UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
(Mark One)
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 2002
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-23974
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]
Indicate by check mark whether the registrant is an accelerated filer
(as defined in Exchange Act Rule 12b-2): Yes___ No X
Aggregate market value of the voting stock held by nonaffiliates of the
registrant: The registrant registered an offering of 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.
As of December 31, 1999, the Partnership owned 43 Properties directly
and 12 Properties indirectly through joint venture arrangements. During 2000,
the Partnership reinvested the majority of the net sales proceeds it received
from the 1999 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. During 2002, the
Partnership sold its Properties in Las Vegas, Nevada; Laurens, South Carolina;
Greeley, Colorado; and Merriam, Kansas and reinvested a portion of these sale
proceeds in Properties in San Antonio, Texas and Phoenix, Arizona.
As of December 31, 2002, the Partnership owned 41 Properties directly
and 12 Properties indirectly through joint venture or tenancy in common
arrangements. The Properties owned at December 31, 2002 include 12 wholly owned
Properties consisting of land only. The lessee of the 12 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 holds its Properties until the General Partners
determine that the sale or other disposition of the Properties is advantageous
in view of the Partnership's investment objectives. In deciding whether to sell
Properties, the General Partners consider factors such as potential capital
appreciation, net cash flow and federal income tax considerations. Certain
lessees also have been granted options to purchase Properties, generally at the
Property's then fair market value after a specified portion of the lease term
has elapsed. The Partnership has no obligation to sell all or any portion of a
Property at any particular time, except as may be required under property
purchase options granted to certain lessees.
Leases
Although there are variations in the specific terms of the leases, the
following is a summarized description of the general structure of the
Partnership's leases. The leases of the Properties owned by the Partnership, 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 25 years (the average being approximately 18
years) and expire between 2008 and 2028. 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 $203,600. 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 38 of the Partnership's 53 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 12 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.
During 2002, the Partnership reinvested the net sales proceeds from the
sales of several Properties in Properties in San Antonio, Texas and Phoenix,
Arizona. The lease terms for these Properties are substantially the same as the
Partnership's other leases, as described above.
During 2000, Elias Brothers Restaurants, Inc. filed for bankruptcy and
rejected the one lease it had with the Partnership relating to a Property in
Akron, Ohio and ceased making rental payments on this lease. In October 2002,
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. In connection with the new lease, the new tenant has
agreed to pay for all the costs necessary to convert the Property into a
different restaurant concept. Conversion of the Property is expected to be
completed early in 2003, at which point rental payments are expected to
commence.
Major Tenants
During 2002, five 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., (iv)
Golden Corral Corporation, and (v) Denny's, Inc. each contributed more than ten
percent of the Partnership's rental revenues (including the Partnership's share
of rental revenues from Properties owned by joint ventures and the Property held
as tenants-in-common with an affiliate). As of December 31, 2002, Flagstar
Enterprises, Inc. was the lessee under leases relating to six restaurants; Jack
in the Box Inc. was the lessee under leases relating to seven restaurants;
Checkers Drive-In Restaurants, Inc. was the lessee under leases relating to 12
restaurants; Golden Corral Corporation was the lessee under leases relating to
three restaurants; and Denny's, Inc. was the lessee under leases relating five
restaurants. It is anticipated that, based on the minimum rental payments
required by the leases, these five leases will each continue to contribute more
than ten percent of the Partnership's rental revenues in 2003. 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 rental revenues during 2002 (including the
Partnership's share of rental revenues from Properties owned by joint ventures
and the Property held as tenants-in-common with an affiliate). In 2003, it is
anticipated that these five Restaurant Chains each will continue to account for
more than ten percent of the rental revenues 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, 2002, 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 and
tenancy in common arrangements as of December 31, 2002:
Entity Name Year Ownership Partners Property
Attalla Joint Venture 1993 50.00 % CNL Income Fund XIII, Ltd. Attalla, AL
Salem Joint Venture 1995 72.20% CNL Income Fund XIII, Ltd., Salem, OH
Wood-Ridge Real Estate Joint 1996 50.00% CNL Income Fund XV, Ltd. Murfreesboro, TN
Venture Raleigh, NC
Blaine, MN
Mathews, NC
Anniston, AL
CNL Kingston Joint Venture 1997 39.94% CNL Income Fund XVII, Ltd. Kingston, TN
Melbourne Joint Venture 1998 50.00% CNL Income Fund VI, Ltd., Melbourne, FL
Bossier City Joint Venture 1999 11.00% CNL Income Fund VIII, Ltd. Bossier City, LA
CNL Income Fund XII, Ltd.
Duluth Joint Venture 1999 44.00% CNL Income Fund VII, Ltd. Duluth, GA
CNL Income Fund VI, Ltd., and 2000 26.00% CNL Income Fund VI, Ltd. Niles, IL
CNL Income Fund XIV, Ltd.,
Tenants in Common
Wood-Ridge Real Estate Joint Venture was formed to hold six Properties,
however, all other joint ventures or tenancies in common were formed to hold one
Property. Each CNL Income Fund is an affiliate of the General Partners and is a
limited partnership organized pursuant to the laws of the state of Florida. The
Partnership shares management control equally with the affiliates of the General
Partners
The joint venture and tenancy in common arrangements provide for the
Partnership and its joint venture or tenancy in common partners to share in all
costs and benefits in proportion to each partner's percentage interest in the
business entity. The Partnership and its partners are also jointly and severally
liable for all debts, obligations and other liabilities of the joint venture or
tenancy in common. Net cash flow from operations is distributed to each joint
venture or tenancy in common partner in accordance with its respective
percentage interest in the business entity.
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 joint venturer by an event of dissolution. Events of
dissolution include the bankruptcy, insolvency or termination of any joint
venturer, sale of the Property owned by the joint venture and mutual agreement
of the Partnership and its joint venture partner to dissolve the joint venture.
Any liquidation proceeds, after paying joint venture debts and liabilities and
funding reserves for contingent liabilities, will be distributed first to the
joint venture partners with positive capital account balances in proportion to
such balances until such balances equal zero, and thereafter in proportion to
each joint venture partner's percentage interest in the joint venture.
The joint venture and tenancy in common agreements restrict each
party's ability to sell, transfer to assign its joint venture or tenancy in
common interest without first offering it for sale to its partner, either upon
such terms and conditions as to which the parties may agree or, in the event the
parties cannot agree, on the same terms and conditions as any offer from a third
party to purchase such joint venture or tenancy in common interest.
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 use of joint venture and tenancy in common arrangements allows the
Partnership to fully invest its available funds at times at which it would not
have sufficient funds to purchase an additional property, or at times when a
suitable opportunity to purchase an additional property is not available. The
use of joint venture and tenancy in common arrangements also provides the
Partnership with increased diversification of its portfolio among a greater
number of properties. In addition, tenancy in common arrangements may allow the
Partnership to defer the gain for federal income tax purposes upon the sale of
the property if the proceeds are reinvested in an additional property.
Certain Management Services
RAI Restaurants, Inc. (formerly known as CNL Restaurants XVIII, Inc.),
an affiliate of the General Partners, provides certain services relating to
management of the Partnership and its Properties pursuant to a management
agreement with the Partnership. CNL APF Partners, LP assigned its rights in, and
its obligations under, the management agreement with the Partnership to RAI
Restaurants Inc. ("Advisor") effective January 1, 2002. All of the terms and
conditions of the management agreement, including the payment of fees, remained
unchanged. Under this agreement, the Advisor is responsible for collecting
rental payments, inspecting the Properties and the tenants' books and records,
assisting the Partnership in responding to tenant inquiries and notices, and
providing information to the Partnership about the status of the leases and the
Properties. The Advisor also assists the General Partners in negotiating the
leases. For these services, the Partnership had agreed to pay the Advisor an
annual fee of one percent of the sum of gross 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.
The management agreement continues until the Partnership no longer owns
an interest in any Properties unless terminated at an earlier date upon 60 days'
prior notice by either party.
Competition
The fast-food and family-style restaurant business is characterized by
intense competition. The restaurants on the Partnership's Properties compete
with independently owned restaurants, restaurants which are part of local or
regional chains, and restaurants in other well-known national chains, including
those offering different types of food and service.
Employees
The Partnership has no employees. The officers of CNL Realty
Corporation and the officers and employees of CNL American Properties Fund,
Inc., the parent company of the Advisor, perform certain services for the
Partnership. In addition, the General Partners have available to them the
resources and expertise of the officers and employees of CNL Financial Group,
Inc., a diversified real estate company, and its affiliates, who may also
perform certain services for the Partnership.
Item 2. Properties
As of December 31, 2002, the Partnership owned 53 Properties. Of the 53
Properties, 41 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 95,500 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,
either directly or indirectly through joint venture of tenancy in common
arrangements, as of December 31, 2002 by state. More detailed information
regarding the location of the Properties is contained in the Schedule of Real
Estate and Accumulated Depreciation.
State Number of Properties
Alabama 4
Arizona 4
Florida 9
Georgia 5
Illinois 1
Kansas 1
Louisiana 2
Minnesota 1
Mississippi 1
North Carolina 7
Ohio 4
Tennessee 5
Texas 8
Virginia 1
-------
TOTAL PROPERTIES 53
=======
Buildings. Each of the Properties owned by the Partnership, either
directly or indirectly through joint venture of tenancy in common arrangements,
includes a building that is one of a Restaurant Chain's approved designs.
However, buildings located on 12 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, 2002, the Partnership had no plans for
renovation of the Properties. Depreciation expense is computed for buildings and
improvements using the straight-line method using depreciable lives of 40 years
for federal income tax purposes.
As of December 31, 2002, 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 $31,532,548
and $11,078,889, respectively.
The following table lists the Properties owned by the Partnership,
either directly or indirectly through joint venture of tenancy in common
arrangements, as of December 31, 2002 by Restaurant Chain.
Restaurant Chain Number of Properties
Bakers Square 1
Bennigan's 1
Boston Market 2
Burger King 1
Checkers 11
Denny's 6
El Ranchito Restaurant 1
Golden Corral 3
Hardee's 6
IHOP 2
Jack in the Box 7
LeeAnn Chin Chinese Cuisine 1
Long John Silver's 4
Roadhouse Grill 1
Taco Bell 2
Taco Cabana 1
Other 3
-------
TOTAL PROPERTIES 53
=======
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.
At December 31, 2002, 2001, 2000, 1999 and 1998, the Properties were
98%, 96%, 96%, 98%, and 93% occupied, respectively. The following is a schedule
of the average rent per Property for each of the years ended December 31:
2002 2001 2000 1999 1998
------------- ------------- --------------- -------------- --------------
Rental Revenues (1)(2) $ 4,110,920 $ 4,016,647 $ 4,006,450 $ 4,190,352 $ 3,805,764
Properties (2) 52 53 54 55 57
Average Rent per
Property $ 79,056 $ 75,786 $ 74,194 $ 76,188 $ 66,768
(1) Rental revenues includes the Partnership's share of rental revenues
from the Properties owned through joint venture arrangements and the
Property owned through a tenancy in common arrangement.
(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, 2002 for the next ten years and thereafter.
