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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 0-17549
CNL INCOME FUND IV, LTD.
(Exact name of registrant as specified in its charter)
Florida 59-2854435
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
450 South Orange Avenue
Orlando, Florida 32801-3336
(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 ($500 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. No [x]
Aggregate market value of the voting stock held by nonaffiliates of the
registrant: The registrant registered an offering of 60,000 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 for such Units. Each Unit was originally sold at $500 per Unit.
DOCUMENTS INCORPORATED BY REFERENCE:
None
PART I
Item 1. Business
CNL Income Fund IV, Ltd. (the "Registrant" or the "Partnership") is a
limited partnership which was organized pursuant to the laws of the State of
Florida on November 18, 1987. 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 May 6, 1988, the Partnership
offered for sale up to $30,000,000 in limited partnership interests (the
"Units") (60,000 Units at $500 per Unit) pursuant to a registration statement on
Form S-11 under the Securities Act of 1933, as amended. The offering terminated
on December 30, 1988, as of which date the maximum offering proceeds of
$30,000,000 had been received from investors who were admitted to the
Partnership as limited partners (the "Limited Partners").
The Partnership was organized to acquire both newly constructed and
existing restaurant properties, as well as properties upon which restaurants
were to be constructed (the "Properties"), which are leased primarily to
operators of selected 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 $26,550,000, and were used to acquire 40 Properties,
including interests in five Properties owned by joint ventures in which the
Partnership is a co-venturer. During the year ended December 31, 1994, the
Partnership sold its Property in York, Pennsylvania, and reinvested the majority
of the net sales proceeds in two Checkers Properties, consisting of only land,
located in Miami, Florida, and Douglasville, Georgia. The remaining net sales
proceeds were used to pay Partnership liabilities. The lessee of the two
Properties consisting of only land owns the buildings currently on the land and
has the right, if not in default under the lease, to remove the buildings from
the land at the end of the lease terms. During the year ended December 31, 1995,
the Partnership sold its Property in Hastings, Michigan, and during 1996
reinvested the net sales proceeds in a Property located in Clinton, North
Carolina, with affiliates of the General Partners as tenants-in-common. Also,
during the year ended December 31, 1996, the Partnership sold its Property in
Tampa, Florida, and reinvested the majority of the net sales proceeds in a
Boston Market in Richmond, Virginia. During the year ended December 31, 1997,
the Partnership sold its Property in Douglasville, Georgia. During the year
ended December 31, 1998, the Partnership sold its Properties in Fort Myers,
Florida and Union Township, Ohio and distributed the majority of the net sales
proceeds to the limited partners as a special distribution. In addition, during
the year ended December 31, 1998, the Partnership sold a Property in Leesburg,
Florida and reinvested the majority of the net sales proceeds in a joint
venture, Warren Joint Venture, to purchase and hold one restaurant Property, and
sold a Property in Naples, Florida. During 1999, the Partnership reinvested the
net sales proceeds received from the sale of the Property in Naples, Florida in
a Property in Zephryhills, Florida, with affiliates of the General Partners as
tenants-in-common. During the year ended December 31, 2000, the Partnership sold
its Properties in Temple Terrace and Punta Gorda, Florida and Detroit, Michigan
and distributed the majority of the net sales proceeds to the limited partners
as a special distribution. In addition, during the year ended December 31, 2000,
the Partnership sold a Property in Topeka, Kansas and intends to distribute to
the investors the majority of the net sales proceeds. As a result of the above
transactions, as of December 31, 2000, the Partnership owned 34 Properties. The
34 Properties include interests in six Properties owned by joint ventures in
which the Partnership is a co-venturer and two Properties owned with affiliates
of the General Partners as tenants-in-common. Generally, the Properties are
leased 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 "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 APF announced that they had mutually
agreed to terminate the Agreement and Plan of Merger. 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.
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
joint ventures in which the Partnership is a co-venturer and Properties owned as
tenants-in-common with affiliates of the General Partners provide for initial
terms, ranging from five to 20 years (the average being 17 years), and expire
between 2001 and 2021. Generally, the leases are 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
$18,100 to $126,600. Generally, the leases provide for percentage rent, based on
sales in excess of a specified amount, to be paid annually. In addition, some of
the leases provide that commencing in the sixth lease year the percentage rent
will be an amount equal to the greater of the percentage rent calculated under
the lease formula or a specified percentage (ranging from one-half to two
percent) of the purchase price.
Generally, the leases of the Properties provide for two or four
five-year renewal options subject to the same terms and conditions as the
initial lease. Lessees of 27 of the Partnership's 34 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. Additionally, certain
leases provide the lessee an option to purchase up to a 49 percent interest in
the Property, after a specified portion of the lease term has elapsed, at an
option purchase price similar to those described above, multiplied by the
percentage interest in the Property with respect to which the option is being
exercised.
The leases also generally provide that, in the event the Partnership
wishes to sell the Property subject to the lease, the Partnership must first
offer the lessee the right to purchase the Property on the same terms and
conditions, and for the same price, as any offer which the Partnership has
received for the sale of the Property.
During 2000, the tenant of the Property in Palm Bay, Florida
experienced financial difficulties and vacated the Property. The Partnership
will not recognize rental and earned income from this vacant Property until a
new tenant for this Property is located or until the Property is sold and the
proceeds from such sale are reinvested in an additional Property. The lost
revenue resulting from the vacant Property could have an adverse effect of the
results of operations of the Partnership if the Partnership is not able to
re-lease the Property in a timely manner. The General Partners are currently
seeking either a new tenant of purchaser for the Property.
In addition, during 1998, the tenant of the Property in Richmond,
Virginia, filed for bankruptcy and in June 2000, rejected the lease relating to
this Property. In December 2000, the Partnership entered into a new lease for
this Property. In connection therewith, the tenant agreed to pay for all costs
necessary to convert this Property into a different concept, conversion of which
is expected to be completed in March 2001, at which time rent will commence. The
lease terms for this Property are substantially the same as the Partnership's
other leases, as described above.
In May 2000, the tenant of the Property in Franklin, Indiana terminated
the lease and vacated the Property. In the same month, the Partnership entered
into a new lease for this Property with a new tenant. The lease terms for this
Property are substantially the same as the Partnership's other leases, as
described above.
Major Tenants
During 2000, one lessee of the Partnership, Shoney's, Inc., contributed
more than ten percent of the Partnership's total rental and earned income
(including the Partnership's share of the rental and earned income from six
Properties owned by joint ventures and two Properties owned with affiliates of
the General Partners as tenants-in-common). As of December 31, 2000, Shoney's,
Inc. was the lessee under leases relating to five restaurants. It is anticipated
that, based on the minimum rental payments required by the leases, Shoney's,
Inc. will continue to contribute more than ten percent of the Partnership's
total rental and earned income in 2001. In addition, three Restaurant Chains,
Shoney's, Denny's, and Wendy's Old Fashioned Hamburger Restaurants ("Wendy's"),
each accounted for more than ten percent of the Partnership's total rental and
earned income in 2000 (including the Partnership's share of the rental and
earned income from six Properties owned by joint ventures and two Properties
owned with affiliates of the General Partners as tenants-in-common). In 2001, it
is anticipated that these three Restaurant Chains each will continue to account
for more than ten percent of the total rental and earned income to which the
Partnership is entitled under the terms of the leases. Any failure of this
lessee or these Restaurant Chains could materially affect the Partnership's
income if the Partnership is unable to re-lease the Property in a timely manner.
No single tenant or group of affiliated tenants lease 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, each to purchase and hold one Property: Holland Joint Venture with
CNL Income Fund II, Ltd., Titusville Joint Venture with CNL Income Fund III,
Ltd., Cocoa Joint Venture with CNL Income Fund V, Ltd., Auburn Joint Venture
with CNL Income Fund VI, Ltd., Kingsville Real Estate Joint Venture with CNL
Income Fund XII, Ltd., and Warren Joint Venture with CNL Income Fund VI, Ltd.
Each of the CNL Income Funds is an affiliate of the General Partners and is a
limited partnership organized pursuant to the laws of the state of Florida.
Each joint venture arrangement provides for the Partnership and its
joint venture partners to share in all costs and benefits associated with the
joint venture in accordance with their respective percentage interest in the
joint venture. The Partnership has a 51 percent interest in Holland Joint
Venture, a 26.6% interest in Titusville Joint Venture, a 57 percent interest in
Cocoa Joint Venture, a 96.1% interest in Auburn Joint Venture, a 68.87% interest
in Kingsville Real Estate Joint Venture and a 35.71% interest in Warren 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
venture.
Each joint venture has an initial term of approximately 5 to 20 years
and, after the expiration of the initial term, continues in existence from year
to year unless terminated at the option of either joint venturer or by an event
of dissolution. Events of dissolution include the bankruptcy, insolvency or
termination of any joint venturer, sale of the Property owned by the joint
venture and mutual agreement of the Partnership and its joint venture partner to
dissolve the joint venture.
The Partnership shares management control of each joint venture equally
with affiliates of the General Partners. 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 partner, 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 Holland Joint Venture, Titusville
Joint Venture, Cocoa Joint Venture, Auburn Joint Venture, Kingsville Real Estate
Joint Venture, and Warren Joint Venture is distributed 51 percent, 26.6%, 57
percent, 96.1%, 68.87%, and 35.71%, respectively, to the Partnership and the
balance is distributed to each of the other joint venture partners. 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 equal zero, and thereafter in proportion each joint venture
partner's percentage interest in the joint venture.
In addition to the above joint venture arrangements, the Partnership
entered into an agreement to hold a Property in Clinton, North Carolina, as
tenants-in-common, with CNL Income Fund VI, Ltd., CNL Income Fund X, Ltd., and
CNL Income Fund XV, Ltd., affiliates of the General Partners; and an agreement
to hold a Property in Zephyrhills, Florida, as tenants-in-common, with CNL
Income Fund XVII, Ltd., an affiliate of the General Partners. The agreements
provide for the Partnership and the affiliates to share in the profits and
losses of the Properties in proportion to each party's percentage interest. The
Partnership owns a 53 percent and 76 percent interest in the Properties in
Clinton, Tennessee and Zephyrhills, Florida, respectively. Each of the
affiliates is a limited partnership organized pursuant to the laws of the state
of Florida. The tenancy in common agreements restrict each co-tenant's ability
to sell, transfer, or assign its interest in the tenancy in common's Properties
without first offering it for sale to the remaining parties to the agreement.
