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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 0-19141
CNL INCOME FUND V, LTD.
(Exact name of registrant as specified in its charter)
Florida 59-2922869
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
450 South Orange Avenue
Orlando, Florida 32801
(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code: (407) 540-2000
Securities registered pursuant to Section 12(b) of
the Act:
Title of each class: Name of exchange on which registered:
None Not Applicable
Securities registered pursuant to Section 12(g) of
the Act:
Units of limited partnership interest ($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. [x]
Aggregate market value of the voting stock held by nonaffiliates of the
registrant: The registrant registered an offering of 50,000 units of limited
partnership interest (the "Units") on Form S-11 under the Securities Act of
1933, as amended. Since no established market for such Units exists, there is no
market value for such Units. Each Unit was originally sold at $500 per Unit.
DOCUMENTS INCORPORATED BY REFERENCE:
None
PART I
Item 1. Business
CNL Income Fund V, Ltd. (the "Registrant" or the "Partnership") is a
limited partnership which was organized pursuant to the laws of the State of
Florida on August 17, 1988. 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 December 16, 1988, the
Partnership offered for sale up to $25,000,000 in limited partnership interests
(the "Units") (50,000 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 June 7, 1989, as of which date the maximum offering
proceeds of $25,000,000 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 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, totaled
$22,125,000, and were used to acquire 30 Properties, including interests in
three Properties owned by joint ventures in which the Partnership is a
co-venturer. During the year ended December 31, 1996, the Partnership sold its
Property in St. Cloud, Florida, to the tenant of the Property and accepted in
cash and a promissory note for the Property. During the year ended December 31,
1997, the Partnership sold its Properties in Franklin and Smyrna, Tennessee;
Salem, New Hampshire; Port St. Lucie and Tampa, Florida; and Richmond, Indiana.
The Partnership reinvested a portion of these net sales proceeds in a Property
in Houston, Texas and a Property in Sandy, Utah. In addition, the Partnership
reinvested a portion of the net sales proceeds in a Property in Mesa, Arizona
and a Property in Vancouver, Washington, as tenants-in-common, with affiliates
of the General Partners. During the year ended December 31 1998, the Partnership
also sold its Properties in Port Orange, Florida and Tyler, Texas. The
Partnership used a portion of the sales proceeds to enter into a joint venture
arrangement, RTO Joint Venture, with an affiliate of the General Partners.
During the year ended December 31, 1999, the Partnership also sold its
Properties in Ithaca and Endicott, New York. The Partnership used the majority
of the net sales proceeds received from the sale of the Property in Ithaca, New
York to enter into a joint venture arrangement, Duluth Joint Venture, with
affiliates of the Partnership to construct and hold one Property. In addition,
during 1999, Halls Joint Venture, in which the Partnership owns a 48.9%
interest, sold its Property. During the year ended December 31, 2000, the
Partnership sold its interest in Duluth Joint Venture to an affiliate of the
General Partners and sold its Property in Belding, Michigan. In addition, during
2000, the Partnership and the joint venture partner liquidated Halls Joint
Venture and the Partnership received its pro rata share of the liquidation
proceeds from the joint venture. During the year ended December 31, 2000, the
Partnership also acquired the remaining interest in CNL/Longacre Joint Venture
from its joint venture partner and liquidated the joint venture.
As a result of the above transactions, as of December 31, 2000, the
Partnership owned 21 Properties. The 21 Properties include interests in two
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. In March 2001, the Partnership sold its Property in
Daleville, Indiana. In March 2001, the Partnership sold its Property in
Daleville, Indiana. 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 or
joint venture 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 entered into in March 1999.
The agreement to terminate the Agreement and Plan of Merger was based, in large
part, on the General Partners' concern that, in light of market conditions
relating to publicly traded real estate investment trusts, the value of the
transaction had diminished. As a result of such diminishment, the General
Partners' ability to unequivocally recommend voting for the transaction, in the
exercise of their fiduciary duties, had become questionable. The General
Partners are continuing to evaluate strategic alternatives for the Partnership,
including alternatives to provide liquidity to the Limited Partners.
Leases
Although there are variations in the specific terms of the leases, the
following is a summarized description of the general structure of the
Partnership's leases. The leases of the Properties owned by the Partnership and
the joint ventures in which the Partnership is a co-venturer provide for initial
terms, ranging from 12 to 20 years (the average being 19 years) and expire
between 2002 and 2018. The leases are generally on a triple-net basis, with the
lessees responsible for all repairs and maintenance, property taxes, insurance
and utilities. The leases of the Properties provide for minimum base annual
rental payments (payable in monthly installments) ranging from approximately
$42,300 to $222,800. Generally, the leases provide for percentage rent, based on
sales in excess of a specified amount, to be paid annually. In addition, a
majority of the leases provide that, commencing in the sixth lease year, the
percentage rent will be an amount equal to the greater of (i) the percentage
rent calculated under the lease formula or (ii) a specified percentage (ranging
from one-fourth to five percent) of the purchase price paid by the Partnership
for the Property.
Generally, the leases of the Properties provide for two to four
five-year renewal options subject to the same terms and conditions as the
initial lease. Lessees of 16 of the Partnership's 21 Properties also have been
granted options to purchase Properties at the Property's then fair market after
a specified portion of the lease term has elapsed. Fair market value will be
determined through an appraisal by an independent appraisal firm. Under the
terms of certain leases the option purchase price may equal the Partnership's
original cost to purchase the Property (including acquisition costs), plus a
specified percentage from the date of the Lease or a specified percentage of the
Partnership's purchase price, if that amount is greater than the Property's fair
market value at the time the purchase option is exercised.
The leases also generally provide that, in the event the Partnership
wishes to sell the Property subject to that lease, the Partnership first must
offer the lessee the right to purchase the Property on the same terms and
conditions, and for the same price, as any offer which the Partnership has
received for the sale of the Property.
The tenant relating to the Property in Lebanon, New Hampshire defaulted
under the terms of its agreement, and in February 1995, ceased operations of the
restaurant on the Property. The Partnership is currently seeking a replacement
tenant or a purchaser for this Property.
In August 1998, the Partnership terminated the lease with the tenant of
the Property in Daleville, Indiana, due to financial difficulties the tenant was
experiencing. In March 2001, the Partnership sold the Property to an unrelated
third party.
In December 1999, the Partnership entered into a joint venture
arrangement, Duluth Joint Venture, with affiliates of the General Partners, to
construct and hold one restaurant Property. During 2000, the Partnership sold
its 12 percent interest in Duluth Joint Venture to an affiliate of the General
Partners.
In February 2001, the Partnership accepted $150,000 as satisfaction of
outstanding receivable amounts and consideration for releasing the tenant of the
Property in Huron, Ohio from its obligation under its lease. The General
Partners are seeking either a replacement tenant or purchaser for this Property.
Major Tenants
During 2000, two lessees, Golden Corral Corporation and the Slaymaker
Group, Inc. each contributed more than ten percent of the Partnership's total
rental, earned, and mortgage interest income (including rental income from the
Partnership's consolidated joint venture and the Partnership's share of the
rental and earned income from two Properties owned by unconsolidated joint
ventures and two Properties owned with affiliates of the General Partners as
tenants-in-common). As of December 31, 2000, Golden Corral Corporation was the
lessee under leases relating to two restaurants and Slaymaker Group, Inc. was
the lessee under a lease relating to one property. It is anticipated that, based
on the minimum rental payments required by the leases, these lessees will
continue to contribute more than ten percent of the Partnership's total rental,
earned, and mortgage interest income in 2001. In addition, three Restaurant
Chains, Golden Corral, Taco Bell, and Tony Roma's Famous For Ribs Restaurants,
each accounted for more than ten percent of the Partnership's total rental,
earned, and mortgage interest income in 2000 (including rental income from the
Partnership's consolidated joint venture and the Partnership's share of the
rental income from two Properties owned by unconsolidated joint ventures and two
Properties owned with affiliates of the General Partners as tenants-in-common).
It is anticipated that these three Restaurant Chains each will continue to
account for more than ten percent of the total rental, earned, and mortgage
interest income to which the Partnership is entitled under the terms of the
leases and mortgage note. Any failure of these lessees 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. 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 entered into a joint venture arrangement, CNL/Longacre
Joint Venture, with an unaffiliated entity, to purchase and hold one Property
through such joint venture. During 2000, the Partnership acquired the remaining
interest in CNL/Longacre Joint Venture from its joint venture partner and
liquidated the joint venture.
The Partnership has also entered into two separate joint venture
arrangements: Cocoa Joint Venture with CNL Income Fund IV, Ltd., and RTO Joint
Venture with CNL Income Fund III, Ltd. Each joint venture was formed to purchase
and hold one Property. 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 proportion to each partner's percentage interest in the joint
venture. The Partnership has a 43 percent interest in Cocoa Joint Venture, and a
53.12% interest in RTO Joint Venture. The Partnership and its joint venture
partners are jointly and severally liable for all debts, obligations, and other
liabilities of the joint ventures.
Each joint venture has an initial term of 15 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 unless terminated 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 equally with affiliates of
the General Partners for Cocoa Joint Venture, and RTO Joint Venture. The joint
venture agreements restrict each venturer's ability to sell, transfer or assign
its joint venture interest without first offering it for sale to its joint
venture 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 Cocoa Joint Venture and RTO Joint
Venture is distributed 43 percent and 53.12%, respectively, to the Partnership
and the balance is distributed to each of the other joint venture partners in
accordance with its percentage ownership in the respective joint venture. Any
liquidation proceeds, after paying joint venture debts and liabilities and
funding reserves for contingent liabilities, will be distributed first to the
joint venture partners with positive capital account balances in proportion to
such balances until such balances equal zero, and thereafter in proportion to
each joint venture partner's percentage interest in the joint venture.
In June 1999, Halls Joint Venture, in which the Partnership owned a
48.9% interest, sold its Property to the tenant in accordance with the purchase
option under the lease agreement. During 2000, the Partnership and the joint
venture partner liquidated Halls Joint Venture and the Partnership received its
pro rata share of the liquidation proceeds from the joint venture.
In addition, in December 1999, the Partnership entered into a joint
venture arrangement, Duluth Joint Venture, with CNL Income Fund VII, Ltd., CNL
Income Fund XIV, Ltd., and CNL Income Fund XV, Ltd., affiliates of the General
Partners, to construct and hold one Property. Each of the affiliates is a
limited partnership organized pursuant to the laws of the state of Florida. In
October 2000, the Partnership sold its 12 percent interest in Duluth Joint
Venture, to CNL Income Fund VII, Ltd.
In addition to the above joint venture agreements, in 1997, the
Partnership entered into two separate agreements, with affiliates of the General
Partners to purchase and hold the following Properties: a Property in Mesa,
Arizona, as tenants-in-common, with CNL Income Fund II, Ltd., and a Property in
Vancouver, Washington, as tenants-in-common, with CNL Income Fund, Ltd., CNL
Income Fund II, Ltd., and CNL Income Fund VI, Ltd. The affiliates are limited
partnerships organized pursuant to the laws of the state of Florida. 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 42.09% and a 27.78% interest in the Property in
Mesa, Arizona and the Property in Vancouver, Washington, respectively. The
tenancy in common agreement restricts each party's ability to sell, transfer, or
assign its interest in the tenancy in common's Property without first offering
it for sale to the remaining party of 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. Under this agreement, CNL Fund Advisors,
Inc. is responsible for collecting rental payments, inspecting the Properties
and the tenants' books and records, assisting the Partnership in responding to
tenant inquiries and notices and providing information to the Partnership about
the status of the leases and the Properties. CNL Fund Advisors, Inc. also
assists the General Partners in negotiating the leases. For these services, the
Partnership has agreed to pay CNL Fund Advisors, Inc. an annual fee of one
percent of the sum of gross 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, 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 21 Properties. Of the 21
Properties, 17 are owned by the Partnership in fee simple, two are owned through
joint venture arrangements and two are owned through tenancy in common
arrangements. 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 12,300
to 135,000 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.
