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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to
Commission file number 0-19141
CNL INCOME FUND V, LTD.
(Exact name of registrant as specified in its charter)
Florida 59-2922869
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
450 South Orange Avenue
Orlando, Florida 32801
(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code: (407) 540-2000
Securities registered pursuant to Section 12(b) of the Act:
Title of each class: Name of exchange on which registered:
None Not Applicable
Securities registered pursuant to Section 12(g) of the Act:
Units of limited partnership interest ($500 per Unit)
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days: Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [x]
Aggregate market value of the voting stock held by nonaffiliates of the
registrant: The registrant registered an offering of 50,000 units of limited
partnership interest (the "Units") on Form S-11 under the Securities Act of
1933, as amended. Since no established market for such Units exists, there is no
market value for such Units. Each Unit was originally sold at $500 per Unit.
DOCUMENTS INCORPORATED BY REFERENCE:
None
PART I
Item 1. Business
CNL Income Fund V, Ltd. (the "Registrant" or the "Partnership") is a
limited partnership which was organized pursuant to the laws of the State of
Florida on August 17, 1988. The general partners of the Partnership are Robert
A. Bourne, James M. Seneff, Jr. and CNL Realty Corporation, a Florida
corporation (the "General Partners"). Beginning on December 16, 1988, the
Partnership offered for sale up to $25,000,000 in limited partnership interests
(the "Units") (50,000 Units at $500 per Unit) pursuant to a registration
statement on Form S-11 under the Securities Act of 1933, as amended. The
offering terminated on June 7, 1989, as of which date the maximum offering
proceeds of $25,000,000 had been received from investors who were admitted to
the Partnership as limited partners (the "Limited Partners").
The Partnership was organized to acquire both newly constructed and
existing restaurant properties, as well as properties upon which restaurants
were to be constructed (the "Properties"), which are leased primarily to
operators of national and regional fast-food and family-style restaurant chains
(the "Restaurant Chains"). Net proceeds to the Partnership from its offering of
Units, after deduction of organizational and offering expenses, totaled
$22,125,000, and were used to acquire 30 Properties, including interests in
three Properties owned by joint ventures in which the Partnership is a
co-venturer. During the year ended December 31, 1996, the Partnership sold its
Property in St. Cloud, Florida, to the tenant of the Property and accepted cash
and a promissory note for the Property. During the year ended December 31, 1997,
the Partnership sold its Properties in Franklin and Smyrna, Tennessee; Salem,
New Hampshire; Port St. Lucie and Tampa, Florida; and Richmond, Indiana. The
Partnership reinvested a portion of these net sales proceeds in a Property in
Houston, Texas and a Property in Sandy, Utah. In addition, the Partnership
reinvested a portion of the net sales proceeds in a Property in Mesa, Arizona
and a Property in Vancouver, Washington, as tenants-in-common, with affiliates
of the General Partners. During the year ended December 31 1998, the Partnership
also sold its Properties in Port Orange, Florida and Tyler, Texas. The
Partnership used a portion of the sales proceeds to enter into a joint venture
arrangement, RTO Joint Venture, with an affiliate of the General Partners.
During the year ended December 31, 1999, the Partnership also sold its
Properties in Ithaca and Endicott, New York. The Partnership used the majority
of the net sales proceeds received from the sale of the Property in Ithaca, New
York to enter into a joint venture arrangement, Duluth Joint Venture, with
affiliates of the Partnership to construct and hold one Property. In addition,
during 1999, Halls Joint Venture, in which the Partnership owned a 48.9%
interest, sold its Property. During the year ended December 31, 2000, the
Partnership sold its interest in Duluth Joint Venture to an affiliate of the
General Partners and sold its Property in Belding, Michigan. In addition, during
2000, the Partnership and the joint venture partner liquidated Halls Joint
Venture and the Partnership received its pro rata share of the liquidation
proceeds from the joint venture. During the year ended December 31, 2000, the
Partnership also acquired the remaining interest in CNL/Longacre Joint Venture
from its joint venture partner and liquidated the joint venture. During the year
ended December 31, 2001, the Partnership sold its Property in Daleville,
Indiana.
As a result of the above transactions, as of December 31, 2001, the
Partnership owned 20 Properties. The 20 Properties include interests in two
Properties owned by joint ventures in which the Partnership is a co-venturer and
two Properties owned with affiliates of the General Partners as
tenants-in-common. In January 2002, the Partnership sold its Properties in
Huron, Ohio, West Lebanon, New Hampshire and Bountiful, Utah. 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 will hold its Properties until the General Partners
determine that the sale or other disposition of the Properties is advantageous
in view of the Partnership's investment objectives. In deciding whether to sell
Properties, the General Partners will consider factors such as potential capital
appreciation, net cash flow and federal income tax considerations. Certain
lessees also have been granted options to purchase Properties, generally at the
Property's then fair market value after a specified portion of the lease term
has elapsed. The Partnership has no obligation to sell all or any portion of a
Property at any particular time, except as may be required under property or
joint venture purchase options granted to certain lessees.
On March 11, 1999, the Partnership entered into an Agreement and Plan
of Merger with CNL American Properties Fund, Inc. ("APF"), pursuant to which the
Partnership would be merged with and into a subsidiary of APF (the " Merger").
APF is a real estate investment trust whose primary business is the ownership of
restaurant properties leased on a long-term, "triple-net" basis to operators of
national and regional restaurant chains. Under the Agreement and Plan of Merger,
APF was to issue shares of its common stock as consideration for the Merger. On
March 1, 2000, the General Partners and APF announced that they had mutually
agreed to terminate the Agreement and Plan of Merger entered into in March 1999.
The agreement to terminate the Agreement and Plan of Merger was based, in large
part, on the General Partners' concern that, in light of market conditions
relating to publicly traded real estate investment trusts, the value of the
transaction had diminished. As a result of such diminishment, the General
Partners' ability to unequivocally recommend voting for the transaction, in the
exercise of their fiduciary duties, had become questionable. The General
Partners are continuing to evaluate strategic alternatives for the Partnership,
including alternatives to provide liquidity to the Limited Partners.
Leases
Although there are variations in the specific terms of the leases, the
following is a summarized description of the general structure of the
Partnership's leases. The leases of the Properties owned by the Partnership and
the joint ventures in which the Partnership is a co-venturer provide for initial
terms, ranging from 10 to 20 years (the average being 18 years) and expire
between 2004 and 2021. The leases are generally on a triple-net basis, with the
lessees responsible for all repairs and maintenance, property taxes, insurance
and utilities. The leases of the Properties provide for minimum base annual
rental payments (payable in monthly installments) ranging from approximately
$42,000 to $245,800. Generally, the leases provide for percentage rent, based on
sales in excess of a specified amount, to be paid annually. In addition, a
majority of the leases provide that, commencing in the sixth lease year, the
percentage rent will be an amount equal to the greater of (i) the percentage
rent calculated under the lease formula or (ii) a specified percentage (ranging
from one-fourth to five percent) of the purchase price paid by the Partnership
for the Property.
Generally, the leases of the Properties provide for two to four
five-year renewal options subject to the same terms and conditions as the
initial lease. Lessees of 15 of the Partnership's 20 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 also generally provide that, in the event the Partnership
wishes to sell the Property subject to that lease, the Partnership first must
offer the lessee the right to purchase the Property on the same terms and
conditions, and for the same price, as any offer which the Partnership has
received for the sale of the Property.
In February 2001, the Partnership accepted $150,000 as satisfaction of
outstanding receivable amounts and consideration for releasing the tenant of the
Property in Huron, Ohio from its obligation under its lease. The Partnership
sold the Property to an unrelated third party in January 2002.
In addition, in June 2001, the lease for the Property in Livingston,
Texas, which was scheduled to expire during 2002, was terminated by the
Partnership and the tenant. The Partnership re-leased the Property to a new
tenant with terms substantially the same as the Partnership's leases.
Major Tenants
During 2001, two lessees, Golden Corral Corporation and the Slaymaker
Group, Inc. each contributed more than 10% of the Partnership's total rental,
earned, and mortgage interest income (including the Partnership's share of the
rental and earned income from Properties owned by unconsolidated joint ventures
and Properties owned with affiliates of the General Partners as
tenants-in-common). As of December 31, 2001, Golden Corral Corporation was the
lessee under a lease relating to one Property and Slaymaker Group, Inc. was the
lessee under a lease relating to one Property. It is anticipated that, based on
the minimum rental payments required by the leases, Slaymaker Group, Inc. will
continue to contribute more than 10% of the Partnership's total rental and
earned income in 2002. In addition, three Restaurant Chains, Golden Corral, Taco
Bell, and Tony Roma's Famous For Ribs Restaurants, each accounted for more than
10% of the Partnership's total rental, earned and mortgage interest income in
2001 (including the Partnership's share of the rental income from Properties
owned by unconsolidated joint ventures and Properties owned with affiliates of
the General Partners as tenants-in-common). It is anticipated that these three
Restaurant Chains each will continue to account for more than 10% of the total
rental and earned income to which the Partnership is entitled under the terms of
the leases. Any failure of these lessees or these Restaurant Chains could
materially affect the Partnership's income if the Partnership is not able to
re-lease the Properties in a timely manner. No single tenant or group of
affiliated tenants lease Properties with an aggregate carrying value in excess
of 20% of the total assets of the Partnership.
Joint Venture and Tenancy in Common Arrangements
The Partnership entered into a joint venture arrangement, CNL/Longacre
Joint Venture, with an unaffiliated entity, to purchase and hold one Property.
During 2000, the Partnership acquired the remaining interest in CNL/Longacre
Joint Venture from its joint venture partner and liquidated the joint venture.
The Partnership has also entered into two separate joint venture
arrangements: Cocoa Joint Venture with CNL Income Fund IV, Ltd., and RTO Joint
Venture with CNL Income Fund III, Ltd. Each joint venture was formed to purchase
and hold one Property. Each of the CNL Income Funds is an affiliate of the
General Partners and is a limited partnership organized pursuant to the laws of
the state of Florida.
Each joint venture arrangement provides for the Partnership and its
joint venture partners to share in all costs and benefits associated with the
joint venture in proportion to each partner's percentage interest in the joint
venture. The Partnership has a 43% interest in Cocoa Joint Venture and a 53.12%
interest in RTO Joint Venture. The Partnership and its joint venture partners
are jointly and severally liable for all debts, obligations, and other
liabilities of the joint ventures.
Each joint venture has an initial term of 15 to 20 years and, after the
expiration of the initial term, continues in existence from year to year unless
terminated at the option of either joint venturer or unless terminated 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.
The Partnership shares management control equally with affiliates of
the General Partners for Cocoa Joint Venture, and RTO Joint Venture. The joint
venture agreements restrict each venturer's ability to sell, transfer or assign
its joint venture interest without first offering it for sale to its joint
venture partner, either upon such terms and conditions as to which the venturers
may agree or, in the event the venturers cannot agree, on the same terms and
conditions as any offer from a third party to purchase such joint venture
interest.
Net cash flow from operations of Cocoa Joint Venture and RTO Joint
Venture is distributed 43% and 53.12%, respectively, to the Partnership and the
balance is distributed to each of the other joint venture partners in accordance
with its percentage ownership in the respective 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.