The use of joint venture and tenancy in common arrangements allows the
Partnership to fully invest its available funds at times at which it would not
have sufficient funds to purchase an additional property, or at times when a
suitable opportunity to purchase an additional property is not available. The
use of joint venture and tenancy in common arrangements also provides the
Partnership with increased diversification of its portfolio among a greater
number of properties. In addition, tenancy in common arrangements may allow the
Partnership to defer the gain for federal income tax purposes upon the sale of
the property if the proceeds are reinvested in an additional property.
Certain Management Services
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 equal to one percent of the sum of gross
rental revenues from Properties wholly owned by the Partnership plus the
Partnership's allocable share of gross revenues of joint ventures in which the
Partnership is a co-venturer, but not in excess of competitive fees for
comparable services. Under the management agreement, the management fee is
subordinated to receipt by the Limited Partners of an aggregate, ten percent,
cumulative, noncompounded annual return on their adjusted capital contributions
(the "10% Preferred Return"), calculated in accordance with the Partnership's
limited partnership agreement (the "Partnership Agreement").
The management agreement continues until the Partnership no longer owns
an interest in any Properties unless terminated at an earlier date upon 60 days'
prior notice by either party.
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 34 Properties. Of the 34
Properties, 26 are owned by the Partnership in fee simple, six are owned through
joint venture arrangements and two are owned 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 14,100
to 98,800 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 3
Florida 7
Illinois 2
Indiana 3
Maryland 1
Massachusetts 1
Michigan 3
Mississippi 1
North Carolina 1
Ohio 1
Tennessee 1
Texas 7
Virginia 2
Washington, D.C. 1
-----------------
TOTAL PROPERTIES 34
=================
Buildings. Each of the Properties owned by the Partnership includes a
building that is one of a Restaurant Chain's approved designs. However, the
building located on one Checkers Property is owned by the tenant, while the land
parcel is owned by the Partnership. The buildings generally are rectangular and
are constructed from various combinations of stucco, steel, wood, brick and
tile. The sizes of buildings owned by the Partnership range from approximately
1,200 to 6,800 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 depreciable lives of 31.5 and
39 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 Properties owned through tenancy
in common arrangements) for federal income tax purposes was $16,858,382 and
$7,061,746, 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 3
Boston Market 1
Captain D's 2
Checkers 1
Denny's 4
Dunkin Donuts 1
Golden Corral 3
IHOP 1
Jack in the Box 1
KFC 1
Pizza Hut 5
Shoney's 3
Taco Bell 1
Waffle House 1
Wendy's 3
Other 3
---------------------
TOTAL PROPERTIES 34
=====================
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.
At December 31, 2000, 1999, 1998, 1997, and 1996, the Properties were
94%, 97%, 97%, 93%, and 98% occupied, respectively. The following is a schedule
of the average rent per party for the years ended December 31:
2000 1999 1998 1997 1996
-------------- -------------- ------------- ------------- -------------
Rental Revenues (1) $ 2,255,228 $2,640,100 $ 2,544,386 $ 2,596,455 $ 2,815,542
Properties (2) 32 37 36 37 40
Average Rent per Property $ 70,476 $ 71,354 $ 70,677 $ 70,174 $ 70,389
(1) Rental income includes the Partnership's share of rental income from
the Properties owned through joint venture arrangements and the
Properties owned through tenancy in common arrangements. Rental
revenues have been adjusted, as applicable, for any amounts for which
the Partnership has established an allowance for doubtful accounts.
(2) Excludes Properties that were vacant at December 31, and that did not
generate rental revenues during the year ended December 31.
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
Expiration Year Number Annual Rental Gross Annual
of Leases Revenues Rental Income
---------------- ---------------- --------------------- ----------------------
2001 1 $ 40,800 1.78%
2002 2 130,473 5.71%
2003 -- -- --
2004 1 48,000 2.10%
2005 -- -- --
2006 -- -- --
2007 1 118,968 5.20%
2008 14 863,616 37.77%
2009 4 327,369 14.32%
2010 1 71,336 3.12%
Thereafter 7 685,811 30.00%
---------- ------------- -------------
Total (1) 31 $ 2,286,373 100.00%
========== ============= =============
(1) Excludes three Properties which were vacant at December 31, 2000.
Leases with Major Tenants. The terms of each of the leases with the
Partnership's major tenant as of December 31, 2000 (see Item 1. Business - Major
Tenants), are substantially the same as those described in Item 1. Business -
Leases.
Shoney's, Inc. leases three Shoney's restaurants and two Captain D's
restaurants. The initial term of each lease is 20 years (expiring in 2008) and
average minimum base rent is approximately $62,400 (ranging from approximately
$41,000 to $81,300).
Item 3. Legal Proceedings
Neither the Partnership, nor its General Partners or any affiliate 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 2,912 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 transfer of Units. The
price paid for any Unit transferred pursuant to the Plan range from $405.10 to
$475 per Unit. The price paid for any Unit transferred other than pursuant to
the Plan was subject to negotiation by the purchasers 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 $ 365 $365 $ 365 $500 $500 $ 500
Second Quarter 353 353 353 406 368 387
Third Quarter 328 185 317 413 295 366
Fourth Quarter 433 140 348 450 311 370
(1) A total of 262 and 374 Units were transferred other than pursuant to the
Plan for the years ended December 31, 2000 and 1999, respectively.
The capital contribution per Unit was $500. All cash available for
distribution will be distributed to the partners pursuant to the provision of
the Partnership Agreement.
For the years ended December 31, 2000 and 1999, the Partnership declared
cash distributions of $5,050,000 and $2,400,000, respectively, to the Limited
Partners. Distributions for the year ended December 31, 2000 included $2,800,000
and as a result of the distribution of the net sales proceeds from the sale of
the Properties in Detroit, Michigan, and Temple Terrace and Punta Gorda,
Florida, to the Limited Partners. This amount was applied toward the Limited
Partners' cumulative 10% Preferred Return. The reduced number of Properties for
which the Partnership receives rental payments reduced the Partnership's
revenues. The decrease in Partnership revenues, combined with the fact that a
significant portion of the Partnership's expenses are fixed in nature, resulted
in a decrease in cash distribution to the Limited Partners commencing in 2000.
No amounts distributed to the 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. As indicated in the chart below, these distributions were
declared at the close of each of the Partnership's calendar quarters. This
amount includes monthly distributions made in arrears for the Limited Partners
electing to receive such distributions on this basis.
Quarter Ended 2000 1999
------------------- ------------- -------------
March 31 $ 600,000 $ 600,000
June 30 600,000 600,000
September 30 3,325,000 600,000
December 31 525,000 600,000
The Partnership intends to continue to make distributions of cash
available for distribution to the Limited Partners on a quarterly basis,
although the General Partners, in their sole discretion, may elect to pay
distributions monthly.
(b) Not applicable
Item 6. Selected Financial Data
2000 1999 1998 1997 1996
-------------- -------------- -------------- -------------- --------------
Year ended December 31:
Revenues (1) $ 2,138,240 $ 2,602,057 $ 2,285,696 $ 2,531,385 $ 2,820,295
Net income (2) 2,078,310 1,827,359 1,821,449 1,720,668 2,347,167
Cash distributions
declared (3) 5,050,000 2,400,000 3,633,748 2,760,000 2,760,000
Net income per Unit (2) 34.64 30.15 30.15 28.42 38.75
Cash distributions declared
per Unit 84.17 40.00 60.56 46.00 46.00
At December 31:
Total assets $17,616,159 $20,828,319 $21,189,833 $23,309,888 $23,730,892
Partners' capital 16,795,669 19,767,359 20,340,000 22,152,299 22,897,631
(1) Revenues include equity in earnings (losses) of joint ventures and
adjustments to accrued rental income.
(2) Net income for the years ended December 31, 2000 and 1997 include
$92,397 and $6,652, respectively, from losses on the sale of assets and
$387,612 and $70,337, respectively, for provisions for loss on assets.
Net income for the years ended December 31, 2000, 1998, and 1996
includes $1,134,692, $226,024, and $221,390, respectively, from gains
on the sale of assets.
(3) Distributions for the year ended December 31, 2000 and 1998 include a
special distribution to the Limited Partners of $2,800,000 and
$1,233,748, respectively, in net sales proceeds from the sale of four
and two Properties in 2000 and 1998, respectively.
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 November 18, 1987, 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, which are leased primarily to
operators of selected national and regional fast-food and family-style
Restaurant Chains. Substantially all of the leases are triple-net leases, with
the lessees generally responsible for all repairs and maintenance, property
taxes, insurance and utilities. As of December 31, 2000, the Partnership owned
34 Properties, either directly or indirectly through joint venture or tenancy in
common arrangements.
Capital Resources
During the years ended December 31, 2000, 1999, and 1998, the
Partnership generated cash from operations (which includes cash received from
tenants, distributions from joint ventures and interest received, less cash paid
for expenses) of $1,827,107, $2,401,313, and $2,362,320, 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. The increase in cash from operations for 1999, as compared to
1998, was primarily a result of changes in income and expenses as described in
"Results of Operations" below and 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 June 1997, the Partnership terminated the leases with the tenant of
the Properties in Portland and Winchester, Indiana. In connection therewith, the
Partnership accepted a promissory note from the former tenant for $32,343 for
amounts relating to past due real estate taxes the Partnership had accrued as a
result of the former tenant's financial difficulties. The promissory note, which
was uncollateralized, bore interest at a rate of ten percent per annum, and was
being collected in 36 monthly installments. As of December 31, 1998, the
Partnership had collected the full amount of the promissory note.
In July 1997, the Partnership entered into new leases for the
Properties in Portland and Winchester, Indiana, with a new tenant to operate the
Properties as Arby's restaurants. In connection therewith, the Partnership
agreed to fund up to $125,000 in renovation costs for each Property. As of
December 31, 1998, such renovations had been completed.
