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 0-26216
CNL INCOME FUND XV, LTD.
(Exact name of registrant as specified in its charter)
Florida 59-3198888
(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 4,000,000 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 XV, Ltd. (the "Registrant" or the "Partnership") is a
limited partnership which was organized pursuant to the laws of the State of
Florida on September 2, 1993. 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 February 23, 1994, the
Partnership offered for sale up to $40,000,000 of limited partnership interests
(the "Units") (4,000,000 Units at $10 per Unit) pursuant to a registration
statement on Form S-11 under the Securities Act of 1933, as amended, effective
February 23, 1994. The offering terminated on September 1, 1994, at which date
the maximum offering proceeds of $40,000,000 had been received from investors
who were admitted to the Partnership as limited partners (the "Limited
Partners").
The Partnership was organized to acquire both newly constructed and
existing restaurant properties, as well as properties upon which restaurants
were to be constructed (the "Properties"), which are leased primarily to
operators of national and regional fast-food and family-style restaurant chains
(the "Restaurant Chains"). Net proceeds to the Partnership from its offering of
Units, after deduction of organizational and offering expenses, totaled
$35,200,000 and were used to acquire 45 Properties, including 15 Properties
consisting of only land and two Properties owned by a joint venture in which the
Partnership is a co-venturer, to pay acquisition fees totaling $2,200,000 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 40 Properties directly,
which included 14 wholly owned Properties consisting of only land, and owned
nine Properties indirectly through joint venture or tenancy in common
arrangements. During the year ended December 31, 2001, the Partnership sold its
Property in Greer, South Carolina and accepted a promissory note in the
principal sum of $467,000 which the Partnership collected in its entirety during
2001. In addition, during 2001, the Partnership sold its Properties in Woodland
Hills and Altadena, California. The Partnership used the net sales proceeds from
the sales of these Properties, a portion of the net sales from the sale of the
Property in Greer, South Carolina, and a portion of the amount received from the
promissory note, to invest in a Property in Blue Springs, Missouri with CNL
Income Fund XIII, Ltd., a Florida limited partnership and an affiliate of the
General Partners as tenants-in-common and to invest in a Property in Houston,
Texas. In addition, during 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 and used the
proceeds to invest in a joint venture arrangement, CNL VII, XV Columbus Joint
Venture, with an affiliate of the General Partners to construct and hold one
Property. During 2002, the Partnership sold its Properties in Redlands,
California, Medina, Ohio, and Stratford, New Jersey and reinvested the majority
of the net sales proceeds from the sale of the Property in Redlands, California
in a Property in Houston, Texas. During 2003, the Partnership sold its Property
in Bartlesville, Oklahoma to the tenant and used a portion of the net sales
proceeds to invest in a Property in Dalton, Georgia with CNL Income Fund VI,
Ltd., CNL Income Fund XI, Ltd., and CNL Income Fund XVI, Ltd., each a Florida
limited partnership and an affiliate of the General Partners as
tenants-in-common. In addition, during 2003, the Partnership used the remaining
net sales proceeds from the sale of the Properties in Redlands, California,
Medina, Ohio and Stratford, New Jersey, a portion of the net sales proceeds from
the sale of the Property in Bartlesville, Oklahoma and the remaining amount
received from the promissory note to invest in a Property in Tucker, Georgia
with CNL Income Fund X, Ltd., CNL Income Fund XIII, Ltd., and CNL Income Fund
XIV, Ltd., each a Florida limited partnership and a affiliate of the General
Partners as tenants-in-common.
As of December 31, 2003, the Partnership owned 35 Properties directly,
which included 13 wholly owned Properties consisting of only land, and held
interests in seven Properties owned by joint ventures in which the Partnership
is a co-venturer and five Properties owned with affiliates as tenants-in-common.
Generally, the Properties are leased on a triple-net basis with the lessees
responsible for all repairs and maintenance, property taxes, insurance and
utilities.
The Partnership holds its Properties until the General Partners
determine that the sale or other disposition of the Properties is advantageous
in view of the Partnership's investment objectives. In deciding whether to sell
Properties, the General Partners consider factors such as potential capital
appreciation, net cash flow and federal income 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
owned with affiliates as tenants-in-common, provide for initial terms ranging
from 10 to 20 years (the average being 18 years) and expire between 2009 and
2023. Generally, the leases are 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 $25,200 to
$259,900. The majority of the leases provide for percentage rent, based on sales
in excess of a specified amount. In addition, the majority of the leases provide
that, commencing in specified lease years (generally the third or sixth 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 47 Properties also have
been granted options to purchase Properties at the Property's then fair market
value after a specified portion of the lease term has elapsed. Fair market value
will be determined through an appraisal by an independent appraisal firm. Under
the terms of certain leases, the option purchase price may equal the
Partnership's original cost to purchase the Property (including acquisition
costs), plus a specified percentage from the date of the lease or a specified
percentage of the Partnership's purchase price, if that amount is greater than
the Property's fair market value at the time the purchase option is exercised.
The leases for the 13 wholly owned Properties consisting of only land
are substantially the same as those described above except that the leases
relate solely to the land associated with the Property, with the tenant owning
the buildings currently on the land and having the right, if not in default
under the lease, to remove the buildings from the land at the end of the lease
term.
The leases generally provide that, in the event the Partnership wishes
to sell the Property subject to that lease, the Partnership must first offer the
lessee the right to purchase the Property on the same terms and conditions, and
for the same price, as any offer which the Partnership has received for the sale
of the Property.
During 2003, the Partnership reinvested a portion of the net sales
proceeds from the sale of its Property in Bartlesville, Oklahoma in a Property
in Dalton, Georgia, as tenants-in-common, with CNL Income Fund VI, Ltd., CNL
Income Fund XI, Ltd., and CNL Income Fund XVI, Ltd. In addition, the Partnership
reinvested the remaining net sales proceeds from the sale of its Properties in
Redlands, California, Medina, Ohio and Stratford, New Jersey, a portion of the
net sales proceeds from the sale of the Property in Bartlesville, Oklahoma and
the remaining amount received from a promissory note in a Property in Tucker,
Georgia, as tenants-in-common, with CNL Income Fund X, Ltd., CNL Income Fund
XIII, Ltd., and CNL Income Fund XIV, Ltd. Each of the CNL Income Funds is a
Florida limited partnership and an affiliate of the General Partners. The lease
terms for these Properties are substantially the same as the Partnership's other
leases, as described above.
In March 2004, the Partnership entered into an agreement to provide
temporary and partial rent relief to a tenant who is experiencing liquidity
difficulties. The Partnership anticipates lowering rent over the next twelve
months on the one lease the tenant has with the Partnership will provide the
necessary relief to the tenant. Rental payment terms go back to the original
terms starting with the thirteenth month. The deferred rent is due in equal
monthly payments beginning January 2005 and continuing for 60 months thereafter.
The General Partners do not believe that this temporary decline in cash flows
will have a material adverse effect on the operating results of the Partnership.
Major Tenants
During 2003, three lessees of the Partnership, Flagstar Enterprises,
Inc., Checkers Drive-In Restaurants, Inc., and Golden Corral Corporation, each
contributed more than 10% of the Partnership's total rental revenues (including
the Partnership's share of total rental revenues from Properties owned by joint
ventures and Properties owned with affiliates as tenants-in-common). As of
December 31, 2003, Flagstar Enterprises, Inc. was the lessee under leases
relating to seven restaurants, Checkers Drive-In Restaurants, Inc. was the
lessee under leases relating to 13 restaurants and Golden Corral Corporation was
the lessee under leases relating to five restaurants. It is anticipated that,
based on the minimum rental payments required by the leases, these three lessees
each will continue to contribute more than 10% of the Partnership's total rental
revenues in 2004. In addition, four Restaurant Chains, Hardee's, Checker's, Long
John Silver's, and Golden Corral Buffet and Grill ("Golden Corral"), each
accounted for more than 10% of the Partnership's total rental revenues during
2003 (including the Partnership's share total of rental revenues from Properties
owned by joint ventures and Properties owned with affiliates as
tenants-in-common). In 2004, it is anticipated that these four Restaurant Chains
each will continue to account for more than 10% of the total rental revenues to
which the Partnership is entitled under the terms of the leases. Any failure of
these lessees or Restaurant Chains will materially affect the Partnership's
operating results if the Partnership is not able to re-lease the Properties in a
timely manner. No single tenant or group of affiliated tenants lease Properties
with an aggregate carrying value in excess of 20% of the total assets of the
Partnership.
Joint Venture and Tenancy in Common Arrangements
The Partnership has entered into the following joint venture and
tenancy in common arrangements as of December 31, 2003:
Entity Name Year Ownership Partners Property
Wood-Ridge Real Estate Joint 1996 50.00% CNL Income Fund XIV, Ltd. Murfreesboro, TN
Venture Raleigh, NC
Blaine, MN
Matthews, NC
Anniston, AL
CNL Income Fund IV, Ltd., CNL 1996 16.00% CNL Income Fund IV, Ltd. Clinton, NC
Income Fund VI, Ltd., CNL Income Fund VI, Ltd.
CNL Income Fund X, Ltd. CNL Income Fund X, Ltd.
and CNL Income Fund XV,
Ltd., Tenants in Common
CNL Income Fund VI, Ltd., and 1998 15.00% CNL Income Fund VI, Ltd. Ft Myers, FL
CNL Income Fund XV,
Ltd., Tenants in Common
TGIF Pittsburgh Joint Venture 2000 23.62% CNL Income Fund VII, Ltd. Homestead, PA
CNL Income Fund XVI, Ltd.
CNL Income Fund XVIII, Ltd.
CNL Income Fund XIII, Ltd. 2001 59.00% CNL Income Fund XIII, Ltd. Blue Springs, MO
and CNL Income Fund XV,
Ltd., Tenants in Common
CNL VII, XV Columbus Joint 2001 31.25% CNL Income Fund VII, Ltd. Columbus, GA
Venture
Entity Name Year Ownership Partners Property
CNL Income Fund X, Ltd., CNL 2003 68.00% CNL Income Fund X, Ltd. Tucker, GA
Income Fund XIII, Ltd., CNL Income Fund XIII, Ltd.
CNL Income Fund XIV, CNL Income Fund XIV, Ltd.
