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, 2003
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, 2000, the Partnership owned 43 Properties directly
and 13 Properties indirectly through joint venture or tenancy in common
arrangements. 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. During 2003,
the Partnership reinvested a portion of the net sales proceeds from the sale of
the Property in Merriam, Kansas in a Property in Tucker, Georgia, with CNL
Income Fund X, Ltd., CNL Income Fund XIII, Ltd., and CNL Income Fund XV, Ltd.,
as tenants-in-common. Each of the CNL Income Funds is an affiliate of the
General Partners and a Florida limited partnership.
As of December 31, 2003, the Partnership owned 41 Properties directly
and 13 Properties indirectly through joint venture or tenancy in common
arrangements. The Properties owned at December 31, 2003 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 Partnership's Properties are generally leased
on a triple-net basis with the lessees responsible for all repairs and
maintenance, property taxes, insurance and utilities. In February and March
2004, the Partnership sold its Properties in Bullhead City, Arizona and
Franklin, Tennessee, respectively, and intends to reinvest these proceeds in
additional Properties or use the proceeds to pay liabilities of the Partnership.
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 taxes. 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 Properties held
as tenants-in-commons with affiliates of the General Partners provide for
initial terms ranging from 10 to 25 years (the average being approximately 19
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
successive five-year renewal options subject to the same terms and conditions as
the initial lease. Lessees of 38 of the Partnership's 54 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 2003, the Partnership reinvested the net sales proceeds from the
sale of the Property in Merriam, Kansas in a Property in Tucker, Georgia, with
CNL Income Fund X, Ltd., CNL Income Fund XIII, Ltd., and CNL Income Fund XV,
Ltd., as tenants-in-common. The lease terms for this Property are substantially
the same as the Partnership's other leases.
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 was completed in
February 2003, at which point rental payments commenced.
In January 2001, the lease relating to the Property in Tempe, Arizona
was assigned to another tenant and amended to provide for a reduction in rents
for a two-year period. In December 2002, the lease was amended to provide for a
reduction in rents for an additional six-month period. All other lease terms
remained unchanged. The General Partners do not anticipate that any decrease in
rental income relating to this amendment will have a material adverse effect on
the Partnership's financial position or results of operations.
In February and March 2004, the Partnership sold its Properties in
Bullhead City, Arizona and Franklin, Tennessee, respectively, each to a third
party. The Partnership intends to reinvest these proceeds in additional
Properties or use the proceeds to pay liabilities of the Partnership.
Major Tenants
During 2003, five lessees of the Partnership, 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."), Golden
Corral Corporation, Checkers Drive-In Restaurants, Inc., Flagstar Enterprises,
Inc., and Denny's, Inc. each contributed more than ten percent of total rental
revenues (including the Partnership's share of total rental revenues from
Properties owned by unconsolidated joint ventures and the Properties held as
tenants-in-common with affiliates). As of December 31, 2003, Jack in the Box
Inc. was the lessee under leases relating to seven restaurants; Golden Corral
Corporation was the lessee under leases relating to three restaurants; Checkers
Drive-In Restaurants, Inc. was the lessee under leases relating to 12
restaurants; Flagstar Enterprises, Inc. was the lessee under leases relating to
six 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 total rental revenues in 2004. In addition, five Restaurant
Chains, Jack in the Box, Golden Corral Buffet and Grill ("Golden Corral"),
Denny's, Checkers, and Hardee's, each accounted for more than ten percent of
total rental revenues during 2003 (including the Partnership's share of total
rental revenues from Properties owned by unconsolidated joint ventures and the
Properties held as tenants-in-common with affiliates). In 2004, it is
anticipated that these five Restaurant Chains each will continue to account for
more than ten percent of the total rental revenues to which the Partnership is
entitled under the terms of the leases. Any failure of these lessees or
Restaurant Chains will materially affect the Partnership's operating results if
the Partnership is not able to re-lease the Properties in a timely manner. As of
December 31, 2003, 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, 2003:
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
CNL Income Fund X, Ltd., CNL 2003 10.00% CNL Income Fund X, Ltd. Tucker, Georgia
Income Fund XIII, Ltd., CNL Income Fund XIII, Ltd.
CNL Income Fund XIV, Ltd., CNL Income Fund XV, Ltd.
and CNL Income Fund XV,
Ltd. Tenants in Common
Wood-Ridge Real Estate Joint Venture was originally 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
entity or the Property. 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 entity or the Property.
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. After the expiration of the
initial terms, each 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 or assign its 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. (the "Advisor"), an affiliate of the General
Partners, provides certain services relating to management of the Partnership
and its Properties pursuant to a management agreement with the Partnership.
Under this agreement, 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 has 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.
During 2003, CNL Capital Management, Inc., ("CCM"), a wholly owned
subsidiary of CNL Financial Group, Inc., began providing certain strategic
advisory services to the General Partners relative to the Partnership's
business. CCM is not reimbursed for these services by the Partnership. CCM also
began providing some accounting and portfolio management services to the
Partnership during 2003, through a subcontract with the Advisor.
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, the officers and employees of CNL Restaurant Properties, Inc.
(formerly CNL American Properties Fund, Inc.), the parent company of the
Advisor, and the officers and employees of CCM 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, 2003, the Partnership owned 54 Properties. Of the 54
Properties, 41 are owned by the Partnership in fee simple, 11 are owned through
joint venture arrangements and two are owned with affiliates of the General
Partners, 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.
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, 2003 by state.
State Number of Properties
Alabama 4
Arizona 4
Florida 9
Georgia 6
Illinois 1
Kansas 1
Louisiana 2
Minnesota 1
Mississippi 1
North Carolina 7
Ohio 4
Tennessee 5
Texas 8
Virginia 1
-------
TOTAL PROPERTIES 54
=======
Buildings. Each of the Properties 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,
2003, 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, 2003, the aggregate cost of the Properties owned by
the Partnership and unconsolidated joint ventures (including the Properties
owned through tenancy in common arrangements) for federal income tax purposes
was $31,532,548 and $12,615,253, respectively.
The following table lists the Properties owned by the Partnership,
either directly or indirectly through joint venture or tenancy in common
arrangements, as of December 31, 2003 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
O'Charley's 1
Roadhouse Grill 1
Taco Bell 2
Taco Cabana 1
Other 3
-------
TOTAL PROPERTIES 54
=======
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
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.
The following is a schedule of the average rent per Property and the
occupancy rate for each of the years ended December 31:
2003 2002 2001 2000 1999
------------- ------------- --------------- -------------- --------------
Rental Revenues (1)(2) $ 4,117,796 $ 4,110,920 $ 4,016,647 $ 4,006,450 $ 4,190,352
Properties (2) 54 52 53 54 55
Average Rent per
Property $ 76,255 $ 79,056 $ 75,786 $ 74,194 $ 76,188
Occupancy rate 100% 98% 96% 96% 98%
(1) Rental revenues include the Partnership's share of rental revenues from
the Properties owned through joint venture arrangements and the
Properties owned through tenancy in common arrangements.
(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, 2003 for the next ten years and thereafter.
Percentage of
Expiration Number Annual Rental Gross Annual
Year of Leases Revenues Rental Income
----------------- ---------------- --------------------- --------------------------
2004 -- -- --
2005 -- -- --
2006 -- -- --
2007 -- -- --
2008 2 $ 197,304 4.90%
2009 1 40,181 1.00%
2010 -- -- --
2011 8 680,176 16.88%
2012 1 28,745 0.70%
2013 9 841,597 20.88%
Thereafter 31 2,242,540 55.64%
---------- ------------- -------------
Total (1) 52 $ 4,030,543 100.00%
========== ============= =============
(1) Excludes one Property that was sold in February 2004 and one that was
sold in March 2004.
Leases with Major Tenants. The terms of each of the leases with the
Partnership's major tenants as of December 31, 2003 (see Item 1. Business -
Major Tenants), are substantially the same as those described in Item 1.
Business - Leases.
Jack in the Box Inc. leases seven Jack in the Box restaurants. The
initial term of each lease is 18 years (expiring between 2011 and 2020) and the
average minimum base annual rent is approximately $96,700 (ranging from
approximately $68,500 to $125,300).
Golden Corral Corporation leases three Golden Corral restaurants. The
initial term of two of the leases is 15 years and the initial term of the third
lease is 16 years, (expiring between 2008 and 2016) and the average minimum base
annual rent is approximately $179,800 (ranging from approximately $132,800 to
$203,600).
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.
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).
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, nor any affiliate of
the Partnership, 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 12, 2004, there were 2,991 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 2003, 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, 2003, 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 2003 and 2002 other than
pursuant to the Plan, net of commissions.
