ========== =========== ==========
$270,189 $243,326 $513,515 $25,614 1988 10/92 (j)
============ ========== =========== ==========
$521,571 (f) $521,571 (f) 1995 05/96 (d)
============ ===========
$407,096 $498,684 $905,780 $33,938 1998 08/98 (b)
============ ========== =========== ==========
$453,016 $866,192 $1,319,208 $33,414 1998 11/99 (b)
============ ========== =========== ==========
$947,120 $1,279,013 $2,226,133 $17,765 2000 08/00 (b)
============ ========== =========== ==========
- (f) (f) (d) 1993 11/92 (d)
- (f) (f) (d) 1992 12/92 (d)
- (f) (f) (d) 1993 12/92 (d)
(f) (f) (f) (e) 1992 12/92 (e)
- (f) (f) (d) 1982 02/93 (d)
(f) (f) (f) (e) 1987 07/93 (e)
- (f) (f) (d) 1992 12/92 (d)
(f) (f) (f) (e) 1993 12/92 (e)
(f) (f) (f) (e) 1993 01/93 (e)
- (f) (f) (d) 1991 01/93 (d)
- (f) (f) (d) 1993 03/93 (d)
- (f) (f) (d) 1991 05/93 (d)
- (f) (f) (d) 1992 06/93 (d)
- (f) (f) (d) 1992 07/93 (d)
- (f) (f) (d) 1990 03/93 (d)
(f) (f) (f) (e) 1989 02/93 (e)
- (f) (f) (d) 1993 06/93 (d)
(f) (f) (f) (e) 1993 07/93 (e)
- (f) (f) (d) 1991 12/92 (d)
- (f) (f) (d) 1993 12/92 (d)
- (f) (f) (d) 1993 05/93 (d)
(f) (f) (f) (e) 1993 12/92 (e)
- (f) (f) (d) 1995 05/96 (d)
CNL INCOME FUND XII, LTD.
(A Florida Limited Partnership)
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 2000
(a) Transactions in real estate and accumulated depreciation during 2000,
1999, and 1998, are summarized as follows:
Accumulated
Cost Depreciation
---------------- -----------------
Properties the Partnership has Invested in Under
Operating Leases:
Balance, December 31, 1997 $ 22,281,166 $ 1,460,887
Reclassified as operating lease (i) 1,019,673 --
Dispositions (595,872 ) (7,949 )
Depreciation expense -- 342,161
---------------- -----------------
Balance, December 31, 1998 22,704,967 1,795,099
Dispositions (664,199) (10,079 )
Additional costs capitalized 30,000 --
Reclassified to operating lease (k) 837,797 --
Depreciation expense -- 342,717
---------------- -----------------
Balance, December 31, 1999 22,908,565 2,127,737
Acquisition 1,009,067 --
Reclassified to operating lease (l) 302,975 --
Dispositions (455,986 ) --
Depreciation expense -- 397,718
---------------- -----------------
Balance, December 31, 2000 $ 23,764,621 $ 2,525,455
================ =================
Property of Joint Venture in Which the Partnership
has a 18.61% Interest and has Invested in Under an
Operating Lease:
Balance, December 1997 $ 1,114,384 $ 137,508
Depreciation expense -- 26,387
---------------- -----------------
Balance, December 31, 1998 1,114,384 163,895
Depreciation expense -- 26,389
---------------- -----------------
Balance, December 31, 1999 1,114,384 190,284
Depreciation expense -- 26,389
---------------- -----------------
Balance, December 31, 2000 $ 1,114,384 $ 216,673
================ =================
CNL INCOME FUND XII, LTD.
(A Florida Limited Partnership)
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED
DEPRECIATION - CONTINUED
December 31, 2000
Accumulated
Cost Depreciation
---------------- -----------------
Property of Joint Venture in Which the Partnership
has 27.72% Interest and has Invested in Under
Operating Leases:
Balance, December 31, 1997 $ -- $ --
Acquisition 875,702 --
Depreciation expense -- --
---------------- -----------------
Balance, December 31, 1998 $ 875,702 $ --
Acquisition 30,078 --
Depreciation expense -- 17,315
---------------- -----------------
Balance, December 31, 1999 905,780 17,315
Depreciation expense -- 16,623
---------------- -----------------
Balance, December 31, 2000 $ 905,780 $ 33,938
================ =================
Property of Joint Venture in Which the Partnership
has a 31.13% Interest and has Invested in Under an
Operating Lease:
Balance, December 31, 1997 $ 270,189 $ --
Depreciation Expense (d) -- --
---------------- -----------------
Balance, December 31, 1998 270,189 --
Reclassification to operating lease 243,326 --
Depreciation expense (j) -- 12,807
---------------- -----------------
Balance, December 31, 1999 513,515 12,807
Depreciation expense (j) -- 12,807
---------------- -----------------
Balance, December 31, 2000 $ 513,515 $ 25,614
================ =================
CNL INCOME FUND XII, LTD.
