Back to GetFilings.com
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT of 1934
For the quarterly period ended September 30, 2002
--------------------------------------------------------------------------
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT of 1934
For the transition period from ____________________ to ______________________
Commission file number
0-19141
---------------------------------------
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
incorporation or organization) Identification No.)
450 South Orange Avenue
Orlando, Florida 32801
- ---------------------------------- -----------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number
(including area code) (407) 540-2000
-----------------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No _________
CONTENTS
Part I Page
Item 1. Financial Statements:
Condensed Balance Sheets 1
Condensed Statements of Income 2
Condensed Statements of Partners' Capital 3
Condensed Statements of Cash Flows 4
Notes to Condensed Financial Statements 5-7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8-11
Item 3. Quantitative and Qualitative Disclosures About
Market Risk 11
Item 4. Controls and Procedures 11
Part II
Other Information 12-13
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
CONDENSED BALANCE SHEETS
September 30, December 31,
2002 2001
------------------ -------------------
ASSETS
Land and buildings on operating leases, net $ 6,434,316 $ 7,799,714
Net investment in direct financing leases 1,204,976 1,228,690
Real estate held for sale -- 630,820
Investment in joint ventures 1,933,361 1,930,836
Cash and cash equivalents 551,477 313,783
Receivables, less allowance for doubtful accounts
of $35,317 in 2001 26,749 48,750
Accrued rental income 355,644 349,296
Other assets 3,765 4,165
------------------ -------------------
$ 10,510,288 $ 12,306,054
================== ===================
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 14,018 $ 10,873
Real estate taxes payable 6,237 9,496
Distributions payable 351,233 430,258
Due to related parties 212,964 118,585
Rents paid in advance and deposits 10,370 4,583
------------------ -------------------
Total liabilities 594,822 573,795
Partners' capital 9,915,466 11,732,259
------------------ -------------------
$ 10,510,288 $ 12,306,054
================== ===================
See accompanying notes to condensed financial statements.
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF INCOME
Quarter Ended Nine Months Ended
September 30, September 30,
2002 2001 2002 2001
------------- -------------- --------------- -------------
Revenues:
Rental income from operating leases $ 222,031 $ 236,865 $ 671,302 $ 713,400
Earned income from direct financing leases 33,019 34,525 99,666 105,797
Contingent rental income 19,745 18,184 40,060 39,447
Lease termination income -- 13,373 -- 13,373
Interest and other income 2,349 5,992 10,962 103,207
------------- -------------- --------------- -------------
277,144 308,939 821,990 975,224
------------- -------------- --------------- -------------
Expenses:
General operating and administrative 41,455 28,882 151,272 175,024
Property expenses 3,453 15,117 23,713 42,214
State and other taxes -- -- 9,805 2,840
Depreciation and amortization 44,619 48,597 133,858 164,776
Provision for write-down of assets -- 67,641 -- 156,644
------------- -------------- --------------- -------------
89,527 160,237 318,648 541,498
------------- -------------- --------------- -------------
Income Before Gain on Sale of Assets and Equity in
Earnings of Joint Ventures 187,617 148,702 503,342 433,726
Gain on Sale of Assets -- -- 571,759 171,130
Equity in Earnings of Joint Ventures 50,763 37,132 147,998 106,479
------------- -------------- --------------- -------------
Income from Continuing Operations 238,380 185,834 1,223,099 711,335
------------- -------------- --------------- -------------
Discontinued Operations (Note 4):
Income (loss) from discontinued operations, net 305 28,332 (7,048 ) 85,836
Gain on disposal of discontinued operations, net -- -- 193,496 --
------------- -------------- --------------- -------------
305 28,332 186,448 85,836
------------- -------------- --------------- -------------
Net Income $ 238,685 $ 214,166 $ 1,409,547 $ 797,171
============= ============== =============== =============
Income Per Limited Partner Unit
Continuing Operations $ 4.77 $ 3.72 $ 24.46 $ 14.23
Discontinued Operations -- 0.56 3.73 1.71
------------- -------------- --------------- -------------
Total $ 4.77 $ 4.28 $ 28.19 $ 15.94
============= ============== =============== =============
Weighted Average Number of Limited Partner
Units Outstanding 50,000 50,000 50,000 50,000
============= ============== =============== =============
See accompanying notes to condensed financial statements.
