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, 2001
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 0-23974
CNL INCOME FUND XIV, LTD.
(Exact name of registrant as specified in its charter)
Florida 59-3143096
(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 ($10 per Unit)
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days: Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [x]
Aggregate market value of the voting stock held by nonaffiliates of the
registrant: The registrant registered an offering of 4,500,000 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 $10 per Unit.
DOCUMENTS INCORPORATED BY REFERENCE:
None
PART I
Item 1. Business
CNL Income Fund XIV, Ltd. (the "Registrant" or the "Partnership") is a
limited partnership which was organized pursuant to the laws of the State of
Florida on September 25, 1992. 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 August 27, 1993, the
Partnership offered for sale up to $45,000,000 of limited partnership interests
(the "Units") (4,500,000 Units at $10 per Unit) pursuant to a registration
statement on Form S-11 under the Securities Act of 1933, as amended, effective
March 17, 1993. The offering terminated on February 22, 1994, at which date the
maximum proceeds of $45,000,000 had been received from investors who were
admitted to the Partnership as limited partners ("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
$39,606,055 and were used to acquire 54 Properties, including 18 Properties
consisting of land only and four Properties owned by joint ventures in which the
Partnership is a co-venturer, to pay acquisition fees totaling $2,475,000 to an
affiliate of the General Partners and to establish a working capital reserve for
Partnership purposes.
During the year ended December 31, 1995, the tenant of the Checkers
Property in Knoxville, Tennessee, and the Checkers Property in Dallas, Texas,
exercised its option in accordance with the lease agreements to substitute two
other Properties for these Properties. The Partnership sold the Knoxville and
Dallas Properties to the tenant and used the net sales proceeds to acquire two
Checkers Properties in Coral Springs and St. Petersburg, Florida. During 1996,
Wood-Ridge Real Estate Joint Venture, a joint venture in which the Partnership
is a co-venturer with an affiliate of the General Partners, sold its two
Properties to the tenant. The joint venture reinvested the majority of the net
sales proceeds in four Boston Market Properties (one of which consisted of only
land) and one Golden Corral Property during 1996, and a Taco Bell Property in
Anniston, Alabama, in 1997. During the year ended December 31, 1997, the Port of
Palm Bay took possession of the Property in Riviera Beach, Florida, through a
total right of way taking. In addition, in 1997, the Partnership entered into a
joint venture arrangement, CNL Kingston Joint Venture, with affiliates of the
General Partners. During the year ended December 31, 1998, the Partnership sold
one Property in Madison, Alabama and two Properties in Richmond, Virginia, and
reinvested the proceeds, along with the proceeds from the right of way taking in
December 1997 of the Property in Riviera Beach, Florida, in a Property in
Fayetteville, North Carolina, and in a joint venture arrangement, Melbourne
Joint Venture, with an affiliate of the General Partners. During 1999, the
Partnership sold one Property in each of Houston, Texas; Kansas City, Missouri;
Stockbridge, Georgia; and Shelby, North Carolina, and reinvested the majority of
the net sales proceeds in two joint venture arrangements, Bossier City Joint
Venture and Duluth Joint Venture, with affiliates of the General Partners.
During 2000, the Partnership reinvested the majority of the net sales proceeds
it received from the sale of the Property in Houston, Texas, in a Baker's Square
Property located in Niles, Illinois, as tenants-in-common with CNL Income Fund
VI, Ltd., an affiliate of the General Partners and a Florida limited
partnership. In addition, during 2000, the Partnership sold its Property in
Columbus, Ohio and reinvested the net sales proceeds in a Property in Bristol,
Virginia. In May 2001, Wood-Ridge Real Estate Joint Venture, in which the
Partnership owns a 50% interest, sold its property in Paris, Texas. The
Partnership and the other joint venture partner each received $400,000
representing a return of capital from the net sales proceeds which the
Partnership used to pay liabilities of the Partnership.
As a result of the above transactions, as of December 31, 2001, the
Partnership owned 55 Properties. In February 2002, the Partnership sold its
Property in Las Vegas, Nevada, to an unrelated third party and in March 2002,
reinvested the net sales proceeds in a Property in San Antonio, Texas. The 55
Properties owned at December 31, 2001, include 13 wholly owned Properties
consisting of land only and interests in 11 Properties owned by joint ventures
in which the Partnership is a co-venturer and one Property held as
tenants-in-common with an affiliate of the General Partners. The lessee of the
13 wholly owned Properties consisting of only land owns the buildings currently
on the land and has the right, if not in default under the lease, to remove the
buildings from the land at the end of the lease terms. The Properties are
generally leased on a triple-net basis with the lessees responsible for all
repairs and maintenance, property taxes, insurance and utilities.
The Partnership will hold its Properties until the General Partners
determine that the sale or other disposition of the Properties is advantageous
in view of the Partnership's investment objectives. In deciding whether to sell
Properties, the General Partners will consider factors such as potential capital
appreciation, net cash flow and federal income tax considerations. Certain
lessees also have been granted options to purchase Properties, generally at the
Property's then fair market value after a specified portion of the lease term
has elapsed. The Partnership has no obligation to sell all or any portion of a
Property at any particular time, except as may be required under property
purchase options granted to certain lessees.
On March 11, 1999, the Partnership entered into an Agreement and Plan
of Merger with CNL American Properties Fund, Inc. ("APF"), pursuant to which the
Partnership would be merged with and into a subsidiary of APF (the "Merger").
APF is a real estate investment trust whose primary business is the ownership of
restaurant properties leased on a long-term, "triple-net" basis to operators of
national and regional restaurant chains. Under the Agreement and Plan of Merger,
APF was to issue shares of its common stock as consideration for the Merger. On
March 1, 2000, the General Partners and APF announced that they had mutually
agreed to terminate the Agreement and Plan of Merger. The agreement to terminate
the Agreement and Plan of Merger was based, in large part, on the General
Partners' concern that, in light of market conditions relating to publicly
traded real estate investment trusts, the value of the transaction had
diminished. As a result of such diminishment, the General Partners' ability to
unequivocally recommend voting for the transaction, in the exercise of their
fiduciary duties, had become questionable.
Leases
Although there are variations in the specific terms of the leases, the
following is a summarized description of the general structure of the
Partnership's leases. The leases of the Properties owned by the Partnership, the
joint ventures in which the Partnership is a co-venturer and the Property held
as tenants-in-common with an affiliate of the General Partners provide for
initial terms ranging from 10 to 20 years (the average being approximately 18
years) and expire between 2008 and 2019. The leases are, in general, 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 $21,100 to $200,900. The majority of the leases
provide for percentage rent, based on sales in excess of a specified amount. In
addition, the majority of the leases provide that, commencing in specified lease
years (generally the sixth or ninth lease year), the annual base rent required
under the terms of the lease will increase.
Generally, the leases of the Properties provide for two to five
five-year renewal options subject to the same terms and conditions as the
initial lease. Lessees of 41 of the Partnership's 55 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 for the 13 wholly owned Properties consisting of only land
are substantially the same as those described above except that the leases
relate solely to the land associated with the Property, with the tenant owning
the buildings currently on the land and having the right, if not in default
under the lease, to remove the buildings from the land at the end of the lease
term.
In February 2000, the lease relating to the Property held by Melbourne
Joint Venture, in which the Partnership owns a 50% interest, was amended to
provide for rent reductions. In June 2000, the operator of this Property vacated
the Property and discontinued operations. In June 2001, the Partnership entered
into a new lease with a new tenant for this Property. The lease terms for this
Property are substantially the same as the Partnership's other leases, as
described above.
In January 2001, the lease relating to the Property in Tempe, Arizona
was amended to provide for a reduction in rents for a two-year period. All other
lease terms remained unchanged. The General Partners do not anticipate that any
decrease in rental income relating to this amendment will have a material
adverse affect on the Partnership's financial position or results of operations.
In March 2002, the Partnership reinvested the net sales proceeds from
the sale of the Property in Las Vegas, Nevada, in a Property in San Antonio,
Texas. The lease terms for this Property are substantially the same as the
Partnership's other leases, as described above.
Major Tenants
During 2001, four lessees of the Partnership, (i) Flagstar Enterprises,
Inc., (ii) Jack in the Box Inc., and Jack in the Box Eastern Division L.P.
(affiliated under common control of Jack in the Box Inc.) (herein after referred
to as "Jack in the Box Inc."), (iii) Checkers Drive-In Restaurants, Inc., and
(iv) Golden Corral Corporation, each contributed more than ten percent of the
Partnership's total rental and earned income (including the Partnership's share
of rental and earned income from Properties owned by joint ventures and a
Property held as tenants-in-common with an affiliate). As of December 31, 2001,
Flagstar Enterprises, Inc. was the lessee under leases relating to six
restaurants; Jack in the Box Inc. was the lessee under leases relating to six
restaurants; Checkers Drive-In Restaurants, Inc. was the lessee under leases
relating to 13 restaurants; and Golden Corral Corporation was the lessee under
leases relating to four restaurants. It is anticipated that, based on the
minimum rental payments required by the leases, that these four lessees will
each continue to contribute more than ten percent of the Partnership's total
rental and earned income in 2002. In addition, five Restaurant Chains, Hardee's,
Denny's, Jack in the Box, Checkers, and Golden Corral Family Steakhouse
Restaurants ("Golden Corral"), each accounted for more than ten percent of the
Partnership's total rental and earned income during 2001 (including the
Partnership's share of rental and earned income from Properties owned by joint
ventures and a Property held as tenants-in-common with an affiliate). In 2002,
it is anticipated that these five Restaurant Chains each will continue to
account for more than ten percent of the total rental and earned income to which
the Partnership is entitled under the terms of the leases. Any failure of these
lessees or Restaurant Chains could materially affect the Partnership's income if
the Partnership is not able to re-lease the Properties in a timely manner. As of
December 31, 2001, no single tenant or group of affiliated tenants leased
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
arrangements: Attalla Joint Venture and Salem Joint Venture, each with CNL
Income Fund XIII, Ltd.; CNL Kingston Joint Venture with CNL Income Fund XVII,
Ltd.; Melbourne Joint Venture with CNL Income Fund VI, Ltd.; Bossier City Joint
Venture with CNL Income Fund VIII, Ltd. and CNL Income Fund XII, Ltd.; Duluth
Joint Venture with CNL Income Fund VII, Ltd., and Wood-Ridge Real Estate Joint
Venture, with CNL Income Fund XV, Ltd. Each of the CNL Income Funds is an
affiliate of the General Partners. The affiliates are limited partnerships
organized pursuant to the laws of the state of Florida. Attalla Joint Venture,
Salem Joint Venture, Kingston Joint Venture, Melbourne Joint Venture, Bossier
City Joint Venture and Duluth Joint Venture were formed to purchase or construct
and hold one restaurant Property each. Wood-Ridge Real Estate Joint Venture, was
formed to purchase and hold six Properties. In May 2001, Wood-Ridge Real Estate
Joint Venture sold its Property in Paris, Texas to the tenant and distributed
the net sales proceeds to each co-venture partner as a return of capital.
The joint venture arrangements provide for the Partnership and its
joint venture partners to share in all costs and benefits associated with the
joint ventures in accordance with their respective percentage interests in the
joint ventures. The Partnership has a 50% interest in Attalla Joint Venture, a
72.2% interest in Salem Joint Venture, a 39.94% interest in CNL Kingston Joint
Venture, a 50% interest in Melbourne Joint Venture, an 11% interest in Bossier
City Joint Venture, a 44% interest in Duluth Joint Venture, and a 50% interest
in Wood-Ridge Real Estate Joint Venture. The Partnership and its joint venture
partners are also jointly and severally liable for all debts, obligations and
other liabilities of the joint ventures.
Wood-Ridge Real Estate Joint Venture, Attalla Joint Venture, Salem
Joint Venture, Bossier City Joint Venture and Duluth Joint Venture each have an
initial term of 30 years and CNL Kingston Joint Venture and Melbourne Joint
Venture each have an initial term of 20 years and, after the expiration of the
initial term, continues in existence from year to year unless terminated at the
option of either of the joint venturers 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 unless agreed to by
mutual agreement of the Partnership and its joint venture partners to reinvest
the sales proceeds in replacement Properties, and by mutual agreement of the
Partnership and its joint venture partners to dissolve the joint venture.
The Partnership shares management control equally with affiliates of
the General Partners for each joint venture. The joint venture agreements
restrict each venturer's ability to sell, transfer or assign its joint venture
interest without first offering it for sale to its joint venture partner, either
upon such terms and conditions as to which the venturers may agree or, in the
event the venturers cannot agree, on the same terms and conditions as any offer
from a third party to purchase such joint venture interest.
Net cash flow from operations of Attalla Joint Venture, Wood-Ridge Real
Estate Joint Venture, Salem Joint Venture, CNL Kingston Joint Venture, Melbourne
Joint Venture, Bossier City Joint Venture, and Duluth Joint Venture is
distributed 50%, 50%, 72.2%, 39.94%, 50%, 11%, and 44%, respectively, to the
Partnership and the balance is distributed to each of the other joint venture
partners. Any liquidation proceeds, after paying joint venture debts and
liabilities and funding reserves for contingent liabilities, will be distributed
first to the joint venture partners with positive capital account balances in
proportion to such balances until such balances equal zero, and thereafter in
proportion to each joint venture partner's percentage interest in the joint
venture.
In addition to the above joint venture agreements, in January 2000, the
Partnership entered into an agreement to hold a Baker's Square Property as
tenants-in-common with CNL Income Fund VI, Ltd., a Florida limited partnership
and an affiliate of the General Partners. The agreement provides for the
Partnership and the affiliate to share in the profits and losses of the Property
in proportion to each co-venturer's percentage interest. The Partnership owns an
approximate 26% interest in this Property.
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 a
Property if the proceeds are reinvested in an additional Property.
Certain Management Services
CNL APF Partners, LP, an affiliate of the General Partners, provides
certain services relating to management of the Partnership and its Properties
pursuant to a management agreement with the Partnership. Under this agreement,
CNL APF Partners, LP (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 rental revenues from Properties
wholly owned by the Partnership plus the Partnership's allocable share of gross
revenues of joint ventures in which the Partnership is a co-venturer, but not in
excess of competitive fees for comparable services.
During 2000, CNL Fund Advisors, Inc. assigned its rights in, and its
obligations under, the management agreement with the Partnership to CNL APF
Partners, LP. All of the terms and conditions of the management agreement,
including the payment of fees, as described above, remain unchanged.
The management agreement continues until the Partnership no longer owns
an interest in any Properties unless terminated at an earlier date upon 60 days'
prior notice by either party.
Competition
The fast-food and family-style restaurant business is characterized by
intense competition. The restaurants on the Partnership's Properties compete
with independently owned restaurants, restaurants which are part of local or
regional chains, and restaurants in other well-known national chains, including
those offering different types of food and service.