Ltd., and CNL Income
Fund XV, Ltd., Tenants
in Common
CNL Income Fund VI, Ltd., CNL 2003 17.00% CNL Income Fund VI, Ltd. Dalton, GA
Income Fund XI, Ltd., CNL Income Fund XI, Ltd.
CNL Income Fund XV, CNL Income Fund XVI, Ltd.
Ltd., and CNL Income
Fund XVI, Ltd., Tenants
in Common
Wood-Ridge Real Estate Joint Venture holds five 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 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 Property.
Each joint venture has an initial term of 30 years and, after the
expiration of the initial term, continues in existence from year to year unless
terminated at the option of either joint venturer by an event of dissolution.
Events of dissolution include the bankruptcy, insolvency or termination of any
joint venturer, sale of the Property owned by the joint venture and mutual
agreement of the Partnership and its joint venture partner to dissolve the joint
venture. Any liquidation proceeds, after paying joint venture debts and
liabilities and funding reserves for contingent liabilities, will be distributed
first to the joint venture partners with positive capital account balances in
proportion to such balances until such balances equal zero, and thereafter in
proportion to each joint venture partner's percentage interest in the joint
venture.
The joint venture and tenancy in common agreements restrict each
party's ability to sell, transfer 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.
During 2003, the Partnership reinvested a portion of the net sales
proceeds from the sale of its Property in Bartlesville, Oklahoma in a Property
in Dalton, Georgia, as tenants-in-common, with CNL Income Fund VI, Ltd., CNL
Income Fund XI, Ltd., and CNL Income Fund XVI, Ltd. In addition, the Partnership
reinvested the remaining net sales proceeds from the sale of its Properties in
Redlands, California, Medina, Ohio and Stratford, New Jersey, a portion of the
net sales proceeds from the sale of the Property in Bartlesville, Oklahoma and
the remaining amount received from a promissory note in a Property in Tucker,
Georgia, as tenants-in-common, with CNL Income Fund X, Ltd., CNL Income Fund
XIII, Ltd., and CNL Income Fund XIV, Ltd. Each of the CNL Income Funds is a
Florida limited partnership and an affiliate of the General Partners.
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 47 Properties. Of the 47
Properties, 35 are owned by the Partnership in fee simple, seven are owned
indirectly through three joint venture arrangements and five are owned
indirectly through tenancy in common arrangements. See Item 1. Business - Joint
Venture and Tenancy in Common Arrangements. The Partnership is not permitted to
encumber its Properties under the terms of its partnership agreement.
Description of Properties
Land. The Partnership's Property sites range from approximately 15,600
to 137,700 square feet depending upon building size and local demographic
factors. Sites purchased by the Partnership are in locations zoned for
commercial use which have been reviewed for traffic patterns and volume.
The following table lists the Properties owned, either directly or
indirectly, by the Partnership as of December 31, 2003 by state.
State Number of Properties
Alabama 1
Florida 10
Georgia 7
Kentucky 1
Minnesota 1
Mississippi 1
Missouri 2
New Mexico 1
North Carolina 4
Ohio 1
Oklahoma 1
Pennsylvania 3
South Carolina 4
Tennessee 4
Texas 5
Virginia 1
-------
TOTAL PROPERTIES 47
=======
Buildings. Each of the Properties includes a building that is one of a
Restaurant Chain's approved designs. However, the buildings located on the 13
Checkers Properties owned by the Partnership are owned by the tenants. The
Partnership's 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 11,000
square feet. All buildings on the 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. 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,
either directly or indirectly, by the Partnership and joint ventures (including
the Properties owned indirectly through tenancy in common arrangements) for
federal income tax purposes was $27,882,047 and $15,527,623, respectively.
The following table lists the Properties owned, either directly or
indirectly, by the Partnership as of December 31, 2003 by Restaurant Chain.
Restaurant Chain Number of Properties
Bennigan's 2
Boston Market 2
Checkers 13
Denny's 1
Golden Corral 5
Hardee's 7
Jack in the Box 1
Japan Express 1
Long John Silver's 5
O' Charley's 2
Sonny's Bar-B-Q 1
TGI Fridays 1
Taco Bell 1
Taco Cabana 2
Wendy's 1
Other 2
-------
TOTAL PROPERTIES 47
=======
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
occupancy rates for the years ended December 31:
2003 2002 2001 2000 1999
-------------- ------------- -------------- ------------- -------------
Rental Income (1)(2) $ 3,653,941 $ 3,669,076 $ 3,528,678 $ 3,555,125 $3,568,289
Properties (2) 47 46 47 48 50
Average Per Property 77,743 79,763 $ 75,078 $ 74,065 $ 71,366
Occupancy Rate 100% 100% 98% 92% 98%
(1) Rental income includes the Partnership's share of rental income from
the Properties owned indirectly through joint venture arrangements and
tenancy in common arrangements.
(2) Excludes Properties which were vacant at December 31 and did not
generate rental revenues.
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
Number Annual Rental Gross Annual
Expiration Year of Leases Revenues Rental Income
------------------ ----------------- ------------------- ------------------
2004 -- $ -- --
2005 -- -- --
2006 -- -- --
2007 -- -- --
2008 -- -- --
2009 5 576,568 16.32%
2010 -- -- --
2011 3 122,604 3.47%
2012 2 146,872 4.15%
2013 -- -- --
Thereafter 36 2,688,240 76.06%
----------------- -------------------- -------------------
Total (1) 46 $ 3,534,284 100.00%
================= ==================== ===================
(1) Excludes one Property which was sold in 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.
Flagstar Enterprises, Inc. leases seven Hardee's restaurants. The
initial term of each lease is 20 years (expiring in 2014) and the average
minimum base annual rent is approximately $82,600 (ranging from approximately
$70,500 to $98,300).
Checkers Drive-In Restaurants, Inc. leases 13 Checkers Drive-In
Restaurants ("Checkers"). The initial term of each of its leases is 20 years
(expiring between 2014 and 2015) and the average minimum base annual rent is
approximately $49,100 (ranging from approximately $25,200 to $70,700). The
leases for the 13 Checkers Properties consist of only land. The tenant 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 term.
Golden Corral Corporation leases five Golden Corral restaurants. The
initial term of each lease is 15 years (expiring between 2009 and 2015) and the
average minimum base annual rent is approximately $159,900 (ranging from
approximately $88,000 to $222,500).
Item 3. Legal Proceedings
Neither the Partnership, nor its General Partners, nor any affiliate of
the Partnership, nor any of their respective Properties, is party to, or subject
to, any material pending legal proceedings.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
(a) As of March 12, 2004 there were 2,697 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 $8.29 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 $15.00 $6.00 $ 9.18 $6.45 $6.00 $ 6.08
Second Quarter 7.79 6.00 7.27 (2) (2) (2)
Third Quarter 9.50 6.10 8.91 7.18 5.79 6.43
Fourth Quarter 9.50 7.12 8.01 (2) (2) (2)
(1) A total of 36,609 and 16,339 Units were transferred other than pursuant
to the Plan for the years ended December 31, 2003 and 2002,
respectively. (2) No transfer of Units took place during the quarter
other than pursuant to the Plan.
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 the year ended December 31, 2003, the Partnership declared cash
distributions of $3,200,000 to the Limited Partners. For the year ended December
31, 2002, the Partnership declared cash distributions of $3,300,000 to the
Limited Partners including a special distribution of $100,000 representing
cumulative excess operating reserves. No amounts distributed to the Limited
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.
As indicated in the chart below, distributions were declared at the
close of each of the Partnership's calendar quarters. These amounts include
monthly distributions made in arrears for the Limited Partners electing to
receive such distributions on this basis.
Quarter Ended 2003 2002
----------------------- -------------- ---------------
March 31 $ 800,000 $ 800,000
June 30 800,000 800,000
September 30 800,000 800,000
December 31 800,000 900,000
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
Year ended December 31: 2003 2002 2001 2000 1999
----------------- --------------- ---------------- --------------- ---------------
Continuing Operations (4):
Revenues $ 2,874,892 $ 2,830,904 $ 2,795,517 $ 2,990,724 $ 3,308,442
Equity in earnings of
unconsolidated joint ventures 452,452 442,344 435,249 296,929 259,508
Income from continuing
operations (1) 2,639,411 2,576,431 2,632,581 2,694,801 2,409,935
Discontinued Operations (4):
Revenues 235,089 327,828 341,569 418,445 430,776
Income (loss) from and gain
(loss) on disposal of
discontinued operations (2) 215,616 457,714 7,620 (70,386) 360,040
Net income 2,855,027 3,034,145 2,640,201 2,624,415 2,769,975
Income (loss) per Unit:
Continuing operations $ 0.66 $ 0.64 $ 0.66 $ 0.67 $ 0.60
Discontinued operations 0.05 0.12 -- (0.01) 0.09
----------------- ---------------- ---------------- -------------- ---------------
$ 0.71 $ 0.76 $ 0.66 $ 0.66 $ 0.69
================= ================ ================ ============= ===============
Cash distributions declared (3) $ 3,200,000 $ 3,300,000 $ 3,200,000 $ 3,200,000 $ 3,200,000
Cash distributions declared per
Unit (3) 0.80 0.83 0.80 0.80 0.80
At December 31:
Total assets $ 34,310,971 $ 34,727,532 $ 34,832,208 $ 34,465,658 $ 36,073,980
Total partners' capital 33,289,663 33,634,636 33,900,491 34,460,290 35,035,875
(1) Income from continuing operations for the years ended December 31, 2001
and 2000, includes $418,754 and $38,003, respectively, from gain on
sale of assets and for the year ended December 31, 1999, includes
$165,503 from loss on sale of assets. Income for the years ended
December 31, 2001 and 1999 includes $288,684 and $258,995,
respectively, from provision for write-down of assets.
(2) Income (loss) from and gain (loss) on disposal of discontinued
operations for the year ended December 31, 2002 includes $304,600 from
aggregate gains on disposal of discontinued operations. Income (loss)
from and gain (loss) on disposal of discontinued operations for the
years ended December 31, 2002, 2001 and 2000 includes $138,222,
$223,839 and $446,975, respectively, from provisions for write-down of
assets.
(3) Distributions for the year ended December 31, 2002 includes a special
distribution to the Limited Partners of $100,000 which represented
cumulative excess operating reserves.