State Number of Properties
Arizona 1
Florida 3
Georgia 1
Illinois 1
Indiana 3
Michigan 1
New Hampshire 1
Ohio 2
Texas 4
Utah 2
Washington 2
-----
TOTAL PROPERTIES 21
=====
Buildings. Generally, each of the Properties owned by the Partnership
includes a building that is one of a Restaurant Chain's approved designs. The
buildings generally are rectangular and are constructed from various
combinations of stucco, steel, wood, brick and tile. Building sizes range from
approximately 1,700 to 10,100 square feet. All buildings on Properties acquired
by the Partnership 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 (including its consolidated joint venture) and unconsolidated
joint ventures (including Properties owned through tenancy-in-common
arrangements) for federal income tax purposes was $12,960,962 and $5,175,275,
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 2
Boston Market 1
Burger King 1
Captain D's 2
Chevy's Fresh Mex 1
Denny's 3
Golden Corral 2
IHOP 1
Market Street Buffet & Bakery 1
Pizza Hut 1
Ruby Tuesday 1
Taco Bell 2
Tony Roma's 1
Waffle House 1
Wendy's 1
-----
TOTAL PROPERTIES 21
=====
The General Partners consider the Properties to be well-maintained and
sufficient for the Partnership's operations.
The General Partners believe that the Properties are adequately covered
by insurance. In addition, the General Partners have obtained contingent
liability and property coverage for the Partnership. This insurance is intended
to reduce the Partnership's exposure in the unlikely event a tenant's insurance
policy lapses or is insufficient to cover a claim relating to the Property.
Leases. The Partnership leases the Properties to operators of selected
national and regional fast-food restaurant chains. The leases are generally on a
long-term "triple net" basis, meaning that the tenant is responsible for
repairs, maintenance, property taxes, utilities and insurance. Generally, a
lessee is required, under the terms of its lease agreement, to make such capital
expenditures as may be reasonably necessary to refurbish buildings, premises,
signs and equipment so as to comply with the lessee's obligations, if
applicable, under the franchise agreement to reflect the current commercial
image of its Restaurant Chain. These capital expenditures are required to be
paid by the lessee during the term of the lease. The terms of the leases of the
Properties owned by the Partnership are described in Item 1. Business - Leases.
As of December 31, 2000, 1999, 1998, 1997, and 1996, the Properties
were 81%, 87%, 88%, 93%, and 90% occupied, respectively. The following is a
schedule of the average rent per Property for the years ended December 31:
2000 1999 1998 1997 1996
------------- ------------- ------------- --------------- ---------------
Rental Revenues (1) $ 1,633,709 $ 1,721,252 $ 1,710,326 $ 1,804,300 $2,119,765
Properties (2) 18 20 23 24 27
Average Rent per
Property $ 90,762 $ 86,063 $ 74,362 $ 75,179 $ 78,510
(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.
The following is a schedule of lease expirations for leases in place as
of December 31, 2000 for each of the next ten years and thereafter.
Percentage of
Number Annual Rental Gross Annual
Expiration Year of Leases Revenues Rental Income
----------------- ---------------- ----------------- --------------------------
2001 -- $ -- --
2002 1 63,360 4.49%
2003 -- -- --
2004 1 132,151 9.35%
2005 -- -- --
2006 -- -- --
2007 -- -- --
2008 5 248,107 17.56%
2009 5 359,575 25.44%
2010 -- -- --
Thereafter 6 610,391 43.16%
---------- ----------------- -------------
Total (1) 18 $ 1,413,584 100.00%
========== ================= =============
(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 tenants as of December 31, 2000 (see Item 1. Business -Major
Tenants), are substantially the same as those described in Item 1. Business -
Leases.
SlaymakerGroup, Inc., leases one Tony Roma's restaurant pursuant to one
lease, with an initial term of 20 years (expiring in 2017). The minimum base
annual rent for the lease is $167,500.
Golden Corral Corporation leases two restaurants pursuant to two leases
with initial terms of 12 and 15 years (expiring 2002 and 2004, respectively) and
average minimum base annual rent of approximately $97,800 ($63,400 and $132,200,
respectively).
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 a 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 2,477 holders of record of the Units. There
is no public trading market for the Units, and it is not anticipated that a
public market for the Units will develop. During 2000, Limited Partners who
wished to sell their Units may have offered the Units for sale pursuant to the
Partnership's distribution reinvestment plan (the "Plan"), and Limited Partners
who wished to have their distributions used to acquire additional Units (to the
extent Units were available for purchase), may have done so pursuant to such
Plan. The General Partners had the right to prohibit transfers of Units. From
inception through December 31, 2000, the price paid for any Unit transferred
pursuant to the Plan ranged from $376 to $475 per Unit. The price paid for any
Unit transferred other than pursuant to the Plan was subject to negotiation by
the purchaser and the selling Limited Partner. The Partnership will not redeem
or repurchase Units.
The following table reflects, for each calendar quarter, the high, low
and average sales prices for transfers of Units during 2000 and 1999 other than
pursuant to the Plan, net of commissions.
2000 (1) 1999 (1)
------------------------------------ ----------------------------------
High Low Average High Low Average
--------- ---------- ---------- --------- -------- -----------
First Quarter (2) (2) (2) $450 $328 $389
Second Quarter $ 335 $ 305 $ 328 390 390 390
Third Quarter 310 310 310 440 299 361
Fourth Quarter 306 222 263 357 295 324
(1) A total of 154 and 302 Units were transferred other than pursuant to
the Plan for the years ended December 31, 2000 and 1999, respectively.
(2) No transfer of Units took place during the quarter other than pursuant
to the Plan.
The capital contribution per Unit was $500. All cash available for
distribution will be distributed to the partners pursuant to the provisions of
the Partnership Agreement.
For the years ended December 31, 2000 and 1999, the Partnership
declared cash distributions of $2,375,000 and $2,000,000, respectively, to the
Limited Partners. Distributions during 2000 included a special distribution of
$500,000, as a result of the distribution of net sales proceeds from the sale of
several Properties. This amount was applied toward the Limited Partners'
cumulative 10% Preferred Return. As a result of the sales of Properties during
2000, the Partnership's total revenue was reduced during 2000 and is expected to
remain reduced in subsequent years. 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 during the quarter ended September 30, 2000. No amounts
distributed to partners for the years ended December 31, 2000 and 1999, are
required to be or have been treated by the Partnership as a return of capital
for the 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. These amounts include
monthly distributions made in arrears for the Limited Partners electing to
receive such distributions on this basis.
Quarter Ended 2000 1999
----------------------- --------------- ---------------
March 31 $ 500,000 $ 500,000
June 30 500,000 500,000
September 30 937,500 500,000
December 31 437,500 500,000
The Partnership intends to continue to make distributions of cash
available for distribution to the limited Partners on a quarterly basis,
although some Limited Partners, in accordance with their election, receive
monthly distributions, for an annual fee.
(b) Not applicable.
Item 6. Selected Financial Data
2000 1999 1998 1997 1996
-------------- --------------- -------------- -------------- ---------------
Year ended December 31:
Revenues (1) $1,676,183 $1,956,691 $ 2,024,231 $2,147,770 $2,279,880
Net income (2) 969,570 1,435,646 1,544,895 1,731,915 1,428,159
Cash distributions
declared (3) 2,375,000 2,000,000 3,838,327 2,300,000 2,300,000
Net income per Unit (2) 19.39 28.51 30.70 34.40 28.31
Cash distributions
declared per Unit (3) 47.50 40.00 76.77 46.00 46.00
At December 31:
Total assets $14,848,256 $16,680,780 $ 17,135,485 $19,718,430 $20,133,002
Partners' capital 14,257,318 15,662,748 16,227,102 18,520,534 18,982,619
(1) Revenues include equity in earnings of unconsolidated joint ventures
and minority interest in loss of the consolidated joint venture.
(2) Net income for the year ended December 31, 2000 includes $15,088 from
gains on sales of assets, $9,763 from gain on dissolution of
consolidated joint venture, and provision for loss on assets of
$142,373. Net income for the year ended December 31, 1999 includes
$396,066 from gains on the sales of assets and provision for loss on
assets of $308,310. Net income for the year ended December 31, 1998,
includes $469,613 from gains on the sales of assets, $25,500 for a loss
on sale of assets and $403,157 for a provision for loss on assets. Net
income for the year ended December 31, 1997, includes $550,878 from
gains on the sales of assets, $141,567 from a loss on the sale of
assets and $250,694 for a provision for loss on assets. Net income for
the year ended December 31, 1996, includes $19,369 from the gains on
sale of assets and $239,525 for a provision for loss on assets.
(3) Distributions for the year ended December 31, 1998 include a special
distribution to the Limited Partners of $1,838,327 as a result of the
distribution of net sales proceeds from the sales of Properties.
Distributions for the year ended December 31, 2000 include a special
distribution to the Limited Partners of $500,000 as a result of the
distribution of net sales proceeds from the sales of several Properties
and the proceeds from the payoff of the mortgage note relating to the
1996 sale of a Property.
The above selected financial data should be read in conjunction with
the financial statements and related notes contained in Item 8 hereof.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The Partnership was organized on August 17, 1988, 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. The
leases are generally triple-net leases, with the lessee generally responsible
for all repairs and maintenance, property taxes, insurance and utilities. As of
December 31, 2000, the Partnership owned 21 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 $904,073, $1,595,565, and $1,649,735, respectively. The
decrease in cash from operations during 2000 and 1999, each as compared to the
previous year, was primarily a result of changes in income and expenses as
discussed in "Results of Operations" below and changes in the Partnership's
working capital during each of the respective years.
Other sources and uses of capital included the following during the
years ended December 31, 2000, 1999, and 1998.
In August 1995, the Partnership sold its Property in Myrtle Beach,
South Carolina, to the tenant of the Property for $1,040,000, and in connection
therewith, accepted a promissory note in the principal sum of $1,040,000
collateralized by a mortgage on the Property. The note bears interest at a rate
of 10.25% per annum and is being collected in 59 equal monthly installments of
$9,319. This sale is being accounted for under the installment sales method for
financial reporting purposes; therefore, the Partnership recognized a gain of
$1,269, $1,255, and $1,134 for financial reporting purposes for the years ended
December 31, 2000, 1999, and 1998, respectively. The mortgage note receivable
balance relating to this Property at December 31, 2000 and 1999 was $868,713 and
$868,309, respectively, including accrued interest of $16,869 and $8,516,
respectively. In February 2001, the Partnership received a balloon payment of
$999,083 which included the outstanding principal balance and $12,084 of accrued
interest. The Partnership may use the net sales proceeds to pay liabilities of
the Partnership, including quarterly distributions to the Limited Partners. The
Partnership distributed amounts sufficient to enable the Limited Partners to pay
federal and state income taxes, if any (at a level reasonably assumed by the
General Partners), resulting from the sale.
In 1996, the Partnership sold its Property in St. Cloud, Florida, and
received $100,000 in cash and accepted a promissory note in the principal sum of
$1,057,299. The promissory note bore interest at a rate of 10.75% per annum, was
collateralized by a mortgage on the Property, and was being collected in 12
monthly installments of interest only and thereafter in 168 equal monthly
installments of principal and interest. This sale was being accounted for under
the installment sales method for financial reporting purposes; therefore, the
Partnership recognized a gain of $2,157 for financial reporting purposes for the
year ended December 31, 1998. The mortgage note receivable balance relating to
this Property at December 31, 1998, was $871,812, including accrued interest of
$9,350, and net of the remaining deferred gain of $181,308. During the year
ended December 31, 1999, the Partnership collected the outstanding balance of
$1,043,770 relating to the promissory note and in connection therewith,
recognized the remaining gain of $181,308 relating to this Property. During
2000, the Partnership distributed $500,000 of the amount collected as a special
distribution to the Limited Partners. The Partnership may use the remaining net
sales proceeds to pay liabilities of the Partnership, including quarterly
distributions to the Limited Partners. The Partnership distributed amounts
sufficient to enable the Limited Partners to pay federal and state income taxes,
if any (at a level reasonably assumed by the General Partners), resulting from
the sale.
