FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT of 1934
For the quarterly period ended June 30, 2002
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OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT of 1934
For the transition period from ______________________ to ____________________
Commission file number
0-26218
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CNL Income Fund XVI, Ltd.
- -----------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Florida 59-3198891
- -------------------------------- -------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
450 South Orange Ave.
Orlando, Florida 32801 - 3336
- -------------------------------- -------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number
(including area code) (407) 540-2000
-------------------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No _________
CONTENTS
Part I Page
----
Item 1. Financial Statements:
Condensed Balance Sheets 1
Condensed Statements of Income 2
Condensed Statements of Partners' Capital 3
Condensed Statements of Cash Flows 4
Notes to Condensed Financial Statements 5-7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8-11
Item 3. Quantitative and Qualitative Disclosures About
Market Risk 11
Part II
Other Information 12
CNL INCOME FUND XVI, LTD.
(A Florida Limited Partnership)
CONDENSED BALANCE SHEETS
June 30, December 31,
2002 2001
------------------ -------------------
ASSETS
Land and buildings on operating leases, net $ 25,708,332 $ 24,546,795
Net investment in direct financing leases 2,691,141 2,713,964
Real estate held for sale 151,165 1,544,807
Investment in joint ventures 3,458,794 3,248,973
Cash and cash equivalents 1,246,276 774,673
Receivables, less allowance for doubtful accounts
of $90,774 and $755,431, respectively 25,989 61,512
Accrued rental income, less allowance for doubtful accounts of
$12,753 and $48,919, respectively 1,465,102 1,382,581
Other assets 37,374 32,097
------------------ -------------------
$ 34,784,173 $ 34,305,402
================== ===================
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 3,840 $ 9,022
Real estate taxes payable 21,115 36,398
Distributions payable 900,000 900,000
Due to related parties 19,848 17,331
Rents paid in advance and deposits 35,117 50,039
------------------ -------------------
Total liabilities 979,920 1,012,790
Commitment (Note 7)
Partners' capital 33,804,253 33,292,612
------------------ -------------------
$ 34,784,173 $ 34,305,402
================== ===================
See accompanying notes to condensed financial statements.
CNL INCOME FUND XVI, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF INCOME
Quarter Ended Six Months Ended
June 30, June 30,
2002 2001 2002 2001
-------------- ------------- --------------- ---------------
Revenues:
Rental income from operating leases $ 1,271,848 $ 646,620 $ 2,015,509 $ 1,298,365
Earned income from direct financing leases 75,244 60,570 150,813 145,534
Interest and other income 33,316 25,777 42,269 42,759
-------------- ------------- --------------- ---------------
1,380,408 732,967 2,208,591 1,486,658
-------------- ------------- --------------- ---------------
Expenses:
General operating and administrative 66,907 85,144 140,297 236,322
Property expenses 5,972 180,894 22,300 227,236
Management fees to related party 14,507 6,199 23,861 14,160
Other taxes 2,991 1,423 19,699 33,194
Depreciation and amortization 124,604 129,705 246,643 260,708
Provision for write-down of assets -- 58,285 -- 262,361
-------------- ------------- --------------- ---------------
214,981 461,650 452,800 1,033,981
-------------- ------------- --------------- ---------------
Income (Loss) Before Gain on Sale of Assets and
Equity in Earnings of Joint Ventures 1,165,427 271,317 1,755,791 452,677
Gain on Sale of Assets -- -- -- 281,058
Equity in Earnings of Joint Ventures 75,646 47,716 150,801 97,030
-------------- ------------- --------------- ---------------
Income from Continuing Operations 1,241,073 319,033 1,906,592 830,765
-------------- ------------- --------------- ---------------
Discontinued Operations (Note 6):
Income (Loss) from discontinued operation, net 3,940 (39,822 ) 22,678 3,038
Gain on disposal of discontinued operations, net 382,371 (382,366 ) 382,371 (382,366 )
-------------- ------------- --------------- ---------------
386,311 (422,188 ) 405,049 (379,328 )
-------------- ------------- --------------- ---------------
Net Income (Loss) $ 1,627,384 $ (103,155 ) $ 2,311,641 $ 451,437
============== ============= =============== ===============
Net Income (Loss) Per Limited Partner Unit
Continuing $ 0.28 $ 0.07 $ 0.42 $ 0.18
Discontinued 0.08 (0.09 ) 0.09 (0.08 )
-------------- ------------- --------------- ---------------
Total $ 0.36 $ (0.02 ) $ 0.51 $ 0.10
============== ============= =============== ===============
Weighted Average Number of Limited Partner
Units Outstanding 4,500,000 4,500,000 4,500,000 4,500,000
============== ============= =============== ===============
See accompanying notes to condensed financial statements.