Percentage of
Expiration Number Annual Rental Gross Annual
Year of Leases Revenues Rental Income
----------------- ---------------- --------------------- --------------------------
2003 -- -- --
2004 -- -- --
2005 -- -- --
2006 -- -- --
2007 -- -- --
2008 2 $ 197,304 5.18%
2009 1 40,181 1.05%
2010 -- -- --
2011 8 651,054 17.08%
2012 1 28,745 0.75%
Thereafter 40 2,894,521 75.94%
---------- ------------- -------------
Total (1) 52 $ 3,811,805 100.00%
========== ============= =============
(1) Excludes one Property which was closed for renovations at December 31,
2002.
Leases with Major Tenants. The terms of each of the leases with the
Partnership's major tenants as of December 31, 2002 (see Item 1. Business -
Major Tenants), are substantially the same as those described in Item 1.
Business - Leases.
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 $77,800 (ranging from approximately $66,100 to
$91,600).
Jack in the Box Inc. leases seven Jack in the Box restaurants. The
initial term of each lease is 18 years (expiring in between 2011 and 2020) and
the average minimum base annual rent is approximately $96,700 (ranging from
approximately $68,500 to $125,300).
Checkers Drive-In Restaurants, Inc. leases 11 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 $39,400
(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.
Golden Corral Corporation leases three Golden Corral restaurants. The
initial term of each lease is 15 years, (expiring between 2008 and 2015) and the
average minimum base annual rent is approximately $179,800 (ranging from
approximately $132,800 to $203,600).
Denny's, Inc. leases four Denny's restaurants and one other restaurant.
The initial term of each lease is 20 years (expiring between 2013 and 2015) and
the average minimum base annual rent is approximately $93,900 (ranging from
approximately $69,400 to $113,000).
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 10, 2003, there were 2,995 holders of record of the
Units. There is no public trading market for the Units, and it is not
anticipated that a public market for the Units will develop. During 2002,
Limited Partners who wished to sell their Units may have offered the Units for
sale pursuant to the Partnership's distribution reinvestment plan (the "Plan"),
and Limited Partners who wished to have their distributions used to acquire
additional Units (to the extent Units were available for purchase) may have done
so pursuant to such Plan. The General Partners have the right to prohibit
transfers of Units. From inception through December 31, 2002, the price paid for
any Unit transferred pursuant to the Plan ranged from $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 2002 and 2001 other than
pursuant to the Plan, net of commissions.
2002 (1) 2001 (1)
-------------------------------------- ---------------------------------------
High Low Average High Low Average
--------- ---------- ----------- -------- ---------- -----------
First Quarter $9.50 $ 5.40 $ 8.04 $7.35 $ 6.52 $ 6.76
Second Quarter 7.28 6.28 6.84 6.80 6.43 6.53
Third Quarter 9.50 9.00 9.31 6.77 5.98 6.35
Fourth Quarter 7.34 5.33 6.67 6.57 5.74 6.16
(1) A total of 62,617 and 19,924 Units were transferred other than pursuant
to the Plan for the years ended December 31, 2002 and 2001,
respectively.
The capital contribution per Unit was $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, 2002 and 2001, 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
2002 and 2001. No amounts distributed to partners for the years ended December
31, 2002 and 2001 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
The following selected financial data should be read in conjunction
with the financial statements and related notes in Item 8. hereof.
2002 2001 2000 1999 1998
--------------- --------------- --------------- --------------- ---------------
Year ended December 31:
Continuing Operations (5):
Revenues $ 3,399,290 $ 3,367,426 $ 3,699,423 $ 3,618,584 $ 3,567,671
Equity in earnings of
joint ventures 386,433 498,273 266,023 373,434 317,654
Income from continuing
operations (1) (2) 3,473,229 2,417,656 3,149,228 2,970,736 3,023,359
Discontinued Operations (5):
Revenues 154,325 176,546 184,288 199,691 223,804
Income from discontinued
operations (3) (4) 256,225 86,442 42,410 100,386 175,728
Net income 3,729,454 2,504,098 3,191,638 3,071,122 3,199,087
Net Income per Unit:
Continuing operations $ 0.77 $ 0.54 $ 0.70 $ 0.66 $ 0.66
Discontinued operations 0.06 0.02 0.01 0.02 0.04
--------------- --------------- --------------- --------------- ---------------
Total $ 0.83 $ 0.56 $ 0.71 $ 0.68 $ 0.70
=============== =============== =============== =============== ===============
Cash distributions
declared $ 3,712,520 $ 3,712,520 $ 3,712,520 $ 3,712,520 $ 3,712,520
Cash distributions
declared per
Unit 0.83 0.83 0.83 0.83 0.83
At December 31:
Total assets $38,296,857 $ 38,253,909 $39,632,587 $40,072,897 $ 40,538,159
Total partners' capital 37,121,956 37,105,022 38,313,444 38,834,326 39,475,724
(1) Income from continuing operations includes $526,947, $41,997, and
$314,474, in provisions for write-down of assets for the years ended
December 31, 2001, 2000, and 1998, respectively.
(2) Income from continuing operations includes $497,689, $37,369, and
$112,206 in gains on sale of assets for the years ended December 31,
2002, 1999, and 1998, respectively, and $75,930 for the year ended
December 31, 2000 in losses on sale of assets.
(3) Income from discontinued operations includes $143,065, $39,096,
$98,822, and $27,211 in provisions for write-down of assets for the
years ended December 31, 2002, 2001, 2000, and 1999, respectively.
(4) Income from discontinued operations includes $271,909 from gain on sale
of assets for the year ended December 31, 2002.
(5) Certain items from prior years' financial statements have been
reclassified to conform to 2002 presentation. These reclassifications
had no effect on net income. The results of operations relating to
Properties that were either disposed of or were classified as held for
sale as of December 31, 2002 are reported as discontinued operations.
The results of operations relating to Properties that were identified
for sale as of December 31, 2001 but sold subsequently are reported as
continuing operations.
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. The leases of the Properties provide for minimum base annual rental
amounts (payable in monthly installments) ranging from approximately $21,100 to
$203,600. 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.
As of December 31, 2000, the Partnership owned 43 Properties directly and 13
Properties indirectly through joint venture and tenancy in common arrangements.
As of December 31, 2001, the Partnership owned 43 Properties directly and 12
Properties indirectly through joint venture or tenancy in common arrangements.
As of December 31, 2002, the Partnership owned 41 Properties directly and 12
Properties indirectly through joint venture or tenancy in common arrangements.
Capital Resources
Cash from operating activities was $3,680,160, $3,313,181, and
$3,840,163, for the years ended December 31, 2002, 2001, and 2000, respectively.
The increase in cash from operating activities during 2002, as compared to 2001,
was a result of changes in the Partnership's working capital while the decrease
in cash from operating activities during 2001, as compared to the previous year,
was a result of changes in income and expenses and changes in the Partnership's
working capital.
Other sources and uses of cash included the following during the years
ended December 31, 2002, 2001, and 2000.
During 2000, the Partnership reinvested the net sales proceeds from the
1999 sale of the Property in Houston, Texas 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. As of December 31, 2002, the Partnership had a 26% interest in this
Property.
In addition, during 2000, the Partnership sold its Property in
Columbus, Ohio for and received net sales proceeds of approximately $1,631,900,
resulting in a loss of approximately $75,900. In November 2000, the Partnership
reinvested the net sales proceeds in a Golden Corral Property in Bristol,
Virginia. 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.
During 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. During 2001, the Partnership and the other
joint venture partner each received $400,000 representing a return of capital of
the net sales proceeds.
During 2002, the Partnership sold its Properties in Las Vegas, Nevada;
Greeley, Colorado; Laurens, South Carolina, and Merriam, Kansas, each to a third
party and received total net sales proceeds of approximately $2,928,800. The
Property in Las Vegas, Nevada had been identified for sale as of December 31,
2001. The gain on the sale of the Property in Las Vegas, Nevada totaled
approximately $497,700. The other three Properties were identified for sale
during 2002 and resulted in a net gain on sale of discontinued operations of
approximately $128,800. During 2002, the Partnership reinvested the net sales
proceeds from these four sales in a Property in San Antonio, Texas at an
approximate cost of $1,262,200 and in a Property in Phoenix, Arizona at an
approximate cost of $1,319,200. The Partnership acquired the Property in San
Antonio, Texas 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 the
Property.
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 accounts and certificates of deposit with less than a 90-day maturity
date, pending reinvestment in additional Properties, paying Partnership
expenses, or making distributions to partners. At December 31, 2002, the
Partnership had $1,328,466 invested in such short-term investments as compared
to $1,039,216 at December 31, 2001. As of December 31, 2002, the average
interest rate earned on the rental income deposited in demand deposit accounts
at commercial banks was approximately 0.5% annually. The funds remaining at
December 31, 2002, after the payment of distributions and other liabilities,
will be used to invest in additional Properties and to meet the Partnership's
working capital needs.
Short-Term Liquidity
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 generate cash flow in excess
of operating expenses.
The Partnership's short-term liquidity requirements consist primarily
of the operating expenses of the Partnership.
The General Partners have the right, but not the obligation, to make
additional capital contributions if they deem it appropriate in connection with
the operations of the Partnership.
Due to low operating expenses and ongoing cash flow, the General
Partners 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 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, 2002,
2001, and 2000. This represents distributions of $0.83 per Unit for each of the
years ended December 31, 2002, 2001, and 2000. No amounts distributed to the
Limited Partners for the years ended 2002, 2001 or 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 of their adjusted capital
contributions. No distributions were made to the General Partners for the years
ended December 31, 2002, 2001, or 2000. The Partnership intends to continue to
make distributions of cash available for distribution to the Limited Partners on
a quarterly basis.
During 2000, the General Partners waived their right to receive future
distributions from the Partnership, including both distributions of operating
cash flow and distributions of liquidation proceeds, to the extent that the
cumulative amount of such distributions would exceed the balance in the General
Partners' capital account as of December 31, 1999. Accordingly, the General
Partners were not allocated any net income during the years ended December 31,
2002, 2001 and 2000.
At December 31, 2002 and 2001, the Partnership owed $21,304 and
$14,154, respectively, to affiliates for accounting and administrative services
and management fees. As of March 10, 2003, the Partnership had reimbursed the
affiliates these amounts. Other liabilities, including distributions payable,
were $1,153,597 at December 31, 2002, as compared to $1,134,733 at December 31,
2001. The General Partners believe that the Partnership has sufficient cash on
hand to meet its current working capital needs.
Long-Term Liquidity
The Partnership has no long-term debt or other long-term liquidity
requirements.
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 the Partnership's Properties and investments in
unconsolidated entities periodically for impairment at least once a year or
whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. The assessment is based on the carrying amount
of the Property or investment at the date it is tested for recoverability
compared to the sum of the estimated future cash flows expected to result from
its operation and sale through the expected holding period. If an impairment is
indicated, the asset is adjusted to its estimated fair value.
When the Partnership makes the decision to sell or commits to a plan to
sell a Property within one year, its operating results are reported as
discontinued operations.
Results of Operations
Comparison of year ended December 31, 2002 to year ended December 31, 2001
Total rental revenues were $3,325,008 during the year ended December
31, 2002, as compared to $3,265,684 during the year ended December 31, 2001.
Rental revenues were higher during the year ended December 31, 2002, as compared
to the same period of 2001, because the Partnership reinvested the sales
proceeds from the sale of the Property in Las Vegas, Nevada, in a Property in
San Antonio, Texas, in March 2002. The tenant of the Las Vegas, Nevada Property
ceased restaurant operations and vacated the Property in 2001.