2003 (1) 2002 (1)
---------- ---------- ----------- -------- ---------- -----------
High Low Average High Low Average
---------- ---------- ----------- -------- ---------- -----------
First Quarter $10.00 $ 6.17 $ 7.15 $9.50 $ 5.40 $ 8.04
Second Quarter 7.52 6.83 7.29 7.28 6.28 6.84
Third Quarter 6.75 6.75 6.75 9.50 9.00 9.31
Fourth Quarter 9.50 6.83 7.99 7.34 5.33 6.67
(1) A total of 17,291 and 62,617 Units were transferred other than pursuant
to the Plan for the years ended December 31, 2003 and 2002,
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, 2003 and 2002, 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
2003 and 2002. No amounts distributed to partners for the years ended December
31, 2003 and 2002 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.
2003 2002 2001 2000 1999
--------------- --------------- ---------------- --------------- ---------------
Year ended December 31:
Continuing Operations (5):
Revenues $ 3,469,942 $ 3,290,519 $ 3,253,887 $ 3,584,942 $ 3,504,103
Equity in earnings of
unconsolidated joint
ventures 447,035 386,433 498,273 266,023 373,434
Income from continuing
operations (1) (2) 3,150,878 3,390,601 2,330,204 3,060,833 2,882,341
Discontinued Operations (5):
Revenues 113,323 263,096 290,085 298,769 314,172
Income from and gain on
disposal of
discontinued
operations (3) (4) 92,424 338,853 173,894 130,805 188,781
Net income 3,243,302 3,729,454 2,504,098 3,191,638 3,071,122
Income per unit:
Continuing operations $ 0.70 $ 0.75 $ 0.52 $ 0.68 $ 0.64
Discontinued operations 0.02 0.08 0.04 0.03 0.04
--------------- --------------- ---------------- --------------- ---------------
$ 0.72 $ 0.83 $ 0.56 $ 0.71 $ 0.68
=============== =============== ================ =============== ===============
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 $37,843,030 $38,296,857 $ 38,253,909 $39,632,587 $40,072,897
Total partners' capital 36,652,738 37,121,956 37,105,022 38,313,444 38,834,326
(1) Income from continuing operations includes $526,947 and $41,997, in
provisions for write-down of assets for the years ended December 31,
2001 and 2000, respectively.
(2) Income from continuing operations includes $497,689 and $37,369, in
gains on sale of assets for the years ended December 31, 2002 and 1999,
respectively, and $75,930 in losses on sale of assets for the year
ended December 31, 2000.
(3) Income from and gain on disposal of 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 and gain on disposal of discontinued operations includes
$271,909 from gain on disposal of discontinued operations for the year
ended December 31, 2002.
(5) Certain items in the prior years' financial data have been reclassified
to conform to the 2003 presentation. This reclassification had no
effect on net income. The results of operations relating to properties
that were identified for sale as of December 31, 2001 but sold
subsequently are reported as continuing operations. The results of
operations relating to properties that were either identified for sale
and disposed of subsequent to January 1, 2002 or were classified as
held for sale as of December 31, 2003 are reported as discontinued
operations for all periods presented.
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 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, 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. As of December 31, 2003, the Partnership
owned 41 Properties directly and 13 Properties indirectly through joint venture
and tenancy in common arrangements.
Capital Resources
Cash from operating activities was $3,700,899, $3,680,160, and
$3,313,181, for the years ended December 31, 2003, 2002, and 2001, respectively.
The increase in cash from operating activities during 2003, as compared to the
previous year, was a result of changes in income and expenses, such as changes
in rental revenues and changes in operating and Property related expenses, and
changes in the Partnership's working capital, such as the timing of transactions
relating to the collection of receivables and the payment of expenses, while the
increase in cash from operating activities during 2002, as compared to 2001, was
a result of changes in the Partnership's working capital, such as the timing of
transactions relating to the collection of receivables and the payment of
expenses.
Other sources and uses of cash included the following during the years
ended December 31, 2003, 2002, and 2001.
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 disposal of discontinued operations of
approximately $271,900. The Partnership had recorded provisions for write-down
of assets in previous periods relating to these Properties. During 2002, the
Partnership reinvested the majority of 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.
During 2003, the Partnership reinvested the remaining proceeds from the
2002 sale of the Property in Merriam, Kansas in a Property in Tucker, Georgia
with CNL Income Fund X, Ltd., CNL Income Fund XIII, Ltd., and CNL Income Fund
XV, Ltd., as tenants-in-common. The Partnership contributed approximately
$153,600 for a 10% interest in this Property. Each of the CNL Income Funds is a
Florida limited partnership and an affiliate of the General Partners.
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.
At December 31, 2003, the Partnership had $1,150,084 in cash and cash
equivalents, as compared to $1,328,466 at December 31, 2002. At December 31,
2003, these funds were held in a non-interest bearing demand deposit account at
a commercial bank. As of December 31, 2003, the average interest rate earned on
the rental income deposited in demand deposit accounts at commercial banks was
less than one percent annually. The decrease in cash was primarily a result of
the Partnership reinvesting sales proceeds during 2003 that were held at
December 31, 2002, as described above. The funds remaining at December 31, 2003,
will be used toward the payment of distributions and other liabilities.
In February 2004, the Partnership sold its Property in Bullhead City,
Arizona to a third party. The Partnership received approximately $1,348,900 in
net sales proceeds, resulting in a gain on disposal of discontinued operations
of approximately $439,400. In addition, in March 2004, the Partnership sold its
Property in Franklin, Tennessee to a third party. The Partnership received
approximately $675,300 in net sales proceeds, resulting in a gain on disposal of
discontinued operations of approximately $129,100. The Partnership intends to
either reinvest the proceeds from these sales in additional Properties or to use
the proceeds to pay liabilities of the Partnership.
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 or loans 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 on current 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, 2003, 2002, and 2001. This represents
distributions of $0.83 per Unit for each of the years ended December 31, 2003,
2002, and 2001. No amounts distributed to the Limited Partners for the years
ended 2003, 2002, or 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 of their adjusted capital contributions. No distributions were
made to the General Partners for the years ended December 31, 2003, 2002, or
2001. 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,
2003, 2002, and 2001.
At December 31, 2003 and 2002, the Partnership owed $18,885 and
$21,304, respectively, to affiliates for accounting and administrative services
and management fees. As of March 12, 2004, the Partnership had reimbursed the
affiliates these amounts. Other liabilities, including distributions payable,
were $1,171,407 at December 31, 2003, as compared to $1,153,597 at December 31,
2002. Liabilities at December 31, 2003, to the extent they exceed cash and cash
equivalents at December 31, 2003, will be paid from anticipated future cash from
operations or from future General Partners' contributions.
Off-Balance Sheet Transactions
The Partnership holds interests in various unconsolidated joint venture
and tenancy in common arrangements that are accounted for using the equity
method. The General Partners do not believe that any such interest would
constitute an off-balance sheet arrangement requiring any additional disclosures
under the provisions of the Sarbanes-Oxley Act of 2002.
Contractual Obligations, Contingent Liabilities, and Commitments
In November 2003, the Partnership entered into an agreement to sell the
Property in Bullhead City, Arizona. The Partnership sold this Property in
February 2004.
The Partnership has no contractual obligations or contingent
liabilities as of December 31, 2003.
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 Financial Accounting Standards 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.
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 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.
Effective January 1, 2002, the Partnership adopted Statement of
Financial Accounting Standards No. 144 "Accounting for the Impairment or
Disposal of Long-Lived Assets." Accordingly, 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, 2003 to year ended December 31, 2002
Rental revenues from continuing operations were $3,387,016 during the
year ended December 31, 2003, as compared to $3,211,570 during the same period
of 2002. Rental revenues from continuing operations were higher during the year
ended December 31, 2003, as compared to the previous year, because, in 2002, the
Partnership acquired two Properties, one in San Antonio, Texas and the other in
Phoenix, Arizona. In addition, in October 2002, the Partnership entered into a
new lease with a new tenant for the Property in Akron, Ohio, which had been
vacant since November 2000. The new tenant converted the Property to a new
concept and commenced rental payments in February 2003. The increase in rental
revenues from continuing operations was partially offset by a decrease in rental
revenues resulting from the 2002 sale of the Property in Las Vegas, Nevada.
The Partnership also earned $79,610 in contingent rental income during
the year ended December 31, 2003, as compared to $65,613 during the same period
of 2002. The increase in contingent rental income during 2003, as compared to
2002, was primarily due to an increase in the reported gross sales of the
restaurants with leases that require the payment of contingent rental income.
