10-Q 1 if16.txt CNL INCOME FUND XVI, LTD. FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT of 1934 For the quarterly period ended September 30, 2002 -------------------------------------------------------------------------- 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 --------------------------------------- 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 Item 4. Controls and Procedures 11 Part II Other Information 12-13 CNL INCOME FUND XVI, LTD. (A Florida Limited Partnership) CONDENSED BALANCE SHEETS

See accompanying notes to condensed financial statements. CNL INCOME FUND XVI, LTD. (A Florida Limited Partnership) CONDENSED STATEMENTS OF OPERATIONS

See accompanying notes to condensed financial statements. CNL INCOME FUND XVI, LTD. (A Florida Limited Partnership) CONDENSED STATEMENTS OF PARTNERS' CAPITAL

See accompanying notes to condensed financial statements. CNL INCOME FUND XVI, LTD. (A Florida Limited Partnership) CONDENSED STATEMENTS OF CASH FLOWS

See accompanying notes to condensed financial statements. CNL INCOME FUND XVI, LTD. (A Florida Limited Partnership) NOTES TO CONDENSED FINANCIAL STATEMENTS Quarters and Nine Months Ended September 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 nine months ended September 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 6). 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 6). 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 September 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 Nine Months Ended September 30, 2002 and 2001 4. Investment in Joint Ventures - Continued: As of September 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, in three separate tenancies 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:

The Partnership recognized income of $232,499 and $173,398 during the nine months ended September 30, 2002 and 2001, respectively, of which $81,698 and $76,368 were earned during the quarters ended September 30, 2002 and 2001, respectively, from these joint ventures and tenancies in common. 5. 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, including $482,753 during the quarter and nine months ended September 30, 2001, respectively, no gain or loss on disposal of discontinued operations was recorded during the nine months ended September 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 nine months ended September 30, 2002. CNL INCOME FUND XVI, LTD. (A Florida Limited Partnership) NOTES TO CONDENSED FINANCIAL STATEMENTS Quarters and Nine Months Ended September 30, 2002 and 2001 5. Discontinued Operations - Continued: In June 2002, the Partnership entered into an agreement with an unrelated third party to sell the Denny's property in Bucyrus, Ohio. In connection with the anticipated sale of the property, the Partnership recorded a loss on disposal of assets of $382,366 during the nine months ended September 30, 2001 and $20,262 during the quarter and six months ended June 30, 2002. In August 2002, the Partnership sold this property for $156,200 and received net sales proceeds of approximately $144,900, resulting in an additional loss of $6,251 during the quarter and nine months ended September 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:

6. 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. During 2001, Phoenix Restaurant Group, Inc. ("PRG") filed for bankruptcy and rejected two of the four leases it had with the Partnership. In May and June 2002, the bankruptcy court assigned the two leases not rejected by PRG relating to the properties Branson, Missouri and Temple, Texas to CherryDen, LLC and Seana, LLC, respectively. CherryDen, LLC is an affiliate of the general partners. All other lease terms remained the same. In connection with these leases, the Partnership recognized rental revenues of approximately $196,500 and $74,500 relating to the properties in Branson, Missouri and Temple, Texas, respectively, during the nine months ended September 30, 2002 of which approximately $74,100 and $17,500 were earned during the quarter ended September 30, 2002, respectively. 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 September 30, 2001, the Partnership owned 38 Properties directly and five Properties indirectly through joint venture or tenancy in common arrangements. As of September 30, 2002, the Partnership owned 35 Properties, directly and six Properties indirectly through joint venture or tenancy in common arrangements. Capital Resources 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) was $3,025,652 and $2,184,632 for the nine months ended September 30, 2002 and 2001, respectively. The increase in cash from operating activities during the nine months ended September 30, 2002, as compared to the nine months ended September 30, 2001, was 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 nine months ended September 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 nine months ended September 30, 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 nine months ended September 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 $1,406,700. 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. 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. In June 2002, the Partnership entered into an agreement with an unrelated third party to sell the Denny's Property in Bucyrus, Ohio. 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. In August 2002, the Partnership sold this Property for $156,200 and received net sales proceeds of approximately $144,900, resulting in an additional loss of $6,251 during the quarter and nine months ended September 30, 2002. The Partnership anticipates it will reinvest these proceeds in an additional Property. 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 this transaction. 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 invest in an additional Property, pay Partnership expenses, or to make distributions to the partners. At September 30, 2002, the Partnership had $1,390,817 invested in such short-term investments, as compared to $774,673 at December 31, 2001. Cash and cash equivalents increased during the nine months ended September 30, 2002, primarily as a result of collections of accounts receivable from December 31, 2001 and the receipt of sales proceeds from the sale of the Property in Bucyrus, Ohio, as described above. The funds remaining at September 30, 2002, will be used to invest in an additional Property and to pay distributions and other liabilities. Short-Term Liquidity The Partnership's investment strategy of acquiring Properties for cash and leasing them under triple-net leases to operators who generally meet specified financial standards minimizes the Partnership's operating expenses. The general partners believe that the leases will generate net cash flow in excess of operating expenses. The Partnership's short-term liquidity requirements consist primarily of the operating expenses of the Partnership. The general partners have the right, but not the obligation, to make additional capital contributions if they deem it appropriate in connection with the operations of the Partnership. Total liabilities of the Partnership, including distributions payable, were $1,021,086 at September 30, 2002, as compared to $1,012,790 at December 31, 2001. The general partners believe that the Partnership has sufficient cash on hand to meet its current working capital needs. The Partnership generally distributes cash from operations remaining after the payment of operating expenses of the Partnership. Based on current and, for the nine months ended September 30, 2001, a loan from the corporate general partner, the Partnership declared distributions to limited partners of $2,700,000 for each of the nine months ended September 30, 2002 and 2001 ($900,000 for each of the quarters ended September 30, 2002 and 2001). This represents distributions of $0.60 per unit for each of the nine months ended September 30, 2002 and 2001, ($0.20 for each applicable quarter). No distributions were made to the general partners for the quarters and nine months ended September 30, 2002 and 2001. No amounts distributed to the limited partners for the nine months ended September 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. Long-Term Liquidity The Partnership has no long-term debt or other long-term liquidity requirements. Results of Operations Total rental revenues were $3,047,113 for the nine months ended September 30, 2002, as compared to $2,135,255 for the same period of 2001, of which $880,791 and $691,355 were earned during the third quarter of 2002 and 2001, respectively. Rental revenues were lower during the quarter and nine months ended September 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. During the nine months ended September 30, 2002, the Partnership received payment of past due rents relating to the two Properties not rejected by PRG and recorded the rental revenues. During 2002, the bankruptcy court assigned these two leases to new tenants, all other lease terms remained the same. ne of the new tenants is an affiliate of the general partners. In March 2002, the Partnership sold one of the vacant Properties, as described above in "Capital Resources." The Partnership still has one vacant Property and will not recognize any rental revenues from it 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. The tenant of the Las Vegas, Nevada Property vacated the Property and ceased restaurant operations during the first quarter of 2001. The Partnership sold this Property in December 2001 and used the proceeds to acquire two additional Properties. The