Revenues remained at reduced amounts during 2002 and 2001, because
prior to 2001, Elias Brothers Restaurants, Inc., which leased one Property with
the Partnership, filed for bankruptcy and rejected the one lease it had with the
Partnership. As a result, the Partnership stopped recording rental revenue
relating to this Property. In October 2002, 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. In connection with
the new lease, the new tenant has agreed to pay for all costs necessary to
convert the Property into a different restaurant concept. Conversion of the
Property is expected to be completed early in 2003, at which point rental
payments are expected to commence.
During the year ended December 31, 2002, the Partnership also earned
$65,613 in contingent rental income, as compared to $64,387 during the same
period of 2001. The Partnership also earned $8,669 in interest and other income
during the year ended December 31, 2002, as compared to $37,355 during the same
period of 2001. Interest and other income were higher during 2001 due to higher
average cash balances and interest rates during 2001.
The Partnership earned $386,433, attributable to net income earned by
joint ventures, during the year ended December 31, 2002, as compared to $498,273
during the same period of 2001. Net income earned by joint ventures was higher
during 2001, partially because 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 for $800,000. In connection with the sale of this Property,
Wood-Ridge Real Estate Joint Venture received $200,000 in lease termination
income in consideration for the joint venture releasing the tenant from its
obligation under the lease. However, the sale of this Property resulted in a
loss to the joint venture of approximately $84,500. During 2001, the joint
venture distributed the net sales proceeds received from the sale as a return of
capital to the Partnership and the other joint venture partner. The Partnership
used this return of capital to pay liabilities of the Partnership, and make
quarterly distributions. Net income earned by joint ventures was also lower
during 2002, as compared to 2001, partially because the tenant of the Property
owned by Duluth Joint Venture, in which the Partnership owns a 44% interest,
experienced financial difficulties and ceased making rental payments. As a
result, Duluth Joint Venture stopped recording rental revenues during the
quarter ended March 31, 2002. The joint venture also recorded a provision for
write-down of assets of approximately $65,800. The provision represented the
difference between the Property's net carrying value and its estimated fair
value. During the second quarter of 2002, the tenant began making rental
payments to the joint venture and the joint venture recognized these amounts as
rental revenues.
During 2002, five lessees of the Partnership, Flagstar Enterprises,
Inc., Jack in the Box Inc., Checkers Drive-In Restaurants, Inc., Golden Corral
Corporation, and Denny's, Inc. each contributed more than ten percent of the
Partnership's rental revenues (including the Partnership's share of rental
revenues from Properties owned by joint ventures and the Property held as
tenants-in-common with an affiliate). As of December 31, 2002, Flagstar
Enterprises, Inc. was the lessee under leases relating to six restaurants; Jack
in the Box Inc. was the lessee under leases relating to seven restaurants;
Checkers Drive-In Restaurants, Inc. was the lessee under leases relating to 12
restaurants; Golden Corral Corporation was the lessee under leases relating to
three restaurants; and Denny's, Inc. was the lessee under leases relating five
restaurants. It is anticipated that, based on the minimum rental payments
required by the leases, these five lessees will each continue to contribute more
than ten percent of the Partnership's rental revenues in 2003. In addition, five
Restaurant Chains, Hardee's, Denny's, Jack in the Box, Checkers, and Golden
Corral, each accounted for more than ten percent of the Partnership's rental
revenues during 2002 (including the Partnership's share of rental revenues from
Properties owned by joint ventures and the Property held as tenants-in-common
with an affiliate). In 2003, it is anticipated that these five Restaurant Chains
each will continue to account for more than ten percent of the rental revenues
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.
Operating expenses, including depreciation and amortization expense and
provision for write-down of assets were $810,183 during the year ended December
31, 2002, as compared to $1,448,043 during the same period of 2001. Operating
expenses were higher during 2001, as compared to 2002, because the Partnership
recorded provisions for write-down of assets of $526,947 relating to the vacant
Properties in Akron, Ohio and Las Vegas, Nevada. Operating expenses were also
lower during 2002 because of a decrease in state tax expense and a decrease in
the costs incurred for administrative expenses for servicing the Partnership and
its Properties. In addition, during the years ended December 31, 2002 and 2001,
the Partnership incurred Property related expenses, such as legal fees, real
estate taxes, insurance and maintenance relating to the vacant Properties in
Akron, Ohio, and Las Vegas, Nevada, as described above. In February 2002 the
Partnership sold the Las Vegas Property and in October 2002, the Partnership
re-leased the Akron, Ohio Property to a new tenant, as described above. The new
tenant 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.
Effective January 1, 2002, the Partnership adopted Statement of
Financial Accounting Standards No. 144 "Accounting for the Impairment or
Disposal of Long-Lived Assets." This statement requires that a long-lived asset
be tested for recoverability whenever events or changes in circumstances
indicate that its carrying amount may not be recoverable. The carrying amount of
a long-lived asset is not recoverable if it exceeds the sum of the undiscounted
cash flows expected to result from the use and eventual disposition of the
asset. The assessment is based on the carrying amount of the asset at the date
it is tested for recoverability. An impairment loss is recognized when the
carrying amount of a long-lived asset exceeds its fair value. If an impairment
is recognized, the adjusted carrying amount of a long-lived asset is its new
cost basis. The statement also requires that the results of operations of a
component of an entity that either has been disposed of or is classified as held
for sale be reported as a discontinued operation if the disposal activity was
initiated subsequent to the adoption of the Standard.
As a result of the sale of the Property in Las Vegas, Nevada, the
Partnership recognized a gain on sale of assets of $497,689 during the year
ended December 31, 2002. This Property had been identified for sale as of
December 31, 2001.
During 2002, the Partnership identified and sold three Properties that
met the criteria of this standard and were classified as Discontinued Operations
in the accompanying financial statements. During 2002, the Partnership entered
into three separate agreements, each with a third party, to sell the Properties
in Greeley, Colorado; Laurens, South Carolina; and Merriam, Kansas. During 2002,
the Partnership sold these Properties and received net sales proceeds of
approximately $1,785,000, resulting in a net gain on disposal of discontinued
operations of $271,900. In anticipation of these sales, the Partnership recorded
provisions for write-down of assets of approximately $123,400 and $19,600 during
the year ended December 31, 2002, relating to the Properties in Laurens, South
Carolina and Merriam, Kansas, respectively. In addition, the Partnership had
recorded provisions for write-down of assets in previous years of approximately
$39,100 and $98,800 during the years ended December 31, 2001 and 2000 relating
to the Property in Laurens, South Carolina. The tenant of this Property filed
for bankruptcy during 1998 and rejected the lease relating to this Property. The
provision represented the difference between the Property's net carrying value
and its estimated fair value. The financial results for these three Properties
are reflected as Discontinued Operations in the accompanying financial
statements. In December 2002, the Partnership reinvested a portion of these net
sales proceeds in a Property in Phoenix, Arizona.
Comparison of year ended December 31, 2001 to year ended December 31, 2000
Total rental revenues were $3,265,684 during the year ended December
2001, as compared to $3,542,179 during the same period of 2000. Rental revenues
were lower during 2001, as compared to 2000 partially due to the sale of its
Property in Columbus, Ohio in September 2000. In November 2000, the Partnership
reinvested a portion of these net sales proceeds in a Property in Bristol,
Virginia and reinvested the remaining net sales proceeds in a Property with an
affiliate as tenants-in-common. Therefore, the Partnership anticipates rental
revenues to remain at reduced amounts and net income earned by joint ventures to
be at increased amounts.
Rental revenues were also lower during 2001 because the tenant of the
Property in Las Vegas, Nevada ceased restaurant operations and vacated the
Property during 2001. In February 2002, the Partnership sold this Property, as
described above. In addition, during 2001, 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 a material adverse effect on the financial position of the
Partnership.
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 in 1998 and rejected the leases relating to
five Properties.
The Partnership also earned $64,387 in contingent rental income during
the year ended December 31, 2001, as compared to $46,125 during the same period
of 2000. Contingent rental income was higher during 2001, because certain
restaurant Properties, the leases of which require the payment of contingent
rental income, had an increase in gross sales. The Partnership earned $37,355 in
interest and other income during the year ended December 31, 2001, as compared
to $111,119 during the same period of 2000. Interest and other income was higher
during 2000, as compared to 2001, because the Partnership received easement
proceeds during 2000. In addition, the Partnership earned interest income on the
net sales proceeds relating to the 1999 sales of several Properties pending
reinvestment in additional Properties.
The Partnership earned $498,273, attributable to net income earned by
joint ventures in which the Partnership is a co-venturer during the year ended
December 31, 2001, as compared to $266,023 during the same period of 2000. Net
income earned by joint ventures was higher during 2001, as compared to 2000,
partially because the Partnership invested in Duluth Joint Venture with
affiliates of the General Partners, in January 2000, for which rental payments
commenced in October 2000. Net income earned by joint ventures was also higher
during 2001 because Wood-Ridge Real Estate Joint Venture, in which the
Partnership owns a 50% interest, sold its Property in Paris, Texas, as described
above. Net income earned by joint ventures was lower during 2000, as compared to
2001, because 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. 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 its estimated fair value. 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.
Operating expenses, including depreciation and amortization expense and
provision for write-down of assets, were $1,448,043 during the year ended
December 31, 2001, as compared to $740,288 during the same period of 2000.
Operating expenses were higher during 2001, as compared to 2000, partially
because the Partnership recorded provisions for write-down of assets of $526,947
relating to the vacant Properties in Akron, Ohio, and Las Vegas, Nevada, as
described above. The provisions represented the difference between the net
carrying value of each Property and its estimated fair value.
During 2001 and 2000, the Partnership incurred expenses, such as legal
fees, real estate taxes, insurance and maintenance relating to the vacant
Properties, as described above. Operating expenses were also higher during 2001,
due to increased state taxes and higher administrative expenses for servicing
the Partnership and its Properties. The Partnership incurred transaction costs
during 2000 related to the General Partners retaining financial and legal
advisors to assist them in evaluating and negotiating a proposed merger with
APF. On March 1, 2000, the merger discussions were terminated.
As a result of the sale of the Property in Columbus, Ohio, the
Partnership recognized a loss on sale of assets of $75,930 during the year ended
December 31, 2000.
The restaurant industry has been relatively resilient during this
volatile time with steady performance during 2002. However, the industry remains
in a state of cautious optimism. Restaurant operators expect their business to
be better in 2003, according to a nationwide survey conducted by the National
Restaurant Association, but are concerned by the budget deficits being
experienced by many states and the potential of new taxes on the industry to
alleviate the situation.
The Partnership's leases as of December 31, 2002, are, in general,
triple-net leases and contain provisions that the General Partners believe
mitigate the adverse effect of inflation. Such provisions include clauses
requiring the payment of percentage rent based on certain restaurant sales above
a specified level and/or automatic increases in base rent at specified times
during the term of the lease. Inflation, overall, has had a minimal effect on
the results of operations of the Partnership. Continued inflation may cause
capital appreciation of the Partnership's Properties. Inflation and changing
prices, however, also may have an adverse impact on the sales of the restaurants
and on potential capital appreciation of the Properties.