CNL INCOME FUND XVI, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF PARTNERS' CAPITAL
Six Months Ended Year Ended
June 30, December 31,
2002 2001
--------------------- -----------------
General partners:
Beginning balance $ 160,017 $ 160,017
Net income -- --
--------------------- -----------------
160,017 160,017
--------------------- -----------------
Limited partners:
Beginning balance 33,132,595 36,592,727
Net income 2,311,641 139,868
Distributions ($0.40 and $0.80 per limited
partner unit, respectively) (1,800,000 ) (3,600,000 )
--------------------- -----------------
33,644,236 33,132,595
--------------------- -----------------
Total partners' capital $ 33,804,253 $ 33,292,612
===================== =================
See accompanying notes to condensed financial statements.
CNL INCOME FUND XVI, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF CASH FLOWS
Six Months Ended
June 30,
2002 2001
----------------- ----------------
Increase (Decrease) in Cash and Cash Equivalents
Net Cash Provided by Operating Activities $ 2,126,023 $ 1,476,601
----------------- ----------------
Cash Flows from Investing Activities:
Proceeds from sale of assets 1,773,729 1,145,045
Addition to land and buildings on operating
leases (1,406,745 ) --
Investment in joint ventures (210,757 ) (1,134,117 )
Other (10,647 ) --
----------------- ----------------
Net cash provided by investing activities 145,580 10,928
----------------- ----------------
Cash Flows from Financing Activities:
Distributions to limited partners (1,800,000 ) (1,800,000 )
----------------- ----------------
Net cash used in financing activities (1,800,000 ) (1,800,000 )
----------------- ----------------
Net Increase (Decrease) in Cash and Cash Equivalents 471,603 (312,471 )
Cash and Cash Equivalents at Beginning of Period 774,673 1,081,650
----------------- ----------------
Cash and Cash Equivalents at End of Period $ 1,246,276 $ 769,179
================= ================
Supplemental Schedule of Non-Cash Financing
Activities:
Distributions declared and unpaid at end of
period $ 900,000 $ 900,000
================= ================
See accompanying notes to condensed financial statements.
CNL INCOME FUND XVI, LTD.
(A Florida Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS
Quarters and Six Months Ended June 30, 2002 and 2001
1. Basis of Presentation:
The accompanying unaudited condensed financial statements have been
prepared in accordance with the instructions to Form 10-Q and do not
include all of the information and note disclosures required by
generally accepted accounting principles. The financial statements
reflect all adjustments, consisting of normal recurring adjustments,
which are, in the opinion of management, necessary to a fair statement
of the results for the interim periods presented. Operating results for
the quarter and six months ended June 30, 2002, may not be indicative
of the results that may be expected for the year ending December 31,
2002. Amounts as of December 31, 2001, included in the financial
statements, have been derived from audited financial statements as of
that date.
These unaudited financial statements should be read in conjunction with
the financial statements and notes thereto included in Form 10-K of CNL
Income Fund XVI, Ltd. (the "Partnership") for the year ended December
31, 2001.
Effective January 1, 2002, the Partnership adopted Statement of
Financial Accounting Standards No. 144 "Accounting for the Impairment
or Disposal of Long-Lived Assets." This statement requires that a
long-lived asset be tested for recoverability whenever events or
changes in circumstances indicate that its carrying amount may not be
recoverable. The carrying amount of a long-lived asset is not
recoverable if it exceeds the sum of the undiscounted cash flows
expected to result from the use and eventual disposition of the asset.
The assessment is based on the carrying amount of the asset at the date
it is tested for recoverability. An impairment loss is recognized when
the carrying amount of a long-lived asset exceeds its fair value. If an
impairment is recognized, the adjusted carrying amount of a long-lived
asset is its new cost basis. The statement also requires that the
results of operations of a component of an entity that either has been
disposed of or is classified as held for sale be reported as a
discontinued operation if the disposal activity was initiated
subsequent to the adoption of the Standard.
2. Reclassification:
Certain items in the prior years' financial statements have been
reclassified to conform to 2002 presentation. These reclassifications
had no effect on total partners' capital or net income.