In March 1998, the Partnership sold its Property in Fort Myers, Florida
to a third party for $842,100 and received net sales proceeds of $794,690,
resulting in a gain of $225,902 for financial reporting purposes. This Property
was originally acquired by the Partnership in December 1988 and had a cost of
approximately $598,000, excluding acquisition fees and miscellaneous acquisition
expenses; therefore, the Partnership sold the Property for approximately
$196,700 in excess of its original purchase price. In addition, in March 1998,
the Partnership sold its Property in Union Township, Ohio to an unrelated third
party for $680,000 and received net sales proceeds of $674,135, resulting in a
loss of $104,987 for financial reporting purposes. In connection with the sale
of these Properties, the Partnership incurred deferred, subordinated, real
estate disposition fees of $45,663. In April 1998, the Partnership distributed
$1,233,748 of the net sales proceeds from these Properties as a special
distribution to the Limited Partners and used the remaining net proceeds to pay
Partnership liabilities.
In addition, in July 1998, the Partnership sold its Property in
Leesburg, Florida for $565,000 and received net sales proceeds of $523,931,
resulting in a total loss for financial reporting purposes of $135,509. Due to
the fact that at December 31, 1997, the Partnership recorded a provision for
loss on assets in the amount of $70,337 for this Property, the Partnership
recognized the remaining loss of $65,172 for financial reporting purposes at
July 1998, relating to the sale. In September 1998, the Partnership contributed
the majority of the net sales proceeds from the sale of the Property in
Leesburg, Florida to a joint venture, Warren Joint Venture, to purchase and hold
one restaurant property. The Partnership has an approximate 36 percent interest
in the profits and losses of Warren Joint Venture and the remaining interest in
this joint venture is held by an affiliate of the General Partners.
In September 1998, the Partnership sold its Property in Naples, Florida
to a third party for $563,000 and received net sales proceeds of $533,598,
resulting in a gain of $170,281 for financial reporting purposes. This Property
was originally acquired by the Partnership in December 1988 and had a cost of
approximately $410,500 excluding acquisition fees and miscellaneous acquisition
expenses; therefore, the Partnership sold the Property for approximately
$123,100 in excess of its original purchase price. As of December 31, 1998, the
remaining net sales proceeds from the sale of this Property, including accrued
interest, were being held in an interest bearing escrow account pending
reinvestment. In January 1999, the Partnership invested the net sales proceeds
in a Property in Zephyrhills, Florida, with an affiliate of the General Partners
as tenants-in-common for a 76 percent interest in the Property. A portion of the
transaction relating to the sale of the Property in Naples, Florida and the
reinvestment of the net sales proceeds qualified as a like-kind exchange
transaction for federal income tax purposes.
In June 2000, the Partnership sold its Property in Detroit, Michigan to
the tenant for $1,095,000 and received net sales proceeds of $1,089,325,
resulting in a gain of approximately $552,600 for financial reporting purposes.
This Property was originally acquired by the Partnership in October 1988 and had
a cost of approximately $614,500, excluding acquisition fees and miscellaneous
acquisition expenses; therefore, the Partnership sold the Property for
approximately $474,800 in excess of its original purchase price. In connection
with the sale, the Partnership incurred a deferred, subordinated, real estate
disposition fee of $32,850. In addition, in July 2000, the Partnership sold its
Properties in Temple Terrace, Florida and Punta Gorda, Florida, to a third party
for $2,353,583 resulting in a gain of approximately $582,100 for financial
reporting purposes. These Properties were originally acquired by the Partnership
in March of 1989 and had a cost of approximately $2,081,700 excluding
acquisition fees and miscellaneous acquisition expenses; therefore, the
Partnership sold the Properties for approximately $271,900 in excess of their
original purchase prices. In connection with the sales, the Partnership incurred
deferred subordinated real estate disposition fees of $70,068. In October 2000,
the Partnership distributed $2,800,000 of the net sales proceeds from the sales
of these Properties as a special distribution to the Limited Partners, as
described below, and used the remaining net proceeds to pay Partnership
liabilities. 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 sales.
In November 2000, the Partnership sold its Property in Topeka, Kansas
to a third party for $500,000 and received net sales proceeds of approximately
$496,400, resulting in a loss of approximately $92,400 for financial reporting
purposes. In connection with the sale, the Partnership incurred a deferred,
subordinated, real estate disposition fee of $15,000. The Partnership intends to
use the majority of the net sales proceeds to pay liabilities of the Partnership
(including quarterly distributions to the Limited Partners).
None of the Properties owned by the Partnership, or the joint ventures
or tenancy in common arrangements in which the Partnership owns an interest, is
or may be encumbered. Under its partnership agreement, the Partnership is
prohibited from borrowing for any purpose; provided, however, that the General
Partners or their affiliates are entitled to reimbursement, at cost, for actual
expenses incurred by the General Partners or their affiliates on behalf of the
Partnership. Affiliates of the General Partners from time to time incur certain
operating expenses on behalf of the Partnership for which the Partnership
reimburses the affiliates without interest.
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, certificates of deposit and money market accounts with less
than a 30-day maturity date, pending the Partnership's use of such funds to pay
Partnership expenses or to make distributions to the partners. At December 31,
2000, the Partnership had $1,366,871 invested in such short-term investments, as
compared to $725,493 at December 31, 1999. The increase in the amount invested
in short-term investments at December 31, 2000, as compared to December 31,
1999, is primarily attributable to the Partnership holding the net sales
proceeds it received from the 2000 sale of the Property in Topeka, Kansas, as
described above, pending distribution to the Limited Partners. As of December
31, 2000, the average interest rate earned on the rental income deposited in
demand deposit accounts at commercial banks was 5.56% annually. The General
Partners believe that the Partnership has sufficient cash on hand to meet its
current working capital 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 do not believe that working capital reserves are necessary at this
time. In addition, because the leases for the Partnership's Properties are
generally 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 and anticipated future cash from operations and
for the years ended December 31, 2000 and 1998, net sales proceeds from the sale
of Properties, the Partnership declared distributions to the Limited Partners of
$5,050,000, $2,400,000, and $3,633,748, for the years ended December 31, 2000,
1999, and 1998, respectively. This represents distributions of $84, $40, and $61
per Unit for the years ended December 31, 2000, 1999, and 1998, respectively.
Distributions for the years ended December 31, 2000 and 1998 included $2,800,000
and $1,233,748, respectively, as a result of the distribution of a portion of
net sales proceeds from the sale of several Properties. The special
distributions were effectively a return of a portion of the Limited Partners'
investment, although, in accordance with the Partnership agreement, they were
applied to the Limited Partners' unpaid preferred return. The reduced number of
Properties for which the Partnership receives rental payments reduced the
Partnership's revenues. The decrease in Partnership revenues, combined with the
fact that a significant portion of the Partnership's expenses are fixed in
nature, resulted in a decrease in cash distributions to the Limited Partners
commencing the quarter ended March 31, 1998 and the quarter ended September 30,
2000. 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.
As of December 31, 2000 and 1999, the Partnership owed affiliates
$8,556 and $195,846, respectively, for operating expenses and accounting and
administrative services. As of March 15, 2001, the Partnership had reimbursed
the affiliates all such amounts. In addition, during the years ended December
31, 2000 and 1998, the Partnership incurred $118,458 and $45,663, respectively,
in real estate disposition fees due to an affiliate as a result of its services
in connection with the sale of several Properties. The payment of such fees is
deferred until the Limited Partners have received the sum of their 10% Preferred
Return and their adjusted capital contributions.
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.
Amounts payable to other parties, including distributions payable,
decreased to $647,813 at December 31, 2000, from $819,451 at December 31, 1999.
The decrease in liabilities at December 31, 2000, was partially due to the
amounts of transaction costs relating to the proposed Merger with CNL American
Properties Fund, Inc. ("APF"), as described below in "Termination of Merger",
and partially the result of the Partnership reducing distributions to the
Limited Partners, as discussed above. 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 34 wholly owned
Properties (including four Properties which were sold in 1998) and during 1999
and 2000, the Partnership owned and leased 30 wholly owned Properties (including
four Properties which were sold in 2000). In addition, during 1998 and 1999, the
Partnership was a co-venturer in six separate joint ventures that each owned and
leased one Property and owned one Property with affiliates as tenants-in-common.
In addition, during 1999 and 2000, the Partnership owned and leased one
additional Property, with an affiliate of the General Partners, as
tenants-in-common. As of December 31, 2000, the Partnership owned, either
directly or through joint venture arrangements, 34 Properties, which are, in
general, subject to long-term, triple-net leases. The leases of the Properties
provide for minimum base annual rental amounts (payable in monthly installments)
ranging from $18,100 to $126,600. Generally, the leases provide for percentage
rent based on sales in excess of a specified amount to be paid annually. In
addition, some of the leases provide that, commencing in the sixth lease year
the percentage rent will be an amount equal to the greater of the percentage
rent calculated under the lease formula or a specified percentage (ranging from
one-half to two percent) of the purchase price. For 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 $1,809,132, $2,132,891, and $2,231,513, 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 described above. The decrease in rental and earned income during 2000
and 1999, each as compared to the previous year, was partially attributable to a
decrease in rental and earned income due to the sales of various Properties
during 2000 and 1998. During 1998, the Partnership used the net sales proceeds
from the sale of the Property in Douglasville, Georgia to fund renovation costs
for two Properties and during 1999, used the net sales proceeds from the sale of
a Property in Naples, Florida to acquire one Property in Zephryhills, Florida,
held as tenants-in-common with affiliates of the General Partners, as described
above in "Capital Resources." In addition, during 1998 and 2000, the Partnership
distributed a portion of the net sales proceeds from the sale of several
Properties to the Limited Partners, as described in "Short-Term Liquidity."
Rental and earned income are expected to remain at reduced amounts as a result
of distributing the net sales proceeds from the 2000 and 1998 sales of
Properties to the Limited Partners.
In October 1998, the tenant of one Boston Market Property filed for
bankruptcy, and in June 2000, rejected, the lease relating to this Property. As
a result, the tenant discontinued making rental payments on the rejected lease.
In conjunction with the rejected lease, during 2000, the Partnership reversed
approximately $38,700 of accrued rental income. The accrued rental income was
the accumulated amount of non-cash accounting adjustments primarily recorded in
order to recognize future scheduled rent increases as income evenly over the
term of the lease. No such amounts were reversed during 1999 or 1998. In
December 2000, the Partnership entered into a new lease with a new tenant for
this Property with rental income expected to commence in March 2001.