In January 2003, FASB issued FASB Interpretation No. 46 ("FIN 46"),
"Consolidation of Variable Interest Entities" to expand upon and strengthen
existing accounting guidance that addresses when a company should include the
assets, liabilities and activities of another entity in its financial
statements. To improve financial reporting by companies involved with variable
interest entities (more commonly referred to as special-purpose entities or
off-balance sheet structures), FIN 46 requires that a variable interest entity
be considered by a company if that company is subject to a majority risk of loss
from the variable interest entity's activities or entitled to receive a majority
of the entity's residual returns or both. Prior to FIN 46, a company generally
included another entity in its consolidated financial statements only if it
controlled the entity through voting interests. Consolidation of variable
interests entities will provide more complete information about the resources,
obligations, risks and opportunities of the consolidated company. The
consolidation requirements of FIN 46 apply immediately to variable interest
entities created after January 31, 2003, and to older entities in the first
fiscal year or interim period beginning after June 15, 2003. Management believes
adoption of this standard may result in either consolidation or additional
disclosure requirements with respect to the Partnership's unconsolidated joint
ventures or Properties held with affiliates of the General Partners as
tenants-in-common, which are currently accounted for under the equity method.
However, such consolidation is not expected to significantly impact the
Partnership's results of operations.
Item 7A. Quantitative and qualitative Disclosures About Market Risk.
Not applicable
Item 8. Financial Statements and Supplementary Data
CNL INCOME FUND XIV, LTD
(A Florida Limited Partnership)
CONTENTS
Page
Report of Independent Certified Public Accountants 18
Financial Statements:
Balance Sheets 19
Statements of Income 20
Statements of Partners' Capital 21
Statements of Cash Flows 22-23
Notes to Financial Statements 24-36
Report of Independent Certified Public Accountants
To the Partners
CNL Income Fund 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, 2002 and 2001, and the results of its operations
and its cash flows for each of the three years in the period ended December 31,
2002 in conformity with accounting principles generally accepted in the United
States of America. In addition, in our opinion, the financial statement
schedules listed in the index appearing under item 15(a)(2) present fairly, in
all material respects, the information set forth therein when read in
conjunction with the related financial statements. These financial statements
and financial statement schedules are the responsibility of the Partnership's
management; our responsibility is to express an opinion on these financial
statements and 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.
As described in Note 1 to the financial statements, on January 1, 2002, the
Partnership adopted Statement of Financial Accounting Standard No. 144
"Accounting for the Impairment or Disposal of Long-Lived Assets."
/s/ PricewaterhouseCoopers LLP
Orlando, Florida
January 31, 2003
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
BALANCE SHEETS
December 31,
2002 2001
------------------- -------------------
ASSETS
Real estate properties with operating leases, net $ 24,081,481 $ 22,152,733
Net Investment in direct financing leases 5,830,462 6,315,829
Real estate held for sale -- 1,671,833
Investment in joint ventures 4,513,911 4,639,435
Cash and cash equivalents 1,328,466 1,039,216
Receivables, less allowance for doubtful accounts of $77,256
in 2001 20,232 80,044
Due from related parties 44 7,045
Accrued rental income less allowance for doubtful accounts
of $48,635 in 2002 and 2001 2,462,242 2,300,040
Other assets 60,019 47,734
------------------- -------------------
$ 38,296,857 $ 38,253,909
=================== ===================
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 7,365 $ 21,657
Real estate taxes payable 19,009 28,596
Distributions payable 928,130 928,130
Due to related parties 21,304 14,154
Rents paid in advance and deposits 175,204 104,907
Deferred rental income 23,889 51,443
--------------------
-------------------
Total liabilities 1,174,901 1,148,887
Partners' capital 37,121,956 37,105,022
------------------- --------------------
$ 38,296,857 $ 38,253,909
=================== ====================
See accompanying notes to financial statements.
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
STATEMENTS OF INCOME
Year Ended December 31,
2002 2001 2000
----------------- ----------------- ------------------
Revenues:
Rental income from operating leases $ 2,750,709 $ 2,600,062 $ 2,836,059
Earned income from direct financing leases 574,299 665,622 706,120
Contingent rental income 65,613 64,387 46,125
Interest and other income 8,669 37,355 111,119
------------------ ----------------- -----------------
3,399,290 3,367,426 3,699,423
------------------ ----------------- -----------------
Expenses:
General operating and administrative 299,458 328,127 221,073
Property expenses 63,369 144,631 26,481
Management fees to related parties 39,837 38,742 40,255
State and other taxes 38,133 63,998 30,957
Depreciation and amortization 369,386 345,598 340,130
Provision for write-down of assets -- 526,947 41,997
Transaction costs -- -- 39,395
------------------ ----------------- -----------------
810,183 1,448,043 740,288
------------------ ----------------- -----------------
Income Before Gain (Loss) on Sale of Assets and Equity in
Earnings of Joint Ventures 2,589,107 1,919,383 2,959,135
Gain (Loss) on Sale of Assets 497,689 -- (75,930 )
Equity in Earnings of Joint Ventures 386,433 498,273 266,023
------------------ ----------------- ------------------
Income from Continuing Operations 3,473,229 2,417,656 3,149,228
------------------ ----------------- -----------------
Discontinued Operations (Note 5):
Income (loss) from discontinued operations (15,684 ) 86,442 42,410
Gain (loss) on disposal of discontinued operations 271,909 -- --
------------------ ----------------- -----------------
256,225 86,442 42,410
------------------ ----------------- -----------------
Net Income $ 3,729,454 $ 2,504,098 $ 3,191,638
================== ================= =================
Income Per Limited Partner Unit
Continuing Operations $ 0.77 $ 0.54 $ 0.70
Discontinued Operations 0.06 0.02 0.01
------------------ ----------------- -----------------
Total $ 0.83 0.56 $ 0.71
================== ================= =================
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, 2002, 2001 and 2000
General Partners Limited Partners
-------------------------------------- -------------------------------------------------------
Accumulated Accumulated Syndication
Contributions Earnings Contributions Distributions Earnings Costs
-------------- ----------- -------------- ------------- ------------- --------------
Balance, December 31, 1999 $ 1,000 $ 208,255 $ 45,000,000 $ (21,560,965 ) $ 20,569,981 $ (5,383,945 )
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 (5,383,945 )
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 (5,383,945 )
Distributions to limited
partners ($0.83 per
limited partner unit) -- -- -- (3,712,520 ) -- --
Net income -- -- -- -- 3,729,454 --
------------- ------------- --------------- -------------- --------------- -------------
Balance, December 31, 2002 $ 1,000 $ 208,255 $ 45,000,000 $ (32,698,525 ) $ 29,995,171 $ (5,383,945 )
============= ============= =============== ============== =============== =============
See accompanying notes to financial statements.
- -----------
Total
- ----------
$38,834,326
(3,712,520 )
3,191,638
- -------------
38,313,444
(3,712,520 )
2,504,098
- -------------
37,105,022
(3,712,520 )
3,729,454
- -------------
$37,121,956
=============
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
STATEMENTS OF CASH FLOWS
Year Ended December 31,
2002 2001 2000
------------------ ------------------ -----------------
Cash Flows from Operating Activities:
Net income $ 3,729,454 $ 2,504,098 $ 3,191,638
------------------ ------------------ -----------------
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation 382,161 382,996 381,303
Amortization of investment in direct financing
leases 148,328 136,255 115,699
Amortization 4,373 4,332 4,332
Equity in earnings of unconsolidated joint
ventures, net of distributions 124,492 15,038 215,799
Loss (gain) on sale of assets (769,598 ) -- 75,930
Provision for write-down of assets 143,065 566,043 140,819
Decrease (increase) in receivables 59,812 97,398 (91,359 )
Decrease (increase) in due from related party 7,001 11,700 (13,705 )
Increase in accrued rental income (163,691 ) (239,622 ) (248,177 )
Decrease (increase) in other assets (11,251 ) 5,199 (12,688 )
Decrease in accounts payable and real estate
taxes payable (23,879 ) (53,919 ) (62,097 )
Increase (decrease) in due to related parties 7,150 (116,269 ) 53,447
Increase (decrease) rents paid in advance and
deposits 42,743 (68 ) 89,222
------------------ ------------------ -----------------
Total adjustments (49,294 ) 809,083 648,525
------------------ ------------------ -----------------
Net Cash Provided by Operating Activities 3,680,160 3,313,181 3,840,163
------------------ ------------------ -----------------
Cash Flows from Investing Activities:
Proceeds from sale of assets 2,928,771 -- 1,631,947
Additions to real estate properties with operating (2,602,786 ) -- (1,879,324 )
leases
Investment in joint ventures -- -- (769,498 )
Return of capital from joint venture -- 400,000 --
Decrease (increase) in restricted cash -- -- 384,096
Payment of lease costs (4,375 ) -- --
------------------ ------------------ -----------------
Net cash provided by (used in) investing activities 321,610 400,000 (632,779 )
------------------ ------------------ -----------------
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 289,250 661 (505,136 )
Cash and Cash Equivalents at Beginning of Year 1,039,216 1,038,555 1,543,691
------------------ ------------------ -----------------
Cash and Cash Equivalents at End of Year $ 1,328,466 $ 1,039,216 $ 1,038,555
================== ================== =================
See accompanying notes to financial statements.
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
STATEMENTS OF CASH FLOWS - CONTINUED
Year Ended December 31,
2002 2001 2000
----------------- ----------------- -----------------
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, 2002, 2001, and 2000
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 property
acquisitions at cost, including acquisition and closing costs. Real
estate properties are leased to 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. During the years ended December 31, 2002,
2001, and 2000, tenants paid directly to real estate taxing authorities
approximately $491,500, $455,000, and $426,700, respectively, in real
estate taxes in accordance with the terms of their triple net leases
with the Partnership.
The leases of the Partnership provide for base minimum annual rental
payments payable in monthly installments. In addition, certain leases
provide for contingent rental revenues based on the tenants' gross
sales in excess of a specified threshold. The partnership defers
recognition of the contingent rental revenues until the defined
thresholds are met. The leases are accounted for using either the
direct financing or the operating methods. Such methods are described
below:
Direct financing method - Leases accounted for using the
direct financing method are recorded at their net investment
(which at the inception of the lease generally represents the
cost of the asset). Unearned income is deferred and amortized
to income over the lease terms so as to produce a constant
periodical rate of return on the Partnership's net investment
in the leases. For the leases classified as direct financing
leases, the building portions of the property leases are
accounted for as direct financing leases while the land
portions of the majority of the leases are operating 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, 2002, 2001, and 2000
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.
Substantially all leases are for 15 to 20 years and provide for minimum
and contingent rentals. The lease options generally allow tenants to
renew the leases for two to 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.
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.
When the collection of amounts recorded as rental or other income is
considered to be doubtful, a provision is made to increase the
allowance for doubtful accounts. If amounts are subsequently determined
to be uncollectible, the corresponding receivable and allowance for
doubtful accounts are decreased accordingly.
Investment in Joint Ventures - 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 and 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.
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
Years Ended December 31, 2002, 2001, and 2000
1. Significant Accounting Policies - Continued:
-------------------------------------------
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 represent a reduction
of Partnership equity and a reduction in the basis of each partner's
investment.
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.
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 2002 presentation,
including a change in presentation of the statement of cash flows from
the direct to the indirect method. These reclassifications had no
effect on total partners' capital, net income or cash flows.
Statement of Financial Accounting Standards No. 144 ("FAS 144") -
Effective January 1, 2002, the Partnership adopted Statement of
Financial Accounting Standards No. 144 "Accounting for the Impairment
or Disposal of Long-Lived Assets." This statement requires that a
long-lived asset be tested for recoverability whenever events or
changes in circumstances indicate that its carrying amount may not be
recoverable. The carrying amount of a long-lived asset is not
recoverable if it exceeds the sum of the undiscounted cash flows
expected to result from the use and eventual disposition of the asset.