The Partnership earned $3,316 in interest and other income during the
year ended December 31, 2003, as compared to $13,336 during the same period of
2002. Interest and other income were higher during 2002 due to higher average
cash balances during 2002 while the Partnership held sales proceeds prior to
reinvestment.
The Partnership earned $447,035 attributable to net income earned by
unconsolidated joint ventures during the year ended December 31, 2003, as
compared to $386,433 during the same period of 2002. Net income earned by
unconsolidated joint ventures was lower during the year ended December 31, 2002,
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 first quarter of 2002. The joint venture also
recorded a provision for write-down of assets of approximately $65,800. The
provision represented the difference between the net carrying value of the
Property and its estimated fair value. During the second quarter of 2002, the
tenant resumed, and has continued, making rental payments to the joint venture.
Net income earned by unconsolidated joint ventures increased slightly during
2003 as a result of the Partnership reinvesting the remaining portion of the
sales proceeds from the 2002 sale of the Property in Merriam, Kansas in a
Property in Tucker, Georgia, with CNL Income Fund X, Ltd., CNL Income Fund XIII,
Ltd., and CNL Income Fund XV, Ltd., as tenants-in-common. Each of the CNL Income
Funds is a Florida limited partnership and an affiliate of the General Partners.
During 2003, five lessees of the Partnership, Jack in the Box Inc.,
Golden Corral Corporation, Checkers Drive-In Restaurants, Inc., Flagstar
Enterprises, Inc., and Denny's, Inc. each contributed more than ten percent of
total rental revenues (including the Partnership's share of total rental
revenues from Properties owned by joint ventures and the Properties held as
tenants-in-common with affiliates). As of December 31, 2003, Jack in the Box
Inc. was the lessee under leases relating to seven restaurants; Golden Corral
Corporation was the lessee under leases relating to three restaurants; Checkers
Drive-In Restaurants, Inc. was the lessee under leases relating to 12
restaurants; Flagstar Enterprises, Inc. was the lessee under leases relating to
six 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 total rental revenues in 2004. In addition, five Restaurant
Chains, Jack in the Box, Golden Corral, Denny's, Checkers, and Hardee's, each
accounted for more than ten percent of total rental revenues during 2003
(including the Partnership's share of total rental revenues from Properties
owned by joint ventures and the Properties held as tenants-in-common with
affiliates). In 2004, it is anticipated that these five Restaurant Chains each
will continue to account for more than ten percent of the total rental revenues
to which the Partnership is entitled under the terms of the leases. Any failure
of these lessees or Restaurant Chains will materially affect the Partnership's
operating results if the Partnership is not able to re-lease the Properties in a
timely manner.
Operating expenses, including depreciation and amortization expense,
were $766,099 during the year ended December 31, 2003, as compared to $784,040
during the same period of 2002. Operating expenses were lower during the year
ended December 31, 2003, due to a decrease in Property expenses resulting from
the 2002 sale of one of the two vacant Properties owned by the Partnership, and
the 2003 re-lease of the other vacant Property. The Partnership did not incur
additional expenses related to these Properties once they were re-leased or
sold. In addition, operating expenses were lower during 2003 due to a decrease
in the costs incurred for administrative expenses for servicing the Partnership
and its Properties. The decrease in operating expenses during 2003 was partially
offset by an increase in state tax expense relating to several states in which
the Partnership conducts business and an increase in depreciation expense
related to the acquisition of two Properties during 2002.
As a result of the sale of the Property in Las Vegas, Nevada, the
Partnership recognized a gain of approximately $497,700 during the year ended
December 31, 2002. Because this Property was identified for sale prior to the
January 2002 implementation of Statement of Financial Accounting Standards No.
144 "Accounting for the Impairment or Disposal of Long-Lived Assets", the
results of operations relating to this Property were included as Income from
Continuing Operations in the accompanying financial statements.
During the year ended December 31, 2002, the Partnership identified and
sold three Properties that were classified as Discontinued Operations in the
accompanying financial statements. In addition, in November 2003, the
Partnership entered into an agreement with a third party to sell the Property in
Bullhead City, Arizona. The Partnership recognized net rental income (rental
revenues less Property related expenses and provision for write-down of assets)
of $92,424 and $66,944 during the years ended December 31, 2003 and 2002,
respectively, relating to these Properties. The reduced net rental income during
2002 was a result of the Partnership recording provisions for write-down of
assets of approximately $143,100 during the year ended December 31, 2002. The
Partnership recorded these provisions in anticipation of the August and November
2002 sales of the Properties in Laurens, South Carolina and Merriam, Kansas,
respectively. The provision represented the difference between the net carrying
value of the Property and its estimated fair value. The Partnership had recorded
provisions for write-down of assets relating to the Property in Laurens, South
Carolina in previous periods. During 2002, the Partnership sold the Properties
in Greeley, Colorado; Laurens, South Carolina; and Merriam, Kansas and
recognized a net gain on disposal of discontinued operations of approximately
$271,900. In February 2004, the Partnership sold the Property in Bullhead City,
Arizona and recorded a gain on disposal of discontinued operations of
approximately $439,400. The financial results for these Properties are reflected
as Discontinued Operations in the accompanying financial statements.
Comparison of year ended December 31, 2002 to year ended December 31, 2001
Rental revenues from continuing operations were $3,211,570 during the
year ended December 31, 2002, as compared to $3,152,246 during the year ended
December 31, 2001. Rental revenues from continuing operations 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., 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 was completed in February 2003, at which
point rental payments commenced.
During the year ended December 31, 2002, the Partnership also earned
$65,613 in contingent rental income, as compared to $64,286 during the same
period of 2001. The Partnership also earned $13,336 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
unconsolidated joint ventures, during the year ended December 31, 2002, as
compared to $498,273 during the same period of 2001. Net income earned by
unconsolidated 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
unconsolidated joint ventures was also lower during 2002, as compared to 2001,
partially because the tenant of the Property owned by Duluth Joint Venture
experienced financial difficulties and ceased making rental payments, as
described above.
Operating expenses, including depreciation and amortization expense and
provision for write-down of assets were $784,040 during the year ended December
31, 2002, as compared to $1,421,956 during the same period of 2001. Operating
expenses were higher during 2001, as compared to 2002, because the Partnership
recorded a provision for write-down of assets of approximately $526,900 during
2001, 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 lease; therefore, the General Partners do not anticipate the Partnership
will incur these expenses for this Property in the future.
As a result of the sale of the Property in Las Vegas, Nevada, the
Partnership recognized a gain of approximately $497,700 during the year ended
December 31, 2002. This Property was identified for sale as of December 31,
2001. Because this Property was identified for sale prior to the January 2002
implementation of Statement of Financial Accounting Standards No. 144
"Accounting for the Impairment or Disposal of Long-Lived Assets", the results of
operations relating to this Property were included as Income from Continuing
Operations in the accompanying financial statements.
During 2002, the Partnership identified and sold three Properties that
were classified as Discontinued Operations in the accompanying financial
statements. In addition, in November 2003, the Partnership entered into an
agreement with a third party to sell the Property in Bullhead City, Arizona. The
Partnership recognized net rental income (rental revenues less Property related
expenses and provision for write-down of assets) of $66,944 and $173,894 during
the years ended December 31, 2002 and 2001, respectively, relating to these
Properties. The reduced net rental income during 2002 and 2001 was a result of
the Partnership recording provisions for write-down of assets of approximately
$143,100 and $39,100, respectively. The provisions represented the difference
between the net carrying value of each Property and its estimated fair value.
During 2002, the Partnership sold the Properties in Greeley, Colorado; Laurens,
South Carolina; and Merriam, Kansas and recognized a net gain on disposal of
discontinued operations of approximately $271,900. In February 2004, the
Partnership sold the Property in Bullhead City, Arizona, as described above. The
financial results for these Properties are reflected as Discontinued Operations
in the accompanying financial statements.
The General Partners continuously evaluate strategic alternatives for
the Partnership, including alternatives to provide liquidity to the Limited
Partners.