In addition, rental and earned income decreased during 2000 due to the
fact that in May 2000, the tenant of the Property in Palm Bay, Florida vacated
the Property and discontinued making rental payments. In addition, the
Partnership reversed approximately $12,830 of accrued rental income. 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 such amounts were reversed during
1999 or 1998. The General Partners will continue to pursue collection of past
due rental amounts relating to this Property and will recognize such amounts as
income if collected. The Partnership will not recognize any rental and earned
income relating to this Property until the Partnership finds a new tenant for
this Property or sells the Property and reinvests the net sales proceeds in an
additional Property. The Partnership is currently seeking either a replacement
tenant or purchaser for this Property. The decrease in rental and earned income
during 2000, was partially offset by the fact that during 2000, the Partnership
collected and recognized as income approximately $39,000 in past due rental
amounts from the guarantor of the former tenant of the Property in Palm Bay,
Florida. The lost revenues from this vacant Property could have an adverse
effect on the results of operations of the Partnership if the Partnership is
unable to re-lease the Property in a timely manner. The General Partners are
currently seeking either a new tenant or purchaser for this Property.
Rental and earned income also decreased by approximately $25,000 during
1999, as a result of the fact that, effective January 1, 1999, the Partnership
amended the lease for the Property located in Edgewood, Maryland, to provide for
reduced annual rental income.
The decrease in rental and earned income during 2000 was partially
offset by an increase of approximately $22,700 during 2000 due to the fact that
the Partnership collected and recognized as income past due rental amounts for
which the Partnership had previously established an allowance for doubtful
accounts relating to its Properties in Dundee, Michigan and Marion, Ohio.
For the years ended December 31, 2000, 1999, and 1998, the Partnership
also earned $24,545, $126,521, and $83,377, respectively, in contingent rental
income from the Partnership's Properties. The increase in contingent rental
income during the year ended December 31, 1999, as compared to the year ended
December 31, 1998, was primarily attributable to an increase in gross sales of
certain restaurant Properties, the leases of which require the payment of
contingent rental income. The decrease during 2000, as compared to 1999, was
partially attributable to (i) the Partnership adjusting estimated contingent
rental amounts during 1999 and (ii) a decrease in gross sales for certain
restaurant Properties whose leases require the payment of contingent rental
income.
For the years ended December 31, 1999, 1998, and 1997, the Partnership
also recognized income of $234,317 and $303,223, and a loss of $90,144,
respectively, attributable to net income earned or losses recognized by joint
ventures in which the Partnership is a co-venturer. During 1997, the operator of
the Property owned by Titusville Joint Venture vacated the Property and ceased
operations. For the years ended December 31, 2000, 1999, and 1998, Titusville
Joint Venture (in which the Partnership owns a 26.6% interest in the profits and
losses of the joint venture) incurred expenses, which are fixed in nature, such
as real estate taxes, insurance and maintenance. In addition, during 2000 and
1998, the joint venture established additional allowances for loss on land and
building for its Property for approximately $227,100 and $125,300, respectively,
for financial reporting purposes. The allowances represented the difference
between the Property's carrying values at December 31, 2000 and 1998,
respectively, and the estimated net realizable value of the Property. Titusville
Joint Venture has ceased collection efforts on past due amounts. The joint
venture will not recognize any rental income from this Property until a new
tenant is located or until the Property is sold and the proceeds from such a
sale are reinvested in an additional Property. The joint venture is currently
seeking a replacement tenant or purchaser for this Property.
The increase in net income earned by joint ventures in 1999, as
compared to 1998, was partially attributable to the fact that Kingsville Real
Estate Joint Venture (in which the Partnership owns a 68.87% interest)
established an allowance for loss on the land and net investment in the direct
financing lease for its Property of approximately $316,000 during the year ended
December 31, 1998 in accordance with its policy. The tenant of this Property
experienced financial difficulties and ceased payment of rents under the terms
of its lease agreement. 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 addition, the joint venture increased its allowance
for doubtful accounts by approximately $130,000 during 1998, for amounts due
from this tenant deemed uncollectible in accordance with its collection policy.
No such allowances were recorded during 2000 and 1999 relating to this Property.
The increase in net income in 1999, as compared to 1998, is also partially
attributable to the fact that 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.
In addition, the increase in net income earned by joint ventures during
1999, as compared to 1998, was partially attributable to the fact that, during
1998, the Partnership reinvested net sales proceeds from the 1998 sale of its
Property in Leesburg, Florida in Warren Joint Venture, and during 1999,
reinvested net sales proceeds from the 1998 sale of its Property in Naples,
Florida in a Property in Zephyrhills, Florida, as tenants-in-common with
affiliates of the General Partners, as described above in "Capital Resources."
During the year ended December 31, 2000, one of the Partnership's
lessees, Shoney's, Inc., contributed more than ten percent of the Partnership's
total rental and earned income (including the Partnership's share of the rental
and earned income from six Properties owned by joint ventures and two Properties
owned with affiliates of the General Partners as tenant-in-common). As of
December 31, 2000, Shoney's, Inc. was the lessee under leases relating to five
restaurants. It is anticipated that, based on the minimum rental payments
required by the leases, Shoney's, Inc. will continue to contribute more than ten
percent of the Partnership's total rental income during 2001. In addition,
during the year ended December 31, 2000, three Restaurant Chains, Denny's,
Shoney's and Wendy's, each accounted for more than ten percent of the
Partnership's total rental and earned income (including the Partnership's share
of the rental and earned income from six Properties owned by joint ventures and
two Properties owned with affiliates of the General Partners as
tenants-in-common). In 2001, it is anticipated that these three Restaurant
Chains each will continue to account for more than ten percent of the total
rental income to which the Partnership is entitled under the terms of the
leases. Any failure of this lessee or these Restaurant Chains could materially
affect the Partnership's income if the Partnership is not able to re-lease the
Properties in a timely manner.
Operating expenses, including depreciation and amortization expense,
were $714,613, $774,698, and $690,271, for the years ended December 31, 2000,
1999, and 1998, respectively. The decrease in operating expenses for 2000, as
compared to 1999, and the increase in operating expenses for 1999, as compared
to 1998, was partially attributable to the amount of transaction costs that the
Partnership incurred 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." The
decrease during 2000 was partially due to, and the increase during 1999 was
partially offset by, a decrease in depreciation expense which resulted from the
sales of various Properties during 1998 and 2000.
The decrease in operating expenses during 2000 was partially offset by
the fact that during 2000, the Partnership increased its allowance for doubtful
accounts for past due rental amounts relating to the Big Boy's Property located
in Topeka, Kansas, due to financial difficulties the tenant was experiencing. No
such allowance was recorded during 1999 or 1998.
The decrease in operating expenses during 2000 was partially offset by
an increase in real estate taxes and insurance expense relating to certain
Properties. The Partnership is responsible for the proportionate share of real
estate taxes and insurance expense for one of the two leases for the Property in
Maywood, Illinois. In addition, during 2000, 1999, and 1998, the Partnership
paid for a portion of the real estate taxes that are the responsibility of the
other tenant of the Maywood Property, due to a shortage of amounts collected
from the tenant for the payment of its proportionate share of real estate taxes.
In addition, as a result of the former tenants of the Properties in Palm Bay and
Leesburg, Florida defaulting under the terms of their leases, and the tenant of
the Property in Richmond, Virginia rejecting its lease, the Partnership incurred
certain expenses, such as real estate taxes, insurance, legal fees and
maintenance expense relating to these Properties. The Partnership sold the
Property in Leesburg, Florida in July 1998, therefore the Partnership does not
anticipate incurring such expenses in future periods relating to this Property.
In addition, in December 2000, the Partnership re-leased the Property in
Richmond, Virginia to a new tenant. The new tenant is responsible for these
expenses commencing March 2001, therefore the Partnership does not expect to
incur these expenses relating to this Property after March 2001. However, the
Partnership will continue to incur certain expenses, relating to the Property in
Palm Bay, Florida, until the Property is sold or re-leased to a new tenant. The
General Partners are currently seeking a new tenant or purchaser for this
Property.
The increase during 1999, as compared to 1998, is partially offset by
the fact that, through a settlement agreement during 1999, the Partnership
collected a portion of the amounts due from the former tenant that had been
expensed by the Partnership for the Property in Palm Bay, Florida, as described
above in "Capital Resources."
As a result of the sale of three Properties during 2000, the
Partnership recognized a total gain of $1,134,692 for financial reporting
purposes during the year ended December 31, 2000. In addition, as a result of
the sale of the Property in Topeka, Kansas, the Partnership recognized a loss
for financial reporting purposes of $92,397 for the year ended December 31,
2000. As a result of the sales of four Properties during 1998, the Partnership
recognized a total gain of $226,024 for financial reporting purposes during the
year ended December 31, 1998. No Properties were sold during 1999.
During 2000, the Partnership established an allowance for loss on
assets in the amount of $387,612 for financial reporting purposes for the
Property in Palm Bay, Florida. The tenant of this Property defaulted under the
terms of its lease and vacated the Property. The allowance represented the
difference between the Property's carrying value at December 31, 2000, and the
estimated net realizable value for this Property based on an anticipated sales
price. No such allowance was established during 1998 and 1999.
The Partnership's leases as of December 31, 2000, are, in general,
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's 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. 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.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
Item 8. Financial Statements and Supplementary Data
CNL INCOME FUND IV, 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 24-39
Report of Independent Certified Public Accountants
To the Partners
CNL Income Fund IV, 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 IV, 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 IV, LTD.