In June 1997, the Partnership terminated the leases with the tenant of
the Properties in Connorsville and Richmond, Indiana. In connection therewith,
the Partnership accepted a promissory note from the former tenant for $35,297
for amounts relating to past due real estate taxes. The promissory note, which
is uncollateralized, bears interest at a rate of ten percent per annum and is
being collected in 36 monthly installments. Receivables at December 31, 2000 and
1999, included $4,401 and $9,219, respectively, of such amounts. In July 1997,
the Partnership entered into a new lease for the Property in Connorsville,
Indiana, with a new tenant to operate the Property as an Arby's restaurant. In
connection therewith, the Partnership paid $125,000 in renovation costs during
the year ended December 31, 1998.
During 1998, the Partnership sold its Properties in Port Orange,
Florida, and Tyler, Texas, to the tenants for a total of $2,180,000 and received
net sales proceeds totaling $2,125,220, resulting in a total gain of $440,822
for financial reporting purposes. These Properties were originally acquired by
the Partnership in 1988 and 1989 and had costs totaling approximately
$1,791,300, excluding acquisition fees and miscellaneous acquisition expenses;
therefore, the Partnership sold the Properties for approximately $333,900 in
excess of their original purchase prices. In addition, the Partnership incurred
deferred, subordinated, real estate disposition fees of $65,400 relating to the
sales of the Properties for which net sales proceeds were not reinvested in
additional Properties. The Partnership distributed $1,838,327 of the net sales
proceeds from the 1997 and 1998 sales of the Properties in Tampa, Florida, as
described above, and Port Orange, Florida, as a special distribution to the
Limited Partners in April 1998. In addition, in May 1998, the Partnership
contributed the net sales proceeds from the sale of the Property in Tyler, Texas
in a joint venture arrangement as described below. The Partnership distributed
amounts sufficient to enable the Limited Partners to pay federal and state
income taxes, if any (at a level reasonably assumed by the General Partners).
In May 1998, the Partnership entered into a joint venture, RTO Joint
Venture, with CNL Income Fund III, Ltd., a Florida limited partnership and an
affiliate of the General Partners, to construct and hold one restaurant
Property. The Partnership contributed $766,746 to purchase land and pay for
construction relating to the joint venture. Construction was completed and rent
commenced in December 1998. The Partnership held a 53.12% interest in the
profits and losses of the joint venture as of December 31, 2000.
In addition, in March 1999, the Partnership sold its Properties in
Endicott and Ithaca, New York to the tenant for a total of $1,125,000 and
received net sales proceeds of $1,113,759 resulting in a total gain of $213,503
for financial reporting purposes. These Properties were originally acquired by
the Partnership in December 1989 and had costs totaling approximately $942,000,
excluding acquisition fees and miscellaneous acquisition expenses; therefore,
the Partnership sold the Properties for approximately $171,800 in excess on
their original purchase prices. In December 1999, the Partnership reinvested the
net sales proceeds received from the sale of the Property in Ithaca, New York,
in a joint venture arrangement, as described below. The Partnership used the net
sales proceeds from the sale of the Property in Endicott, New York, to pay
liabilities of the Partnership, including quarterly distributions to the Limited
Partners. 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 June 1999, Halls Joint Venture, in which the Partnership owned a
48.9% interest, sold its Property to the tenant in accordance with the purchase
option under its lease agreement for $891,915, resulting in a gain to the joint
venture of approximately $239,300 for financial reporting purposes. The Property
was originally contributed to Halls Joint Venture in February 1990 and had a
total cost of approximately $672,000, excluding acquisition fees and
miscellaneous acquisition expenses; therefore, the joint venture sold the
Property for approximately $219,900 in excess of its original purchase price.
During 2000, the Partnership and the joint venture partner liquidated Halls
Joint Venture and the Partnership received its pro rata share of the liquidation
proceeds. The Partnership used the liquidation proceeds to pay liabilities of
the Partnership including quarterly distributions to the Limited Partners.
In addition, in December 1999, the Partnership reinvested the net sales
proceeds from the sale of the Property in Ithaca, New York, as described above,
in a joint venture arrangement, Duluth Joint Venture, with CNL Income Fund VII,
Ltd., CNL Income Fund XIV, Ltd., and CNL Income Fund XV, Ltd., each a Florida
limited partnership and an affiliate of the General Partners, to construct and
hold one restaurant Property. During 2000 and 1999, the Partnership contributed
$91,851 and $129,979, respectively, to Duluth Joint Venture to pay for
construction costs. In October 2000, the Partnership sold its 12 percent
interest in Duluth Joint Venture to CNL Income Fund VII, Ltd. for $221,830. The
proceeds from the sale exceeded the basis of the interest in this joint venture
resulting in a gain of $13,819 for financial reporting purposes, as described
below in "Results of Operations." The Partnership distributed amounts sufficient
to enable the Limited Partners to pay federal and state income taxes, if any,
(at a level reasonably assumed by the General Partners), resulting from the
sale.
In March 2000, the Partnership sold its Property in Belding, Michigan,
to an unrelated third party, for $135,000 and received net sales proceeds of
approximately $126,900. Due to the fact that as of December 31, 1999, the
Partnership had recorded an allowance for loss on assets of approximately
$446,100, no gain or loss was recorded for financial reporting purposes during
2000. In connection with the sale, the Partnership incurred a deferred, real
estate disposition fee of $4,050. Payment of the real estate disposition fee is
subordinated to receipt by the Limited Partners of the cumulative 10 percent
Preferred Return, plus their adjusted capital contributions. The Partnership
distributed the majority of the net sales proceeds to the Limited Partners. The
Partnership distributed amounts sufficient to enable the Limited partners to pay
federal and state income taxes, if any (at a level reasonably assumed by the
General Partners), resulting from the sale.
In October 2000, the Partnership acquired the remaining 33.5% interest
in CNL/Longacre Joint Venture from its joint venture partner in accordance with
the terms of the joint venture agreement. As of September 30, 2000, the
Partnership had recorded a provision for loss on assets of $32,454, which
represented the difference between the net carrying value of the joint venture
and the estimated net realizable value of the joint venture. In October, the
Partnership liquidated the joint venture and recorded a gain on dissolution of
$9,763, for financial reporting purposes.
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 pending reinvestment in additional
Properties, distributions to the Limited Partners or use for the payment of
Partnership liabilities, are invested in money market accounts or other
short-term, highly liquid investments such as demand deposit accounts at
commercial banks, money market accounts and certificates of deposit with less
than a 30-day maturity date. At December 31, 2000, the Partnership had
$1,137,958 invested in such short-term investments as compared to $1,984,879 at
December 31, 1999. The decrease in cash and cash equivalents during 2000, was
primarily attributable to the special distribution to the Limited Partners of
the net sales proceeds from several sales and a portion of the payoff of the
mortgage note relating to the 1996 sale of the Property in St. Cloud, Florida.
As of December 31, 2000, the average interest rate earned on the rental income
deposited in demand deposit accounts at commercial banks was approximately 2.7%
annually. The funds remaining at December 31, 2000, after payment of
distributions and other liabilities, will be used to meet the Partnership's
working capital and other needs.
Short-Term Liquidity
The Partnership's short-term liquidity requirements consist primarily
of the operating expenses of the Partnership.
The Partnership's investment strategy of acquiring Properties for cash
and generally 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 of 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 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, a portion of the sales proceeds
received from the sales of the Properties the Partnership declared distributions
to the Limited Partners of $2,375,000, $2,000,000, and $3,838,327 for the years
ended December 31, 2000, 1999, and 1998, respectively. This represents
distributions of $47.50, $40.00 and $76.77 per Unit for the years ended December
31, 2000, 1999, and 1998, respectively. Distributions for 2000 included a
special distribution to the Limited Partners of $500,000 as a result of the
distribution of net sales proceeds from the sales of several Properties and the
proceeds from the payoff of the mortgage note related to the 1996 sale of a
Property in St. Cloud, Florida. Distributions for 1998 included $1,838,327 as a
result of the distribution of net sales proceeds from the 1997 and 1998 sales of
Properties in Tampa and Port Orange, Florida. These special distributions were
effectively a return of a portion of the Limited Partners' investment, although,
in accordance with the Partnership agreement, it was applied to the Limited
Partners' unpaid cumulative 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 in 1998.
No amounts distributed to the Limited Partners for the years ended December
2000, 1999, and 1998, are required to be or have been treated by the Partnership
as a return of capital for purposes of calculating the Limited Partners' return
on their adjusted capital contributions. The Partnership intends to continue to
make distributions of cash available for distribution to the Limited Partners on
a quarterly basis.
During 2000, the general partners waived their right to receive future
distributions from the Partnership, including both distributions of operating
cash flow and distributions of liquidation proceeds, to the extent that the
cumulative amount of such distributions would exceed the balance in the general
partners' capital account as of December 31, 1999. Accordingly, the general
partners were not allocated any net income and did not receive any distributions
during the year ended December 31, 2000.
As of December 31, 2000, 1999, and 1998, the Partnership owed $3,185,
$248,988 and $128,548, respectively, to affiliates for accounting and
administrative services. As of March 15, 2001, the Partnership had reimbursed
the affiliates all such amounts. In addition, during 2000 and 1998, the
Partnership incurred $4,050 and $65,400, respectively, in real estate
disposition fees due to an affiliate as a result of its services in connection
with the sale of the Properties in Belding, Michigan, Port Orange, and Tampa,
Florida. 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. Other liabilities, including distributions payable, decreased to
$483,803 at December 31, 2000, from $591,771 at December 31, 1999, primarily due
to the Partnership paying amounts accrued at December 31, 2000 relating to the
proposed and terminated merger with CNL American Properties Fund, Inc. ("APF"),
as described below in "Termination of Merger." The General Partners believe that
the Partnership has sufficient cash on had to meet its 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 and its consolidated joint venture,
CNL/Longacre Joint Venture, owned 22 wholly owned and leased Properties
(including two Properties, which were sold during 1998). During 1999, the
Partnership and CNL/Longacre Joint Venture, owned and leased 20 wholly owned
Properties (including two Properties, which were sold during 1999). During 2000,
the Partnership and CNL/Longacre Joint Venture owned and leased 18 wholly owned
Properties (including one Property which was sold during 2000). In addition,
during 1998, the Partnership was a co-venturer in two separate unconsolidated
joint ventures that each owned and leased one Property. During 1999, the
Partnership was a co-venturer in three unconsolidated joint ventures that each
owned and leased one Property (including one Property in Halls Joint Venture,
which was sold in 1999). During 2000, the Partnership was a co-venturer in three
unconsolidated joint ventures that each owned and leased one Property (including
one Property in Duluth Joint Venture the Partnership's interest in which was
sold in October 2000). During 2000, 1999, and 1998, the Partnership owned and
leased two Properties, with affiliates of the General Partners, as
tenants-in-common. As of December 31, 2000, the Partnership owned, either
directly or through joint venture arrangements, 21 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 approximately $42,300 to $222,800. Generally, the leases provide
for percentage rent based on sales in excess of a specified amount to be paid
annually. In addition, a majority of the leases provide that, commencing in the
sixth lease year, the percentage rent will be an amount equal to the greater of
(i) the percentage rent calculated under the lease formula or (ii) a specified
percentage (ranging from one-fourth to five percent) of the purchase price paid
by the Partnership for the Property. 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 and its consolidated joint venture earned $1,251,723, $1,255,050,
and $1,367,303, respectively, in rental income from operating leases and earned
income from direct financing leases. The decrease in rental and earned income
during the year ended December 31, 2000 and 1999, each as compared to the
previous year was partially attributable to a decrease of approximately $19,000
and $78,400, respectively, as a result of the sale of several Properties during
2000 and 1999, as described above in "Capital Resources."