The Partnership's leases as of December 31, 2003, 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, the Financial Accounting Standards Board ("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, FIN 46 requires
that a variable interest entity be consolidated 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. In December 2003, the FASB issued FASB Interpretation No. 46R
("FIN 46R"), to clarify some of the provisions of FIN 46. Under FIN 46R, special
effective date provisions apply to entities that have fully or partially applied
FIN 46 prior to issuance of FIN 46R. Otherwise, application of FIN 46R is
required in financial statements of public entities that have interests in
structures that are commonly referred to as special-purpose entities for periods
ending after December 15, 2003. Application by public entities, other than small
business issuers, for all other types of variable interest entities is required
in financial statements for periods ending after March 15, 2004. The Partnership
did not fully or partially apply FIN 46 prior to the issuance of FIN 46R. Also,
the Partnership does not have interests in structures commonly referred to as
special-purpose entities. Therefore, application of FIN 46R is required in the
Partnership's financial statements for periods ending after March 15, 2004. The
General Partners believe adoption of this standard may result in either
consolidation or additional disclosure requirements of the Partnership's
unconsolidated joint ventures, 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 24-35
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, 2003 and 2002, and the results of its operations
and its cash flows for each of the three years in the period ended December 31,
2003 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 used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
As described in Note 1 to the financial statements, on January 1, 2002, the
Partnership adopted Statement of Financial Accounting Standards No. 144
"Accounting for the Impairment or Disposal of Long-Lived Assets."
/s/ PricewaterhouseCoopers LLP
Orlando, Florida
March 24, 2004
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
BALANCE SHEETS
December 31,
2003 2002
------------------- -------------------
ASSETS
Real estate properties with operating leases, net $ 22,626,809 $ 23,258,326
Net investment in direct financing leases 5,946,458 5,830,462
Real estate held for sale 909,475 930,018
Investment in joint ventures 4,620,044 4,513,911
Cash and cash equivalents 1,150,084 1,328,466
Receivables, less allowance for doubtful accounts of $12,700
in 2003 18,006 20,232
Due from related parties -- 44
Accrued rental income less allowance for doubtful accounts
of $48,635 in 2003 and 2002 2,509,514 2,355,379
Other assets 62,640 60,019
------------------- -------------------
$ 37,843,030 $ 38,296,857
=================== ===================
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable and accrued expenses $ 12,802 $ 7,365
Real estate taxes payable 2,492 19,009
Distributions payable 928,130 928,130
Due to related parties 18,885 21,304
Rents paid in advance and deposits 202,505 175,204
Deferred rental income 25,478 23,889
------------------- --------------------
Total liabilities 1,190,292 1,174,901
Commitment (Note 11)
Partners' capital 36,652,738 37,121,956
------------------- --------------------
$ 37,843,030 $ 38,296,857
=================== ====================
See accompanying notes to financial statements.
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
STATEMENTS OF INCOME
Year Ended December 31,
2003 2002 2001
----------------- ----------------- ------------------
Revenues:
Rental income from operating leases $ 2,779,230 $ 2,637,271 $ 2,486,624
Earned income from direct financing leases 607,786 574,299 665,622
Contingent rental income 79,610 65,613 64,286
Interest and other income 3,316 13,336 37,355
------------------ ----------------- -----------------
3,469,942 3,290,519 3,253,887
------------------ ----------------- -----------------
Expenses:
General operating and administrative 286,155 299,402 338,770
Property related 17,325 63,369 133,988
Management fees to related parties 40,706 39,837 38,742
State and other taxes 51,618 38,133 63,998
Depreciation and amortization 370,295 343,299 319,511
Provision for write-down of assets -- -- 526,947
------------------ ----------------- -----------------
766,099 784,040 1,421,956
------------------ ----------------- -----------------
Income before gain on sale of assets and equity in
earnings of unconsolidated joint ventures 2,703,843 2,506,479 1,831,931
Gain on sale of assets -- 497,689 --
Equity in earnings of unconsolidated joint ventures 447,035 386,433 498,273
------------------ ----------------- -----------------
Income from continuing operations 3,150,878 3,390,601 2,330,204
------------------ ----------------- -----------------
Discontinued operations
Income from discontinued operations 92,424 66,944 173,894
Gain on disposal of discontinued operations -- 271,909 --
------------------ ----------------- -----------------
92,424 338,853 173,894
------------------ ----------------- -----------------
Net income $ 3,243,302 $ 3,729,454 $ 2,504,098
================== ================= =================
Income per limited partner unit
Continuing operations $ 0.70 $ 0.75 $ 0.52
Discontinued operations 0.02 0.08 0.04
------------------ ----------------- -----------------
$ 0.72 $ 0.83 $ 0.56
================== ================= =================
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, 2003, 2002 and 2001
General Partners Limited Partners
--------------------------------------- -------------------------------------------------------
Accumulated Accumulated
Contributions Earnings Contributions Distributions Earnings
------------------ ----------------- ---------------- ----------------- -----------------
Balance, December 31, 2000 $ 1,000 $ 208,255 $ 45,000,000 $ (25,273,485 ) $ 23,761,619
Distributions to limited
partners ($0.83 per
limited partner unit) -- -- -- (3,712,520 ) --
Net income -- -- -- -- 2,504,098
------------------ ----------------- ---------------- ----------------- -----------------
Balance, December 31, 2001 1,000 208,255 45,000,000 (28,986,005 ) 26,265,717
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
Distributions to limited
partners ($0.83 per
limited partner unit) -- -- -- (3,712,520 ) --
Net income -- -- -- -- 3,243,302
------------------ ----------------- ---------------- ----------------- -----------------
Balance, December 31, 2003 $ 1,000 $ 208,255 $ 45,000,000 $ (36,411,045 ) $ 33,238,473
================== ================= ================ ================= =================
See accompanying notes to financial statements.
- ----------------
Syndication
Costs Total
-------------- -------------
$ (5,383,945 ) $38,313,444
-- (3,712,520 )
-- 2,504,098
-------------- -------------
(5,383,945 ) 37,105,022
-- (3,712,520 )
-- 3,729,454
-------------- -------------
(5,383,945 ) 37,121,956
-- (3,712,520 )
-- 3,243,302
-------------- -------------
$ (5,383,945 ) $36,652,738
============== =============
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
STATEMENTS OF CASH FLOWS
Year Ended December 31,
2003 2002 2001
------------------ ------------------ -----------------
Cash Flows from Operating Activities:
Net income $ 3,243,302 $ 3,729,454 $ 2,504,098
------------------ ------------------ -----------------
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation 386,150 382,161 382,996
Amortization of investment in direct financing
leases 150,260 148,328 136,255
Amortization 5,034 4,373 4,332
Equity in earnings of unconsolidated joint
ventures, net of distributions 46,471 124,492 15,038
Gain on sale of assets -- (769,598 ) --
Provision for write-down of assets -- 143,065 566,043
Decrease in receivables 2,226 59,812 97,398
Decrease in due from related parties 44 7,001 11,700
Increase in accrued rental income (154,481 ) (163,691 ) (239,622 )
Decrease (increase) in other assets 6,502 (11,251 ) 5,199
Decrease in accounts payable and accrued
expenses and real estate taxes payable (11,080 ) (23,879 ) (53,919 )
Increase (decrease) in due to related parties (2,419 ) 7,150 (116,269 )
Increase (decrease) rents paid in advance and
deposits 27,301 70,297 (26,063 )
Increase (decrease) in deferred rental income 1,589 (27,554 ) 25,995
------------------ ------------------ -----------------
Total adjustments 457,597 (49,294 ) 809,083
------------------ ------------------ -----------------
Net cash provided by operating activities 3,700,899 3,680,160 3,313,181
------------------ ------------------ -----------------
Cash Flows from Investing Activities:
Proceeds from sale of assets -- 2,928,771 --
Additions to real estate properties with operating -- (2,602,786 ) --
leases
Investment in joint venture (153,636 ) -- --
Return of capital from joint venture -- -- 400,000
Payment of lease costs (13,125 ) (4,375 ) --
------------------ ------------------ -----------------
Net cash provided by (used in) investing activities (166,761 ) 321,610 400,000
------------------ ------------------ -----------------
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 (178,382 ) 289,250 661
Cash and cash equivalents at beginning of year 1,328,466 1,039,216 1,038,555
------------------ ------------------ -----------------
Cash and cash equivalents at end of year $ 1,150,084 $ 1,328,466 $ 1,039,216
================== ================== =================
See accompanying notes to financial statements.
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
STATEMENTS OF CASH FLOWS - CONTINUED
Year Ended December 31,
2003 2002 2001
----------------- ----------------- -----------------
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, 2003, 2002, and 2001
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, 2003,
2002, and 2001, tenants paid, or are expected to pay, directly to real
estate taxing authorities approximately $472,300, $491,500, and
$455,000, respectively, in estimated real estate taxes in accordance
with the terms of their leases.
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
operating or the direct financing methods.
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.
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.
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
Years Ended December 31, 2003, 2002, and 2001
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 or deferred 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 the
properties in Niles, Illinois and Tucker, Georgia, each held as
tenants-in-common with affiliates, 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. 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 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, 2003, 2002, and 2001
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 2003 presentation.
These reclassifications had no effect on total partners' capital, net
income or cash flows.
