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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, 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 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]
Indicate by check mark whether the registrant is an accelerated filer
(as defined in Exchange Act Rule 12b-2): Yes___ No 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. As of December 31, 1999, the Partnership owned 16 Properties
directly and owned five Properties through joint venture or tenancy in common
arrangements.
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. During the year ended December
31, 2001, the Partnership sold its Property in Daleville, Indiana. During the
year ended December 31, 2002, the Partnership sold its Properties in Huron,
Ohio; West Lebanon, New Hampshire; Bountiful, Utah, and Lawrenceville, Georgia.
As of December 31, 2002, the Partnership owned 12 Properties directly
and held 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. 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 holds 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 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.
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 10 to 20 years (the average being 18 years) and expire
between 2004 and 2021. 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
$42,000 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 13 of the Partnership's 16 Properties also have been
granted options to purchase Properties at the Property's then fair market value
after a specified portion of the lease term has elapsed. Fair market value will
be determined through an appraisal by an independent appraisal firm. Under the
terms of certain leases the option purchase price may equal the Partnership's
original cost to purchase the Property (including acquisition costs), plus a
specified percentage from the date of the lease or a specified percentage of the
Partnership's purchase price, if that amount is greater than the Property's fair
market value at the time the purchase option is exercised.
The leases 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.
Effective May 2002, the lease relating to the Property in Connorsville,
IN was amended to eliminate guaranteed scheduled rent increases. The General
Partners do not believe that the rent reductions will have a material adverse
effect on the results of operations of the Partnership. All other lease terms
remain unchanged.
Major Tenants
During 2002, three lessees, 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 joint ventures and Properties owned
with affiliates of the General Partners as tenants-in-common). As of December
31, 2002, Slaymaker Group, Inc., IHOP Properties, Inc. and Golden Corral
Corporation were each the lessee under a lease relating to one Property. It is
anticipated that, based on the minimum rental payments required by the leases,
these three lessees will each continue to contribute more than 10% of the
Partnership's total rental revenues in 2003. In addition, 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 in
2002 (including the Partnership's share of the rental revenues from Properties
owned by joint ventures and Properties owned with affiliates of the General
Partners as tenants-in-common). In 2003, 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. No single tenant or group of affiliated tenants
lease Properties with an aggregate carrying value in excess of 20% of the total
assets of the Partnership.
Joint Venture and Tenancy in Common Arrangements
The Partnership has entered into the following joint venture and
tenancy in common arrangements as of December 31, 2002:
Entity Name Year Ownership Partners Property
Cocoa Joint Venture 1988 43.00 % CNL Income Fund IV, Ltd. Cocoa Beach, FL
CNL Income Fund II, Ltd. and 1997 42.09 % CNL Income Fund II, Ltd. Mesa, AZ
CNL Income Fund V, Ltd.,
Tenants in Common
CNL Income Fund, Ltd., CNL 1997 27.78% CNL Income Fund, Ltd. Vancouver, WA
Income Fund II, Ltd., CNL Income Fund II, Ltd.
CNL Income Fund V, Ltd. CNL Income Fund VI, Ltd.
and CNL Income Fund VI,
Ltd., Tenants in Common
RTO Joint Venture 1998 53.12% CNL Income Fund III, Ltd. Orlando, FL
Each joint venture or tenancy in common was formed to hold one
Property. Each CNL Income Fund is an affiliate of the General Partners and is a
limited partnership organized pursuant to the laws of the state of Florida. The
Partnership shares management control equally with the affiliates of the General
Partners.
The joint venture and tenancy in common arrangements provide for the
Partnership and its joint venture and tenancy in common partners to share in all
costs and benefits in proportion to each partner's percentage interest in the
business entity. The Partnership and its partners are also jointly and severally
liable for all debts, obligations and other liabilities of the joint venture or
tenancy in common. Net cash flow from operations is distributed to each joint
venture or tenancy in common partner in accordance with its respective
percentage interest in the business entity.
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 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. 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.
The joint venture and tenancy in common agreements restrict each
party's ability to sell, transfer or assign its joint venture or tenancy in
common interest without first offering it for sale to its partner, either upon
such terms and conditions as to which the parties may agree or, in the event the
parties cannot agree, on the same terms and conditions as any offer from a third
party to purchase such joint venture or tenancy in common interest.
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
RAI Restaurants, Inc. (formerly known as CNL Restaurants XVIII, Inc.),
an affiliate of the General Partners, provided certain services relating to
management of the Partnership and its Properties pursuant to a management
agreement with the Partnership. CNL APF Partners, LP assigned its rights in, and
its obligations under, the management agreement with the Partnership to RAI
Restaurants, Inc. ("the Advisor") effective January 1, 2002. All of the terms
and conditions of the management agreement, including the payment of fees,
remained unchanged. Under this agreement, the Advisor 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. The Advisor also assists the General Partners in
negotiating the leases. For these services, the Partnership had agreed to pay
the Advisor 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 property 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"). In any year in which the
Limited Partners have not received the 10% Preferred Return, no property
management fee will be paid.
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 CNL American Properties Fund, Inc.
("APF"), the parent company of the Advisor 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, 2002, the Partnership owned 16 Properties. Of the 16
Properties, 12 are owned by the Partnership in fee simple, two are owned
indirectly through joint venture arrangements and two are owned indirectly
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 19,600
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, either directly or
indirectly, by the Partnership as of December 31, 2002 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
Illinois 1
Indiana 2
Michigan 1
Ohio 1
Texas 4
Utah 1
Washington 2
-----
TOTAL PROPERTIES 16
=====
Buildings. Generally, each of the Properties owned, either directly or
indirectly, 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, 2002, 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, 2002, the aggregate cost of the Properties owned by
the Partnership and unconsolidated joint ventures (including Properties owned
indirectly through tenancy-in-common arrangements) for federal income tax
purposes was $9,402,161 and $5,175,275, respectively.
The following table lists the Properties owned, either directly or
indirectly, by the Partnership as of December 31, 2002 by Restaurant Chain.
Restaurant Chain Number of Properties
Arby's 2
Captain D's 2
Chevy's Fresh Mex 1
Del Taco 1
Denny's 1
Golden Corral 2
IHOP 1
Pizza Hut 1
Ruby Tuesday 1
Taco Bell 1
Tony Roma's 1
Waffle House 1
Wendy's 1
-----
TOTAL PROPERTIES 16
=====
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.
As of December 31, 2002, 2001, 2000, 1999, and 1998, the Properties
were 100%, 90%, 81%, 87%, and 88%, occupied, respectively. The following is a
schedule of the average rent per Property for the years ended December 31:
2002 2001 2000 1999 1998
------------- -------------- ------------- -------------- ---------------
Rental Revenues (1)(2) $ 1,300,361 $ 1,476,917 $ 1,633,709 $ 1,721,252 $ 1,710,326
Properties (2) 16 18 18 20 23
Average Rent per
Property $ 81,273 $ 82,051 $ 90,762 $ 86,063 $ 74,362
(1) Rental revenues include the Partnership's share of rental revenues from
the Properties owned indirectly through joint venture and tenancy in
common arrangements.
(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, 2002 for each of the next ten years and thereafter.
Percentage of
Expiration Number Annual Rental Gross Annual
Year of Leases Revenues Rental Income
----------------- ---------------- ----------------- --------------------------
2003 -- -- --
2004 1 $ 132,151 10.43%
2005 -- -- --
2006 -- -- --
2007 -- -- --
2008 5 263,519 20.79%
2009 2 150,736 11.89%
2010 -- -- --
2011 1 57,748 4.55%
2012 1 68,296 5.38%
Thereafter 6 595,534 46.96%
---------- ----------------- -------------
Total 16 $ 1,267,984 100.00%
========== ================= =============
Leases with Major Tenants. The terms of each of the leases with the
Partnership's major tenants as of December 31, 2002 (see Item 1. Business -Major
Tenants), are substantially the same as those described in Item 1. Business -
Leases.
Slaymaker Group, 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 approximately $167,500.
Golden Corral Corporation leases one restaurant pursuant to one lease
with an initial term of 15 years (expiring in 2004). The minimum base annual
rent for the lease is approximately $132,100.
IHOP Properties, Inc. leases one restaurant pursuant to one lease with
an initial term of 20 years (expiring in 2017). The minimum base annual rent for
the lease is approximately $132,200.
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 10, 2003, there were 2,431 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 2002, 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 have the right to prohibit transfers of Units. From
inception through December 31, 2002, the price paid for any Unit transferred
pursuant to the Plan ranged from $338 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 2002 and 2001 other than
pursuant to the Plan, net of commissions.
2002 (1) 2001 (1)
------------------------------------ ---------------------------------------
High Low Average High Low Average
--------- ---------- ---------- --------- ---------- -----------
First Quarter $ 278 $ 206 $ 233 $ 320 $ 170 $ 289
Second Quarter 245 245 245 276 250 265
Third Quarter 246 213 229 284 284 284
Fourth Quarter 254 75 197 235 262 260
(1) A total of 443 and 218 Units were transferred other than pursuant to
the Plan for the years ended December 31, 2002 and 2001, respectively.