The assessment is based on the carrying amount of the asset at the date
it is tested for recoverability. An impairment loss is recognized when
the carrying amount of a long-lived asset exceeds its fair value. If an
impairment is recognized, the adjusted carrying amount of a long-lived
asset is its new cost basis. The statement also requires that the
results of operations of a component of an entity that either has been
disposed of or is classified as held for sale be reported as a
discontinued operation if the disposal activity was initiated
subsequent to the adoption of the Standard.
FASB Interpretation No. 46 ("FIN 46") - In January 2003, FASB issued
FASB Interpretation No. 46 ("FIN 46"), "Consolidation of Variable
Interest Entities" to expand upon and strengthen existing accounting
guidance that addresses when a company should include the assets,
liabilities and activities of another entity in its financial
statements. To improve financial reporting by companies involved with
variable interest entities (more commonly referred to as
special-purpose entities or off-balance sheet structures), FIN 46
requires that a variable interest entity be considered by a company if
that company is subject to a majority risk of loss from the variable
interest entity's activities or entitled to receive a majority of the
entity's residual returns or both. Prior to FIN 46, a company generally
included another entity in its consolidated financial statements only
if it controlled the entity through voting interests. Consolidation of
variable interests entities will provide more complete information
about the resources, obligations, risks and opportunities of the
consolidated company. The consolidation requirements of FIN 46 apply
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
Years Ended December 31, 2002, 2001, and 2000
1. Significant Accounting Policies - Continued:
-------------------------------------------
immediately to variable interest entities created after January 31,
2003, and to older entities in the first fiscal year or interim period
beginning after June 15, 2003. Management believes adoption of this
standard may result in either consolidation or additional disclosure
requirements with respect to the Partnership's unconsolidated joint
ventures or properties held with affiliates of the general partners as
tenants-in-common, which are currently accounted for under the equity
method. However, such consolidation is not expected to significantly
impact the Partnership's results of operations.
2. Real Estate Properties with Operating Leases:
--------------------------------------------
Real estate Properties with operating leases consisted of the following
at December 31:
2002 2001
---------------- ----------------
Land $ 15,214,610 $ 14,407,070
Buildings 11,544,044 10,057,823
---------------- ----------------
26,758,654 24,464,893
Less accumulated depreciation (2,677,173 ) (2,312,160 )
---------------- ----------------
$ 24,081,481 $ 22,152,733
================ ================
During the year ended December 31, 2001, the Partnership recorded a
provision for write-down of assets of approximately $37,000 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
net carrying value of the property at December 31, 2001 and its
estimated fair value. In October 2002, the Partnership re-leased this
property to a new tenant with rental payments expected to commence in
early 2003.
In addition, during 2001, the Partnership recorded a provision for
write-down of assets of approximately $278,100 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 net carrying value of the property and its
estimated fair value. In February 2002, the Partnership sold this
property to a third party and received net sales proceeds of
approximately $1,143,800, resulting in a gain of approximately
$497,700. As of December 31, 2001, this property had been identified
for sale. 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, an affiliate of the general partners. In addition, in
December 2002, the Partnership reinvested the net sales proceeds from
the sale of the property in Greeley, Colorado in a property in Phoenix,
Arizona at an approximate cost of $1,319,200.
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
Years Ended December 31, 2002, 2001, and 2000
2. Real Estate Properties with Operating Leases - Continued:
--------------------------------------------------------
The following is a schedule of the future minimum lease payments to be
received on noncancellable operating leases at December 31, 2002:
2003 $ 2,674,373
2004 2,822,946
2005 2,865,794
2006 2,887,293
2007 2,950,485
Thereafter 20,255,353
---------------------
$ 34,456,244
=====================
3. Net Investment in Direct Financing Leases:
-----------------------------------------
The following lists the components of the net investment in direct
financing leases at December 31:
2002 2001
---------------- ----------------
Minimum lease payments receivable $ 9,067,495 $ 10,907,441
Estimated residual values 2,052,866 2,156,574
Less unearned income (5,289,899 ) (6,748,186 )
---------------- ----------------
Net investment in direct financing leases $ 5,830,462 $ 6,315,829
================ ================
The following is a schedule of future minimum lease payments to be
received on direct financing leases at December 31, 2002:
2003 $ 783,323
2004 790,648
2005 790,648
2006 793,809
2007 803,294
Thereafter 5,105,773
-----------------
$ 9,067,495
=================
During 2001, the Partnership recorded a provision for write-down of
assets of approximately $211,900 for the property in Las Vegas, Nevada,
because the tenant of this property vacated the property and ceased
restaurant operations. The provision represented the difference between
the net carrying value of the property and its estimated fair value. In
February 2002, the Partnership sold this property to a third party.
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
Years Ended December 31, 2002, 2001, and 2000
4. 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. In addition the Partnership has a
26% interest in the profits and losses of a property in Niles,
Illinois, held as tenants-in-common. The remaining interest in these
joint ventures and the property held as tenants-in-common are held by
affiliates of the Partnership which have the same general partners.
During 2000, the lease associated with the property owned by Melbourne
Joint Venture was amended to provide for rent reductions due to
financial difficulties the tenant was experiencing and the joint
venture recorded a provision for write-down of assets of approximately
$219,100. The provision represented the difference between the
property's net carrying value at December 31, 2000 and its estimated
fair value. 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. During 2001, the Partnership and the other joint venture
partner each received $400,000 representing a return of capital from
the net sales proceeds.
During 2002, the tenant of the property owned by Duluth Joint Venture
experienced financial difficulties and ceased making rental payments to
the joint venture. As a result, Duluth Joint Venture stopped recording
rental revenues during the quarter ended March 31, 2002. During the
second quarter of 2002, the tenant began making rental payments to the
joint venture and the joint venture recognized these amounts as rental
revenues. At September 30, 2002, the joint venture recorded a provision
for write-down of assets of approximately $65,800. The provision
represented the difference between the property's net carrying value
and its estimated fair value.
As of December 31, 2002, 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, December 31,
2002 2001
------------------- -----------------
Real estate properties with operating
leases, net $ 9,087,636 $ 9,255,329
Net investment in direct financing lease 1,185,476 1,200,282
Cash 76,520 141,460
Accrued rental income 543,445 513,697
Accounts receivable 2,529 66,676
Other assets 13,140 16,859
Liabilities 142,107 144,332
Partners' Capital 10,766,639 11,049,971
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
Years Ended December 31, 2002, 2001, and 2000
4. Investment in Joint Ventures - Continued:
----------------------------------------
Year Ended December 31,
2002 2001 2000
--------------- ---------------- -----------------
Revenues $ 1,193,814 $ 1,288,188 $ 1,204,248
Lease termination income -- 200,000 --
Expenses (211,565 ) (246,031 ) (272,141 )
Provision for write-down of assets (65,755 ) -- (271,043 )
Loss on sale of assets -- (84,473 ) --
--------------- ---------------- ----------------
Net Income $ 916,494 $ 1,157,684 $ 661,064
=============== ================ =================
The Partnership recognized income of $386,433, $498,273, and $266,023
during the years ended December 31, 2002, 2001 and 2000, respectively,
from these joint ventures and tenancy in common arrangements.
5. Discontinued Operations:
-----------------------
During 2002, the Partnership entered into three separate agreements,
each with a third party, to sell the properties in Greeley, Colorado;
Laurens, South Carolina; and Merriam, Kansas. During 2002, the
Partnership sold these properties and received net sales proceeds of
approximately $1,785,000, resulting in a net gain on disposal of
discontinued operations of approximately $271,900. In anticipation of
these sales, the Partnership recorded provisions for write-down of
assets of approximately $123,400 and $19,600 during the year ended
December 31, 2002, relating to the properties in Laurens, South
Carolina and Merriam, Kansas, respectively. In addition, the
Partnership had recorded provisions for write-down of assets in
previous years of approximately $39,100 and $98,800 during the years
ended December 31, 2001 and 2000 relating to the property in Laurens,
South Carolina. The tenant of this property filed for bankruptcy during
1998 and rejected the lease relating to this property. The provision
represented the difference between the property's net carrying value
and its estimated fair value. The financial results for these three
properties are reflected as Discontinued Operations in the accompanying
financial statements. In December 2002, the Partnership reinvested a
portion of these net sales proceeds in a property in Phoenix, Arizona.
The operating results of the discontinued operations for the above
properties are as follows:
Year Ended December 31,
2002 2001 2000
----------------- ---------------- ------------------
Rental revenues $ 154,325 $ 176,546 $ 184,288
Expenses (26,944 ) (51,008 ) (43,056 )
Provisions for write-down of assets (143,065 ) (39,096 ) (98,822 )
Gain on disposal of assets 271,909 -- --
----------------- ---------------- ------------------
Income from discontinued operations $ 256,225 $ 86,442 $ 42,410
================= ================ ==================
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
Years Ended December 31, 2002, 2001, and 2000
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. However, the one
percent of net cash flow to be distributed to the general partners was
subordinated to receipt by the limited partners of an aggregate, ten
percent, cumulative, noncompounded annual return on their invested
capital contributions (the "Limited Partners' 10% Return").
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, 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 during the years ended December 31, 2002, 2001 and 2000.
During each of the years ended December 31, 2002, 2001 and 2000, 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, 2002, 2001, and 2000
7. Income Taxes:
------------
The following is a reconciliation of net income for financial reporting
purposes to net income for federal income tax purposes for the years
ended December 31:
2002 2001 2000
-------------- -------------- ---------------
Net income for financial reporting purposes $ 3,729,454 $ 2,504,098 $ 3,191,638
Effect of timing differences relating to
depreciation (42,452 ) (49,054 ) (44,656 )
Effect of timing differences relating to
equity in earnings of joint ventures (21,789 ) (6,710 ) 133,500
Effect of timing differences relating to
gains/losses on real estate property sales (998,826 ) -- 138,725
Provision for write-down of assets 143,065 566,043 140,819
Direct financing leases recorded as operating
leases for tax reporting purposes 148,328 136,255 115,699
Effect of timing differences relating to (77,256 ) 47,335 23,218
allowance for doubtful accounts
Accrued rental income (163,691 ) (239,622 ) (248,177 )
Deduction of transaction costs for tax
reporting purposes -- -- (239,842 )
Rents paid in advance 123,602 (30,637 ) 77,385
Deferred rental income (27,554 ) (3,570 ) --
Other 1,032 1,032 1,920
-------------- -------------- ---------------
Net income for federal income tax purposes $ 2,813,913 $ 2,925,170 $ 3,290,229
============== ============== ===============
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
Years Ended December 31, 2002, 2001, and 2000
8. Related Party Transactions:
--------------------------
One of the individual general partners, James M. Seneff, Jr., is one of
the principal shareholders of CNL Holdings, Inc. The other individual
general partner, Robert A. Bourne, serves as President and Treasurer of
CNL Financial Group, Inc., a wholly owned subsidiary of CNL Holdings,
Inc. CNL APF Partners, LP, a wholly owned subsidiary of CNL American
Properties Fund, Inc. ("APF") served as the Partnership's advisor until
January 1, 2002, when it assigned its rights and obligations under a
management agreement to RAI Restaurants, Inc. (formerly known as CNL
Restaurants XVIII, Inc.). RAI Restaurants, Inc. ("the Advisor") is a
wholly owned subsidiary of APF. The individual general partners are
stockholders and directors of APF.