Rental and earned income in 2000, 1999, and 1998 continued to remain at
reduced amounts due to the fact that the Partnership was not receiving any
rental income from the Properties in Belding, Michigan and Lebanon, New
Hampshire during 2000, 1999, and 1998 as a result of the tenants defaulting
under the terms of their leases and ceasing operations of the restaurants on the
Properties during 1994. The Partnership sold the Property in Belding, Michigan
in March 2000. The General Partners are currently seeking either a new tenant or
purchaser for the Property in Lebanon, New Hampshire. Rental and earned income
is expected to remain at reduced amounts until such time as the Partnership
executes a new lease for the Property in Lebanon, New Hampshire or until the
Property is sold and the proceeds from such sales are reinvested in an
additional Property.
Rental and earned income decreased during 1999, as compared to 1998,
partially as a result of the Partnership establishing an allowance for doubtful
accounts of approximately $4,700 for past due rental amounts relating to the
Property in Huron, Ohio, in accordance with the Partnership's collection policy.
The decrease in rental and earned income during 2000, was partially offset by
the fact that during 2001, the Partnership received $150,000 as satisfaction for
outstanding receivable amounts and in consideration for the Partnership
releasing the tenant from its obligations under the lease. The Partnership
applied approximately $83,200 of these amounts to past due rental and other
amounts. As a result, in 2000, the Partnership reversed the previously
established reserves and will recognize the remaining portion as income in 2001.
The General Partners are currently seeking a new tenant or purchaser for this
Property. Rental and earned income is expected to remain at reduced amounts
until such time as the Partnership executes new lease for the Property or until
the Property is sold and the proceeds from such sales are reinvested in an
additional Property.
Rental and earned income also decreased during 1999, by approximately
$12,800 due to the fact that in August 1998, the Partnership terminated the
lease with the tenant of the Property in Daleville, Indiana, due to financial
difficulties the tenant was experiencing. In March 2001, the partnership sold
the Property to an unrelated third party. Rental and earned income are expected
to remain at reduced levels until the net sales proceeds are invested in an
additional Property.
In October 1995, the tenant ceased operations of the Property in South
Haven, Michigan. In connection therewith, in June 1997, the Partnership incurred
renovation costs to convert the Property into an Arby's restaurant and entered
into an operating agreement. The decrease during 1999, was partially offset by
the fact that in March 1998, the Partnership entered into a new lease for this
Property, and as a result, rental and earned income increased by approximately
$7,300 during 1999.
For the years ended December 31, 2000, 1999, and 1998, the Partnership
earned $72,214, $91,829, and $133,179, respectively, in contingent rental
income. The decrease in contingent rental income during 2000 and 1999, each as
compared to the previous year, was partially attributable to (i) the fact that
the Partnership sold several Properties, whose leases required the payment of
contingent rental income and (ii) a decrease in gross sales of certain
restaurant Properties requiring the payment of contingent rental income.
During the years ended December 31, 2000, 1999, and 1998, the
Partnership earned $155,098, $193,571, and $282,795, respectively, in interest
and other income. The decrease in interest and other income during 2000, and
1999, each as compared to the previous year, was primarily attributable to the
Partnership collecting the outstanding balance of the mortgage note related to
the sale of the Property in St. Cloud, Florida, during 1999, as described in
"Capital Resources."
In addition, for the years ended December 31, 2000, 1999, and 1998, the
Partnership earned $151,430, $337,698, and $173,941, respectively, attributable
to net income earned by unconsolidated joint ventures in which the Partnership
is a co-venturer. The decrease in net income earned by these joint ventures
during 2000 as compared to 1999 was primarily attributable to the fact that
Halls Joint Venture, in which the Partnership owned a 48.9% interest, sold its
Property during 1999. During 2000, the Partnership and its joint venture
partners dissolved this joint venture. In addition, during 2000, the tenant of
the Property in Mesa, Arizona in which the Partnership owns an approximate 42
percent interest, rejected its lease. As a result, the tenant ceased making
rental payments. In conjunction with the rejected lease, the Partnership
reversed approximately $31,500 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. The Partnership will not recognize any rental income
from the Property until a new tenant is located or until the Property is sold
and the proceeds from such sale are reinvested in an additional Property. The
increase in net income earned by these joint ventures during 1999, as compared
to 1998, was primarily attributable to the fact that in June 1999, Halls Joint
Venture, in which the Partnership owned a 48.9% interest, recognized a gain of
approximately $239,300 for financial reporting purposes as a result of the sale
of its Property, as described above in "Capital Resources." In addition, the
increase in net income earned by joint ventures during 1999, was primarily
attributable to the fact that during 1998, the Partnership reinvested a portion
of the net sales proceeds it received from the 1997 and 1998 sales of several
Properties in a Property with affiliates of the General Partners, as
tenants-in-common and acquired an interest in RTO Joint Venture with CNL Income
Fund III, Ltd., an affiliate of the General Partners, as described above in
"Capital Resources."
During the year ended December 31, 2000, two lessees of the Partnership
and its consolidated joint venture, Golden Corral Corporation and Slaymaker
Group, Inc., each contributed more than ten percent of the Partnership's total
rental, earned, and mortgage interest income (including rental income from the
Partnership's consolidated joint venture and the Partnership's share of the
rental and earned income from two Properties owned by unconsolidated joint
ventures and two Properties owned with affiliates of the General Partners as
tenants-in-common). As of December 31, 2000, Golden Corral Corporation was the
lessee under leases relating to two restaurants and Slaymaker Group, Inc. was
the lessee under a lease relating to one property. It is anticipated that, based
on the minimum rental payments required by the leases, these lessees will
continue to contribute more than ten percent of the Partnership's total rental,
earned and mortgage interest income during 2001. In addition, three Restaurant
Chains, Golden Corral, Taco Bell, and Tony Roma's Famous for Ribs Restaurants,
each accounted for more than ten percent of the Partnership's total rental,
earned, and mortgage interest income during 2000, (including rental income from
the Partnership's consolidated joint venture and the Partnership's share of the
rental income from two Properties owned by unconsolidated joint ventures and two
Properties owned with affiliates of the General Partners as tenants-in-common).
It is anticipated that these three Restaurant Chains each will continue to
account for more than ten percent of the total rental, earned, and mortgage
interest income to which the Partnership is entitled under the terms of the
leases and mortgage note. Any failure of these lessees or Restaurant Chains
could materially affect the Partnership's income if the Partnership is not able
to re-lease the Properties in a timely manner.
Operating expenses, including depreciation and amortization expense,
were $589,091, $608,801, and $520,292, for the years ended December 31, 2000,
1999, and 1998, respectively. The decrease in operating expenses during 2000, as
compared to 1999 and the increase during 1999, as compared to 1998, was
primarily due to the fact that the Partnership incurred $24,443, $125,291 and
$14,644 during 2000, 1999 and 1998, respectively, in transaction costs related
to the General Partners retaining financial and legal advisors to assist them in
evaluating and negotiating the proposed and terminated merger with APF, as
described in "Termination of Merger."
In addition, the decrease during 2000, as compared to 1999, was
partially attributable to, and the increase in operating expenses during 1999,
as compared to 1998, was partially offset by, a decrease in depreciation expense
due to the sale of one Property in 2000 and the sales of several Properties
during 1999 and 1998. The decrease in operating expenses during 2000, as
compared to 1999 was partially offset by the fact that CNL/Longacre Joint
Venture, the Partnership's consolidated joint venture, paid $60,000 as
settlement for a lawsuit against the consolidated joint venture. Even though the
Partnership and CNL/Longacre Joint Venture believed there was no merit to the
lawsuit, they elected to pay a settlement to avoid incurring legal fees to
defend this lawsuit. The joint venture also incurred additional fees during 2000
related to the settlement of the lawsuit. The Partnership and CNL/Longacre Joint
Venture do not anticipate incurring additional costs relating to this lawsuit.
Operating expenses were also higher during 1999 due to tenant defaults
under the terms of the lease arrangements for the Properties in Belding,
Michigan; Daleville, Indiana, and Lebanon, New Hampshire. In March 2000, the
Partnership sold its Property in Belding, Michigan to an unrelated third party.
The Partnership and its consolidated joint venture have incurred and the
Partnership expects to continue to incur certain expenses, such as repairs and
maintenance, insurance, and real estate taxes, relating to the remaining vacant
Properties as well as a vacant property in Huron, Ohio, until the Properties are
sold or re-leased to new tenants.
In connection with the sale of its Properties in St. Cloud, Florida and
Myrtle Beach, South Carolina, during 1997 and 1996, respectively, as described
above in "Capital Resources," the Partnership recognized a gain for financial
reporting purposes of $1,269, $182,563 and $3,291, for the years ended December
31, 2000, 1999 and 1998, respectively. In accordance with Statement of Financial
Accounting Standards No. 66, "Accounting for Sales of Real Estate," the
Partnership recorded the sales using the installment sales method. As such, the
gains on the sales was deferred and were being recognized as income
proportionately as payments under the mortgage notes were collected. The gain
recognized during 1999, was higher than the gain recognized during 2000 and 1998
due to the fact that during 1999, the Partnership collected the outstanding
balance relating to the promissory note collateralized by the Property in St.
Cloud, Florida, as described above in "Capital Resources," which resulted in the
recognition of the remaining deferred gain on this Property.
As a result of the sales of several Properties and the dissolution of
CNL/Longacre Joint Venture as described above in "Capital Resources," the
Partnership recognized gains totaling $9,763, $213,503 and $440,822 during 2000,
1999 and 1998, respectively, for financial reporting purposes. In addition, as a
result of the sale of the Partnership's interest in Duluth Joint Venture the
Partnership recognized a gain of $13,819 for financial reporting purposes during
2000.
During 2000, 1999 and 1998, the Partnership established allowances for
loss on assets of $109,919, $169,482, and $403,157, respectively, for financial
reporting purposes, relating to Properties which became vacant and which the
Partnership has not successfully re-leased. The allowances represented the
difference between the net carrying value at December 31, 2000, 1999 and 1998,
and their current estimated net realizable values. In addition, as of September
30, 2000, the Partnership established an allowance for loss on assets of $32,454
for financial reporting purposes, relating to the October 2000 acquisition of
CNL/Longacre Joint Venture, as described in "Capital Resources." The allowance
represented the difference between the net carrying value of the joint venture
and the estimated net realizable value of the joint venture.
In addition, during the year ended December 31, 1999, the Partnership
recorded an additional provision for loss on assets in the amount of $138,828
for financial reporting purposes relating to the Property in Belding, Michigan.
The allowance represented the difference between the carrying value of the
Property at December 31, 1999, and the net sales proceeds received from the sale
of the Property to a third party in March 2000.
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 (for certain Properties) 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 result 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
The Partnership accepted a promissory note in conjunction with the sale
of a Property. The General Partners believe that the estimated fair value of the
mortgage note at December 31, 2000 approximated the outstanding principal
amount. In February 2001, the Partnership collected the outstanding principal
balance and $12,084 of accrued interest relating to the mortgage note receivable
from the 1995 sale of the Partnership's property in Myrtle Beach, South
Carolina.