3. Land and Buildings on Operating Leases:
In June 2002, the Partnership reinvested a portion of the net sales
proceeds from the sale of the property in Mesquite, Texas and the
majority of the net sales proceeds from the sale of the property in
Rancho Cordova, California in a property in Austin, Texas at an
approximate cost of $1,406,700. The Partnership acquired this property
from CNL Funding 2001-A, LP, an affiliate of the general partners (see
Note 5).
4. Investment in Joint Ventures:
In June 2002, the Partnership reinvested a portion of the net sales
proceeds from the sale of the property in Mesquite, Texas, in a joint
venture arrangement, Arlington Joint Venture, with CNL Income Fund VII,
Ltd., an affiliate of the general partners. The joint venture acquired
a property in Arlington, Texas from CNL Funding 2001-A, LP, an
affiliate of the general partners (see Note 5). The Partnership and CNL
Income Fund VII, Ltd. entered into an agreement whereby each
co-venturer will share in the profits and losses of the property in
proportion to its applicable percentage interest. As of June 30, 2002,
the Partnership had contributed approximately $210,800 for a 21%
interest in this joint venture.
CNL INCOME FUND XVI, LTD.
(A Florida Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS
Quarters and Six Months Ended June 30, 2002 and 2001
4. Investment in Joint Ventures - Continued:
As of June 30, 2002, Columbus Joint Venture, TGIF Pittsburgh Joint
Venture, and Arlington Joint Venture, each owned and leased one
property to operators of fast-food or family-style restaurants. In
addition, the Partnership and affiliates, as three separate
tenants-in-common, each owned and leased one property to operators of
fast-food or family-style restaurants. The following presents the
combined, condensed financial information for the joint ventures at:
June 30, December 31,
2002 2001
------------ ---------------
Land and buildings on operating leases, net $7,864,169 $ 6,921,194
Cash 15,022 11,544
Accrued rental income 294,061 246,192
Other assets 1,145 1,160
Liabilities 23,343 23,698
Partners' Capital 8,151,054 7,156,392
Quarter Ended June 30, Six Months Ended June 30,
2002 2001 2002 2001
----------- ------------ ------------- --------------
Revenues $ 207,783 $ 165,268 $ 413,908 $ 332,371
Expenses (38,728 ) (30,304 ) (76,594 ) (60,155 )
----------- ------------ ------------- --------------
Net Income $ 169,055 $ 134,964 $ 337,314 $ 272,216
=========== ============ ============= ==============
The Partnership recognized income of $150,801 and $97,030 during the
six months ended June 30, 2002 and 2001, respectively, of which $75,646
and $47,716 was earned during the quarters ended June 30, 2002 and
2001, respectively, from these joint ventures and tenants-in-common.
5. Related Party Transactions:
In June 2002, the Partnership acquired a property, in Austin, Texas,
from CNL Funding 2001-A, LP, for a purchase price of approximately
$1,406,700 (see Note 3). In addition, in June 2002, the Partnership
invested in Arlington Joint Venture with CNL Income Fund VII, Ltd.
Arlington Joint Venture acquired a property in Arlington, Texas, from
CNL Funding 2001-A, LP, for a purchase price of approximately
$1,003,600 (see Note 4). CNL Funding 2001-A, LP is an affiliate of the
general partners. CNL Funding 2001-A, LP had purchased and temporarily
held title to the properties in order to facilitate the acquisition of
the properties by the Partnership. The purchase price paid by the
Partnership and the joint venture represented the costs incurred by CNL
Funding 2001-A, LP to acquire the properties, including closing costs.
CNL INCOME FUND XVI, LTD.
(A Florida Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS
Quarters and Six Months Ended June 30, 2002 and 2001
6. Discontinued Operations:
In March 2002, the Partnership sold its Denny's property in Mesquite,
Texas, to an unrelated third party for $475,000 and received net sales
proceeds of approximately $448,700. Due to the fact that the
Partnership had recorded provisions for write-down of assets in
previous years, no gain or loss on disposal of discontinued operations
was recorded during the quarter and six months ended June 30, 2002
relating to this sale.
In June 2002, the Partnership sold its Jack in the Box property in
Rancho Cordova, California, to an unrelated third party for
approximately $1,363,400 and received net sales proceeds of
approximately $1,325,100, resulting in a gain on disposal of
discontinued operations of approximately $402,600 during the quarter
and six months ended June 30, 2002.