Employees
The Partnership has no employees. The officers of CNL Realty
Corporation and the officers and employees of APF, the parent company of 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, 2001, the Partnership owned 55 Properties. Of the 55
Properties, 43 are owned by the Partnership in fee simple and 11 are owned
through joint venture arrangements and one is owned with an affiliate as
tenants-in-common. 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 15,900
to 100,100 square feet depending upon building size and local demographic
factors. Sites purchased by the Partnership are in locations zoned for
commercial use which have been reviewed for traffic patterns and volume.
The following table lists the Properties owned by the Partnership as of
December 31, 2001 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
----- --------------------
Alabama 4
Arizona 3
Colorado 1
Florida 9
Georgia 5
Illinois 1
Kansas 2
Louisiana 2
Minnesota 1
Mississippi 1
Nevada 1
North Carolina 7
Ohio 4
South Carolina 1
Tennessee 5
Texas 7
Virginia 1
-------
TOTAL PROPERTIES 55
=======
Buildings. Each of the Properties owned by the Partnership includes a
building that is one of a Restaurant Chain's approved designs. However,
buildings located on 13 of the Properties owned by the Partnership are owned by
the tenants. The buildings generally are rectangular and are constructed from
various combinations of stucco, steel, wood, brick and tile. The sizes of the
buildings owned by the Partnership range from approximately 2,100 to 11,400
square feet. All buildings on Properties are freestanding and surrounded by
paved parking areas. Buildings are suitable for conversion to various uses,
although modifications may be required prior to use for other than restaurant
operations. As of December 31, 2001, 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 40 years
for federal income tax purposes.
As of December 31, 2001, the aggregate cost of the Properties owned by
the Partnership and joint ventures (including the Property owned through a
tenancy in common arrangement) for federal income tax purposes was $32,470,424
and $11,078,889, respectively.
The following table lists the Properties owned by the Partnership as of
December 31, 2001 by Restaurant Chain.
Restaurant Chain Number of Properties
---------------- --------------------
Bakers Square 1
Bennigan's 1
Big Boy 1
Boston Market 2
Burger King 1
Checkers 12
Denny's 6
El Ranchito Restaurant 1
Golden Corral 4
Hardee's 6
IHOP 1
Jack in the Box 6
LeeAnn Chin Chinese Cuisine 1
Long John Silver's 5
Razzleberries 1
Roadhouse Grill 1
Taco Bell 2
Other 3
-------
TOTAL PROPERTIES 55
=======
The General Partners consider the Properties to be well-maintained and
sufficient for the Partnership's operations.
The General Partners believe that the Properties are adequately covered
by insurance. In addition, the General Partners have obtained contingent
liability and property coverage for the Partnership. This insurance is intended
to reduce the Partnership's exposure in the unlikely event a tenant's insurance
policy lapses or is insufficient to cover a claim relating to the Property.
Leases. The Partnership leases the Properties to operators of selected
national and regional fast-food restaurant chains. The leases are generally on a
long-term "triple net" basis, meaning that the tenant is responsible for
repairs, maintenance, property taxes, utilities and insurance. Generally, a
lessee is required, under the terms of its lease agreement, to make such capital
expenditures as may be reasonably necessary to refurbish buildings, premises,
signs and equipment so as to comply with the lessee's obligations, if
applicable, under the franchise agreement to reflect the current commercial
image of its Restaurant Chain. These capital expenditures are required to be
paid by the lessee during the term of the lease. The terms of the leases of the
Properties owned by the Partnership are described in Item 1. Business - Leases.
At December 31, 2001, 2000, 1999, 1998, and 1997, 96%, 96%, 98%, 93%,
and 100%, respectively, of the Properties were occupied. The following is a
schedule of the average rent per Property for each of the years ended December
31:
2001 2000 1999 1998 1997
------------- ------------- --------------- -------------- --------------
Rental Revenues (1)(2) $ 4,016,647 $ 4,006,450 $ 4,190,352 $ 3,805,764 $4,283,030
Properties (2) 53 54 55 57 58
Average Rent per
Property $ 75,786 $ 74,194 $ 76,188 $ 66,768 $ 73,845
(1) Rental income includes the Partnership's share of rental income from
the Properties owned through joint venture arrangements and the
Property owned through a tenancy in common arrangement. Rental revenues
have been adjusted, as applicable, for any amounts for which the
Partnership has established an allowance for doubtful accounts.
(2) Excludes Properties that were vacant and generated no revenue.
The following is a schedule of lease expirations for leases in place as
of December 31, 2001 for the next ten years and thereafter.
Percentage of
Number Annual Rental Gross Annual
Expiration Year of Leases Revenues Rental Income
- --------------- --------------- ----------------- --------------------
2002 -- $ -- --
2003 -- -- --
2004 -- -- --
2005 -- -- --
2006 -- -- --
2007 -- -- --
2008 3 416,617 10.32%
2009 2 167,548 4.15%
2010 -- -- --
2011 9 724,520 17.95%
Thereafter 38 2,726,633 67.58%
-------- ----------------- -------------
Total (1) 52 $ 4,035,318 100.00%
======== ================= =============
(1) Excludes two Properties which were vacant at December 31, 2001 and one
Property that was sold in February 2002.
Leases with Major Tenants. The terms of each of the leases with the
Partnership's major tenants as of December 31, 2001 (see Item 1. Business -
Major Tenants), are substantially the same as those described in Item 1.
Business - Leases.
Flagstar Enterprises, Inc. leases six Hardee's restaurants. The initial
term of each lease is 20 years (expiring in 2013) and the average minimum base
annual rent is approximately $71,300 (ranging from approximately $62,000 to
$85,900).
Jack in the Box Inc. leases six Jack in the Box restaurants. The
initial term of each lease is 18 years (expiring in 2011) and the average
minimum base annual rent is approximately $91,900 (ranging from approximately
$68,500 to $109,900).
Checkers Drive-In Restaurants, Inc. leases 12 Checkers restaurants and
one other Property. The initial term of each lease is 20 years (expiring between
2014 and 2015) and the average minimum base annual rent is approximately $39,000
(ranging from approximately $21,100 to $61,100). The tenant owns the buildings
currently on the land and has the right, if not in default under the leases, to
remove the buildings from the land at the end of the lease term.
In addition, Golden Corral Corporation leases four Golden Corral
restaurants. The initial term of each lease is 15 years (expiring between 2008
and 2016) and the average minimum base annual rent is approximately $134,400
(ranging from approximately $76,500 to $200,900).
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 any
material pending legal proceedings.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
(a) As of March 15, 2002, there were 3,002 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 2001, 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, 2001, the price paid for any Unit transferred
pursuant to the Plan ranged from $8.51 to $9.50 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 2001 and 2000 other than
pursuant to the Plan, net of commissions.
2001(1) 2000(1)
-------------------------------------- ---------------------------------------
High Low Average High Low Average
--------- ---------- ----------- -------- ---------- -----------
First Quarter $7.35 $ 6.52 $ 6.76 $7.40 $ 7.35 $ 7.38
Second Quarter 6.80 6.43 6.53 9.00 6.20 8.14
Third Quarter 6.77 5.98 6.35 6.74 6.12 6.66
Fourth Quarter 6.57 5.74 6.16 7.36 6.53 6.96
(1) A total of 19,924 and 24,980 Units were transferred other than pursuant
to the Plan for the years ended December 31, 2001 and 2000,
respectively.
The capital contribution per Unit was $10. All cash available for
distribution will be distributed to the partners pursuant to the provisions of
the Partnership Agreement.
For each of the years ended December 31, 2001 and 2000, the Partnership
declared cash distributions of $3,712,520 to the Limited Partners. Distributions
of $928,130 were declared at the close of each of the calendar quarters during
2001 and 2000. No amounts distributed to partners for the years ended December
31, 2001 and 2000 are required to be or have been treated by the Partnership as
a return of capital for purposes of calculating the Limited Partners' return on
their adjusted capital contributions. No distributions have been made to the
General Partners to date. These amounts include monthly distributions made in
arrears for the Limited Partners electing to receive such distributions on this
basis.
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
2001 2000 1999 1998 1997
--------------- -------------- -------------- --------------- ----------------
Year ended December 31:
Revenues (1) $4,042,245 $4,149,734 $4,191,709 $4,109,129 $ 4,268,693
Net income (2) 2,504,098 3,191,638 3,071,122 3,199,087 3,665,940
Cash distributions
declared 3,712,520 3,712,520 3,712,520 3,712,520 3,712,520
Net income per Unit (2) 0.56 0.71 0.68 0.70 0.81
Cash distributions
declared per Unit 0.83 0.83 0.83 0.83 0.83
At December 31:
Total assets $38,253,909 $39,632,587 $40,072,897 $40,538,159 $40,984,624
Partners' capital 37,105,022 38,313,444 38,834,326 39,475,724 39,989,157
(1) Revenues include equity in earnings of the joint ventures.
(2) Net income for the year ended December 31, 2001 includes $566,043 for
provisions for write-down of assets. Net income for the year ended
December 31, 2000 includes $75,930 from a loss on a sale of assets and
$140,819 for a provision for write-down of assets. Net income for the
year ended December 31, 1999 includes $37,369 from gains on the sales
of assets, $182,089 from losses on sales of assets and $27,211 for a
provision for write-down of assets. Net income for the year ended
December 31, 1998 includes $314,474 for a provision for write-down of
assets and $112,206 from gains on sales of assets.
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 September 25, 1992, 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
responsible for all repairs and maintenance, property taxes, insurance and
utilities. As of December 31, 2001, the Partnership owned 43 Properties directly
and held interests in 12 Properties through joint venture or tenancy in common
arrangements.
Capital Resources
The Partnership's primary source of capital for the years ended
December 31, 2001, 2000, and 1999, was cash from operations (which includes cash
received from tenants, distributions from joint ventures and tenancy in common
and interest received, less cash paid for expenses). Cash from operations was
$3,313,181, $3,840,163, and $3,545,471, for the years ended December 31, 2001,
2000, and 1999, respectively. The decrease in cash from operations during 2001
and the increase in cash from operations during 2000, each as compared to the
previous year, was primarily a result of changes in income and expenses as
described in "Results of Operations" below and changes in the Partnership's
working capital during each of the respective years.
Other sources and uses of capital included the following during the
years ended December 31, 2001, 2000, and 1999.
In May 1999, the Partnership sold its Property in Stockbridge, Georgia,
to a third party for $700,000 and received net sales proceeds of $696,300. As a
result of this transaction, the Partnership recognized a loss of $60,882. During
1999, the Partnership reinvested a portion of the net sales proceeds in Bossier
City Joint Venture and Duluth Joint Venture, as described below. The Partnership
used the remaining net sales proceeds to pay Partnership liabilities.
In November 1999, the Partnership sold its Property in Shelby, North
Carolina, to a third party for $527,370 and received net sales proceeds of
$494,178. As a result of this transaction, the Partnership recognized a loss of
$121,207. In December 1999, the Partnership reinvested these net sales proceeds
in Duluth Joint Venture, as described below.
In December 1999, the Partnership sold its Property in Kansas City,
Missouri to a related party for $270,000 and received net sales proceeds of
$268,450, resulting in a gain of $20,718. In December 1999, the Partnership
reinvested a portion of these net sales proceeds in Duluth Joint Venture, as
described below. In September 2000, the Partnership reinvested the remaining net
sales proceeds in an additional Property in Bristol, Virginia, as described
below. The Partnership distributed amounts sufficient to enable the Limited
Partners to pay federal and state income taxes, if any (at a level reasonably
assumed by the General Partners), resulting from the sale.
In addition, in December 1999, the Partnership sold its Property in
Houston, Texas to a third party for $387,812 and received net sales proceeds of
$385,673, resulting in a gain of $16,651. In January 2000, the Partnership
reinvested these net sales proceeds in a Property in Niles, Illinois, as
tenants-in-common with CNL Income Fund VI, Ltd., a Florida limited partnership
and an affiliate of the General Partners. The Partnership acquired this Property
from CNL BB Corp., an affiliate of the General Partners. The affiliate had
purchased and temporarily held title to the Property in order to facilitate the
acquisition of the Property by the Partnership. The purchase price paid by the
Partnership represented the costs incurred by the affiliate to acquire the
Property, including closing costs. The transaction, or a portion thereof,
relating to the sale of the Property in Houston, Texas, and the reinvestment of
the net sales proceeds, was structured to qualify as a like-kind exchange
transaction for federal income tax purposes. As of December 31, 2001, the
Partnership had a 26% interest as a tenant-in-common.
In November 1999, the Partnership reinvested a portion of the net sales
proceeds from the 1999 sale of the Property in Stockbridge, Georgia, in a joint
venture arrangement, Bossier City Joint Venture, with CNL Income Fund VII, Ltd.
and CNL Income Fund XII, Ltd., both Florida limited partnerships and affiliates
of the General Partners, to purchase and hold one restaurant Property. As of
December 31, 2001, the Partnership had contributed approximately $145,100 and
had an 11% interest in the profits and losses of the joint venture.
In addition, in December 1999, the Partnership reinvested the net sales
proceeds from the 1999 sale of the Property in Shelby, North Carolina and a
portion of the net sales proceeds from the 1999 sales of the Properties in
Stockbridge, Georgia and Kansas City, Missouri, in a joint venture arrangement,
Duluth Joint Venture, with CNL Income Fund VII, Ltd., a Florida limited
partnership and affiliate of the General Partners, to construct and hold one
restaurant Property. As of December 31, 2001, the Partnership had contributed
approximately $855,200 to purchase land and pay for construction costs relating
to this joint venture. As of December 31, 2001, the Partnership had a 44%
interest in the profits and losses of the joint venture.
In September 2000, the Partnership sold its Property in Columbus, Ohio
for and received net sales proceeds of $1,631,947, resulting in a loss of
$75,930. In November 2000, the Partnership reinvested the net sales proceeds in
a Golden Corral Property in Bristol, Virginia. In connection therewith, the
Partnership entered into a long-term, triple-net lease with terms substantially
the same as its other leases. The Partnership acquired the Property from CNL BB
Corp., an affiliate of the General Partners. The affiliate had purchased and
temporarily held title to the Property in order to facilitate the acquisition of
the Property by the Partnership. The purchase price paid by the Partnership
represented the costs incurred by the affiliate to acquire the Property,
including closing costs.
In May 2001, Wood-Ridge Real Estate Joint Venture, in which the
Partnership owns a 50% interest, sold its Property in Paris, Texas to the tenant
for $800,000, in accordance with the purchase option under the lease agreement.
The sale resulted in a loss to the joint venture of approximately $84,500. In
connection with the sale, the joint venture received $200,000 in lease
termination income in consideration for the joint venture releasing the tenant
from its obligations under the lease. As of December 31, 2001, the Partnership
and the other joint venture partner had each received $400,000 representing a
return of capital of the net sales proceeds.