Item 8. Financial Statements and Supplementary Data
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
CONTENTS
Page
Report of Independent Certified Public Accountants 19
Financial Statements:
Balance Sheets 20
Statements of Income 21
Statements of Partners' Capital 22
Statements of Cash Flows 23-24
Notes to Financial Statements 25-42
Report of Independent Certified Public Accountants
To the Partners
CNL Income Fund V, 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 V, 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, except for Note 13 for which the date is March 2, 2001
CNL INCOME FUND V, 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
$ 8,767,623 $ 9,208,302
Net investment in direct financing leases 1,627,873 1,670,966
Investment in joint ventures 1,939,860 2,534,850
Mortgage note receivable, less deferred gain 868,713 868,309
Cash and cash equivalents 1,137,958 1,984,879
Receivables, less allowance for doubtful accounts of
$134,799 and $153,750, respectively
139,772 54,580
Due from related parties 11,409 --
Prepaid expenses 2,810 4,458
Accrued rental income 352,238 300,090
Other assets -- 54,346
------------------- -------------------
$ 14,848,256 $ 16,680,780
=================== ===================
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 34,182 $ 81,476
Accrued real estate taxes payable 7,012 4,201
Distributions payable 437,500 500,000
Due to related parties 107,135 348,888
Rents paid in advance 5,109 6,094
------------------- -------------------
Total liabilities 590,938 940,659
Minority interest -- 77,373
Partners' capital 14,257,318 15,662,748
------------------- -------------------
$ 14,848,256 $ 16,680,780
=================== ===================
See accompanying notes to financial statements.
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
STATEMENTS OF INCOME
Year Ended December 31,
2000 1999 1998
---------------- ----------------- ----------------
Revenues:
Rental income from operating leases $ 1,068,679 $ 1,077,199 $ 1,168,301
Earned income from direct financing leases 183,044 177,851 199,002
Contingent rental income 72,214 91,829 133,179
Interest and other income 155,098 193,571 282,795
---------------- ----------------- ----------------
1,479,035 1,540,450 1,783,277
---------------- ----------------- ----------------
Expenses:
General operating and administrative 222,866 150,715 166,878
Professional services 74,222 48,751 20,542
Bad debt expense -- -- 5,882
Real estate taxes 30,934 33,857 35,434
State and other taxes 7,381 6,927 9,658
Depreciation 229,245 243,260 267,254
Transaction costs 24,443 125,291 14,644
---------------- ----------------- ----------------
589,091 608,801 520,292
---------------- ----------------- ----------------
Income Before Minority Interest in Loss of Consolidated Joint
Venture, Equity in Earnings of Unconsolidated Joint Ventures,
Gain on Dissolution of Consolidated Joint Venture, Gain on Sale
of Assets and Provision for Loss on Assets 889,944 931,649 1,262,985
Minority Interest in Loss of Consolidated Joint Venture 45,718 78,543 67,013
Equity in Earnings of Unconsolidated Joint Ventures 151,430 337,698 173,941
Gain on Sale of Assets 24,851 396,066 444,113
Provision for Loss on Assets (142,373 ) (308,310 ) (403,157 )
---------------- ----------------- ----------------
Net Income $ 969,570 $ 1,435,646 $ 1,544,895
================ ================= ================
Allocation of Net Income
General partners $ -- $ 10,296 $ 9,748
Limited partners 969,570 1,425,350 1,535,147
---------------- ----------------- ----------------
$ 969,570 $ 1,435,646 1,544,895
================ ================= ================
Net Income Per Limited Partner Unit $ 19.39 $ 28.51 $ 30.70
================ ================= ================
Weighted Average Number of Limited Partner Units Outstanding 50,000 50,000 50,000
================ ================= ================
See accompanying notes to financial statements.
CNL INCOME FUND V, 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 $ 343,200 $ 150,782 $ 25,000,000 $(19,768,240) $ 15,659,792 $ (2,865,000) $18,520,534
Distributions to limited
partners ($76.77 per
limited partner unit) -- -- -- (3,838,327) -- -- (3,838,327)
Net income -- 9,748 -- -- 1,535,147 -- 1,544,895
----------- ------------- --------------- ------------- --------------- ------------ ----------
Balance, December 31, 1998 $ 343,200 160,530 25,000,000 (23,606,567) 17,194,939 (2,865,000) 16,227,102
Distributions to limited
partners ($40.00 per
limited partner unit) -- -- -- (2,000,000) -- -- (2,000,000)
Net income -- 10,296 -- -- 1,425,350 -- 1,435,646
----------- ------------- ---------------- ------------- --------------- ------------- ---------
Balance, December 31, 1999 $ 343,200 170,826 25,000,000 (25,606,567) 18,620,289 (2,865,000) 15,662,748
Distributions to limited
partners ($47.50 per
limited partner unit) -- -- -- (2,375,000) -- -- (2,375,000)
Net income -- -- -- -- 969,570 -- 969,570
----------- ------------- --------------- ------------- --------------- -------------- ---------
Balance, December 31, 2000 $ 343,200 $ 170,826 $ 25,000,000 $(27,981,567) $ 19,589,859 $ (2,865,000) $14,257,318
=========== ============= ============= ============= ============== ============== ==========
See accompanying notes to financial statements.
CNL INCOME FUND V, 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 $ 1,222,630 $ 1,353,143 $ 1,490,412
Distributions from unconsolidated joint ventures 189,895 214,838 215,839
Cash paid for expenses (647,634 ) (168,342 ) (331,363 )
Interest received 139,182 195,926 274,847
---------------- --------------- ----------------
Net cash provided by operating activities 904,073 1,595,565 1,649,735
---------------- --------------- ----------------
Cash Flows from Investing Activities:
Proceeds from sale of land and buildings 126,947 1,113,759 2,125,220
Additions to land and buildings on operating leases (20,000 ) -- (125,000 )
Return of capital from joint venture 662,195 -- --
Investment in joint ventures (91,851 ) (129,978 ) (765,201 )
Collections on mortgage notes receivable 9,215 1,052,885 19,931
---------------- ----------------------------------
Net cash provided by investing activities 686,506 2,036,666 1,254,950
---------------- ----------------------------------
Cash Flows from Financing Activities:
Distributions to limited partners (2,437,500 ) (2,000,000 ) (3,913,327 )
---------------- --------------- ----------------
Net cash used in financing activities (2,437,500 ) (2,000,000 ) (3,913,327 )
---------------- --------------- ----------------
Net Increase (Decrease) in Cash and Cash Equivalents (846,921 ) 1,632,231 (1,008,642 )
Cash and Cash Equivalents at Beginning of Year 1,984,879 352,648 1,361,290
---------------- --------------- ----------------
Cash and Cash Equivalents at End of Year $ 1,137,958 $ 1,984,879 $ 352,648
================ =============== ================
See accompanying notes to financial statements.
CNL INCOME FUND V, 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 $ 969,570 $1,435,646 $1,544,895
--------------- --------------- --------------
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 229,245 243,260 267,254
Minority interest in loss of consolidated joint
venture (45,718 ) (78,543 ) (67,013 )
Equity in earnings of unconsolidated joint
ventures, net of distributions 38,465 (122,860 ) 41,898
Gain on sale of assets (24,851 ) (396,066 ) (444,113 )
Bad debt expense -- -- 5,882
Provisions for loss on assets 142,373 308,310 403,157
Decrease in net investment in direct financing
leases 43,093 38,000 38,017
Decrease (increase) in accrued interest on mortgage
note receivable (8,350 ) 9,429 (6,533 )
Decrease (increase) in receivables (95,673 ) 31,982 17,333
Decrease (increase) in prepaid expenses 1,648 (2,586 ) 7,435
Increase in accrued rental income (52,148 ) (60,127 ) (70,237 )
Increase (decrease) in accounts payable and accrued
expenses (45,865 ) 67,770 (100,554 )
Increase (decrease) in due to related parties (246,731 ) 121,368 19,181
Decrease in rents paid in advance and deposits (985 ) (18 ) (6,867 )
--------------- --------------- --------------
Total adjustments (65,497 ) 159,919 104,840
--------------- --------------- --------------
Net Cash Provided by Operating Activities $ 904,073 $1,595,565 $1,649,735
=============== =============== ==============
Supplemental Schedule of Non-Cash Investing and
Financing Activities:
Deferred real estate disposition fees incurred
and unpaid at end of year $ 4,050 $ -- $ 65,400
=============== =============== ==============
Distributions declared and unpaid at
December 31 $ 437,500 $ 500,000 $ 500,000
=============== =============== ==============
See accompanying notes to financial statements.
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
Years Ended December 31, 2000, 1999, and 1998
1. Significant Accounting Policies:
-------------------------------
Organization and Nature of Business - CNL Income Fund V, 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 leased to unrelated third parties
generally on a triple-net basis, whereby the tenant is generally
responsible for all operating expenses relating to the property,
including property taxes, insurance, maintenance and repairs. The
leases are accounted for using either the direct financing or the
operating methods. Such methods are described below:
Direct financing method - The leases accounted for using the
direct financing method are recorded at their net investment
(which at the inception of the lease generally represents the
cost of the asset) (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 V, 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' 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 are
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 - Prior to the liquidation of CNL/Longacre
Joint Venture in October 2000, the Partnership accounted for its 66.5%
interest in such joint venture, using the consolidation method.
Minority interest represented the minority joint venture partner's
proportionate share of the equity in the Partnership's consolidated
joint venture. All significant intercompany accounts and transactions
have been eliminated.
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED.
-----------------------------------------
Years Ended December 31, 2000, 1999, and 1998
1. Significant Accounting Policies - Continued:
-------------------------------------------
The Partnership accounts for its interest in Cocoa Joint Venture, RTO
Joint Venture, and a property in each of Mesa, Arizona and Vancouver,
Washington, held as tenants-in-common with affiliates of the general
partners, using the equity method since the Partnership shares control
with affiliates which have the same general partners.
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.
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 properties.
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 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 V, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2000, 1999, and 1998
1. Significant Accounting Policies - Continued:
-------------------------------------------
Staff Accounting Bulletin No. 101 ("SAB 101") - In December 1999, the
Securities and Exchange Commission released SAB 101, which provides the
staff's view in applying generally accepted accounting principles to
selected revenue recognition issues. SAB 101 requires the Partnership
to defer recognition of certain percentage rental income until certain
defined thresholds are met. The Partnership adopted SAB 101 beginning
January 1, 2000. Implementation of SAB 101 did not have a material
impact on the Partnership results of operations.
Statement of Financial Accounting Standards No. 133 ("FAS 133") and
Statement of Financial Accounting Standards No. 137 ("FAS 137") - In
June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities." The Statement establishes
accounting and reporting standards for derivative instruments,
including certain derivative instruments, embedded in other contracts
(collectively referred to as derivatives), and for hedging activities.
The Statement requires that an entity recognize all derivatives as
either assets or liabilities in the balance sheet and measure those
instruments at fair value. In June 1999, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards No.
137, "Accounting for Derivative Instruments and Hedging Activities -
Deferral of the Effective Date of FASB Statement No. 133, an Amendment
of FASB Statement No. 133." FAS 137 deferred the effective date of FAS
133 for one year. FAS 133, as amended, is now effective for all fiscal
quarters of all fiscal years beginning after June 15, 2000. The
Partnership has reviewed both statements and has determined that both
FAS 133 and FAS 137 do not apply to the Partnership as of December 31,
2000.