In June 2002, the Partnership entered into an agreement with an
unrelated third party to sell the Denny's property in Bucyrus, Ohio. As
a result, the Partnership reclassified the asset from land and building
on operating leases to real estate held for sale. The reclassified
asset was recorded at the lower of its carrying amount or fair value,
less cost to sell. In addition, the Partnership stopped recording
depreciation once the property was placed up for sale. On August 5,
2002, the Partnership sold this property (see Note 8). In connection
with the anticipated sale of the property, the Partnership recorded a
loss on disposal of assets of $20,262 during the quarter and six months
ended June 30, 2002. The financial results for these three properties
are reflected as Discontinued Operations in the accompanying financial
statements.
The operating results of the discontinued operations for the above
properties are as follows:
Quarter Ended June 30, Six Months Ended June 30,
2002 2001 2002 2001
------------- -------------- --------------- --------------
Rental revenues $ 17,606 $ 21,292 $ 42,364 $ 62,310
Interest and other income -- -- 1,963 35,532
Expenses (13,666 ) (61,114 ) (21,649 ) (94,804 )
Gain (loss) on disposal of assets 382,371 (382,366 ) 382,371 (382,366 )
------------- -------------- --------------- --------------
Income (loss) from discontinued
operations $ 386,311 $ (422,188 ) $ 405,049 $ (379,328 )
============= ============== =============== ==============
7. Commitment:
During 2002, the Partnership entered into an agreement with an
unrelated third party to sell the Denny's property in Bucyrus, Ohio
(see Notes 6 and 8).
8. Subsequent Event:
On August 5, 2002, the Partnership sold its property in Bucyrus, Ohio
for $156,200 and received net sales proceeds of approximately $144,900,
resulting in a loss on disposal of assets of $20,262, which the
Partnership recorded at June 30, 2002.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
CNL Income Fund XVI, Ltd. (the "Partnership") is a Florida limited
partnership that was organized on September 2, 1993, to acquire for cash, either
directly or through joint venture arrangements, both newly constructed and
existing restaurant properties, as well as land upon which restaurants were to
be constructed (the "Properties"), which are leased primarily to operators of
national and regional fast-food and family-style restaurant chains. The leases
are generally triple-net leases, with the lessee responsible for all repairs and
maintenance, property taxes, insurance and utilities. As of June 30, 2001, the
Partnership owned 38 Properties directly and five Properties indirectly through
joint venture or tenancy in common arrangements. As of June 30, 2002, the
Partnership owned 36 Properties, directly and six Properties indirectly through
joint venture or tenancy in common arrangements.
Capital Resources
The Partnership's primary source of capital for the six months ended
June 30, 2002 and 2001 was cash from operating activities (which includes cash
received from tenants, distributions from joint ventures, and interest and other
income received, less cash paid for expenses). Cash from operating activities
was $2,126,023 and $1,476,601 for the six months ended June 30, 2002 and 2001,
respectively. The increase in cash from operating activities during the six
months ended June 30, 2002, as compared to the six months ended June 30, 2001,
was primarily a result of changes in the Partnership's working capital and
changes in income and expenses, as described in "Results of Operations."
Other sources and uses of capital included the following during the six
months ended June 30, 2002.
In March 2002, the Partnership sold its Property in Mesquite, Texas, to
an unrelated third party for $475,000 and received net sales proceeds of
approximately $448,700. Due to the fact that the Partnership had recorded
provisions for write-down of assets in previous years, no gain or loss was
recorded during the quarter ended March 31, 2002 relating to this sale.
In June 2002, the Partnership sold the Jack in the Box Property in
Rancho Cordova, California, to an unrelated third party for approximately
$1,363,400 and received net sales proceeds of approximately $1,325,100,
resulting in a gain on disposal of discontinued operations of approximately
$402,600 during the quarter and six months ended June 30, 2002.
In June 2002, the Partnership reinvested a portion of the net sales
proceeds from the sale of the property in Mesquite, Texas and the majority of
the net sales proceeds from the sale of the property in Rancho Cordova,
California in a Property in Austin, Texas at an approximate cost of $1,510,200.
In June 2002, the Partnership reinvested approximately $210,800 of the
remaining proceeds from the sale of the Property in Mesquite, Texas, in a joint
venture arrangement, Arlington Joint Venture, with CNL Income Fund VII, Ltd., a
Florida limited partnership and an affiliate of the general partners. The joint
venture acquired a Property in Arlington, Texas at an approximate cost of
$1,003,600.