increase in rental revenues during the quarter and nine months ended September 30, 2002, as compared to the same periods of 2001, was partially due to the acquisition of these two Properties, one in December 2001 and one in June 2002. During the nine months ended September 30, 2002 and 2001, the Partnership earned net income from joint ventures of $232,499 and $173,398, respectively, of which $81,698 and $76,368 were earned during the quarters ended September 30, 2002 and 2001, respectively. The increase in net income earned by joint ventures during the quarter and nine months ended September 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 $662,715 and $2,419,698, for the nine months ended September 30, 2002 and 2001, respectively, of which $211,865 and $1,332,776 were incurred during the quarters ended September 30, 2002 and 2001, respectively. Operating expenses were higher during the quarter and nine months ended September 30, 2001, as compared to the same periods of 2002, due to the fact that during the quarter and nine months ended September 30, 2001, the Partnership recorded provisions for write-down of assets of $1,128,352 and $1,390,713, 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 September 30, 2002, the Partnership had one remaining vacant Property. The Partnership is seeking a replacement tenant for the Property. In addition, the decrease in operating expenses during the quarter and nine months ended September 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 September 2002, the Partnership sold four of its vacant Properties. The Partnership did not incur any additional expenses relating to these Properties after the sale of the Properties had occurred. The decrease in operating expenses during the nine months ended September 30, 2002, was also 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. The decrease in operating expenses during the quarter ended September 30, 2002, as compared to the same quarter of 2001, was partially offset by an increase in depreciation expense due to the fact that in December 2001 and June 2002 the Partnership acquired two additional Properties. 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. During the nine months ended September 30, 2002, the Partnership identified and sold three Properties that met the criteria of this standard and were classified as Discontinued Operations in the accompanying financial statements. Two of the Properties were vacant and the proceeds from all three sales were reinvested in income producing Properties. As a result of the 2001 sale of the Property in Marana, Arizona, the Partnership recognized a gain of $281,058, during the nine months ended September 30, 2001. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Not applicable. ITEM 4. CONTROLS AND PROCEDURES The general partners maintain a set of disclosure controls and procedures designed to ensure that information required to be disclosed in the Partnership's filings under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms. The principal executive and financial officers of the corporate general partner have evaluated the Partnership's disclosure controls and procedures within 90 days prior to the filing of this Quarterly Report on Form 10-Q and have determined that such disclosure controls and procedures are effective. Subsequent to the above evaluation, there were no significant changes in internal controls or other factors that could significantly affect these controls, including any corrective actions with regard to significant deficiencies and material weaknesses. 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. (Included as Exhibit 10.5 to Form 10-Q filed with the Securities and Exchange Commission on August 13, 2002, and incorporated herein by reference.) 99.1 Certification of Chief Executive Officer of Corporate General Partner Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (Filed herewith.) 99.2 Certification of Chief Financial Officer of Corporate General Partner Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (Filed herewith.) (b) Reports on Form 8-K No reports on Form 8-K were filed during the quarter ended September 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 4th day of November, 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 RULE 13a-14 AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, James M. Seneff, Jr., the Chief Executive Officer of CNL Realty Corporation, the corporate general partner of CNL Income Fund XVI, Ltd. (the "registrant"), certify that: 1. I have reviewed this quarterly report on Form 10-Q of the registrant; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a. designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b. evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c. presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a. all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: November 4, 2002 /s/ James M. Seneff, Jr. -------------------------- James M. Seneff, Jr. Chief Executive Officer CERTIFICATION OF CHIEF FINANCIAL OFFICER OF CORPORATE GENERAL PARTNER PURSUANT TO RULE 13a-14 AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Robert A. Bourne, President and Treasurer of CNL Realty Corporation, the corporate general partner of CNL Income Fund XVI, Ltd. (the "registrant") certify that: 1. I have reviewed this quarterly report on Form 10-Q of the registrant; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a. designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b. evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c. presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a. all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: November 4, 2002 /s/ Robert A. Bourne ----------------------------- Robert A. Bourne President and Treasurer EXHIBIT INDEX Exhibit Number (c) 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. (Included as Exhibit 10.5 to Form 10-Q filed with the Securities and Exchange Commission on August 13, 2002, and incorporated herein by reference.) 99.1 Certification of Chief Executive Officer of Corporate General Partner Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (Filed herewith.) 99.2 Certification of Chief Financial Officer of Corporate General Partner Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (Filed herewith.) EXHIBIT 99.1 EXHIBIT 99.2

CNL INCOME FUND XVI LTD 10-Q