Statement of Financial Accounting Standards No. 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.
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
Years Ended December 31, 2003, 2002, and 2001
1. Significant Accounting Policies - Continued
FASB Interpretation No. 46 - In January 2003, the Financial Accounting
Standards Board ("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, FIN 46 requires
that a variable interest entity be consolidated 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. In December 2003,
the FASB issued FASB Interpretation No. 46R ("FIN 46R"), to clarify
some of the provisions of FIN 46. Under FIN 46R, special effective date
provisions apply to entities that have fully or partially applied FIN
46 prior to issuance of FIN 46R. Otherwise, application of FIN 46R is
required in financial statements of public entities that have interests
in structures that are commonly referred to as special-purpose entities
for periods ending after December 15, 2003. Application by public
entities, other than small business issuers, for all other types of
variable interest entities is required in financial statements for
periods ending after March 15, 2004. The Partnership did not fully or
partially apply FIN 46 prior to the issuance of FIN 46R. Also, the
Partnership does not have interests in structures commonly referred to
as special-purpose entities. Therefore, application of FIN 46R is
required in the Partnership's financial statements for periods ending
after March 15, 2004. The General Partners believe adoption of this
standard may result in either consolidation or additional disclosure
requirements of the Partnership's unconsolidated joint ventures, 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:
2003 2002
------------------- -------------------
Land $ 14,686,093 $ 14,932,524
Buildings 10,514,853 10,767,850
------------------- -------------------
25,200,946 25,700,374
Less accumulated depreciation (2,574,137 ) (2,442,048 )
------------------- -------------------
$ 22,626,809 $ 23,258,326
=================== ===================
In February 2002, the Partnership sold the property in Las Vegas,
Nevada 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. The Partnership had recorded a provision for write-down of
assets in a previous year relating to this property. In March 2002, the
Partnership reinvested these net sales proceeds in a property in San
Antonio, Texas. 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.
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
Years Ended December 31, 2003, 2002, and 2001
2. Real Estate Properties with Operating Leases - Continued
During 2003, the Partnership entered into a new lease for the property
in Akron, Ohio. As a result, the Partnership reclassified the asset
from real estate properties with operating leases to net investment in
direct financing leases.
The following is a schedule of the future minimum lease payments to be
received on noncancellable operating leases at December 31, 2003:
2004 $ 2,730,352
2005 2,773,199
2006 2,788,002
2007 2,836,396
2008 2,835,443
Thereafter 16,738,376
---------------------
Total (1) $ 30,701,768
=====================
(1) Excludes one property that was sold in February 2004 and one
property that was sold in March 2004.
3. Net Investment in Direct Financing Leases
The following lists the components of the net investment in direct
financing leases at December 31:
2003 2002
---------------- ----------------
Minimum lease payments receivable $ 9,588,332 $ 9,067,495
Estimated residual values 2,152,919 2,052,866
Less unearned income (5,794,793 ) (5,289,899 )
---------------- ----------------
Net investment in direct financing leases $ 5,946,458 $ 5,830,462
================ ================
The following is a schedule of future minimum lease payments to be
received on direct financing leases at December 31, 2003:
2004 $ 774,129
2005 774,129
2006 777,291
2007 786,775
2008 797,688
Thereafter 5,678,320
-----------------
$ 9,588,332
=================
In February 2002, the Partnership sold the property in Las Vegas,
Nevada, the building portion of which was classified as a direct
financing lease, to a third party.
During 2003, the lease relating to the property in Tempe, Arizona was
amended. As a result, the Partnership reclassified the asset from net
investment in direct financing leases to real estate properties with
operating leases.
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
Years Ended December 31, 2003, 2002, and 2001
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 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.
In November 2003, the Partnership and CNL Income Fund X, Ltd, CNL
Income Fund XIII, Ltd., and CNL Income Fund XV, Ltd., as
tenants-in-common, invested in a property in Tucker, Georgia. Each of
the CNL Income Funds is an affiliate of the general partners. The
Partnership and affiliates entered into an agreement whereby each
co-venturer will share in the profits and losses of the property in
proportion to its applicable percentage interest. The Partnership
contributed approximately $153,600 for a 10% interest in the property.
As of December 31, 2003, Attalla Joint Venture, Salem Joint Venture,
CNL Kingston Joint Venture, Melbourne Joint Venture, Bossier City Joint
Venture, Duluth Joint Venture, and the Partnership and affiliates in
two separate tenancy in common arrangements, each owned one property,
and Wood-Ridge Real Estate Joint Venture owned five properties. The
following presents the combined condensed financial information for the
joint ventures and the properties held as tenants-in-common with
affiliates at:
December 31,
2003 2002
------------------- -----------------
Real estate properties with operating $ 10,451,699 $ 9,087,636
leases, net
Net investment in direct financing leases 1,167,569 1,185,476
Cash 103,837 76,520
Accrued rental income 617,408 543,445
Receivables 5,249 2,529
Other assets 10,800 13,140
Liabilities 149,837 142,107
Partners' capital 12,206,725 10,766,639
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
Years Ended December 31, 2003, 2002, and 2001
4. Investment in Joint Ventures - Continued
Year Ended December 31,
2003 2002 2001
---------------- ---------------- -----------------
Revenues $ 1,244,416 $ 1,193,814 $ 1,288,188
Lease termination income -- -- 200,000
Expenses (183,619 ) (211,565 ) (246,031 )
Provision for write-down of assets -- (65,755 ) --
Loss on sale of assets -- -- (84,473 )
---------------- ---------------- -----------------
Net income $ 1,060,797 $ 916,494 $ 1,157,684
================ ================ =================
The Partnership recognized income of $447,035, $386,433, and $498,273,
during the years ended December 31, 2003, 2002, and 2001, respectively,
from these joint ventures and tenancy in common arrangements.
5. Discontinued Operations
During 2002, the Partnership identified and sold the properties in
Greeley, Colorado; Laurens, South Carolina; and Merriam, Kansas. The
Partnership 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, during the year
ended December 31, 2002, the Partnership recorded provisions for
write-down of assets of approximately $123,400 and $19,600 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, including approximately $39,100
during the year ended December 31, 2001 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 provisions represented the difference between each
property's net carrying value and its estimated fair value. In
addition, in November 2003, the Partnership entered into an
arrangement, with a third party, to sell the property in Bullhead City,
Arizona. As a result, the Partnership reclassified the asset from real
estate properties with operating leases to real estate held for sale.
The reclassified asset was recorded at the lower of its carrying amount
or fair value, less cost to sell. The financial results for these
properties are reflected as Discontinued Operations in the accompanying
financial statements.
The operating results of the discontinued operations for these
properties are as follows:
Year Ended December 31,
2003 2002 2001
----------------- ---------------- ------------------
Rental revenues $ 113,323 $ 263,096 $ 290,085
Expenses (20,899 ) (53,087 ) (77,095 )
Provisions for write-down of assets -- (143,065 ) (39,096 )
----------------- ---------------- ------------------
Income from discontinued operations $ 92,424 $ 66,944 $ 173,894
================= ================ ==================
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
Years Ended December 31, 2003, 2002, and 2001
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, 2003, 2002, and
2001.
During each of the years ended December 31, 2003, 2002, and 2001, 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, 2003, 2002, and 2001
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:
2003 2002 2001
-------------- -------------- ---------------
Net income for financial reporting purposes $ 3,243,302 $ 3,729,454 $ 2,504,098
Effect of timing differences relating to
depreciation (36,599 ) (42,452 ) (49,054 )
Effect of timing differences relating to
equity in earnings of joint ventures (10,182 ) (21,789 ) (6,710 )
Effect of timing differences relating to
gains/losses on real estate property sales -- (998,826 ) --
Provision for write-down of assets -- 143,065 566,043
Direct financing leases recorded as operating
leases for tax reporting purposes 150,260 148,328 136,255
Effect of timing differences relating to
allowance for doubtful accounts 12,700 (77,256 ) 47,335
Accrued rental income (154,481 ) (163,691 ) (239,622 )
Rents paid in advance 27,301 123,602 (30,637 )
Deferred rental income 1,589 (27,554 ) (3,570 )
Other 609 1,032 1,032
-------------- -------------- ---------------
Net income for federal income tax purposes $ 3,234,499 $ 2,813,913 $ 2,925,170
============== ============== ===============
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 Restaurant
Properties, Inc. (formerly CNL American Properties Fund, Inc.) 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. (the "Advisor"). The Advisor is a wholly owned
subsidiary of CNL Restaurant Properties, Inc. ("CNL-RP"). The
individual general partners are stockholders and directors of CNL-RP.