The Partnership and the joint venture acquired the Properties from CNL
Funding 2001-A, LP, a Delaware limited partnership and an affiliate of the
general partners. CNL Funding 2001-A, LP had purchased and temporarily held
title to the Properties in order to facilitate the acquisition of the Properties
by the Partnership. The purchase prices paid by the Partnership and the joint
venture represented the costs incurred by CNL Funding 2001-A, LP to acquire the
Properties, including closing costs. The general partners believe that this
transaction, or a portion thereof, relating to the sale of the Property in
Rancho Cordova, California and the reinvestment of the net sales proceeds,
described above, will qualify as a like-kind transaction for federal income tax
purposes. The Partnership anticipates its distributions will be 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 these
transactions.
Currently, rental income from the Partnership's Properties and any 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 90-day maturity date, pending the Partnership's use of such funds to pay
Partnership expenses or to make distributions to the partners. At June 30, 2002,
the Partnership had $1,246,276 invested in such short-term investments, as
compared to $774,673 at December 31, 2001. Cash and cash equivalents increased
during the six months ended June 30, 2002, primarily as a result of receipts of
accounts receivable from December 31, 2001. The funds remaining at June 30,
2002, will be used to pay distributions and other liabilities.
During the six months ended June 30, 2002, the Partnership entered into
an agreement with an unrelated third party to sell the Denny's Property in
Bucyrus, Ohio. The Partnership reclassified the assets relating to this Property
to real estate held for sale. On August 5, 2002, the Partnership sold its
Property in Bucyrus, Ohio for $156,200 and received net sales proceeds of
approximately $144,900, resulting in a loss on disposal of assets of $20,262,
which the Partnership recorded at June 30, 2002. The Partnership intends to
reinvest these proceeds in an additional Property.
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.
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 operating expenses of the Partnership. Based on current
and, for the six months ended June 30, 2001, a loan from the corporate general
partner, the Partnership declared distributions to limited partners of
$1,800,000 for each of the six months ended June 30, 2002 and 2001 ($900,000 for
each of the quarters ended June 30, 2002 and 2001). This represents
distributions of $0.40 per unit for each of the six months ended June 30, 2002
and 2001, ($0.20 for each applicable quarter). No distributions were made to the
general partners for the quarters and six months ended June 30, 2002 and 2001.
No amounts distributed to the limited partners for the six months ended June 30,
2002 and 2001 are required to be or have been treated by the Partnership as a
return of capital for purposes of calculating the limited partners' return on
their adjusted capital contributions. The Partnership intends to continue to
make distributions of cash available for distribution to the limited partners on
a quarterly basis.
Total liabilities of the Partnership, including distributions payable,
were $979,919 at June 30, 2002, as compared to $1,012,790 at December 31, 2001.
The decrease in total liabilities was primarily due to a decrease in rents paid
in advance and security deposits at June 30, 2002, as compared to December 31,
2001. The general partners believe that the Partnership has sufficient cash on
hand to meet its current working capital needs.
Long-Term Liquidity
The Partnership has no long-term debt or other long-term liquidity
requirements.
Results of Operations
Total rental revenues were $2,166,322 for the six months ended June 30,
2002, as compared to $1,443,899 for the same period of 2001, of which $1,347,092
and $707,190 were earned during the second quarter of 2002 and 2001,
respectively. Rental revenues were lower during the quarter and six months ended
June 30, 2001 as compared to the same periods of 2002, due to the fact that in
March 2001, the Partnership stopped recording rental revenues relating to four
Denny's Properties because the tenant, Phoenix Restaurant Group, Inc. ("PRG")
was experiencing financial difficulties and ceased rental payments. In October
2001, PRG filed for bankruptcy and rejected two of the four leases it had with
the Partnership. In March 2002, the Partnership sold one of the vacant
Properties, as described above in "Capital Resources." The Partnership will not
recognize any rental revenues from the remaining vacant Property until the
Property is re-leased or the Property is sold and the proceeds are reinvested in
an additional Property. The lost revenues resulting from the remaining vacant
Property will have an adverse effect on the results of operation of the
Partnership if the Partnership is not able to re-lease or sell the Property in a
timely manner. The general partners are currently seeking a replacement tenant
for the vacant Property. Rental revenues were higher during the quarter and six
months ended June 30, 2002 as compared to the same periods of 2001, due to the
fact that during the quarter and six months ended June 30, 2002, the Partnership
received payment of past due rents relating to the two Properties not rejected
by PRG. The Partnership assigned the leases relating to these Properties to a
new tenant.