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF PARTNERS' CAPITAL
Nine Months Ended Year Ended
September 30, December 31,
2002 2001
---------------------- ------------------
General partners:
Beginning balance $ 514,026 $ 514,026
Net income -- --
---------------------- ------------------
514,026 514,026
---------------------- ------------------
Limited partners:
Beginning balance 11,218,233 13,743,292
Net income 1,409,547 945,973
Distributions ($64.53 and $69.42 per
limited partner unit, respectively) (3,226,340 ) (3,471,032 )
---------------------- ------------------
9,401,440 11,218,233
---------------------- ------------------
Total partners' capital $ 9,915,466 $ 11,732,259
====================== ==================
See accompanying notes to condensed financial statements.
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF CASH FLOWS
Nine Months Ended
September 30,
2002 2001
---------------- ----------------
Increase (Decrease) in Cash and Cash Equivalents
Net Cash Provided by Operating Activities $ 793,251 $ 1,074,380
---------------- ----------------
Cash Flows from Investing Activities:
Proceeds from sale of land and buildings 2,749,808 300,386
Collections on mortgage note receivable -- 987,881
---------------- ----------------
Net cash provided by investing activities 2,749,808 1,288,267
---------------- ----------------
Cash Flows from Financing Activities:
Distributions to limited partners (3,305,365 ) (3,048,016 )
---------------- ----------------
Net cash used in financing activities (3,305,365 ) (3,048,016 )
---------------- ----------------
Net Increase (Decrease) in Cash and Cash Equivalents 237,694 (685,369 )
Cash and Cash Equivalents at Beginning of Period 313,783 1,137,958
---------------- ----------------
Cash and Cash Equivalents at End of Period $ 551,477 $ 452,589
================ ================
Supplemental Schedule of Non-Cash Investing and
Financing Activities:
Deferred real estate disposition fees incurred
and unpaid at end of period $ 83,430 $ 9,750
================ ================
Distributions declared and unpaid at end of
period $ 351,233 $ 430,258
================ ================
See accompanying notes to condensed financial statements.
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS
Quarters and Nine Months Ended September 30, 2002 and 2001
1. Basis of Presentation:
The accompanying unaudited condensed financial statements have been
prepared in accordance with the instructions to Form 10-Q and do not
include all of the information and note disclosures required by
generally accepted accounting principles. The financial statements
reflect all adjustments, consisting of normal recurring adjustments,
which are, in the opinion of management, necessary to a fair statement
of the results for the interim periods presented. Operating results for
the quarter and nine months ended September 30, 2002, may not be
indicative of the results that may be expected for the year ending
December 31, 2002. Amounts as of December 31, 2001, included in the
financial statements, have been derived from audited financial
statements as of that date.
These unaudited financial statements should be read in conjunction with
the financial statements and notes thereto included in Form 10-K of CNL
Income Fund V, Ltd. (the "Partnership") for the year ended December 31,
2001.
Effective January 1, 2002, the Partnership adopted Statement of
Financial Accounting Standards No. 144 "Accounting for the Impairment
or Disposal of Long-Lived Assets." This statement requires that a
long-lived asset be tested for recoverability whenever events or
changes in circumstances indicate that its carrying amount may not be
recoverable. The carrying amount of a long-lived asset is not
recoverable if it exceeds the sum of the undiscounted cash flows
expected to result from the use and eventual disposition of the asset.