2. Leases:
--------
The Partnership leases its land and buildings 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. 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
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2000, 1999, and 1998
2. Leases-Continued:
----------------
to five 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 $ 4,649,824 $ 4,763,707
Buildings 6,860,336 7,405,142
---------------- ----------------
11,510,160 12,168,849
Less accumulated depreciation (2,116,569 ) (1,998,386 )
---------------- ----------------
9,393,591 10,170,463
Less allowance for loss on
land and buildings (625,968 ) (962,161 )
---------------- ----------------
$ 8,767,623 $ 9,208,302
================ ================
In 1997, the Partnership established an allowance for loss on assets of
$99,023, for financial reporting purposes, relating to the property in
Lebanon, New Hampshire which was owned by the Partnership's
consolidated joint venture, CNL/Longacre Joint Venture. Due to the fact
that the Partnership has not been able to successfully re-lease this
property, at December 31, 1998, the Partnership increased the allowance
by $122,875 for this property. In addition, during 1999, the
Partnership increased the allowance by $169,482 for this property,
based on a change in the estimated net realizable value for the
property. The allowance represented the difference between the net
carrying value of the property at December 31, 1999, and the estimated
net realizable value of the property. In October 2000, the Partnership
acquired the remaining 33.5% interest in CNL/Longacre Joint Venture
from its joint venture partner (see Note 5).
CNL INCOME FUND V, 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:
--------------------------------------------------
At December 31, 1998, the Partnership also established an allowance for
loss on assets of $124,670 relating to the property located in
Daleville, Indiana, due to the fact that the tenant terminated the
lease with the Partnership. During 2000, the Partnership increased its
allowance by $109,919 for the property in Daleville, Indiana based on
the net sales proceeds received by the Partnership from the sale of the
property in March 2001 (see Note 13). The allowance represented the
difference between the net carrying value of the property at December
31, 2000, and the net sales proceeds received in March 2001.
In addition, in 1997, the Partnership established an allowance for loss
on assets of $151,672 for financial reporting purposes, relating to the
property in Belding, Michigan. The Partnership increased the allowance
by $155,612 during 1998 based on a change in the estimated net
realizable value for the property. In addition, during 1999, the
Partnership increased the allowance by $138,828 which represents the
difference between the carrying value of the property at December 31,
1999 and the net sales proceeds from the sale of the property to a
third party in March 2000. In connection with the sale, the Partnership
incurred a deferred, subordinated, real estate disposition fee of
$4,050 (see Note 10).
During the year ended December 31, 1999, the Partnership sold its
properties in Endicott and Ithaca, New York to the tenant for a total
of $1,125,000 and received net sales proceeds of $1,113,759, resulting
in a total gain of $213,503 for financial reporting purposes. These
properties were originally acquired by the Partnership in December 1989
and had costs totaling approximately $942,000, excluding acquisition
fees and miscellaneous acquisition expenses; therefore, the Partnership
sold these properties for a total of approximately $171,800 in excess
of their original purchase price.
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 $52,148, $60,127, and $70,237, respectively, of such rental
income.
CNL INCOME FUND V, 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 $1,011,773
2002 957,742
2003 987,672
2004 990,720
2005 868,146
Thereafter 6,299,204
-----------------
$11,115,257
=================
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 gross sales.
4. Net Investment 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 $ 2,817,960 $ 3,039,591
Estimated residual values 566,502 566,502
Less unearned income (1,756,589 ) (1,935,127 )
---------------- ----------------
Net investment in direct
financing leases $ 1,627,873 $ 1,670,966
================ ================
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2000, 1999, and 1998
5. Net Investment Direct Financing Leases:
--------------------------------------
The following is a schedule of future minimum lease payments to be
received on direct financing leases at December 31, 2000:
2001 $ 220,518
2002 220,518
2003 220,518
2004 220,518
2005 220,518
Thereafter 1,715,370
----------------
$2,817,960
================
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 43 percent, and a
53.12%, interest in the profits and losses of Cocoa Joint Venture, and
RTO Joint Venture, respectively. The remaining interests in these joint
ventures are held by affiliates of the Partnership which have the same
general partners.
In addition, the Partnership owns a property in each of Mesa, Arizona
and Vancouver, Washington, as tenants-in-common with affiliates of the
general partners. As of December 31, 2000, the Partnership owned a
42.09% and a 27.78% interest in the properties, respectively.
In June 1999, Halls Joint Venture, in which the Partnership owned a
48.9% interest, sold its property to the tenant in accordance with the
purchase option under the lease agreement for $891,915. This resulted
in a gain to the joint venture of approximately $239,300 for financial
reporting purposes. The property was originally contributed to Halls
Joint Venture in February 1990 and had a total cost of approximately
$672,000, excluding acquisition fees and miscellaneous acquisition
expenses; therefore, the joint venture sold the property for
approximately $219,900 in excess of its original purchase price. During
2000, the Partnership and the joint venture partner liquidated Halls
Joint Venture and the Partnership received its pro rata share of the
liquidation proceeds. No gain or loss was recorded relating to the
liquidation.
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2000, 1999, and 1998
5. Investment in Joint Ventures:
----------------------------
In December 1999, the Partnership entered into a joint venture
arrangement, Duluth Joint Venture, with CNL Income Fund VII, Ltd., CNL
Income Fund XIV, Ltd., and CNL Income Fund XV, Ltd., each of which is a
Florida limited partnership and an affiliate of the general partners,
to construct and hold one restaurant property. During 2000 and 1999,
the Partnership contributed $91,851 and $129,979, respectively, to
Duluth Joint Venture to purchase the land for construction costs. In
October 2000, the Partnership sold its 12 percent interest to CNL
Income Fund VII, Ltd., an affiliate of the general partners for
$221,830 resulting in a gain of $13,819 for financial reporting
purposes.
In October 2000, the Partnership acquired the remaining 33.5% interest
in CNL/Longacre Joint Venture from its joint venture partner in
accordance with the terms of the joint venture agreement. At September
30, 2000, the Partnership had recorded a provision for loss on assets
of $32,454, which represented the difference between the net carrying
value of the joint venture and the estimated net realizable value of
the joint venture. In October, the Partnership liquidated the joint
venture and realized a gain of $9,763, for financial reporting
purposes.
Cocoa Joint Venture, RTO Joint Venture, and the Partnership and
affiliates as tenants-in-common in two separate tenancy-in-common
arrangements, each own and lease one property to an operator of
national fast-food or family-style restaurants.
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2000, 1999, and 1998
5. Investment in Joint Ventures - Continued:
----------------------------------------
The following presents the combined condensed financial information for
all of the Partnership's investments in joint ventures at December 31:
2000 1999
----------------- -----------------
Land and buildings on operating leases, less
accumulated depreciation $ 4,077,033 $5,234,614
Net investment in direct financing lease 799,018 808,773
Cash 15,476 934,873
Receivables 14,624 13,051
Prepaid expenses 422 823
Accrued rental income 127,265 106,225
Liabilities 49,512 59,298
Partners' capital 4,984,326 7,039,061
Revenues 478,610 634,266
Gain on sale of assets -- 239,336
Net income 387,305 780,488
The Partnership recognized income totaling $151,430, $337,698, and
$173,941 for the years ended December 31, 2000, 1999, and 1998,
respectively, from these joint ventures.
6. Mortgage Notes Receivable:
- ----------------------------------
In connection with the sale in 1995 of its property in Myrtle Beach,
South Carolina, the Partnership accepted a promissory note in the
principal sum of $1,040,000, collateralized by a mortgage on the
property. The promissory note bears interest at 10.25% per annum and is
being collected in 59 equal monthly installments of $9,319, including
interest. As a result of this sale being accounted for using the
installment sales method for financial reporting purposes as required
by Statement of Financial Accounting Standards No. 66, "Accounting for
Sales of Real Estate," the Partnership recognized a gain of $1,269,
$1,255 and $1,134, for financial reporting purposes during the years
ended December 31, 2000, 1999, and 1998, respectively. In February
2001, the Partnership received a balloon
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2000, 1999, and 1998
6. Mortgage Notes Receivable - Continued:
-------------------------------------
payment of $999,083 which included the outstanding principal balance
and $12,084 of accrued interest (see Note 13).
In addition, in connection with the sale in 1996 of its property in St.
Cloud, Florida, the Partnership accepted a promissory note in the
principal sum of $1,057,299, representing the balance of the sales
price of $1,050,000 plus tenant closing costs in the amount of $7,299
that the Partnership financed on behalf of the tenant. The note was
collateralized by a mortgage on the property. The promissory note bore
interest at a rate of 10.75% per annum and was being collected in 12
monthly installments of interest only, and thereafter in 168 equal
monthly installments of principal and interest. As a result of this
sale being accounted for using the installment sales method for
financial reporting purposes as required by Statement of Financial
Accounting Standards No. 66, "Accounting for Sales of Real Estate," the
Partnership recognized a gain of $2,157 for the year ended December 31,
1998. During the year ended December 31, 1999, the Partnership
collected the outstanding balance of $1,043,770 relating to the
promissory note and in connection therewith, recognized the remaining
gain of $181,308 relating to the property sale.
The mortgage note receivable consisted of the following at December 31:
2000 1999
-------------- -------------
Principal balance $ 987,881 $ 997,096
Accrued interest receivable 16,866 8,516
Less deferred gains on sale of assets (136,034 ) (137,303 )
-------------- -------------
$ 868,713 $ 868,309
============== =============
The general partners believe that the estimated fair values of mortgage
note receivable at December 31, 2000 and 1999, approximate the
outstanding principal amount based on estimated current rates at which
similar loans would be made to borrowers with similar credit and for
similar maturities.
7. Receivables:
-----------
In June 1997, the Partnership terminated the leases with the tenant of
the properties in Connorsville and Richmond, Indiana. In connection
therewith, the Partnership accepted a
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2000, 1999, and 1998
7. Receivables - Continued:
------------------------
promissory note from the former tenant for $35,297 for amounts relating
to past due real estate taxes. The promissory note is uncollateralized,
bears interest at a rate of ten percent per annum, and is being
collected in 36 monthly installments. Receivables at December 31, 2000
and 1999, included $4,401 and $9,218, respectively of such amounts,
including accrued interest of $67 and $76 in 2000 and 1999,
respectively.
8. Allocations and Distributions:
-----------------------------
From inception through December 31, 1999, all net income and net losses
of the Partnership, excluding gains and losses from the sale of
properties, were allocated 99 percent to the limited partners and one
percent to the general partners. 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, 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 was, in general, allocated first, on a pro rata
basis, to partners with positive balances in their capital accounts;
and thereafter, 95 percent to the limited partners and five percent to
the general partners.
Generally, net sales proceeds from a liquidating sale of properties,
will be used in the following order: (i) first to pay and discharge all
of the Partnership's liabilities to creditors, (ii) second, to
establish reserves that may be deemed necessary for any anticipated or
unforeseen liabilities or obligations of the Partnership, (iii) third,
to pay all of the Partnership's liabilities, if any, to the general and
limited partners, (iv) fourth, after allocations of net income, gains
and/or losses, to distribute to the partners with positive
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2000, 1999, and 1998
8. Allocations and Distributions - Continued:
-----------------------------------------
capital accounts balances, in proportion to such balances, up to amount
sufficient to reduce such positive balances to zero, and (v)
thereafter, any funds remaining shall then be distributed 95 percent to
the limited partners and five percent to the general partners.
Effective January 1, 2000, the general partners waived their right to
receive future distributions from the Partnership, including both
distributions of operating cash flow and distributions of liquidation
proceeds, to the extent that the cumulative amount of such
distributions would exceed the balance in the general partners' capital
account as of December 31, 1999. Accordingly, for years commencing
January 1, 2000 and after, the partnership's net income will be
allocated entirely among the limited partners. However, if losses are
allocated to the general partners in a year, an amount of income equal
to the sum of such losses may be allocated to the general partners in 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 the years ended December 31, 2000, 1999, and 1998, the
Partnership declared distributions to the limited partners of
$2,375,000, $2,000,000, and $3,838,327, respectively. Distributions for
2000 included a special distribution of $500,000 as a result of the
distribution of net sales proceeds from the sale of the properties in
Belding, Michigan; Halls, Tennessee; Ithaca, New York and St. Cloud,
Florida. Distributions for 1998 included $1,838,327 as a result of the
distribution of net sales proceeds from the 1997 and 1998 sales of the
properties in Tampa and Port Orange, Florida. These amounts were
applied toward the limited partners' 10% Preferred Return. No
distributions have been made to the general partners to date.