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, 2002 and 2001, the Partnership
declared cash distributions of $3,577,572 and $3,471,032, respectively, to the
Limited Partners. Distributions during 2002 included a special distribution of
$2,150,000 as a result of the distribution of sales proceeds from the sales of
the Properties in Huron, Ohio; West Lebanon, New Hampshire; Bountiful, Utah and
Lawrenceville, Georgia. Distributions during 2001 included a special
distribution of $1,750,000 as a result of the distribution of sales proceeds
from the sale of the Property in Daleville, Indiana and the distribution of
amounts collected from the promissory notes related to the 1995 and 1996 sales
of the Properties in Myrtle Beach, South Carolina and St. Cloud, Florida. The
special distributions in 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 towards the 10%
Preferred Return, on a cummulative basis, and the balance of $1,170,678 and
$413,848, respectively, were treated as a return of capital for purposes of
calculating the 10% Preferred Return. As a result of the return of capital, the
amount of the Limited Partners' invested capital contributions (which is
generally 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 Properties during 2002 and 2001, the
Partnership's total revenues were reduced during 2002 and 2001 and are 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 quarters ended March 2001 and 2002. 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 2002 2001
------------------------- --------------- ----------------
March 31 $ 1,512,606 $ 2,180,258
June 30 1,362,501 430,258
September 30 351,233 430,258
December 31 351,232 430,258
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
2002 2001 2000 1999 1998
------------- -------------- ------------- -------------- -------------
Year ended December 31:
Continuing Operations (3):
Revenues $ 1,083,885 $1,322,811 $1,358,207 $1,416,552 $1,659,170
Equity in earnings of joint
ventures 198,037 157,935 151,430 337,698 173,941
Income from continuing
operations (1) 1,440,193 1,008,021 861,023 1,324,029 1,433,069
Discontinued Operations (3):
Revenues 11,100 95,046 120,828 123,898 124,107
Income (loss) from
discontinued operations (4) 182,258 (62,048 ) 108,547 111,617 111,826
Net income 1,622,451 945,973 969,570 1,435,646 1,544,895
Net income (loss) per Unit:
Continuing operations $ 28.80 $ 20.16 $ 17.22 $ 25.99 $ 28.17
Discontinued operations 3.65 (1.24 ) 2.17 2.72 2.73
------------- -------------- ------------- -------------- -------------
Total $ 32.45 $ 18.92 $ 19.39 $ 28.71 $ 30.90
============= ============== ============= ============== =============
Cash distributions declared (2) $ 3,577,572 $3,471,032 $2,375,000 $2,000,000 $3,838,327
Cash distributions
declared per Unit (2) 71.55 69.42 47.50 40.00 76.77
At December 31:
Total assets $10,369,047 $12,306,054 $14,848,256 $16,680,780 $17,135,485
Total partners' capital 9,777,138 11,732,259 14,257,318 15,662,748 16,227,102
(1) Income from continuing operations for the years ended December 31,
2002, 2001, 2000, 1999 and 1998 includes $571,759, $171,130, $15,088,
$396,066 and $469,613, respectively, from gains on sale of assets. For
the years ended December 31, 2001, 2000, 1999 and 1998, income from
continuing operations includes $156,643, $142,373, $308,310 and
$403,157 for provisions for write-down of assets. For the year ended
December 31, 2000 income from continuing operations includes $9,763
from gain on dissolution of consolidated joint venture and for the year
ended December 31, 1998 includes $25,500 for a loss on sale of assets.
(2) Distributions for the years ended December 31, 2002, 2001 and 2000
included special distributions to the Limited Partners of $2,150,000,
$1,750,000 and $500,000, respectively. Distributions for the year ended
December 31, 1998 include a special distribution to the Limited
Partners of $1,838,327.
(3) Income from discontinued operations for the year ended December 31,
2002 includes $193,496 in gains from sales of assets. Income from
discontinued operations for the year ended December 31, 2001 includes a
provision for write-down of assets of $134,726.
(4) Certain items in the prior years' financial statements have been
reclassified to conform to 2002 presentation. These reclassifications
had no effect on net income. The results of operations relating to
Properties that were either disposed of or were classified as held for
sale as of December 31, 2002 are reported as discontinued operations.
The results of operations relating to Properties that were identified
for sale as of December 31, 2001 but sold subsequently are reported as
continuing operations.
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. The
leases provide for minimum base annual rental amounts (payable in monthly
installments) ranging from approximately $42,000 to $222,800. The majority of
the leases provide that, commencing in specified lease years (generally the
sixth lease year), the annual base rent required under the terms of the lease
will increase. As of December 31, 2001 and 2000, the Partnership directly owned
16 and 17 Properties, respectively, and owned four Properties indirectly through
joint venture or tenancy in common arrangements. As of December 31, 2002, the
Partnership owned 12 Properties directly and four Properties indirectly through
joint venture or tenancy in common arrangements.
Capital Resources
For the years ended December 31, 2002, 2001, and 2000, the Partnership
generated cash from operating activities of $1,049,272, $1,365,832, and
$904,073, respectively. The decrease in cash from operating activities during
2002 and the increase in 2001, each as compared to the previous year, was a
result of changes in income and expenses and changes in the Partnership's
working capital during each of the respective years.
Other sources and uses of cash included the following during the years
ended December 31, 2002, 2001, and 2000.
The Partnership had a mortgage note receivable relating to a sale in
1995 of a Property in Myrtle Beach, South Carolina. In February 2001, the
Partnership received a balloon payment of $999,083 which included the
outstanding principal balance and $12,084 of accrued interest and, in connection
therewith, recognized the remaining gain of $136,034 relating to this Property.
During 2001, the Partnership distributed the amount collected as a special
distribution to the Limited Partners.
During the year ended December 31, 1999, the Partnership collected
$1,043,770 representing the outstanding balance of a promissory note issued in
connection with the 1996 sale of a Property in St. Cloud Florida. During 2000,
the Partnership distributed $500,000 of the amount collected as a special
distribution to the Limited Partners, and the majority of the remaining net
sales proceeds were distributed in 2001.
During 2000, the Partnership and the joint venture partner liquidated
Halls Joint Venture, whose Property was sold during 1999. 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.
During 2000, the Partnership contributed $91,851 to Duluth Joint
Venture to pay for construction costs. The joint venture had been organized in
the previous year with affiliates of the General Partners to construct and hold
one restaurant Property. In October 2000, the Partnership sold its 12% 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.
In March 2000, the Partnership sold its Property in Belding, Michigan,
to a third party, and received net sales proceeds of approximately $126,900. Due
to the fact that as of December 31, 1999, the Partnership had recorded a
provision for write-down of assets of approximately $446,100, no gain or loss
was recorded 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% Preferred Return, plus their adjusted capital contributions. The
Partnership distributed the majority of the net sales proceeds to the Limited
Partners.
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, then, liquidated the joint venture and
recorded a gain on dissolution of $9,763.
In March 2001, the Partnership sold its Property in Daleville, Indiana
to a third party and received net sales proceeds of $300,386 resulting in a gain
of $35,096. The Partnership had previously recorded provisions for write-down of
assets relating to this Property because the tenant terminated the lease with
the Partnership. In connection with the sale, the Partnership incurred a
deferred, real estate disposition fee of $9,750. Payment of the real estate
disposition fee is subordinated to receipt by the Limited Partners of the
cummulative 10% Preferred Return, plus their adjusted capital contributions. The
Partnership distributed the majority of the net sales proceeds to the Limited
Partners.
During 2001, the Partnership collected the outstanding balance of
$4,401 relating to the promissory note that was issued in 1997 in connection
with Properties in Connorsville and Richmond, Indiana.
During 2002, the Partnership sold its Properties in Huron, Ohio, West
Lebanon, New Hampshire and Bountiful, Utah and received net sales proceeds
aggregating approximately $1,902,800. The Partnership recorded gains aggregating
approximately $571,700 relating to the sale of these Properties. Since the
Partnership had recorded provisions for write-down of assets in previous years
relating to the Property in Huron, Ohio because the tenant terminated its lease
in 2001, no gain or loss was recorded on the sale. In addition, in June 2002,
the Partnership sold its Property in Lawrenceville, Georgia to the tenant and
received net sales proceeds of $847,000, resulting in a gain on disposal of
discontinued operations of approximately $193,500. In connection with these
sales, the Partnership incurred deferred, real estate disposition fees of
$83,430. Payment of the real estate disposition fee is subordinated to receipt
by the Limited Partners of the cumulative 10% Preferred Return, plus their
adjusted capital contributions. The Partnership used the majority of the net
sales proceeds to pay special distributions to the Limited Partners, and used
the remaining funds to pay Partnership liabilities.
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 any net
sales proceeds from the sale of Properties, pending 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 90-day maturity date. At December 31,
2002, the Partnership had $456,266 invested in such short-term investments as
compared to $313,783 at December 31, 2001. The increase in cash and cash
equivalents during 2002, as compared to 2001, was primarily attributable the
Partnership still holding a portion of the net sales proceeds it received from
the sale of the Properties described above. As of December 31, 2002, the average
interest rate earned on the rental income deposited in demand deposit accounts
at commercial banks was approximately one percent annually. The funds remaining
at December 31, 2002, after payment of distributions and other liabilities, will
be used to meet the Partnership's working capital needs.