The assessment is based on the carrying amount of the asset at the date
it is tested for recoverability. An impairment loss is recognized when
the carrying amount of a long-lived asset exceeds its fair value. If an
impairment is recognized, the adjusted carrying amount of a long-lived
asset is its new cost basis. The statement also requires that the
results of operations of a component of an entity that either has been
disposed of or is classified as held for sale be reported as a
discontinued operation if the disposal activity was initiated
subsequent to the adoption of the Standard.
2. Reclassification:
Certain items in the prior years' financial statements have been
reclassified to conform to 2002 presentation. These reclassifications
had no effect on total partners' capital or net income.
3. Land and Buildings on Operating Leases:
During the nine months ended September 30, 2002, the Partnership sold
its properties in Huron, Ohio, West Lebanon, New Hampshire and
Bountiful, Utah for an aggregate sales price of $1,931,000, and
received net sales proceeds aggregating approximately $1,844,900. The
Partnership recorded gains aggregating approximately $571,700 relating
to the sale of the properties in West Lebanon, New Hampshire and
Bountiful, Utah. Due to the fact that the Partnership had recorded
provisions for write-down of assets in previous years, no gain or loss
was recorded in 2002 relating to the property in Huron, Ohio. As of
December 31, 2001, these properties had been identified as held for
sale. In connection with these sales, the Partnership incurred
deferred, subordinated, real estate disposition fees of $57,930 (see
Note 6).
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS
Quarters and Nine Months Ended September 30, 2002 and 2001
4. Discontinued Operations:
In June 2002, the Partnership sold its property in Lawrenceville,
Georgia to the tenant for $850,000 and received net sales proceeds of
$821,500, resulting in a gain on disposal of discontinued operations of
approximately $193,500. In connection with the sale, the Partnership
incurred a deferred, subordinated, real estate disposition fee of
$25,500 (see Note 6). The financial results for this property are
reflected as Discontinued Operations in the accompanying financial
statements.
The operating results of discontinued operations are as follows:
Quarter Ended September 30, Nine Months Ended September 30,
2002 2001 2002 2001
--------------- -------------- ----------------- ---------------
Rental revenues $ 10,000 $ 36,295 $ 10,000 $ 91,722
Interest and other income -- 1,247 1,100 3,324
Expenses (9,695 ) (9,210 ) (18,148 ) (9,210 )
Gain on disposal of assets -- -- 193,496 --
--------------- -------------- ----------------- ---------------
Income from discontinued
operations $ 305 $ 28,332 $ 186,448 $ 85,836
=============== ============== ================= ===============
5. Concentration of Credit Risk:
The following schedule presents total rental revenues and mortgage
interest income from individual lessees, or affiliated groups of
lessees, each representing more than 10% of the Partnership's total
rental revenues and mortgage interest income (including the Partnership
share of total rental revenues from unconsolidated joint ventures and
the properties held as tenants-in-common with affiliates of the general
partners) for each of the nine months ended September 30:
2002 2001
--------------- ---------------
Slaymaker Group, Inc. $ 135,008 $ 136,188
IHOP Properties, Inc. 104,591 N/A
Golden Corral Corporation 99,113 130,793
In addition, the following schedule presents total rental revenues and
mortgage interest income from individual restaurant chains, each
representing more than 10% of the Partnership's total rental revenues
and mortgage interest income (including the Partnership's share of
total rental revenues from joint ventures and the properties held as
tenants-in-common with affiliates of the general partners) for each of
the nine months ended September 30:
2002 2001
------------- ---------------
Golden Corral Family Steakhouse $ 149,473 $ 145,231
Tony Roma's 135,008 136,188
IHOP 104,591 N/A
Arby's 98,412 N/A
Taco Bell N/A 113,470
The information denoted by N/A indicates that for each period
presented, the tenant or the chain did not represent more than 10% of
the Partnership's total rental revenues.
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS
Quarters and Nine Months Ended September 30, 2002 and 2001
5. Concentration of Credit Risk - Continued:
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.