The Advisor provides services pursuant to a management agreement with
the Partnership. In connection therewith, the Partnership 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.
Any portion of the management fee not paid is deferred without
interest. The Partnership incurred management fees of $39,837, $38,742,
and $40,255, for the years ended December 31, 2002, 2001, and 2000,
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.
During the years ended December 31, 2002, 2001, and 2000, the
Partnership's advisor and its affiliates provided accounting and
administrative services. The Partnership incurred $220,717, $234,884,
and $109,991, for the years ended December 31, 2002, 2001, and 2000,
respectively, for such services.
In March 2002, the Partnership acquired a property in San Antonio,
Texas from CNL Funding 2001-A, LP, for a purchase price of
approximately $1,262,200. CNL Funding 2001-A, LP is 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 the property.
The due to related parties at December 31, 2002 and 2001 totaled
$21,304 and $14,154, respectively.
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
Years Ended December 31, 2002, 2001, and 2000
9. Concentration of Credit Risk:
----------------------------
The following schedule presents rental revenues from individual
lessees, or affiliated groups of lessees, each representing more than
ten percent of the Partnership's rental revenues (including the
Partnership's share of rental revenues from joint ventures and the
property held as tenants-in-common with an affiliate) for each of the
years ended December 31:
2002 2001 2000
---------------- ---------------- ----------------
Jack in the Box Inc. (formerly
Foodmaker, Inc.) $ 567,822 $ 544,315 $ 577,253
Checkers Drive-In
Restaurants, Inc. 534,859 549,759 540,233
Golden Corral Corporation 698,979 491,463 548,433
Flagstar Enterprises, Inc. 421,564 425,666 424,211
Denny's, Inc. 418,557 N/A N/A
In addition, the following schedule presents rental revenues income
from individual restaurant chains, each representing more than ten
percent of the Partnership's rental revenues (including the
Partnership's share of rental revenues from joint ventures and the
property held as tenants-in-common with an affiliate) for each of the
years ended December 31:
2002 2001 2000
---------------- ---------------- ----------------
Golden Corral Family Steakhouse
Restaurants $ 698,979 $ 689,256 $ 548,433
Denny's 598,446 563,851 526,651
Jack in the Box 567,822 544,315 577,253
Checkers Drive-In Restaurants 534,859 549,759 540,233
Hardee's 421,564 390,736 424,211
The information denoted by N/A indicates that for each period
presented, the tenant or group of affiliated tenants did not represent
more than ten percent of the Partnership's rental revenues.
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.
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
Years Ended December 31, 2002, 2001, and 2000
10. Selected Quarterly Financial Data:
---------------------------------
The following table presents selected unaudited quarterly financial
data for each full quarter during the years ended December 31, 2002 and
2001.
2002 Quarter First Second Third Fourth Year
------------------------------- ------------ --------------- ------------- -------------- ---------------
Continuing Operations (1):
Revenues $820,952 $ 880,300 $ 848,514 $ 849,524 $ 3,399,290
Equity earnings of joint
ventures 65,419 101,524 118,922 100,568 386,433
Income from continuing
operations (1) 1,147,550 776,760 781,929 766,990 3,473,229
Discontinued Operations (1):
Revenues 52,126 40,768 39,046 22,385 154,325
Income (Loss) from
discontinued
operations 40,454 (95,170 ) 289,498 21,443 256,225
Net Income 1,188,004 681,590 1,071,427 788,433 3,729,454
Net Income per limited partner unit:
Continuing operations $ 0.25 $ 0.17 $ 0.18 $ 0.17 $ 0.77
Discontinued operations 0.01 (0.02 ) 0.06 0.01 0.06
------------ --------------- ------------- -------------- ---------------
Total $ 0.26 $ 0.15 $ 0.24 $ 0.18 $ 0.83
============ =============== ============= ============== ===============
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
Years Ended December 31, 2002, 2001, and 2000
10. Selected Quarterly Financial Data - Continued:
---------------------------------------------
2001 Quarter First Second Third Fourth Year
------------------------------- ------------ --------------- ------------ --------------- ---------------
Continuing Operations (1):
Revenues $ 846,392 $ 852,213 $ 826,899 $ 841,922 $ 3,367,426
Equity earnings of joint
ventures 91,009 175,560 116,294 115,410 498,273
Income from continuing
operations 612,006 276,837 790,945 737,868 2,417,656
Discontinued operations (1):
Revenues 44,243 40,769 50,769 40,765 176,546
Income (Loss) from
discontinued
operations 32,254 28,158 (24,550 ) 50,580 86,442
Net Income 644,260 304,995 766,395 788,448 2,504,098
Net Income (Loss) per limited partner unit:
Continuing operations $ 0.13 $ 0.06 $ 0.18 $ 0.17 $ 0.54
Discontinued operations 0.01 0.01 (0.01 ) 0.01 0.02
------------ --------------- ------------ --------------- ---------------
Total $ 0.14 $ 0.07 $ 0.17 $ 0.18 $ 0.56
============ =============== ============ =============== ===============
(1) Certain items in the quarterly financial data have been reclassified to
conform to the 2002 presentation. This reclassification had no effect
on total net income. The results of operations relating to properties
that were either disposed of or were classified as held for sale as of
December 31, 2002 are reported as discontinued operations for all
periods presented. The results of operations relating to properties
that were identified for sale as of December 31, 2001 but sold
subsequently are reported as continuing operations.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None
PART III
Item 10. Directors and Executive Officers of the Registrant
The General Partners of the Registrant are James M. Seneff, Jr., Robert
A. Bourne and CNL Realty Corporation, a Florida corporation. The General
Partners manage and control the Partnership's affairs and have general
responsibility and the ultimate authority in all matters affecting the
Partnership's business. The Partnership has available to it the services,
personnel and experience of CNL American Properties Fund, Inc. ("APF"), CNL Fund
Advisors, Inc., CNL Financial Group, Inc. and their affiliates, all of which are
affiliates of the General Partners.
James M. Seneff, Jr., age 56. Since 1971, Mr. Seneff has been active in
the acquisition, development, and management of real estate projects and,
directly or through an affiliated entity, has served as a general partner or
co-venturer in over 100 real estate ventures. These ventures have involved the
financing, acquisition, construction, and leasing of restaurants, office
buildings, apartment complexes, hotels, and other real estate. Mr. Seneff has
served as Director and Chairman of the Board of APF, a public, unlisted real
estate investment trust, since 1994. Mr. Seneff served as Chief Executive
Officer of APF from 1994 through August 1999, and has served as co-Chief
Executive Officer of APF since December 2000. Mr. Seneff served as Chairman of
the Board and Chief Executive Officer of CNL Fund Advisors, Inc., formerly the
Partnership's advisor, until it merged with a wholly-owned subsidiary of APF in
September 1999, and in June 2000, was re-elected to those positions of CNL Fund
Advisors, Inc. Mr. Seneff is a principal stockholder of CNL Holdings, Inc., the
parent company of CNL Financial Group, Inc. (formerly CNL Group, Inc.), a
diversified real estate company, and has served as a Director, Chairman of the
Board and Chief Executive Officer of CNL Financial Group, Inc. since its
formation in 1980. CNL Financial Group, Inc. is the parent company, either
directly or indirectly through subsidiaries, of CNL Real Estate Services, Inc.,
CNL Capital Markets, Inc., CNL Investment Company and CNL Securities Corp., all
of which are engaged in the business of real estate finance. Mr. Seneff also
serves as a Director, Chairman of the Board and Chief Executive Officer of CNL
Hospitality Properties, Inc., a public, unlisted real estate investment trust,
as well as, CNL Hospitality Corp., its advisor. In addition, he serves as a
Director, Chairman of the Board and Chief Executive Officer of CNL Retirement
Properties, Inc., a public, unlisted real estate investment trust and its
advisor, CNL Retirement Corp. Since 1992, Mr. Seneff has also served as a
Director, Chairman of the Board and Chief Executive Officer of Commercial Net
Lease Realty, Inc., a public real estate investment trust that is listed on the
New York Stock Exchange. Mr. Seneff has also served as a Director, Chairman of
the Board and Chief Executive Officer of CNL Securities Corp. since 1979; CNL
Investment Company since 1990; and CNL Institutional Advisors, Inc., a
registered investment advisor for pension plans, since 1990. Mr. Seneff formerly
served as a Director of First Union National Bank of Florida, N.A., and
currently serves as the Chairman of the Board of CNL Bank, an independent,
state-chartered commercial bank. Mr. Seneff previously served on the Florida
State Commission on Ethics and is a former member and past Chairman of the State
of Florida Investment Advisory Council, which recommends to the Florida Board of
Administration investments for various Florida employee retirement funds. The
Florida Board of Administration, Florida's principal investment advisory and
money management agency, oversees the investment of more than $60 billion of
retirement funds. Mr. Seneff received his degree in Business Administration from
Florida State University in 1968.
Robert A. Bourne, age 55. Mr. Bourne has participated as a general
partner or co-venturer in over 100 real estate ventures involved in the
financing, acquisition, construction, and leasing of restaurants, office
buildings, apartment complexes, hotels, and other real estate. Mr. Bourne is a
Director of APF. Mr. Bourne served as President of APF from 1994 through
February 1999. He also served as Treasurer from February 1999 through August
1999 and from May 1994 through December 1994. He also served in various
executive positions with CNL Fund Advisors, Inc. prior to its merger with a
wholly-owned subsidiary of APF including, President from 1994 through September
1997, and Director from 1994 through August 1999. Mr. Bourne serves as President
and Treasurer of CNL Financial Group, Inc.; Director, Vice Chairman of the
Board, and Treasurer , and from 1997 until June 2002 served as President, of CNL
Hospitality Properties, Inc., a public, unlisted real estate investment trust;
as well as, Director, Vice Chairman of the Board, and Treasurer, and from 1997
until June 2002 served as President, of CNL Hospitality Corp., its advisor. In
addition, Mr. Bourne serves as Director, Vice Chairman of the Board, and
Treasurer, and from 1997 until June 2002 served as President, of CNL Retirement
Properties, Inc., a public, unlisted real estate investment trust; as well as, a
Director, Vice Chairman of the Board, and Treasurer, and from 1997 until June
2002 served as President, of its advisor, CNL Retirement Corp. Mr. Bourne also
serves as a Director of CNL Bank. He has served as a Director since 1992, Vice
Chairman of the Board since February 1996, Secretary and Treasurer from February
1996 through 1997, and President from July 1992 through February 1996, of
Commercial Net Lease Realty, Inc., a public real estate investment trust listed
on the New York Stock Exchange. Mr. Bourne also serves as Director, President
and Treasurer for various affiliates of CNL Financial Group, Inc. including, CNL
Investment Company, CNL Securities Corp. and CNL Institutional Advisors, Inc., a
registered investment advisor for pension plans. Mr. Bourne began his career as
a certified public accountant employed by Coopers & Lybrand, Certified Public
Accountants, from 1971 through 1978, where he attained the position of Tax
Manager in 1975. Mr. Bourne graduated from Florida State University in 1970
where he received a B.A. in Accounting, with honors.