In addition, the increase in rental revenues during the quarter and six
months ended June 30, 2002, as compared to the same periods of 2001, was
partially due to the acquisition of two Properties, one in December 2001 and one
in June 2002. The tenant of the Las Vegas, Nevada Property vacated the Property
and ceased restaurant operations during the first quarter of 2001. Rental
revenues are expected to remain at reduced amounts while equity in earnings of
joint ventures is expected to increase due to the fact that in June 2001 and
June 2002 the Partnership reinvested the net sales proceeds from the 2001 sale
of the Property in Marana, Arizona and a portion of the net sales proceeds from
the 2002 sale of the Property in Mesquite, Texas in a Property with an affiliate
of the general partners, as tenants in common and in a joint venture
arrangement, Arlington Joint Venture, as described above in "Capital Resources".
During the six months ended June 30, 2002 and 2001, the Partnership
earned net income from joint ventures of $150,801 and $97,030, respectively,
$75,646 and $47,716 of which was earned during the quarters ended June 30, 2002
and 2001, respectively. The increase in net income earned by joint ventures
during the quarter and six months ended June 30, 2002, as compared to the same
periods of 2001, was primarily due to the fact that in June 2001, the
Partnership reinvested the net sales proceeds it received from the 2001 sale of
the Property in Marana, Arizona in a Property in Walker, Louisiana, with an
affiliate of the general partners, as tenants-in-common. In addition, in June
2002, the Partnership reinvested a portion of the net sales proceeds from the
sale of the Property in Marana, Arizona in a joint venture arrangement,
Arlington Joint Venture, as described above in "Capital Resources".
Operating expenses, including depreciation and amortization expense and
provision for write-down of assets were $452,800 and $1,033,981, for the six
months ended June 30, 2002 and 2001, respectively, of which $214,981 and
$461,650 were incurred during the quarters ended June 30, 2002 and 2001,
respectively. Operating expenses were higher during the quarter and six months
ended June 30, 2001, as compared to the same periods of 2002, due to the fact
that during the quarter and six months ended June 30, 2001, the Partnership
recorded provisions for write-down of assets of $58,285 and $262,361,
respectively, relating to the Properties leased by PRG and the vacant Property
in Las Vegas, Nevada. The provisions represented the difference between each
Property's carrying value and its fair value. As of June 30, 2002, the
Partnership had two remaining vacant Properties. In June 2002, the Partnership
entered into an agreement with an unrelated third party to sell the Property in
Bucyrus, Ohio, as described below, and is seeking a replacement tenant for the
other Property.
In addition, the decrease in operating expenses during the quarter and
six months ended June 30, 2002, was partially due to the fact that during 2002
and 2001, the Partnership incurred Property related expenses, such as legal
fees, repairs and maintenance, insurance and real estate taxes relating to
vacant Properties. Between November 2001 and June 2002, the Partnership sold
three of its vacant Properties. The Partnership did not incur any additional
expenses relating to these Properties after the sale of the Properties had
occurred.
In addition, the decrease in operating expenses during the quarter and
six months ended June 30, 2002, was partially due to a decrease in the costs
incurred for administrative expenses for servicing the Partnership and its
Properties and a decrease in the amount of state tax expense relating to several
states in which the Partnership conducts business.
Effective January 1, 2002, the Partnership adopted Statement of
Financial Accounting Standards No. 144 "Accounting for the Impairment or
Disposal of Long-Lived Assets." This statement requires that a long-lived asset
be tested for recoverability whenever events or changes in circumstances
indicate that its carrying amount may not be recoverable. The carrying amount of
a long-lived asset is not recoverable if it exceeds the sum of the undiscounted
cash flows expected to result from the use and eventual disposition of the
asset. The assessment is based on the carrying amount of the asset at the date
it is tested for recoverability. An impairment loss is recognized when the
carrying amount of a long-lived asset exceeds its fair value. If an impairment
is recognized, the adjusted carrying amount of a long-lived asset is its new
cost basis. The statement also requires that the results of operations of a
component of an entity that either has been disposed of or is classified as held
for sale be reported as a discontinued operation if the disposal activity was
initiated subsequent to the adoption of the Standard.