Short-Term Liquidity
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
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.
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 cash from operating activities, and for the years
ended December 31, 2002, 2001 and 2000, a portion of the sales proceeds received
from the sales of the Properties, and collection of amounts due under two
promissory notes, the Partnership declared distributions to the Limited Partners
of $3,577,572, $3,471,032, and $2,375,000 for the years ended December 31, 2002,
2001 and 2000, respectively. This represents distributions of $71.55, $69.42 and
$47.50 per Unit for the years ended December 31, 2002, 2001, and 2000,
respectively. Distributions during 2002 included a special distribution of
$2,150,000 as a result of the distribution of sales proceeds from the sales of
the Properties in West Lebanon, New Hampshire; Bountiful, Utah and
Lawrenceville, Georgia. Distributions during 2001 included a special
distribution of $1,750,000 as a result of the distribution of sales proceeds
from the sale of the Property in Daleville, Indiana and the distribution of
amounts collected from the promissory notes related to the 1995 and 1996 sales
of the Properties in Myrtle Beach, South Carolina and St. Cloud, Florida,
respectively. The special distributions in 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 were applied towards the
10% Preferred Return, on a cummulative basis, and the balance of $1,170,678 and
$413,848 was treated as a return of capital for purposes of calculating the 10%
Preferred Return. As a result of the return of capital, the amount of the
Limited Partners' invested capital contributions (which is generally 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.
Distributions during 2000 included a special distribution to the
Limited Partners of $500,000 as a result of the distribution of a portion of the
proceeds from the payoff of the mortgage note related to the 1996 sale of a
Property in St. Cloud, Florida. The special distribution in 2000 was applied
toward the Limited Partners' cummulative 10% Preferred Return. The reduced
number of Properties for which the Partnership receives rental payments reduced
the Partnership's revenues. The decrease in Partnership revenues, combined with
the fact that a significant portion of the Partnership's expenses are fixed in
nature, resulted in a decrease in cash distributions to the Limited Partners
commencing in September 2000. 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 years ended December 31, 2002 and 2001.
As of December 31, 2002 and 2001, the Partnership owed $10,161 and
$4,885, respectively, to affiliates for accounting and administrative services.
As of March 15, 2003, the Partnership had reimbursed the affiliates for these
amounts. In addition, during 2002 and 2001, the Partnership incurred $83,430 and
$9,750, respectively, in real estate disposition fees due to an affiliate as a
result of its services in connection with the sale of four Properties in 2002
and the sale of one Property in 2001. As of December 31, 2002 and 2001, the
Partnership owed $ $197,130 and $113,700 respectively, to affiliates for real
estate disposition fees. 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 $384,618 at December 31, 2002, from $455,210 at December 31, 2001,
primarily due to a decrease in distributions payable. Liabilities at December
31, 2002 to the extent they exceed cash and cash equivalents will be paid from
anticipated future cash from operating activities.
Long-Term Liquidity
The Partnership has no long-term debt or other long-term liquidity
requirements.
Critical Accounting Policies
The Partnership's leases are accounted for under the provisions of
Statement of Accounting Standard No. 13, "Accounting for Leases" ("FAS 13"), and
have been accounted for using either the direct financing or operating method.
FAS 13 requires management to estimate the economic life of the leased property,
the residual value of the leased property and the present value of minimum lease
payments to be received from the tenant. In addition, management assumes that
all payments to be received under its leases are collectible. Changes in
management's estimates or assumption regarding collectibility of lease payments
could result in a change in accounting for the lease at the inception of the
lease.
The Partnership accounts for its unconsolidated joint ventures using
the equity method of accounting. Under generally accepted accounting principles,
the equity method of accounting is appropriate for entities that are partially
owned by the Partnership, but for which operations of the investee are shared
with other partners. The Partnership's joint venture agreements require the
consent of all partners on all key decisions affecting the operations of the
underlying Property.
Management reviews the Partnership's Properties and investments in
unconsolidated entities periodically for impairment at least once a year or
whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. The assessment is based on the carrying amount
of the Property or investment at the date it is tested for recoverability
compared to the sum of the estimated future cash flows expected to result from
its operation and sale through the expected holding period. If an impairment is
indicated, the asset is adjusted to its estimated fair value.
When the Partnership makes the decision to sell or commits to a plan to
sell a Property within one year, its operating results are reported as
discontinued operations.
Results of Operations
Comparison of year ended December 31, 2002 to year ended December 31, 2001
Total rental revenues were $1,011,861 during the year ended December
31, 2002 as compared to $1,113,780 for the same period of 2001. Rental revenues
were lower in 2002 due to the sale of Properties, as described above. The
Partnership used the majority of the net sales proceeds from the sale of these
Properties to make distributions to the Limited Partners. The decrease in rental
revenues during 2002 is also partially attributable to the fact that the tenant
of the Property in Livingston, Texas is experiencing financial difficulties and
has ceased making rental payments to the Partnership.
The Partnership also earned $60,443 in contingent rental income for the
year ended December 31, 2002 as compared to $94,469 for the same period of 2001.
The decrease in contingent rental income during 2002 was attributable to the
sale of Properties, and to a decrease in gross sales of certain restaurant
Properties, the leases of which require the payment of contingent rent.
During the year ended December 31, 2001, the Partnership recognized
$52,676 and $13,373 in lease termination income from the former tenants of the
Properties in Huron, Ohio and Livingston, Texas, respectively, as consideration
for the Partnership releasing the former tenants from their obligations under
the terms of their respective lease. The tenant of the Property in Huron, Ohio
also paid all outstanding rent receivables. No such lease termination income was
recognized during the year ended December 31, 2002.
During the year ended December 31, 2002, the Partnership also earned
$11,581 as compared to $48,513 for the same period of 2001 in interest and other
income. The decrease in interest and other income during 2002 was attributable
to a decrease in the average cash balance due to the payment of a special
distribution of $2,150,000 of net sales proceeds to the Limited Partners during
2002 and due to a decline in interest rates.
For the year ended December 31, 2002, the Partnership earned $198,037
as compared to $157,935 during the same period of 2001 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 2002, as compared to the
same period 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.
During the year ended December 31, 2002, three lessees of the
Partnership, Slaymaker Group, Inc., Golden Corral Corporation and IHOP
Properties, Inc. 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). As of December 31,
2002, Slaymaker Group, Inc., Golden Corral Corporation and IHOP Properties Inc.
were each the lessee under a lease relating to one Property. It is anticipated
that, based on the minimum rental payments required by the leases, these three
lessees will each continue to contribute more than 10% of the Partnership's
total rental revenues during 2003. In addition, 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.
Operating expenses, including depreciation expense and provision for
write-down of assets, were $413,488 for the year ended December 31, 2002 as
compared to $643,855 for the same period of 2001. Operating expenses were higher
in 2001 because the Partnership recorded a provision for write-down of assets
for the Property in Huron, Ohio amounting to approximately $156,000. The
provision represented the difference between the net carrying value of the
Property and its estimated fair value.
In addition, operating expenses were higher during 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. During 2002, the Partnership
incurred Property expenses, such as repairs and maintenance, insurance and real
estate taxes, as a result of the tenant of the Property in Lawrenceville,
Georgia defaulting under the terms of its lease. The Partnership sold this
Property in June 2002. The Partnership will not incur expenses relating to these
Properties in the future.
The decrease in operating expenses during the year ended December 31
2002, as compared to the same period of 2001, was also partially due to a
decrease in the costs incurred for administrative expenses for servicing the
Partnership and its Properties and due 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.
As a result of the sale of the Properties in West Lebanon, New
Hampshire and Bountiful, Utah, during the year ended December 31, 2002, the
Partnership recognized gains of $571,759. These Properties were identified as
held for sale as of December 31, 2001. In 2001, the Partnership recognized
approximately $136,000 in gains from Properties sold in 1995 and 1996, which
were accounted for using the installment sales method, as described below. In
addition, the Partnership sold the Property in Daleville, Indiana and recognized
approximately $35,000 in gains during 2001.
During 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. During 2002, the Partnership recorded a
provision for write-down of assets in the amount of $134,726 relating to the
Property in Lawrenceville, Georgia. The provision represented the difference
between the net carrying value of the Property and its estimated fair value. 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.
Comparison of year ended December 31, 2001 to year ended December 31, 2000
Total rental revenues were $1,113,780 during the year ended December
31, 2001 as compared to $1,140,869 for the same period of 2000. The decrease in
rental revenues during 2001, as compared to 2000, was primarily due to the fact
that during 2001 the tenant of the Property in Huron, Ohio experienced financial
difficulties and ceased making rental payments to the Partnership. As a result,
the Partnership stopped recording rental revenues relating to this Property. The
Partnership sold this Property during 2002.
During 2001 and 2000, the Partnership did not receive any rental
revenues from the Properties in Belding, Michigan and West Lebanon, New
Hampshire because the tenants ceased restaurant operations prior to 1999. The
Partnership sold the Property in Belding, Michigan in March 2000 and sold the
Property in West Lebanon, New Hampshire in January 2002.