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
Years Ended December 31, 2003, 2002, and 2001
8. Related Party Transactions - Continued
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 $40,706, $39,837,
and $38,742, for the years ended December 31, 2003, 2002, and 2001,
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, 2003, 2002, and 2001, the
Partnership's affiliates provided accounting and administrative
services. The Partnership incurred $178,429, $220,717, and $234,884,
for the years ended December 31, 2003, 2002, and 2001, 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, 2003 and 2002 totaled
$18,885 and $21,304, respectively.
9. Concentration of Credit Risk
The following schedule presents total rental revenues from individual
lessees, or affiliated groups of lessees, each representing more than
ten percent of total rental revenues (including the Partnership's share
of total rental revenues from unconsolidated joint ventures and the
properties held as tenants-in-common with affiliates) for each of the
years ended December 31:
2003 2002 2001
---------------- ---------------- ----------------
Jack in the Box Inc. $ 699,359 $ 567,822 $ 544,315
Golden Corral Corporation 584,591 698,979 491,463
Checkers Drive-In
Restaurants, Inc. 505,012 534,859 549,759
Flagstar Enterprises, Inc. 419,993 421,564 425,666
Denny's, Inc. 415,017 418,557 N/A
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
Years Ended December 31, 2003, 2002, and 2001
9. Concentration of Credit Risk - Continued
In addition, the following schedule presents total rental revenues from
individual restaurant chains, each representing more than ten percent
of rental revenues (including the Partnership's share of total rental
revenues from unconsolidated joint ventures and the properties held as
tenants-in-common with affiliates) for each of the years ended December
31:
2003 2002 2001
---------------- ---------------- ----------------
Jack in the Box $ 699,359 $ 567,822 $ 544,315
Golden Corral Buffet and Grill 584,591 698,979 689,256
Denny's 545,539 598,446 563,851
Checkers Drive-In Restaurants 466,223 534,859 549,759
Hardee's 419,993 421,564 390,736
The information denoted by N/A indicates that for the period presented,
the lessee did not represent more than ten percent of 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 revenues will significantly
impact the results of operations of the Partnership if the Partnership
is not able to re-lease the properties in a timely manner.
10. Selected Quarterly Financial Data
The following table presents selected unaudited quarterly financial
data for each full quarter during the years ended December 31, 2003 and
2002.
2003 Quarter First Second Third Fourth Year
------------------------------- ------------ --------------- ------------- -------------- ---------------
Continuing Operations (1):
Revenues $ 848,204 $ 874,587 $ 863,989 $ 883,162 $ 3,469,942
Equity in earnings of
unconsolidated joint
ventures 109,503 110,779 113,732 113,021 447,035
Income from continuing
operations 715,451 812,349 798,596 824,482 3,150,878
Discontinued Operations (1):
Revenues 28,360 28,360 28,360 28,243 113,323
Income from discontinued
operations 21,827 21,838 21,838 26,921 92,424
Net income 737,278 834,187 820,434 851,403 3,243,302
Income per limited partner unit:
Continuing operations $ 0.16 $ 0.18 $ 0.18 $ 0.18 $ 0.70
Discontinued operations -- 0.01 -- 0.01 0.02
------------ --------------- ------------- -------------- ---------------
$ 0.16 $ 0.19 $ 0.18 $ 0.19 $ 0.72
============ =============== ============= ============== ===============
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
Years Ended December 31, 2003, 2002, and 2001
10. Selected Quarterly Financial Data - Continued
2002 Quarter First Second Third Fourth Year
-------------------------------- ----------- --------------- ------------- -------------- ---------------
Continuing Operations (1):
Revenues $ 792,592 $ 851,909 $820,154 $825,864 $3,290,519
Equity in earnings of
unconsolidated joint
ventures 65,419 101,524 118,922 100,568 386,433
Income from continuing
operations 1,125,768 754,890 760,091 749,852 3,390,601
Discontinued Operations (1):
Revenues 80,486 69,159 67,406 46,045 263,096
Income (loss) from and
gain on disposal of
discontinued operations 62,236 (73,300 ) 311,336 38,581 338,853
Net income 1,188,004 681,590 1,071,427 788,433 3,729,454
Income per limited partner unit:
Continuing operations $ 0.24 $ 0.17 $ 0.17 $ 0.17 $ 0.75
Discontinued operations 0.02 (0.02 ) 0.07 0.01 0.08
----------- --------------- ------------- -------------- ---------------
$ 0.26 $ 0.15 $ 0.24 $ 0.18 $ 0.83
=========== =============== ============= ============== ===============
(1) Certain items in the quarterly financial data have been
reclassified to conform to the 2003 presentation. This
reclassification had no effect on net income. The results of
operations relating to properties that were identified for sale as
of December 31, 2001 but sold subsequently are reported as
continuing operations. The results of operations relating to
properties that were either identified for sale and disposed of
subsequent to January 1, 2002 or were classified as held for sale
as of December 31, 2003 are reported as discontinued operations
for all periods presented.
11. Commitment
In November 2003, the Partnership entered into an agreement with a
third party to sell the property in Bullhead City, Arizona.
12. Subsequent Events
In February 2004, the Partnership sold its property in Bullhead City,
Arizona to a third party and received net sales proceeds of
approximately $1,348,900, resulting in a gain on disposal of
discontinued operations of approximately $439,400.
In addition, in March 2004, the Partnership sold its property in
Franklin, Tennessee to a third party. The Partnership received
approximately $675,300 in net sales proceeds, resulting in a gain on
disposal of discontinued operations of approximately $129,100. The
Partnership identified this property for sale in January 2004.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None
Item 9A. 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 as of the end of the period
covered by this Annual Report on Form 10-K and have determined that such
disclosure controls and procedures are effective.
There was no change in internal control over financial reporting that
occurred during the most recent fiscal quarter that has materially affected, or
is reasonably likely to materially affect, internal control over financial
reporting.
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-RP, CCM, CNL Financial Group, Inc. and their
affiliates, all of which are affiliates of the General Partners.
James M. Seneff, Jr., age 57. Since 1971, Mr. Seneff has been active in
the acquisition, development, and management of real estate projects and,
directly or through an affiliated entity, has served as a general partner or
co-venturer in over 100 real estate ventures. These ventures have involved the
financing, acquisition, construction, and leasing of restaurants, office
buildings, apartment complexes, hotels, and other real estate. Mr. Seneff has
served as Director and Chairman of the Board of CNL-RP, a public, unlisted real
estate investment trust since 1994. Mr. Seneff served as Chief Executive Officer
of CNL-RP from 1994 through August 1999 and as Co-Chief Executive Officer from
December 2000 through September 2003. Mr. Seneff served as Chairman of the Board
and Chief Executive Officer of CNL Fund Advisors, Inc., formerly the
Partnership's advisor, from its inception in 1990 until it merged with a
wholly-owned subsidiary of CNL-RP in September 1999, and in June 2000, was
re-elected to those positions of CNL Fund Advisors, Inc. CNL Fund Advisors,
Inc., formerly CNL Institutional Advisors, Inc., is a registered investment
advisor. Mr. Seneff is a principal stockholder of CNL Holdings, Inc., the parent
company of CNL Financial Group, Inc., a diversified real estate company, and has
served as a Director, Chairman of the Board and Chief Executive Officer of CNL
Financial Group, Inc. since 1973. CNL Financial Group, Inc. is and 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 and Chairman of the Board of CNL
Hospitality Properties, Inc., a public, unlisted real estate investment trust;
and served as Chief Executive Officer of CNL Hospitality Properties, Inc. from
its inception in 1997 until 2003 and served as Co-Chief Executive Officer from
February 2003 until May 1, 2003. Mr. Seneff has served as Chairman of the Board
of CNL Hospitality Corp., the advisor to CNL Hospitality Properties, Inc., since
its inception in 1997. Mr. Seneff also served as Chief Executive Officer from
its inception in 1997 through February 2003, and currently serves as Co-Chief
Executive Officer of CNL Hospitality Corp. Mr. Seneff has served as Director and
Chairman of the Board of CNL Retirement Corp. since 1997 and served as Chief
Executive Officer of CNL Retirement Corp. from 1997 through 2003. CNL Retirement
Corp. is the advisor to CNL Retirement Properties, Inc., a public, unlisted real
estate investment trust. Mr. Seneff has also served as Director and Chairman of
the Board of Commercial Net Lease Realty, Inc., a public real estate investment
trust that is listed on the New York Stock Exchange, since 1992 and served as
Chief Executive Officer of Commercial Net Lease Realty, Inc. from 1992 through
February 2004. Mr. Seneff has served as a Director, Chairman of the Board, and
Chief Executive Officer of CNL Securities Corp. since its formation in 1979; CNL
Investment Company since 1990; and CNL Institutional Advisors, Inc., a
registered investment advisor for pension plans, since 1990. Mr. Seneff has
served as Chairman of the Board and Chief Executive Officer of CNL Commercial
Finance, Inc. since 2000. Mr. Seneff also serves as Chairman of the Board of
CNLBank, 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 the
Florida state retirement plan. Mr. Seneff received his degree in Business
Administration from Florida State University in 1968.