In October 2001, the Partnership entered into an agreement to sell the
Property in Las Vegas, Nevada to an unrelated third party. In February 2002, the
Partnership sold this Property, to an unrelated third party for $1,200,000 and
received net sales proceeds of approximately $1,141,800, resulting in a gain of
approximately $497,700. In March 2002, the Partnership reinvested these net
sales proceeds in a Property in San Antonio, Texas at an approximate cost of
$1,262,200. The Partnership acquired this Property from CNL Funding 2001-A, LP,
a Delaware limited partnership and an affiliate of the General Partners. CNL
Funding 2001-A, LP had purchased and temporarily held title to the Property in
order to facilitate the acquisition of the Property by the Partnership. The
purchase price paid by the Partnership represented the costs incurred by CNL
Funding 2001-A, LP to acquire and carry the Property, including closing costs.
None of the Properties owned by the Partnership, the joint ventures or
tenancy in common arrangements in which the Partnership owns an interest, is or
may be encumbered. Subject to certain restrictions on borrowing, however, the
Partnership may borrow funds but will not encumber any of the Properties in
connection with any such borrowing. The Partnership will not borrow for the
purpose of returning capital to the Limited Partners. The Partnership will not
borrow under arrangements that would make the Limited Partners liable to
creditors of the Partnership. The General Partners further have represented that
they will use their reasonable efforts to structure any borrowing so that it
will not constitute "acquisition indebtedness" for federal income tax purposes
and also will limit the Partnership's outstanding indebtedness to three percent
of the aggregate adjusted tax basis of its Properties. Affiliates of the General
Partners from time to time incur certain operating expenses on behalf of the
Partnership for which the Partnership reimburses the affiliates without
interest.
Currently, rental income from the Partnership's Properties and net
sales proceeds are invested in money market accounts or other short-term, highly
liquid investments such as demand deposit accounts at commercial banks, money
market and certificates of deposit accounts with less than a 90-day maturity
date, pending the Partnership's use of such funds to pay Partnership expenses,
to make distributions to partners, or to reinvest in additional Properties. At
December 31, 2001, the Partnership had $1,039,216 invested in such short-term
investments as compared to $1,038,555 at December 31, 2000. As of December 31,
2001, the average interest rate earned on the rental income deposited in demand
deposit accounts at commercial banks was approximately 2.7% annually. The funds
remaining at December 31, 2001 will be used to pay distributions and other
liabilities.
Short-Term Liquidity
The Partnership's short-term liquidity requirements consist primarily
of the operating expenses of the Partnership.
The Partnership's investment strategy of acquiring Properties for cash
and leasing them under triple-net leases to operators who generally meet
specified financial standards minimizes the Partnership's operating expenses.
The General Partners believe that the leases will continue to generate cash flow
in excess of operating expenses.
Due to low operating expenses and ongoing cash flow, the General
Partners believe that the Partnership has sufficient working capital reserves at
this time. In addition, because leases of the Partnership's Properties are on a
triple-net basis, it is not anticipated that a permanent reserve for maintenance
and repairs will be established at this time. To the extent, however, that the
Partnership has insufficient funds for such purposes, the General Partners will
contribute to the Partnership an aggregate amount of up to one percent of the
offering proceeds for maintenance and repairs. The General Partners have the
right to cause the Partnership to maintain additional reserves if, in their
discretion, they determine such reserves are required to meet the Partnership's
working capital needs.
The General Partners have the right, but not the obligation, to make
additional capital contributions if they deem it appropriate in connection with
the operations of the Partnership.
The Partnership generally distributes cash from operations remaining
after the payment of the operating expenses of the Partnership, to the extent
that the General Partners determine that such funds are available for
distribution. Based primarily on current cash from operations and anticipated
future cash from operations, the Partnership declared distributions to the
Limited Partners of $3,712,520 for each of the years ended December 31, 2001,
2000, and 1999. This represents distributions of $0.83 per Unit for each of the
years ended December 31, 2001, 2000, and 1999. No amounts distributed to the
Limited Partners for the years ended 2001, 2000 or 1999 are required to be or
have been treated by the Partnership as a return of capital for purposes of
calculating the Limited Partners' return of their adjusted capital
contributions. No distributions were made to the General Partners for the years
ended December 31, 2001, 2000, or 1999. 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, 2001 and 2000.
At December 31, 2001 and 2000, the Partnership owed $14,154 and
$130,423, respectively, to affiliates for accounting and administrative services
and management fees. As of March 15, 2002, the Partnership had reimbursed the
affiliates all such amounts. Other liabilities, including distributions payable,
decreased to $1,134,733 at December 31, 2001, from $1,188,720 at December 31,
2000, primarily due to a decrease in amounts payable to related parties at
December 31, 2001, as compared to December 31, 2000. Total liabilities at
December 31, 2001, to the extent they exceed cash and cash equivalents at
December 31, 2001, will be paid from anticipated future cash from operations,
and in the event the General Partners elect to make additional loans or
contributions, from General Partners' loans or contributions.
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 the 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 its Properties and investments in unconsolidated
entities periodically (no less than once per year) for impairment whenever
events or changes in circumstances indicate that the carrying amount of the
assets may not be recoverable through operations. Management determines whether
impairment in value has occurred by comparing the estimated future undiscounted
cash flows, including the residual value of the Property, with the carrying cost
of the individual Property. If an impairment is indicated, the assets are
adjusted to their fair value.
Results of Operations
The Partnership owned and leased 47 wholly owned Properties during 1999
(including four Properties that were sold during 1999), 44 wholly owned
Properties during 2000 (including one Property that was sold during 2000), and
43 wholly owned Properties during 2001. In addition, during 1999, the
Partnership was a co-venturer in six separate joint ventures that owned and
leased 12 Properties; and during 2000 and 2001, the Partnership was a
co-venturer in seven separate joint ventures that owned and leased 12 Properties
(including one Property that was sold in 2001) and one tenancy in common that
owned and leased one Property. As of December 31, 2001, the Partnership owned,
either directly, through joint venture or through tenancy in common
arrangements, 55 Properties which are, in general, subject to long-term,
triple-net leases. The leases of the Properties provide for minimum base annual
rental amounts (payable in monthly installments) ranging from approximately
$21,100 to $200,900. The majority of the leases provide for percentage rent
based on sales in excess of a specified amount. In addition, the majority of the
leases provide that, commencing in specified lease years (generally the sixth or
ninth lease year), the annual base rent required under the terms of the lease
will increase. For further description of the Partnership's leases and
Properties, see Item 1. Business - Leases and Item 2. Properties, respectively.
During the years ended December 31, 2001, 2000, and 1999, the
Partnership earned $3,438,766, $3,724,976, and $3,692,965, respectively, in
rental income from operating leases and earned income from direct financing
leases from its wholly owned Properties.
Rental and earned income decreased during 2001 and 2000, each as
compared to the previous year, due to the 2000 sale of the Property in Columbus,
Ohio and the 1999 sales of several Properties, as described in "Capital
Resources." In November 2000, the Partnership reinvested a portion of these net
sales proceeds in a Property in Bristol, Virginia. The decrease in rental and
earned income during 2000 was partially offset by the rental income earned by
this Property. The Partnership reinvested the remaining net sales proceeds from
the above sales in two separate joint venture arrangements and one Property with
an affiliate as tenants-in-common. Therefore, the Partnership anticipates rental
and earned income to remain at reduced amounts and net income earned by joint
ventures to be at increased amounts, as described below.
The decrease in rental and earned income during 2001 was also partially
due to the fact that during 2001, the tenant of the Property in Las Vegas,
Nevada ceased restaurant operations and vacated the Property. In February 2002,
the Partnership sold this Property to an unrelated third party, as described
above in "Capital Resources." The Partnership intends to reinvest these sales
proceeds in an additional Property.
The decrease in rental and earned income during the years ended
December 31, 2001 and 2000 was also partially due to the fact that the leases
relating to the Properties in Houston, Texas and Marion, Ohio were amended to
provide for rent reductions to the tenants. The Partnership does not anticipate
that the rent reductions will have an adverse material effect on the financial
position of the Partnership.
In addition, the decrease during 2001 and 2000 was partially due to the
fact that during 2000, Elias Brothers Restaurants, Inc., which leased one
Property operated as a Big Boy, filed for bankruptcy and rejected its lease. As
a result, this tenant ceased making rental payments. The Partnership will not
recognize any rental and earned income from the vacant Property until a
replacement tenant for this Property is located or until the Property is sold
and the proceeds from the sale are reinvested in an additional Property. The
lost revenues resulting from the vacant Property could have an adverse effect on
the results of operations of the Partnership, if the Partnership is not able to
re-lease the Property in a timely manner.
In June 1998 Long John Silver's, Inc. filed for bankruptcy and rejected
the leases relating to four of the nine Properties it leased. As a result, this
tenant ceased making rental payments on the four rejected leases. In September
1999, Long John Silver's, Inc. rejected an additional lease and ceased making
rental payments on the lease. The Partnership entered into new leases, each with
a new tenant, for two of the five vacant Properties, one in Albemarle, North
Carolina and one in Las Vegas, Nevada. In connection with the new leases, the
tenant for each Property agreed to pay for all costs necessary to convert the
Properties into different restaurant concepts. Conversion of both Properties was
completed in March 1999, at which time rental payments commenced. During 2001,
the new tenant of the Las Vegas, Nevada Property vacated the Property, as
describe above. In May and November 1999, the Partnership sold two of the vacant
Properties and invested the majority of the net sales proceeds in Bossier City
Joint Venture and Duluth Joint Venture in November and December 1999,
respectively, as described in "Capital Resources." The Partnership used the
remaining net sales proceeds to pay Partnership liabilities. In August 1999,
Long John Silver's, Inc. assumed and affirmed its four remaining leases, and the
Partnership has continued receiving rental payments relating to these four
leases. The Partnership will not recognize any rental and earned income from the
remaining vacant Property in Laurens, South Carolina until a replacement tenant
for this Property is located or until the Property is sold and the proceeds from
the sale are reinvested in an additional Property. At this time, there is no
commitment to sell or re-lease this Property. The lost revenues resulting from
the remaining vacant Property could have an adverse effect on the results of
operations of the Partnership, if the Partnership is not able to re-lease the
Property in a timely manner.
Rental and earned income were higher during 2000, as compared to 2001,
due to the fact that during 2000, the Partnership collected and recognized as
income approximately $175,700 in bankruptcy proceeds relating to Long John
Silver's. Inc., which filed for bankruptcy during 1998 and rejected the leases
relating to five Properties, as described above. No such amounts were recognized
during 2001 or 1999.
During the years ended December 31, 2001, 2000, and 1999, the
Partnership also earned $67,851, $47,437, and $49,928, respectively, in
contingent rental income. The increase in contingent rental income during 2001,
as compared to 2000, was primarily attributable to an increase in gross sales of
certain restaurant Properties, the leases of which require the payment of
contingent rental income.
In addition, for the years ended December 31, 2001, 2000, and 1999, the
Partnership earned $498,273, $266,023, and $373,434, respectively, attributable
to net income earned by joint ventures in which the Partnership is a
co-venturer. The increase in net income earned by these joint ventures during
2001, as compared to 2000, was partially due to the fact that in January 2000,
the Partnership invested in Duluth Joint Venture with affiliates of the General
Partners, for which rental payments commenced in October 2000. In addition, the
increase in net income earned by the joint ventures was partially due to the
fact that in May 2001, Wood-Ridge Real Estate Joint Venture, in which the
Partnership owns a 50% interest, sold its Property in Paris, Texas to the
tenant, in accordance with the purchase option under the lease agreement. This
resulted in a loss to the joint venture of approximately $84,500. In conjunction
with the sale of its Property in Paris, Texas, Wood-Ridge Real Estate Joint
Venture received $200,000 in consideration for the Partnership releasing the
tenant from its obligations under the lease. As of December 31, 2001, the
Partnership and the other joint venture partner had each received $400,000
representing a return of capital of the net sales proceeds. The Partnership used
this return of capital to pay liabilities of the Partnership. Net income earned
by these joint ventures was lower during 2000, as compared to 2001 and 1999, due
to the fact that during 2000, the lease relating to the Property held by
Melbourne Joint Venture, in which the Partnership owns a 50% interest, was
amended to provide for rent reductions starting in February 2000. In June 2000,
the operator of this Property vacated the Property and discontinued operations.
As a result, during 2000, the joint venture stopped recording rental revenues.
The joint venture will continue to pursue collection of past due rental amounts.
In addition, during 2000, the joint venture recorded a provision for write-down
of assets for this Property of approximately $219,100. The provision represented
the difference between the net carrying value of the Property at December 31,
2000, and the General Partners' estimated net realizable value of the Property.
No such provision was recorded during 2001 or 1999. The joint venture did not
recognize any rental income until June 2001, at which time, the joint venture
re-leased this Property to a new tenant. The lease terms for this Property are
substantially the same as the Partnership's other leases. The decrease in net
income earned by joint ventures during 2000, as compared to 1999, was partially
offset by an increase in net income earned by joint ventures due to the
Partnership investing in two joint venture arrangements in late 1999 and one
Property in January 2000, as tenants-in-common, as described in "Capital
Resources."
During 2001, four lessees of the Partnership, (i) Flagstar Enterprises,
Inc., (ii) Jack in the Box Inc., and Jack in the Box Eastern Division L.P.
(affiliated under common control of Jack in the Box Inc.) (herein after referred
to as "Jack in the Box Inc."), (iii) Checkers Drive-In Restaurants, Inc., and
(iv) Golden Corral Corporation, each contributed more than ten percent of the
Partnership's total rental and earned income (including the Partnership's share
of rental and earned income from Properties owned by joint ventures and a
Property held as tenants-in-common with an affiliate). As of December 31, 2001,
Flagstar Enterprises, Inc. was the lessee under leases relating to six
restaurants; Jack in the Box Inc. was the lessee under leases relating to six
restaurants; Checkers Drive-In Restaurants, Inc. was the lessee under leases
relating to 13 restaurants, and Golden Corral Corporation was the lessee under
leases relating to four restaurants. It is anticipated that, based on the
minimum rental payments required by the leases, that these four lessees will
each continue to contribute more than ten percent of the Partnership's total
rental and earned income in 2002. In addition, five Restaurant Chains, Hardee's,
Denny's, Jack in the Box, Checkers, and Golden Corral Family Steakhouse
Restaurants ("Golden Corral"), each accounted for more than ten percent of the
Partnership's total rental and earned income during 2001 (including the
Partnership's share of rental and earned income from Properties owned by joint
ventures and a Property held as tenants-in-common with an affiliate). In 2002,
it is anticipated that these five Restaurant Chains each will continue to
account for more than ten percent of the total rental and earned income to which
the Partnership is entitled under the terms of the leases. Any failure of these
lessees or Restaurant Chains could materially affect the Partnership's income if
the Partnership is not able to re-lease the Properties in a timely manner.