(A Florida Limited Partnership)
BALANCE SHEETS
December 31,
2000 1999
------------------ ------------------
ASSETS
Land and buildings on operating leases, less
accumulated depreciation and allowance
for loss on assets $ 12,385,122 $ 15,080,971
Net investment in direct financing leases 339,689 1,189,488
Investment in joint ventures 3,197,510 3,332,012
Cash and cash equivalents 1,366,871 725,493
Receivables, less allowance for doubtful
accounts of $301,517 and $215,029, respectively 45,144 141,675
Due from related parties 15,226 --
Prepaid expenses 14,076 15,383
Lease costs, less accumulated amortization
of $22,913 and $26,113, respectively 1,031 29,031
Accrued rental income 250,635 314,266
Other assets 855 --
------------------ ----------------
$ 17,616,159 $ 20,828,319
================== ================
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable and accrued expenses $ 45,070 $ 91,074
Accrued and escrowed real estate taxes payable 48,508 63,585
Distributions payable 525,000 600,000
Due to related parties 172,677 241,509
Rents paid in advance and deposits 29,235 64,792
------------------ -----------------
Total liabilities 820,490 1,060,960
Partners' capital 16,795,669 19,767,359
------------------ ------------------
$ 17,616,159 $ 20,828,319
================== ==================
See accompanying notes to financial statements.
CNL INCOME FUND IV, LTD.
(A Florida Limited Partnership)
STATEMENTS OF INCOME
Year Ended December 31,
2000 1999 1998
--------------- --------------- --------------
Revenues:
Rental income from operating leases $ 1,781,392 $ 2,009,987 $2,104,520
Adjustments to accrued rental income (51,520) -- --
Earned income from direct financing leases 79,260 122,904 126,993
Contingent rental income 24,545 126,521 83,377
Interest and other income 70,246 39,422 60,950
--------------- --------------- --------------
1,903,923 2,298,834 2,375,840
--------------- --------------- --------------
Expenses:
General operating and administrative 168,539 146,650 151,775
Professional services 46,673 36,759 43,609
Bad debt expense 12,685 -- --
Real estate taxes 30,731 21,468 31,879
State and other taxes 15,479 17,426 15,747
Depreciation and amortization 404,013 410,151 428,975
Transaction costs 36,493 142,244 18,286
--------------- --------------- --------------
714,613 774,698 690,271
--------------- --------------- --------------
Income Before Equity in Earnings (Losses)
of Joint Ventures, Gain on Sale of Assets
and Provision for Loss on Assets 1,189,310 1,524,136 1,685,569
Equity in Earnings (Losses) of Joint Ventures 234,317 303,223 (90,144)
Gain on Sale of Assets 1,042,295 -- 226,024
Provision for Loss on Assets (387,612) -- --
--------------- --------------- --------------
Net Income $ 2,078,310 $ 1,827,359 $1,821,449
=============== =============== ==============
Allocation of Net Income:
General partners $ -- $ 18,273 $ 12,724
Limited partners 2,078,310 1,809,086 1,808,725
--------------- --------------- --------------
$ 2,078,310 $ 1,827,359 $1,821,449
=============== =============== ==============
Net Income per Limited Partner Unit $ 34.64 $ 30.15 $ 30.15
=============== =============== ==============
Weighted Average Number of Limited
Partner Units Outstanding 60,000 60,000 60,000
=============== =============== ==============
See accompanying notes to financial statements.
CNL INCOME FUND IV, 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 $ 557,804 $ 198,550 $ 30,000,000 $ (25,207,963) $ 20,043,908 $ (3,440,000) $22,152,299
Distributions to limited
partners ($61 per limited -- -- -- (3,633,748) -- -- (3,633,748)
partner unit)
Net income -- 12,724 -- -- 1,808,725 -- 1,821,449
------------- ------------- ------------- ------------- -------------- ------------ -----------
Balance, December 31, 1998 557,804 211,274 30,000,000 (28,841,711) 21,852,633 (3,440,000) 20,340,000
Distributions to limited
partners ($40 per limited
partner unit) -- -- -- (2,400,000) -- -- (2,400,000)
Net income -- 18,273 -- -- 1,809,086 -- 1,827,359
------------- ------------- ------------- -------------- -------------- ------------ ------------
Balance, December 31, 1999 557,804 229,547 30,000,000 (31,241,711) 23,661,719 (3,440,000) 19,767,359
Distributions to limited
partners ($84 per limited
partner unit) -- -- -- (5,050,000) -- -- (5,050,000)
Net income -- -- -- -- 2,078,310 -- 2,078,310
------------- ------------- ------------- -------------- -------------- ------------ ------------
Balance, December 31, 2000 $ 557,804 $ 229,547 $ 30,000,000 $ (36,291,711) $ 25,740,029 $ (3,440,000) $16,795,669
============= ============= ============= ============== ============== ============ ============
See accompanying notes to financial statements.
CNL INCOME FUND IV, LTD.
(A Florida Limited Partnership)
STATEMENTS OF CASH FLOWS
Year Ended December 31,
2000 1999 1998
-------------- ------------- -------------
Increase (Decrease) in Cash and Cash
Equivalents:
Cash Flows from Operating Activities:
Cash received from tenants $ 1,972,961 $ 2,186,946 $ 2,351,732
Distributions from joint ventures 368,819 367,317 248,360
Cash paid for expenses (569,192) (181,668) (274,436)
Interest received 54,519 28,718 36,664
-------------- ------------- -------------
Net cash provided by operating
activities 1,827,107 2,401,313 2,362,320
-------------- ------------- -------------
Cash Flows from Investing Activities:
Proceeds from sale of assets 3,939,271 -- 2,526,354
Additions to land and buildings on
operating leases -- -- (275,000)
Investment in joint ventures -- (533,200) (493,398)
Decrease (increase) in restricted cash -- 533,598 (533,598)
Payment of lease costs -- (15,600) --
-------------- ------------- -------------
Net cash provided by (used in) investing
activities 3,939,271 (15,202) 1,224,358
-------------- ------------- -------------
Cash Flows from Financing Activities:
Distributions to limited partners (5,125,000) (2,400,000) (3,723,748)
-------------- ------------- -------------
Net cash used in financing activities (5,125,000) (2,400,000) (3,723,748)
-------------- ------------- -------------
Net Increase (Decrease) in Cash and Cash
Equivalents 641,378 (13,889) (137,070)
Cash and Cash Equivalents at Beginning of Year 725,493 739,382 876,452
-------------- ------------- -------------
Cash and Cash Equivalents at End of Year $ 1,366,871 $ 725,493 $ 739,382
============== ============= =============
See accompanying notes to financial statements.
CNL INCOME FUND IV, LTD.
(A Florida Limited Partnership)
STATEMENTS OF CASH FLOWS - CONTINUED
Year Ended December 31,
2000 1999 1998
-------------- ---------------- ----------------
Reconciliation of Net Income to Net Cash
Provided by Operating Activities:
Net income $ 2,078,310 $ 1,827,359 $ 1,821,449
-------------- ---------------- ----------------
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation 376,013 405,488 425,481
Amortization 28,000 4,663 3,494
Bad debt expense 12,685 -- --
Equity in earnings of joint ventures,
net of distributions 134,502 64,094 338,504
Gain on sale of assets (1,042,295) -- (226,024)
Provision for loss on assets 387,612 -- --
Decrease (increase) in receivables 83,846 (113,323) 8,607
Increase in due from related parties (15,226) -- --
Decrease (increase) in prepaid expenses 1,307 (5,547) 1,279
Decrease in net investment in direct
financing leases 31,769 41,994 37,907
Decrease (increase) in accrued rental
income 35,367 (34,542) (40,515)
Increase in other assets (855) -- --
Increase (decrease) in accounts
payable and accrued expenses (46,004) 86,571 (55,404)
Increase (decrease) in accrued and
escrowed real estate taxes (15,077) 26,853 28,444
Increase (decrease) in due to related
parties (187,290) 92,531 9,461
Increase (decrease) in rents paid in
advance and deposits (35,557) 5,172 9,637
-------------- ---------------- ----------------
Total adjustments (251,203) 573,954 540,871
-------------- ---------------- ----------------
Net Cash Provided by Operating Activities $ 1,827,107 $ 2,401,313 $ 2,362,320
============== ================ ================
Supplemental Schedule of Non-Cash Investing
and Financing Activities:
Deferred real estate disposition fees incurred
and unpaid at December 31 $ 118,458 $ -- $ 45,663
============== ================ ================
Distributions declared and unpaid at
December 31 $ 525,000 $ 600,000 $ 600,000
============== ================ ================
See accompanying notes to financial statements.
CNL INCOME FUND IV, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2000, 1999, and 1998
1. Significant Accounting Policies:
Organization and Nature of Business - CNL Income Fund IV, Ltd. (the
"Partnership") is a Florida limited partnership that was organized for
the purpose of acquiring both newly constructed and existing restaurant
properties, as well as properties upon which restaurants were to be
constructed, which are leased primarily to operators of national and
regional fast-food and family-style restaurant chains.
The general partners of the Partnership are CNL Realty Corporation (the
"Corporate General Partner"), James M. Seneff, Jr. and Robert A.
Bourne. Mr. Seneff and Mr. Bourne are also 50 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 generally 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 method 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) (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 IV, 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 value. 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' best 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 Holland
Joint Venture, Titusville Joint Venture, Cocoa Joint Venture, Auburn
Joint Venture, Kingsville Real Estate Joint Venture, Warren Joint
Venture, and properties in Clinton, North Carolina and Zephyrhills,
Florida, held as tenants-in-common, are accounted for using the equity
method since the Partnership shares control with affiliates which have
the same general partners.
CNL INCOME FUND IV, 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 new leases are
amortized over the terms of the new leases 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 IV, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2000, 1999, and 1998
1. Significant Accounting Policies - Continued:
Reclassifications - Certain items in the prior years' financial
statements have been reclassified to conform to 2000 presentation.
These reclassifications had no effect on partners' capital or net
income.
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's 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 or land and buildings primarily 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." The leases generally are classified as operating leases;
however, some leases have been classified as direct financing leases.
For the leases classified as direct
CNL INCOME FUND IV, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2000, 1999, and 1998
2. Leases - Continued:
financing leases, the building portions of the property leases are
accounted for as direct financing leases while the land portion of
these leases are operating leases. Substantially all leases are for 15
to 20 years and provide for minimum and contingent rentals. In
addition, the tenant generally 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 or 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 6,442,595 $ 7,244,512
Buildings 10,163,786 11,986,556
------------------ -----------------
16,606,381 19,231,068
Less accumulated depreciation (3,833,647) (4,150,097)
------------------ -----------------
12,772,734 15,080,971
Less allowance for loss on assets (387,612) --
------------------ -----------------
$ 12,385,122 $ 15,080,971
================== =================
In June 2000, the Partnership sold its property in Detroit, Michigan to
the tenant for $1,095,000 and received net sales proceeds of
$1,089,325, resulting in a gain of approximately $552,600 for financial
reporting purposes. This property was originally acquired by the
Partnership in October 1988 and had a cost of approximately $614,500,
excluding acquisition fees and miscellaneous acquisition expenses;
therefore, the Partnership sold the property for approximately $474,800
in excess of its original purchase price. In connection with the sale,
the Partnership incurred a deferred, subordinated, real estate
disposition fee of $32,850 (see Note 8).