As a result of the 2001 sale of the Property in Marana, Arizona, the
Partnership recognized a gain of $281,058, during the six months ended June 30,
2001.
In January 2002, the Partnership entered into an agreement with an
unrelated third party to sell the Jack in the Box Property in Rancho Cordova,
California. In June 2002, the Partnership sold this Property and recognized a
gain on disposal of discontinued operations of approximately $402,600 during the
quarter and six months ended June 30, 2002. In addition, during the six months
ended June 30, 2002, the Partnership sold one of its vacant PRG Properties, as
described above, and used a portion of the proceeds from the sale to reinvest in
an income producing Property. Due to the fact that the Partnership had recorded
provisions for write-down of assets in previous years, no gain or loss on
disposal of discontinued operations was recorded during the six months ended
June 30, 2002 relating to this sale. During 2002, the Partnership entered into
an agreement with an unrelated third party to sell the Denny's property in
Bucyrus, Ohio. On August 5, 2002, the Partnership sold this Property, as
described above in "Capital Resources." The Partnership expects to use the
proceeds from the sale to reinvest in an income producing Property. In
accordance with Statement of Financial Accounting Standards No. 144, "Accounting
for the Impairment or Disposal of Long-Lived Assets," the Partnership
reclassified the asset from land and building on operating leases to real estate
held for sale. The Partnership recorded the reclassified asset at the lower of
its carrying amount or fair value, less cost to sell, which resulted in a loss
on disposal of assets of $20,262 during the quarter and six months ended June
30, 2002. During the quarter and six months ended June 30, 2001, the Partnership
recorded a loss on disposal of assets of $382,366 relating to this Property. The
loss represented the difference between the Property's carrying value and its
fair value. In addition, during the six months ended June 30, 2002, the
Partnership stopped recording depreciation upon placing the Property up for
sale. The Partnership recognized net rental income (rental revenues less
Property related expenses), of $22,678 and $3,038 during the six months ended
June 30, 2002 and 2001, respectively, of which, income of $3,940 and a loss of
$39,822 were recorded during the quarters ended June 30, 2002 and 2001,
respectively, relating to these Properties. In June 2002, the Partnership
reinvested the majority of the net sales proceeds from the two sales in a
Property in Austin, Texas and used the remaining proceeds to invest in Arlington
Joint Venture, as described above in "Capital Resources".
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings. Inapplicable.
------------------
Item 2. Changes in Securities. Inapplicable.
--------------------------
Item 3. Default upon Senior Securities. Inapplicable.
-------------------------------
Item 4. Submission of Matters to a Vote of Security Holders. Inapplicable.
----------------------------------------------------
Item 5. Other Information. Inapplicable.
------------------
Item 6. Exhibits and Reports on Form 8-K.
---------------------------------
(a) Exhibits
3.1 Affidavit and Certificate of Limited Partnership of
CNL Income Fund XVI, Ltd. (Included as Exhibit 3.2
to Registration Statement No. 33-69968-01 on Form
S-11 and incorporated herein by reference.)
4.1 Affidavit and Certificate of Limited Partnership of
CNL Income Fund XVI, Ltd. (Included as Exhibit 3.2
to Registration Statement No. 33-69968-01 on Form
S-11 and incorporated herein by reference.)
4.2 Amended and Restated Agreement of Limited
Partnership of CNL Income Fund XVI, Ltd. (Included
as Exhibit 4.2 to Form 10-K filed with the
Securities and Exchange Commission on March 30,
1995, and incorporated herein by reference.)
10.1 Management Agreement between CNL Income Fund XVI,
Ltd. and CNL Investment Company (Included as Exhibit
10.1 to Form 10-K filed with the Securities and
Exchange Commission on March 30, 1995, and
incorporated herein by reference.)
10.2 Assignment of Management Agreement from CNL
Investment Company to CNL Income Fund Advisors, Inc.
(Included as Exhibit 10.2 to Form 10-K filed with
the Securities and Exchange Commission on March 30,
1995, and incorporated herein by reference.)
10.3 Assignment of Management Agreement from CNL Income
Fund Advisors, Inc. to CNL Fund Advisors, Inc.
(Included as Exhibit 10.3 to Form 10-K filed with
the Securities and Exchange Commission on April 1,
1996, and incorporated herein by reference.)