6. Related Party Transactions:
An affiliate of the Partnership is 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
affiliate provides a substantial amount of services in connection with
the sale. However, if the net sales proceeds are reinvested in a
replacement property, no such real estate disposition fees will be
incurred until such replacement property is sold and the net sales
proceeds are distributed. The payment of the real estate disposition
fee is subordinated to receipt by the limited partners of their
aggregate 10% preferred return, plus their adjusted capital
contributions. During the nine months ended September 30, 2002, the
Partnership incurred deferred, subordinated, real estate disposition
fees of $83,430 as a result of the sale of four properties (see Notes 3
and 4).
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
CNL Income Fund V, Ltd. (the "Partnership") is a Florida limited
partnership that was organized on August 17, 1988, to acquire for cash, either
directly or through joint venture and tenancy in common arrangements, both newly
constructed and existing restaurants, as well as land upon which restaurants
were to be constructed, which are leased primarily to operators of national and
regional fast-food and family-style restaurant chains (collectively, the
"Properties"). The leases generally are triple-net leases, with the lessees
responsible for all repairs and maintenance, property taxes, insurance and
utilities. As of September 30, 2001, the Partnership owned 16 Properties
directly and owned four Properties indirectly through joint venture or tenancy
in common arrangements. As of September 30, 2002, the Partnership owned 12
Properties directly and owned four Properties indirectly through joint venture
or tenancy in common arrangements.
Capital Resources
Cash from operating activities (which includes cash received from
tenants, distributions from joint ventures, and interest and other income
received, less cash paid for expenses) was $793,251 and $1,074,380 for the nine
months ended September 30, 2002 and 2001, respectively. The decrease in cash
from operating activities for the nine months ended September 30, 2002 was a
result of changes in income and expenses, as described in "Results of
Operations" below, and changes in the Partnership's working capital.
Other sources and uses of capital included the following during the
nine months ended September 30, 2002.
During the nine months ended September 30, 2002, the Partnership sold
its Properties in Huron, Ohio, West Lebanon, New Hampshire and Bountiful, Utah
for an aggregate sales price of $1,931,000 and received net sales proceeds
aggregating approximately $1,844,900. The Partnership recorded gains aggregating
approximately $571,700 relating to the sale of the Properties in West Lebanon,
New Hampshire and Bountiful, Utah. Due to the fact that the Partnership had
recorded provisions for write-down of assets in previous years, no gain or loss
was recorded relating to the Property in Huron, Ohio. In addition, in June 2002,
the Partnership sold its Property in Lawrenceville, Georgia to the tenant for
$850,000 and received net sales proceeds of $821,500, resulting in a gain on
disposal of discontinued operations of approximately $193,500 during the nine
months ended September 30, 2002. The Partnership used the majority of the net
sales proceeds to pay special distributions to the limited partners, as
described below, and used the remaining funds to pay Partnership liabilities.
The Partnership anticipates that its distributions will be sufficient to enable
the limited partners to pay federal and state income taxes, if any (at a level
reasonably assumed by the general partners), resulting from the sale.
Currently, rental income from the Partnership's Properties and any net
sales proceeds held by the Partnership are invested in money market accounts or
other short-term, highly liquid investments, such as demand deposit accounts at
commercial banks, money market accounts and certificates of deposit with less
than a 90-day maturity date, pending the Partnership's use of such funds to pay
Partnership expenses and to make distributions to the partners. At September 30,
2002, the Partnership had $551,477 invested in such short-term investments, as
compared to $313,783 at December 31, 2001. The increase in cash and cash
equivalents at September 30, 2002, was primarily a result of the Partnership
still holding a portion of the net sales proceeds it received from the sale of
the Properties described above. The funds remaining after the payment of
distributions to the limited partners will be used to pay Partnership
liabilities.
Short-Term Liquidity
The Partnership's investment strategy of acquiring Properties for cash
and leasing them under triple-net leases to operators who meet specified
financial standards minimizes the Partnership's operating expenses. The general
partners believe that the leases will generate net cash flow in excess of
operating expenses.
The Partnership's short-term liquidity requirements consist primarily
of the operating expenses of the Partnership.