During the years ended December 31, 2001, 2000, and 1999, the
Partnership earned $37,355, $111,298, and $75,382, respectively in interest and
other income. Interest and other income was higher during 2000, as compared to
2001 and 1999, due to the receipt of easement proceeds during 2000, and the fact
that the Partnership earned interest income on net sales proceeds relating to
the 1999 sales of several Properties pending the reinvestment of the net sales
proceeds in additional Properties.
Operating expenses, including depreciation and amortization expense and
provision for write-down of assets, were $1,538,147, $882,166, and $975,867 for
the years ended December 31, 2001, 2000, and 1999, respectively. The increase in
operating expenses during 2001, as compared to 2000, was partially due to the
fact that during 2001, the Partnership recorded provisions for write-down of
assets of $566,043 relating to the vacant Properties in Akron, Ohio, Laurens,
South Carolina, and Las Vegas, Nevada, as described above. The provisions
represented the difference between the carrying value of each Property and the
General Partners' estimated net realizable value for each Property. In February
2002, the Partnership sold the Property in Las Vegas, Nevada to an unrelated
third party, as described above in "Capital Resources." The decrease in
operating expenses during 2000, as compared to 1999, was partially offset by the
fact that during 2000, the Partnership recorded a provision for write-down of
assets of $98,822, as compared to $27,211 during 1999, relating to the vacant
Property in Laurens, South Carolina, described above. In addition, during 2000,
the Partnership recorded a provision for write-down of assets of $41,997
relating to the vacant Property in Akron, Ohio, described above. The provisions
represented the difference between the carrying value of each Property,
including the accumulated accrued rental income balance and the General
Partners' estimated net realizable value for each Property. The Partnership is
currently seeking a replacement tenant or purchaser for the remaining vacant
Property.
During 2001, 2000, and 1999, the Partnership incurred certain expenses,
such as legal fees, real estate taxes, insurance and maintenance relating to the
Properties whose leases were rejected by their respective tenants, as described
above. Due to the fact that Long John Silver's, Inc. assumed and affirmed its
four remaining leases, as described above, Long John Silver's, Inc. will be
responsible for real estate taxes, insurance and maintenance relating to these
Properties; therefore, the General Partners do not anticipate that the
Partnership will incur these expenses for these Properties in the future. The
Partnership sold two of the five vacant Long John Silver's Properties and
entered into new leases with new tenants for the Properties in Albemarle, North
Carolina and Las Vegas, Nevada. The new tenant of the Albemarle, North Carolina
Property is responsible for real estate taxes, insurance, and maintenance
relating to the Property in accordance with the terms of its leases; therefore,
the General Partners do not anticipate the Partnership will incur these expenses
for this Property in the future. During 2001, the new tenant of the Las Vegas,
Nevada Property vacated the Property and ceased restaurant operations, as
described above. In February 2002, the Partnership sold this vacant Property, as
described above in "Capital Resources." The Partnership will continue to incur
certain expenses, such as legal fees, real estate taxes, insurance, and
maintenance relating to the remaining vacant Properties in Laurens, South
Carolina and Akron, Ohio until new tenants or purchasers are located. The
Partnership is currently seeking replacement tenants or purchasers for these
Properties.
Operating expenses increased during 2001, as compared to 2000, due to
the Partnership incurring additional state taxes due to changes in the tax laws
of a state in which the Partnership conducts business and due to an increase in
the costs incurred for administrative expenses for servicing the Partnership and
its Properties, as permitted by the Partnership agreement. The decrease in
operating expenses during 2000, as compared to 1999, was primarily due to the
amount of transaction costs the Partnership incurred related to the General
Partners retaining financial and legal advisors to assist them in evaluating and
negotiating the proposed and terminated merger with APF, as described in
"Termination of Merger." No such amounts were incurred during 2001.
As a result of Long John Silver's, Inc. filing for bankruptcy and
rejecting several leases, as described above, during 1999, the Partnership
reclassified these assets from net investment in direct financing leases to land
and buildings on operating leases. In accordance with Statement of Financial
Accounting Standards No. 13, "Accounting for Leases," the Partnership recorded
the reclassified assets at the lower of original cost, present fair value, or
present carrying amount, which resulted in a loss on termination of direct
financing lease, of $20,119 during 1999. No such loss was recorded during 2001
or 2000.
As a result of the sales of several Properties as described above in
"Capital Resources," the Partnership recognized a loss of $75,930 and $144,720
during 2000 and 1999, respectively. No Properties were sold during 2001.
The restaurant industry, as a whole, has been one of the many
industries affected by the general slowdown in the economy. While the
Partnership has experienced some losses due to the financial difficulties of a
limited number of restaurant operators, the General Partners remain confident in
the overall performance of the fast-food and family style restaurants, the
concepts that comprise the majority of the Partnership's portfolio. Industry
data shows that these restaurant concepts continue to outperform and remain more
stable than higher-end restaurants, those that have been more adversely affected
by the slowing economy.
The Partnership's leases as of December 31, 2001, 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 December 1999, the Securities and Exchange Commission released SAB
101, which provides the staff's view in applying generally accepted accounting
principles to selected revenue recognition issues. SAB 101 requires the
Partnership to defer recognition of certain percentage rental income until
certain defined thresholds are met. The Partnership adopted SAB 101 beginning
January 1, 2000. Implementation of SAB 101 did not have a material impact on the
Partnership's results of operations.
In July 2001, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 141 "Business Combinations" (FAS 141) and
Statement of Financial Accounting Standards No. 142 "Goodwill and Other
Intangible Assets" (FAS 142). The Partnership has reviewed both statements and
has determined that both FAS 141 and FAS 142 do not apply to the Partnership as
of December 31, 2001.
In October 2001, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 144 "Accounting for the
Impairment or Disposal of Long-Lived Assets" (FAS 144). 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 adoption of FAS 144 did not have any
effect on the partnership's recording of impairment losses as this Statement
retained the fundamental provisions of FAS No. 121 "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of".
Termination of Merger
On March 11, 1999, the Partnership entered into an Agreement and Plan
of Merger with APF, pursuant to which the Partnership would be merged with and
into a subsidiary of APF. Under the Agreement and Plan of Merger, APF was to
issue shares of its common stock as consideration for the Merger. On March 1,
2000, the General Partners and APF announced that they had mutually agreed to
terminate the Agreement and Plan of Merger. The agreement to terminate the
Agreement and Plan of Merger was based, in large part, on the General Partners'
concern that, in light of market conditions relating to publicly traded real
estate investment trusts, the value of the transaction had diminished. As a
result of such diminishment, the General Partners' ability to unequivocally
recommend voting for the transaction, in the exercise of their fiduciary duties,
had become questionable.
Item 7A. Quantitative and qualitative Disclosures About Market Risk.
Not applicable
Item 8. Financial Statements and Supplementary Data
CNL INCOME FUND XIV, LTD
(A Florida Limited Partnership)
CONTENTS
Page
----
Report of Independent Certified Public Accountants 19
Financial Statements:
Balance Sheets 20
Statements of Income 21
Statements of Partners' Capital 22
Statements of Cash Flows 23-24
Notes to Financial Statements 25-42
Report of Independent Certified Public Accountants
To the Partners
CNL Income Fund XIV, 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 XIV, Ltd, (a Florida limited
partnership) at December 31, 2001 and 2000, and the results of its operations
and its cash flows for each of the three years in the period ended December 31,
2001 in conformity with accounting principles generally accepted in the United
States of America. In addition, in our opinion, the financial statement
schedules listed in the index appearing under item 14(a)(2) present fairly, in
all material respects, the information set forth therein when read in
conjunction with the related financial statements. These financial statements
and financial statement schedules are the responsibility of the Partnership's
management; our responsibility is to express an opinion on these financial
statements and the 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 use and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
Orlando, Florida
February 8, 2002, except for Note 12, as to which the date is March 5, 2002.
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
BALANCE SHEETS
December 31,
2001 2000
-------------------- -------------------
ASSETS
Land and buildings on operating leases, net $ 23,789,156 $ 24,460,091
Net Investment in direct financing leases 6,315,829 6,663,943
Investment in joint ventures 4,639,435 5,055,505
Cash and cash equivalents 1,039,216 1,038,555
Receivables, less allowance for doubtful accounts
of $77,256 and $29,921, respectively 80,044 177,442
Due from related parties 7,045 18,745
Accrued rental income less allowance for doubtful
accounts of $48,635 in 2001 and 2000 2,335,450 2,162,073
Other assets 47,734 56,233
-------------------- -------------------
$ 38,253,909 $ 39,632,587
==================== ===================
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 21,657 $ 75,746
Accrued and escrowed real estate taxes payable
28,596 28,426
Distributions payable 928,130 928,130
Due to related parties 14,154 130,423
Rents paid in advance and deposits 104,907 101,406
Deferred rental income 51,443 55,012
-------------------- --------------------
Total liabilities 1,148,887 1,319,143
Commitment (Note 11)
Partners' capital 37,105,022 38,313,444
---------------------- --------------------
$ 38,253,909 $ 39,632,587
====================== ====================
See accompanying notes to financial statements.
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
STATEMENTS OF INCOME
Year Ended December 31,
2001 2000 1999
------------------ ----------------- -----------------
Revenues:
Rental income from operating leases $ 2,773,144 $ 3,018,716 $ 2,876,498
Earned income from direct financing leases 665,622 706,260 816,467
Contingent rental income 67,851 47,437 49,928
Interest and other income 37,355 111,298 75,382
------------------ ----------------- -----------------
3,543,972 3,883,711 3,818,275
------------------ ----------------- -----------------
Expenses:
General operating and administrative 312,501 193,074 181,011
Professional services 135,923 38,158 46,238
Management fees to related parties 38,742 40,255 39,473
Real estate taxes 33,612 13,873 22,148
State and other taxes 63,998 30,957 33,353
Loss on termination of direct financing lease -- -- 20,119
Depreciation and amortization 387,328 385,635 391,703
Provision for write-down of assets 566,043 140,819 27,211
Transaction costs -- 39,395 214,611
------------------ ----------------- -----------------
1,538,147 882,166 975,867
------------------ ----------------- -----------------
Income Before Loss on Sale of Assets and Equity
in Earnings of Joint Ventures 2,005,825 3,001,545 2,842,408
Loss on Sale of Assets -- (75,930) (144,720)
Equity in Earnings of Joint Ventures 498,273 266,023 373,434
------------------ ----------------- -----------------
Net Income $ 2,504,098 $ 3,191,638 $ 3,071,122
================== ================= =================
Allocation of Net Income:
General partners $ -- $ -- $ 31,522
Limited partners 2,504,098 3,191,638 3,039,600
------------------ ----------------- -----------------
$ 2,504,098 $ 3,191,638 $ 3,071,122
================== ================= =================
Net Income Per Limited Partner Unit $ 0.56 $ 0.71 $ 0.68
================== ================= =================
Weighted Average Number of Limited Partner Units
Outstanding 4,500,000 4,500,000 4,500,000
================== ================= =================
See accompanying notes to financial statements.
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
STATEMENTS OF PARTNERS' CAPITAL
Years Ended December 31, 2001, 2000 and 1999
General Partners Limited Partners
--------------------------------------- ------------------------------------------------------
Accumulated Accumulated
Contributions Earnings Contributions Distributions Earnings
------------------ ----------------- ---------------- ----------------- -----------------
Balance, December 31, 1998 $ 1,000 $ 176,733 $ 45,000,000 $ (17,848,445 ) $ 17,530,381
Distributions to limited
partners ($0.83 per
limited partner unit) -- -- -- (3,712,520 ) --
Net income -- 31,522 -- -- 3,039,600
------------------ ----------------- ---------------- ----------------- -----------------
Balance, December 31, 1999 1,000 208,255 45,000,000 (21,560,965 ) 20,569,981
Distributions to limited
partners ($0.83 per
limited partner unit) -- -- -- (3,712,520 ) --
Net income -- -- -- -- 3,191,638
------------------ ----------------- ---------------- ----------------- -----------------
Balance, December 31, 2000 1,000 208,255 45,000,000 (25,273,485 ) 23,761,619
Distributions to limited
partners ($0.83 per
limited partner unit) -- -- -- (3,712,520 ) --
Net income -- -- -- -- 2,504,098
------------------ ----------------- ---------------- ----------------- -----------------
Balance, December 31, 2001 $ 1,000 $ 208,255 $ 45,000,000 $ (28,986,005 ) $ 26,265,717
================== ================= ================ ================= =================
Limited Partners
---------------
Syndication
Costs Total
-------------- -------------
$ (5,383,945 ) $39,475,724
-- (3,712,520 )
-- 3,071,122
-------------- -------------
(5,383,945 ) 38,834,326
-- (3,712,520 )
-- 3,191,638
-------------- -------------
(5,383,945 ) 38,313,444
-- (3,712,520 )
-- 2,504,098
-------------- -------------
$ (5,383,945 ) $37,105,022
============== =============
See accompanying note to financial statements.
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
STATEMENTS OF CASH FLOWS
Year Ended December 31,
2001 2000 1999
------------------ ------------------ -----------------
Increase (Decrease) in Cash and Cash Equivalents:
Cash Flows from Operating Activities:
Cash received from tenants $ 3,474,309 $ 3,661,139 $ 3,504,076
Distributions from joint ventures 513,311 481,458 348,560
Cash paid for expenses (698,591) (369,129) (348,555)
Interest received 24,152 66,695 41,390
------------------ ------------------ -----------------
Net cash provided by operating activities 3,313,181 3,840,163 3,545,471
------------------ ------------------ -----------------
Cash Flows from Investing Activities:
Proceeds from sale of assets -- 1,631,947 1,844,601
Additions to land and buildings on operating leases
-- (1,879,324) --
Investment in joint ventures -- (769,498) (665,821)
Return of capital from joint venture 400,000 -- --
Decrease (increase) in restricted cash -- 384,096 (384,096)
Payment of lease costs -- -- (33,000)
------------------ ------------------ -----------------
Net cash provided by (used in) investing activities
400,000 (632,779) 761,684
------------------ ------------------ -----------------
Cash Flows from Financing Activities:
Distributions to limited partners (3,712,520) (3,712,520) (3,712,520)
------------------ ------------------ -----------------
Net cash used in financing activities (3,712,520) (3,712,520) (3,712,520)
------------------ ------------------ -----------------
Net Increase (Decrease) in Cash and Cash Equivalents
661 (505,136) 594,635
Cash and Cash Equivalents at Beginning of Year 1,038,555 1,543,691 949,056
------------------ ------------------ -----------------
Cash and Cash Equivalents at End of Year $ 1,039,216 $ 1,038,555 $ 1,543,691
================== ================== =================
See accompanying notes to financial statements.