(4) Certain items in the prior years' financial data have been reclassified
to conform to 2003 presentation. These reclassifications had no effect
on net income. 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. The
results of operations relating to Properties that were identified for
sale as of December 31, 2001, but sold subsequently are reported as
continuing operations.
The above selected financial data should be read in conjunction with
the financial statements and related notes contained in Item 8 hereof.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The Partnership was organized on September 2, 1993, 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, to be leased primarily to
operators of Restaurant Chains. The leases are generally triple-net leases, 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 amounts (payable in monthly installments) ranging from
approximately $25,200 to $259,900. Generally, the leases provide for percentage
rent based on sales in excess of a specified amount. In addition, a majority of
the leases provide that, commencing in specified lease years (ranging from the
third to the sixth lease year), the annual base rent required under the terms of
the lease will increase.
As of December 31, 2001, the Partnership owned 38 Properties directly
and ten Properties indirectly through joint venture or tenancy in common
arrangements. As of December 31, 2002, the Partnership owned 36 Properties
directly and ten Properties indirectly through joint venture and tenancy in
common arrangements. As of December 31, 2003, the Partnership owned 35
Properties directly and 12 Properties indirectly through joint venture or
tenancy in common arrangements.
Capital Resources
Cash from operating activities was $3,238,075, $3,355,765 and
$3,097,228, for the years ended December 31, 2003, 2002 and 2001, respectively.
The decrease in cash from operating activities during the year ended December
31, 2003, as compared to 2002, and the increase during the year ended December
31, 2002, as compared to the previous year, 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, and changes in income
and expenses, such as changes in rental revenues and changes in operating and
Property related expenses.
Other sources and uses of cash included the following during the years
ended December 31, 2003, 2002 and 2001.
In April 2001, the Partnership sold its Property in Greer, South
Carolina and received net sales proceeds of $700,000 (consisting of $233,000 in
cash and $467,000 in the form of a promissory note), resulting in a loss of
$288,684, which the Partnership had recorded as a provision for write-down of
assets at March 31, 2001. The promissory note, collateralized by a mortgage on
the Property, bore interest at a rate of 10% per annum. The Partnership
collected the outstanding principal and interest during 2001. In addition, in
April 2001, the Partnership sold its Property in Woodland Hills, California to a
third party and received net sales proceeds of approximately $1,253,700,
resulting in a gain of approximately $246,700. In April 2001, the Partnership
reinvested the net sales proceeds from the sale of these Properties in a
Property in Blue Springs, Missouri, as tenants-in-common with CNL Income Fund
XIII, Ltd., ("CNL XIII") a Florida limited partnership and an affiliate of the
General Partners. The Partnership and CNL XIII, as tenants-in-common, acquired
this Property from CNL BB Corp., an affiliate of the General Partners. The
affiliate had purchased and temporarily held title to the Property in order to
facilitate the acquisition of the Property by the Partnership and CNL XIII, as
tenants-in-common. The purchase price paid by the Partnership and CNL XIII, as
tenants-in-common, represented the costs incurred by the affiliate to acquire
and carry the Property. The Partnership contributed approximately $1,269,700 for
a 59% interest in the profits and losses of the Property. The transaction
relating to the sale of the Property in Woodland Hills, California and the
reinvestment of the net sales proceeds was structured to qualify as a like-kind
exchange transaction for federal income tax purposes.
In May 2001, Wood-Ridge Real Estate Joint Venture, in which the
Partnership owns a 50% interest, sold its Property in Paris, Texas to the tenant
for $800,000, in accordance with the purchase option under the lease agreement.
The sale resulted in a loss to the joint venture of approximately $84,500. In
connection with the sale, the joint venture received $200,000 in lease
termination income in consideration for the joint venture releasing the tenant
from its obligations under the lease. During 2001, the Partnership and the other
joint venture partner each received approximately $400,000 representing a return
of capital from the net sales proceeds.
In August 2001, the Partnership used a portion of the amounts received
as a return of capital, as described above, to enter into a joint venture
arrangement, CNL VII, XV Columbus Joint Venture, with CNL Income Fund VII, Ltd.,
a Florida limited partnership and affiliate of the General Partners, to
construct one restaurant Property in Columbus, Georgia. During 2001, the
Partnership contributed approximately $466,100 to purchase land and pay for its
share of construction costs relating to the joint venture and contributed
approximately $34,900 during 2002 to complete the construction. The Partnership
has a 31.25% interest in the profits and losses of the joint venture.
In October 2001, the Partnership sold its Property in Altadena,
California to a third party and received net sales proceeds of approximately
$937,300, resulting in a gain of approximately $172,100. In December 2001, the
Partnership reinvested the net sales proceeds received from this sale and a
portion of the proceeds from the sale of the Property in Greer, South Carolina
in a Property in Houston, Texas. The Partnership acquired this Property from CNL
Funding 2001-A, LP, a Delaware limited partnership and an affiliate of the
General Partners. The transaction, or a portion thereof, relating to the sale of
the Property and the reinvestment of the proceeds, qualified as a like-kind
exchange transaction for federal income tax purposes.
During 2002, the Partnership sold its Properties in Redlands,
California, Medina, Ohio and Stratford, New Jersey to separate third parties and
received aggregate net sales proceeds of $2,046,900 resulting in an aggregate
gain on disposal of discontinued operations of $304,600. The Property in
Stratford, New Jersey consisted of land only. The Partnership had recorded a
provision for write-down of assets in the amount of $394,474 related to the
Property in Medina, Ohio during 2000 because the tenant of the Property filed
for bankruptcy and rejected its lease in 1998. The Partnership reinvested the
proceeds from the sale of the Property in Redlands, California in a Property in
Houston, Texas. The Partnership acquired this Property from CNL Funding 2001-A,
LP, a Delaware limited partnership and an affiliate of the General Partners. The
purchase price paid by the Partnership represented the costs incurred by CNL
Funding 2001-A, LP to acquire and carry the Property. The transaction relating
the sale of the Property and the reinvestment of the net sales proceeds was
structured to qualify as a like-kind exchange transaction for federal income tax
purposes. The Partnership used the proceeds from the sale of the other
Properties to invest in additional joint venture Properties.
In June 2003, the Partnership sold its Property in Bartlesville,
Oklahoma to a third party and received net sales proceeds of approximately
$559,000 resulting in no gain or loss. The Partnership had recorded provisions
for write-down of assets in previous years relating to this asset. In November
2003, the Partnership reinvested a portion of the proceeds in a Property in
Dalton, Georgia with CNL Income Fund VI, Ltd., CNL Income Fund XI, Ltd. and CNL
Income Fund XVI, Ltd. as tenants in common. Each of the CNL Income Funds is a
Florida limited partnership and 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 $323,000 for a 17%
interest in the Property.
In addition, in November 2003, the Partnership used a portion of the
remaining net sales proceeds received from the sale of the Property in Greer,
South Carolina and the Property in Redlands, California, the net sales proceeds
received from the sale of the Property in Medina, Ohio and the Property in
Stratford, New Jersey and the remaining net sales proceeds from the sale of the
Property in Bartlesville, Oklahoma in a Property in Tucker, Georgia with CNL
Income Fund X, Ltd., CNL Income Fund XIII, Ltd., and CNL Income Fund XIV, Ltd.
as tenants in common. Each of the CNL Income Funds is a Florida limited
partnership and 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 $1,045,000 for a 68%
interest in the Property.
During 2003, the Property in Lexington, Kentucky was destroyed by fire.
The Property is covered by insurance held by the tenant. The General Partners
anticipate that the insurance proceeds will exceed the net carrying value of the
building.
None of the Properties owned by the Partnership, or the joint ventures
or tenancy in common arrangements in which the Partnership owns an interest, is
or may be encumbered. 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 3% 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 $1,446,341 invested in cash
and cash equivalents as compared to $2,317,004 at December 31, 2002. At December
31, 2003, these funds were held in demand deposit and money market accounts at
commercial banks. The decrease in cash and cash equivalents was due to the fact
that the Partnership reinvested the net sales proceeds received from the 2002
sales of the Properties in Medina, Ohio and Stratford, New Jersey in additional
properties. As of December 31, 2003, the average interest rate earned on rental
income held in demand deposit and money market accounts at commercial banks was
less than one percent annually. The funds remaining at December 31, 2003, after
payment of distributions and other liabilities, will be used to meet the
Partnership's working capital needs.
In December 2003, the Partnership entered into an agreement with a
third party to sell its Property in Huntsville, Texas. In March 2004, the
Partnership sold the Property and received net sales proceeds of approximately
$1,294,800 resulting in a gain of approximately $344,000 which will be
recognized in the first quarter of 2004. The General Partners intend to use the
proceeds received from the sale to invest in additional Properties.
In March 2004, the Partnership entered into an agreement to provide
temporary and partial rent relief to a tenant who is experiencing liquidity
difficulties. The Partnership anticipates lowering rent over the next twelve
months on the one lease the tenant has with the Partnership will provide the
necessary relief to the tenant. Rental payment terms go back to the original
terms starting with the thirteenth month. The deferred rent is due in equal
monthly payments beginning January 2005 and continuing for 60 months thereafter.
The General Partners do not believe that this temporary decline in cash flows
will have a material adverse effect on the operating results 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 continue to generate cash flow
in excess of operating expenses.
The Partnership's short-term liquidity requirements consist primarily
of the operating expenses of the Partnership.
The General Partners have the right, but not the obligation, to make
additional capital contributions if they deem it appropriate in connection with
the operations of the Partnership.
Due to low operating expenses and ongoing cash flow, the General
Partners believe that the Partnership has sufficient working capital reserves at
this time. In addition, because substantially all leases of the Partnership's
Properties are on a triple-net basis, it is not anticipated that a permanent
reserve for maintenance and repairs will be established at this time. To the
extent, however, that the Partnership has insufficient funds for such purposes,
the General Partners will contribute to the Partnership an aggregate amount of
up to one percent of the offering proceeds for maintenance and repairs. The
General Partners have the right to cause the Partnership to maintain additional
reserves if, in their discretion, they determine such reserves are required to
meet the Partnership's working capital needs.