CNL INCOME FUND IV, 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 2000, the Partnership sold its properties in Temple Terrace,
Florida and Punta Gorda, Florida, to a third party for $2,353,583
resulting in a gain of approximately $582,100 for financial reporting
purposes. These properties were originally acquired by the Partnership
in March of 1989 and had a cost of $2,081,700 excluding acquisition
fees and miscellaneous acquisition expenses; therefore, the Partnership
sold the properties for approximately $271,900 in excess of their
original purchase prices. In connection with the sales, the Partnership
incurred deferred, subordinated, real estate disposition fees of
$70,608 (see Note 8).
In November 2000, the Partnership sold its property in Topeka, Kansas
to a third party for $500,000 and received net sales proceeds of
approximately $496,400, resulting in a loss of approximately $92,400
for financial reporting purposes. In connection with the sale, the
Partnership incurred a deferred, subordinated, real estate disposition
fee of $15,000 (see Note 8).
During 2000, the Partnership recorded a provision for loss on assets of
$387,612 relating to the property in Palm Bay, Florida. The tenant of
this property vacated the property and discontinued the payment of
rent. The allowance represented the difference between the carrying
value of the property at December 31, 2000, and the estimated net
realizable value of the property.
Some leases provide for escalating guaranteed minimum rents throughout
the lease terms. 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 a loss of $35,346 (including $51,520 in reversals) and
income of $34,542 and $40,515, respectively, of such rental income.
CNL INCOME FUND IV, 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 $ 1,519,388
2002 1,512,739
2003 1,391,174
2004 1,407,263
2005 1,412,921
Thereafter 6,617,214
-----------------
$ 13,860,699
=================
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 $ 429,981 $ 1,495,893
Estimated residual values 114,886 527,829
Less unearned income (205,178) (834,234)
---------------- ----------------
Net investment in direct
financing leases $ 339,689 $ 1,189,488
================ ================
CNL INCOME FUND IV, 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:
During 2000, the Partnership sold its property in Punta Gorda, Florida,
for which the building portion had been classified as a direct
financing lease. In connection therewith, the gross investment (minimum
lease payments receivable and the estimated residual value) and
unearned income relating to the building were removed from the accounts
and the gain from the sale of the property was reflected in income (see
Note 3).
The following is a schedule of future minimum lease payments to be
received on direct financing leases at December 31, 2000:
2001 $ 53,568
2002 53,568
2003 53,568
2004 53,568
2005 53,568
Thereafter 162,141
------------------
$ 429,981
==================
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).
5. Investment in Joint Ventures:
As of December 31, 2000, the Partnership had a 51 percent, 26.6%, 57
percent, 96.1%, 68.87%, and 35.71% interest in the profits and losses
of Holland Joint Venture, Titusville Joint Venture, Cocoa Joint
Venture, Auburn Joint Venture, Kingsville Real Estate Joint Venture and
Warren Joint Venture, respectively, and a 53 percent and 76 percent
interest in the profits and losses of properties in Clinton, North
Carolina and Zephyrhills, Florida, held as tenants-in-common with
affiliates of the general partners. The remaining interests in these
joint ventures are held by affiliates of the Partnership which have the
same general partners. Holland Joint Venture, Titusville Joint Venture,
Cocoa Joint Venture, Auburn Joint Venture, Kingsville Real Estate Joint
Venture, Warren Joint Venture and the Partnership and affiliates, as
tenants-in-common, each owns and leases one property to an operator of
national fast-food or family-style restaurants.
CNL INCOME FUND IV, 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 January 1999, the Partnership invested $533,200 in a property in
Zephyrhills, Florida as tenants-in-common with CNL Income Fund XVII,
Ltd., a Florida limited partnership and affiliate of the general
partners. As of December 31, 2000, the Partnership had a 76 percent
interest in the property.
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 $ 4,866,583 $ 5,223,253
Net investment in direct financing
lease 358,308 371,740
Cash 32,143 29,223
Receivables 20,345 13,544
Prepaid expenses 1,850 --
Accrued rental income, less
allowance for doubtful accounts 165,097 168,836
Other assets 1,402 3,644
Liabilities 56,461 44,425
Partners' capital 5,389,267 5,765,815
Revenues 606,228 619,788
Provision for loss on assets (227,093 ) --
Net income 222,879 458,146
The Partnership recognized income totaling $234,317 and $303,223, and a
loss totaling $90,144 for the years ended December 31, 2000, 1999 and
1998, respectively, from these joint ventures.
CNL INCOME FUND IV, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2000, 1999, and 1998
6. 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 property, were allocated 99 percent to the limited partners and one
percent to the general partners. From inception through December 31,
1999, distributions of net cash flow were made 99 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 was subordinated to receipt by the limited partners of
an aggregate, ten percent, cumulative, noncompounded annual return on
their adjusted capital contributions (the "10% Preferred Return").
From inception through December 31, 1999, generally, net sales proceeds
from the sale of properties not in liquidation of the Partnership, to
the extent distributed, were distributed first to the limited partners
in an amount sufficient to provide them with their 10% Preferred
Return, plus the return of their adjusted capital contributions. The
general partners then received, to the extent previously subordinated
and unpaid, a one percent interest in all prior distributions of net
cash flow and a return of their capital contributions. Any remaining
sales proceeds were distributed 95 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 not in
liquidation of the Partnership 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 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.
CNL INCOME FUND IV, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2000, 1999, and 1998
6. Allocations and Distributions - Continued:
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.
During each of the years ended December 31, 2000, 1999, and 1998, the
Partnership declared distributions to the limited partners of
$5,050,000, $2,400,000, and $3,633,748, respectively. Distributions for
the year ended December 31, 1998 included $1,233,748 as a result of the
distribution of net sales proceeds from the sale of the properties in
Fort Myers, Florida and Union Township, Ohio. This amount was applied
toward the limited partners' 10% Preferred Return. Distributions for
the year ended December 31, 2000, included $2,800,000 in a special
distribution, as a result of the distribution of net sales proceeds
from the sale of the properties in Temple Terrace and Punta Gorda,
Florida and Detroit, Michigan. This amount was applied toward the
limited partners' 10% Preferred Return. No distributions have been made
to the general partners to date.
CNL INCOME FUND IV, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2000, 1999, and 1998
7. Income Taxes:
The following is a reconciliation of net income for financial reporting
purposes to net income for federal income tax purposes for the years
ended December 31:
2000 1999 1998
------------- ------------- -------------
Net income for financial reporting
purposes $ 2,078,310 $ 1,827,359 $ 1,821,449
Depreciation for tax reporting purposes in
excess of depreciation for financial
reporting purposes (3,055) (8,171) (8,014)
Allowance for loss on assets 387,612 -- --
Direct financing leases recorded as
operating leases for tax reporting
purposes 31,769 41,995 37,907
Gain on sale of assets for financial
reporting purposes less than (in excess)
gain for tax reporting purposes 89,247 -- (231,919)
Capitalization (deduction) of transaction
costs for tax reporting purposes (160,530) 142,244 18,286
Equity in earnings of joint ventures
for financial reporting purposes less
than (in excess of) equity in earnings
of joint ventures for tax reporting
purposes 73,569 (76,060) 319,186
Allowance for doubtful accounts 86,488 (43,612) (36,939)
Accrued rental income 35,367 (34,542) (40,515)
Rents paid in advance (11,518) (14,327) 9,137
Other -- -- 501
------------ ------------- -------------
Net income for federal income tax
purposes $ 2,607,259 $ 1,834,886 $ 1,889,079
============ ============= =============
CNL INCOME FUND IV, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2000, 1999, and 1998
8. Related Party Transactions:
One of the individual general partners, James M. Seneff, Jr., is one of
the principal shareholders of CNL Holdings, Inc. The other individual
general partner, Robert A. Bourne, serves as President and Treasurer of
CNL Financial Group, Inc., a wholly owned subsidiary of CNL Holdings,
Inc. CNL 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 an annual, noncumulative, subordinated management fee of
one percent of the sum of gross revenues from properties wholly owned
by the Partnership and the Partnership's allocable share of gross
revenues from joint ventures, but not in excess of competitive fees for
comparable services. These fees are incurred payable only after the
limited partners receive their 10% Preferred Return. Due to the fact
that these fees are noncumulative, if the limited partners have not
received their 10% Preferred Return in any particular year, no
management fees will be due or payable for such year. As a result of
such threshold, no management fees were incurred during the years ended
December 31, 2000, 1999 and 1998.
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 the receipt by the limited partners of their aggregate
10% Preferred Return, plus their adjusted capital contributions. For
the years ended December 31, 2000 and 1998, the Partnership incurred
$118,458 and $45,663, respectively, in deferred, subordinated, real
estate disposition fees as a result of the sales of properties. No
deferred, subordinated, real estate disposition fees were incurred for
the year ended December 31, 1999.
CNL INCOME FUND IV, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2000, 1999, and 1998
8. Related Party Transactions - Continued:
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 $88,356,
$107,553, and $94,365 for the years ended December 31, 2000, 1999 and
1998, respectively, for such services.
The due to related parties consisted of the following at December 31:
2000 1999
-------------- --------------
Due to the Advisor:
Expenditures incurred on
behalf of the Partnership $ -- $ 122,830
Accounting and administrative
services 3,556 70,716
Deferred, subordinated real
estate disposition fee 164,121 45,663
Other 5,000 2,300
-------------- --------------
$ 172,677 $ 241,509
============== ==============
9. Concentration of Credit Risk:
For the years ended December 31, 2000, 1999, and 1998, rental income
from Shoney's, Inc. was $313,115, $347,088, and $413,755, respectively,
representing more than ten percent of the Partnership's total rental
and earned income (including the Partnership's share of rental and
earned income from joint ventures and the properties held as
tenants-in-common with affiliates of the general partners).