The general partners have the right, but not the obligation, to make
additional capital contributions if they deem it appropriate in connection with
the operations of the Partnership.
Total liabilities of the Partnership were $594,822 at September 30,
2002, as compared to $573,795 at December 31, 2001 primarily attributable to an
increase in amounts due to related parties, partially offset by a lower
distribution payable.
The Partnership generally distributes cash from operations remaining
after the payment of 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 nine
months ended September 30, 2002 and 2001, net sales proceeds from the sale of
several Properties, the Partnership declared distributions to the limited
partners of $3,226,340 and $3,040,774 for the nine months ended September 30,
2002 and 2001, respectively, ($351,233 and $430,258 for the quarters ended
September 30, 2002 and 2001, respectively.) This represents distributions of
$64.53 and $60.82 per unit for the nine months ended September 30, 2002 and
2001, respectively ($7.02 and $8.61 per unit for the quarters ended September
30, 2002 and 2001, respectively). The distribution for the nine months ended
September 30, 2002 included $2,150,000 in a special distribution, as a result of
the distribution of net sales proceeds from the 2002 sale of several Properties,
as described in "Capital Resources." The distribution for the nine months ended
September 30, 2001, included $1,750,000 in a special distribution, as a result
of the distribution of net sales proceeds from the sale of the Property in
Daleville, Indiana and the payoff of the promissory notes accepted in connection
with the sale of the Properties in Myrtle Beach, South Carolina and St. Cloud,
Florida. These special distributions during the nine months ended September 30,
2002 and 2001, were effectively a return of a portion of the limited partners'
investment, although in accordance with the partnership agreement, $979,322 and
$1,336,152, respectively, were applied toward the limited partners' 10%
Preferred Return and the balance of $1,170,678 and $413,848, respectively, were
treated as a return of capital for purposes of calculating the limited partners'
10% Preferred Return. As a result of the return of capital, the amount of the
limited partners' invested capital contributions (which generally is the limited
partners' capital contributions, less distributions from the sale of Properties
that are considered to be a return of capital) was decreased; therefore, the
amount of the limited partners' invested capital contributions on which the 10%
Preferred Return is calculated was lowered accordingly. As a result of the sales
of the Properties, the Partnership's total revenue was reduced, while the
majority of the Partnership's operating expenses remained fixed. Therefore,
distributions of net cash flow were adjusted during the nine months ended
September 30, 2002 and 2001. No distributions were made to the general partners
for the quarters and nine months ended September 30, 2002 and 2001. The
Partnership intends to continue to make distributions of cash available for
distribution to the limited partners on a quarterly basis.
Long-Term Liquidity
The Partnership has no long-term debt or other long-term liquidity
requirements.
Results of Operations
Total rental revenues were $770,968 for the nine months ended September
30, 2002, as compared to $819,197 in the comparable period of 2001, of which
$255,050 and $271,390 were earned during the quarters ended September 30, 2002
and 2001, respectively. Rental revenues decreased during the quarter and nine
months ended September 30, 2002 as compared to the same periods in 2001, due to
the sale of Properties during 2002, as described in "Capital Resources." The
Partnership used the net sales proceeds from the sale of these Properties to pay
liabilities of the Partnership and to make distributions to the limited
partners.
For the nine months ended September 30, 2002 and 2001, the Partnership
also earned contingent rental income of $40,060 and $39,447, respectively, of
which $19,745 and $18,184 were earned during the quarters ended September 30,
2002 and 2001, respectively. The slight increase in contingent rental income
earned during the quarter and nine months ended September 30, 2002, as compared
to the same periods of 2001, was attributable to an increase in gross sales of
certain restaurant Properties, the leases of which require the payment of
contingent rent.
During the quarter and nine months ended September 30, 2001, the
Partnership recognized $13,373 in lease termination income from a former tenant
as consideration for the Partnership releasing the former tenant from its
obligations under the terms of the lease.