The Partnership generally distributes cash from operations remaining
after the payment of the operating expenses of the Partnership, to the extent
that the General Partners determine that such funds are available for
distribution. Based primarily on current and anticipated future cash from
operating activities, the Partnership declared distributions to the Limited
Partners of $3,200,000 for each of the years ended December 31, 2003 and 2001
and $3,300,000 for the year ended December 31, 2002. This represents
distributions of $0.80 for each of the years ended December 31, 2003 and 2001
and $0.83 for the year ended December 31, 2002. No distributions were made to
the General Partners for the years ended December 31, 2003, 2002 and 2001. No
amounts distributed to the Limited Partners for the years ended December 31,
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 on
their adjusted capital contributions. The Partnership intends to continue to
make distributions of cash available for distribution to the Limited Partners on
a quarterly basis.
During 2000, the General Partners waived their right to receive future
distributions from the Partnership, including both distributions of operating
cash flow and distributions of liquidation proceeds, to the extent that the
cumulative amount of such distributions would exceed the balance in the General
Partners' capital account as of December 31, 1999. Accordingly, the General
Partners were not allocated any net income and did not receive any distributions
during the years ended December 31, 2003, 2002 and 2001.
As of December 31, 2003 and 2002, the Partnership owed $16,989 and
$20,605, respectively, to related parties for accounting and administrative
services and management fees. As of March 12, 2004, the Partnership had
reimbursed the affiliates for these amounts. Other liabilities, including
distributions payable, decreased to $1,004,319 at December 31, 2003, from
$1,072,291 at December 31, 2002 primarily as a result of a decrease in
distributions payable. The decrease was partially offset by an increase in
accounts payable and accrued expenses and rents paid in advance during 2003 as
compared to 2002. The General Partners believe that the Partnership has
sufficient cash on hand to meet its current working capital needs.
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
The Partnership has no contractual obligations, contingent liabilities,
or commitments 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 at the inception of the lease.
The Partnership accounts for its unconsolidated joint ventures using
the equity method of accounting. Under generally accepted accounting principles,
the equity method of accounting is appropriate for entities that are partially
owned by the Partnership, but for which operations of the investee are shared
with other partners. The Partnership's joint venture agreements require the
consent of all partners on all key decisions affecting the operations of the
underlying Property.
Management reviews the Partnership's Properties and investments in
unconsolidated entities 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 $2,811,091 during the
year ended December 31, 2003 as compared to $2,768,774 for the same period of
2001. Rental revenues from continuing operations increased during the year ended
December 31, 2003 because the Partnership acquired a Property in Houston, Texas
in June 2002.
The Partnership also earned $58,066 in contingent rental income for the
year ended December 31, 2003 as compared to $39,211 for the same period of 2002.
The increase in contingent rental income was primarily the result of increased
gross sales reported by certain restaurant Properties, the leases of which
require the payment of contingent rent.
During the year ended December 31, 2003, the Partnership earned
$452,452 in net income earned by unconsolidated joint ventures as compared to
$442,344 for the same period of 2002. The slight increase in net income earned
by joint ventures was due to the fact that in November 2003, the Partnership
invested in a Property in Dalton, Georgia with CNL Income Fund VI, Ltd., CNL
Income Fund XI, Ltd., and CNL Income Fund XVI, Ltd. as tenants-in-common, and in
a Property in Tucker, Georgia, with CNL Income Fund X, Ltd., CNL Income Fund
XIII, Ltd. and CNL Income Fund XIV, Ltd. as tenants-in-common. Each of the CNL
Income Funds is a Florida limited partnership and an affiliate of the General
Partners.
During the year ended December 31, 2003, three lessees of the
Partnership, Flagstar Enterprises, Inc., Checkers Drive-In Restaurants, Inc.,
and Golden Corral Corporation, each contributed more than 10% of the
Partnership's total rental revenues (including the Partnership's share of total
rental revenues from Properties owned by joint ventures and Properties owned
with affiliates of the General Partners as tenants-in-common). As of December
31, 2003, Flagstar Enterprises, Inc. was the lessee under leases relating to
seven restaurants, Checkers Drive-In Restaurants, Inc. was the lessee under
leases relating to 13 restaurants, and Golden Corral Corporation was lessee
under leases relating to five restaurants. It is anticipated that, based on the
minimum rental payments required by the leases, these three lessees each will
continue to contribute more than 10% of the Partnership's total rental revenues
in 2004. In addition, during the year ended December 31, 2003, four Restaurant
Chains, Hardee's, Checkers Drive-In Restaurants, Long John Silver's, and Golden
Corral each accounted for more than 10% of the Partnership's total rental
revenues (including the Partnership's share of total rental revenues from
Properties owned by joint ventures and Properties owned with affiliates of the
General Partners as tenants-in-common). In 2004, it is anticipated that these
four Restaurant Chains each will continue to account for more than 10% of the
total rental revenues to which the Partnership is entitled under the terms of
the leases. Any failure of these lessees or Restaurant Chains will materially
affect the Partnership's operating results if the Partnership is not able to
re-lease the Properties in a timely manner.
The Partnership also earned $5,735 attributable to interest and other
income during the year ended December 31, 2003, as compared to $22,919 during
the same period of 2002. Interest and other income were higher during 2002
primarily due to the Partnership holding the proceeds from the sale of a
Property in an interest bearing bank account pending reinvestment in an
additional Property until June 2002, when the Partnership reinvested the sales
proceeds.
Operating expenses, including depreciation and amortization expense,
were $687,933 during the year ended December 31, 2003, as compared to $696,817
during the same period of 2002. The decrease in operating expenses during 2003
was due to a decrease in the costs incurred for administrative expenses for
servicing the Partnership and its Properties. The decrease during 2003 was
partially offset by an increase in depreciation expense as a result of the
acquisition of the Property in Houston, Texas in June 2002.
During 2002, the Partnership identified and sold three Properties
located in Redlands, California, Medina, Ohio and Stratford, New Jersey. The
Partnership recognized a gain of approximately $306,200 on the sale of the
Properties in Redlands, California and Stratford, New Jersey, and a loss of
approximately $1,600 on the sale of the Property in Medina, Ohio. During 2003,
the Partnership identified and sold its Property located in Bartlesville,
Oklahoma and recorded no gain or loss on the sale. The Partnership had recorded
provisions for write-down of assets in previous years relating to this Property.
Also during 2003, the Partnership identified for sale its Properties in
Columbia, South Carolina and Huntsville, Texas. These Properties are classified
as discontinued operations in the accompanying financial statements. The
Partnership recognized net rental income (rental revenues less Property related
expenses and provision for write-down of assets) of $215,616 and $153,114 during
the years ended December 31, 2003 and 2002, respectively, relating to these
Properties.
Comparison of year ended December 31, 2002 to year ended December 31, 2001
Rental revenues from continuing operations were $2,768,774 during the
year ended December 31, 2002 as compared to $2,692,675 for the same period of
2001. The increase in rental revenues from continuing operations during 2002, as
compared to the same period of 2001, was partially due to the fact that in
December 2001 the Partnership used a portion of the sales proceeds from the sale
of the Partnership's Property in Greer, South Carolina and the majority of the
sales proceeds from the sale of the Partnership's Property in Altadena,
California to acquire a Property in Houston, Texas. In addition, rental revenues
from continuing operations increased during 2002 because in June 2002 the
Partnership used the majority of the proceeds from the sale of the Property in
Redlands, California to acquire another Property in Houston, Texas. The increase
in rental revenues from continuing operations during 2002 was partially offset
by the fact that the Partnership sold three Properties during 2001.
The Partnership also earned $39,211 in contingent rental income for the
year ended December 31, 2002 as compared to $23,529 for the same period of 2001.
The increase in contingent rental income was the result of increased gross sales
reported by certain restaurant Properties, the leases of which require the
payment of contingent rent.
During the year ended December 31, 2002, the Partnership earned
$442,344 in net income earned by unconsolidated joint ventures as compared to
$435,249 for the same period of 2001. The increase in net income earned by joint
ventures was due to the fact that during 2001, the Partnership invested in a
Property in Blue Springs, Missouri with CNL Income Fund XIII, Ltd. as
tenants-in-common, and in a joint venture arrangement, CNL VII, XV Columbus
Joint Venture, with CNL Income Fund VII, Ltd. Each of the CNL Income Funds is a
Florida limited partnership and an affiliate of the General Partners. The
increase in net income earned by joint ventures during 2002, as compared to the
previous year was partially offset by the fact that in May 2001, Wood-Ridge Real
Estate Joint Venture, in which the Partnership owns a 50% interest, sold its
Property in Paris, Texas in accordance with the purchase option under the lease
agreement. 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. During 2002, the Partnership reinvested these net sales
proceeds in a joint venture arrangement, CNL VII, XV Columbus Joint Venture,
with an affiliate of the General Partners as described above.
During the year ended December 31, 2002, the Partnership also earned
$22,919 as compared to $79,313 for the same period of 2001 in interest and other
income. Interest and other income were lower during 2002 due to a decrease in
the average cash balance as a result of the reinvestment of sales proceeds
received in 2001 and due to a decline in interest rates.
Operating expenses, including depreciation and amortization expense and
provision for write-down of assets, were $696,817 for the year ended December
31, 2002 as compared to $1,016,939 for the same period of 2001. Operating
expenses were higher during 2001 as a result of the Partnership recording a
provision for write-down of assets in the amount of $288,684 relating to the
Property in Greer, South Carolina. The provision represented the difference
between the carrying value of the Property and its estimated fair value. The
Partnership sold this Property in 2001.
The decrease in operating expenses during 2002, as compared to the same
period of 2001, was also attributable to a decrease in the costs incurred for
administrative expenses for servicing the Partnership and its Properties and due
to a decrease in state tax expense.
As a result of the sale of the Properties in Woodland Hills and
Altadena, CA, the Partnership recognized a gain on sale of assets of
approximately $419,000 during the year ended December 31, 2001. Because these
Properties were 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 these Properties 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. The Partnership recognized an aggregate net
gain on disposal of discontinued operations of $304,600 relating to these
Properties. The Partnership recognized net rental income (rental revenue less
Property related expenses and provision for write-down of assets) of $153,114
and $7,620 during the years ended December 31, 2002 and 2001, respectively,
relating to these Properties.
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 generally
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
results of operations of the Partnership. Continued inflation also 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 XV, LTD.