The Partnership also earned $94,469 in contingent rental income for the
year ended December 31, 2001 as compared to $62,656 for the same period of 2000.
The increase in contingent rental income during 2001 was primarily attributable
to an increase in gross sales of certain restaurant Properties, the leases of
which require the payment of contingent rent.
During the year ended December 31, 2001, the Partnership recognized
$66,049 in lease termination income as a result of releasing two former tenants
from their obligations under the terms of their respective leases, as described
above.
During the year ended December 31, 2001, the Partnership also earned
$48,513 as compared to $154,682 for the same period of 2000 in interest and
other income. Interest and other income was lower during 2001 because the
Partnership collected the outstanding balance of the mortgage note relating to
the sale of the Property in Myrtle Beach, South Carolina during 2001.
In addition, for the year ended December 31, 2001, the Partnership
earned $157,935 as compared to $151,430 during the same period of 2000
attributable to net income earned by joint ventures in which the Partnership is
a co-venturer.
Operating expenses, including depreciation expense and provision for
write-down of assets, were $643,855 for the year ended December 31, 2001 as
compared to $719,183 for the same period of 2000. Property expenses were higher
in 2000 because the Partnership incurred certain expenses, such as repairs and
maintenance, insurance and real estate taxes as a result of tenant defaults
under the terms of the lease agreements for the Properties in Belding, Michigan;
Daleville, Indiana, and West Lebanon, New Hampshire. In March 2000, the
Partnership sold its Property in Belding, Michigan to a third party. The
Partnership sold the Property in Daleville, Indiana and the Property in West
Lebanon, New Hampshire during 2001 and 2002. The Partnership did not incur any
additional expenses relating to these Properties after the sale of the
Properties occurred. In 2001, the Partnership recorded a provision for
write-down of assets of $156,643 relating to a vacant Property. The provision
represented the difference between the net carrying value at December 31, 2001
and its estimated fair value. During 2000, the Partnership recorded a provision
for write-down of assets of $109,919 relating to the Property in Daleville,
Indiana. In addition, during 2000, the Partnership recorded a provision for
write-down of assets of $32,454 relating to the 2000 dissolution of CNL/Longacre
Joint Venture.
The Partnership incurred $24,443 during 2000 in transaction costs
related to the General Partners retaining financial and legal advisors to assist
them in evaluating and negotiating the terminated merger with APF.
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 and $1,269 during the years ended
December 31, 2001 and 2000, respectively. 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 year ended December 31, 2001 the Partnership
collected the outstanding balances of the mortgage note collateralized by these
Properties. In addition, as a result of the sale of the Property in Daleville,
Indiana and the dissolution of CNL Longacre Joint Venture, the Partnership
recognized a gain of $35,096 and $9,763, respectively, during the years ended
December 31, 2001 and 2000. In addition, as a result of the sale of
Partnership's interest in Duluth Joint Venture, the Partnership recognized a
gain of $13,819 during 2000.
The restaurant industry has been relatively resilient during this
volatile time with steady performance during 2002. However, the industry remains
in a state of cautious optimism. Restaurant operators expect their business to
be better in 2003, according to a nationwide survey conducted by the National
Restaurant Association, but are concerned by the budget deficits being
experienced by many states and the potential of new taxes on the industry to
alleviate the situation.
The Partnership's leases as of December 31, 2002, 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. Inflation, overall, has had a minimal effect on
the results of operations of the Partnership. Continued inflation 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 January 2003, FASB issued FASB Interpretation No. 46 ("FIN 46"),
"Consolidation of Variable Interest Entities" to expand upon and strengthen
existing accounting guidance that addresses when a company should include the
assets, liabilities and activities of another entity in its financial
statements. To improve financial reporting by companies involved with variable
interest entities (more commonly referred to as special-purpose entities or
off-balance sheet structures), FIN 46 requires that a variable interest entity
be considered by a company if that company is subject to a majority risk of loss
from the variable interest entity's activities or entitled to receive a majority
of the entity's residual returns or both. Prior to FIN 46, a company generally
included another entity in its consolidated financial statements only if it
controlled the entity through voting interests. Consolidation of variable
interests entities will provide more complete information about the resources,
obligations, risks and opportunities of the consolidated company. The
consolidation requirements of FIN 46 apply immediately to variable interest
entities created after January 31, 2003, and to older entities in the first
fiscal year or interim period beginning after June 15, 2003. Management believes
adoption of this standard may result in either consolidation or additional
disclosure requirements with respect to the Partnership's unconsolidated joint
ventures or Properties held with affiliates of the General Partners as
tenants-in-common, which are currently accounted for under the equity method.
However, such consolidation is not expected to significantly impact the
Partnership's results of operations.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
Item 8. Financial Statements and Supplementary Data
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
CONTENTS
Page
Report of Independent Certified Public Accountants 18
Financial Statements:
Balance Sheets 19
Statements of Income 20
Statements of Partners' Capital 21
Statements of Cash Flows 22-23
Notes to Financial Statements 24-36
Report of Independent Certified Public Accountants
To the Partners
CNL Income Fund V, Ltd.
In our opinion, the accompanying balance sheets and the related statements of
income, of partners' capital and of cash flows present fairly, in all material
respects, the financial position of CNL Income Fund V, Ltd. (a Florida limited
partnership) at December 31, 2002 and 2001, and the results of its operations
and its cash flows for each of the three years in the period ended December 31,
2002 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 15(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.
As described in Note 1 to the financial statements, on January 1, 2002, the
Partnership adopted Statement of Financial Accounting Standard No. 144
"Accounting for the Impairment or Disposal of Long-Lived Assets."
/s/ PricewaterhouseCoopers LLP
Orlando, Florida
January 31, 2003
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
BALANCE SHEETS
December 31,
2002 2001
------------------- -------------------
ASSETS
Real estate properties with operating leases, net $ 6,389,697 $ 7,799,714
Net investment in direct financing leases 1,196,659 1,228,690
Real estate held for sale -- 630,820
Investment in joint ventures 1,933,290 1,930,836
Cash and cash equivalents 456,266 313,783
Receivables, less allowance for doubtful accounts of
$8,040 and $35,317, respectively 25,233 48,750
Accrued rental income 362,640 349,296
Other assets 5,262 4,165
------------------- -------------------
$ 10,369,047 $ 12,306,054
=================== ===================
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 10,324 $ 10,873
Real estate taxes payable 6,935 9,496
Distributions payable 351,233 430,258
Due to related parties 207,291 118,585
Rents paid in advance and deposits 16,126 4,583
------------------- -------------------
Total liabilities 591,909 573,795
Partners' capital 9,777,138 11,732,259
------------------- -------------------
$ 10,369,047 $ 12,306,054
=================== ===================
See accompanying notes to finacial statements.
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
STATEMENTS OF INCOME
Year Ended December 31,
2002 2001 2000
---------------- ----------------- ----------------
Revenues:
Rental income from operating leases $ 879,387 $ 974,888 $ 957,825
Earned income from direct financing leases 132,474 138,892 183,044
Contingent rental income 60,443 94,469 62,656
Lease termination income -- 66,049 --
Interest and other income 11,581 48,513 154,682
---------------- ----------------- ----------------
1,083,885 1,322,811 1,358,207
---------------- ----------------- ----------------
Expenses:
General operating and administrative 190,276 207,420 192,321
Property expenses 34,928 61,363 135,701
State and other taxes 9,806 545 7,381
Depreciation 178,478 217,884 216,964
Provision for write-down of assets -- 156,643 142,373
Transaction costs -- -- 24,443
---------------- ----------------- ----------------
413,488 643,855 719,183
---------------- ----------------- ----------------
Income Before Gain on Sale of Assets, Minority Interest in Loss of
Consolidated Joint Venture and Equity in Earnings of
Unconsolidated Joint Ventures 670,397 678,956 639,024
Gain on Sale of Assets 571,759 171,130 24,851
Minority Interest in Loss of Consolidated Joint Venture -- -- 45,718
Equity in Earnings of Unconsolidated Joint Ventures 198,037 157,935 151,430
---------------- ----------------- ----------------
Income from Continuing Operations 1,440,193 1,008,021 861,023
---------------- ----------------- ----------------
Discontinued Operations (Note 5 )
Income (Loss) from discontinued operations (11,238 ) (62,048 ) 108,547
Gain on disposal of discontinued operations 193,496 -- --
---------------- ----------------- ----------------
182,258 (62,048 ) 108,547
---------------- ----------------- ----------------
Net Income $ 1,622,451 $ 945,973 $ 969,570
================ ================= ================
Income (Loss) per Limited Partner Unit:
Continuing Operations $ 28.80 $ 20.16 $ 17.22
Discontinued Operations 3.65 (1.24 ) 2.17
---------------- ----------------- ----------------
Total $ 32.45 $ 18.92 $ 19.39
================ ================= ================
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, 2002, 2001, and 2000
General Partners Limited Partners
---------------------------- --------------------------------------------------------------
Accumulated Accumulated Syndication
Contributions Earnings Contributions Distributions Earnings Costs
-------------- ------------ ------------- ------------- ------------- --------------
Balance, December 31, 1999 $ 343,200 $ 170,826 $ 25,000,000 $ (25,606,567 ) $ 18,620,289 $ (2,865,000 )
Distributions to limited
partners ($47.50 per
limited partner unit) -- -- -- (2,375,000 ) -- --
Net income -- -- -- -- 969,570 --
-------------- ------------ -------------- -------------- -------------- -------------
Balance, December 31, 2000 343,200 170,826 25,000,000 (27,981,567 ) 19,589,859 (2,865,000 )
Distributions to limited
partners ($69.42 per
limited partner unit) -- -- (413,848 ) (3,057,184 ) -- --
Net income -- -- -- -- 945,973 --
-------------- ------------ -------------- ------------- -------------- -------------
- -
Balance, December 31, 2001 343,200 170,826 24,586,152 (31,038,751 ) 20,535,832 (2,865,000 )
Distributions to limited
partners ($71.55 per
limited partner unit) -- -- (1,170,678 ) (2,406,894 ) -- --
Net income -- -- -- -- 1,622,451 --
-------------- ------------ ------------- -------------- ------------- ---------------
Balance, December 31, 2002 $ 343,200 $ 170,826 $ 23,415,474 $ (33,445,645 ) $ 22,158,283 $ (2,865,000 )
============== ============ ============== ============== ============== =============
Total
-----------
$15,662,748
(2,375,000 )
969,570
- --------------
14,257,318
(3,471,032 )
945,973
- --------------
11,732,259
(3,577,572 )
1,622,451
------------
$9,777,138
============
See accompanying notes to financial statements.