During the nine months ended September 30, 2002 and 2001, the
Partnership also earned $10,962 and $103,207, respectively, in interest and
other income of which $2,349 and $5,992 were earned during the quarters ended
September 30, 2002 and 2001, respectively. Interest and other income were higher
during the quarter and nine months ended September 30, 2001 due to the fact that
in February 2001, the Partnership received $150,000 as satisfaction for
outstanding receivable amounts of which approximately $56,800 was received in
consideration for the Partnership releasing the tenant of the Property in Huron,
Ohio from its obligations under the lease, which the Partnership recorded as
other income. The tenant terminated its lease and ceased restaurant operations.
During the quarter and nine months ended September 30, 2002, three
lessees of the Partnership, Slaymaker Group, Inc., IHOP Properties, Inc., and
Golden Corral Corporation, each contributed more than 10% of the Partnership's
total rental revenues (including the Partnership's share of the rental revenues
from Properties owned by unconsolidated joint ventures and Properties owned with
affiliates of the general partners as tenants-in-common). It is anticipated
that, based on the minimum rental payments required by the leases, these three
lessees will continue to contribute more than 10% of the Partnership's total
rental revenues. In addition, during the quarter and nine months ended September
30, 2002, four restaurant chains, Golden Corral, Tony Roma's Famous for Ribs
Restaurants, IHOP and Arby's, each accounted for more than 10% of the
Partnership's total rental revenues during 2002 (including the Partnership's
share of the rental revenues from Properties owned by unconsolidated joint
ventures and Properties owned with affiliates of the general partners as
tenants-in-common). It is anticipated that these four restaurant chains each
will continue to account for more than 10% of the total rental revenues to which
the Partnership is entitled under the terms of the leases. Any failure of these
lessees or restaurant chains will materially affect the Partnership's income if
the Partnership is not able to re-lease the Properties in a timely manner.
During the nine months ended September 30, 2002 and 2001, the
Partnership earned $147,998 and $106,479, respectively, $50,763 and $37,132 of
which was earned during the quarters ended September 30, 2002 and 2001,
respectively, attributable to net income earned by joint ventures in which the
Partnership is a co-venturer. The increase in net income earned by joint
ventures during the quarter and nine months ended September 30, 2002, as
compared to the same periods in 2001, was primarily attributable to the fact
that the Partnership and CNL Income Fund II, Ltd., as tenants-in-common,
re-leased the Property in Mesa, Arizona, to a new tenant in September 2001 with
terms substantially the same as the Partnership's other leases. The former
tenant of the Property, in which the Partnership owns an approximate 42%
interest with an affiliate of the general partners, as tenants-in-common, had
filed for bankruptcy in 1998 and in June 2000 had rejected the lease.
Operating expenses, including depreciation expense and provision for
write-down of assets, were $318,648 and $541,498 for the nine months ended
September 30, 2002 and 2001, respectively, of which $89,527 and $160,237 were
incurred during the quarters ended September 30, 2002 and 2001, respectively.
Operating expenses were higher during 2001 due to the fact that the Partnership
increased its provision for write-down of assets during the quarter ended
September 30, 2001 by approximately $67,600 to approximately $156,600 relating
to its Property in Huron, Ohio. The tenant for this Property terminated its
lease due to financial difficulties and vacated the Property. The provision
represented the difference between the net carrying value of the Property and
its fair value at September 30, 2001. In addition, operating expenses were
higher during the quarter and nine months ended September 30, 2001 due to the
fact that the Partnership incurred certain expenses, such as repairs and
maintenance, insurance and real estate taxes, as a result of the tenant of the
Property in West Lebanon, New Hampshire defaulting under the terms of its lease
and due to the tenant of the Property in Huron, Ohio terminating its lease. In
January 2002, the Partnership sold these Properties and will not continue to
incur such expenses relating to these Properties in the future.