(A Florida Limited Partnership)
CONTENTS
Page
Report of Independent Certified Public Accountants 19
Financial Statements:
Balance Sheets 20
Statements of Income 21
Statements of Partners' Capital 22
Statements of Cash Flows 23-24
Notes to Financial Statements 25-36
Report of Independent Certified Public Accountants
To the Partners
CNL Income Fund XV, 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 XV, 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) presents fairly, in
all material respects, the information set forth therein when read in
conjunction with the related financial statements. These financial statements
and financial statement schedules are the responsibility of the Partnership's
management; our responsibility is to express an opinion on these financial
statements and financial statement schedules based on our audits. We conducted
our audits of these statements in accordance with auditing standards generally
accepted in the United States of America, which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
As described in Note 1 to the financial statements, on January 1, 2002, the
Partnership adopted Statement of Financial Accounting Standards No. 144
"Accounting for the Impairment or Disposal of Long-Lived Assets."
/s/ PricewaterhouseCoopers LLP
Orlando, Florida
March 24, 2004
CNL INCOME FUND XV, LTD.
(A Florida Limited Partnership)
BALANCE SHEETS
December 31,
2003 2002
--------------------- ---------------------
ASSETS
Real estate properties with operating leases, net $ 19,946,540 $ 20,515,325
Net investment in direct financing leases 3,401,635 3,499,168
Real estate held for sale 1,575,082 2,158,790
Investment in joint ventures 5,776,721 4,455,920
Cash and cash equivalents 1,446,341 2,317,004
Receivables, less allowance for doubtful accounts of
$1,068 in 2002 310,398 37,849
Accrued rental income, less allowance for doubtful
accounts of $27,005 in 2003 and 2002 1,815,999 1,700,570
Other assets 38,255 42,906
--------------------- ---------------------
$ 34,310,971 $ 34,727,532
===================== =====================
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable and accrued expenses $ 15,983 $ 6,985
Real estate taxes payable 9,590 2,109
Distributions payable 800,000 900,000
Due to related parties 16,989 20,605
Rents paid in advance and deposits 178,746 163,197
--------------------- ---------------------
Total liabilities 1,021,308 1,092,896
Partners' capital 33,289,663 33,634,636
--------------------- ---------------------
$ 34,310,971 $ 34,727,532
===================== =====================
See accompanying notes to financial statements.
CNL INCOME FUND XV, LTD.
(A Florida Limited Partnership)
STATEMENTS OF INCOME
Year Ended December 31,
2003 2002 2001
------------------ ----------------- -----------------
Revenues:
Rental income from operating leases $ 2,427,798 $ 2,375,205 $ 2,267,548
Earned income from direct financing leases 383,293 393,569 425,127
Contingent rental income 58,066 39,211 23,529
Interest and other income 5,735 22,919 79,313
------------------ ----------------- -----------------
2,874,892 2,830,904 2,795,517
------------------ ----------------- -----------------
Expenses:
General operating and administrative 265,356 280,594 304,976
Property related 15,562 26,041 44,893
Management fees to related parties 36,162 36,043 33,498
State and other taxes 51,744 41,960 55,122
Depreciation and amortization 319,109 312,179 289,766
Provision for write-down of assets -- -- 288,684
------------------ ----------------- -----------------
687,933 696,817 1,016,939
------------------ ----------------- -----------------
Income before gain on sale of assets and equity in
earnings of unconsolidated joint ventures 2,186,959 2,134,087 1,778,578
Gain on sale of assets -- -- 418,754
Equity in earnings of unconsolidated joint ventures 452,452 442,344 435,249
------------------ ----------------- -----------------
Income from continuing operations 2,639,411 2,576,431 2,632,581
------------------ ----------------- -----------------
Discontinued operations
Income from discontinued operations 215,616 153,114 7,620
Gain on disposal of discontinued operations -- 304,600 --
------------------ ----------------- -----------------
215,616 457,714 7,620
------------------ ----------------- -----------------
Net income $ 2,855,027 $ 3,034,145 $ 2,640,201
================== ================= =================
Income per limited partner unit
Continuing operations $ 0.66 $ 0.64 $ 0.66
Discontinued operations 0.05 0.12 --
------------------ ----------------- -----------------
$ 0.71 $ 0.76 $ 0.66
================== ================= =================
Weighted average number of limited partner units
outstanding 4,000,000 4,000,000 4,000,000
================== ================= =================
See accompanying notes to financial statements.
CNL INCOME FUND XV, 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 $ 173,788 $ 40,000,000 $ (20,365,947) $ 19,441,449
Distributions to limited
partners ($0.80 per
limited partner unit) -- -- -- (3,200,000) --
Net income -- -- -- -- 2,640,201
------------------- ----------------- ------------------ ----------------- ------------------
Balance, December 31, 2001 1,000 173,788 40,000,000 (23,565,947) 22,081,650
Distributions to limited
partners ($0.83 per
limited partner unit) -- -- -- (3,300,000) --
Net income -- -- -- -- 3,034,145
------------------- ----------------- ------------------ ----------------- ------------------
Balance, December 31, 2002 1,000 173,788 40,000,000 (26,865,947) 25,115,795
Distributions to limited
partners ($0.80 per
limited partner unit) -- -- -- (3,200,000) --
Net income -- -- -- -- 2,855,027
------------------- ----------------- ------------------ ----------------- ------------------
Balance, December 31, 2003 $ 1,000 $ 173,788 $ 40,000,000 $ (30,065,947) $ 27,970,822
=================== ================= ================== ================= ==================
See accompanying notes to financial statements.
- --------------
Syndication
Costs Total
- --------------- ---------------
$ (4,790,000) $ 34,460,290
-- (3,200,000)
-- 2,640,201
- --------------- ---------------
(4,790,000) 33,900,491
-- (3,300,000)
-- 3,034,145
- --------------- ---------------
(4,790,000) 33,634,636
-- (3,200,000)
-- 2,855,027
- --------------- ---------------
$ (4,790,000) $ 33,289,663
=============== ===============
CNL INCOME FUND XV, LTD.
(A Florida Limited Partnership)
STATEMENTS OF CASH FLOWS
Year Ended December 31,
2003 2002 2001
---------------- ----------------- --------------------
Cash Flows from Operating Activities:
Net income $ 2,855,027 $ 3,034,145 $ 2,640,201
---------------- ----------------- --------------------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 331,348 328,034 327,426
Amortization of net investment in direct
financing leases 113,613 106,674 87,580
Amortization 2,952 2,961 3,170
Equity in earnings of unconsolidated
joint ventures, net of distributions 46,098 133,074 87,495
Gains on sale of assets -- (304,600) (418,754)
Provision for write-down of assets -- 138,222 512,523
Decrease (increase) in receivables (19,921) (15,835) 57,276
Decrease in due from related parties -- 14,982 18,856
Decrease (increase) in other assets 2,528 (11,580) 9,750
Increase in accrued rental income (121,982) (131,491) (136,975)
Increase (decrease) in accounts payable and
accrued expenses and real estate taxes
payable 16,479 (26,504) (31,919)
Decrease in due to related parties (3,616) (365) (254)
Increase (decrease) in rents paid in advance
and deposits 15,549 94,944 (14,533)
Decrease in deferred rental income -- (6,896) (44,614)
---------------- ----------------- --------------------
Total adjustments 383,048 321,620 457,027
---------------- ----------------- --------------------
Net cash provided by operating activities 3,238,075 3,355,765 3,097,228
---------------- ----------------- --------------------
Cash Flows from Investing Activities:
Proceeds from sale of real estate properties 558,990 2,046,888 2,423,978
Additions to real estate properties with operating -- (1,215,441) (1,445,207)
leases
Redemption of certificate of deposit -- -- 100,000
Investment in joint ventures (1,367,728) (34,876) (1,735,778)
Return of capital from joint venture -- -- 400,000
Collections on mortgage note receivable -- -- 467,000
---------------- ----------------- --------------------
Net cash provided by (used in) investing activities (808,738) 796,571 209,993
---------------- ----------------- --------------------
Cash Flows from Financing Activities:
Distributions to limited partners (3,300,000) (3,200,000) (3,200,000)
---------------- ----------------- --------------------
Net cash used in financing activities (3,300,000) (3,200,000) (3,200,000)
---------------- ----------------- --------------------
Net increase (decrease) in cash and cash equivalents (870,663) 952,336 107,221
Cash and cash equivalents at beginning of year 2,317,004 1,364,668 1,257,447
---------------- ----------------- --------------------
Cash and cash equivalents at end of year $ 1,446,341 $ 2,317,004 $ 1,364,668
================ ================= ====================
See accompanying notes to financial statements.
CNL INCOME FUND XV, LTD.
(A Florida Limited Partnership)
STATEMENT OF CASH FLOWS - CONTINUED
Year Ended December 31,
2003 2002 2001
------------------- -------------------- --------------------
Supplemental Schedule of Non-Cash Investing
and Financing Activities:
Insurance proceeds receivable $ 252,628 $ -- $ --
=================== ==================== ====================
Distributions declared and unpaid at
December 31 $ 800,000 $ 900,000 $ 800,000
=================== ==================== ====================
See accompanying notes to finanical statements.
CNL INCOME FUND XV, 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 XV, Ltd. (the
"Partnership") is a Florida limited partnership that was organized for
the purpose of acquiring both newly constructed and existing restaurant
properties, as well as properties upon which restaurants were to be
constructed, which are leased primarily to operators of national and
regional fast-food and family-style restaurant chains.
The general partners of the Partnership are CNL Realty Corporation (the
"Corporate General Partner"), James M. Seneff, Jr. and Robert A.
Bourne. Mr. Seneff and Mr. Bourne are also 50% shareholders of the
Corporate General Partner. The general partners have responsibility for
managing the day-to-day operations of the Partnership.
Real Estate and Lease Accounting - The Partnership records the
acquisitions of real estate properties at cost, including 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 $339,500, $361,000, and
$342,500, 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 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 a majority of
the land portion of these leases are operating leases.
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.
CNL INCOME FUND XV, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
Years Ended December 31, 2003, 2002, and 2001
1. Significant Accounting Policies - Continued
Substantially all leases are for 15 to 20 years and provide for minimum
and contingent rentals. The lease options generally allow tenants to
renew the leases for two to five successive five-year periods subject
to the same terms and conditions as the initial lease. Most leases also
allow the tenant to purchase the property at fair market value after a
specified portion of the lease has elapsed.