In June 1999, Halls Joint Venture, in which the Partnership owned a
48.9% interest, sold its Property to the tenant in accordance with the purchase
option under the lease agreement. During 2000, the Partnership and the joint
venture partner liquidated Halls Joint Venture and the Partnership received its
pro rata share of the liquidation proceeds from the joint venture.
In addition, in December 1999, the Partnership entered into a joint
venture arrangement, Duluth Joint Venture, with CNL Income Fund VII, Ltd., CNL
Income Fund XIV, Ltd., and CNL Income Fund XV, Ltd., affiliates of the General
Partners, to construct and hold one Property. Each of the affiliates is a
limited partnership organized pursuant to the laws of the state of Florida. In
October 2000, the Partnership sold its 12% interest in Duluth Joint Venture, to
CNL Income Fund VII, Ltd.
In addition to the above joint venture arrangements, in 1997, the
Partnership entered into two separate agreements, with affiliates of the General
Partners to purchase and hold the following Properties: a Property in Mesa,
Arizona, as tenants-in-common, with CNL Income Fund II, Ltd., and a Property in
Vancouver, Washington, as tenants-in-common, with CNL Income Fund, Ltd., CNL
Income Fund II, Ltd., and CNL Income Fund VI, Ltd. The affiliates are limited
partnerships organized pursuant to the laws of the state of Florida. The
agreements provide for the Partnership and the affiliates to share in the
profits and losses of the Properties in proportion to each party's percentage
interest. The Partnership owns a 42.09% and a 27.78% interest in the Property in
Mesa, Arizona and the Property in Vancouver, Washington, respectively. The
tenancy in common agreement restricts each party's ability to sell, transfer, or
assign its interest in the tenancy in common's Property without first offering
it for sale to the remaining party of the agreement.
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
CNL APF Partners, LP, an affiliate of the General Partners, provides
certain services relating to management of the Partnership and its Properties
pursuant to a management agreement. Under this agreement, CNL APF Partners, LP
(the "Advisor") is responsible for collecting rental payments, inspecting the
Properties and the tenants' books and records, assisting the Partnership in
responding to tenant inquiries and notices and providing information to the
Partnership about the status of the leases and the Properties. The Advisor also
assists the General Partners in negotiating the leases. For these services, the
Partnership has agreed to pay the Advisor an annual fee of one percent of the
sum of gross operating revenues from Properties wholly owned by the Partnership
plus the Partnership's allocable share of gross revenues of joint ventures in
which the Partnership is a co-venturer, but not in excess of competitive fees
for comparable services. Under the management agreement, the management fee is
subordinated to receipt by the Limited Partners of an aggregate, ten percent,
cumulative, noncompounded annual return on their adjusted capital contributions
(the "10% Preferred Return"), calculated in accordance with the Partnership's
limited partnership agreement (the "Partnership Agreement").
During 2000, CNL Fund Advisors, Inc. assigned its rights in, and its
obligations under, the management agreement with the Partnership to CNL APF
Partners, LP. All of the terms and conditions of the management agreement,
including the payment of fees, as described above, remain unchanged.
The management agreement continues until the Partnership no longer owns
an interest in any Properties unless terminated at an earlier date upon 60 days'
prior notice by either party.
Competition
The fast-food and family-style restaurant business is characterized by
intense competition. The restaurants on the Partnership's Properties compete
with independently owned restaurants, restaurants which are part of local or
regional chains, and restaurants in other well-known national chains, including
those offering different types of food and service.
Employees
The Partnership has no employees. The officers of CNL Realty
Corporation and the officers and employees of APF, the parent company of the
Advisor perform certain services for the Partnership. In addition, the General
Partners have available to them the resources and expertise of the officers and
employees of CNL Financial Group, Inc., a diversified real estate company, and
its affiliates, who may also perform certain services for the Partnership.
Item 2. Properties
As of December 31, 2001, the Partnership owned 20 Properties. Of the 20
Properties, 16 are owned by the Partnership in fee simple, two are owned through
joint venture arrangements and two are owned through tenancy in common
arrangements. See Item 1. Business - Joint Venture and Tenancy in Common
Arrangements. The Partnership is not permitted to encumber its Properties under
the terms of its partnership agreement. Reference is made to the Schedule of
Real Estate and Accumulated Depreciation for a listing of the Properties and
their respective costs, including acquisition fees and certain acquisition
expenses.
Description of Properties
Land. The Partnership's Property sites range from approximately 19,600
to 135,000 square feet depending upon building size and local demographic
factors. Sites purchased by the Partnership are in locations zoned for
commercial use which have been reviewed for traffic patterns and volume.
The following table lists the Properties owned by the Partnership as of
December 31, 2001 by state. More detailed information regarding the location of
the Properties is contained in the Schedule of Real Estate and Accumulated
Depreciation.
State Number of Properties
Arizona 1
Florida 3
Georgia 1
Illinois 1
Indiana 2
Michigan 1
New Hampshire 1
Ohio 2
Texas 4
Utah 2
Washington 2
-----
TOTAL PROPERTIES 20
=====
Buildings. Generally, each of the Properties owned by the Partnership
includes a building that is one of a Restaurant Chain's approved designs. The
buildings generally are rectangular and are constructed from various
combinations of stucco, steel, wood, brick and tile. Building sizes range from
approximately 1,700 to 10,100 square feet. All buildings on Properties acquired
by the Partnership are freestanding and surrounded by paved parking areas.
Buildings are suitable for conversion to various uses, although modifications
may be required prior to use for other than restaurant operations. As of
December 31, 2001, the Partnership had no plans for renovation of the
Properties. Depreciation expense is computed for buildings and improvements
using the straight line method using depreciable lives of 31.5 and 39 years for
federal income tax purposes.
As of December 31, 2001, the aggregate cost of the Properties owned by
the Partnership and unconsolidated joint ventures (including Properties owned
through tenancy-in-common arrangements) for federal income tax purposes was
$12,376,486 and $5,175,275, respectively.
The following table lists the Properties owned by the Partnership as of
December 31, 2001 by Restaurant Chain.
Restaurant Chain Number of Properties
Arby's 2
Burger King 1
Captain D's 2
Chevy's Fresh Mex 1
Del Taco 1
Denny's 2
Golden Corral 2
IHOP 1
Market Street Buffet & Bakery 1
Pizza Hut 1
Ruby Tuesday 1
Taco Bell 2
Tony Roma's 1
Waffle House 1
Wendy's 1
-----
TOTAL PROPERTIES 20
=====
The General Partners consider the Properties to be well-maintained and
sufficient for the Partnership's operations.
The General Partners believe that the Properties are adequately covered
by insurance. In addition, the General Partners have obtained contingent
liability and property coverage for the Partnership. This insurance is intended
to reduce the Partnership's exposure in the unlikely event a tenant's insurance
policy lapses or is insufficient to cover a claim relating to the Property.
Leases. The Partnership leases the Properties to operators of selected
national and regional fast-food restaurant chains. The leases are generally on a
long-term "triple net" basis, meaning that the tenant is responsible for
repairs, maintenance, property taxes, utilities and insurance. Generally, a
lessee is required, under the terms of its lease agreement, to make such capital
expenditures as may be reasonably necessary to refurbish buildings, premises,
signs and equipment so as to comply with the lessee's obligations, if
applicable, under the franchise agreement to reflect the current commercial
image of its Restaurant Chain. These capital expenditures are required to be
paid by the lessee during the term of the lease. The terms of the leases of the
Properties owned by the Partnership are described in Item 1. Business - Leases.
As of December 31, 2001, 2000, 1999, 1998, and 1997, the Properties
were 90%, 81%, 87%, 88%, and 93% occupied, respectively. The following is a
schedule of the average rent per Property for the years ended December 31:
2001 2000 1999 1998 1997
------------- -------------- ------------- -------------- ---------------
Rental Revenues (1)(2) $ 1,476,917 $ 1,633,709 $ 1,721,252 $ 1,710,326 $ 1,804,300
Properties (2) 18 18 20 23 24
Average Rent per
Property $ 82,051 $ 90,762 $ 86,063 $ 74,362 $ 75,179
(1) Rental income includes the Partnership's share of rental income from
the Properties owned through joint venture arrangements and the
Properties owned through tenancy in common arrangements. Rental
revenues have been adjusted, as applicable, for any amounts for which
the Partnership has established an allowance for doubtful accounts.
(2) Excludes Properties that were vacant at December 31 and that did not
generate rental revenues.
The following is a schedule of lease expirations for leases in place as
of December 31, 2001 for each of the next ten years and thereafter.
Percentage of
Expiration Number Annual Rental Gross Annual
Year of Leases Revenues (2) Rental Income
----------------- ---------------- ----------------- --------------------------
2002 -- $ -- --
2003 -- -- --
2004 1 132,151 9.61%
2005 -- -- --
2006 -- -- --
2007 -- -- --
2008 5 261,519 19.02%
2009 3 272,594 19.83%
2010 -- -- --
2011 -- -- --
Thereafter 8 708,585 51.54%
---------- ----------------- -------------
Total (1) 17 $ 1,374,849 100.00%
========== ================= =============
(1) Excludes two Properties which were vacant at December 31, 2001 and one
Property that was sold in January 2002.
Leases with Major Tenants. The terms of each of the leases with the
Partnership's major tenants as of December 31, 2001 (see Item 1. Business -Major
Tenants), are substantially the same as those described in Item 1. Business -
Leases.
Slaymaker Group, Inc., leases one Tony Roma's restaurant pursuant to
one lease, with an initial term of 20 years (expiring in 2017). The minimum base
annual rent for the lease is approximately $194,200.
Golden Corral Corporation leases one restaurant pursuant to one leases
with an initial term of 15 years (expiring in 2004). The minimum base annual
rent for the lease is approximately $132,100.
Item 3. Legal Proceedings
Neither the Partnership, nor its General Partners or any affiliate of
the General Partners, nor any of their respective Properties, is a party to, or
subject to any material pending legal proceedings.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
(a) As of March 15, 2002, there were 2,466 holders of record of the
Units. There is no public trading market for the Units, and it is not
anticipated that a public market for the Units will develop. During 2001,
Limited Partners who wished to sell their Units may have offered the Units for
sale pursuant to the Partnership's distribution reinvestment plan (the "Plan"),
and Limited Partners who wished to have their distributions used to acquire
additional Units (to the extent Units were available for purchase), may have
done so pursuant to such Plan. The General Partners have the right to prohibit
transfers of Units. From inception through December 31, 2001, the price paid for
any Unit transferred pursuant to the Plan ranged from $369 to $475 per Unit. The
price paid for any Unit transferred other than pursuant to the Plan was subject
to negotiation by the purchaser and the selling Limited Partner. The Partnership
will not redeem or repurchase Units.
The following table reflects, for each calendar quarter, the high, low
and average sales prices for transfers of Units during 2001 and 2000 other than
pursuant to the Plan, net of commissions.