Robert A. Bourne, age 56. 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 has
served as a Director and Vice Chairman of the Board of CNL-RP since 1994. Mr.
Bourne also served as President of CNL-RP from 1994 through February 1999 and
served as Treasurer from February 1999 through August 1999 and from May 1994
through December 1994. Mr. Bourne served in various executive positions with CNL
Fund Advisors, Inc. prior to its merger with a wholly-owned subsidiary of CNL-RP
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. Mr. Bourne serves as Director, Vice Chairman of the Board
and Treasurer and from 1997 until June 2002 served as President of CNL
Hospitality Properties, Inc. and as Director, President and Treasurer of CNL
Hospitality Corp. Mr. Bourne also serves as Director and Treasurer of CNL
Retirement Properties, Inc. and as Director and Treasurer of CNL Retirement
Corp. Mr. Bourne serves as a Director of CNLBank. Mr. Bourne has also 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. Mr. Bourne 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. 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 48. Mr. McWilliams has served as President of
CNL-RP since May 2001 and as Chief Executive Officer of CNL-RP since September
2003. Mr. McWilliams served as Co-Chief Executive Officer of CNL-RP from
December 2000 through September 2003 and served as Chief Executive Officer from
September 1999 through December 2000. Mr. McWilliams also served as President
and Chief Executive Officer of CNL Franchise Network Corp., a wholly owned
subsidiary of CNL-RP since August 2002 and served as President of CNL-RP from
February 1999 until September 1999 and as Executive Vice President of CNL-RP
from 1997 through February 1999. Mr. McWilliams served as an Executive Vice
President of CNL Financial Group, Inc. from the time he joined the company in
April 1997 until September 1999. 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 CNL-RP 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 40. Mr. Shackelford was promoted to
Executive Vice President and Chief Operating Officer of CNL-RP in September
2003. Mr. Shackelford has also served as Chief Financial Officer since January
1997. He served as Senior Vice President of CNL-RP from January 1997 through
July 2000, when he was promoted to Executive Vice President. Mr. Shackelford has
also served as Secretary and Treasurer of CNL-RP 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.
Thomas Arasi, age 46. Mr. Arasi has served as President of CCM since it
was formed in July 2003 to provide strategic advisory services to the General
Partners. He has served in various consulting capacities to CNL Hospitality Corp
and other CNL affiliates since January 2003. Since November 2001 he has been an
independent consultant working for a variety of operating and investment
companies in the hospitality industry. Until October 2001, Mr. Arasi was
President & Chief Executive Officer, and a member of the Board of Directors of
Lodgian, Inc., a New York Stock Exchange traded company, one of the largest
independent hotel owner/operators in North America, with hotel properties under
most brand names including Marriott, Courtyard by Marriott, Fairfield Inn by
Marriott, Crowne Plaza, Holiday Inn, Hilton, and Radisson. From June 1997
through November 2000, Mr. Arasi was a member of the Management Committee and
held several top operating positions with Bass Hotels & Resorts, one of the
leading international owners, operators and franchisors of hotels, most recently
serving as President, Bass Hotels & Resort--The Americas. Mr. Arasi was formerly
President of Tishman Hotel Corporation, Vice President of Salomon Brothers,
Inc., in New York, Tokyo and Los Angeles and held positions with Sheraton,
Westin and HVS International. Mr. Arasi graduated from Cornell University in
January 1981, where he received a Bachelor's degree in Hotel and Restaurant
Administration.
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 2003.
Code of Business Conduct
The Partnership does not have employees and, accordingly, has not
adopted a code of business conduct applicable exclusively to the Partnership.
However, employees of the General Partners or their affiliates, including the
individual General Partners, are bound by the Code of Business Conduct adopted
November 11, 2003 by CNL Holdings, Inc. Separately, the employees of the Advisor
are bound by the similar Code of Business Conduct adopted by CNL Restaurant
Properties, Inc. Each of these codes of business conduct will be made available
to any person who writes the Partnership requesting a copy.
Audit Committee Financial Expert
Due to its organization as a limited partnership, the Partnership does
not have an audit committee that is responsible for supervising the
Partnership's relationship with its independent auditors. For the Partnership,
this role is performed by the General Partners. Based on his previous service as
the principal financial officer of companies with businesses similar to that of
the Partnership, Robert A. Bourne, one of the General Partners, has the
requisite experience to be considered an "audit committee financial expert" as
defined in the rules under the Securities Exchange Act of 1934, if the
Partnership had an audit committee. As a General Partner, Mr. Bourne is not
independent of the Partnership.
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 and
Related Stockholder Matters
As of March 12, 2004, 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 12, 2004, 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, 2003, 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, 2003
- --------------------------------- --------------------------------------------- -------------------------------
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: $178,429
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 $40,706
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, 2003
- --------------------------------- --------------------------------------------- -------------------------------
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
proceeds from a sale of sales to certain minimum returns to the Limited
not in liquidation of the Partners.
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.
Item 14. Principal Accountant Fees and Services
The following table outlines the fees paid or accrued by the
Partnership for the audit and other services provided by the Partnership's
independent certified public accountants, PricewaterhouseCoopers LLP, for the
years ended December 31:
2003 2002
--------------------- ---------------------
Audit Fees (1) $ 16,844 $ 14,400
Tax Fees (2) 6,991 6,910
--------------------- ---------------------
Total $ 23,835 $ 21,310
===================== =====================
(1) Audit services of PricewaterhouseCoopers LLP for 2003 and 2002
consisted of the examination of the financial statements of the
Partnership and quarterly review of financial statements.
(2) Tax Fees relates to tax consulting and compliance services.
Each of the non-audit services described above was approved by the
General Partners. Due to its organization as a limited partnership, the
Partnership does not have an audit committee.
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, 2003 and 2002
Statements of Income for the Years Ended December 31, 2003, 2002,
and 2001
Statements of Partners' Capital for the Years Ended December 31,
2003, 2002, and 2001
Statements of Cash Flows for the Years Ended December 31, 2003, 2002,
and 2001
Notes to Financial Statements
2. Financial Statement Schedules
Schedule II - Valuation and Qualifying Accounts - Years Ended
December 31, 2003, 2002, and 2001
Schedule III - Real Estate and Accumulated Depreciation at December
31, 2003
Notes to Schedule III - Real Estate and Accumulated Depreciation at
December 31, 2003
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.)
31.1 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. (Filed
herewith.)
31.2 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. (Filed
herewith.)
32.1 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.)
32.2 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,
2003 through December 31, 2003.
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 23rd day of
March, 2004.
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 23, 2004
- ------------------------------------ (Principal Financial and Accounting
Robert A. Bourne (Officer)
/s/ James M. Seneff, Jr. Chief Executive Officer and Director March 23, 2004
- ------------------------------------ (Principal Executive Officer)
James M. Seneff, Jr.