10.4 Assignment of Management Agreement from CNL Fund
Advisors, Inc. to CNL APF Partners, LP. (Included as
Exhibit 10.4 to Form 10-Q filed with the Securities
and Exchange Commission on August 13, 2001, and
incorporated herein by reference).
10.5 Assignment of Management Agreement from CNL APF
Partners, LP to CNL Restaurants XVIII, Inc. (Filed
herewith)
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter
ended June 30, 2002.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
DATED this 6th day of August, 2002.
CNL INCOME FUND XVI, LTD.
By:CNL REALTY CORPORATION
General Partner
By:/s/ James M. Seneff, Jr.
-------------------------------
JAMES M. SENEFF, JR.
Chief Executive Officer
(Principal Executive Officer)
By:/s/ Robert A. Bourne
-------------------------------
ROBERT A. BOURNE
President and Treasurer
(Principal Financial and
Accounting Officer)
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
OF CORPORATE GENERAL PARTNER
PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
The undersigned, James M. Seneff, Jr., the Chief Executive Officer of CNL Realty
Corporation, the corporate general partner of CNL Income Fund XVI, Ltd. (the
"Partnership"), has executed this certification in connection with the filing
with the Securities and Exchange Commission of the Partnership's Quarterly
Report on Form 10-Q for the period ending June 30, 2002 (the "Report"). The
undersigned hereby certifies that:
(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of
the Securities Exchange Act of 1934; and
(2) the information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Partnership.
Date: August 6, 2002 /s/ James M. Seneff, Jr.
--------------- --------------------------
Name: James M. Seneff, Jr.
Title: Chief Executive Officer
CERTIFICATION OF CHIEF FINANCIAL OFFICER
OF CORPORATE GENERAL PARTNER
PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
The undersigned, Robert A. Bourne, the President and Treasurer of CNL Realty
Corporation, the corporate general partner of CNL Income Fund XVI, Ltd. (the
"Partnership"), has executed this certification in connection with the filing
with the Securities and Exchange Commission of the Partnership's Quarterly
Report on Form 10-Q for the period ending June 30, 2002 (the "Report"). The
undersigned hereby certifies that:
(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of
the Securities Exchange Act of 1934; and
(2) the information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Partnership.
Date: August 6, 2002 /s/ Robert A. Bourne
----------------- ------------------------
Name: Robert A. Bourne
Title: President and Treasurer
EXHIBIT INDEX
Exhibit Number
3.1 Affidavit and Certificate of Limited Partnership of CNL
Income Fund XVI, Ltd. (Included as Exhibit 3.2 to
Registration Statement No. 33-69968-01 on Form S-11 and
incorporated herein by reference.)
4.1 Affidavit and Certificate of Limited Partnership of CNL
Income Fund XVI, Ltd. (Included as Exhibit 3.2 to
Registration Statement No. 33-69968-01 on Form S-11 and
incorporated herein by reference.)
4.2 Amended and Restated Agreement of Limited Partnership of
CNL Income Fund XVI, Ltd. (Included as Exhibit 4.2 to
Form 10-K filed with the Securities and Exchange
Commission on March 30, 1995, and incorporated herein by
reference.)
10.1 Management Agreement between CNL Income Fund XVI, Ltd.
and CNL Investment Company (Included as Exhibit 10.1 to
Form 10-K filed with the Securities and Exchange
Commission on March 30, 1995, and incorporated herein by
reference.)
10.2 Assignment of Management Agreement from CNL Investment
Company to CNL Income Fund Advisors, Inc. (Included as
Exhibit 10.2 to Form 10-K filed with the Securities and
Exchange Commission on March 30, 1995, and incorporated
herein by reference.)
10.3 Assignment of Management Agreement from CNL Income Fund
Advisors, Inc. to CNL Fund Advisors, Inc. (Included as
Exhibit 10.3 to Form 10-K filed with the Securities and
Exchange Commission on April 1, 1996, and incorporated
herein by reference.)
10.4 Assignment of Management Agreement from CNL Fund
Advisors, Inc. to CNL APF Partners, LP. (Included as
Exhibit 10.4 to Form 10-Q filed with the Securities and
Exchange Commission on August 13, 2001, and incorporated
herein by reference).
10.5 Assignment of Management Agreement from CNL APF Partners,
LP to CNL Restaurants XVIII, Inc. (Filed herewith)