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2000, 1999, and 1998
9. 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 $ 969,570 $ 1,435,646 $ 1,544,895
Depreciation for tax reporting purposes less than
(in excess of) depreciation for financial
reporting purposes (31,908 ) (35,961 ) 18,802
Gain on disposition of assets for financial
reporting purposes in excess of gain for tax
reporting purposes (377,255 ) (13,664 ) (16,347 )
Allowance for loss on assets 142,373 308,310 403,157
Direct financing leases recorded as operating
leases for tax reporting purposes 43,093 37,999 38,017
Equity in earning of unconsolidated joint
ventures for tax reporting purposes in
excess of equity in earnings of unconsolidated
joint ventures for financial
reporting purposes 4,135 4,201 10,795
Capitalization (deduction) of transaction costs
for tax reporting purposes (139,935 ) 125,291 14,644
Allowance for doubtful accounts (18,951 ) 12,245 3,613
Accrued rental income (52,148 ) (60,127 ) (70,237 )
Capitalization of administrative expenses for tax
reporting purposes 255 -- 22,990
Rents paid in advance (985 ) (18 ) (6,867 )
Minority interest in temporary differences of
consolidated joint venture 2,620 (55,146 ) (84,622 )
Other (8,745 ) -- 1,705
-------------- -------------- ------------------
Net income for federal income tax purposes $ 532,119 $ 1,758,776 $ 1,880,545
============== ============== ==================
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2000, 1999, and 1998
10. 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 in the same geographic area. These fees are
incurred and payable only after the limited partners receive their 10%
Preferred Return. Due to the fact that these fees are noncumulative, if
the limited partners do not receive 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 2000, 1999, and 1998.
The Advisor of the Partnership 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. During the years ended December 31, 2000 and 1998, the
Partnership incurred a deferred, subordinated real estate disposition
fees of $4,050 and $65,400, respectively, as the result of the sales of
properties during 2000 and 1998. No deferred, subordinated real
disposition fee was incurred for the year ended December 31, 1999 due
to the reinvestment of net sales proceeds in additional properties.
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2000, 1999, and 1998
10. Related Party Transactions - Continued:
--------------------------------------
During the years ended December 31, 2000, 1999, and 1998, the Advisor
and its affiliates of the general partners, 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 $83,476, $97,136, and $94,611 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 and its affiliates:
Expenditures incurred on behalf of
the Partnership $ -- $ 153,743
Accounting and administrative services
3,185 95,245
Deferred, subordinated real estate
disposition fee 103,950 99,900
----------------- ------------------
$ 107,135 $ 348,888
================= ==================
11. Concentration of Credit Risk:
----------------------------
The following schedule presents total rental, earned and mortgage
interest income from individual lessees, or affiliated groups of
lessees, each representing more than ten percent of the Partnership's
total rental, earned and mortgage interest income (including the
Partnership share of total rental and earned income from unconsolidated
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
------------ ----------- ------------
Golden Corral Corporation $195,511 $195,511 $195,511
Slaymaker Group, Inc. 182,817 184,082 N/A
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2000, 1999, and 1998
11. Concentration of Credit Risk - Continued:
----------------------------------------
In addition, the following schedule presents total rental, earned, and
mortgage interest income from individual restaurant chains, each
representing more than ten percent of the Partnership's total rental,
earned, and mortgage interest income (including the Partnership's share
of 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
--------------- ---------------- ---------------
Golden Corral Family Steakhouse
$195,511 $195,511 $ 195,511
Tony Roma's 182,817 184,082 184,082
Taco Bell 173,908 184,260 N/A
Wendy's Old Fashioned Hamburger
Restaurant N/A N/A 220,347
The information denoted by N/A indicates that for each period
presented, the tenant and the chains did not represent more than ten
percent of the Partnership's total rental, earned, and mortgage
interest 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 one of these lessees or
restaurant chains, could significantly impact the results of operations
of the Partnership if the Partnership is not able to re-lease the
properties in a timely manner.
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2000, 1999, and 1998
12. Selected Quarterly Financial Data:
---------------------------------
The following table presents selected unaudited quarterly financial
data for each full quarter during they years ended December 31, 2000
and 1999:
2000 Quarter First Second Third Fourth Year
----------------------- ---------------- --------------- ---------------- ------------- ----------------
Revenues (1) $ 392,366 $ 412,299 $ 427,220 $444,298 $ 1,676,183
Net Income 218,805 277,142 179,505 294,118 969,570
Net income per
limited partner
unit 4.33 5.49 3.57 6.00 19.39
1999 Quarter First Second Third Fourth Year
---------------- --------------- ---------------- ------------- ----------------
Revenues (1) $ 458,808 $ 548,888 $ 490,525 $458,470 $1,956,691
Net Income 703,071 372,205 162,601 197,769 1,435,646
Net income per
limited partner
unit 13.95 7.37 3.22 3.97 28.51
(1) Revenues include equity in earnings of unconsolidated joint ventures
and minority interest in loss of the consolidated joint ventures.
13. Subsequent Event:
-----------------
In February 2001, the Partnership collected the outstanding principal
balance and $12,084 of accrued interest relating to the mortgage note
receivable from the 1995 sale of the Partnership's property in Myrtle
Beach, South Carolina.
On March 2, 2001, the Partnership sold its property in Daleville,
Indiana for $325,000 and received net sales proceeds of $296,708 (see
Note 3).
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, 1999, 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 Operating expenses are reimbursed at Accounting and
for operating expenses the lower of cost or 90 percent of administrative services:
the prevailing rate at which $83,476
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
noncumulative if the Limited
Partners do not receive 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 $4,050
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.
In addition, in 2000, the Partnership sold its 12 percent interest in Duluth
Joint Venture to CNL Income Fund VII, Ltd., and affiliate of the General
Partners, for $221,830. The proceeds from the sale exceeded the basis of the
interest in this joint venture resulting in a gain of $13,819 for financial
reporting purposes.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) The following documents are filed as part of this report.
1. Financial Statements
Report of Independent Certified Public Accountants
Balance Sheets at December 31, 2000 and 1999
Statements of Income for the years ended December 31, 2000,
1999, and 1998
Statements of Partners' Capital for the years ended December
31, 2000, 1999, and 1998
Statements of Cash Flows for the years ended December 31,
2000, 1999, and 1998
Notes to Financial Statements
2. Financial Statement Schedules
Schedule II - Valuation and Qualifying Accounts for the years
ended December 31, 2000, 1999, and 1998
Schedule III - Real Estate and Accumulated Depreciation at
December 31, 2000
Notes to Schedule III - Real Estate and Accumulated
Depreciation at December 31, 2000
Schedule IV - Mortgage Loans on Real Estate 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 Amended and Restated Affidavit and Certificate of
Limited Partnership of CNL Income Fund V, Ltd.
(Included as Exhibit 3.1 to Form 10-K filed with the
Securities and Exchange Commission on March 31, 1994,
and incorporated herein by reference.)
4.1 Amended and Restated Affidavit and Certificate of
Limited Partnership of CNL Income Fund V, Ltd.
(Included as Exhibit 3.1 to Form 10-K filed with the
Securities and Exchange Commission on March 31, 1994,
and incorporated herein by reference.)
4.2 Amended and Restated Certificate and Agreement of
Limited Partnership of CNL Income Fund V, Ltd.
(Included as Exhibit 4.2 to Form 10-K filed with the
Securities and Exchange Commission on March 31, 1994,
and incorporated herein by reference.)
10.1 Management Agreement (Included as Exhibit 10.1 to
From 10-K filed with the Securities and Exchange
Commission on March 31, 1994, and incorporated herein
by reference.)
10.2 Assignment of Management Agreement from CNL
Investment Company to CNL Income Fund Advisors, Inc.
(Included as Exhibit 10.2 to Form 10-K filed with the
Securities and Exchange Commission on March 30, 1995,
and incorporated herein by reference.)
10.3 Assignment of Management Agreement from CNL Income
Fund Advisors, Inc. to CNL Fund Advisors, Inc.
(Included as Exhibit 10.3 to Form 10-K filed with the
Securities and Exchange Commission on April 1, 1996,
and incorporated herein by reference.)
(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 29th day of
March, 2001.
CNL INCOME FUND V, LTD.
By: CNL REALTY CORPORATION
General Partner
/s/ Robert A. Bourne
-----------------------------------
ROBERT A. BOURNE, President
By: ROBERT A. BOURNE
General Partner
/s/ Robert A. Bourne
-----------------------------------
ROBERT A. BOURNE
By: JAMES M. SENEFF, JR.
General Partner
/s/ James M. Seneff, Jr.
-----------------------------------
JAMES M. SENEFF, JR.
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signature Title Date
/s/ Robert A. Bourne President, Treasurer and Director March 29, 2001
- ------------------------------------
Robert A. Bourne (Principal Financial and Accounting
Officer)
/s/ James M. Seneff, Jr. Chief Executive Officer and Director March 29, 2001
- ------------------------------------
James M. Seneff, Jr. (Principal Executive Officer)
CNL INCOME FUND V, 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) $ 137,892 $ -- $ 17,303 (b) $ 3,094 (c) $ 10,596 $ 141,505
============== =============== ================ ============= ============ ============
1999 Allowance for
doubtful
accounts (a) $ 141,505 $ -- $ 13,070 (b) $ -- $ 825 $ 153,750
============== =============== ================ ============= ============ ============
2000 Allowance for
doubtful
accounts (a) $ 153,750 $ -- $ 47,400 (b) $ -- $ 66,351 $ 134,799
============== =============== ================ ============= ============ ============
(a) deducted from receivables on the balance sheet.
(b) reduction of rental and other income.
(c) amounts written off as uncollectible.