The decrease in operating expenses during the nine months ended
September 30, 2002, as compared to the same period of 2001, was partially due to
a decrease in the costs incurred for administrative expenses for servicing the
Partnership and its Properties and to lower depreciation expense during 2002 as
a result of the sale of four Properties, as described above.
Effective January 1, 2002, the Partnership adopted Statement of
Financial Accounting Standards No. 144 "Accounting for the Impairment or
Disposal of Long-Lived Assets." This statement requires that a long-lived asset
be tested for recoverability whenever events or changes in circumstances
indicate that its carrying amount may not be recoverable. The carrying amount of
a long-lived asset is not recoverable if it exceeds the sum of the undiscounted
cash flows expected to result from the use and eventual disposition of the
asset. The assessment is based on the carrying amount of the asset at the date
it is tested for recoverability. An impairment loss is recognized when the
carrying amount of a long-lived asset exceeds its fair value. If an impairment
is recognized, the adjusted carrying amount of a long-lived asset is its new
cost basis. The statement also requires that the results of operations of a
component of an entity that either has been disposed of or is classified as held
for sale be reported as a discontinued operation if the disposal activity was
initiated subsequent to the adoption of the Standard.
During the nine months ended September 30, 2002, the Partnership
identified and sold a Property that met the criteria of this standard and was
classified as Discontinued Operations in the accompanying financial statements.
The tenant exercised its option to purchase the Property under the terms of the
lease and the proceeds from the sale were distributed to the Limited Partners as
a special distribution.
As a result of the sale of the Properties in West Lebanon, New
Hampshire and Bountiful, Utah, during the nine months ended September 30, 2002,
the Partnership recognized gains of $571,759. These Properties were identified
as held for sale as of December 31, 2001.
In connection with the sale of its Properties in Myrtle Beach, South
Carolina and St. Cloud, Florida during 1995 and 1996, respectively, the
Partnership recognized gains of $136,034 during the nine months ended September
30, 2001. The Partnership recorded the sales of the Properties using the
installment sales method. As such, the gains on the sales were deferred, and
were recognized as income proportionately as payments under the mortgage notes
were collected. The gains recognized during 2001 were due to the fact that
during the nine months ended September 30, 2001 the Partnership collected the
outstanding balances of the mortgage note collaterized by these Properties. In
addition, as a result of the sale of the Property in Daleville, Indiana, the
Partnership recognized a gain of $35,096, during the nine months ended September
30, 2001.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 4. CONTROLS AND PROCEDURES
The general partners maintain a set of disclosure controls and
procedures designed to ensure that information required to be disclosed in the
Partnership's filings under the Securities Exchange Act of 1934 is recorded,
processed, summarized and reported within the time periods specified in the
Securities and Exchange Commission's rules and forms. The principal executive
and financial officers of the corporate general partner have evaluated the
Partnership's disclosure controls and procedures within 90 days prior to the
filing of this Quarterly Report on Form 10-Q and have determined that such
disclosure controls and procedures are effective.
Subsequent to the above evaluation, there were no significant changes
in internal controls or other factors that could significantly affect these
controls, including any corrective actions with regard to significant
deficiencies and material weaknesses.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings. Inapplicable.
------------------
Item 2. Changes in Securities. Inapplicable.
----------------------
Item 3. Default upon Senior Securities. Inapplicable.
-------------------------------
Item 4. Submission of Matters to a Vote of Security Holders. Inapplicable.
----------------------------------------------------
Item 5. Other Information. Inapplicable.
------------------
Item 6. Exhibits and Reports on Form 8-K.
---------------------------------
(a) Exhibits
3.1 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.)
10.4 Assignment of Management Agreement from CNL Fund
Advisors, Inc. to CNL APF Partners, LP. (Included as
Exhibit 10.4 to Form 10-Q filed with the Securities
and Exchange Commission on August 9, 2001, and
incorporated herein by reference.)
10.5 Assignment of Management Agreement from CNL APF
Partners, LP to CNL Restaurants XVIII, Inc. (Included
as Exhibit 10.5 to Form 10-Q filed with the
Securities and Exchange Commission on August 13,
2002, and incorporated herein by reference.)