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
STATEMENTS OF CASH FLOWS
Year Ended December 31,
2002 2001 2000
----------------- ----------------- -----------------
Increase (Decrease) in Cash and Cash
Equivalents:
Cash Flows from Operating Activities:
Net income $ 1,622,451 $ 945,973 $ 969,570
----------------- ----------------- -----------------
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 181,293 229,845 229,245
Amortization of net investment
in direct financing leases 32,031 27,765 43,093
Minority interest in loss of
consolidated joint venture -- -- (45,718 )
Equity in earnings (loss) of
joint ventures, net of (2,454 ) 9,024 38,465
distributions
Gain on sale of assets (765,255 ) (171,130 ) (24,851 )
Provisions for write-down of -- 291,369 142,373
assets
Decrease (increase) in accrued
interest on mortgage note -- 16,866 (8,350 )
receivable
Decrease (increase) in receivables 22,961 102,431 (95,673 )
Decrease (increase) in other (1,097 ) (1,355 ) 1,648
assets
Increase in accrued rental income (54,367 ) (65,305 ) (52,148 )
Decrease in accounts payable and
escrowed real estate taxes (3,110 ) (20,825 ) (45,865 )
payable
Increase (decrease) in due to
related parties 5,276 1,700 (246,731 )
Increase (decrease) in rents paid
in advance and deposits 11,543 (526 ) (985 )
----------------- ----------------- -----------------
Total adjustments (573,179 ) 419,859 (65,497 )
----------------- ----------------- -----------------
Net Cash Provided by Operating
Activities 1,049,272 1,365,832 904,073
Cash Flows from Investing Activities:
Proceeds from sale of real estate properties 2,749,808 300,386 126,947
Additions to real estate properties with
operating leases -- -- (20,000 )
Liquidating distribution from joint venture -- -- 662,195
Investment in joint ventures -- -- (91,851 )
Collections on mortgage notes receivable -- 987,881 9,215
----------------- ----------------- -----------------
Net cash provided by investing activities 2,749,808 1,288,267 686,506
Cash Flows from Financing Activities:
Distributions to limited partners (3,656,597 ) (3,478,274 ) (2,437,500 )
----------------- ----------------- -----------------
Net cash used in financing activities (3,656,597 ) (3,478,274 ) (2,437,500 )
Net Increase (Decrease) in Cash and Cash
Equivalents 142,483 (824,175 ) (846,921 )
Cash and Cash Equivalents at Beginning of Year 313,783 1,137,958 1,984,879
----------------- ----------------- -----------------
Cash and Cash Equivalents at End of Year $ 456,266 $ 313,783 $ 1,137,958
================= ================= =================
See accompanying notes to financial statements.
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
STATEMENTS OF CASH FLOWS - CONTINUED
Year Ended December 31,
2002 2001 2000
--------------- --------------- --------------
Supplemental Schedule of Non-Cash Investing and
Financing Activities:
Deferred real estate disposition fees incurred
and unpaid at end of year $ 83,430 $ 9,750 $ 4,050
=============== =============== ==============
Distributions declared and unpaid at
December 31 $ 351,233 $ 430,258 $ 437,500
=============== =============== ==============
See accompanying notes to financial statements.
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
Years Ended December 31, 2002, 2001, and 2000
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% 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
acquisitions of real estate properties at cost, including acquisition
and closing costs. Real estate properties 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.
During the years ended December 2002, 2001 and 2000 tenants paid
directly to real estate taxing authorities approximately $165,200,
$166,800 and $173,800 in real estate taxes in accordance with the terms
of their triple net leases with the Partnership.
The leases of the Partnership provide for base minimum annual rental
payments payable in monthly installments. In addition, certain leases
provide for contingent rental revenues based on the tenants' gross
sales in excess of a specified threshold. The Partnership defers
recognition of the contingent rental revenues until the defined
thresholds are met. The leases are accounted for using either the
direct financing or the operating methods. Such methods are described
below:
Direct financing method - 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). 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. For the leases classified as direct financing
leases, the building portions of the property leases are
accounted for as direct financing leases while the land
portion of some of the leases are operating leases.
Operating method - Property 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.
Accrued rental income represents the aggregate amount of
income recognized on a straight-line basis in excess of
scheduled rental payments to date.
Substantially all leases are for 15 to 20 years and provide for minimum
and contingent rentals. The lease options generally allow tenants to
renew the leases for two to four successive five-year periods subject
to the same terms and conditions as the initial lease. Most leases also
allow the tenant to purchase the property at fair market value after a
specified portion of the lease has elapsed.
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
Years Ended December 31, 2002, 2001, and 2000
1. Significant Accounting Policies - Continued:
-------------------------------------------
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 estimated fair value.
When the collection of amounts recorded as rental or other income are
considered to be doubtful, a provision is made to increase the
allowance for doubtful accounts. 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 2000, the Partnership accounted for its 66.5% percent
interest in such joint venture using the consolidation method. Minority
interest represents the minority joint venture partner's proportionate
share of the equity in the Partnership's consolidated joint venture.
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 each joint venture agreement
requires the consent of all partners on all key decisions affecting the
operations of the underlying property.
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 represent a reduction
of Partnership equity and a reduction in the basis of each partner's
investment.
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
Years Ended December 31, 2002, 2001, and 2000
1. Significant Accounting Policies - Continued:
-------------------------------------------
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.
Reclassification - Certain items in the prior years' financial
statements have been reclassified to conform to 2002 presentation,
including a change in presentation of the statement of cash flows from
the direct to the indirect method. These reclassifications had no
effect on partners capital, net income or cash flows.
Statement of Financial Accounting Standards No. 144 ("FAS 144") -
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.
FASB Interpretation No. 46 ("FIN 46") - In January 2003, FASB issued
FASB Interpretation No. 46 ("FIN 46"), "Consolidation of Variable
Interest Entities" to expand upon and strengthen existing accounting
guidance that addresses when a company should include the assets,
liabilities and activities of another entity in its financial
statements. To improve financial reporting by companies involved with
variable interest entities (more commonly referred to as
special-purpose entities or off-balance sheet structures), FIN 46
requires that a variable interest entity be considered by a company if
that company is subject to a majority risk of loss from the variable
interest entity's activities or entitled to receive a majority of the
entity's residual returns or both. Prior to FIN 46, a company generally
included another entity in its consolidated financial statements only
if it controlled the entity through voting interests. Consolidation of
variable interests entities will provide more complete information
about the resources, obligations, risks and opportunities of the
consolidated company. The consolidation requirements of FIN 46 apply
immediately to variable interest entities created after January 31,
2003, and to older entities in the first fiscal year or interim period
beginning after June 15, 2003. Management believes adoption of this
standard may result in either consolidation or additional disclosure
requirements with respect to the Partnership's unconsolidated joint
ventures or properties held with affiliates of the general partners as
tenants-in-common, which are currently accounted for under the equity
method. However, such consolidation is not expected to significantly
impact the Partnership's results of operations.
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2002, 2001, and 2000
2. Real Estate Properties with Operating Leases:
--------------------------------------------
Real estate properties with operating leases consisted of the following
at December 31:
2002 2001
-------------------- --------------------
Land $ 3,263,305 $ 3,870,305
Buildings 5,050,733 6,082,265
-------------------- --------------------
8,314,038 9,952,570
Less accumulated depreciation (1,924,341 ) (2,152,856 )
-------------------- --------------------
$ 6,389,697 $ 7,799,714
==================== ====================
In March 2001, the Partnership sold its property in Daleville, Indiana,
to a third party and received net sales proceeds of $300,386, resulting
in a gain of $35,096. The Partnership had previously recorded
provisions for write-down of assets relating to this property because
the tenant terminated the lease with the Partnership. The provision
represented the difference between the carrying value of the property
at December 31, 2000 and its estimated fair value. In connection with
the sale, the Partnership incurred a deferred, subordinated, real
estate disposition fee of $9,750.