When the properties are sold, the related cost and accumulated
depreciation for operating leases and the net investment for direct
financing leases, plus any accrued rental income, are removed from the
accounts and gains or losses from sales are reflected in income. The
general partners of the Partnership review properties for impairment
whenever events or changes in circumstances indicate that the carrying
amount of the assets may not be recoverable through operations. The
general partners determine whether an impairment in value has occurred
by comparing the estimated future undiscounted cash flows, including
the residual value of the property, with the carrying cost of the
individual property. If an impairment is indicated, the assets are
adjusted to their estimated 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 Wood-Ridge Real Estate Joint Venture, TGIF Pittsburgh
Joint Venture, CNL VII, XV Columbus Joint Venture, and properties in
Clinton, North Carolina, Fort Myers, Florida, Blue Springs, Missouri,
and Dalton and Tucker, Georgia 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 and money market funds. Cash equivalents
are stated at cost plus accrued interest, which approximates market
value.
Cash accounts maintained on behalf of the Partnership in demand
deposits at commercial banks and money market funds may exceed
federally insured levels; however, the Partnership has not experienced
any losses in such accounts.
Lease Costs - Other assets include lease incentive costs and brokerage
and legal fees associated with negotiating leases and are amortized
over the term of the new lease using the straight-line method.
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.
CNL INCOME FUND XV, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
Years Ended December 31, 2003, 2002, and 2001
1. Significant Accounting Policies - Continued
Use of Estimates - The general partners of the Partnership have made a
number of estimates and assumptions relating to the reporting of assets
and liabilities and the disclosure of contingent assets and liabilities
to prepare these financial statements in conformity with generally
accepted accounting principles. The more significant areas requiring
the use of management estimates relate to the allowance for doubtful
accounts and future cash flows associated with long-lived assets.
Actual results could differ from those estimates.
Reclassification - Certain items in the prior years' financial
statements have been reclassified to conform to 2003 presentation,
including a change in presentation of the statement of cash flows from
the direct to the indirect method. These reclassifications had no
effect on total partners' capital, net income or cash flows.
Statement of Financial Accounting Standards No. 144 - Effective January
1, 2002, the Partnership adopted Statement of Financial Accounting
Standards No. 144 "Accounting for the Impairment or Disposal of
Long-Lived Assets." This statement requires that a long-lived asset be
tested for recoverability whenever events or changes in circumstances
indicate that its carrying amount may not be recoverable. The carrying
amount of a long-lived asset is not recoverable if it exceeds the sum
of the undiscounted cash flows expected to result from the use and
eventual disposition of the asset. The assessment is based on the
carrying amount of the asset at the date it is tested for
recoverability. An impairment loss is recognized when the carrying
amount of a long-lived asset exceeds its fair value. If an impairment
is recognized, the adjusted carrying amount of a long-lived asset is
its new cost basis. The statement also requires that the results of
operations of a component of an entity that either has been disposed of
or is classified as held for sale be reported as a discontinued
operation if the disposal activity was initiated subsequent to the
adoption of the Standard.
FASB Interpretation No. 46 - 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.
CNL INCOME FUND XV, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
Years Ended December 31, 2003, 2002, and 2001
2. Real Estate Properties with Operating Leases
Real estate properties with operating leases consisted of the following
at December 31:
2003 2002
------------------------ -----------------------
Land $ 13,248,122 $ 13,248,122
Buildings 8,792,461 9,095,885
----------------------- -----------------------
22,040,583 22,344,007
Less accumulated depreciation (2,094,043) (1,828,682)
---------------------- -----------------------
$ 19,946,540 $ 20,515,325
======================= ========================
In December 2003, the property in Lexington, Kentucky was destroyed by
fire. The property is covered by insurance held by the tenant. The
expected insurance proceeds of approximately $252,600 were included in
receivables at December 31, 2003.
In June 2002, the Partnership reinvested the majority of the proceeds
from the sale of the property in Redlands, California (see Note 5) in a
property in Houston, Texas. The Partnership acquired this property from
CNL Funding 2001-A, LP, an affiliate of the general partners.
The following is a schedule of the future minimum lease payments to be
received on noncancellable operating leases at December 31, 2003:
2004 $ 2,482,633
2005 2,609,497
2006 2,613,379
2007 2,648,296
2008 2,666,078
Thereafter 15,092,610
---------------------
$ 28,112,493
=====================
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 $ 5,012,714 $ 5,493,541
Estimated residual values 1,232,928 1,232,928
Less unearned income (2,844,007) (3,227,301)
-------------------- ---------------------
Net investment in direct financing
leases $ 3,401,635 $ 3,499,168
==================== =====================
CNL INCOME FUND XV, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
Years Ended December 31, 2003, 2002, and 2001
3. Net Investment in Direct Financing Leases - Continued
The following is a schedule of future minimum lease payments to be
received on direct financing leases at December 31, 2003:
2004 $ 556,128
2005 556,128
2006 556,128
2007 568,122
2008 574,120
Thereafter 2,982,541
-----------------------
$ 5,793,167
=======================
4. Investment in Joint Ventures
The Partnership has a 50%, a 23.62%, a 16%, a 15% and a 59% interest in
the profits and losses of Wood-Ridge Real Estate Joint Venture, TGIF
Pittsburgh Joint Venture, a property in Clinton, North Carolina, a
property in Fort Myers, Florida and a property in Blue Springs,
Missouri held as tenants-in-common with affiliates of the general
partners. The remaining interests in these joint ventures are held by
affiliates of the Partnership, which have the same general partners.
In August 2001, the Partnership used a portion of the amounts received
as a return of capital from the 2001 sale of the property in Paris,
Texas, to enter into a joint venture arrangement, CNL VII, XV Columbus
Joint Venture, with CNL Income Fund VII, Ltd., an affiliate of the
general partners, to construct one restaurant property in Columbus,
Georgia. As of December 31, 2001, the Partnership had contributed
approximately $466,120 to purchase land and pay for its share of
construction costs relating to the joint venture. During 2002, the
Partnership contributed $34,876 to complete the construction. The
Partnership owns a 31.25% interest in the profits and losses of the
joint venture.
In November 2003, the Partnership and CNL Income Fund X, Ltd., CNL
Income Fund XIII, Ltd., and CNL Income Fund XIV, 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 $1,044,700 for a 68% interest in the
property.
In addition, in November 2003, the Partnership and CNL Income Fund VI,
Ltd., CNL Income Fund XI, Ltd., and CNL Income Fund XVI, Ltd., as
tenants-in-common, invested in a property in Dalton, 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 $323,000 for a 17% interest in the property.
CNL INCOME FUND XV, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
Years Ended December 31, 2003, 2002, and 2001
4. Investment in Joint Ventures - Continued
Wood-Ridge Real Estate Joint Venture owns five properties, TGIF
Pittsburgh Joint Venture and CNL VII, XV Columbus Joint Venture, each
own one property. The Partnership and affiliates, as tenants-in-common
in five separate tenancy-in-common arrangements, each own one property.
The following presents the combined, condensed financial information
for all of the Partnership's investments in joint ventures and
properties held as tenants-in-common at December 31:
2003 2002
--------------- ---------------
Real estate properties with operating leases, net $ 13,922,001 $ 10,724,926
Net investment in direct financing leases 764,271 779,576
Cash 103,799 47,507
Receivables 18,000 20,708
Accrued rental income 553,323 450,591
Other assets 10,700 12,990
Liabilities 66,613 70,077
Partners' capital 15,305,481 11,966,221
Year Ended December 31,
2003 2002 2001
---------------- ---------------- ---------------
Revenues $ 1,483,617 $ 1,447,921 $ 1,227,629
Lease termination income -- -- 200,000
Expenses (248,461 ) (233,338 ) (204,327 )
Loss on sale of assets -- -- (84,473 )
---------------- ---------------- ---------------
Net income $ 1,235,156 $ 1,214,583 $ 1,138,829
================ ================ ===============
The Partnership recognized income of $452,452, $442,344 and $435,249
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 three properties to
third parties and received aggregate net sales proceeds of
approximately $2,046,900 resulting in a net gain on disposal of
discontinued operations of approximately $304,600. During 2003, the
Partnership identified three additional properties for sale. As a
result, the properties were reclassified from real estate properties
with operating leases to real estate held for sale. The reclassified
assets were recorded at the lower of their carrying amounts or fair
value, less cost to sell. In June 2003, the Partnership sold one of
these properties, in Bartlesville, Oklahoma, to the tenant and received
net sales proceeds of approximately $559,000. Because the Partnership
had recorded provisions for write-down of assets relating to this
property in previous years, no gain or loss was recorded during 2003
relating to the sale of this property. The financial results relating
to these properties are reflected as discontinued operations in the
accompanying financial statements.
CNL INCOME FUND XV, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
Years Ended December 31, 2003, 2002, and 2001
5. Discontinued Operations - Continued
The operating results of the discontinued operations for these
properties are as follows:
Year Ended December 31,
2003 2002 2001
------------- ------------- ---------------
Rental revenues $ 235,089 $ 327,828 $ 341,569
Expenses (19,473 ) (36,492 ) (110,110 )
Provision for write-down of assets -- (138,222 ) (223,839 )
------------- ------------- ---------------
Income from discontinued
operations $ 215,616 $ 153,114 $ 7,620
============= ============= ===============
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, generally, distributions of net cash flow were made 99% to the
limited partners and one percent to the general partners. However, one
percent of net cash flow to be distributed to the general partners was
subordinated to receipt by the limited partners of an aggregate, 8%,
cumulative, noncompounded annual return on their invested capital
contributions (the "Limited Partners' 8% 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' 8%
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 5% 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 5% 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 obligation 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 5% to the general partners.
CNL INCOME FUND XV, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
Years Ended December 31, 2003, 2002, and 2001
6. Allocations and Distributions - Continued
Effective January 1, 2000, the general partners waived their right to
receive future distributions from the Partnership, including both
distributions of operating cash flow and distributions of liquidation
proceeds, to the extent that the cumulative amount of such
distributions would exceed the balance in the general partners' capital
account as of December 31, 1999. Accordingly, for years commencing
January 1, 2000 and after, the Partnership's net income will be
allocated entirely among the limited partners. However, if losses are
allocated to the general partners in a year, an amount of income equal
to the sum of such losses may be allocated to the general partners in
succeeding years. Accordingly, the general partners were not allocated
any net income and did not receive any distributions during the years
ended December 31, 2003, 2002 and 2001.