CNL INCOME FUND IV, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2000, 1999, and 1998
9. Concentration of Credit Risk - Continued:
In addition, the following schedule presents total rental and earned
income from individual restaurant chains, each representing more than
ten percent of the Partnership's total rental and earned income
(including the Partnership's share of total rental and earned income
from joint ventures and the properties held as tenants-in-common with
affiliates of the general partners) for each of the years ended
December 31:
2000 1999 1998
-------------- -------------- -------------
Wendy's Old Fashioned
Hamburger Restaurants $ 386,618 442,195 437,896
Shoney's 327,448 $ 466,964 $541,175
Denny's 236,184 N/A N/A
The information denoted by N/A indicates that for each period
presented, the chain did not represent more than ten percent of the
Partnership's total rental and earned income.
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 of these lessees or
restaurant chains could significantly impact the results of operations
of the Partnership.
CNL INCOME FUND IV, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2000, 1999, and 1998
10. 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
------------------------ -------------- ------------- ------------- -------------- --------------
Revenue (1) $661,494 $558,977 $484,190 $433,579 $ 2,138,240
Net income 430,730 487,937 890,412 269,231 2,078,310
Net income per
limited partner
unit 7.11 8.27 14.73 4.53 34.64
1999 Quarter First Second Third Fourth Year
------------------------ -------------- ------------- ------------- -------------- --------------
Revenue (1) $619,494 $633,848 $654,319 $694,396 $ 2,602,057
Net income 412,833 409,135 452,989 552,402 1,827,359
Net income per
limited partner
unit 6.81 6.75 7.47 9.11 30.15
(1) Revenues include equity in earnings of joint ventures and
adjustments to accrued rental income.
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: $88,356
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, subordinated One percent of the sum of gross $-0-
management fee to affiliates operating revenues from Properties
wholly owned by the Partnership plus
the Partnership's allocable share of
gross revenues of joint ventures in
which the Partnership is a
co-venturer, subordinated to certain
minimum returns to the Limited
Partners. The management fee will
not exceed competitive fees for
comparable services. Due to the
fact that these fees are
non-cumulative, if the Limited
Partners have not received their 10%
Preferred Return in any particular
year, no management fees will be due
or payable for such year.
Amount Incurred
Type of Compensation For the Year
and Recipient Method of Computation Ended December 31, 2000
- --------------------------------- -------------------------------------- ------------------------------
Deferred, subordinated real A deferred, subordinated real estate $118,458
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.
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
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 Certificate of Limited Partnership of CNL Income Fund
IV, Ltd. (Included as Exhibit 3.1 in Amendment No. 1
to Registration Statement No. 33-20249 on Form S-11
and incorporated herein by reference.)
3.2 Amended and Restated Agreement and Certificate of
Limited Partnership of CNL Income Fund IV, Ltd.
(Included as Exhibit 3.2 to Form 10-K filed with the
Securities and Exchange Commission on March 31, 1994,
and incorporated herein by reference.)
4.1 Certificate of Limited Partnership of CNL Income Fund
IV, Ltd. (Included as Exhibit 3.1 in Amendment No. 1
to Registration Statement No. 33-20249 on Form S-11
and incorporated herein by reference.)
4.2 Amended and Restated Agreement and Certificate of
Limited Partnership of CNL Income Fund IV, Ltd.
(Included as Exhibit 3.2 to Form 10-K filed with the
Securities and Exchange Commission on March 31, 1994,
and incorporated herein by reference.)
10.1 Property Management Agreement (Included as Exhibit
10.1 to Form 10-K filed with the Securities and
Exchange Commission on March 31, 1994, and
incorporated herein by reference.)
10.2 Assignment of Property 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 Property 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
from October 1, 2000 through December 31, 2000.
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 28th day of
March, 2001.
CNL INCOME FUND IV, 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 28, 2001
---------------------------
Robert A. Bourne (Principal Financial and Accounting
Officer)
/s/ James M. Seneff, Jr. Chief Executive Officer and Director March 28, 2001
---------------------------
James M. Seneff, Jr. (Principal Executive Officer)
CNL INCOME FUND IV, 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) $ 295,580 $ -- $ 26,370 (b) $ 3,303 (c) $ 60,006 $ 258,641
============== =============== ================ ============= ============ ============
1999 Allowance for
doubtful
accounts (a) $ 258,641 $ -- $ 18,765 (b) $ 7,167 (c) $ 55,210 $ 215,029
============== =============== ================ ============= ============ ============
2000 Allowance for
doubtful
accounts (a) $ 215,029 $ 28,953 $ 153,383 (b) $ -- $ 95,848 $ 301,517
============== =============== ================ ============= ============ ============
(a) Deducted from receivables on the balance sheet.
(b) Reduction of rental and other income.
(c) Amounts written off as uncollectible.
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:
Arby's Restaurants:
Winchester, Indiana - $287,769 - $567,785 -
Portland, Indiana - 187,928 - 657,931 -
Boston Market Restaurant:
Richmond, Virginia 504,169 522,025 - -
Captain D's Restaurants:
Alexander City, Alabama - 120,210 279,689 - -
Oak Ridge, Tennessee - 169,951 281,686 - -
Checkers Drive-In Restaurant:
Miami, Florida - 174,336 - - -
Denny's Restaurants:
Marion, Ohio - 135,407 334,665 - -
Dundee, Michigan - 251,650 - 372,278 -
Golden Corral Family
Steakhouse Restaurants:
Franklin, Indiana - 107,560 586,375 - -
Streator, Illinois - 161,616 650,934 - -
Jack in the Box Restaurant:
San Antonio, Texas - 352,957 - 368,702 -
Pizza Hut Restaurants:
Memphis, Texas - 26,510 231,874 - -
Carthage, Texas - 40,444 232,823 - -
Crystal City, Texas - 8,826 178,570 - -
Sequin, Texas - 63,708 184,279 - -
Washington, D.C. - 191,737 - - -
Shoney's Restaurants:
Alexander City, Alabama - 202,438 428,406 - -
Brookhaven, Mississippi - 312,574 452,601 - -
Auburn, Alabama - 363,432 426,123 - -
Taco Bell Restaurant:
Edgewood, Maryland - 440,355 - 523,478 -
Wendy's Old Fashioned
Hamburger Restaurants:
Mechanicsville, -irginia 346,627 502,117 - -
Tampa, Florida - 530,456 432,958 - -
Tampa, Florida - 476,755 368,405 - -
Other Restaurants:
Corpus Christi, Tex-s 204,287 - 460,804 -
Maywood, Illinoi- (i) 310,966 - 443,473 -
Palm Bay, Florid- (m) 469,927 365,128 310,677 -
------------ ------------ ----------- -------
$6,442,595 $6,458,658 $3,705,128 -
============ ============ =========== =======
Property of Joint Venture in Which
the Partnership has a 51%
Interest and has Invested in
Under an Operating Lease:
Denny's Restaurant:
Holland, Michigan - $295,987 - $780,451 -
============ ============ =========== =======
Property of Joint Venture in Which
the Partnership has a 26.6%
Interest and has Invested in
Under an Operating Lease:
Po Folks Restaurant:
Titusville, Florida (-) $271,350 - $750,985 -
============ ============ =========== =======
Property of Joint Venture in Which
the Partnership has a 57%
Interest and has Invested in
Under an Operating Lease:
Waffle House Restaurant:
Cocoa, Florida $183,229 $192,857 - -
============ ============ =========== =======
Property of Joint Venture in Which
the Partnership has a 96.1%
Interest and has Invested in
Under an Operating Lease:
KFC Restaurant:
Auburn, Massachusetts- $484,362 - - -
============ ============ =========== =======
Property of Joint Venture in Which
the Partnership has a 68.87%
Interest and has Invested in
Under an Operating Lease:
Denny's Restaurant:
Kingsville, Texas (k)- $270,189 - $243,326 -
============ ============ =========== =======
Property in Which the Partner- ship
has a 53% Interest as
Tenants-in-Common and has
Invested in Under an Operating
Lease:
Golden Corral Family
Steakhouse Restaurant:
Clinton, North Ca-olina $138,382 $676,588 - -
============ ============ =========== =======
Property of Joint Venture in Which
the Partnership has a 35.71%
Interest and has Invested in
Under an Operating Lease:
IHOP Restaurant:
Warren, Michigan - $507,965 $889,080 - -
============ ============ =========== =======
Property in Which the Partnership
has a 76% Interest as Tenants-
in-Common and has Invested in
Under an Operating Lease:
Arby's Restaurant:
Zephyrhills, Florida - $260,146 $441,434 - -
============ ============ =========== =======
Properties the Partnership has
Invested in Under Direct
Financing Leases:
Pizza Hut Restaurant:
Washington, D. C. - - $459,543 - -
============ ============ =========== =======
Property of Joint Venture in
Which the Partnership has a
96.1% Interest and has Invested
in Under a Direct Financing
Lease:
KFC Restaurant:
Auburn, Massachusetts- - - $434,947 -
============ ============ =========== =======
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
------------ ----------- ------------ ---------- ------- -------- ------------
$287,769 $567,785 $855,554 $198,190 1988 07/88 (b)
187,928 657,931 845,859 218,379 1989 11/88 (b)
504,169 522,025 1,026,194 69,651 1996 12/96 (b)
120,210 279,689 399,899 112,106 1988 12/88 (b)
169,951 281,686 451,637 112,932 1988 12/88 (b)
174,336 - 174,336 (g) - 06/94 (g)
135,407 334,665 470,072 93,395 1989 10/88 (h)
251,650 372,278 623,928 150,980 1988 10/88 (b)
107,560 586,375 693,935 244,323 1988 06/88 (b)
161,616 650,934 812,550 267,606 1988 08/88 (b)
352,957 368,702 721,659 145,433 1989 11/88 (b)
26,510 231,874 258,384 95,004 1985 09/88 (b)
40,444 232,823 273,267 95,393 1981 09/88 (b)
8,826 178,570 187,396 73,164 1981 09/88 (b)
63,708 184,279 247,987 75,503 1974 09/88 (b)
191,737 (f) 191,737 - 1986 01/89 (d)
202,438 428,406 630,844 171,714 1988 12/88 (b)
312,574 452,601 765,175 181,453 1988 12/88 (b)
363,432 426,123 789,555 170,838 1988 12/88 (b)
440,355 523,478 963,833 207,210 1989 10/88 (b)
346,627 502,117 848,744 202,241 1988 12/88 (b)
530,456 432,958 963,414 173,270 1984 12/88 (b)
476,755 368,405 845,160 147,437 1987 12/88 (b)