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
STATEMENTS OF CASH FLOWS - CONTINUED
Year Ended December 31,
2001 2000 1999
----------------- ----------------- -----------------
Reconciliation of Net Income to Net Cash Provided by
Operating Activities
Net income $ 2,504,098 $ 3,191,638 $ 3,071,122
----------------- ----------------- -----------------
Adjustments to reconcile net income to net cash
provided by operating activities:
Loss on termination of direct financing lease -- -- 20,119
Depreciation 382,996 381,303 387,123
Amortization 4,332 4,332 4,580
Equity in earnings of joint ventures, net of
distributions 15,038 215,799 (24,874 )
Loss on sale of assets -- 75,930 144,720
Provision for write-down of assets 566,043 140,819 27,211
Decrease in net investment in direct financing
leases 136,255 115,699 107,236
Decrease (increase) in receivables 97,398 (91,359 ) (47,175 )
Decrease (increase) in due from related parties
11,700 (13,705 ) (5,040 )
Increase in accrued rental income (239,622 ) (248,177 ) (306,683 )
Increase in other assets 5,199 (12,688 ) (9,004 )
Increase (decrease) in accounts payable and
accrued and escrowed real estate taxes payable (53,919 ) (62,097 ) 145,494
Increase (decrease) in due to related parties (116,269 ) 53,447 51,544
Increase (decrease) in rents paid in advance and
deposits (68 ) 89,222 (20,902 )
----------------- ----------------- -----------------
Total adjustments 809,083 648,525 474,349
----------------- ----------------- -----------------
Net Cash Provided by Operating Activities $ 3,313,181 $ 3,840,163 $ 3,545,471
================= ================= =================
Supplemental Schedule of Non-Cash Financing Activities:
Distributions declared and unpaid at December 31 $ 928,130 $ 928,130 $ 928,130
================= ================= =================
See accompanying notes to financial statements.
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
Years Ended December 31, 2001, 2000, and 1999
1. Significant Accounting Policies:
--------------------------------
Organization and Nature of Business - CNL Income Fund XIV, 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. Borne 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
acquisition of land and buildings at cost, including acquisition and
closing costs. Land and buildings are leased to unrelated third parties
generally on a triple-net basis, whereby the tenant is responsible for
all operating expenses relating to the property, including property
taxes, insurance, maintenance and repairs. The leases are accounted for
using either the direct financing or the operating methods. Such
methods are described below:
Direct financing method - The leases accounted for using the
direct financing method are recorded at their net investment
(which at the inception of the lease generally represents the
cost of the asset) (Note 4). Unearned income is deferred and
amortized to income over the lease terms so as to produce a
constant periodical rate of return on the Partnership's net
investment in the leases.
Operating method - Land and building leases accounted for
using the operating method are recorded at cost, revenue is
recognized as rentals are earned and depreciation is charged
to operations as incurred. Buildings are depreciated on the
straight-line method over their estimated useful lives of 30
years. When scheduled rentals vary during the lease term,
income is recognized on a straight-line basis so as to produce
a constant periodic rent over the lease term commencing on the
date the property is placed in service.
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
Years Ended December 31, 2001, 2000, and 1999
1. Significant Accounting Policies - Continued:
-------------------------------------------
Accrued rental income represents the aggregate amount of
income recognized on a straight-line basis in excess of
scheduled rental payments to date. In contrast, deferred
rental income represents the aggregate amount of scheduled
rental payments to date (including rental payments due during
construction and prior to the property being placed in
service) in excess of income recognized on a straight-line
basis over the lease term commencing on the date the property
is placed in service. Whenever a tenant defaults under the
terms of its lease, or events or changes in circumstance
indicate that the tenant will not lease the property through
the end of the lease term, the Partnership either reserves or
reverses the cumulative accrued rental income balance.
When the properties are sold, the related cost and accumulated
depreciation for operating leases and the net investment for direct
financing leases, plus any accrued rental income, are removed from the
accounts and gains or losses from sales are reflected in income. The
general partners of the Partnership review properties for impairment
whenever events or changes in circumstances indicate that the carrying
amount of the assets may not be recoverable through operations. The
general partners determine whether an impairment in value has occurred
by comparing the estimated future undiscounted cash flows, including
the residual value of the property, with the carrying cost of the
individual property. If an impairment is indicated, the assets are
adjusted to their fair value. Although the general partners have made
their best estimate of these factors based on current conditions, it is
reasonably possible that changes could occur in the near term, which
could adversely affect the general partners' best estimate of net cash
flows expected to be generated from its properties and the need for
asset impairment write-downs.
When the collection of amounts recorded as rental or other income is
considered to be doubtful, an adjustment is made to increase the
allowance for doubtful accounts, which is netted against receivables,
although the Partnership continues to pursue collection of such
amounts. If amounts are subsequently determined to be uncollectible,
the corresponding receivable and allowance for doubtful accounts are
decreased accordingly.
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
Years Ended December 31, 2001, 2000, and 1999
1. Significant Accounting Policies - Continued:
-------------------------------------------
Investment in Joint Ventures - The Partnership accounts for its
interests in Attalla Joint Venture, Wood-Ridge Real Estate Joint
Venture, Salem Joint Venture, Melbourne Joint Venture, CNL Kingston
Joint Venture, Bossier City Joint Venture, Duluth Joint Venture and a
property in Niles, Illinois held as tenants-in-common with an affiliate
using the equity method since the 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.
Lease Costs - Other assets include lease incentive costs and brokerage
and legal fees associated with negotiating new leases, which are
amortized over the terms of the new leases using the straight-line
method. When a property is sold or a lease is terminated the related
lease cost, if any, net of accumulated amortization is removed from the
accounts and charged against income.
Income Taxes - Under Section 701 of the Internal Revenue Code, all
income, expenses and tax credit items flow through to the partners for
tax purposes. Therefore, no provision for federal income taxes is
provided in the accompanying financial statements. The Partnership is
subject to certain state taxes on its income and property.
Additionally, for tax purposes, syndication costs are included in
Partnership equity and in the basis of each partner's investment. For
financial reporting purposes, syndication costs are netted against
partners' capital and represent a reduction of Partnership equity and a
reduction in the basis of each partner's investment. See "Income Taxes"
footnote for a reconciliation of net income for financial reporting
purposes to net income for tax reporting purposes.
Rents Paid in Advance - Rents paid in advance by lessees for future
periods are deferred upon receipt and are recognized as revenues during
the period in which the rental income is earned.
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
Years Ended December 31, 2001, 2000, and 1999
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 management estimates relate to the allowance for doubtful
accounts and future cash flows associated with long-lived assets.
Actual results could differ from those estimates.
Reclassification - Certain items in the prior years' financial
statements have been reclassified to conform to 2001 presentation.
These reclassifications had no effect on total partners' capital or net
income.
Staff Accounting Bulletin No. 101 ("SAB 101") - In December 1999, the
Securities and Exchange Commission released SAB 101, which provides the
staff's view in applying generally accepted accounting principles to
selected revenue recognition issues. SAB 101 requires the Partnership
to defer recognition of certain percentage rental income until certain
defined thresholds are met. The Partnership adopted SAB 101 beginning
January 1, 2000. Implementation of SAB 101 did not have a material
impact on the Partnership results of operations.
Statement of Financial Accounting Standards No. 141 ("FAS 141") and
Statement of Financial Accounting Standards No. 142 ("FAS 142") - - In
July 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 141 "Business Combinations" (FAS
141) and Statement of Financial Accounting Standards No. 142 "Goodwill
and Other Intangible Assets" (FAS 142). The Partnership has reviewed
both statements and has determined that both FAS 141 and FAS 142 do not
apply to the Partnership as of December 31, 2001.
Statement of Financial Accounting Standards No. 144 ("FAS 144") - In
October 2001, the Financial Accounting Standards Board issued 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
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
Years Ended December 31, 2001, 2000, and 1999
1. Significant Accounting Policies - Continued:
-------------------------------------------
recognized, the adjusted carrying amount of a long-lived asset is its
new cost basis. The adoption of FAS 144 did not have any effect on the
partnership's recording of impairment losses as this Statement retained
the fundamental provisions of FAS No. 121 "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed of".
2. Leases:
------
The Partnership leases its land or land and buildings primarily to
operators of national and regional fast-food and family-style
restaurants. The leases are accounted for under the provisions of
Statement of Financial Accounting Standards No. 13, "Accounting for
Leases." Some of the leases are classified as operating leases and some
of the leases have been classified as direct financing 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 portions of the majority of the leases are operating leases.
Substantially all leases are for 15 to 20 years and provide for minimum
and contingent rentals. In addition, the tenant pays all property taxes
and assessments, fully maintains the interior and exterior of the
building and carries insurance coverage for public liability, property
damage, fire and extended coverage. The lease options generally allow
tenants to renew the leases for two to five successive five-year
periods subject to the same terms and conditions as the initial lease.
Most leases also allow the tenant to purchase the property at fair
market value after a specified portion of the lease has elapsed.
3. Land and Buildings on Operating Leases:
--------------------------------------
Land and buildings on operating leases consisted of the following at
December 31:
2001 2000
----------------- ----------------
Land $ 15,112,888 $ 15,324,747
Buildings 11,244,002 11,320,082
----------------- ----------------
26,356,890 26,644,829
Less accumulated depreciation (2,567,734 ) (2,184,738 )
----------------- ----------------
$ 23,789,156 $ 24,460,091
================= ================
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
Years Ended December 31, 2001, 2000, and 1999
3. Land and Buildings on Operating Leases - Continued:
--------------------------------------------------
During the year ended December 31, 2000, the Partnership recorded a
provision for write-down of assets in the amount of $98,822 relating to
a Long John Silver's Property. The tenant of this property filed for
bankruptcy and ceased payment of rents under the terms of its lease
agreement. The provision represented the difference between the
carrying value of the property at December 31, 2000 and the general
partners' estimated net realizable value for the property. During 2001,
the Partnership increased the provision for write-down of assets by
$39,096. The total provision represented the difference between the
carrying value of the property at December 31, 2001 and the general
partners' estimated net realizable value of the property.
In September 2000, the Partnership sold its property in Columbus, Ohio
and received net sales proceeds of $1,631,947, resulting in a loss of
$75,930. In November 2000, the Partnership reinvested these net sales
proceeds in a property in Bristol, Virginia (see Note 8).
During the year ended December 31, 2001, the Partnership recorded a
provision for write-down of assets in the amount of $36,984 relating to
the property located in Akron, Ohio. The tenant for this property filed
for bankruptcy and ceased payments of rents under the terms of its
lease agreement. The provision represented the difference between the
carrying value of the property at December 31, 2001 and the general
partners' estimated net realizable value for the property.
In addition, at June 30, 2001, the Partnership recorded a provision for
write-down of assets of $278,104 relating to the property located in
Las Vegas, Nevada. The tenant of this property vacated the property and
ceased operations. The provision represented the difference between the
carrying value of the property, including the accumulated accrued
rental income balance and the general partners' estimated net
realizable value for the property. In February 2002, the Partnership
sold this property to an unrelated third party (see Note 12).
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
Years Ended December 31, 2001, 2000, and 1999
3. Land and Buildings on Operating Leases - Continued:
--------------------------------------------------
The following is a schedule of the future minimum lease payments to be
received on noncancellable operating leases at December 31, 2001:
2002 $ 2,552,633
2003 2,592,135
2004 2,743,616
2005 2,787,467
2006 2,808,967
Thereafter 20,218,002
---------------------
$ 33,702,820
=====================
Since lease renewal periods are exercisable at the option of the
tenant, the above table only presents future minimum lease payments due
during the initial lease terms. In addition, this table does not
include any amounts for future contingent rentals which may be received
on the leases based on a percentage of the tenant's gross sales.
4. Net Investment in Direct Financing Leases:
-----------------------------------------
The following lists the components of the net investment in direct
financing leases at December 31:
2001 2000
-------------- -------------
Minimum lease payments receivable
$ 11,011,148 $ 12,016,087
Estimated residual values 2,052,866 2,156,574
Less unearned income (6,748,185 ) (7,508,718 )
-------------- -------------
Net investment in direct financing leases $ 6,315,829 $ 6,663,943
============== =============
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
Years Ended December 31, 2001, 2000, and 1999
4. Net Investment in Direct Financing Leases - Continued:
-----------------------------------------------------
The following is a schedule of future minimum lease payments to be
received on direct financing leases at December 31, 2001:
2002 $ 854,130
2003 857,792
2004 865,117
2005 865,117
2006 868,279
Thereafter 6,700,713
-----------------
$ 11,011,148
=================
The above table does not include future minimum lease payments for
renewal periods or for contingent rental payments that may become due
in future periods (see Note 3).
At June 30, 2001, the Partnership recorded a provision for write-down
of assets of $211,859 for an impairment of the carrying value of the
property in Las Vegas, Nevada, due to the fact that the tenant of this
property vacated the property and ceased restaurant operations. The
provision represented the difference between the carrying value of the
property and the general partners' estimated net realizable value for
the property. In February 2002, the Partnership sold this property to
an unrelated third party (see Note 12).
5. Investment in Joint Ventures:
----------------------------
The Partnership owns a 50%, 72.2%, 50%, 39.94%, 50%, 11% and 44%
interest in the profits and losses of Attalla Joint Venture, Salem
Joint Venture, Wood-Ridge Real Estate Joint Venture, CNL Kingston Joint
Venture, Melbourne Joint Venture, Bossier City Joint Venture, and
Duluth Joint Venture, respectively. The remaining interests in these
joint ventures are held by affiliates of the Partnership which have the
same general partners.
In January 2000, the Partnership used the majority of the net sales
proceeds it received from the 1999 sale of a property in Houston,
Texas, to acquire an interest in a Baker's
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
Years Ended December 31, 2001, 2000, and 1999
5. Investment in Joint Ventures - Continued:
----------------------------------------
Square property in Niles, Illinois, as tenants-in-common, with CNL
Income Fund VI, Ltd., a Florida limited partnership and an affiliate of
the general partners. As of December 31, 2001, the Partnership owned a
26% interest in this property.
During 2000, the lease associated with the property owned by Melbourne
Joint Venture had been amended to provide for rent reductions due to
financial difficulties the tenant was experiencing. As a result,
Melbourne Joint Venture reclassified the building portion of the asset
from net investment in direct financing lease to land and building on
operating leases. In accordance with the Statement of Financial
Accounting Standards #13, "Accounting for Leases," Melbourne Joint
Venture recorded the reclassified asset at the lower of original cost,
present fair value, or present carrying amount. No loss on the
reclassification of the direct financing lease was recorded. As of
December 31, 2000, Melbourne Joint Venture recorded a provision for
write-down of assets totaling approximately $219,100 due to the fact
that the operator of its property vacated the property and discontinued
operations. The provision represented the difference between the
property's carrying value at December 31, 2000 and the general
partners' estimated net realizable value of the property. In June 2001,
the Partnership released this property to a new tenant.