2001 (1) 2000 (1)
------------------------------------ ----------------------------------
High Low Average High Low Average
--------- ---------- ---------- --------- -------- -----------
First Quarter $ 320 $ 170 $ 289 (2) (2) (2)
Second Quarter 276 250 265 $ 335 $ 305 $ 328
Third Quarter 284 284 284 310 310 310
Fourth Quarter 235 262 260 306 222 263
(1) A total of 218 and 154 Units were transferred other than pursuant to
the Plan for the years ended December 31, 2001 and 2000, respectively.
(2) No transfer of Units took place during the quarter other than pursuant
to the Plan.
The capital contribution per Unit was $500. All cash available for
distribution will be distributed to the partners pursuant to the provisions of
the Partnership Agreement.
For the years ended December 31, 2001 and 2000, the Partnership
declared cash distributions of $3,471,032, and $2,375,000, respectively, to the
Limited Partners. Distributions during 2001 included a special distribution of
$1,750,000 as a result of the distribution of sales proceeds from the sale of
the Property in Daleville, Indiana and the distribution of amounts collected
from the promissory notes related to the 1995 and 1996 sales of the Properties
in Myrtle Beach, South Carolina and St. Cloud, Florida, respectively.
Distributions during 2000 included a special distribution of $500,000, as a
result of the distribution of a portion of the amount collected from the
mortgage note receivable relating to the 1996 sale of the Property in St. Cloud,
Florida. The special distribution in 2001 was effectively a return of a portion
of the Limited Partners' investment; although, in accordance with the
Partnership agreement, $1,336,152 was applied towards the 10% Preferred Return,
on a cummulative basis, and the balance of $413,848 was treated as a return of
capital for purposes of calculating the 10% Preferred Return. As a result of the
return of capital, the amount of the Limited Partners' invested capital
contributions (which is generally the Limited Partners' capital contributions,
less distributions from the sale of Properties that are considered to be a
return of capital) was decreased; therefore the amount of the Limited Partners'
invested capital contributions on which the 10% Preferred Return is calculated
was lowered accordingly. The special distribution in 2000 was applied toward the
Limited Partners' cumulative 10% Preferred Return. As a result of the sales of
Properties during 2001 and 2000, the Partnership's total revenue was reduced
during 2001 and 2000 and is expected to remain reduced in subsequent years. The
decrease in Partnership revenues, combined with the fact that a significant
portion of the Partnership's expenses are fixed in nature, resulted in a
decrease in cash distributions to the Limited Partners commencing during the
quarter ended September 30, 2000 and March 2001. No distributions have been made
to the General Partners to date. As indicated in the chart below, these
distributions were declared at the close of each of the Partnership's calendar
quarters. These amounts include monthly distributions made in arrears for the
Limited Partners electing to receive such distributions on this basis.
Quarter Ended 2001 2000
-------------------- --------------- ----------------
March 31 $ 2,180,258 $ 500,000
June 30 430,258 500,000
September 30 430,258 937,500
December 31 430,258 437,500
The Partnership intends to continue to make distributions of cash
available for distribution to the limited Partners on a quarterly basis,
although some Limited Partners, in accordance with their election, receive
monthly distributions, for an annual fee.
(b) Not applicable.
Item 6. Selected Financial Data
2001 2000 1999 1998 1997
-------------- --------------- -------------- -------------- ---------------
Year ended December 31:
Revenues (1) $1,565,385 $1,676,183 $1,956,691 $2,024,231 $2,147,770
Net income (2) 945,973 969,570 1,435,646 1,544,895 1,731,915
Cash distributions
declared (3) 3,471,032 2,375,000 2,000,000 3,838,327 2,300,000
Net income per Unit (2) 18.92 19.39 28.51 30.70 34.40
Cash distributions
declared per Unit (3) 69.42 47.50 40.00 76.77 46.00
At December 31:
Total assets $12,306,054 $14,848,256 $16,680,780 $17,135,485 $19,718,430
Partners' capital 11,732,259 14,257,318 15,662,748 16,227,102 18,520,534
(1) Revenues include equity in earnings of unconsolidated joint ventures
and minority interest in loss of the consolidated joint venture. In
addition, revenues for the year ended December 31, 2001, includes lease
termination income of $13,373.
(2) Net income for the year ended December 31, 2001 includes $171,130 from
gains on sale of assets and $291,369 for provision for write-down of
assets. Net income for the year ended December 31, 2000 includes
$15,088 from gains on sales of assets, $9,763 from gain on dissolution
of consolidated joint venture, and provision for write-down of assets
of $142,373. Net income for the year ended December 31, 1999 includes
$396,066 from gains on the sales of assets and provision for write-down
of assets of $308,310. Net income for the year ended December 31, 1998,
includes $469,613 from gains on the sales of assets, $25,500 for a loss
on sale of assets and $403,157 for a provision for write-down of
assets. Net income for the year ended December 31, 1997, includes
$550,878 from gains on the sales of assets, $141,567 from a loss on the
sale of assets and $250,694 for a provision for write-down of assets.
(3) Distributions for the year ended December 31, 2001 included a special
distribution to the Limited Partners of $1,750,000 as a result of the
distribution of net sales proceeds from 2001 and 2000 the collections
of the mortgage notes relating to the 1995 and 1996 sale of Properties.
Distributions for the year ended December 31, 2000 include a special
distribution to the Limited Partners of $500,000 as a result of the
distribution of net sales proceeds from the sales of several Properties
and the proceeds from the payoff of the mortgage note relating to the
1996 sale of a Property. Distributions for the year ended December 31,
1998 include a special distribution to the Limited Partners of
$1,838,327 as a result of the distribution of net sales proceeds from
the sales of Properties.
The above selected financial data should be read in conjunction with
the financial statements and related notes contained in Item 8 hereof.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The Partnership was organized on August 17, 1988, to acquire for cash,
either directly or through joint venture arrangements, both newly constructed
and existing restaurant Properties, as well as land upon which restaurant
Properties were to be constructed, which are leased primarily to operators of
selected national and regional fast-food and family-style Restaurant Chains. The
leases are generally triple-net leases, with the lessee generally responsible
for all repairs and maintenance, property taxes, insurance and utilities. As of
December 31, 2001, the Partnership owned 20 Properties, either directly or
indirectly through joint venture or tenancy in common arrangements.
Capital Resources
During the years ended December 31, 2001, 2000, and 1999, the
Partnership generated cash from operations (which includes cash received from
tenants, distributions from joint ventures and interest received, less cash paid
for expenses) of $1,365,532, $904,073, and $1,595,565, respectively. The
increase in cash from operations during 2001 and the decrease in 2000, each as
compared to the previous year, was primarily a result of changes in income and
expenses as discussed in "Results of Operations" below and changes in the
Partnership's working capital during each of the respective years.
Other sources and uses of capital included the following during the
years ended December 31, 2001, 2000, and 1999.
The Partnership had a mortgage note receivable relating to a sale in
1995 of a Property in Myrtle Beach, South Carolina. In February 2001, the
Partnership received a balloon payment of $999,083 which included the
outstanding principal balance and $12,084 of accrued interest and in connection
therewith recognized the remaining gain of $136,036 relating to this Property.
During 2001, the Partnership distributed the amount collected as a special
distribution to the Limited Partners. The Partnership distributed amounts
sufficient to enable the Limited Partners to pay federal and state income taxes,
if any (at a level reasonably assumed by the General Partners), resulting from
the sale.
The Partnership had a mortgage note receivable relating to a sale in
1996 of a Property in St. Cloud, Florida. During the year ended December 31,
1999, the Partnership collected the outstanding balance of $1,043,770 relating
to the promissory note and in connection therewith, recognized the remaining
gain of $181,308 relating to this Property. During 2000, the Partnership
distributed $500,000 of the amount collected as a special distribution to the
Limited Partners. During 2001, the Partnership distributed the majority of the
remaining net sales proceeds as a special distribution to the Limited Partners.
The Partnership distributed amounts sufficient to enable the Limited Partners to
pay federal and state income taxes, if any (at a level reasonably assumed by the
General Partners), resulting from the sale.
In June 1997, the Partnership terminated the leases with the tenant of
the Properties in Connorsville and Richmond, Indiana. In connection therewith,
the Partnership accepted a promissory note from the former tenant for $35,297
for amounts relating to past due real estate taxes. During 2001, the Partnership
collected the outstanding balance of $4,401 relating to this promissory note.
In addition, in March 1999, the Partnership sold its Properties in
Endicott and Ithaca, New York to the tenant for a total of $1,125,000 and
received net sales proceeds of $1,113,759 resulting in a total gain of $213,503.
In December 1999, the Partnership reinvested the net sales proceeds received
from the sale of the Property in Ithaca, New York, in a joint venture
arrangement, as described below. The Partnership used the net sales proceeds
from the sale of the Property in Endicott, New York, to pay liabilities of the
Partnership, including quarterly distributions to the Limited Partners. The
Partnership distributed amounts sufficient to enable the Limited Partners to pay
federal and state income taxes, if any (at a level reasonably assumed by the
General Partners), resulting from the sales.
In June 1999, Halls Joint Venture, in which the Partnership owned a
48.9% interest, sold its Property to the tenant in accordance with the purchase
option under its lease agreement for $891,915, resulting in a gain to the joint
venture of approximately $239,300. During 2000, the Partnership and the joint
venture partner liquidated Halls Joint Venture and the Partnership received its
pro rata share of the liquidation proceeds. The Partnership used the liquidation
proceeds to pay liabilities of the Partnership including quarterly distributions
to the Limited Partners.
In addition, in December 1999, the Partnership reinvested the net sales
proceeds from the sale of the Property in Ithaca, New York, as described above,
in a joint venture arrangement, Duluth Joint Venture, with CNL Income Fund VII,
Ltd., CNL Income Fund XIV, Ltd., and CNL Income Fund XV, Ltd., each a Florida
limited partnership and an affiliate of the General Partners, to construct and
hold one restaurant Property. During 2000 and 1999, the Partnership contributed
$91,851 and $129,979, respectively, to Duluth Joint Venture to pay for
construction costs. In October 2000, the Partnership sold its 12% interest in
Duluth Joint Venture to CNL Income Fund VII, Ltd. for $221,830. The proceeds
from the sale exceeded the basis of the interest in this joint venture resulting
in a gain of $13,819, as described below in "Results of Operations." The
Partnership distributed amounts sufficient to enable the Limited Partners to pay
federal and state income taxes, if any, (at a level reasonably assumed by the
General Partners), resulting from the sale.
In March 2000, the Partnership sold its Property in Belding, Michigan,
to an unrelated third party, for $135,000 and received net sales proceeds of
approximately $126,900. Due to the fact that as of December 31, 1999, the
Partnership had recorded a provision for write-down of assets of approximately
$446,100, no gain or loss was recorded during 2000. In connection with the sale,
the Partnership incurred a deferred, real estate disposition fee of $4,050.
Payment of the real estate disposition fee is subordinated to receipt by the
Limited Partners of the cumulative 10% Preferred Return, plus their adjusted
capital contributions. The Partnership distributed the majority of the net sales
proceeds to the Limited Partners. The Partnership distributed amounts sufficient
to enable the Limited partners to pay federal and state income taxes, if any (at
a level reasonably assumed by the General Partners), resulting from the sale.