The Partnership declared distributions to the limited partners of
$3,200,000, during each of the years ended December 31, 2003 and 2001.
During the year ended December 31, 2002, the Partnership declared
distributions to the limited partners of $3,300,000. No distributions
have been made to the general partners to date.
CNL INCOME FUND XV, 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 $ 2,855,027 $ 3,034,145 $ 2,640,201
Effect of timing differences relating to
depreciation (27,597) (41,215) (52,017)
Direct financing leases recorded as operating
leases for tax reporting purposes 113,613 106,674 87,580
Provision for write-down of assets -- 138,222 512,523
Effect of timing differences relating to equity
in earnings of unconsolidated joint 334 (7,242) 31,391
ventures
Accrued rental income (118,311) (134,712) (177,910)
Rents paid in advance 11,877 95,015 (14,461)
Effect of timing differences relating to
allowance for doubtful accounts (1,068) (190,534) 153,720
Effect of timing differences relating to
gains/losses on sale on real estate (275,718) (563,927) (601,834)
properties
Other (384) 837 1,046
---------------- ---------------- ---------------
Net income for federal income tax purposes $ 2,557,773 $ 2,437,263 $ 2,580,239
================ ================ ===============
CNL INCOME FUND XV, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
Years Ended December 31, 2003, 2002, and 2001
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 known as 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.
The Advisor provides services pursuant to a management agreement with
the Partnership. In connection therewith, the Partnership 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 $36,162, $36,043,
and $33,498, 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 3% 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 receipt by the limited partners of their aggregate
Limited Partners' 8% 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 advisor and its affiliates of the general partners
provided accounting and administrative services to the Partnership. The
Partnership incurred $164,192, $204,164, and $233,022, for the years
ended December 31, 2003, 2002, and 2001, respectively, for such
services.
The amount due to related parties at December 31, 2003 and 2002,
totaled $16,989 and $20,605, respectively.
9. Concentration of Credit Risk
The following schedule presents total rental revenues from individual
lessees, each representing more than 10% of the Partnership's total
rental revenues (including the Partnership's share of total rental
revenues from joint ventures and the properties held as
tenants-in-common with affiliates of the general partners) for each of
the years ended December 31:
2003 2002 2001
---------------- --------------- ----------------
Checkers Drive-In Restaurants, Inc. $ 688,761 $ 715,508 $ 717,759
Golden Corral Corporation 686,973 679,064 637,725
Flagstar Enterprises, Inc. 523,779 529,394 533,063
CNL INCOME FUND XV, 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 10% of the
Partnership's total rental revenues (including the Partnership's share
of total rental revenues from joint ventures and the properties held as
tenants-in-common with affiliates of the general partners) for each of
the years ended December 31:
2003 2002 2001
-------------- ---------------- ---------------
Checkers Drive-In Restaurants $ 688,761 $ 715,508 $ 717,759
Golden Corral Buffet and Grill 686,973 679,064 637,725
Hardee's 523,779 529,394 533,063
Long John Silver's 393,086 407,523 396,422
Although the Partnership's properties have some geographic diversity in
the United States and the Partnership's lessees operate a variety of
restaurant concepts, default by any lessee or restaurant chain
contributing more than 10% of the Partnership's 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 $ 705,860 $ 705,850 $ 702,752 $ 760,430 $2,874,892
Equity in earnings of
unconsolidated joint
ventures 109,281 109,524 108,634 125,013 452,452
Income from continuing
operations 602,647 662,597 656,270 717,897 2,639,411
Discontinued Operations (1):
Revenues 73,451 71,483 45,436 44,719 235,089
Income from
discontinued
operations 65,327 67,289 41,293 41,707 215,616
Net Income 667,974 729,886 697,563 759,604 2,855,027
Income per limited partner unit:
Continuing operations $ 0.15 $ 0.17 $ 0.16 $ 0.18 $ 0.66
Discontinued operations 0.02 0.01 0.01 0.01 0.05
------------ -------------- ------------- ------------- --------------
Total $ 0.17 $ 0.18 $ 0.17 $ 0.19 $ 0.71
============ ============== ============= ============= ==============
CNL INCOME FUND XV, 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 $ 688,342 $ 692,820 $ 727,440 $ 722,302 $2,830,904
Equity in earnings of
unconsolidated joint
ventures 109,916 111,892 109,591 110,945 442,344
Income from continuing
operations 591,895 637,644 677,656 669,236 2,576,431
Discontinued Operations (1):
Revenues 93,750 61,684 93,471 78,923 327,828
Income (loss) from and
gain on disposal of
discontinued
operations 384,221 38,950 84,447 (49,904 ) 457,714
Net Income 976,116 676,594 762,103 619,332 3,034,145
Income per limited partner unit:
Continuing operations $ 0.15 $ 0.16 $ 0.17 $ 0.16 $ 0.64
Discontinued operations 0.09 0.01 0.02 -- 0.12
------------ -------------- ------------- ------------- --------------
Total $ 0.24 $ 0.17 $ 0.19 $ 0.16 $ 0.76
============ ============== ============= ============= ==============
(1) Certain items in the quarterly financial data have been
reclassified to conform to 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. Subsequent Event
In March 2004, the Partnership sold the property in Huntsville, Texas
for $1,350,000 and received net sales proceeds of approximately
$1,294,800 resulting in a gain of approximately $344,000, which will be
recognized in the first quarter of 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
As of March 12, 2004, no person was known to the Registrant to be a
beneficial owner of more than 5% 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 has no equity compensation plans.
45
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 Accounting and
operating expenses the lower of cost or 90% of the administra-tive services:
prevailing rate at which comparable $164,192
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 $36,162
affiliates 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. 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.
Amount Incurred
Type of Compensation For the Year
and Recipient Method of Computation Ended December 31, 2003
--------------------------------- -------------------------------------- -------------------------------
Deferred, subordinated real A deferred, subordinated real estate $-0-
estate disposition fee payable disposition fee, payable upon sale
to affiliates of one or more Properties, in an
amount equal to the lesser of (i)
one-half of a competitive real estate
commission, or (ii) 3% of the sales
price of such Property or Properties.
Payment of such fee shall be made only
if affiliates of the General Partners
provide a substantial amount of
services in connection with the sale of
a Property or Properties and shall be
subordinated to certain minimum returns
to the Limited Partners. However, if
the net sales proceeds are reinvested
in a replacement Property, no such real
estate disposition fee will be incurred
until such replacement Property is sold
and the net sales proceeds are
distributed.
General Partners' deferred, A deferred, subordinated share equal $-0-
subordinated share of to one percent of Partnership
Partnership net cash flow distributions of net cash flow,
subordinated to certain minimum
returns to the Limited Partners.
General Partners' share of Distributions of net sales proceeds $-0-
Partnership net sales from a sale or sales of substantially
proceeds from a sale or sales all of the Partnership's assets will be
in liquidation of the distributed in the following order or
Partnership 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 Parnters
Amount Incurred
Type of Compensation For the Year
And Recipient Method of Computation Ended December 31, 2003
--------------------------------- -------------------------------------- -------------------------------
General Partners' share of Distributions of net sales proceeds $-0-
Partnership net sales proceeds from a sale or sales of
from a sale or sales in substantially all of the
liquidation of the Partnership Partnership's assets will be
distributed in the following order or
priority: (i) first, to pay all debts
and liabilities of the Partnership and
to establish reserves; (ii) second, to
Partners with positive capital account
balances, determined after the
allocation of net income, net loss,
gain and loss, in proportion to such
balances, up to amounts sufficient to
reduce such balances to zero; and (iii)
thereafter, 95% to the Limited Partners
and 5% to the General Partners.
Item 14. Principal Accountant Fees and Services
The following table outlines the only 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) $ 15,743 $ 13,400
Tax Fees (2) 7,884 6,661
---------------- -----------------
Total $ 23,627 $ 20,061
================ =================
(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 Schedule
Schedule II - Valuation and Qualifying Accounts for the 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 XV, Ltd. (Included as Exhibit 3.2 to Registration
Statement No. 33-69968 on Form S-11 and incorporated herein by
reference.)
4.1 Affidavit and Certificate of Limited Partnership of CNL Income
Fund XV, Ltd. (Included as Exhibit 3.1 to Registration
Statement No. 33-69968 on Form S-11 and incorporated herein by
reference.)
4.2 Amended and Restated Agreement of Limited Partnership of CNL
Income Fund XV, Ltd. (Included as Exhibit 4.2 to Form 10-K
filed with the Securities and Exchange Commission on March
30,1995, incorporated herein by reference.)
10.1 Management Agreement between CNL Income Fund XV, Ltd. and CNL
Investment Company (Included as Exhibit 10.1 to Form 10-K
filed with the Securities and Exchange Commission on March 30,
1995, 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 for
Form 10-Q filed with the Securities and Exchange Commission on
August 7, 2001 and incorporated herein be reference.)
10.5 Assignment of Management Agreement from CNL APF Partners, LP
to CNL Restaurants XVIII, Inc. (Included as Exhibit 10.5 to
Form 10-Q filed with the Securities and Exchange Commission on
August 13, 2002, and incorporated herein by reference.)
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 24th day of
March, 2004.
CNL INCOME FUND XV, LTD.
By: CNL REALTY CORPORATION
General Partner
/s/ Robert A. Bourne
-----------------------------
ROBERT A. BOURNE, President
By: ROBERT A. BOURNE
General Partner
/s/ Robert A. Bourne
------------------------------
ROBERT A. BOURNE
By: JAMES M. SENEFF, JR.
General Partner
/s/ James M. Seneff, Jr.
------------------------------
JAMES M. SENEFF, JR.
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signature Title Date
/s/ Robert A. Bourne President, Treasurer and Director March 24, 2004
------------------------------------ (Principal Financial and Accounting
Robert A. Bourne (Officer)
/s/ James M. Seneff, Jr. Chief Executive Officer and Director March 24, 2004
------------------------------------ (Principal Executive Officer)
James M. Seneff, Jr.