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION - CONTINUED
December 31, 2000
Costs Capitalized
Subsequent To
Initial Cost Acquisition
-------------------------- ---------------------
Encum- Buildings and Improve- Carrying
brances Land Improvements ments Costs
----------- ------------ ------------ ----------- --------
Properties the Partnership
has Invested in Under
Operating Leases:
Arby's Restaurants:
Connorsville, Indiana - $279,665 - $591,137 -
South Haven, Michigan - 120,847 599,339 120,363 -
Burger King Restaurant:
Lawrenceville, Georgia - 482,071 - 368,415 -
Captain D's Restaurant:
Belleville, Illinois - 186,050 383,781 - -
Denny's Restaurant:
Daleville, Indiana (k) (m) - 125,562 404,935 - -
New Castle, Indiana - 117,394 471,340 - -
Golden Corral Family
Steakhouse Restaurants:
Livingston, Texas - 156,382 429,107 - -
Victoria, Texas - 504,787 742,216 - -
IHOP:
Houston, Texas - 513,384 671,713 - -
Pizza Hut Restaurant:
Mexia, Texas - 237,944 200,501 - -
Taco Bell Restaurants:
Bountiful, Utah - 330,164 - 319,511 -
Centralia, Washington - 215,302 - 378,836 -
Tony Romas:
Sandy, Utah - 595,330 - - -
Wendy's Old Fashioned
Hamburger Restaurants:
Tampa, Florida - 336,216 462,401 - -
Other:
Lebanon, New Hampshire (g) (l) - 448,726 - 716,741 -
------------ ------------ -----------
$4,649,824 $4,365,333 $2,495,003 -
============ ============ =========== ========
Property of Joint Venture in Which
the Partnership has a 43%
Interest and has Invested in
Under an Operating Lease:
Waffle House Restaurant:
Cocoa, Florida - $183,229 $192,857 - -
============ ============ =========== ========
Property in Which the Partnership
has a 42.09% Interest as
Tenants-in-Common and has
Invested in Under an Operating
Lease:
Boston Market Restaurant:
Mesa, Arizona (j) - $440,842 $650,622 - -
============ ============ =========== ========
Property in Which the Partnership
has a 27.78% Interest as
Tenants-in-Common and has
Invested in Under an Operating
Lease:
Chevy's Fresh Mex Restaurant:
Vancouver, Washington - $875,659 $1,389,366 - -
============ ============ =========== ========
Property of Joint Venture in Which
the Partnership has a 53.12%
Interest and has Invested in
Under an Operating Lease:
Ruby Tuesday's Restaurant:
Orlando, Florida - $623,496 - - -
============ ============ =========== ========
Properties the Partnership
has Invested in Under
Direct Financing Leases:
Captain D's Restaurant
Zanesville, Ohio - $99,651 $390,518 - -
Denny's Restaurant:
Huron, Ohio - 27,418 456,139 - -
Tony Romas:
Sandy, Utah - - 911,072 - -
------------ ------------ ----------- --------
$127,069 $1,757,729 - -
============ ============ =========== ========
Property of Joint Venture in Which
the Partnership has a 53.12%
Interest and has Invested in
Under a Direct Financing Lease:
Ruby Tuesday's Restaurant:
Orlando, Florida - - $820,202 - -
============ ============ =========== ========
Life on Which
Gross Amount at Which Depreciation in
Carried at Close of Period (c) Date Latest Income
-----------------------------------------
Buildings and Accumulated of Con- Date Statement is
Land Improvements Total Depreciation struction Acquired Computed
------------ ------------ ------------ ----------- ------- ------- -------------
$279,665 $591,137 $870,802 $195,520 1989 03/89 (b)
120,847 719,702 840,549 184,193 1989 03/89 (i)
482,071 368,415 850,486 141,226 1989 04/89 (b)
186,050 383,781 569,831 150,847 1988 03/89 (b)
125,562 404,935 530,497 39,165 1974 02/89 (l)
117,394 471,340 588,734 131,493 1989 02/89 (h)
156,382 429,107 585,489 162,105 1986 09/89 (b)
504,787 742,216 1,247,003 272,997 1989 12/89 (b)
513,384 671,713 1,185,097 69,348 1997 11/97 (b)
237,944 200,501 438,445 78,530 1985 03/89 (b)
330,164 319,511 649,675 121,149 1989 05/89 (b)
215,302 378,836 594,138 139,960 1989 08/89 (b)
595,330 (f) 595,330 (d) 1997 12/97 (d)
336,216 462,401 798,617 182,392 1987 02/89 (b)
448,726 716,741 1,165,467 247,644 1989 03/89 (b)
------------ ------------ ------------ -----------
$4,649,824 $6,860,336 $11,510,160 $2,116,569
============ ============ ============ ===========
$183,229 $192,857 $376,086 $70,765 1986 12/89 (b)
============ ============ ============ ===========
$440,842 $650,622 $1,091,464 $69,211 1997 10/97 (b)
============ ============ ============ ===========
$875,659 $1,389,366 $2,265,025 $139,062 1994 12/97 (b)
============ ============ ============ ===========
$623,496 (f) $623,496 (d) 1998 05/98 (d)
============ ============
(f) (f) (f) (e) 1988 03/89 (e)
(f) (f) (f) (e) 1971 05/89 (e)
- (f) (f) (d) 1997 12/97 (d)
- (f) (f) (d) 1998 05/98 (d)
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED
DEPRECIATION - CONTINUED
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 $ 14,616,195 $ 1,944,358
Reclassification from direct financing lease 530,497 --
Dispositions (1,936,958 ) (315,857 )
Depreciation expense (l)(m) -- 267,254
---------------- ----------------
Balance, December 31, 1998 13,209,734 1,895,755
Dispositions (1,040,885 ) (140,629 )
Depreciation expense -- 243,260
---------------- ----------------
Balance, December 31, 1999 12,168,849 1,998,386
Acquisition 20,000 --
Disposition (678,689 ) (111,062 )
Depreciation expense -- 229,245
---------------- ----------------
Balance, December 31, 2000 $ 11,510,160 $ 2,116,569
================ ================
Property of Joint Venture in Which the Partnership
has a 43% Interest and has Invested in Under an Operating
Lease:
Balance, December 1997 $ 376,086 $ 51,481
Depreciation expense -- 6,428
---------------- ----------------
Balance, December 31, 1998 376,086 57,909
Depreciation expense -- 6,428
---------------- ----------------
Balance, December 31, 1999 376,086 64,337
Depreciation expense -- 6,428
---------------- ----------------
Balance, December 31, 2000 $ 376,086 $ 70,765
================ ================
CNL INCOME FUND V, 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 53.12% Interest and has Invested in Under an
Operating Lease:
Balance, December 31, 1997 $ -- $ --
Acquisition 623,496 --
Depreciation expense (d) -- --
---------------- ----------------
Balance, December 31, 1998 $ 623,496 $ --
Depreciation (d) -- --
---------------- ----------------
Balance, December 31, 1999 623,496 --
Depreciation (d) -- --
---------------- ----------------
Balance, December 31, 2000 $ 623,496 $ --
================ ================
Property in Which the Partnership has a 42.09%
Interest as Tenants-in-Common and has Invested in Under
an Operating Lease:
Balance, December 31, 1997 $ 1,091,464 $ 4,021
Depreciation Expense -- 21,816
---------------- -----------------
Balance, December 31, 1998 1,091,464 25,837
Depreciation expense -- 21,687
---------------- -----------------
Balance, December 31, 1999 1,091,464 47,524
Depreciation expense -- 21,687
---------------- -----------------
Balance, December 31, 2000 $ 1,091,464 $ 69,211
================ =================
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED
DEPRECIATION - CONTINUED
December 31, 2000
Accumulated
Cost Depreciation
---------------- -----------------
Property of in Which the Partnership has a 27.78%
Interest as Tenants-in-Common and has Invested in Under
an Operating Lease:
Balance, December 31, 1997 $ 2,265,025 $ 127
Depreciation expense -- 46,309
---------------- -----------------
Balance, December 31, 1998 2,265,025 46,436
Depreciation expense -- 46,313
---------------- -----------------
Balance, December 31, 1999 2,265,025 92,749
Depreciation expense -- 46,313
---------------- -----------------
Balance, December 31, 2000 $ 2,265,025 $ 139,062
================ =================
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED
DEPRECIATION - CONTINUED
December 31, 2000
(b) Depreciation expense is computed for buildings and improvements based
upon estimated lives of 30 years.
(c) As of December 31, 2000, the aggregate cost of the Properties owned by
the Partnership and its consolidated joint venture, and the
unconsolidated joint ventures for federal income tax purposes was
$12,960,962 and $5,175,275, 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 land and building has
been recorded as a direct financing lease. The cost of the land and
building has been included in net investment in direct financing
leases; therefore, depreciation is not applicable.
(f) For financial reporting purposes, certain components of the lease
relating to the land and building have been recorded as a direct
financing lease. Accordingly, costs related to these components of this
lease are not shown.
(g) The restaurant on the Property in Lebanon, New Hampshire, was converted
from a Ponderosa Steakhouse restaurant to a local, independent
restaurant in 1992.
(h) Effective January 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 its remaining estimated life
of approximately 25 years.
(i) Effective February 1994, the lease for this Property was terminated,
resulting in the lease's reclassification as an operating lease. The
building was recorded at net book value as of February 1994 and will be
depreciated over its remaining estimated life of approximately 25
years.
(j) During the year ended December 31, 1997, the Partnership and an
affiliate, as tenants-in-common, purchased land and building from CNL
BB Corp., an affiliate of the General Partners, for an aggregate cost
of $1,091,464.
(k) Effective March 1998, the lease for this property was terminated,
resulting in the lease being reclassified as an operating lease. The
building was recorded at net book value as of March 1998, and will be
depreciated over its remaining estimated life of approximately 20
years.
(l) For financial reporting proposes, the undepreciated cost of the
Property in Lebanon, New Hampshire, was written down to net realizable
value due to an impairment in value. The Partnership recognized the
impairments by recording an allowance for loss on assets in the amount
of $169,482 and $221,898 at December 31, 1999 and 1998, respectively.
The impairments represented the difference between the Property's
carrying value and the estimated net realizable value of the Property
at December 31, 1999 and 1998, respectively. 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.
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED
DEPRECIATION - CONTINUED
December 31, 2000
(m) For financial reporting purposes, the undepreciated cost of the
Property in Daleville, Indiana, 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 assets in the amount
of $109,919 and $124,670 for the years ended December 31, 2000 and
1998, respectively. The impairments represented the difference between
the Property's carrying value and the estimated 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.
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
SCHEDULE IV - MORTGAGE LOANS ON REAL ESTATE
December 31, 2000
Principal
Amount
of Loans
Subject to
Carrying Delinquent
Final Periodic Face Amount of Principal or
Interest Maturity Payment Prior Amount of Mortgages Description
Rate Date Terms Liens Mortgages (1) Interest
----------- --------------- ---------- ----------- ------------- --------------- --------------
Perkins-
Myrtle Beach, FL
First Mortgage 10.25% February 2001 (2) $ -- $ 1,040,000 $ 868,713 (3) $ --
=========== ============= =============== ==============
(1) Carrying amount consists of outstanding principal plus accrued interest
less a deferred gain. The tax carrying value of the note is $857,575,
which is net of a deferred gains of $130,306.
(2) Monthly payments of principal and interest at an annual rate of 10.25%,
with a balloon payment at maturity of $986,999.
(3) The changes in the carrying amounts are summarized as follows:
2000 1999 1998
------------------- -------------------- -------------------
Balance at beginning of period $ 868,309 $ 1,748,060 $ 1,758,167
Interest earned 101,650 129,936 223,031
Collections of principal and interest (102,515 ) (1,192,250 ) (236,429)
Recognition of deferred gain on sale of
land and building 1,269 182,563 3,291
------------------- -------------------- -------------------
Balance at end of period $ 868,713 $ 868,309 $ 1,748,060
=================== ==================== ===================
EXHIBITS
EXHIBIT INDEX
Exhibit Number
3.1 Amended and Restated Affidavit and Certificate of Limited
Partnership of CNL Income Fund V, Ltd. (Included as Exhibit
3.1 to Form 10-K filed with the Securities and Exchange
Commission on March 31, 1994, and incorporated herein by
reference.)
4.1 Amended and Restated Affidavit and Certificate of Limited
Partnership of CNL Income Fund V, Ltd. (Included as Exhibit
3.1 to Form 10-K filed with the Securities and Exchange
Commission on March 31, 1994, and incorporated herein by
reference.)
4.2 Amended and Restated Certificate and Agreement of Limited
Partnership of CNL Income Fund V, Ltd. (Included as Exhibit
4.2 to Form 10-K filed with the Securities and Exchange
Commission on March 31, 1994, and incorporated herein by
reference.)
10.1 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 Management Agreement from CNL Investment Company
to CNL Income Fund Advisors, Inc. (Included as Exhibit 10.2 to
Form 10-K filed with the Securities and Exchange Commission on
March 30, 1995, and incorporated herein by reference.)
10.3 Assignment of Management Agreement from CNL Income Fund
Advisors, Inc. to CNL Fund Advisors, Inc. (Included as Exhibit
10.3 to Form 10-K filed with the Securities and Exchange
Commission on April 1, 1996, and incorporated herein by
reference.)