In October 2000, the Partnership acquired the remaining 33.5% interest
in CNL/Longacre Joint Venture from its joint venture partner in accordance with
the terms of the joint venture agreement. As of September 30, 2000, the
Partnership had recorded a provision for write-down of assets of $32,454, which
represented the difference between the net carrying value of the joint venture
and the General Partners' estimated net realizable value of the joint venture.
In October 2000, the Partnership liquidated the joint venture and recorded a
gain on dissolution of $9,763.
In March 2001, the Partnership sold its Property in Daleville, Indiana
to an unrelated third party and received net sales proceeds of $300,386
resulting in a gain of $35,096. The Partnership had previously recorded
provisions for write-down of assets relating to this Property. In connection
with the sale, the Partnership incurred a deferred, real estate disposition fee
of $9,750. Payment of the real estate disposition fee is subordinated to receipt
by the Limited Partners of the cummulative 10% Preferred Return, plus their
adjusted capital contributions. The Partnership distributed the net sales
proceeds to the Limited Partners, to pay federal and state income taxes, if any
(at a level reasonably assumed by the General Partners), resulting from the
sale.
None of the Properties owned by the Partnership, or the joint ventures
or tenancy in common arrangements in which the Partnership owns an interest, is
or may be encumbered. Under its partnership agreement, the Partnership is
prohibited from borrowing for any purpose; provided, however, that the General
Partners or their affiliates are entitled to reimbursement, at cost, for actual
expenses incurred by the General Partners or their affiliates on behalf of the
Partnership. Affiliates of the General Partners from time to time incur certain
operating expenses on behalf of the Partnership for which the Partnership
reimburses the affiliates without interest.
Currently, rental income from the Partnership's Properties, any net
sales proceeds from the sale of Properties, and any amounts collected from the
promissory note pending distributions to the Limited Partners or use for the
payment of Partnership liabilities, are invested in money market accounts or
other short-term, highly liquid investments such as demand deposit accounts at
commercial banks, money market accounts and certificates of deposit with less
than a 90-day maturity date. At December 31, 2001, the Partnership had $313,783
invested in such short-term investments as compared to $1,137,958 at December
31, 2000. The decrease in cash and cash equivalents during 2001 as compared to
2000 was primarily attributable to a special distribution to the Limited
Partners of the net sales proceeds from the sale of a Property and a portion of
the payoff of the mortgage note relating to the 1996 sale of the Property in St.
Cloud, Florida and the payoff of the mortgage note relating to the 1995 sale of
the Property in Myrtle Beach, South Carolina. As of December 31, 2001, the
average interest rate earned on the rental income deposited in demand deposit
accounts at commercial banks was approximately 4% annually. The funds remaining
at December 31, 2001, after payment of distributions and other liabilities, will
be used to meet the Partnership's working capital needs.
In January 2002, the Partnership sold its Properties in Huron, Ohio and
West Lebanon, New Hampshire to separate unrelated third parties for $210,000 and
$675,000, respectively and received net sales proceeds of approximately $202,000
and $634,300, respectively, resulting in a gain of approximately $122,000
relating to the Property in West Lebanon, New Hampshire for which the
Partnership had previously recorded a provision of write-down of assets. Due to
the fact that the Partnership had previously recorded a provision for write-down
of assets related to the Property in Huron, Ohio, no gain or loss was recorded
on the sale.
In addition, in January 2002, the Partnership sold its Property in
Bountiful, Utah to the tenant in accordance with the option under the lease for
$1,046,000 and received net sales proceeds of approximately $1,008,600 resulting
in a gain of $449,700. The Partnership intends to use the proceeds received from
these sales for distributions to the Limited Partners and to pay Partnership
liabilities. The Partnership will distribute amounts sufficient to enable the
Limited Partners to pay federal and state income taxes, if any (at a level
reasonably assumed by the General Partners), resulting from the sales.
Short-Term Liquidity
The Partnership's short-term liquidity requirements consist primarily
of the operating expenses of the Partnership.
The Partnership's investment strategy of acquiring Properties for cash
and generally leasing them under triple-net leases to operators who generally
meet specified financial standards minimizes the Partnership's operating
expenses. The General Partners believe that the leases will continue to generate
cash flow in excess of operating expenses.
Due to low operating expenses and ongoing cash flow, the General
Partners do not believe that working capital reserves are necessary at this
time. In addition, because the leases of the Partnership's Properties are
generally on a triple-net basis, it is not anticipated that a permanent reserve
for maintenance and repairs will be established at this time. To the extent,
however, that the Partnership has insufficient funds for such purposes, the
General Partners will contribute to the Partnership an aggregate amount of up to
one percent of the offering proceeds for maintenance and repairs.
The Partnership generally distributes cash from operations remaining
after the payment of the operating expenses of the Partnership, to the extent
that the General Partners determine that such funds are available for
distribution. Based on current and anticipated future cash from operations, and
for the years ended December 31, 2001 and 2000, a portion of the sales proceeds
received from the sales of the Properties, and collection of amounts due under
two promissory notes, the Partnership declared distributions to the Limited
Partners of $3,471,032, $2,375,000, and $2,000,000, for the years ended December
31, 2001, 2000, and 1999, respectively. This represents distributions of $69.42,
$47.50, and $40.00 per Unit for the years ended December 31, 2001, 2000, and
1999, respectively. Distributions during 2001 included a special distribution of
$1,750,000 as a result of the distribution of sales proceeds from the sale of
the Property in Daleville, Indiana and the distribution of amounts collected
from the promissory notes related to the 1995 and 1996 sales of the Properties
in Myrtle Beach, South Carolina and St. Cloud, Florida, respectively. The
special distribution in 2001 was effectively a return of a portion of the
Limited Partners' investment; although, in accordance with the Partnership
agreement, $1,336,152 was applied towards the 10% Preferred Return, on a
cummulative basis, and the balance of $413,848 was treated as a return of
capital for purposes of calculating the 10% Preferred Return. As a result of the
return of capital, the amount of the Limited Partners' invested capital
contributions (which is generally the Limited Partners' capital contributions,
less distributions from the sale of Properties that are considered to be a
return of capital) was decreased; therefore the amount of the Limited Partners'
invested capital contributions on which the 10% Preferred Return is calculated
was lowered accordingly.
Distributions during 2000 included a special distribution to the
Limited Partners of $500,000 as a result of the distribution of a portion of the
proceeds from the payoff of the mortgage note related to the 1996 sale of a
Property in St. Cloud, Florida. The special distribution in 2000 was applied
toward the Limited Partners' cummulative 10% Preferred Return. The reduced
number of Properties for which the Partnership receives rental payments reduced
the Partnership's revenues. The decrease in Partnership revenues, combined with
the fact that a significant portion of the Partnership's expenses are fixed in
nature, resulted in a decrease in cash distributions to the Limited Partners
commencing in September 2000. The Partnership intends to continue to make
distributions of cash available for distribution to the Limited Partners on a
quarterly basis.
During 2000, the General Partners waived their right to receive future
distributions from the Partnership, including both distributions of operating
cash flow and distributions of liquidation proceeds, to the extent that the
cumulative amount of such distributions would exceed the balance in the General
Partners' capital account as of December 31, 1999. Accordingly, the General
Partners were not allocated any net income and did not receive any distributions
during the year ended December 31, 2001 and 2000.
As of December 31, 2001 and 2000, the Partnership owed $4,885 and
$3,185, respectively, to affiliates for accounting and administrative services.
As of March 15, 2002, the Partnership had reimbursed the affiliates all such
amounts. In addition, during 2001 and 2000, the Partnership incurred $9,750 and
$4,050, respectively, in real estate disposition fees due to an affiliate as a
result of its services in connection with the sale of the Properties in
Daleville, Indiana and Belding, Michigan. As of December 31, 2001 and 2000, the
Partnership owed $113,700 and $103,950, respectively, to affiliates for real
estate disposition fees. The payment of such fees is deferred until the Limited
Partners have received the sum of their 10% Preferred Return and their adjusted
capital contributions. Other liabilities, including distributions payable,
decreased to $455,210 at December 31, 2001, from $483,803 at December 31, 2000,
primarily due to a decrease in accounts payable. The decrease was partially
offset by an increase in amounts due to related parties. The funds remaining at
December 31, 2001, after payment of distributions and other liabilities, will be
used to meet the Partnership's working capital needs.
Long-Term Liquidity
The Partnership has no long-term debt or other long-term liquidity
requirements.
Critical Accounting Policies
The Partnership's leases are accounted for under the provisions of
Statement of Accounting Standard No. 13, "Accounting for Leases" ("FAS 13"), and
have been accounted for using either the direct financing or operating method.
FAS 13 requires management to estimate the economic life of the leased property,
the residual value of the leased property and the present value of minimum lease
payments to be received from the tenant. In addition, management assumes that
all payments to be received under its leases are collectible. Changes in
management's estimates or assumption regarding collectibility of lease payments
could result in a change in accounting for the lease at the inception of the
lease.
The Partnership accounts for its unconsolidated joint ventures using
the equity method of accounting. Under generally accepted accounting principles,
the equity method of accounting is appropriate for entities that are partially
owned by the Partnership, but for which operations of the investee are shared
with other partners. The Partnership's joint venture agreements require the
consent of all partners on all key decisions affecting the operations of the
underlying Property.
Management reviews its Properties and investments in unconsolidated
entities periodically (no less than once per year) for impairment whenever
events or changes in circumstances indicate that the carrying amount of the
assets may not be recoverable through operations. Management determines whether
impairment in value has occurred by comparing the estimated future undiscounted
cash flows, including the residual value of the Property, with the carrying cost
of the individual Property. If an impairment is indicated, the assets are
adjusted to their fair value.
Results of Operations
During 1999, the Partnership and its consolidated joint venture,
CNL/Longacre Joint Venture, owned and leased 20 wholly owned Properties
(including two Properties, which were sold during 1999). During 2000, the
Partnership and CNL/Longacre Joint Venture owned and leased 18 wholly owned
Properties (including one Property which was sold during 2000). During 2001, the
Partnership owned and leased 17 wholly owned Properties (including one Property
which was sold during 2001). In addition, during 1999, the Partnership was a
co-venturer in three unconsolidated joint ventures that each owned and leased
one Property (including one Property in Halls Joint Venture, which was sold in
1999). During 2000, the Partnership was a co-venturer in three unconsolidated
joint ventures that each owned and leased one Property (including one Property
in Duluth Joint Venture the Partnership's interest in which was sold in October
2000). During 2001, the Partnership was a co-venturer in two unconsolidated
joint ventures that each owned and leased one Property. During 2001, 2000, and
1999, the Partnership owned and leased two Properties, with affiliates of the
General Partners, as tenants-in-common. As of December 31, 2001, the Partnership
owned, either directly or through joint venture arrangements, 20 Properties
which are, in general, subject to long-term, triple-net leases. The leases of
the Properties provide for minimum base annual rental amounts (payable in
monthly installments) ranging from approximately $42,000 to $245,800. Generally,
the leases provide for percentage rent based on sales in excess of a specified
amount to be paid annually. In addition, a majority of the leases provide that,
commencing in the sixth lease year, the percentage rent will be an amount equal
to the greater of (i) the percentage rent calculated under the lease formula or
(ii) a specified percentage (ranging from one-fourth to five percent) of the
purchase price paid by the Partnership for the Property. For a further
description of the Partnership's leases and Properties, see Item 1. Business -
Leases and Item 2. Properties, respectively.