CNL INCOME FUND XV, 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) $ 63,507 $ 46,935 $ 109,684 (b) $ 1,519 (c) $ -- $ 218,607
============== =============== ================ ============= ============ ============
2002 Allowance for
doubtful
accounts (a) $ 218,607 $ -- $ 5,242 (b) $ 184,891 (c) $ 10,885 $ 28,073
============== =============== ================ ============= ============ ============
2003 Allowance for
doubtful
accounts (a) $ 28,073 $ -- $ -- $ -- $ 1,068 $ 27,005
============== =============== ================ ============= ============ ============
(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 XV, LTD.
(A Florida Limited Partnership)
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 2003
Costs Capitalized
Subsequent To Net Cost Basis 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:
Mentor, Ohio (h) - $520,556 $1,135,584 $749,500 - $520,556 $1,885,084 $2,405,640
Checkers Drive-In Restaurants:
Englewood, Florida - 339,499 - - - 339,499 - 339,499
Marietta, Georgia - 432,547 - - - 432,547 - 432,547
Norcross, Georgia - 405,256 - - - 405,256 - 405,256
Philadelphia, Pennsylvania - 417,014 - - - 417,014 - 417,014
St. Petersburg, Florida - 557,206 - - - 557,206 - 557,206
Lake Mary, Florida - 614,471 - - - 614,471 - 614,471
Philadelphia, Pennsylvania - 599,586 - - - 599,586 - 599,586
Winter Garden, Florida - 353,799 - - - 353,799 - 353,799
Chamblee, Georgia - 427,829 - - - 427,829 - 427,829
Largo, Florida - 407,211 - - - 407,211 - 407,211
Seminole, Florida - 423,116 - - - 423,116 - 423,116
Orlando, Florida - 604,920 - - - 604,920 - 604,920
Bradenton, Florida - 215,478 - - - 215,478 - 215,478
Golden Corral Buffet and Grill:
Aberdeen, North Carolin- 406,989 - 849,648 - 406,989 849,648 1,256,637
Norman, Oklahoma - 763,892 - 939,205 - 763,892 939,205 1,703,097
Augusta, Georgia - 766,891 - 1,124,687 - 766,891 1,124,687 1,891,578
Hardee's Restaurants:
Olive Branch, Mississippi - 209,243 - - - 209,243 (e) 209,243
Pawleys Island, South Caroli-a 307,911 593,997 - - 307,911 593,997 901,908
Cookeville, Tennessee - 216,335 - - - 216,335 (e) 216,335
Niceville, Florida - 310,511 480,398 - - 310,511 480,398 790,909
Jack in the Box Restaurants:
Port Arthur, Texas - 426,378 646,811 - - 426,378 646,811 1,073,189
Japan Express Restaurant:
Lancaster, South Carolina (j- 221,251 - - - 112,840 (e) 112,840
Long John Silver's Restaurants:
Lexington, Kentucky (i) - 346,854 - - - 346,854 - 346,854
Jackson, Tennessee - 254,023 - - - 254,023 (e) 254,023
Albuquerque, New Mexico - 210,008 311,622 - - 210,008 311,622 521,630
Irving, Texas - 454,448 - - - 454,448 (e) 454,448
Neosho, Missouri - 171,859 - - - 171,859 (e) 171,859
Taco Cabana Restaurant:
Houston, Texas - 735,323 709,885 735,323 709,885 1,445,208
Houston, Texas - 643,211 572,231 - - 643,211 572,231 1,215,442
Wendy's Old Fashioned
Hamburgers Restaurants:
Arlington, Virginia - 592,917 678,893 - - 592,918 678,893 1,271,811
------------ ------------ ------------- ------- ------------ ------------ -----------
$13,356,532 $5,129,421 $3,663,040 - $13,248,122 $8,792,461 $22,040,583
============ ============ ============= ======= ============ ============ ===========
Properties the Partnership has
Invested in Under Direct
Financing Leases:
Hardee's Restaurants:
Chester, South Carolina- 140,016 587,718 - - (e) (e) (e)
Cookeville, Tennessee - - 574,511 - - - (e) (e)
Olive Branch, Mississip-i - 510,712 - - - (e) (e)
Piney Flats, Tennessee - 141,724 504,827 - - (e) (e) (e)
Japan Express Restaurant:
Lancaster, South Caroli-a (k) - 170,415 - - - (e) (e)
Long John Silver's Restaurants:
Jackson, Tennessee - - 459,725 - - - (e) (e)
Neosho, Missouri - - - 403,331 - - (e) (e)
Irving, Texas - - - 414,009 - - (e) (e)
------------ ------------ ------------- -------
$281,740 $2,807,908 $817,340 -
============ ============ ============= =======
Life on Which
Depreciation in
Date Latest Income
Accumulated of Con- Date Statement is
Depreciation struction Acquired Computed
------------ ------- ------- ------------
$291,742 1995 10/94 (h)
(d) - 05/94 (d)
(d) - 05/94 (d)
(d) - 05/94 (d)
(d) - 05/94 (d)
(d) - 05/94 (d)
(d) - 07/94 (d)
(d) - 08/94 (d)
(d) - 08/94 (d)
(d) - 12/94 (d)
(d) - 12/94 (d)
(d) - 12/94 (d)
(d) - 03/95 (d)
(d) - 03/95 (d)
262,051 1994 06/94 (b)
283,221 1994 08/94 (b)
337,713 1994 09/94 (b)
(f) 1994 04/94 (f)
191,517 1992 04/94 (b)
(f) 1992 04/94 (f)
154,929 1993 04/94 (b)
199,496 1994 09/94 (b)
(f) 1994 07/94 (f)
- 1994 06/94 (i)
(f) 1994 06/94 (f)
89,208 1976 05/95 (b)
(f) 1995 07/94 (f)
(f) 1994 07/94 (f)
49,299 1998 12/01 (b)
30,206 1998 06/02 (b)
204,661 1994 12/94 (b)
- -----------
$2,094,043
===========
(g) 1994 04/94 (g)
(f) 1992 04/94 (f)
(f) 1994 04/94 (f)
(g) 1993 04/94 (g)
(f) 1994 07/94 (f)
(f) 1994 06/94 (f)
(f) 1994 07/94 (f)
(f) 1995 07/94 (f)
CNL INCOME FUND XV, 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 $ 21,480,907 $ 1,388,398
Acquisition 1,445,207 --
Dispositions (1,797,548 ) (155,528 )
Depreciation expense -- 286,595
------------------- --------------------
Balance, December 31, 2001 21,128,566 1,519,465
Acquisition 1,215,441 --
Depreciation expense -- 309,217
-------------------- ---------------------
Balance, December 31, 2002 22,344,007 1,828,682
Loss of assets from casualty (i) (303,424 ) (50,795 )
Depreciation expense -- 316,156
-------------------- ---------------------
Balance, December 31, 2003 $ 22,040,583 $ 2,094,043
==================== =====================
(b) Depreciation expense is computed for buildings and improvements based
upon estimated lives of 30 years.
(c) As of December 31, 2003, the aggregate cost of the Partnership's wholly
owned Properties was $27,882,047 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) 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.
(f) The portion of the lease relating to the building has been recorded as
a direct financing lease. The cost of the building has been included in
net investment in direct financing leases; therefore, depreciation is
not applicable.
(g) 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
the net investment in direct financing leases; therefore, depreciation
is not applicable.
CNL INCOME FUND XV, LTD.
(A Florida Limited Partnership)
NOTES TO SCHEDUE III - REAL ESTATE AND ACCUMULATED DEPRECIATION -
CONTINUED
December 31, 2003
(h) Effective December 9, 1999, the lease for this property was terminated
resulting in the reclassification of the building portion of the lease
to an operating lease. The building was recorded at net book value and
depreciated over its remaining estimated life of approximately 25
years.
(i) Effective October 1, 1999, the lease for this property was amended,
resulting in the reclassification of the building portion of the lease
to an operating lease. The building was recorded at net book value and
depreciated over its remaining estimated life of approximately 25
years. In December 2003, this Property was destroyed by fire. As of
December 31, 2003, the total undepreciated cost of the building was
removed from the accounts; therefore, depreciation is not applicable.
(j) Effective June 11, 1998, the lease for this Property was terminated,
resulting in the reclassification of the building portion of the lease
to an operating lease. The building was recorded at net book value and
depreciated over its remaining estimated life of approximately 26
years. The undepreciated cost of the Property in Lancaster, South
Carolina was written down to its estimated net realizable value due to
an impairment in value. The Partnership recognized the impairment
during 1998, by recording a provision for write-down of assets in the
amount of $108,410 and $167,526, respectively. The impairment
represented the difference between the Property's carrying value and
the estimated net realizable value of the Property at December 31,
1998. In May 2000, the Partnership re-leased the Property to a new
tenant. In connection, the building portion of the lease was
reclassified from an operating lease to a net investment in direct
financing lease, based on the net carrying value of the building.
EXHIBIT INDEX
Exhibit Number
(a) Exhibits
3.1 Affidavit and Certificate of Limited Partnership of CNL Income
Fund XV, Ltd. (Included as Exhibit 3.2 to Registration
Statement No. 33-69968 on Form S-11 and incorporated herein by
reference.)
4.1 Affidavit and Certificate of Limited Partnership of CNL Income
Fund XV, Ltd. (Included as Exhibit 3.1 to Registration
Statement No. 33-69968 on Form S-11 and incorporated herein by
reference.)
4.2 Amended and Restated Agreement of Limited Partnership of CNL
Income Fund XV, Ltd. (Included as Exhibit 4.2 to Form 10-K
filed with the Securities and Exchange Commission on March
30,1995, incorporated herein by reference.)
10.1 Management Agreement between CNL Income Fund XV, Ltd. and CNL
Investment Company (Included as Exhibit 10.1 to Form 10-K
filed with the Securities and Exchange Commission on March 30,
1995, 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 for
Form 10-Q filed with the Securities and Exchange Commission on
August 7, 2001 and incorporated herein be reference.)
10.5 Assignment of Management Agreement from CNL APF Partners, LP
to CNL Restaurants XVIII, Inc. (Included as Exhibit 10.5 to
Form 10-Q filed with the Securities and Exchange Commission on
August 13, 2002, and incorporated herein by reference.)
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