During 2002, the Partnership sold its properties in Huron, Ohio, West
Lebanon, New Hampshire and Bountiful, Utah and received net sales
proceeds aggregating approximately $1,902,800. 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.
The following is a schedule of the future minimum lease payments to be
received on noncancellable operating leases at December 31, 2002:
2003 $ 853,857
2004 861,927
2005 731,831
2006 734,581
2007 738,433
Thereafter 4,336,072
-----------------
$ 8,256,701
=================
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2002, 2001, and 2000
3. Net Investment Direct Financing Leases:
--------------------------------------
The following lists the components of the net investment in direct
financing leases at December 31:
2002 2001
----------------- ----------------
Minimum lease payments
receivable $ 2,020,082 $ 2,184,590
Estimated residual values 425,049 425,049
Less unearned income (1,248,472 ) (1,380,949 )
----------------- ----------------
Net investment in direct
financing leases $ 1,196,659 $ 1,228,690
================= ================
The following is a schedule of future minimum lease payments to be
received on direct financing leases at December 31, 2002:
2003 $ 164,506
2004 164,506
2005 164,506
2006 164,506
2007 164,506
Thereafter 1,197,552
----------------
$2,020,082
================
During 2001, the tenant of the Denny's property in Huron, Ohio
terminated its lease due to financial difficulties. As a result, the
Partnership reclassified the asset from net investment in direct
financing leases to real estate properties with on operating leases. No
loss on reclassification was recorded.
4. Investment in Joint Ventures:
----------------------------
As of December 31, 2002, the Partnership had a 43% 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, 2002, the Partnership owned a
42.09% and a 27.78% interest in the properties, respectively.
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2002, 2001, and 2000
4. Investment in Joint Ventures - Continued:
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.
The following presents the combined condensed financial information for
all of the Partnership's investments in joint ventures at December 31:
2002 2001
----------------- -----------------
Real estate properties with operating leases, net $ 3,390,140 $ 3,442,881
Net investment in direct financing lease 1,334,196 1,353,032
Cash 9,887 4,484
Receivables 1,994 3,897
Accrued rental income 245,226 179,923
Other assets 97 1,239
Liabilities 32,300 30,651
Partners' capital 4,949,240 4,954,805
Years Ended December 31,
2002 2001 2000
-------------- --------------- ---------------
Continuing Operations:
Revenues $ 559,263 $ 485,699 $ 510,152
Expenses (64,620 ) (86,509 ) (91,304 )
Provision for write-down of assets -- -- (31,543 )
-------------- --------------- ---------------
Net Income $ 494,643 $ 399,190 $ 387,305
============== =============== ===============
The Partnership recognized income totaling $198,037, $157,935 and
$151,430, for the years ended December 31, 2002, 2001, and 2000,
respectively, from these joint ventures and tenancies in common.
5. Discontinued Operations:
-----------------------
In June 2002, the Partnership sold its property in Lawrenceville,
Georgia to the tenant and received net sales proceeds of $847,000,
resulting in a gain on disposal of discontinued operations of
approximately $193,500. During 2001, the Partnership recorded a
provision for write-down of assets of $134,726. The provision
represented the difference between the carrying value of the property
and its estimated fair value. In connection with the sale, the
Partnership incurred a deferred, subordinated, real estate disposition
fee of $25,500. The financial results for this property are reflected
as Discontinued Operations in the accompanying financial statements.
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2002, 2001, and 2000
5. Discontinued Operations - Continued:
-----------------------------------
The operating results of discontinued operations are as follows:
2002 2001 2000
-------------- --------------- --------------
Rental revenues $ 10,000 $ 91,722 120,412
Interest and other income 1,100 3,324 416
Expenses (22,338 ) (22,368 ) (12,281 )
Provision for write-down of assets -- (134,726 ) --
Gain on disposal of assets 193,496 -- --
-------------- --------------- --------------
Income (loss) from discontinued
operations $ 182,258 $ (62,048 ) $ 108,547
============== =============== ==============
6. 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% 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% to the limited partners
and one percent to the general partners. However, 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% 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% to the limited partners and five percent to the general
partners.
Generally, net sales proceeds from a liquidating sale of properties
will be used in the following order: (i) first to pay and discharge all
of the Partnership's liabilities to creditors, (ii) second, to
establish reserves that may be deemed necessary for any anticipated or
unforeseen liabilities or obligations of the Partnership, (iii) third,
to pay all of the Partnership's liabilities, if any, to the general and
limited partners, (iv) fourth, after allocations of net income, gains
and/or losses, to distribute to the partners with positive capital
accounts balances, in proportion to such balances, up to an amount
sufficient to reduce such positive balances to zero, and (v)
thereafter, any funds remaining shall then be distributed 95% to the
limited partners and five percent to the general partners.
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2002, 2001, and 2000
6. Allocations and Distributions - Continued:
-----------------------------------------
Effective January 1, 2000, the general partners waived their right to
receive future distributions from the Partnership, including both
distributions of operating cash flow and distributions of liquidation
proceeds, to the extent that the cumulative amount of such
distributions would exceed the balance in the general partners' capital
account as of December 31, 1999. Accordingly, for years commencing
January 1, 2000 and after, the partnership's net income will be
allocated entirely among the limited partners. However, if losses are
allocated to the general partners in a year, an amount of income equal
to the sum of such losses may be allocated to the general partners in
succeeding years. Accordingly, the general partners were not allocated
any net income and did not receive any distributions during the years
ended December 31, 2002, and 2001.
During the years ended December 31, 2002, 2001, and 2000, the
Partnership declared distributions to the limited partners of
$3,577,572, $3,471,032, and $2,375,000, respectively. Distributions
during 2002 included a special distribution of $2,150,000 as a result
of the distribution of sales proceeds from the sales of the Properties
in Huron, Ohio; West Lebanon, New Hampshire; Bountiful, Utah and
Lawrenceville, Georgia. Distributions for the year ended December 31,
2001 included $1,750,000 in a special distribution as a result of the
distribution of the net sales proceeds from the sale of the property in
Daleville, Indiana and the distribution of the amounts collected from
the promissory notes relating to the 1995 sale of the property in
Myrtle Beach, South Carolina and the 1996 sale of the property in St.
Cloud, Florida. Distributions for the year ended December 31, 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. The special distributions in 2002, 2001 and 2000 were
effectively a return of a portion of the Limited Partners' investment;
although, in accordance with the Partnership agreement, $979,322,
$1,336,152 and $500,000, respectively, were applied towards the 10%
Preferred Return, on a cumulative basis, and the balance of $1,170,678
and $413,848 was treated as a return of capital for purposes of
calculating the 10% Preferred Return.
As a result of the return of capital, the amount of Limited Partners'
invested capital contributions (which is generally 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. 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, 2002, 2001, and 2000
7. Income Taxes:
------------
The following is a reconciliation of net income for financial reporting
purposes to net income for federal income tax purposes for the years
ended December 31:
2002 2001 2000
-------------- -------------- ---------------
Net income for financial reporting purposes $ 1,622,451 $ 945,973 $ 969,570
Effect of timing differences relating to
depreciation (10,568 ) (12,688 ) (31,908 )
Effect of timing differences relating to gains on
real estate property sales (423,194 ) (158,699 ) (377,255 )
Provision for write-down of assets -- 291,369 142,373
Direct financing leases recorded as operating
leases for tax reporting purposes 32,032 30,452 43,093
Effect of timing differences relating to equity
in earnings of unconsolidated joint ventures (33,195 ) (32,904 ) 4,135
Deduction of transaction costs for tax reporting
purposes -- -- (139,935 )
Effect of timing difference relating to allowance
for doubtful accounts (27,277 ) (99,481 ) (18,951 )
Accrued rental income (54,367 ) (65,304 ) (52,148 )
Capitalization of administrative expenses for tax
reporting purposes -- -- 255
Rents paid in advance 6,952 (526 ) (985 )
Effect of timing differences in minority interest
of consolidated joint venture -- -- 2,620
Other -- (2,686 ) (8,745 )
-------------- -------------- ------------------
Net income for federal income tax purposes $ 1,112,834 $ 895,506 $ 532,119
============== ============== ==================
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2002, 2001, and 2000
8. Related Party Transactions:
--------------------------
One of the individual general partners, James M. Seneff, Jr., is one of
the principal shareholders of CNL Holdings, Inc. The other individual
general partner, Robert A. Bourne, serves as President and Treasurer of
CNL Financial Group, Inc., a wholly owned subsidiary of CNL Holdings,
Inc. CNL APF Partners, LP, a wholly owned subsidiary of CNL American
Properties Fund, Inc. ("APF") served as the Partnership's advisor until
January 1, 2002, when it assigned its rights and obligations under a
management agreement to RAI Restaurants, Inc. (formerly known as CNL
Restaurants XVIII, Inc.). RAI Restaurants, Inc. ("the Advisor") is a
wholly owned subsidiary of APF. The individual general partners are
stockholders and directors of APF.