During the years ended December 31, 2001, 2000, and 1999, the
Partnership (and its consolidated joint venture during 1999 and 2000) earned
$1,198,480, $1,251,723, and $1,255,050, respectively, in rental income from
operating leases and earned income from direct financing leases. The decrease in
rental and earned income during 2001, as compared to 2000, was primarily due to
the fact that in February 2001 the tenant of the Property in Huron, Ohio
terminated its lease and ceased restaurant operations. As a result, the
Partnership stopped recording rental revenue relating to this Property. The
Partnership sold this Property in January 2002 as described in "Capital
Resources."
The decrease in rental and earned income during 2001 was also partially
attributable to the fact that the tenant of the Property in Lawrenceville,
Georgia is experiencing financial difficulties and has ceased making rental
payments to the Partnership, as a result, the Partnership stopped recording
rental and earned income. The decrease in rental and earned income during the
year ended December 31, 2000, as compared to 1999, was partially attributable to
a decrease in rental and earned income as a result of the sale of several
Properties during 2000 and 1999, as described above in "Capital Resources." The
decrease in rental and earned income during 2000 was partially offset by the
fact that the Partnership collected, and recognized as income, past due rental
amounts relating to the Property in New Castle, Indiana. No such amounts were
collected during 2001.
Rental and earned income in 2001, 2000, and 1999 continued to remain at
reduced amounts due to the fact that the Partnership was not receiving any
rental income from the Properties in Belding, Michigan and West Lebanon, New
Hampshire during 2001, 2000, and 1999 as a result of the tenants defaulting
under the terms of their leases and ceasing operations of the restaurants on the
Properties prior to 1999. The Partnership sold the Property in Belding, Michigan
in March 2000 and sold the Property in West Lebanon, New Hampshire in January
2002.
For the years ended December 31, 2001, 2000, and 1999, the Partnership
earned $91,084, $72,214, and $91,829, respectively, in contingent rental income.
The increase in contingent rental income during 2001, as compared to 2000, was
primarily attributable to an increase in the gross sales of certain restaurant
Properties requiring the payment of contingent rental income. The decrease in
contingent rental income during 2000, as compared to 1999, was partially
attributable to (i) the fact that the Partnership sold several Properties, whose
leases required the payment of contingent rental income and (ii) a decrease in
gross sales of certain restaurant Properties requiring the payment of contingent
rental income.
During the year ended December 31, 2001, the Partnership recognized
lease termination income of $13,373 due to the fact that the lease for the
Property in Livingston, Texas, which was scheduled to expire in 2002, was
terminated by the Partnership and the tenant. The Partnership re-leased this
Property to a new tenant with terms substantially the same as the Partnership's
other leases. No such lease termination income was recognized during the years
ended December 31, 2000 and 1999.
During the years ended December 31, 2001, 2000, and 1999, the
Partnership earned $104,513, $155,098, and $193,571, respectively, in interest
and other income. The decrease in interest and other income during 2001 and
2000, each as compared to the previous year, was primarily attributable to the
Partnership collecting the outstanding balances of the mortgage notes relating
to the sale of the Property in Myrtle Beach, South Carolina, during 2001 and to
the sale of the Property in St. Cloud, Florida, during 1999, as described in
"Capital Resources."
In addition, for the years ended December 31, 2001, 2000, and 1999, the
Partnership earned $157,935, $151,430, and $337,698, respectively, attributable
to net income earned by unconsolidated joint ventures in which the Partnership
is a co-venturer. Net income earned by joint ventures was higher during 2001 due
to the fact that the Partnership and CNL Income Fund II, Ltd., as
tenants-in-common re-leased the Property in Mesa, Arizona to a new tenant.
During 2000, the tenant of the Property in Mesa, Arizona, in which the
Partnership owns an approximate 42% interest, filed for bankruptcy and rejected
its lease. As a result, the tenant ceased making rental payments. In conjunction
with the rejected lease, the Partnership reversed approximately $31,500 of
accrued rental income. The accrued rental income was the accumulated amount of
non-cash accounting adjustments previously recorded in order to recognize future
scheduled rent increases as income evenly over the term of the lease. The
decrease in net income earned by these joint ventures during 2000 as compared to
1999 was primarily attributable to the fact that Halls Joint Venture, in which
the Partnership owned a 48.9% interest, sold its Property during 1999. During
2000, the Partnership and its joint venture partners dissolved this joint
venture.
During the year ended December 31, 2001, two lessees of the
Partnership, Golden Corral Corporation and Slaymaker Group, Inc., each
contributed more than 10% of the Partnership's total rental, earned, and
mortgage interest income (including the Partnership's share of the rental and
earned income from Properties owned by unconsolidated joint ventures and
Properties owned with affiliates of the General Partners as tenants-in-common).
As of December 31, 2001, Golden Corral Corporation was the lessee under a lease
relating to one Property and Slaymaker Group, Inc. was the lessee under a lease
relating to one Property. It is anticipated that, based on the minimum rental
payments required by the leases, Slaymaker Group, Inc. will continue to
contribute more than 10% of the Partnership's total rental and earned income
during 2002. In addition, three Restaurant Chains, Golden Corral, Taco Bell, and
Tony Roma's Famous for Ribs Restaurants, each accounted for more than 10% of the
Partnership's total rental, earned, and mortgage interest income during 2001
(including the Partnership's share of the rental income from Properties owned by
unconsolidated joint ventures and Properties owned with affiliates of the
General Partners as tenants-in-common). It is anticipated that these three
Restaurant Chains each will continue to account for more than 10% of the total
rental and earned income to which the Partnership is entitled under the terms of
the leases. Any failure of these lessees or Restaurant Chains could materially
affect the Partnership's income if the Partnership is not able to re-lease the
Properties in a timely manner.
Operating expenses, including depreciation, amortization expense and
provisions for write-down of assets were $790,542, $731,464, and $917,111, for
the years ended December 31, 2001, 2000, and 1999, respectively. The increase in
operating expenses during 2001, and the decrease during 2000, each as compared
to the previous year, was primarily due to the fact that the Partnership
recorded provisions for write-down of assets of $291,369, $109,919, and $169,482
during the years ended December 31,2001, 2000, and 1999, respectively, relating
to Properties which became vacant and which the Partnership had not successfully
re-leased. The provisions represented the difference between the net carrying
value at December 31, 2001, 2000 and 1999, and their current estimated net
realizable values. In addition, as of September 30, 2000, the Partnership
established a provision for write-down of assets of $32,454 relating to the
October 2000 acquisition of CNL/Longacre Joint Venture, as described in "Capital
Resources." The provision represented the difference between the net carrying
value of the joint venture and the estimated net realizable value of the joint
venture.
In addition, during the year ended December 31, 1999, the Partnership
recorded an additional provision for write-down of assets in the amount of
$138,828 relating to the Property in Belding, Michigan. The provision
represented the difference between the carrying value of the Property at
December 31, 1999, and the net sales proceeds received from the sale of the
Property to a third party in March 2000.
The increase in operating expenses during 2001 and the decrease in
operating expenses during 2000, each as compared to the previous year, was
partially offset by the fact that the Partnership incurred certain expenses,
such as repairs and maintenance, insurance and real estate taxes as a result of
tenant defaults under the terms of the lease agreements for the Properties in
Belding, Michigan; Daleville, Indiana, and West Lebanon, New Hampshire. In March
2000, the Partnership sold its Property in Belding, Michigan to an unrelated
third party. In March 2001, the Partnership sold the Property in Daleville,
Indiana and in January 2002, the Partnership sold the Property in West Lebanon,
New Hampshire. The Partnership did not incur any additional expenses relating to
these Properties after the sale of the Property occurred.
Operating expenses were lower during 2000 as compared to the previous
year, primarily due to the fact that the Partnership incurred $24,443 and
$125,291 during 2000 and 1999, respectively, in transaction costs related to the
General Partners retaining financial and legal advisors to assist them in
evaluating and negotiating the proposed and terminated merger with APF, as
described in "Termination of Merger."
In addition, the decrease during 2000, as compared to 1999, was
partially due to a decrease in depreciation expense due to the sale of one
Property in 2000 and the sales of several Properties during 1999. The decrease
in operating expenses during 2000, as compared to 1999 was partially offset by
the fact that CNL/Longacre Joint Venture, the Partnership's consolidated joint
venture during 2000, paid $60,000 as settlement for a lawsuit against the
consolidated joint venture. Even though the Partnership and CNL/Longacre Joint
Venture believed there was no merit to the lawsuit, they elected to pay a
settlement to avoid incurring legal fees to defend this lawsuit. The joint
venture also incurred additional fees during 2000 related to the settlement of
the lawsuit. The Partnership and CNL/Longacre Joint Venture do not anticipate
incurring additional costs relating to this lawsuit.
In connection with the sale of its Properties in Myrtle Beach, South
Carolina and St. Cloud, Florida during 1995 and 1996, respectively, as described
above in "Capital Resources," the Partnership recognized a gain of $136,036,
$1,269, and $182,563, for the years ended December 31, 2001, 2000 and 1999,
respectively. In accordance with Statement of Financial Accounting Standards No.
66, "Accounting for Sales of Real Estate," the Partnership recorded the sales
using the installment sales method. As such, the gains on the sales were
deferred and were being recognized as income proportionately as payments under
the mortgage notes were collected. The gain recognized during 2001 and 1999, was
higher than the gain recognized during 2000 due to the fact that during 2001 and
1999, respectively, the Partnership collected the outstanding balances relating
to the promissory notes collateralized by the Properties in Myrtle Beach, South
Carolina and St. Cloud, Florida, as described above in "Capital Resources,"
which resulted in the recognition of the remaining deferred gains on these
Properties.
As a result of the sales of several Properties and the dissolution of
CNL/Longacre Joint Venture as described above in "Capital Resources," the
Partnership recognized gains totaling $35,094, $9,763, and $213,503 during 2001,
2000 and 1999, respectively. In addition, as a result of the sale of the
Partnership's interest in Duluth Joint Venture the Partnership recognized a gain
of $13,819 during 2000.
The restaurant industry, as a whole, has been one of the many
industries affected by the general slowdown in the economy. While the
Partnership has experienced some losses due to the financial difficulties of a
limited number of restaurant operators, the General Partners remain confident in
the overall performance of the fast-food and family style restaurants, the
concepts that comprise the Partnership's portfolio. Industry data shows that
these restaurant concepts continue to outperform and remain more stable than
higher-end restaurants, which have been more adversely affected by the slowing
economy.