(A Florida Limited Partnership)
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED
DEPRECIATION - CONTINUED
December 31, 2000
Accumulated
Cost Depreciation
---------------- -----------------
Property of Joint Venture in Which the Partnership
has a 87.54% Interest and has Invested in Under an
Operating Lease:
Balance, December 31, 1997 $ 521,571 $ --
Depreciation expense (d) -- --
---------------- -----------------
Balance, December 31, 1998 521,571 --
Depreciation expense (d) -- --
---------------- -----------------
Balance, December 31, 1999 521,571 --
Depreciation expense (d) -- --
---------------- -----------------
Balance, December 31, 2000 $ 521,571 $ --
================ =================
Property of Joint Venture in Which the Partnership
has a 55% Interest and has Invested in Under an
Operating Lease:
Balance, December 31, 1998 $ -- $ --
Acquisition 1,319,208 --
Depreciation expense -- 4,541
---------------- -----------------
Balance, December 31, 1999 1,319,208 4,541
Depreciation expense -- 28,873
---------------- -----------------
Balance, December 31, 2000 $ 1,319,208 $ 33,414
================ =================
Property in Which the Partnership has a 57% Interest
and has Invested in Under an Operating Lease:
Balance, December 31, 1999 $ -- $ --
Acquisition 2,226,133 --
Depreciation expense -- 17,765
---------------- -----------------
Balance, December 31, 2000 $ 2,226,133 $ 17,765
================ =================
CNL INCOME FUND XII, LTD.
(A Florida Limited Partnership)
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED
DEPRECIATION - CONTINUED
December 31, 2000
(b) Depreciation expense is computed for buildings and improvements based
upon estimated lives of 30 years.
(c) As of December 31, 2000, the aggregate cost of the Properties owned by
the Partnership and joint ventures for federal income tax purposes was
$34,243,130 and $8,846,564, respectively. All of the leases are treated
as operating leases for federal income tax purposes.
(d) For financial reporting purposes, the portion of the lease relating to
the building has been recorded as a direct financing lease. The cost of
the building has been included in net investment in direct financing
leases; therefore, depreciation is not applicable.
(e) For financial reporting purposes, the lease for the land and building
has been recorded as a direct financing lease. The cost of the land and
building has been included in net investment in direct financing
leases; therefore, depreciation is not applicable.
(f) For financial reporting purposes, certain components of the lease
relating to land and building have been recorded as a direct financing
lease. Accordingly, costs relating to these components of this lease
are not shown.
(g) Effective January 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 29
years.
(h) Effective July 1996, the lease for this Property terminated, resulting
in the lease being reclassified as an operating lease. The land and
building were recorded at net book value and the building is being
depreciated over its remaining estimated life of approximately 27
years.
(i) Effective June 1998, the lease for this Property was amended, resulting
in a reclassification of the building portion of the lease to an
operating lease. The building was recorded at net book value and
depreciated over its remaining estimated life of approximately 25
years.
(j) For financial reporting purposes, the undepreciated cost of the
Property in Kingsville, Florida, was reduced to its estimated net
realizable value due to an anticipated impairment in value. The
Partnership recognized the impairment by recording an allowance for
loss assets in the amount of $316,113 during 1998. The impairment at
December 31, 1998, represented the difference between the Property's
carrying value and the estimated net realizable value of the Property.
During 1999, the joint venture re-leased the Property to a new tenant,
resulting in the reclassification of the building portion of the lease
as an operating lease. The building was recorded at net book value and
depreciated over the remaining life of approximately 19 years. The cost
of the Property presented on this schedule is the gross amount at which
the Property was carried at December 31, 2000, excluding the allowance
for loss on assets.
CNL INCOME FUND XII, LTD.
(A Florida Limited Partnership)
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED
DEPRECIATION - CONTINUED
December 31, 2000
(k) Effective October 1999, the lease for this Property was amended,
resulting in the reclassification of the building portion of the lease
as an operating lease. The building was recorded at net book value and
depreciated over its remaining estimated life of approximately 23
years.
(l) Effective January 2000, the lease for this Property was amended,
resulting in the reclassification of the building portion of the lease
as an operating lease. The building was recorded at net book value and
depreciated over its remaining estimated life of approximately 23
years.
CNL INCOME FUND XII, LTD.
(A Florida Limited Partnership)
SCHEDULE IV - MORTGAGE LOANS ON REAL ESTATE
December 31, 2000
Principal
Amount
of Loans
Subject to
Carrying Delinquent
Final Periodic Face Amount of Principal or
Interest Maturity Payment Prior Amount of Mortgages Description
Rate Date Terms Liens Mortgages (1) Interest
---------- ----------------- ----------- ----------- -------------- ------------- ---------------
Long John Silver
Morganton, NC
First Mortgage 10.25% May 2004 (2) $ -- $ 55,000 $ 45,375 $ --
=========== ============== ============= ===========
(1) The tax carrying value of the note is $45,375.
(2) Monthly payments of $1,175 consisting of principal and interest at an
annual rate of 10.25%.
(3) The changes in the carrying amounts are summarized as follows:
2000 1999 1998
--------------- ---------------- ----------------
Balance at beginning of period $ 51,301 $ -- $ --
New mortgage loan -- 55,000 --
Interest earned 4,652 3,353 --
Collection of principal and interest (10,578 ) (7,052 ) --
--------------- ---------------- ----------------
Balance at end of period $ 45,375 $ 51,301 $ --
=============== ================ ================
EXHIBITS
EXHIBIT INDEX
Exhibit Number
3.1 Affidavit and Certificate of Limited Partnership of CNL Income
Fund XII, Ltd. (Included as Exhibit 3.2 to Registration
Statement No. 33-43278-01 on Form S-11 and incorporated herein
by reference.)
4.1 Affidavit and Certificate of Limited Partnership of CNL Income
Fund XII, Ltd. (Included as Exhibit 3.2 to Registration
Statement No. 33-43278-01 on Form S-11 and incorporated herein
by reference.)
4.2 Amended and Restated Agreement of Limited Partnership of CNL
Income Fund XII, 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 XII, 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 31, 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.)