99.1 Certification of Chief Executive Officer of Corporate
General Partner Pursuant to 18 U.S.C. Section 1350 as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002. (Filed herewith.)
99.2 Certification of Chief Financial Officer of Corporate
General Partner Pursuant to 18 U.S.C. Section 1350 as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002. (Filed herewith.)
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter
ended September 30, 2002.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
DATED this 8th day of November, 2002
CNL INCOME FUND V, LTD.
By:CNL REALTY CORPORATION
General Partner
By:/s/ James M. Seneff, Jr.
---------------------------
JAMES M. SENEFF, JR.
Chief Executive Officer
(Principal Executive Officer)
By:/s/ Robert A. Bourne
---------------------------
ROBERT A. BOURNE
President and Treasurer
(Principal Financial and
Accounting Officer)
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
OF CORPORATE GENERAL PARTNER
PURSUANT TO RULE 13a-14 AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, James M. Seneff, Jr., the Chief Executive Officer of CNL Realty
Corporation, the corporate general partner of CNL Income Fund V, Ltd. (the
"registrant"), certify that:
1. I have reviewed this quarterly report on Form 10-Q of the
registrant;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading
with respect to the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly
present in all material respects the financial condition, results
of operations and cash flows of the registrant as of, and for, the
periods presented in this quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
and we have:
a. designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b. evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "Evaluation
Date"); and
c. presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed,
based on our most recent evaluation, to the registrant's auditors
and the audit committee of registrant's board of directors (or
persons performing the equivalent function):
a. all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b. any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officer and I have indicated in
this quarterly report whether or not there were significant changes
in internal controls or in other factors that could significantly
affect internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
Date: November 8, 2002
/s/ James M. Seneff, Jr.
- ---------------------------
James M. Seneff, Jr.
Chief Executive Officer
CERTIFICATION OF CHIEF FINANCIAL OFFICER
OF CORPORATE GENERAL PARTNER
PURSUANT TO RULE 13a-14 AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Robert A. Bourne, President and Treasurer of CNL Realty Corporation,
the corporate general partner of CNL Income Fund V, Ltd. (the "registrant")
certify that:
1. I have reviewed this quarterly report on Form 10-Q of the
registrant;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading
with respect to the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly
present in all material respects the financial condition, results
of operations and cash flows of the registrant as of, and for, the
periods presented in this quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
and we have:
a. designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b. evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "Evaluation
Date"); and
c. presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed,
based on our most recent evaluation, to the registrant's auditors
and the audit committee of registrant's board of directors (or
persons performing the equivalent function):
a. all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b. any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officer and I have indicated in
this quarterly report whether or not there were significant changes
in internal controls or in other factors that could significantly
affect internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
Date: November 8, 2002
/s/ Robert A. Bourne
- ---------------------------
Robert A. Bourne
President and Treasurer
EXHIBIT INDEX
Exhibit Number
( b) 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
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.)
10.4 Assignment of Management Agreement from CNL Fund
Advisors, Inc. to CNL APF Partners, LP. (Included as
Exhibit 10.4 to Form 10-Q filed with the Securities
and Exchange Commission on August 9, 2001, and
incorporated herein by reference.)
10.5 Assignment of Management Agreement from CNL APF
Partners, LP to CNL Restaurants XVIII, Inc. (Included
as Exhibit 10.5 to Form 10-Q filed with the
Securities and Exchange Commission on August 13,
2002, and incorporated herein by reference.)
99.1 Certification of Chief Executive Officer of Corporate
General Partner Pursuant to 18 U.S.C. Section 1350 as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002. (Filed herewith.)
99.2 Certification of Chief Financial Officer of Corporate
General Partner Pursuant to 18 U.S.C. Section 1350 as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002. (Filed herewith.)
EXHIBIT 99.1
EXHIBIT 99.2