The Partnership's leases as of December 31, 2001, are, in general,
triple-net leases and contain provisions that the General Partners believe
mitigate the adverse effect of inflation. Such provisions include clauses
requiring the payment of percentage rent based on certain restaurant sales above
a specified level and/or automatic increases in base rent at specified times
during the term of the lease. Inflation, overall, has had a minimal effect on
the results of operations of the Partnership. Continued inflation may cause
capital appreciation of the Partnership's Properties. Inflation and changing
prices, however, also may have an adverse impact on the sales of the restaurants
and on potential capital appreciation of the Properties.
In December 1999, the Securities and Exchange Commission released SAB
101, which provides the staff's view in applying generally accepted accounting
principles to selected revenue recognition issues. SAB 101 requires the
Partnership to defer recognition of certain percentage rental income until
certain defined thresholds are met. The Partnership adopted SAB 101 beginning
January 1, 2000. Implementation of SAB 101 did not have a material impact on the
partnership's result of operations.
In July 2001, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 141 "Business Combinations" (FAS 141) and
Statement of Financial Accounting Standards No. 142 "Goodwill and Other
Intangible Assets" (FAS 142). The Partnership has reviewed both statements and
has determined that both FAS 141 and FAS 142 do not apply to the Partnership as
of December 31, 2001.
In October 2001, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 144 "Accounting for the
Impairment or Disposal of Long-Lived Assets" (FAS 144). This statement requires
that a long-lived asset be tested for recoverability whenever events or changes
in circumstances indicate that its carrying amount may not be recoverable. The
carrying amount of a long-lived asset is not recoverable if it exceeds the sum
of the undiscounted cash flows expected to result from the use and eventual
disposition of the asset. The assessment is based on the carrying amount of the
asset at the date it is tested for recoverability. An impairment loss is
recognized when the carrying amount of a long-lived asset exceeds its fair
value. If an impairment is recognized, the adjusted carrying amount of a
long-lived asset is its new cost basis. The adoption of FAS 144 did not have any
effect on the partnership's recording of impairment losses as this Statement
retained the fundamental provisions of FAS No. 121 "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of."
Termination of Merger
On March 11, 1999, the Partnership entered into an Agreement and Plan
of Merger with APF, pursuant to which the Partnership would be merged with and
into a subsidiary of APF. Under the Agreement and Plan of Merger, APF was to
issue shares of its common stock as consideration for the Merger. On March 1,
2000, the General Partners and APF announced that they had mutually agreed to
terminate the Agreement and Plan of Merger. The agreement to terminate the
Agreement and Plan of Merger was based, in large part, on the General Partners'
concern that, in light of market conditions relating to publicly traded real
estate investment trusts, the value of the transaction had diminished. As a
result of such diminishment, the General Partners' ability to unequivocally
recommend voting for the transaction, in the exercise of their fiduciary duties,
had become questionable.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
Item 8. Financial Statements and Supplementary Data
CNL INCOME FUND V, 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 25-41
Report of Independent Certified Public Accountants
To the Partners
CNL Income Fund V, Ltd.
In our opinion, the accompanying balance sheets and the related statements of
income, of partners' capital and of cash flows present fairly, in all material
respects, the financial position of CNL Income Fund V, Ltd. (a Florida limited
partnership) at December 31, 2001 and 2000, and the results of its operations
and its cash flows for each of the three years in the period ended December 31,
2001 in conformity with accounting principles generally accepted in the United
States of America. In addition, in our opinion, the financial statement
schedules listed in the index appearing under item 14(a)(2) present fairly, in
all material respects, the information set forth therein when read in
conjunction with the related financial statements. These financial statements
and financial statement schedules are the responsibility of the Partnership's
management; our responsibility is to express an opinion on these financial
statements and 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.
/s/ PricewaterhouseCoopers LLP
Orlando, Florida
February 8, 2002
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
BALANCE SHEETS
December 31,
2001 2000
------------------- -------------------
ASSETS
Land and buildings on operating leases, net $ 8,430,534 $ 8,767,623
Net investment in direct financing leases 1,228,690 1,627,873
Investment in joint ventures 1,930,836 1,939,860
Mortgage note receivable, less deferred gain -- 868,713
Cash and cash equivalents 313,783 1,137,958
Receivables, less allowance for doubtful accounts of
$35,317 and $134,799, respectively
48,718 139,772
Due from related parties 32 11,409
Accrued rental income 349,296 352,238
Other assets 4,165 2,810
------------------- -------------------
$ 12,306,054 $ 14,848,256
=================== ===================
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 10,873 $ 34,182
Accrued and escrowed real estate taxes payable 9,496 7,012
Distributions payable 430,258 437,500
Due to related parties 118,585 107,135
Rents paid in advance 4,583 5,109
------------------- -------------------
Total liabilities 573,795 590,938
Partners' capital 11,732,259 14,257,318
------------------- -------------------
$ 12,306,054 $ 14,848,256
=================== ===================
See accompanying notes to financial statements.
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
STATEMENTS OF INCOME
Year Ended December 31,
2001 2000 1999
---------------- ----------------- ----------------
Revenues:
Rental income from operating leases $ 1,059,588 $ 1,068,679 $ 1,077,199
Earned income from direct financing leases 138,892 183,044 177,851
Contingent rental income 91,084 72,214 91,829
Lease termination income 13,373 -- --
Interest and other income 104,513 155,098 193,571
---------------- ----------------- ----------------
1,407,450 1,479,035 1,540,450
---------------- ----------------- ----------------
Expenses:
General operating and administrative 201,258 222,866 150,715
Professional services 49,795 74,222 48,751
Real estate taxes 17,730 30,934 33,857
State and other taxes 545 7,381 6,927
Depreciation 229,845 229,245 243,260
Provision for write-down of assets 291,369 142,373 308,310
Transaction costs -- 24,443 125,291
---------------- ----------------- ----------------
790,542 731,464 917,111
---------------- ----------------- ----------------
Income Before Gain on Sale of Assets, Minority Interest in Loss of
Consolidated Joint Venture and Equity in Earnings of
Unconsolidated Joint Ventures 616,908 747,571 623,339
Gain on Sale of Assets 171,130 24,851 396,066
Minority Interest in Loss of Consolidated Joint Venture -- 45,718 78,543
Equity in Earnings of Unconsolidated Joint Ventures 157,935 151,430 337,698
---------------- ----------------- ----------------
Net Income $ 945,973 $ 969,570 $ 1,435,646
================ ================= ================
Allocation of Net Income
General partners $ -- $ -- $ 10,296
Limited partners 945,973 969,570 1,425,350
---------------- ----------------- ----------------
$ 945,973 $ 969,570 $ 1,435,646
================ ================= ================
Net Income Per Limited Partner Unit $ 18.92 $ 19.39 $ 28.51
================ ================= ================
Weighted Average Number of Limited Partner Units Outstanding 50,000 50,000 50,000
================ ================= ================
See accompanying notes to financial statements.
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
STATEMENTS OF PARTNERS' CAPITAL
Years Ended December 31, 2001, 2000, and 1999
General Partners Limited Partners
-------------------------------------- ----------------- --------------------------------------
Accumulated Accumulated
Contributions Earnings Contributions Distributions Earnings
------------------ ---------------- ----------------- ---------------- -----------------
Balance, December 31, 1998 $ 343,200 $ 160,530 $ 25,000,000 $ (23,606,567 ) $ 17,194,939
Distributions to limited
partners ($40.00 per
limited partner unit) -- -- -- (2,000,000 ) --
Net income -- 10,296 -- -- 1,425,350
------------------ ---------------- ----------------- ---------------- -----------------
Balance, December 31, 1999 343,200 170,826 25,000,000 (25,606,567 ) 18,620,289
Distributions to limited
partners ($47.50 per
limited partner unit) -- -- -- (2,375,000 ) --
Net income -- -- -- -- 969,570
----------------- ---------------- ----------------- -------------- --------------
Balance, December 31, 2000 343,200 170,826 25,000,000 (27,981,567 ) 19,589,859
Distributions to limited
partners ($69.42 per
limited partner unit) -- -- (413,848 ) (3,057,184 ) --
Net income -- -- -- -- 945,973
------------------ ---------------- ---------------- ----------------- ----------------
Balance, December 31, 2001 $ 343,200 $ 170,826 $ 24,586,152 $ (31,038,751 ) $ 20,535,832
================== ================ ================= ================ =================
See accompanying notes to financial statements.
- -----------------------------------
Syndication
Costs Total
-------------- --------------
$ (2,865,000 ) $16,227,102
-- (2,000,000 )
-- 1,435,646
-------------- --------------
(2,865,000 ) 15,662,748
-- (2,375,000 )
-- 969,570
- ------------------ ----------------
(2,865,000 ) 14,257,318
-- (3,471,032 )
-- 945,973
-------------- --------------
$ (2,865,000 ) $11,732,259
=============== ==============
See accompanying notes to financial statements.
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
STATEMENTS OF CASH FLOWS
Year Ended December 31,
2001 2000 1999
---------------- --------------- ----------------
Increase (Decrease) in Cash and Cash Equivalents:
Cash Flows from Operating Activities:
Cash received from tenants $ 1,427,463 $ 1,222,630 $ 1,353,143
Distributions from unconsolidated joint ventures 166,659 189,895 214,838
Cash paid for expenses (282,575 ) (647,634 ) (168,342 )
Interest received 53,985 139,182 195,926
---------------- --------------- ----------------
Net cash provided by operating activities 1,365,532 904,073 1,595,565
---------------- --------------- ----------------
Cash Flows from Investing Activities:
Proceeds from sale of assets 300,386 126,947 1,113,759
Additions to land and buildings on operating leases -- (20,000 ) --
Liquidating distribution from joint venture -- 662,195 --
Investment in joint ventures -- (91,851 ) (129,978 )
Collections on mortgage notes receivable 987,881 9,215 1,052,885
---------------- --------------- ----------------
Net cash provided by investing activities 1,288,267 686,506 2,036,666
---------------- --------------- ----------------
Cash Flows from Financing Activities:
Distributions to limited partners (3,478,274 ) (2,437,500 ) (2,000,000 )
---------------- --------------- ----------------
Net cash used in financing activities (3,478,274 ) (2,437,500 ) (2,000,000 )
---------------- --------------- ----------------
Net Increase (Decrease) in Cash and Cash Equivalents (824,475 ) (846,921 ) 1,632,231
Cash and Cash Equivalents at Beginning of Year 1,137,958 1,984,879 352,648
---------------- --------------- ----------------
Cash and Cash Equivalents at End of Year $ 313,483 $ 1,137,958 $ 1,984,879
================ =============== ================
See accompanying notes to financial statements.