Curtis B. McWilliams, age 47. Mr. McWilliams has served as Co-Chief
Executive Officer of APF since December 2000 and previously served as Chief
Executive Officer from September 1999 through December 2000. Prior to the
acquisition of CNL Fund Advisors, Inc., Mr. McWilliams served as President of
APF from February 1999 until September 1999. From February 1998 to February
1999, he served as Executive Vice President of APF. Mr. McWilliams joined CNL
Financial Group, Inc. in April 1997 and served as an Executive Vice President
from October 1997 until September 1999. In addition, Mr. McWilliams served as
President of CNL Fund Advisors, Inc. and CNL Financial Services, Inc., a
corporation engaged in the business of real estate financing, from April 1997
until the acquisition of such entities by wholly-owned subsidiaries of APF in
September 1999. From September 1983 through March 1997, Mr. McWilliams was
employed by Merrill Lynch & Co. The majority of his career at Merrill Lynch &
Co. was in the Investment Banking division where he served as a Managing
Director. Mr. McWilliams received a B.S.E. in Chemical Engineering from
Princeton University in 1977 and a Master of Business Administration degree with
a concentration in finance from the University of Chicago in 1983.
Steven D. Shackelford, age 39. Mr. Shackelford was promoted to
Executive Vice President of APF in June 2000. He served as Senior Vice President
from September 1999 until his promotion in June 2000. Mr. Shackelford has served
as Chief Financial Officer since January 1997 and has served as Secretary and
Treasurer of APF since September 1999. He also served as Chief Financial Officer
of CNL Fund Advisors, Inc. from September 1996 to September 1999. From March
1995 to July 1996, Mr. Shackelford was a senior manager in the national office
of Price Waterhouse LLP where he was responsible for advising foreign clients
seeking to raise capital and a public listing in the United States. From August
1992 to March 1995, he was a manager in the Paris, France office of Price
Waterhouse, serving several multi-national clients. Mr. Shackelford was an audit
staff and senior from 1986 to 1992 in the Orlando, Florida office of Price
Waterhouse. Mr. Shackelford received a Bachelor of Arts degree in Accounting,
with honors, and a Master of Business Administration degree from Florida State
University and is a certified public accountant.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires the General Partners, the
officers of the corporate General Partner, and persons who own more than ten
percent of a registered class of the Partnership's equity securities
(collectively, the "Reporting Persons"), to file reports of ownership and
changes in ownership on Forms 3, 4 and 5 with the SEC. Reporting Persons are
required by SEC regulation to furnish the Partnership with copies of all Forms
3, 4 and 5 that they file.
Based solely on the General Partners' review of the copies of such
forms the Partnership has received and written representations from certain
Reporting Persons that they were not required to file Forms 5 for the last
fiscal year, the General Partners believe that all Reporting Persons complied
with all filing requirements applicable to them with respect to transactions
during fiscal 2002.
Item 11. Executive Compensation
Other than as described in Item 13, the Partnership has not paid and
does not intend to pay any executive compensation to the General Partners or any
of their affiliates. There are no compensatory plans or arrangements regarding
termination of employment or change of control.
Item 12. Security Ownership of Certain Beneficial Owners and Management
As of March 10, 2003, no person was known to the Registrant to be a
beneficial owner of more than five percent of the Units.
The following table sets forth, as of March 10, 2003, the beneficial
ownership interests of the General Partners in the Registrant.
Title of Class Name of Partner Percent of Class
-------------- --------------- ----------------
General Partnership Interests James M. Seneff, Jr. 45%
Robert A. Bourne 45%
CNL Realty Corporation 10%
--------
100%
========
Neither the General Partners, nor any of their affiliates, owns any
interest in the Registrant, except as noted above.
The Partnership does not have any equity compensation plans.
Item 13. Certain Relationships and Related Transactions
The table below summarizes the types, recipients, methods of
computation and amounts of compensation, fees and distributions paid or payable
by the Partnership to the General Partners and their affiliates for the year
ended December 31, 2002, exclusive of any distributions to which the General
Partners or their affiliates may be entitled by reason of their purchase and
ownership of Units.
Amount Incurred
Type of Compensation For the Year
and Recipient Method of Computation Ended December 31, 2002
- --------------------------------- --------------------------------------------- -------------------------------
Reimbursement to affiliates for Operating expenses are reimbursed at the Accounting and administrative
operating expenses lower of cost or 90% of the prevailing rate services: $220,717
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 $39,837
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, 2002
- --------------------------------- --------------------------------------------- -------------------------------
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 of such net sales proceeds, subordinated to
proceeds from a sale or sales certain minimum returns to the Limited Partners
not in liquidation of the
Partnership.
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.
In addition, during 2002, the Partnership acquired one Property from CNL Funding
2001-A, LP, an affiliate of the General Partners, for a purchase price of
approximately $1,262,200. 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
represents the costs incurred by CNL Funding 2001-A, LP to acquire the Property.
Item 14. Controls and Procedures
The General Partners maintain a set of disclosure controls and
procedures designed to ensure that information required to be disclosed in the
Partnership's filings under the Securities Exchange Act of 1934 is recorded,
processed, summarized and reported within the time periods specified in the
Securities and Exchange Commission's rules and forms. The principal executive
and financial officers of the corporate General Partner have evaluated the
Partnership's disclosure controls and procedures within 90 days prior to the
filing of this Annual Report on Form 10-K and have determined that such
disclosure controls and procedures are effective.
Subsequent to the above evaluation, there were no significant changes
in internal controls or other factors that could significantly affect these
controls, including any corrective actions with regard to significant
deficiencies and material weaknesses.
PART IV
Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) The following documents are filed as part of this report.
1. Financial Statements
Report of Independent Certified Public Accountants
Balance Sheets at December 31, 2002 and 2001
Statements of Income for the Years Ended December 31, 2002,
2001, and 2000
Statements of Partners' Capital for the Years Ended December
31, 2002, 2001, and 2000
Statements of Cash Flows for the Years Ended December 31,
2002, 2001, and 2000
Notes to Financial Statements
2. Financial Statement Schedules
Schedule II - Valuation and Qualifying Accounts - Years Ended
December 31, 2002, 2001, and 2000
Schedule III - Real Estate and Accumulated Depreciation at
December 31, 2002
Notes to Schedule III - Real Estate and Accumulated
Depreciation at December 31, 2002
All other Schedules are omitted as the required information is
inapplicable or is presented in the financial statements or
notes thereto.
3. Exhibits
3.1 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.)
10.5 Assignment of Management Agreement from CNL APF
Partners, LP to CNL Restaurants XVIII, Inc. (Included
as Exhibit 10.3 to Form 10-Q filed with the
Securities and Exchange Commission on August 13,
2002, and incorporated herein by reference.)
99.1 Certification of Chief Executive Officer of Corporate
General Partner Pursuant to 18 U.S.C. Section 1350 as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002. (Filed herewith.)
99.2 Certification of Chief Financial Officer of Corporate
General Partner Pursuant to 18 U.S.C. Section 1350 as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002. (Filed herewith.)
(b) The Registrant filed no reports on Form 8-K during the period October
1, 2002 through December 31, 2002.
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 24th day of
March, 2003.
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 24, 2003
- ------------------------------------ (Principal Financial and Accounting
Robert A. Bourne Officer)
/s/ James M. Seneff, Jr. Chief Executive Officer and Director March 24, 2003
- ------------------------------------ (Principal Executive Officer)
James M. Seneff, Jr.
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
OF CORPORATE GENERAL PARTNER
PURSUANT TO RULE 13a-14 AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, James M. Seneff, Jr., the Chief Executive Officer of CNL Realty
Corporation, the corporate general partner of CNL Income Fund XIV, Ltd. (the
"registrant"), certify that:
1. I have reviewed this annual report on Form 10-K of the registrant;
2. Based on my knowledge, this annual report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect
to the period covered by this annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented
in this annual report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
and have:
a. designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this annual report is being prepared;
b. evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this annual report (the "Evaluation
Date"); and
c. presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed,
based on our most recent evaluation, to the registrant's auditors
and the audit committee of registrant's board of directors (or
persons performing the equivalent functions):
a. all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b. any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officer and I have indicated in
this quarterly report whether or not there were significant changes
in internal controls or in other factors that could significantly
affect internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
Date: March 24, 2003
/s/ James M. Seneff, Jr.
- ---------------------------
James M. Seneff, Jr.
Chief Executive Officer
CERTIFICATION OF CHIEF FINANCIAL OFFICER
OF CORPORATE GENERAL PARTNER
PURSUANT TO RULE 13a-14 AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Robert A. Bourne, President and Treasurer of CNL Realty Corporation,
the corporate general partner of CNL Income Fund XIV, Ltd. (the "registrant")
certify that:
1. I have reviewed this annual report on Form 10-K of the registrant;
2. Based on my knowledge, this annual report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect
to the period covered by this annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented
in this annual report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
and have:
a. designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this annual report is being prepared;
b. evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this annual report (the "Evaluation
Date"); and
c. presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed,
based on our most recent evaluation, to the registrant's auditors
and the audit committee of registrant's board of directors (or
persons performing the equivalent functions):
a. all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b. any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officer and I have indicated in
this annual report whether or not there were significant changes in
internal controls or in other factors that could significantly
affect internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
Date: March 24, 2003
/s/ Robert A. Bourne
- ---------------------------
Robert A. Bourne
President and Treasurer
EXHIBIT INDEX
Exhibit Number
(a) 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.)
10.5 Assignment of Management Agreement from CNL APF Partners,
LP to CNL Restaurants XVIII, Inc. ((Included as Exhibit
10.3 to Form 10-Q filed with the Securities and Exchange
Commission on August 13, 2002, and incorporated herein by
reference.)
99.1 Certification of Chief Executive Officer of Corporate
General Partner Pursuant to 18 U.S.C. Section 1350 as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002. (Filed herewith.)
99.2 Certification of Chief Financial Officer of Corporate
General Partner Pursuant to 18 U.S.C. Section 1350 as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002. (Filed herewith.)