In May 2001, Wood-Ridge Real Estate Joint Venture, in which the
Partnership owns a 50% interest, sold its property in Paris, Texas to
the tenant for $800,000, in accordance with the purchase option under
the lease agreement. The sale resulted in a loss to the joint venture
of approximately $84,500. In connection with the sale, the joint
venture received $200,000 in lease termination income in consideration
for the joint venture releasing the tenant from its obligations under
the lease. As of December 31, 2001, the Partnership and the other joint
venture partner each received $400,000 representing a return of capital
from the net sales proceeds.
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
Years Ended December 31, 2001, 2000, and 1999
5. Investment in Joint Ventures - Continued:
----------------------------------------
As of December 31, 2001, Attalla Joint Venture, Salem Joint Venture,
CNL Kingston Joint Venture, Melbourne Joint Venture, Bossier City Joint
Venture, Duluth Joint Venture, and the Partnership and an affiliate, as
tenants-in-common, each owned and leased one property, and Wood-Ridge
Real Estate Joint Venture owned and leased five properties, to
operators of fast-food or family-style restaurants. The following
presents the condensed financial information for the joint ventures and
the property held as tenants-in-common with an affiliate at December
31:
2001 2000
-------------- -------------
Land and buildings on operating leases, net $ 9,255,329 $11,173,080
Net investment in direct financing leases 1,200,282 351,555
Cash 141,460 96,732
Receivables 66,676 29,955
Accrued rental income 513,697 380,924
Other assets 16,859 18,074
Liabilities 144,332 170,367
Partners' capital 11,049,971 11,879,953
Revenues 1,288,188 1,152,258
Provision for loss in assets -- 219,053
Net income 1,157,684 661,064
The Partnership recognized income totalling $498,273, $266,023, and
$373,434, for the years ended December 31, 2001, 2000, and 1999,
respectively, from these joint ventures.
6. Allocations and Distributions:
-----------------------------
From inception through December 31, 1999, generally, all net income and
net losses of the Partnership, excluding gains and losses from the sale
of 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; provided, however,
that the one percent of net cash flow to be distributed to the general
partners was subordinated to receipt by the limited partners of an
aggregate, ten percent, cumulative, noncompounded annual return on
their invested capital contributions (the "Limited Partners' 10%
Return").
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
Years Ended December 31, 2001, 2000, and 1999
6. Allocations and Distributions - Continued:
-----------------------------------------
From inception through December 31, 1999, generally, net sales proceeds
from the sales 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 Limited Partners'
10% 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 a 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 sale of properties, in liquidation
of the Partnership 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 the partners with
positive capital account balances, in proportion to such balances, up
to amounts sufficient to reduce such positive balances to zero, and (v)
thereafter, any funds remaining shall then be distributed 95% to the
limited partners and five percent to the general partners.
Effective January 1, 2000, the general partners waived their right to
receive future distributions from the Partnership, including both
distributions of operating cash flow and distributions of liquidation
proceeds, to the extent that the cumulative amount of such
distributions would exceed the balance in the general partners' capital
account as of December 31, 1999. Accordingly, for years commencing
January 1, 2000 and after, the Partnership's net income will be
allocated entirely among the limited partners. However,
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
Years Ended December 31, 2001, 2000, and 1999
6. Allocations and Distributions:
-----------------------------
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, 2001 and 2000.
During each of the years ended December 31, 2001, 2000 and 1999, the
Partnership declared distributions to the limited partners of
$3,712,520. No distributions have been made to the general partners to
date.
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
Years Ended December 31, 2001, 2000, and 1999
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:
2001 2000 1999
-------------- -------------- ---------------
Net income for financial reporting purposes $ 2,504,098 $ 3,191,638 $ 3,071,122
Loss on lease termination of direct financing
leases -- -- 20,119
Depreciation for tax reporting purposes in
excess of depreciation for financial
reporting purposes (49,054 ) (44,656 ) (58,526 )
Equity in earnings of joint ventures for tax
reporting purposes in excess of (less than)
equity in earnings of joint ventures for
financial reporting purposes (6,710 ) 133,500 (79,904 )
Gain on sale of assets for tax reporting
purposes in excess of gain for financial
reporting purposes -- 138,725 37,025
Provision for write-down of assets 566,043 140,819 27,211
Direct financing leases recorded as operating
leases for tax reporting purposes 136,255 115,699 107,236
Allowance for doubtful accounts 47,335 23,218 5,598
Accrued rental income (239,622 ) (248,177 ) (306,683 )
Capitalization (deduction) of transaction
costs for tax reporting purposes -- (239,842 ) 214,611
Rents paid in advance (30,637 ) 77,385 (28,232 )
Deferred rental income (3,570 ) -- --
Other 1,032 1,920 566
-------------- -------------- ---------------
Net income for federal income tax purposes $ 2,925,170 $ 3,290,229 $ 3,010,143
============== ============== ===============
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
Years Ended December 31, 2001, 2000, and 1999
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 (the "Advisor") is a wholly owned subsidiary
of CNL Financial Group, Inc. until it merged with CNL American
Properties Fund, Inc. ("APF"). CNL Fund Advisors, Inc., a majority
owned subsidiary of CNL Financial Group, Inc. until it merged with and
into APF effective September 1, 1999, served as the Partnership's
advisor until it assigned its rights in and obligations under a
management agreement with the Partnership to the Advisor effective July
1, 2000. The individual general partners are stockholders and directors
of APF.
The Advisor provides certain services relating to management of the
Partnership and its properties pursuant to a management agreement with
the Partnership. In connection therewith, the Partnership has agreed to
pay the Advisor a 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.
The management fee, which will not exceed fees which are competitive
for similar services in the same geographic area, may or may not be
taken, in whole or in part as to any year, in the sole discretion of
the Advisor. All or any portion of the management fee not taken as to
any fiscal year shall be deferred without interest and may be taken in
such other fiscal year as the Advisors shall determine. The Partnership
incurred management fees of $38,742, $40,255, and $39,473, for the
years ended December 31, 2001, 2000, and 1999, respectively.
The Advisor is also entitled to receive a deferred, subordinated real
estate disposition fee payable upon the sale of one or more properties
based on the lesser of one-half of a competitive real estate commission
or three percent of the sales price if the Advisor provides a
substantial amount of services in connection with the sale. However, if
the net sales proceeds are reinvested in a replacement property, no
such real estate disposition fees will be incurred until such
replacement property is sold and the net sales proceeds are
distributed. The payment of the real estate disposition fee is
subordinated to the receipt by the limited partners of their aggregate
Limited Partners' 10% Return plus their invested capital contributions.
No deferred, subordinated real estate disposition fees have been
incurred since inception.
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
Years Ended December 31, 2001, 2000, and 1999
8. Related Party Transactions - Continued:
--------------------------------------
During the years ended December 31, 2001, 2000, and 1999, the
Partnership's advisor and its affiliates provided accounting and
administrative services to the Partnership on a day-to-day basis,
including services during 2000 and 1999 relating to the proposed and
terminated merger. The Partnership incurred $234,884, $109,991, and
$142,557, for the years ended December 31, 2001, 2000, and 1999,
respectively, for such services.
During 1999, the Partnership sold its property in Kansas City, Missouri
to Commercial Net Lease Realty, Inc., an affiliate of the general
partners, for $270,000 and received net sales proceeds of $268,450,
resulting in a gain of $20,718.
During 2000, the Partnership acquired a 26% interest in a property from
CNL BB Corp., an affiliate of the general partners, for which the
property had a total purchase price of $1,223,500. The property
acquired during 2000 is being held as tenants-in-common, with CNL
Income Fund VI, Ltd. ("CNL VI"), a Florida limited partnership, an
affiliate of the general partners (see Note 5). CNL BB Corp. had
purchased and temporarily held title to this property in order to
facilitate the acquisition of the property by the Partnership and CNL
VI as tenants-in-common. The total purchase price paid by the
Partnership and CNL VI represented the costs incurred by CNL BB Corp.
to acquire and carry the property, including closing costs.
During 2000, the Partnership acquired a property in Bristol, Virginia
for a purchase price of approximately $1,879,300 from CNL BB Corp., an
affiliate of the general partners. CNL BB Corp. had purchased and
temporarily held title to this property in order to facilitate the
acquisition of the property by the Partnership. The purchase price paid
by the Partnership represented the costs incurred by CNL BB Corp. to
acquire and carry the property, including closing costs.
The due to related parties at December 31, 2001 and 2000, totaled
$14,154 and $130,423, respectively.
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
Years Ended December 31, 2001, 2000, and 1999
9. Concentration of Credit Risk:
----------------------------
The following schedule presents total rental and earned income from
individual lessees, or affiliated groups of lessees, each representing
more than ten percent of the Partnership's total rental and earned
income (including the Partnership's share of total rental and earned
income from joint ventures and the property held as tenants-in-common
with an affiliate) for each of the years ended December 31:
2001 2000 1999
---------------- ---------------- ----------------
Jack in the Box Inc. (formerly
Foodmaker, Inc.) $ 544,315 $ 577,253 $ 572,503
Checkers Drive-In
Restaurants, Inc. 549,759 540,233 603,070
Golden Corral Corporation 491,463 548,433 534,997
Flagstar Enterprises, Inc. 425,666 424,211 425,409
Long John Silver's, Inc. N/A N/A 433,701
In addition, the following schedule presents total rental and earned
income from individual restaurant chains, each representing more than
ten percent of the Partnership's total rental and earned income
(including the Partnership's share of total rental and earned income
from joint ventures and the property held as tenants-in-common with an
affiliate) for each of the years ended December 31:
2001 2000 1999
---------------- ---------------- ----------------
Golden Corral Family Steakhouse
Restaurants $ 689,256 $ 548,433 $ 534,997
Denny's 563,851 526,651 615,893
Checkers Drive-In Restaurants 549,759 540,233 603,070
Jack in the Box 544,315 577,253 572,503
Hardee's 390,736 424,211 425,409
Long John Silver's N/A N/A 433,701
The information denoted by N/A indicates that for each period
presented, the tenant or group of affiliated tenants and chain did not
represent more than ten percent of the Partnership's total rental and
earned income.
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
Years Ended December 31, 2001, 2000, and 1999
9. Concentration of Credit Risk - Continued:
----------------------------------------
Although the Partnership's properties are geographically diverse
throughout the United States and the Partnership's lessees operate a
variety of restaurant concepts, default by any lessee or restaurant
chain contributing more than ten percent of the Partnership's revenues
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.
In 1998, Long John Silver's, Inc. filed for bankruptcy and in June 1998
and August 1999 rejected the leases relating to four and one of its
nine leases, respectively, and ceased making rental payments to the
Partnership on the rejected leases. The Partnership entered into new
leases, each with a new tenant, for two of the five properties with
rejected leases. In addition, the Partnership sold two of the five
properties with rejected leases. The Partnership will not recognize any
rental and earned income from the remaining vacant property until a new
tenant for the property is located, or until the property is sold and
the proceeds from the sale are reinvested in additional property. In
August 1999, Long John Silver's, Inc. assumed and affirmed its four
remaining leases, and the Partnership has continued to receive rental
payments relating to these four leases. The lost revenues resulting
from the remaining vacant property, as described above, could have an
adverse effect on the results of operations of the Partnership if the
Partnership is not able to re-lease the property in a timely manner.
10. Selected Quarterly Financial Data:
---------------------------------
The following table presents selected unaudited quarterly financial
data for each full quarter during the years ended December 31, 2001 and
2000:
2001 Quarter First Second Third Fourth Year
----------------------------- -------------- -------------- ------------- ------------- -------------
Revenues (1)(2) $ 981,644 $1,068,542 $ 993,962 $ 998,097 $4,042,245
Net income 644,260 304,995 766,395 788,448 2,504,098
Net income per limited
partner unit 0.14 0.07 0.17 0.18 0.56
2000 Quarter First Second Third Fourth Year
----------------------------- -------------- -------------- ------------- ------------- -------------
Revenues (1)(2) $1,132,075 $887,799 $966,910 $1,162,950 $4,149,734
Net income 872,548 686,940 634,881 997,269 3,191,638
Net income per limited
partner unit 0.19 0.15 0.14 0.23 0.71
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
Years Ended December 31, 2001, 2000, and 1999
10. Selected Quarterly Financial Data - Continued:
---------------------------------------------
(1) Revenues include equity in earnings of the joint ventures.
(2) Revenues have been adjusted to reclassify any reversals of accrued
rental income to provision for write-down of assets. This
reclassification had no effect on total net income.
11. Commitment:
----------
In October 2001, the Partnership entered into an agreement with an
unrelated third party to sell the property in Las Vegas, Nevada. In
February 2002, the Partnership sold this property (see Note 12).
12. Subsequent Events:
-----------------
In February 2002, the Partnership sold its property in Las Vegas,
Nevada, to an unrelated third party for $1,200,000 and received net
sales proceeds of approximately $1,141,800, resulting in a gain of
approximately $497,700. In March 2002, the Partnership reinvested these
net sales proceeds in a property in San Antonio, Texas at an
approximate cost of $1,262,200. The Partnership acquire this property
from CNL Funding 2001-A, LP, a Delaware limited partnership and an
affiliate of the general partners. CNL Funding 2001-A, LP had purchased
and temporarily held title to the property in order to facilitate the
acquisition of the property by the Partnership. The purchase price paid
by the Partnership represented the costs incurred by CNL Funding
2001-A, LP to acquire and carry the property, including closing costs.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None
PART III
Item 10. Directors and Executive Officers of the Registrant
The General Partners of the Registrant are James M. Seneff, Jr., Robert
A. Bourne and CNL Realty Corporation, a Florida corporation. The General
Partners manage and control the Partnership's affairs and have general
responsibility and the ultimate authority in all matters affecting the
Partnership's business. The Partnership has available to it the services,
personnel and experience of CNL Fund Advisors, Inc., CNL Financial Group, Inc.
and their affiliates, all of which are affiliates of the General Partners.
James M. Seneff, Jr., age 55. Since 1971, Mr. Seneff has been active in
the acquisition, development, and management of real estate projects and,
directly or through an affiliated entity, has served as a general partner or
co-venturer in over 100 real estate ventures. These ventures have involved the
financing, acquisition, construction, and leasing of restaurants, office
buildings, apartment complexes, hotels, and other real estate. Mr. Seneff has
served as Director and Chairman of the Board of CNL American Properties Fund,
Inc. ("APF"), a public, unlisted real estate investment trust, since 1994. Mr.
Seneff served as Chief Executive Officer of APF from 1994 through August 1999,
and has served as Co-Chief Executive Officer of APF since December 2000. Mr.
Seneff served as Chairman of the Board and Chief Executive Officer of CNL Fund
Advisors, 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., a diversified real estate company, and has served as a Director,
Chairman of the Board and Chief Executive Officer of CNL Financial Group, Inc.
since its formation in 1980. CNL Financial Group, Inc. is the parent company,
either directly or indirectly through subsidiaries, of CNL Real Estate Services,
Inc., CNL Capital Markets, Inc., CNL Investment Company and CNL Securities Corp.