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
STATEMENTS OF CASH FLOWS - CONTINUED
Year Ended December 31,
2001 2000 1999
--------------- --------------- --------------
Reconciliation of Net Income to Net Cash Provided by
Operating Activities:
Net Income $ 945,973 $ 969,570 $1,435,646
--------------- --------------- --------------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 229,845 229,245 243,260
Minority interest in loss of consolidated joint
venture -- (45,718 ) (78,543 )
Equity in earnings of unconsolidated joint
ventures, net of distributions 9,024 38,465 (122,860 )
Gain on sale of assets (171,130 ) (24,851 ) (396,066 )
Provisions for write-down of assets 291,369 142,373 308,310
Decrease in net investment in direct financing
leases 27,765 43,093 38,000
Decrease (increase) in accrued interest on mortgage
note receivable 16,866 (8,350 ) 9,429
Decrease (increase) in receivables 102,431 (95,673 ) 31,982
Decrease (increase) in other assets (1,355 ) 1,648 (2,586 )
Increase in accrued rental income (65,305 ) (52,148 ) (60,127 )
Increase (decrease) in accounts payable and
escrowed real estate taxes payable (20,825 ) (45,865 ) 67,770
Increase (decrease) in due to related parties 1,700 (246,731 ) 121,368
Decrease in rents paid in advance and deposits (526 ) (985 ) (18 )
--------------- --------------- --------------
Total adjustments 419,859 (65,497 ) 159,919
--------------- --------------- --------------
Net Cash Provided by Operating Activities $1,365,832 $ 904,073 $1,595,565
=============== =============== ==============
Supplemental Schedule of Non-Cash Investing and
Financing Activities:
Deferred real estate disposition fees incurred
and unpaid at end of year $ 9,750 $ 4,050 $ --
=============== =============== ==============
Distributions declared and unpaid at
December 31 $ 430,258 $ 437,500 $ 500,000
=============== =============== ==============
See accompanying notes to financial statements.
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
Years Ended December 31, 2001, 2000, and 1999
1. Significant Accounting Policies:
-------------------------------
Organization and Nature of Business - CNL Income Fund V, Ltd. (the
"Partnership") is a Florida limited partnership that was organized for
the purpose of acquiring both newly constructed and existing restaurant
properties, as well as properties upon which restaurants were to be
constructed, which are leased primarily to operators of national and
regional fast-food and family-style restaurant chains.
The general partners of the Partnership are CNL Realty Corporation (the
"Corporate General Partner"), James M. Seneff, Jr. and Robert A.
Bourne. Mr. Seneff and Mr. Bourne are also 50% shareholders of the
Corporate General Partner. The general partners have responsibility for
managing the day-to-day operations of the Partnership.
Real Estate and Lease Accounting - The Partnership records the
acquisition of land and buildings at cost, including acquisition and
closing costs. Land and buildings are leased to unrelated third parties
generally on a triple-net basis, whereby the tenant is generally
responsible for all operating expenses relating to the property,
including property taxes, insurance, maintenance and repairs. The
leases are accounted for using either the direct financing or the
operating methods. Such methods are described below:
Direct financing method - The leases accounted for using the direct
financing method are recorded at their net investment (which at the
inception of the lease generally represents the cost of the asset)
(Note 4). Unearned income is deferred and amortized to income over the
lease terms so as to produce a constant periodic rate of return on the
Partnership's net investment in the leases.
Operating method - Land and building leases accounted for using the
operating method are recorded at cost, revenue is recognized as rentals
are earned and depreciation is charged to operations as incurred.
Buildings are depreciated on the straight-line method over their
estimated useful lives of 30 years. When scheduled rentals vary during
the lease term, income is recognized on a straight-line basis so as to
produce a constant periodic rent over the lease term commencing on the
date the property is placed in service.
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2001, 2000, and 1999
1. Significant Accounting Policies - Continued:
-------------------------------------------
Accrued rental income represents the aggregate amount of income
recognized on a straight-line basis in excess of scheduled rental
payments to date. Whenever a tenant defaults under the terms of its
lease, or events or changes in circumstance indicate that the tenant
will not lease the property through the end of the lease term, the
Partnership either reserves or reverses the cumulative accrued rental
income balance.
When the properties are sold, the related cost and accumulated
depreciation for operating leases and the net investment for direct
financing leases, plus any accrued rental income, are removed from the
accounts and gains or losses from sales are reflected in income. The
general partners of the Partnership review properties for impairment
whenever events or changes in circumstances indicate that the carrying
amount of the assets may not be recoverable through operations. The
general partners determine whether an impairment in value has occurred
by comparing the estimated future undiscounted cash flows, including
the residual value of the property, with the carrying cost of the
individual property. If an impairment is indicated, the assets are
adjusted to their fair value. Although the general partners have made
their best estimate of these factors based on current conditions, it is
reasonably possible that changes could occur in the near term which
could adversely affect the general partners' estimate of net cash flows
expected to be generated from its properties and the need for asset
impairment write-downs.
When the collection of amounts recorded as rental or other income are
considered to be doubtful, an adjustment is made to increase the
allowance for doubtful accounts, which is netted against receivables,
although the Partnership continues to pursue collection of such
amounts. If amounts are subsequently determined to be uncollectible,
the corresponding receivable and allowance for doubtful accounts are
decreased accordingly.
Investment in Joint Ventures - Prior to the liquidation of CNL/Longacre
Joint Venture in October 2000, the Partnership accounted for its 66.5%
interest in such joint venture, using the consolidation method.
Minority interest represented the minority joint venture partner's
proportionate share of the equity in the Partnership's consolidated
joint venture. All significant intercompany accounts and transactions
have been eliminated.
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2001, 2000, and 1999
1. Significant Accounting Policies - Continued:
-------------------------------------------
The Partnership accounts for its interest in Cocoa Joint Venture, RTO
Joint Venture, and a property in each of Mesa, Arizona and Vancouver,
Washington, held as tenants-in-common with affiliates of the general
partners, using the equity method since each joint venture agreement
requires the consent of all partners on all key decisions affecting the
operations of the underlying property.
Cash and Cash Equivalents - The Partnership considers all highly liquid
investments with a maturity of three months or less when purchased to
be cash equivalents. Cash and cash equivalents consist of demand
deposits at commercial banks and money market funds (some of which are
backed by government securities). Cash equivalents are stated at cost
plus accrued interest, which approximates market value.
Cash accounts maintained on behalf of the Partnership in demand
deposits at commercial banks and money market funds may exceed
federally insured levels; however, the Partnership has not experienced
any losses in such accounts.
Income Taxes - Under Section 701 of the Internal Revenue Code, all
income, expenses and tax credit items flow through to the partners for
tax purposes. Therefore, no provision for federal income taxes is
provided in the accompanying financial statements. The Partnership is
subject to certain state taxes on its income and properties.
Additionally, for tax purposes, syndication costs are included in
Partnership equity and in the basis of each partner's investment. For
financial reporting purposes, syndication costs are netted against
partners' capital and represent a reduction of Partnership equity and a
reduction in the basis of each partner's investment. See "Income Taxes"
footnote for a reconciliation of net income for financial reporting
purposes to net income for federal income tax purposes.
Use of Estimates - The general partners of the Partnership have made a
number of estimates and assumptions relating to the reporting of assets
and liabilities and the disclosure of contingent assets and liabilities
to prepare these financial statements in conformity with generally
accepted accounting principles. The more significant areas requiring
the use of estimates relate to the allowance for doubtful accounts and
future cash flows associated with long-lived assets. Actual results
could differ from those estimates.
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2001, 2000, and 1999
1. Significant Accounting Policies - Continued:
-------------------------------------------
Reclassification - Certain items in the prior years' financial
statements have been reclassified to conform to 2001 presentation.
These classifications had no effect on partners capital or net income.
Staff Accounting Bulletin No. 101 ("SAB 101") - In December 1999, the
Securities and Exchange Commission released SAB 101, which provides the
staff's view in applying generally accepted accounting principles to
selected revenue recognition issues. SAB 101 requires the Partnership
to defer recognition of certain percentage rental income until certain
defined thresholds are met. The Partnership adopted SAB 101 beginning
January 1, 2000. Implementation of SAB 101 did not have a material
impact on the Partnership results of operations.
Statement of Financial Accounting Standards No. 141 ("FAS 141") and
Statement of Financial Accounting Standards No. 142 ("FAS 142") - In
July 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 141 "Business Combinations" (FAS
141) and Statement of Financial Accounting Standards No. 142 "Goodwill
and Other Intangible Assets" (FAS 142). The Partnership has reviewed
both statements and has determined that both FAS 141 and FAS 142 do not
apply to the Partnership as of December 31, 2001.
Statement of Financial Accounting Standards No. 144 ("FAS 144") - In
October 2001, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 144 "Accounting for the
Impairment or Disposal of Long-Lived Assets". This statement requires
that a long-lived asset be tested for recoverability whenever events or
changes in circumstances indicate that its carrying amount may not be
recoverable. The carrying amount of a long-lived asset is not
recoverable if it exceeds the sum of the undiscounted cash flows
expected to result from the use and eventual disposition of the asset.
The assessment is based on the carrying amount of the asset at the date
it is tested for recoverability. An impairment loss is recognized when
the carrying amount of a long-lived asset exceeds its fair value. If an
impairment is recognized, the adjusted carrying amount of a long-lived
asset is its new cost basis. The adoption of FAS 144 did not have any
effect on the partnership's recording of impairment losses as this
Statement retained the fundamental provisions of FAS No. 121
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of."
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2001, 2000, and 1999
2. Leases:
------
The Partnership leases its land and buildings primarily to operators of
national and regional fast-food and family-style restaurants. The
leases are accounted for under the provisions of Statement of Financial
Accounting Standards No. 13, "Accounting for Leases." The leases
generally are classified as operating leases; however, some leases have
been classified as direct financing leases. Substantially all leases
are for 10 to 20 years and provide for minimum and contingent rentals.
In addition, the tenant generally pays all property taxes and
assessments, fully maintains the interior and exterior of the building
and carries insurance coverage for public liability, property damage,
fire and extended coverage. The lease options generally allow tenants
to renew the leases for two to four successive five-year periods
subject to the same terms and conditions as the initial lease. Most
leases also allow the tenant to purchase the property at fair market
value after a specified portion of the lease has elapsed.
3. Land and Buildings on Operating Leases:
--------------------------------------
Land and buildings on operating leases consisted of the following at
December 31:
2001 2000
-------------------- ----------------
Land $ 4,352,375 $ 4,456,489
Buildings 6,384,202 6,427,703
-------------------- ----------------
10,736,577 10,884,192
Less accumulated depreciation (2,306,043 ) (2,116,569 )
-------------------- ----------------
$ 8,430,534 $ 8,767,623
==================== ================
In October 2000, the Partnership acquired the remaining 33.5% interest
in CNL/Longacre Joint Venture from its joint venture partner and became
the sole owner of the property in West Lebanon, New Hampshire (see Note
5).
In March 2000, the Partnership sold the property in Belding, Michigan
for $135,000 and received net sales proceeds of approximately $126,900.
Due to the fact that the Partnership had recorded a provision for
write-down of assets in previous years, no gain on the sale was
recorded during 2000. In connection with the sale, the Partnership
incurred a deferred, subordinated, real estate disposition fee of
$4,050 (see Note 10).
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2001, 2000, and 1999
3. Land and Buildings on Operating Leases - Continued:
--------------------------------------------------
In March 2001, the Partnership sold its property in Daleville, Indiana,
to a third party for $325,000 and received net sales proceeds of
$300,386 resulting in a gain of $35,096. The Partnership had previously
recorded provisions for write-down of assets of relating to this
property due to the fact that the tenant terminated the lease with the
Partnership. The provision represents the difference between the
carrying value of the property at December 31, 2000 and the net sales
proceeds received from the anticipated sale in 2001. In connection with
the sale, the Partnership incurred a deferred, subordinated, real
estate disposition fee of $9,750 (see Note 10).