204,287 460,804 665,091 186,592 1988 10/88 (b)
310,966 443,473 754,439 176,168 1988 09/88 (b)
469,927 675,805 1,145,732 264,665 1989 12/88 (b)
------------ ----------- ------------ ----------
$6,442,595 $10,163,786 $16,606,381 $3,833,647
============ =========== ============ ==========
$295,987 $780,451 $1,076,438 $316,516 1988 11/88 (b)
============ =========== ============ ==========
$271,350 $750,985 $1,022,335 $279,866 1988 12/88 (b)
============ =========== ============ ==========
$183,229 $192,857 $376,086 $70,779 1986 12/89 (b)
============ =========== ============ ==========
$484,362 (f) $484,362 - 1989 05/89 (d)
============ ============ ==========
$270,189 $243,326 $513,515 $25,614 1988 10/88 (d)
============ =========== ============ ==========
$138,382 $676,588 $814,970 $111,379 1996 01/96 (b)
============ =========== ============ ==========
$507,965 $889,080 $1,397,045 $68,041 1998 09/98 (b)
============ =========== ============ ==========
$260,146 $441,434 $701,580 $28,734 1990 01/99 (b)
============ =========== ============ ==========
- (f) (f) (d) 1986 01/89 (d)
============
- (f) (f) (d) 1989 05/89 (d)
CNL INCOME FUND IV, 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 $ 22,012,766 $ 3,844,432
Dispositions (2,781,698 ) (525,304 )
Depreciation expense -- 425,481
---------------- -----------------
Balance, December 31, 1998 19,231,068 3,744,609
Depreciation expense -- 405,488
---------------- -----------------
Balance, December 31, 1999 19,231,068 4,150,097
Dispositions (2,624,687 ) (692,463 )
Depreciation expense -- 376,013
---------------- -----------------
Balance, December 31, 2000 $ 16,606,381 $ 3,833,647
================ =================
Property of Joint Venture in Which the Partnership has
a 51% Interest and has Invested in Under an
Operating Lease:
Balance, December 31, 1997 $ 1,076,438 $ 238,471
Depreciation expense -- 26,015
---------------- -----------------
Balance, December 31, 1998 1,076,438 264,486
Depreciation expense -- 26,015
---------------- -----------------
Balance, December 31, 1999 1,076,438 290,501
Depreciation expense -- 26,015
---------------- -----------------
Balance, December 31, 2000 $ 1,076,438 $ 316,516
================ =================
CNL INCOME FUND IV, 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 26.6% Interest and has Invested in Under an
Operating Lease:
Balance, December 31, 1997 $ 1,022,335 $ 225,296
Depreciation expense -- 20,010
---------------- -----------------
Balance, December 31, 1998 1,022,335 245,306
Depreciation expense -- 17,624
---------------- -----------------
Balance, December 31, 1999 (j) 1,022,335 262,930
Depreciation expense -- 16,936
---------------- -----------------
Balance, December 31, 2000 (j) $ 1,022,335 $ 279,866
================ =================
Property of Joint Venture in Which the Partnership has
a 57% Interest and has Invested in Under an
Operating Lease:
Balance, December 31, 1997 $ 376,086 $ 51,482
Depreciation expense -- 6,429
---------------- -----------------
Balance, December 31, 1998 376,086 57,911
Depreciation expense -- 6,429
---------------- -----------------
Balance, December 31, 1999 376,086 64,340
Depreciation expense -- 6,429
---------------- -----------------
Balance, December 31, 2000 $ 376,086 $ 70,769
================ =================
CNL INCOME FUND IV, 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 35.71% Interest and has Invested in Under an
Operating Lease:
Balance, December 31, 1997 $ -- $ --
Acquisition 1,397,045 --
Depreciation -- 8,769
---------------- -----------------
Balance, December 31, 1998 1,397,045 8,769
Depreciation expense -- 29,636
---------------- -----------------
Balance, December 31, 1999 1,397,045 38,405
Depreciation expense -- 29,636
---------------- -----------------
Balance, December 31, 2000 $ 1,397,045 $ 68,041
================ =================
Property of Joint Venture in Which the Partnership has
a 96.1% Interest and has Invested in Under an
Operating Lease:
Balance, December 31, 1997 $ 484,362 $ --
Depreciation expense (d) -- --
---------------- -----------------
Balance, December 31, 1998 484,362 --
Depreciation expense (d) -- --
---------------- -----------------
Balance, December 31, 1999 484,362 --
Depreciation expense (d) -- --
---------------- -----------------
Balance, December 31, 2000 $ 484,362 $ --
================ =================
CNL INCOME FUND IV, 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 68.87% Interest and has Invested in Under an
Operating Lease:
Balance, December 31, 1997 $ 270,189 $ --
Depreciation expense (d) -- --
----------------- -----------------
Balance, December 31, 1998 (k) 270,189 --
Reclassified from net investment in direct
financing lease 243,326 --
Depreciation expense -- 12,807
----------------- -----------------
Balance, December 31, 1999 (h) 513,515 12,807
Depreciation expense -- 12,807
----------------- -----------------
Balance, December 31, 2000 $ 513,515 $ 25,614
================= =================
Property in Which the Partnership has a 53% Interest
as Tenants-in-Common and has Invested in Under an
Operating Lease:
Balance, December 31, 1997 $ 814,970 $ 43,720
Depreciation expense -- 22,553
----------------- -----------------
Balance, December 31, 1998 814,970 66,273
Depreciation expense -- 22,553
----------------- -----------------
Balance, December 31, 1999 814,970 88,826
Depreciation expense -- 22,553
----------------- -----------------
Balance, December 31, 2000 $ 814,970 $ 111,379
================= =================
CNL INCOME FUND IV, LTD.
(A Florida Limited Partnership)
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION - CONTINUED
December 31, 2000
Accumulated
Cost Depreciation
----------------- -----------------
Property in Which the Partnership has a 76% Interest
as Tenants-in-Common and has Invested in Under
an Operating Lease:
Balance, December 31, 1998 $ -- $ --
Acquisition 701,580 --
Depreciation expense -- 13,532
----------------- -----------------
Balance, December 31, 1999 701,580 13,532
Depreciation -- 15,202
----------------- -----------------
Balance, December 31, 2000 $ 701,580 $ 28,734
================= =================
(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
$16,858,382 and $7,061,746, 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 the 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 the 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 are not shown.
(g) The building portion of this Property is owned by the tenant; therefore,
depreciation is not applicable.
(h) Effective January 1, 1994, 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 as of
January 1, 1994, and depreciated over remaining estimated life of
approximately 25 years.
(i) The restaurant on the Property in Maywood, Illinois, was converted to a
Dunkin Donuts restaurant and a Holsum Bread bakery in 1993.
CNL INCOME FUND IV, LTD.
(A Florida Limited Partnership)
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION - CONTINUED
December 31, 2000
(j) For financial reporting purposes, the undepreciated cost of the Property
in Titusville, Florida, was written down to net realizable value due to an
anticipated impairment in value. The Partnership recognized the impairment
by recording allowances for loss on assets in the amount of $125,251 and
$147,039 at December 31, 1998 and December 31, 1997, respectively. During
1997, the operator of this Property vacated the Property and ceased
operations. The impairment at December 31, 1998, represented the
difference between the Property's carrying value and the estimated net
realizable value of the Property. No additional impairment was recorded
during 1999. During 2000, the Partnership recognized an additional
impairment by recording allowances for loss on assets in the amount of
$227,093. 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 allowances for loss on assets.
(k) For financial reporting purposes, the undepreciated cost of the Property
in Kingsville, Texas, was written down to net realizable value due to an
anticipated impairment in value. The Partnership recognized the impairment
by recording an allowance for loss on assets in the amount of $316,113 at
December 31, 1998. The tenant of this Property experienced financial
difficulties and ceased payment of rents under the terms of their lease
agreement. The impairment at December 31, 1998, represented the difference
between the Property's carrying value at December 31, 1998, 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 as of January 15, 1999,
and depreciated over the remaining life of approximately 19 years. The
cost of land for this 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.
(l) For financial reporting purposes, the undepreciated cost of the Property
in Palm Bay, Florida, was written down to net realizable value due to an
impairment in value. The Partnership recognized the impairment by
recording an allowance for loss on the assets in the amount of $387,612
for the year ended December 31, 2000. The impairment at December 31, 2000,
represented the difference between the Property's carrying value and the
estimated of the net realizable value of the Property. 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.
EXHIBITS
EXHIBIT INDEX
Exhibit Number
3.1 Certificate of Limited Partnership of CNL Income Fund IV, Ltd.
(Included as Exhibit 3.1 in Amendment No. 1 to Registration
Statement No. 33-20249 on Form S-11 and incorporated herein by
reference.)
3.2 Amended and Restated Agreement and Certificate of Limited
Partnership of CNL Income Fund IV, Ltd. (Included as Exhibit
3.2 to Form 10-K filed with the Securities and Exchange
Commission on March 31, 1994, and incorporated herein by
reference.)
4.1 Certificate of Limited Partnership of CNL Income Fund IV, Ltd.
(Included as Exhibit 3.1 in Amendment No. 1 to Registration
Statement No. 33-20249 on Form S-11 and incorporated herein by
reference.)
4.2 Amended and Restated Agreement and Certificate of Limited
Partnership of CNL Income Fund IV, Ltd. (Included as Exhibit
3.2 to Form 10-K filed with the Securities and Exchange
Commission on March 31, 1994, and incorporated herein by
reference.)
10.1 Property Management Agreement (Included as Exhibit 10.1 to
Form 10-K filed with the Securities and Exchange Commission on
March 31, 1994, and incorporated herein by reference.)
10.2 Assignment of Property 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 Property 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.)