The Advisor provides services 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 2002, 2001, and 2000.
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, 2002, 2001, and
2000, the Partnership incurred deferred, subordinated real estate
disposition fees of $83,430, $9,750 and $4,050, respectively, as the
result of the sales of properties during 2002 and 2001.
During the years ended December 31, 2002, 2001, and 2000, the Advisor
and its affiliates of the general partners, provided accounting and
administrative services to the Partnership. The Partnership incurred
$127,235, $140,658 and $83,476, for the years ended December 31, 2002,
2001, and 2000, respectively, for such services.
The due to related parties consisted of the following at December 31:
2002 2001
----------------- ------------------
Due to the Advisor and its affiliates:
Accounting and administrative services $ 10,161 $ 4,885
Deferred, subordinated real estate
disposition fee 197,130 113,700
----------------- ------------------
$ 207,291 $ 118,585
================= ==================
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2002, 2001, and 2000
9. Concentration of Credit Risk:
----------------------------
The following schedule presents total rental revenues 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 years ended December 31:
2002 2001 2000
---------- -------- -------
Slaymaker Group, Inc. $ 179,796 $181,387 $ 182,817
IHOP Properties, Inc. 139,482 N/A N/A
Golden Corral Corporation 132,151 163,831 195,511
In addition, the following schedule presents total rental revenues 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 years ended December 31:
2002 2001 2000
----------- ---------- ----------
Golden Corral Family Steakhouse $ 189,172 $192,721 $195,511
Tony Roma's 179,796 181,387 182,817
IHOP 139,482 N/A N/A
Arby's 124,914 N/A N/A
Taco Bell N/A 186,453 173,908
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.
The information denoted by N/A indicates that for each period
presented, the tenant or restaurant chain did not represent more that
10% of the Partnership's total rental revenues.
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2002, 2001, and 2000
10. Selected Quarterly Financial Data:
---------------------------------
The following table presents selected unaudited quarterly financial
data for each full quarter during the years ended December 31, 2002 and
2001:
2002 Quarter First Second Third Fourth Year
----------------------------- ----------- --------------- ------------ --------------- ---------------
Continuing Operations (1):
Revenues $273,647 $ 271,912 $ 267,144 $ 271,182 $ 1,083,885
Equity in earnings of
joint ventures 50,700 46,534 50,763 50,040 198,037
Income from
continuing
operations 780,798 203,919 238,380 217,096 1,440,193
Discontinued operations (1):
Revenues (365 ) 1,465 10,000 -- 11,100
Income (loss) from
discontinued
operations (5,114 ) 191,258 305 (4,191 ) 182,258
Net Income 775,684 395,177 238,685 212,905 1,622,451
Net Income (Loss) per limited partner unit:
Continuing operations $ 15.61 $ 4.08 $ 4.77 $ 4.34 $ 28.80
Discontinued operations (0.10 ) 3.82 -- (0.07 ) 3.65
----------- --------------- ------------ --------------- ---------------
Total $ 15.51 $ 7.90 $ 4.77 $ 4.27 $ 32.45
=========== =============== ============ =============== ===============
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2002, 2001, and 2000
10. Selected Quarterly Financial Data - Continued:
---------------------------------------------
2001 Quarter First Second Third Fourth Year
----------------------------- ----------- --------------- ------------ --------------- ---------------
Continuing Operations (1):
Revenues $357,685 $ 308,601 $ 308,939 $ 347,586 $ 1,322,811
Equity in earnings of
joint venture 35,306 34,041 37,132 51,456 157,935
Income from
continuing
operations 404,735 126,906 179,694 296,686 1,008,021
Discontinued operations (1):
Revenues 28,544 28,960 37,542 -- 95,046
Income (loss) from
discontinued
operations 25,474 25,891 34,472 (147,885 ) (62,048 )
Net Income 430,209 152,797 214,166 148,801 945,973
Net Income per limited partner unit:
Continuing operations $ 8.10 $ 2.54 $ 3.59 $ 5.93 $ 20.16
Discontinued operations 0.51 0.52 0.69 (2.96 ) (1.24 )
----------- --------------- ------------ --------------- ---------------
Total $ 8.61 $ 3.06 $ 4.28 $ 2.97 $ 18.92
=========== =============== ============ =============== ===============
(1) Certain items in the quarterly financial data have been reclassified to
conform to the 2002 presentation for all periods presented. These
reclassifications had no effect on net income. The results of
operations relating to properties that were either disposed of or that
were classified as held for sale as of December 31, 2002 are reported
as discontinued operations. The results of operations relating to
properties that were identified for sale as of December 31, 2001 but
sold subsequently are reported as continuing operations.
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 American Properties Fund, Inc. ("APF"), 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 56. 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 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, Inc., formerly the
Partnership's advisor, until it merged with a wholly-owned subsidiary of APF in
September 1999, and in June 2000, was re-elected to those positions of CNL Fund
Advisors, Inc. 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., all
of which are engaged in the business of real estate finance. 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, an independent,
state-chartered commercial 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 55. 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 a
Director 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 CNL Fund Advisors, Inc. prior to its merger with a
wholly-owned subsidiary of 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.; Director, Vice Chairman of the
Board, and Treasurer , and from 1997 until June 2002 served as President, of CNL
Hospitality Properties, Inc., a public, unlisted real estate investment trust;
as well as, Director, Vice Chairman of the Board, and Treasurer, and from 1997
until June 2002 served as President, of CNL Hospitality Corp., its advisor. In
addition, Mr. Bourne serves as Director, Vice Chairman of the Board, and
Treasurer, and from 1997 until June 2002 served as President, of CNL Retirement
Properties, Inc., a public, unlisted real estate investment trust; as well as, a
Director, Vice Chairman of the Board, and Treasurer, and from 1997 until June
2002 served as 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 47. 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 CNL Fund Advisors, Inc., Mr. McWilliams served as President of
APF from February 1999 until September 1999. From February 1998 to February
1999, he served as Executive Vice President of APF. Mr. McWilliams joined CNL
Financial Group, Inc. in April 1997 and served as an Executive Vice President
from October 1997 until September 1999. In addition, Mr. McWilliams served as
President of CNL Fund Advisors, Inc. and CNL Financial Services, Inc., a
corporation engaged in the business of real estate financing, from April 1997
until the acquisition of such entities by wholly-owned subsidiaries of 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.
Steven D. Shackelford, age 39. Mr. Shackelford was promoted to
Executive Vice President of APF in June 2000. He served as Senior Vice President
from September 1999 until his promotion in June 2000. Mr. Shackelford has served
as Chief Financial Officer since January 1997 and has served as Secretary and
Treasurer of APF since September 1999. He also served as Chief Financial Officer
of CNL Fund Advisors, Inc. 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.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires the General Partners, the
officers of the corporate General Partner, and persons who own more than ten
percent of a registered class of the Partnership's equity securities
(collectively, the "Reporting Persons"), to file reports of ownership and
changes in ownership on Forms 3, 4 and 5 with the SEC. Reporting Persons are
required by SEC regulation to furnish the Partnership with copies of all Forms
3, 4 and 5 that they file.
Based solely on the General Partners' review of the copies of such
forms the Partnership has received and written representations from certain
Reporting Persons that they were not required to file Forms 5 for the last
fiscal year, the General Partners believe that all Reporting Persons complied
with all filing requirements applicable to them with respect to transactions
during fiscal 2002.
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 10, 2003, 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 10, 2003, 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, 2002, 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, 2002
- ---------------------------------- -------------------------------------- ------------------------------
Reimbursement to affiliates Operating expenses are reimbursed at Accounting and
for operating expenses the lower of cost or 90% of the administra-tive services:
prevailing rate at which comparable $127,235
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, 2002
- --------------------------------- -------------------------------------- ------------------------------
Deferred, subordinated real A deferred, subordinated real estate $83,430
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.
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.
Item 14. 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 Annual Report on Form 10-K 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 IV
Item 15. 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, 2002 and 2001
Statements of Income for the years ended December 31, 2002, 2001, and 2000
Statements of Partners' Capital for the years ended December 31, 2002, 2001, and 2000
Statements of Cash Flows for the years ended December 31, 2002, 2001, and 2000
Notes to Financial Statements
2. Financial Statement Schedules
Schedule II - Valuation and Qualifying Accounts for the years
ended December 31, 2002, 2001, and 2000
Schedule III - Real Estate and Accumulated Depreciation at December 31, 2002
Notes to Schedule III - Real Estate and Accumulated Depreciation at December 31, 2002
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.)
**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) The Registrant filed no reports on Form 8-K during the period from
October 1, 2002 through December 31, 2002.
** Previously filed
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 27th day of
March, 2003.
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 27, 2003
- ------------------------------------ (Principal Financial and Accounting
Robert A. Bourne Officer)
/s/ James M. Seneff, Jr. Chief Executive Officer and Director March 27, 2003
- ------------------------------------ (Principal Executive Officer)
James M. Seneff, Jr.