Mr. Seneff also serves as a Director, Chairman of the Board and Chief Executive
Officer of CNL Hospitality Properties, Inc., a public, unlisted real estate
investment trust, as well as, CNL Hospitality Corp., its advisor. In addition,
he serves as a Director, Chairman of the Board and Chief Executive Officer of
CNL Retirement Properties, Inc., a public, unlisted real estate investment trust
and its advisor, CNL Retirement Corp. Since 1992, Mr. Seneff has also served as
a Director, Chairman of the Board and Chief Executive Officer of Commercial Net
Lease Realty, Inc., a public real estate investment trust that is listed on the
New York Stock Exchange. Mr. Seneff has also served as a Director, Chairman of
the Board and Chief Executive Officer of CNL Securities Corp. since 1979; CNL
Investment Company since 1990; and CNL Institutional Advisors, Inc., a
registered investment advisor for pension plans, since 1990. Mr. Seneff formerly
served as a Director of First Union National Bank of Florida, N.A., and
currently serves as the Chairman of the Board of CNL Bank. Mr. Seneff previously
served on the Florida State Commission on Ethics and is a former member and past
Chairman of the State of Florida Investment Advisory Council, which recommends
to the Florida Board of Administration investments for various Florida employee
retirement funds. The Florida Board of Administration, Florida's principal
investment advisory and money management agency, oversees the investment of more
than $60 billion of retirement funds. Mr. Seneff received his degree in Business
Administration from Florida State University in 1968.
Robert A. Bourne, age 54. Mr. Bourne has participated as a general
partner or co-venturer in over 100 real estate ventures involved in the
financing, acquisition, construction, and leasing of restaurants, office
buildings, apartment complexes, hotels, and other real estate. Mr. Bourne is
Director of the Board of Directors of APF. Mr. Bourne served as President of APF
from 1994 through February 1999. He also served as Treasurer from February 1999
through August 1999 and from May 1994 through December 1994. He also served in
various executive positions with 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, President and Treasurer of CNL Hospitality Properties, Inc., a
public, unlisted real estate investment trust; as well as, Director, Vice
Chairman of the Board, President and Treasurer of CNL Hospitality Corp., its
advisor. In addition, Mr. Bourne serves as Director, Vice Chairman of the Board,
President and Treasurer of CNL Retirement Properties, Inc., a public, unlisted
real estate investment trust; as well as, a Director, Vice Chairman of the
Board, President and Treasurer 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 46. 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. 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 38. 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.
Item 11. Executive Compensation
Other than as described in Item 13, the Partnership has not paid and
does not intend to pay any executive compensation to the General Partners or any
of their affiliates. There are no compensatory plans or arrangements regarding
termination of employment or change of control.
Item 12. Security Ownership of Certain Beneficial Owners and Management
As of March 15, 2002, no person was known to the Registrant to be a
beneficial owner of more than five percent of the Units.
The following table sets forth, as of March 15, 2002, 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, 2001, 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, 2001
- --------------------------------- --------------------------------------------- -------------------------------
Reimbursement to affiliates for Operating expenses are reimbursed at the Accounting and administrative
operating expenses lower of cost or 90% of the prevailing rate services: $234,884
at which comparable services could have
been obtained in the same geographic area.
Affiliates of the General Partners from
time to time incur certain operating
expenses on behalf of the Partnership for
which the Partnership reimburses the
affiliates without interest.
Annual management fee to One percent of the sum of gross revenues $38,742
affiliate 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. The management fee, which
will not exceed competitive fees for
comparable services in the same geographic
area, may or may not be taken, in whole or
in part as to any year, in the sole
discretion of affiliates of the General
Partners. All or any portion of the
management fee not taken as to any fiscal
year shall be deferred without interest and
may be taken in such other fiscal year as
the affiliates shall determine.
Deferred, subordinated real A deferred, subordinated real estate $-0-
estate disposition fee payable disposition fee, payable upon sale of one
to affiliates 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.
Amount Incurred
Type of Compensation For the Year
and Recipient Method of Computation Ended December 31, 2001
- --------------------------------- --------------------------------------------- -------------------------------
General Partners' deferred, A deferred, subordinated share equal to one $-0-
subordinated share of percent of Partnership distributions of net
Partnership net cash flow cash flow, subordinated to certain minimum
returns to the Limited Partners.
General Partners' deferred, A deferred,
subordinated share equal to $-0-
subordinated share of five percent of
Partnership distributions Partnership net
sales proceeds of such net sales proceeds,
subordinated to from a sale or sales
not in certain minimum returns to the Limited
liquidation of the Partnership Partners.
General Partners' share of Distributions of net sales proceeds from a $-0-
Partnership net sales proceeds sale or sales of substantially all of the
from a sale or sales in Partnership's assets will be distributed in
liquidation of the Partnership the following order or priority: (i)
first, to pay all debts and liabilities of
the Partnership and to establish reserves;
(ii) second, to Partners with positive
capital account balances, determined after
the allocation of net income, net loss,
gain and loss, in proportion to such
balances, up to amounts sufficient to
reduce such balances to zero; and (iii)
thereafter, 95% to the Limited Partners and
5% to the General Partners.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) The following documents are filed as part of this report.
1. Financial Statements
Report of Independent Certified Public Accountants
Balance Sheets at December 31, 2001 and 2000
Statements of Income for the Years Ended December 31, 2001,
2000, and 1999
Statements of Partners' Capital for the Years Ended December
31, 2001, 2000, and 1999
Statements of Cash Flows for the Years Ended December 31,
2001, 2000, and 1999
Notes to Financial Statements
2. Financial Statement Schedules
Schedule II - Valuation and Qualifying Accounts - Years Ended
December 31, 2001, 2000, and 1999
Schedule III - Real Estate and Accumulated Depreciation at
December 31, 2001
Notes to Schedule III - Real Estate and Accumulated
Depreciation at December 31, 2001
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 Affidavit and Certificate of Limited Partnership of CNL
Income Fund XIV, Ltd. (Included as Exhibit 3.2 to
Registration Statement No. 33-53672-01 on Form S-11 and
incorporated herein by reference.)
4.1 Affidavit and Certificate of Limited Partnership of CNL
Income Fund XIV, Ltd. (Included as Exhibit 3.2 to
Registration Statement No. 33-53672-01 on Form S-11 and
incorporated herein by reference.)
4.2 Amended and Restated Agreement of Limited Partnership of
CNL Income Fund XIV, Ltd. ( Included as Exhibit 4.2 to
Form 10-K filed with the Securities and Exchange
Commission on April 13, 1994, incorporated herein by
reference.)
10.1 Management Agreement between CNL Income Fund XIV, Ltd.
and CNL Investment Company (Included as Exhibit 10.1 to
Form 10-K filed with the Securities and Exchange
Commission on April 13, 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 13, 2001, and incorporated
herein by reference.)
(b) The Registrant filed no reports on Form 8-K during the period October 1,
2001 through December 31, 2001.
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 21st day of
March, 2002.
CNL INCOME FUND XIV, 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 21, 2002
- ------------------------------------ (Principal Financial and Accounting
Robert A. Bourne Officer)
/s/ James M. Seneff, Jr. Chief Executive Officer and Director March 21, 2002
- ------------------------------------ (Principal Executive Officer)
James M. Seneff, Jr.
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
Years Ended December 31, 2001, 2000, and 1999
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
- ---------- ----------------- -------------- --------------- ------------- ------------- ------------ ------------
1999 Allowance for
doubtful
accounts (a) $ 13,727 $ -- $ 6,563 (b) $ -- (c) $ (965 ) $ 19,325
============== =============== ============= ============= ============ ============
2000 Allowance for
doubtful
accounts (a) $ 19,325 $ 36,750 $ 44,907 (b) $ -- (c) $ (22,426 ) $ 78,556
============== =============== ============= ============= ============ ============
2001 Allowance for
doubtful
accounts (a) $ 78,556 $ 11,945 $ 64,296 (b) $ 28,906 (c) $ -- $ 125,891
============== =============== ============= ============= ============ ============
(a) Deducted from receivables and accrued rental income on the balance sheet.
(b) Reduction of rental and other income.
(c) Amounts written off as uncollectible.
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 2001
Costs Capitalized
Subsequent To
Initial Cost Acquisition
------------------- ----------------
Encum- Buildings Improve- Carrying
brances Land Improvemenments Costs
------- --------- ------------------ ------
Properties the Partnership
has Invested in Under
Operating Leases:
Bennigan's Restaurant:
Fayetteville, North Ca-olina (k$605,712 - - -
Burger King Restaurant:
Alliance, Ohio - 210,290 - - -
Checkers Drive-In Restaurants:
Boynton Beach, Florida- 501,606 - - -
Chamblee, Georgia - 332,737 - - -
Delray Beach, Florida - 193,110 - - -
Foley, Alabama - 197,821 - - -
Huntsville, Alabama - 362,907 - - -
Merriam, Kansas - 305,896 - - -
Norcross, Georgia - 474,262 - - -
Orlando, Florida - 559,646 - - -
Pensacola, Florida - 296,726 - - -
Suwannee, Georgia - 269,643 - - -
St. Petersburg, Florid- 338,396 - - -
Coral Springs, Florida- 421,221 - - -
Denny's Restaurants:
Bullhead City, Arizona- 282,086 623,778 152,416 -
Topeka, Kansas - 420,446 - - -
Tempe, Arizona - 881,047 - - -
-
El Ranchito Restaurant:
Albemarle, North Carol-na (o) 214,623 370,149 - -
Golden Corral Family
Steakhouse Restaurants:
Burlington, North Caro-ina 931,962 - 975,218 -
Wilson, North Carolina- 415,390 - 833,156 -
Greeley, Colorado - 303,170 - 965,024 -
Bristol, Virginia (n) - 733,334 1,145,990 - -
Hardee's Restaurants:
Franklin, Tennessee - 201,441 423,569 - -
Nashville, Tennessee - 315,087 - - -
Antioch, Tennessee - 296,341 485,974 - -
Batesville, Mississipp- 186,404 453,720 - -
Jacksonville, Florida - 385,903 409,773 - -
Jack in the Box Restaurants:
Mesquite, Texas - 449,442 528,882 - -
Plano, Texas - 423,092 467,253 - -
Farmers Branch, Texas - 465,235 525,470 - -
Fort Worth, Texas - 297,688 551,394 - -
Fort Worth, Texas - 257,393 419,245 - -
Long John Silver's Restaurants:
Apopka, Florida - 320,435 - - -
Houston, Texas - 411,403 - - -
Houston, Texas(i) - 342,971 475,749 - -
Marion, Ohio - 321,032 - - -
Laurens, South Carolin- (j)(l) 96,753 386,284 - -
Other Restaurants:
Marietta, Georgia - 332,418 - - -
Albemarle, North Carol-na 202,363 447,278 - -
Akron, Ohio (h) - 246,431 805,793 - -
Las Vegas, Nevada (p) - 520,884 - - -
--------- --------- -------- ------
$15,324,74$8,520,301$2,925,814 -
========= ========= ======== ======
Property of Joint Venture in
Which the Partnership has a
50% Interest and has
Invested in Under an
Operating Lease:
Hardee's Restaurant:
Attalla, Alabama - $196,274 $434,428 - -
========= ========= ======== ======
Properties of Joint Venture in
Which the Partnership has a
50% Interest and has Invested
in Under Operating Leases:
Boston Market Restaurants:
Matthews, North Ca-olina 409,942 737,391 - -
Raleigh, North Car-lina 518,507 542,919 - -
Taco Bell Restaurant:
Anniston, Alabam- 173,395 329,202 - -
Other Restaurants:
Murfreesboro, Tenn-ssee 398,313 - - -
Blaine, Minnesota - 253,934 531,509 - -
--------- --------- -------- ------
$1,754,091$2,141,021 - -
========= ========= ======== ======
Property of Joint Venture in
Which the Partnership has a
72.2% Interest and has
Invested in Under an
Operating Lease:
Denny's Restaurant:
Salem, Ohio - $131,762 - - -
========= ========= ======== ======
Property of Joint Venture in
Which the Partnership has a
39.94% Interest and has
Invested in Under an
Operating Lease:
Taco Bell Restaurant:
Kingston, Tennesse- $189,452 - $328,445 -
========= ========= ======== ======
Property of Joint Venture in
Which the Partnership has a
50% Interest and has
Invested in Under an
Operating Lease:
Denny's Restaurant:
Melbourne, Florida-(m) $438,973 $639,141 - -
========= ========= ======== ======
Property of Joint Venture in
Which the Partnership has a
11% Interest and has
Invested in Under an
Operating Lease:
IHOPaRestaurantstaurants:
Bossier City, Lou-siana $453,016 $866,192 - -
========= ========= ======== ======
Property of Joint Venture in
Which the Partnership has a
44% Interest and has
Invested in Under an
Operating Lease:
RoadhouseeGrillsRestaurant:
Duluth, Georgia - $1,078,469 - - -
========= ========= ======== ======
Property of Tenants-in-Common
in Which the Partnership has
a 26% Interest and
has Invested in Under an
Operating Lease:
Baker's Square
Niles, Illinois (n)- $664,944 $838,434 - -
========= ========= ======== ======
Properties the Partnership has
Invested in Under Direct
Financing Leases:
Bennigan's Restaurant:
Fayetteville, Nor-h Carolina (k) - $931,239 - -
Burger King Restaurant:
Alliance, Ohio - - 535,949 - -
Denny's Restaurants:
Winslow, Arizona - 199,767 788,202 - -
Topeka, Kansas - - - 489,014 -
Tempe, Arizona - - - 585,382 -
Hardee's Restaurants:
Nashville, Tennes-ee - 553,400 - -
Jack in the Box Restaurant:
Shreveport, Louis-ana 240,811 848,338 - -
Long John Silver's Restaurants:
Apopka, Florida - - 506,493 - -
Houston, Texas - - 449,633 - -
Marion, Ohio - - 463,504 - -
Other Restaurant:
Las Vegas, Nevada-(p) - 565,680 - -
--------- --------- -------- ------
$440,578 $5,642,438$1,074,396 -
========= ========= ======== ======
Property of Joint Venture in
Which the Partnership has
a 72.2% Interest and has
Invested in Under a Direct
Financing Lease:
Denny's Restaurant:
Salem, Ohio - - - $371,836 -
========= ========= ======== ======
Gross Amount at Which Life on Which
Carried at Close of Period (c) Depreciation in
- ------------------------------- Date Latest Income
Buildings and Accumulatedof ConDate Statement is
Land ImprovementTotal DepreciatiostructAcquired Computed