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
Years Ended December 31, 2003, 2002, and 2001
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
- ---------- ----------------- -------------- --------------- ------------- ------------- ------------ ------------
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 $ -- $ -- (b) $ 77,256 (c) $ -- $ 48,635
============== =============== ============= ============= ============ ============
2003 Allowance for
doubtful
accounts (a) $ 48,635 $ -- $ 19,451 (b) $ -- (c) $ 6,751 $ 61,335
============== =============== ============= ============= ============ ============
(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, 2003
Costs Capitalized
Subsequent To Gross Amount at Which
Initial Cost Acquisition Carried at Close of Period (c)
------------------------ -------------------- --------------------------------------
Encum- Buildings and Improve- Carrying Buildings and
brances Land Improvements ments Costs Land Improvements Total
---------- ---------- ---------- --------- -------- ----------- ------------- ---------- -
Properties the Partnership
has Invested in Under
Operating Leases:
Bennigan's Restaurant:
Fayetteville, North Carolina -j) $605,712 - - - $605,712 (g) $605,712
Burger King Restaurant:
Alliance, Ohio - 210,290 - - - 210,290 (g) 210,290
Checkers Drive-In Restaurants:
Boynton Beach, Florida - 501,606 - - - 501,606 - 501,606
Chamblee, Georgia - 332,737 - - - 332,737 - 332,737
Delray Beach, Florida - 193,110 - - - 193,110 - 193,110
Foley, Alabama - 197,821 - - - 197,821 - 197,821
Huntsville, Alabama - 362,907 - - - 362,907 - 362,907
Norcross, Georgia - 474,262 - - - 474,262 - 474,262
Orlando, Florida - 559,646 - - - 559,646 - 559,646
Pensacola, Florida - 296,726 - - - 296,726 - 296,726
Suwannee, Georgia - 269,643 - - - 269,643 - 269,643
St. Petersburg, Florida - 338,396 - - - 338,396 - 338,396
Coral Springs, Florida - 421,221 - - - 421,221 - 421,221
Denny's Restaurants:
Topeka, Kansas - 420,446 - - - 420,446 (g) 420,446
Tempe, Arizona (k) - 881,047 - - - 881,047 515,812 1,396,859
-
El Ranchito Restaurant:
Albemarle, North Carolina (m)- 214,623 370,149 - - 214,623 370,149 584,772
Golden Corral Buffet
and Grill Restaurants:
Burlington, North Carolin- 931,962 - 975,218 - 931,962 975,218 1,907,180
Wilson, North Carolina - 415,390 - 833,156 - 415,390 833,156 1,248,546
Bristol, Virginia (l) - 733,334 1,145,990 21,446 - 733,334 1,167,436 1,900,770
Hardee's Restaurants:
Franklin, Tennessee - 201,441 423,569 - - 201,441 423,569 625,010
Nashville, Tennessee - 315,087 - - - 315,087 (g) 315,087
Antioch, Tennessee - 296,341 485,974 - - 296,341 485,974 782,315
Batesville, Mississippi - 186,404 453,720 - - 186,404 453,720 640,124
Jacksonville, Florida - 385,903 409,773 - - 385,903 409,773 795,676
Jack in the Box Restaurants:
Mesquite, Texas - 449,442 528,882 - - 449,442 528,882 978,324
Plano, Texas - 423,092 467,253 - - 423,092 467,253 890,345
Farmers Branch, Texas - 465,235 525,470 - - 465,235 525,470 990,705
Fort Worth, Texas - 297,688 551,394 - - 297,688 551,394 849,082
Fort Worth, Texas - 257,393 419,245 - - 257,393 419,245 676,638
Phoenix, Arizona - 579,515 739,663 - - 579,515 739,663 1,319,178
Long John Silver's Restaurants:
Apopka, Florida - 320,435 - - - 320,435 (g) 320,435
Houston, Texas - 411,403 - - - 411,403 (g) 411,403
Houston, Texas (i) - 342,971 475,749 - - 342,971 475,749 818,720
Marion, Ohio - 321,032 - - - 321,032 (g) 321,032
Taco Cabana Restaurant:
San Antonio, Texas (n) - 537,051 725,112 - - 537,051 725,112 1,262,163
Other:
Marietta, Georgia - 332,418 - - - 332,418 (o) 332,418
Albemarle, North Carolina - 202,363 447,278 - - 202,363 447,278 649,641
------------ ---------- ----------- -------- ------------ ----------- ------------
$14,686,093 $8,169,221 $1,829,820 - $14,686,093 $10,514,853 $25,200,946
============ ========== =========== ======== ============ =========== ============
Properties the Partnership has
Invested in Under Direct
Financing Leases:
Bennigan's Restaurant:
Fayetteville, North Caro-ina (j - $931,239 - - - (g) (g)
Burger King Restaurant:
Alliance, Ohio - - 535,949 - - - (g) (g)
Denny's Restaurants:
Winslow, Arizona - 199,767 788,202 - - (g) (g) (g)
Topeka, Kansas - - - 489,014 - - (g) (g)
Hardee's Restaurant:
Nashville, Tennessee - - 553,400 - - - (g) (g)
IHOP Restaurant:
Akron, Ohio (h) - 246,431 535,636 - - (g) (g) (g)
Jack in the Box Restaurant:
Shreveport, Louisiana - 240,811 848,338 - - (g) (g) (g)
Long John Silver's Restaurants:
Apopka, Florida - - 506,493 - - - (g) (g)
Houston, Texas - - 449,633 - - - (g) (g)
Marion, Ohio - - 463,504 - - - (g) (g)
------------ ---------- ----------- -------- ------------
$687,009 $5,612,394 $489,014 - -
============ ========== =========== ======== ============
Life on Which
Depreciation in
Date Latest Income
Accumulated of Con- Date Statement is
Depreciation struction Acquired Computed
- ------------ --------- ------- -----------
(e) 1983 10/98 (e)
(e) 1994 07/94 (e)
(d) - 03/94 (d)
(d) - 03/94 (d)
(d) - 03/94 (d)
(d) - 03/94 (d)
(d) - 03/94 (d)
(d) - 03/94 (d)
(d) - 03/94 (d)
(d) - 03/94 (d)
(d) - 03/94 (d)
(d) - 03/95 (d)
(d) - 03/95 (d)
(e) 1994 10/93 (e)
22,165 1994 11/93 (k)
79,428 1994 04/94 (m)
325,163 1993 10/93 (b)
283,409 1993 10/93 (b)
123,231 2000 11/00 (b)
143,222 1993 11/93 (b)
(e) 1993 11/93 (e)
164,318 1993 11/93 (b)
151,982 1993 12/93 (b)
137,262 1993 12/93 (b)
178,824 1992 11/93 (b)
157,050 1992 11/93 (b)
176,600 1988 12/93 (b)
184,356 1992 12/93 (b)
140,902 1983 12/93 (b)
26,715 2002 12/02 (b)
(e) 1994 03/94 (e)
(e) 1993 03/94 (e)
82,222 1994 04/94 (i)
(e) 1994 06/94 (e)
44,310 1993 03/02 (b)
(o) - 03/94 (o)
152,978 1992 09/93 (b)
- -------------
$2,574,137
=============
(e) 1983 10/98 (e)
(e) 1994 07/94 (e)
(f) 1993 09/93 (f)
(e) 1994 10/93 (e)
(e) 1993 11/93 (e)
(f) 1993 10/93 (f)
(f) 1993 11/93 (f)
(e) 1994 03/94 (e)
(e) 1993 03/94 (e)
(e) 1994 06/94 (e)
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
NOTES TO SCHEDUE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 2003
(a) Transactions in real estate and accumulated depreciation are summarized
below. The balances in 2003, 2002, 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, 2000 $ 23,655,456 $ 1,787,944
Provision for write-down of assets (248,843 ) --
Depreciation expense -- 315,179
----------------- ------------------
Balance, December 31, 2001 23,406,613 2,103,123
Acquisitions (n) 2,602,786 --
Dispositions (309,025 ) --
Depreciation expense -- 338,925
----------------- ------------------
Balance, December 31, 2002 25,700,374 2,442,048
Reclassification from direct financing lease (k) 515,812 --
Reclassification to direct financing lease (h) (1,015,240 ) (233,172 )
Depreciation expense -- 365,261
----------------- ------------------
Balance, December 31, 2003 $ 25,200,946 $ 2,574,137
================= ==================
(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, 2003, the aggregate cost of the Partnership's wholly
owned Properties was $31,532,548 for federal income tax purposes. 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.
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
NOTES TO SCHEDUE III - REAL ESTATE AND ACCUMULATED
DEPRECIATION - CONTINUED
December 31, 2003
(h) Effective August 1994, the lease for the Property in Akron, Ohio was
terminated, resulting in the reclassification of the assets to real
estate properties with operating leases. The assets were recorded at
their net carrying value and the building was 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 represented the difference between the Property's net
carrying value and its estimated fair value. Effective October 2002,
the Property was re-leased to a new tenant, resulting in the
reclassification of the assets to net investment in direct financing
leases during 2003. The new tenant converted the Property to an IHOP
restaurant.
(i) Effective October 1999, the lease for the Property in Houston, Texas
was amended, resulting in the reclassification of the assets to real
estate properties with operating leases. The assets were recorded at
their net carrying value and the building is being 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 2003, the lease for the Property in Tempe, Arizona
was amended resulting in the reclassification of the assets to real
estate properties with operating leases. The building was recorded at
its net carrying value and is being depreciated over its estimated
remaining life of approximately 21 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.
(m) Effective June 1998, the lease for the Property in Albemarle, North
Carolina was terminated, resulting in the reclassification of the
assets to real estate properties with operating leases. The assets were
recorded at their net carrying 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.
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.)
31.1 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. (Filed herewith.)
31.2 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. (Filed herewith.)
32.1 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.)
32.2 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 31.1
EXHIBIT 31.2
EXHIBIT 32.1
EXHIBIT 32.2