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, 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 annual report on Form 10-K of the registrant;
2. Based on my knowledge, this annual 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 annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual 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 annual 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 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 annual 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 annual report (the "Evaluation
Date"); and
c. presented in this annual 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 functions):
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 annual 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: March 27, 2003
/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 annual report on Form 10-K of the registrant;
2. Based on my knowledge, this annual 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 annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual 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 annual 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 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 annual 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 annual report (the "Evaluation
Date"); and
c. presented in this annual 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 functions):
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 annual 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: March 27, 2003
/s/ Robert A. Bourne
- -----------------------
Robert A. Bourne
President and Treasurer
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
Years Ended December 31, 2002, 2001, and 2000
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
- ---------- ----------------- -------------- --------------- ---------------- ------------- ------------ ------------
2000 Allowance for
doubtful
accounts (a) $ 153,750 $ -- $ 47,400 (b) $ -- $ 66,351 $ 134,799
============== =============== ================ ============= ============ ============
2001 Allowance for
doubtful
accounts (a) $ 134,799 $ -- $ 35,317 (b) $ 134,799 (c) $ -- $ 35,317
============== =============== ================ ============= ============ ============
2002 Allowance for
doubtful
accounts (a) $ 35,317 $ -- $ 41,780 (b) $ 69,057 (c) $ -- $ 8,040
============== =============== ================ ============= ============ ============
(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
December 31, 2002
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 -
Captain D's Restaurant:
Belleville, Illinois - 186,050 383,781 - -
Denny's Restaurant:
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:
Centralia, Washington - 215,302 - 378,836 -
Tony Romas:
Sandy, Utah - 595,330 - - -
Wendy's Old Fashioned
Hamburger Restaurants:
Tampa, Florida - 336,219 462,401 - -
------------ ------------ ---------- --------
$3,263,304 $3,960,398 $1,090,336 -
============ ============ ========== ========
Costs Capitalized
Subsequent To
Initial Cost Acquisition
-------------------------- --------------------
Encum- Building and Improve- Carrying
brances Land Improvements ments Costs
----------- ------------ ------------ ---------- --------
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:
Del Taco Restaurant:
Mesa, Arizona (i) - $440,842 - - -
============ ============ ========== ========
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 - - -
============ ============ ========== ========
Costs Capitalized
Subsequent to
Initial Cost Acquisition
-------------------------- --------------------
Encum- Building and Improve- Carrying
brances Land Improvements ments Costs
----------- ------------ ------------ ---------- --------
Properties the Partnership
has Invested in Under
Direct Financing Leases:
Captain D's Restaurant
Zanesville, Ohio - $99,651 $390,518 - -
Tony Romas:
Sandy, Utah - - 911,072 - -
------------ ------------ ---------- --------
$99,651 $1,301,590 - -
============ ============ ========== ========
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 - -
============ ============ ========== ========
Property in Which the Partnership
has a 42.09% Interest as
Tenants-in-Common and has
Invested in Under a
Direct Financing Lease:
Del Taco Restaurant:
Mesa, Arizona (i) - - $650,622 - -
============ ============ ========== ========
Life on Which
Net Cost Basis 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 structionAcquired Computed
- ------------- ------------ ------------ ----------- ------- ------- ------------
$279,665 $591,137 $870,802 $238,101 1989 03/89 (b)
120,847 719,702 840,549 243,094 1989 03/89 (h)
186,050 383,781 569,831 176,433 1988 03/89 (b)
117,394 471,340 588,734 169,065 1989 02/89 (g)
156,382 429,107 585,489 190,712 1986 09/89 (b)
504,787 742,216 1,247,003 322,478 1989 12/89 (b)
513,384 671,713 1,185,097 114,129 1997 11/97 (b)
237,944 200,501 438,445 91,896 1985 03/89 (b)
215,302 378,836 594,138 165,215 1989 08/89 (b)
595,330 (f) 595,330 (d) 1997 12/97 (d)
336,219 462,401 798,620 213,218 1987 02/89 (b)
- ------------- ------------ ------------ -----------
$3,263,304 $5,050,734 $8,314,038 $1,924,341
============= ============ ============ ===========
Life on Which
Net Cost Basis at Which Depreciation in
Carried at Close of Period (c) Date Latest Income
- -----------------------------------------
Building and Accumulated of Con- Date Statement is
Land Improvements Total Depreciation structionAcquired Computed
- ------------- ------------ ------------ ----------- ------- ------- ------------
$183,229 $192,857 $376,086 $83,621 1986 12/89 (b)
============= ============ ============ ===========
$440,842 (f) $440,842 (d) 1997 10/97 (d)
============= ============
$875,659 $1,389,366 $2,265,025 $231,688 1994 12/97 (b)
============= ============ ============ ===========
$623,496 (f) $623,496 (d) 1998 05/98 (d)
============= ============
Life on Which
Net Cost Basis at Which Depreciation in
Carried at Close of Period (c) Date Latest Income
- -----------------------------------------
Building and Accumulated of Con- Date Statement is
Land Improvements Total Depreciation structionAcquired Computed
- ------------- ------------ ------------ ----------- ------- ------- ------------
(f) (f) (f) (e) 1988 03/89 (e)
- (f) (f) (d) 1997 12/97 (d)
- (f) (f) (d) 1998 05/98 (d)
- (f) (f) (d) 1997 10/97 (d)
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED
DEPRECIATION - CONTINUED
December 31, 2002
(a) Transactions in real estate and accumulated depreciation are summarized
below. The balances in 2002, 2001, and 2000 have been adjusted to
reflect the reclassification of properties accounted for as
discontinued operations.
Accumulated
Cost Depreciation
---------------- -------------------
Properties the Partnership has Invested in Under
Operating Leases:
Balance, December 31, 1999 $ 10,356,203 $ 1,869,440
Acquisition 20,000 --
Dispositions (232,578 ) (111,062 )
Provision for write-down of assets (109,919 ) --
Depreciation expense -- 216,964
---------------- ----------------
Balance, December 31, 2000 10,033,706 1,975,342
Acquisition 371,418 --
Disposition (295,909 ) (40,370 )
Provision for write-down of assets (156,645 ) --
Depreciation expense -- 217,884
---------------- ----------------
Balance, December 31, 2001 9,952,570 2,152,856
Dispositions (1,638,532 ) (406,993 )
Depreciation expense -- 178,478
---------------- ----------------
Balance, December 31, 2002 $ 8,314,038 $ 1,924,341
================ ================
Property of Joint Venture in Which the Partnership has a 43%
Interest and has Invested in Under an Operating Lease:
Balance, December 1999 $ 376,086 $ 64,337
Depreciation expense -- 6,428
---------------- ----------------
Balance, December 31, 2000 376,086 70,765
Depreciation expense -- 6,428
---------------- ----------------
Balance, December 31, 2001 376,086 77,193
Depreciation expense -- 6,428
---------------- ----------------
Balance, December 31, 2002 $ 376,086 $ 83,621
================ ================
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED
DEPRECIATION - CONTINUED
December 31, 2002
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, 1999 $ 623,496 $ --
Depreciation expense (d) -- --
---------------- ----------------
Balance, December 31, 2000 623,496 --
Depreciation expense (d) -- --
---------------- ----------------
Balance, December 31, 2001 623,496 --
Depreciation expense (d) -- --
---------------- ----------------
Balance, December 31, 2002 $ 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, 1999 $ 1,091,464 $ 47,524
Depreciation expense -- 21,687
---------------- -----------------
Balance, December 31, 2000 1,091,464 69,211
Depreciation expense -- 14,699
Reclassification to direct financing lease (650,622 ) (83,910 )
---------------- -----------------
Balance, December 31, 2001 440,842 --
Depreciation expense (d) -- --
---------------- -----------------
Balance, December 31, 2002 $ 440,842 $ --
================ =================
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED
DEPRECIATION - CONTINUED
December 31, 2002
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, 1999 $ 2,265,025 $ 92,749
Depreciation expense -- 46,313
---------------- -----------------
Balance, December 31, 2000 2,265,025 139,062
Depreciation expense -- 46,313
---------------- -----------------
Balance, December 31, 2001 2,265,025 185,375
Depreciation expense -- 46,313
---------------- -----------------
Balance, December 31, 2002 $ 2,265,025 $ 231,688
================ =================
(b) Depreciation expense is computed for buildings and improvements based
upon estimated lives of 30 years.
(c) As of December 31, 2002, the aggregate cost of the Properties owned by
the Partnership and the unconsolidated joint ventures for federal
income tax purposes was $9,402,161 and $5,175,275, respectively. All of
the leases are treated as operating leases for federal income tax
purposes.
(d) 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) 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) 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) 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 will be depreciated over its remaining
estimated life of approximately 25 years.
(h) 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.
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED
DEPRECIATION - CONTINUED
December 31, 2002
(i) 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. Effective September 15, 2001, this Property was
re-leased, resulting in a reclassification of the building portion of
the lease as a capital lease.
EXHIBIT INDEX
Exhibit Number
(c) 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.)
3.2 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