EXHIBIT 99.1
EXHIBIT 99.2
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
Years Ended December 31, 2002, 2001, and 2000
Additions Deductions
---------------------------------- ----------------------------
Collected
or Deter-
Balance at Charged to Charged to Deemed mined to Balance
Beginning Costs and Other Uncollec- be Col- at End
Year Description of Year Expenses Accounts tible lectible of Year
- ---------- ----------------- -------------- --------------- ------------- ------------- ------------ ------------
2000 Allowance for
doubtful
accounts (a) $ 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
============== =============== ============= ============= ============ ============
2002 Allowance for
doubtful
accounts (a) $ 125,891 $ -- $ -- $ 77,256 (c) $ -- $ 48,635
============== =============== ============= ============= ============ ============
(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, 2002
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 C-rolina $605,712 - - -
Burger King Restaurant:
Alliance, Ohio - 210,290 - - -
Checkers Drive-In Restaurants:
Boynton Beach, Florid- 501,606 - - -
Chamblee, Georgia - 332,737 - - -
Delray Beach, Florida- 193,110 - - -
Foley, Alabama - 197,821 - - -
Huntsville, Alabama - 362,907 - - -
Norcross, Georgia - 474,262 - - -
Orlando, Florida - 559,646 - - -
Pensacola, Florida - 296,726 - - -
Suwannee, Georgia - 269,643 - - -
St. Petersburg, Flori-a 338,396 - - -
Coral Springs, Florid- 421,221 - - -
Denny's Restaurants:
Bullhead City, Arizon- 282,086 623,778 152,416 -
Topeka, Kansas - 420,446 - - -
Tempe, Arizona - 881,047 - - -
-
El Ranchito Restaurant:
Albemarle, North Caro-ina (m) 214,623 370,149 - -
Golden Corral Family
Steakhouse Restaurants:
Burlington, North-Carolina931,962 - 975,218 -
Wilson, North Car-lina 415,390 - 833,156 -
Bristol, Virginia-(l) 733,334 1,145,990 21,446 -
Hardee's Restaurants:
Franklin, Tennessee - 201,441 423,569 - -
Nashville, Tennessee - 315,087 - - -
Antioch, Tennessee - 296,341 485,974 - -
Batesville, Mississip-i 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 - -
Phoenix, Arizona - 579,515 739,663 - -
Long John Silver's Restaurants:
Apopka, Florida - 320,435 - - -
Houston, Texas - 411,403 - - -
Houston, Texas(i) - 342,971 475,749 - -
Marion, Ohio - 321,032 - - -
Taco Cabana Restaurants:
San Antonio, Texas (n- 537,051 725,112 - -
IHOP Restaurants:
Akron, Ohio (h) - 246,431 805,793 - -
Other:
Marietta, Georgia (o)- 332,418 - - -
Albemarle, North Caro-ina 202,363 447,278 - -
--------- --------- -------- ------
$15,214,61$9,598,792$1,982,236 -
========= ========= ======== ======
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 C-rolina 409,942 737,391 - -
Raleigh, North Ca-olina 518,507 542,919 - -
Taco Bell Restaurant:
Anniston, Alabam- 173,395 329,202 - -
Other:
Murfreesboro, Ten-essee 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, Tenness-e $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, Florid- (k) $438,973 $639,141 - -
========= ========= ======== ======
Property of Joint Venture
in Which the Partnership
has a 11% Interest and has
Invested in Under an Operating
Lease:
IHOPcRestauranttaurants:
Bossier City, Lo-isiana $453,016 $866,192 - -
========= ========= ======== ======
Property of Joint Venture
in Which the Partnership
has a 44% Interest and has
Invested in Under an Operating
Lease:
RoadhouselGrilltRestaurant:
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 (l- $664,944 $838,434 - -
========= ========= ======== ======
Properties the Partnership has
Invested in Under Direct
Financing Leases:
Bennigan's Restaurant:
Fayetteville, No-th Carolina (j- $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, Tenne-see - 553,400 - -
Jack in the Box Restaurant:
Shreveport, Loui-iana 240,811 848,338 - -
Long John Silver's Restaurants:
Apopka, Florida - - 506,493 - -
Houston, Texas - - 449,633 - -
Marion, Ohio - - 463,504 - -
--------- --------- -------- ------
$440,578 $5,076,758$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 -
========= ========= ======== ======
Property of Joint Venture in
Which the Partnership has a
44.00% Interest and has Invested
in Under a Direct Financing Lease:
Roadhouse GrilluRestaurant:
Duluth, Georgia - - - - $865,185
========= ========= ======== ======
Life on Which
Gross Amount at Which Depreciation in
Carried at Close of Period (c) Date Latest Income
- -------------------------------------------
Buildings and Accumulatedof ConDate Statement is
Land ImprovementsTotal 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)
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 1,058,280 235,125 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 65,112 1994 04/94 (m)
931,962 975,218 1,907,180 292,655 1993 10/93 (b)
415,390 833,156 1,248,546 255,641 1993 10/93 (b)
733,334 1,167,436 1,900,770 84,315 2000 11/00 (b)
201,441 423,569 625,010 129,098 1993 11/93 (b)
315,087 (g) 315,087 (e) 1993 11/93 (e)
296,341 485,974 782,315 148,118 1993 11/93 (b)
186,404 453,720 640,124 136,862 1993 12/93 (b)
385,903 409,773 795,676 123,606 1993 12/93 (b)
449,442 528,882 978,324 161,196 1992 11/93 (b)
423,092 467,253 890,345 141,474 1992 11/93 (b)
465,235 525,470 990,705 159,080 1988 12/93 (b)
297,688 551,394 849,082 165,972 1992 12/93 (b)
257,393 419,245 676,638 126,922 1983 12/93 (b)
579,515 739,663 1,319,178 2,055 2002 12/02 (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 62,878 1994 04/94 (i)
321,032 (g) 321,032 (e) 1994 06/94 (e)
537,051 725,112 1,262,163 20,142 1993 03/02 (b)
246,431 768,809 1,015,240 228,848 1993 10/93 (b)
332,418 (o) 332,418 (o) - 03/94 (o)
202,363 447,278 649,641 138,074 1992 09/93 (b)
- ---------- --------- -------- ----------
$15,214,610$11,544,044$26,758,6$2,677,173
========== ========= ======== ==========
$196,274 $434,428 $630,702 $131,042 1993 11/93 (b)
========== ========= ======== ==========
409,942 737,391 1,147,333 153,124 1994 10/96 (b)
518,507 542,919 1,061,426 112,741 1994 10/96 (b)
173,395 329,202 502,597 65,586 1993 01/97 (b)
398,313 - 398,313 (d) 1996 10/96 (d)
253,934 531,509 785,443 110,371 1996 10/96 (b)
- ---------- --------- -------- ----------
$1,754,091 $2,141,021 $3,895,112$441,822
========== ========= ======== ==========
$131,762 (g) $131,762 (e) 1991 03/95 (e)
========== ========
$189,452 $328,445 $517,897 $55,713 1997 11/97 (b)
========== ========= ======== ==========
$438,973 $420,088 $859,061 $44,371 1998 04/98 (k)
========== ========= ======== ==========
$453,016 $866,192 $1,319,208 $91,161 1998 11/99 (b)
========== ========= ======== ==========
$1,078,469 (g) $1,078,469 (e) 2000 12/99 (e)
========== ========
$664,944 $838,434 $1,503,378 $83,844 2000 01/00 (b)
========== ========= ======== ==========
- (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) 1991 03/95 (e)
==========
- (g) (g) (e) 1999 12/99 (e)
==========
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
NOTES TO SCHEDUE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 2002
(a) Transactions in real estate and accumulated depreciation are summarized
below. The balances in 1999, 2000, and 2001 have been adjusted to
reflect the reclassification of properties accounted for as
discontinued operations.
Accumulated
Cost Depreciation
----------------- --------------------
Properties the Partnership has invested in Under
Operating Leases:
Balance, December 31, 1999 $ 24,552,039 $ 1,834,534
Acquisitions 1,879,324 --
Dispositions (1,717,627 ) (199,438 )
Depreciation expense -- 335,798
----------------- ------------------
Balance, December 31, 2000 24,713,736 1,970,894
Provision for write-down of assets (248,843 ) --
Depreciation expense -- 341,266
----------------- ------------------
Balance, December 31, 2001 24,464,893 2,312,160
Acquisitions (n) 2,602,786 --
Dispositions (309,025 ) --
Depreciation expense -- 365,013
----------------- ------------------
Balance, December 31, 2002 $ 26,758,654 $ 2,677,173
================= ==================
Property of Joint Venture in Which the Partnership has a 50% Interest
and has Invested in Under an Operating Lease:
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
Depreciation expense -- 14,481
----------------- ------------------
Balance, December 31, 2002 $ 630,702 $ 131,042
================= ==================
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
NOTES TO SCHEDUE III - REAL ESTATE AND ACCUMULATED DEPRECIATION - CONTINUED
December 31, 2002
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, 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
Depreciation expense -- 71,367
----------------- ------------------
Balance, December 31, 2002 $ 3,895,112 $
441,822
================= ==================
Properties of Joint Venture in Which the Partnership has a 72.2%
Interest and has Invested in Under an Operating Lease:
Balance, December 31, 1999 $ 131,762 $ --
Depreciation expense (e) -- --
----------------- ------------------
Balance, December 31, 2000 131,762 --
Depreciation expense (e) -- --
----------------- ------------------
Balance, December 31, 2001 131,762 --
Depreciation expense (e) -- --
----------------- ------------------
Balance, December 31, 2002 $ 131,762 $ --
================= ==================
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
NOTES TO SCHEDUE III - REAL ESTATE AND ACCUMULATED DEPRECIATION - CONTINUED
December 31, 2002
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, 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
Depreciation expense -- 10,948
---------------- ------------------
Balance, December 31, 2002 $ 517,897 $ 55,713
================ ==================
Property of Joint Venture in Which the Partnership has a 50% Interest and
has Invested in Under an Operating Lease:
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
Depreciation Expense -- 14,076
---------------- ------------------
Balance, December 31, 2002 $ 859,061 $ 44,371
================ ==================
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
NOTES TO SCHEDUE III - REAL ESTATE AND ACCUMULATED DEPRECIATION - CONTINUED
December 31, 2002
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, 1999 $ $ 4,542
1,319,208
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
Depreciation expense -- 28,873
--------------- -----------------
Balance, December 31, 2002 $ 1,319,208 $ 91,161
=============== =================
Property of Joint Venture in Which the Partnership has a 44% Interest and
has Invested in Under an Operating Lease:
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 --
Depreciation expense -- --
--------------- -----------------
Balance, December 31, 2002 $ 1,078,469 $ --
=============== =================
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
NOTES TO SCHEDUE III - REAL ESTATE AND ACCUMULATED DEPRECIATION - CONTINUED
December 31, 2002
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
Depreciation expense -- 27,948
--------------- -----------------
Balance, December 31, 2002 $ 1,503,378 $ 83,844
=============== =================
(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, 2002, the aggregate cost of the Properties owned by
the Partnership and joint ventures for federal income tax purposes was
$31,532,548 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 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
land and building were recorded at net book value and the building is
being depreciated over its remaining life of approximately 29 years.
The undepreciated cost of the Property in Akron, Ohio was written down
to its estimated fair value due to an impairment in value. The
Partnership recognized the impairment by recording a provision for
write-down of assets of approximately $37,000 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 net carrying value and its
estimated fair value. The cost of the Property presented on this
schedule is the net amount at which the Property was carried at
December 31, 2002, including the provision for write-down of assets.
The Partnership re-leased this Property during 2002 and the tenant
converted the Property to an IHOP.
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
NOTES TO SCHEDUE III - REAL ESTATE AND ACCUMULATED
DEPRECIATION - CONTINUED
December 31, 2002
(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) During the year ended December 31, 1998, the Partnership purchased a
real estate property from CNL First Corp., an affiliate of the General
Partners, for an aggregate cost of approximately $1,537,000.
(k) 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.
(l) During the year ended December 31, 2000, the Partnership purchased a
real estate property from CNL BB Corp., an affiliate of the General
Partners, for an aggregate cost of approximately $1,900,800. In
addition, during the year ended December 31, 2000, the Partnership and
an affiliate, as tenants-in-common, purchased a real estate property
from CNL BB Corp., an affiliate of the General Partners for an
aggregate cost of approximately $1,503,400.
(m) 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.
(n) During the year ended December 31, 2002, the Partnership purchased a
real estate property from CNL Funding 2001-A, LP, an affiliate of the
General Partners, for an aggregate cost of approximately $1,262,200.
(o) In October 2002, the Property in Marietta, Georgia was destroyed by
fire. As of December 31, 2002, the total undepreciated cost of the
building was removed from the accounts; therefore, depreciations is not
applicable.