- ---------- ------------------- ---------------------------------------
$605,712 (g) $605,712 (e) 1983 10/98 (e)
210,290 (g) 210,290 (e) 1994 07/94 (e)
501,606 - 501,606 (d) - 03/94 (d)
332,737 - 332,737 (d) - 03/94 (d)
193,110 - 193,110 (d) - 03/94 (d)
197,821 - 197,821 (d) - 03/94 (d)
362,907 - 362,907 (d) - 03/94 (d)
305,896 - 305,896 (d) - 03/94 (d)
474,262 - 474,262 (d) - 03/94 (d)
559,646 - 559,646 (d) - 03/94 (d)
296,726 - 296,726 (d) - 03/94 (d)
269,643 - 269,643 (d) - 03/94 (d)
338,396 - 338,396 (d) - 03/95 (d)
421,221 - 421,221 (d) - 03/95 (d)
282,086 776,194 1,058,280 209,039 1988 09/93 (b)
420,446 (g) 420,446 (e) 1994 10/93 (e)
881,047 (g) 881,047 (e) 1994 11/93 (e)
214,623 370,149 584,772 50,793 1994 04/94 (o)
931,962 975,218 1,907,180 260,147 1993 10/93 (b)
415,390 833,156 1,248,546 227,869 1993 10/93 (b)
303,170 965,024 1,268,194 226,847 1994 08/94 (b)
733,334 1,145,990 1,879,324 44,566 2000 11/00 (b)
201,441 423,569 625,010 114,979 1993 11/93 (b)
315,087 (g) 315,087 (e) 1993 11/93 (e)
296,341 485,974 782,315 131,918 1993 11/93 (b)
186,404 453,720 640,124 121,738 1993 12/93 (b)
385,903 409,773 795,676 109,946 1993 12/93 (b)
449,442 528,882 978,324 143,567 1992 11/93 (b)
423,092 467,253 890,345 125,899 1992 11/93 (b)
465,235 525,470 990,705 141,565 1988 12/93 (b)
297,688 551,394 849,082 147,592 1992 12/93 (b)
257,393 419,245 676,638 112,947 1983 12/93 (b)
320,435 (g) 320,435 (e) 1994 03/94 (e)
411,403 (g) 411,403 (e) 1993 03/94 (e)
342,971 475,749 818,720 43,531 1994 04/94 (j)
321,032 (g) 321,032 (e) 1994 06/94 (e)
96,753 221,155 317,908 28,726 1994 03/94 (j)
332,418 - 332,418 (d) - 03/94 (d)
202,363 447,278 649,641 123,165 1992 09/93 (b)
246,431 768,809 1,015,240 202,900 1993 10/93 (b)
309,025 (g) 309,025 (e) 1994 07/94 (e)
- ---------- --------- --------- ---------
$15,112,888 $11,244,00$26,356,890$2,567,734
========== ========= ========= =========
$196,274 $434,428 $630,702 $116,561 1993 11/93 (b)
========== ========= ========= =========
409,942 737,391 1,147,333 128,544 1994 10/96 (b)
518,507 542,919 1,061,426 94,643 1994 10/96 (b)
173,395 329,202 502,597 54,614 1993 01/97 (b)
398,313 - 398,313 (d) 1996 10/96 (d)
253,934 531,509 785,443 92,654 1996 10/96 (b)
- ---------- --------- --------- ---------
$1,754,091 $2,141,021$3,895,112 $370,455
========== ========= ========= =========
$131,762 (g) $131,762 (e) 1991 03/95 (e)
========== =========
$189,452 $328,445 $517,897 $44,765 1997 11/97 (b)
========== ========= ========= =========
$438,973 $420,088 $859,061 30,295 1998 04/98 (m)
========== ========= ========= =========
$453,016 $866,192 $1,319,208 $62,288 1998 11/99 (b)
========== ========= ========= =========
$1,078,469 - $1,078,469 - 2000 12/99 (b)
========== ========= ========= =========
$664,944 $838,434 $1,503,378 $55,896 2000 01/00 (b)
========== ========= ========= =========
(g) (g) (g) (e) 1983 10/98 (e)
- (g) (g) (e) 1994 07/94 (e)
(g) (g) (g) (f) 1993 09/93 (f)
- (g) (g) (e) 1994 10/93 (e)
- (g) (g) (e) 1994 11/93 (e)
- (g) (g) (e) 1993 11/93 (e)
(g) (g) (g) (f) 1993 11/93 (f)
- (g) (g) (e) 1994 03/94 (e)
- (g) (g) (e) 1993 03/94 (e)
- (g) (g) (e) 1994 06/94 (e)
- (g) (g) (e) 1994 07/94 (e)
- (g) (g) (e) 1991 03/95 (e)
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
NOTES TO SCHEDUE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 2001
(a) Transactions in real estate and accumulated depreciation during 2001,
2000, and 1999 are summarized as follows:
Accumulated
Cost Depreciation
----------------- --------------------
Properties the Partnership has invested in Under
Operating Leases:
Balance, December 31, 1998 $ 28,220,513 $ 1,674,094
Dispositions (1,987,957 ) (58,344 )
Reclassified from direct financing lease 958,786 --
Reclassified to direct financing lease (582,177 ) --
Provision for write-down of assets (27,211 ) --
Depreciation expense -- 387,123
----------------- ------------------
Balance, December 31, 1999 26,581,954 2,002,873
Acquisitions 1,879,324 --
Dispositions (1,717,627 ) (199,438 )
Provision for write-down of assets (98,822 ) --
Depreciation expense -- 381,303
----------------- ------------------
Balance, December 31, 2000 26,644,829 2,184,738
Provision for write-down of assets (287,939 ) --
Depreciation expense -- 382,996
----------------- ------------------
Balance, December 31, 2001 $ 26,356,890 $ 2,567,734
================= ==================
Property of Joint Venture in Which the Partnership has a 50% Interest
and has Invested in Under an Operating Lease:
Balance, December 31, 1998 $ 630,702 $ 73,118
Depreciation expense -- 14,481
----------------- ------------------
Balance, December 31, 1999 630,702 87,599
Depreciation expense -- 14,481
----------------- ------------------
Balance, December 31, 2000 630,702 102,080
Depreciation expense -- 14,481
----------------- ------------------
Balance, December 31, 2001 $ 630,702 $ 116,561
================= ==================
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
NOTES TO SCHEDUE III - REAL ESTATE AND ACCUMULATED
DEPRECIATION - CONTINUED
December 31, 2001
Accumulated
Cost Depreciation
----------------- ------------------
Properties of Joint Venture in Which the Partnership
has a 50% Interest and has Invested in Under
Operating Leases:
Balance, December 31, 1998 $ 4,883,784 $ 207,269
Depreciation expense -- 94,203
----------------- ------------------
Balance, December 31, 1999 4,883,784 301,472
Depreciation expense -- 94,203
----------------- ------------------
Balance, December 31, 2000 4,883,784 395,675
Dispositions (988,672 ) (104,199 )
Depreciation expense -- 78,979
----------------- ------------------
Balance, December 31, 2001 $ 3,895,112 $ 370,455
================= ==================
Properties of Joint Venture in Which the Partnership has a 72.2%
Interest and has Invested in Under an Operating Lease:
Balance, December 31, 1998 $ 131,762 $ --
Depreciation expense (e) -- --
----------------- ------------------
Balance, December 31, 1999 131,762 --
Depreciation expense (e) -- --
----------------- ------------------
Balance, December 31, 2000 131,762 --
Depreciation expense (e) -- --
----------------- ------------------
Balance, December 31, 2001 $ 131,762 $ --
================= ==================
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
NOTES TO SCHEDUE III - REAL ESTATE AND ACCUMULATED
DEPRECIATION - CONTINUED
December 31, 2001
Accumulated
Cost Depreciation
---------------- ------------------
Property of Joint Venture in Which the Partnership
has a 39.94% Interest and has Invested in Under
an Operating Lease:
Balance, December 31, 1998 $ 517,897 $ 11,921
Depreciation expense -- 10,948
---------------- ------------------
Balance, December 31, 1999 517,897 22,869
Depreciation expense -- 10,948
---------------- ------------------
Balance, December 31, 2000 517,897 33,817
Depreciation expense -- 10,948
---------------- ------------------
Balance, December 31, 2001 $ 517,897 $ 44,765
================ ==================
Property of Joint Venture in Which the Partnership
has a 50% Interest and has Invested in Under an
Operating Lease:
Balance, December 31, 1998 $ 1,042,865 $ 937
Reclassified to a direct financing lease (603,892 ) (937 )
Depreciation expense -- --
---------------- ------------------
Balance, December 31, 1999 438,973 --
Reclassified from a direct financing lease 639,141 --
Provision for write-down of assets (219,053 ) --
Depreciation Expense -- 16,219
---------------- ------------------
Balance, December 31, 2000 859,061 16,219
Depreciation Expense -- 14,076
---------------- ------------------
Balance, December 31, 2001 $ 859,061 $ 30,295
================ ==================
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
NOTES TO SCHEDUE III - REAL ESTATE AND ACCUMULATED
DEPRECIATION - CONTINUED
December 31, 2001
Accumulated
Cost Depreciation
---------------- ------------------
Property of Joint Venture in Which the Partnership
has a 11% Interest and has Invested in Under an
Operating Lease:
Balance, December 31, 1998 $ -- $ --
Acquisition 1,319,208 --
Depreciation expense -- 4,542
--------------- -----------------
Balance, December 31, 1999 1,319,208 4,542
Depreciation expense -- 28,873
--------------- -----------------
Balance, December 31, 2000 1,319,208 33,415
Depreciation expense -- 28,873
--------------- -----------------
Balance, December 31, 2001 $ 1,319,208 $ 62,288
=============== =================
Property of Joint Venture in Which the Partnership has
a 44% Interest and has Invested in Under an Operating Lease:
Balance, December 31, 1998 $ -- $ --
Acquisition 1,083,153 --
Depreciation expense -- --
--------------- -----------------
Balance, December 31, 1999 1,083,153 --
Acquisition 865,184 --
Depreciation Expense -- 7,210
--------------- -----------------
Balance, December 31, 2000 1,948,337 7,210
Reclassified to a direct financing lease (869,868 ) (7,210 )
Depreciation expense -- --
--------------- -----------------
Balance, December 31, 2001 $ 1,078,469 $ --
=============== =================
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
NOTES TO SCHEDUE III - REAL ESTATE AND ACCUMULATED
DEPRECIATION - CONTINUED
December 31, 2001
Accumulated
Cost Depreciation
--------------- -----------------
Property held as Tenant-in-Common in Which the
Partnership has a 26% Interest and has Invested
in Under an Operating Lease:
Balance, December 31, 1999 $ -- $ --
Acquisitions 1,503,378 --
Depreciation Expense -- 27,948
--------------- -----------------
Balance, December 31, 2000 1,503,378 27,948
Depreciation expense -- 27,948
--------------- -----------------
Balance, December 31, 2001 $ 1,503,378 $ 55,896
=============== =================
(b) Depreciation expense is computed for buildings and improvements based
upon estimated lives of 30 years. All of the leases are treated as
operating leases for federal income tax purposes.
(c) As of December 31, 2001, the aggregate cost of the Properties owned by
the Partnership and joint ventures for federal income tax purposes was
$32,470,424 and $11,078,889, respectively. All of the leases are
treated as operating leases for federal income tax purposes.
(d) The building portion of this Property is owned by the tenant;
therefore, depreciation is not applicable.
(e) 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
net investment in direct financing leases; therefore, depreciation is
not applicable.
(f) The lease for the land and building has been recorded as a direct
financing lease. The cost of the land and building has been included in
net investment in direct financing leases; therefore, depreciation is
not applicable.
(g) Certain components of the lease relating to land and building have been
recorded as a direct financing lease. Accordingly, costs relating to
these components of this lease are not shown.
(h) Effective August 1994, the lease for this Property was terminated,
resulting in the lease being reclassified as an operating lease. The
undepreciated cost of the Property in Akron, Ohio was written down to
net realizable value due to an impairment in value. The Partnership
recognized the impairment by recording a provision for write-down of
assets in the amount of $36,984 at December 31, 2001. The tenant of
this Property filed for bankruptcy and ceased payments of rents under
its lease. The impairment at December 31, 2001 represented the
difference between the Property's carrying value and the General
Partners' estimated net realizable value of the Property. The cost of
the Property presented on this schedule is the net amount at which the
Property was carried at December 31, 2001, including the provision for
write-down of assets.
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
NOTES TO SCHEDUE III - REAL ESTATE AND ACCUMULATED
DEPRECIATION - CONTINUED
December 31, 2001
(i) Effective October 1999, the lease for this property was amended,
resulting in the reclassification of the land and building portions of
the lease to an operating lease. The building was recorded at net book
value and depreciated over its estimated remaining life of
approximately 24.5 years.
(j) Effective August 1999, the lease for this Property was terminated,
resulting in the reclassification of the land and building portions of
the lease to an operating lease. The land and building were recorded at
net book value and the building is being depreciated over its estimated
life remaining of approximately 25 years.
(k) During the year ended December 31, 1998, the Partnership purchased land
and building from CNL First Corp., an affiliate of the General
Partners, for an aggregate cost of $1,537,000.
(l) The undepreciated cost of the Property in Laurens, South Carolina was
written down to net realizable value due to an impairment in value. The
Partnership recognized the impairment by recording a provision for
write-down of assets in the amount of $39,096, $98,822, and $27,211 at
December 31, 2001, 2000, and 1999, respectively. The tenant of this
Property filed for bankruptcy and ceased payment of rents under the
terms of its lease agreement. The impairments at December 31, 2001,
2000, and 1999 represented the difference between the Property's
carrying value and the General Partners' estimated net realizable value
of the Property. The cost of the Property presented on this schedule is
the net amount at which the Property was carried at December 31, 2001,
including the provision for write-down of assets.
(m) Effective February 2000, the lease for this Property was terminated,
resulting in the reclassification of the building portion of the lease
to an operating lease. The building was recorded at net book value and
is being depreciated over its estimated remaining life of approximately
29 years.
(n) During the year ended December 31, 2000, the Partnership purchased land
and building from CNL BB Corp., an affiliate of the General Partners,
for an aggregate cost of $1,879,300. In addition, during the year ended
December 31, 2000, the Partnership and an affiliate, as
tenants-in-common, purchased a Property from CNL BB Corp., an affiliate
of the General Partners for an aggregate cost of $1,503,378.
(o) Effective June 1998, the lease for this Property was terminated,
resulting in the reclassification of the land and building portions of
the lease to an operating lease. The land and building were recorded at
net book value and the building is being depreciated over its estimated
remaining life of approximately 26 years.
(p) The undepreciated cost of the Property in Las Vegas, Nevada was written
down to net realizable value due to an impairment in value. The
Partnership recognized the impairment by recording a provision for
write-down of assets in the amount of $423,718 at December 31, 2001.
The tenant of this Property vacated the property and ceased restaurant
operations. The provision represented the difference between the
carrying value of the Property at December 31, 2001 and the General
Partners' estimated net realizable value for the Property. The cost of
the Property presented on this schedule is the net amount at which the
Property was carried at December 31, 2001, including the provision for
write-down of assets.