During the year ended December 31, 2001, the Partnership established a
provision for write-down of assets in the amount of $156,644, relating
to its property in Huron, Ohio. The tenant for this property terminated
its lease due to financial difficulties. The provision represented the
difference between the net carrying value of the property at December
31, 2001 and the general partners' estimated net realizable value of
the property.
In addition, during the year ended December 31, 2001, the Partnership
established a provision for write-down of assets in the amount of
$134,726 relating to its property in Lawrenceville, Georgia. The tenant
for this property experienced financial difficulties and ceased making
rental payments to the Partnership. The provision represented the
difference between the net carrying value of the property, including
the accumulated accrued rental income balance, and the general
partners' estimated net realizable value of the property.
The following is a schedule of the future minimum lease payments to be
received on noncancellable operating leases at December 31, 2001:
2002 $ 941,636
2003 976,847
2004 984,917
2005 862,799
2006 865,549
Thereafter 5,555,182
-----------------
$10,186,930
=================
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2001, 2000, and 1999
3. Land and Buildings on Operating Leases - Continued:
--------------------------------------------------
Since lease renewal periods are exercisable at the option of the
tenant, the above table only presents future minimum lease payments due
during the initial lease terms. In addition, this table does not
include any amounts for future contingent rentals which may be received
on the leases based on a percentage of the tenant gross sales.
4. Net Investment Direct Financing Leases:
--------------------------------------
The following lists the components of the net investment in direct
financing leases at December 31:
2001 2000
-------------- ------------
Minimum lease payments
receivable $ 2,184,590 $ 2,817,960
Estimated residual values 425,049 566,502
Less unearned income (1,380,949 ) (1,756,589 )
-------------- ------------
Net investment in direct
financing leases $ 1,228,690 $ 1,627,873
============== ============
The following is a schedule of future minimum lease payments to be
received on direct financing leases at December 31, 2001:
2002 $ 164,506
2003 164,506
2004 164,506
2005 164,506
2006 164,506
Thereafter 1,362,059
----------------
$2,184,589
================
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2001, 2000, and 1999
4. Net Investment Direct Financing Leases - Continued:
--------------------------------------------------
The above table does not include future minimum lease payments for
renewal periods or for contingent rental payments that may become due
in future periods (see Note 3).
During 2001, the tenant of the Denny's property in Huron, Ohio
terminated its lease due to financial difficulties. As a result, the
Partnership reclassified the asset from net investment in direct
financing leases to land and buildings on operating leases. In
accordance with Statement of Financial Accounting Standards No. 13,
"Accounting for Leases," the Partnership recorded the reclassified
asset at the lower of original cost, present fair value, or present
carrying amount. No loss on reclassification was recorded.
5. Investment in Joint Ventures:
----------------------------
As of December 31, 2001, the Partnership had a 43%, and a 53.12%,
interest in the profits and losses of Cocoa Joint Venture, and RTO
Joint Venture, respectively. The remaining interests in these joint
ventures are held by affiliates of the Partnership which have the same
general partners.
In addition, the Partnership owns a property in each of Mesa, Arizona
and Vancouver, Washington, as tenants-in-common with affiliates of the
general partners. As of December 31, 2001, the Partnership owned a
42.09% and a 27.78% interest in the properties, respectively.
In June 1999, Halls Joint Venture, in which the Partnership owned a
48.9% interest, sold its property to the tenant in accordance with the
purchase option under the lease agreement for $891,915. This resulted
in a gain to the joint venture of approximately $239,300. During 2000,
the Partnership and the joint venture partner liquidated Halls Joint
Venture and the Partnership received its pro rata share of the
liquidation proceeds. No gain or loss was recorded relating to the
liquidation.
In December 1999, the Partnership entered into a joint venture
arrangement, Duluth Joint Venture, with CNL Income Fund VII, Ltd., CNL
Income Fund XIV, Ltd., and CNL Income Fund XV, Ltd., each of which is a
Florida limited partnership and an affiliate of the general partners,
to construct and hold one restaurant property. During 2000, the
Partnership contributed $91,851 to Duluth Joint Venture to purchase the
land for construction costs. In October 2000, the Partnership sold its
12% interest to CNL Income Fund VII, Ltd., an affiliate of the general
partners for $221,830 resulting in a gain of $13,819.
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2001, 2000, and 1999
5. Investment in Joint Ventures - Continued:
----------------------------------------
In October 2000, the Partnership acquired the remaining 33.5% interest
in CNL/Longacre Joint Venture from its joint venture partner in
accordance with the terms of the joint venture agreement. At September
30, 2000, the Partnership had recorded a provision for write-down of
assets of $32,454, which represented the difference between the net
carrying value of the joint venture and the estimated net realizable
value of the joint venture. In October, the Partnership liquidated the
joint venture and realized a gain of $9,763.
Cocoa Joint Venture, RTO Joint Venture, and the Partnership and
affiliates as tenants-in-common in two separate tenancy-in-common
arrangements, each own and lease one property to an operator of
national fast-food or family-style restaurants.
The following presents the combined condensed financial information for
all of the Partnership's investments in joint ventures at December 31:
2001 2000
-------------- -----------
Land and buildings on operating leases, net $ 3,442,881 $4,077,033
Net investment in direct financing lease 1,353,032 799,018
Cash 4,484 15,476
Receivables 3,897 14,624
Accrued rental income 179,923 127,265
Other assets 1,239 422
Liabilities 30,651 49,512
Partners' capital 4,954,805 4,984,326
Revenues 485,699 478,610
Net income 399,190 387,305
The Partnership recognized income totaling $157,935, $151,430, and
$337,698, for the years ended December 31, 2001, 2000, and 1999,
respectively, from these joint ventures.
6. Mortgage Notes Receivable:
-------------------------
In connection with the sale of its property in Myrtle Beach, South
Carolina during 1995, the Partnership accepted a promissory note in the
principal sum of $1,040,000, collateralized by a mortgage on the
property. The promissory note bore interest at 10.25% per annum and was
being collected in 59 equal monthly installments of $9,319,
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2001, 2000, and 1999
6. Mortgage Notes Receivable - Continued:
-------------------------------------
including interest. As a result of this sale being accounted for using
the installment sales method for financial reporting purposes as
required by Statement of Financial Accounting Standards No. 66,
"Accounting for Sales of Real Estate," the Partnership recognized a
gain of $136,036, $1,269, and $1,255, during the years ended December
31, 2001, 2000, and 1999, respectively. In February 2001, the
Partnership received a balloon payment of $999,083 which included the
outstanding principal balance and $12,084 of accrued interest.
7. Receivables:
-----------
In June 1997, the Partnership terminated the leases with the tenant of
the properties in Connorsville and Richmond, Indiana. In connection
therewith, the Partnership accepted a promissory note from the former
tenant for $35,297 for amounts relating to past due real estate taxes.
During 2001, the Partnership collected the outstanding balance relating
to this note.
8. Allocations and Distributions:
-----------------------------
From inception through December 31, 1999, all net income and net losses
of the Partnership, excluding gains and losses from the sale of
properties, were allocated 99% to the limited partners and one percent
to the general partners. From inception through December 31, 1999,
distributions of net cash flow were made 99% to the limited partners
and one percent to the general partners; provided, however, that the
one percent of net cash flow to be distributed to the general partners
was subordinated to receipt by the limited partners of an aggregate,
ten percent, cumulative, noncompounded annual return on their adjusted
capital contributions (the "10% Preferred Return").
From inception through December 31, 1999, net sales proceeds from the
sale of properties not in liquidation of the Partnership, to the extent
distributed, were distributed first to the limited partners in an
amount sufficient to provide them with their 10% Preferred Return, plus
the return of their adjusted capital contributions. The general
partners then received, to the extent previously subordinated and
unpaid, a one percent interest in all prior distributions of net cash
flow and a return of their capital contributions. Any remaining sales
proceeds were distributed 95% to the limited partners and five percent
to the general partners. Any gain from the sale of a property not in
liquidation of the Partnership was, in general, allocated in the same
manner as net
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2001, 2000, and 1999
8. Allocations and Distributions - Continued:
-----------------------------------------
sales proceeds are distributable. Any loss from the sale of a property
was, in general, allocated first, on a pro rata basis, to partners with
positive balances in their capital accounts, and thereafter, 95% to the
limited partners and five percent to the general partners.
Generally, net sales proceeds from a liquidating sale of properties
will be used in the following order: (i) first to pay and discharge all
of the Partnership's liabilities to creditors, (ii) second, to
establish reserves that may be deemed necessary for any anticipated or
unforeseen liabilities or obligations of the Partnership, (iii) third,
to pay all of the Partnership's liabilities, if any, to the general and
limited partners, (iv) fourth, after allocations of net income, gains
and/or losses, to distribute to the partners with positive capital
accounts balances, in proportion to such balances, up to an amount
sufficient to reduce such positive balances to zero, and (v)
thereafter, any funds remaining shall then be distributed 95% to the
limited partners and five percent to the general partners.
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, 2001 and 2000.
During the years ended December 31, 2001, 2000, and 1999, the
Partnership declared distributions to the limited partners of
$3,471,032, $2,375,000, and $2,000,000, respectively. Distributions for
the year ended December 31, 2001 included $1,750,000 in a special
distribution as a result of the distribution of the net sales proceeds
from the sale of the property in Daleville, Indiana and the
distribution of the amounts collected from the promissory notes
relating to the 1995 sale of the property in Myrtle Beach, South
Carolina and the 1996 sale of the property in St. Cloud, Florida. The
special distribution in 2001 was effectively a return of a portion of
the Limited Partners' investment; although, in accordance with the
Partnership agreement, $1,336,152 was applied towards the 10% Preferred
Return, on a cummulative basis, and the balance of $413,848 was
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2001, 2000, and 1999
9. Allocations and Distributions - Continued:
-----------------------------------------
treated as a return of capital for purposes of calculating the 10%
Preferred Return. As a result of the return of capital, the amount of
Limited Partners' invested capital contributions (which is generally
the Limited Partners' capital contributions, less distributions from
the sale of Properties that are considered to be a return of capital)
was decreased; therefore the amount of the Limited Partners' invested
capital contributions on which the 10% Preferred Return is calculated
was lowered accordingly. Distributions for the year ended December 31,
2000 included a special distribution of $500,000 as a result of the
distribution of net sales proceeds from the sale of the properties in
Belding, Michigan; Halls, Tennessee; Ithaca, New York and St. Cloud,
Florida. These amounts were applied toward the limited partners' 10%
Preferred Return. No distributions have been made to the general
partners to date.
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2001, 2000, and 1999
9. Income Taxes:
------------
The following is a reconciliation of net income for financial reporting
purposes to net income for federal income tax purposes for the years
ended December 31:
2001 2000 1999
-------------- -------------- ---------------
Net income for financial reporting purposes $ 945,973 $ 969,570 $ 1,435,646
Depreciation for tax reporting purposes in excess
of depreciation for financial reporting
purposes (12,688 ) (31,908 ) (35,961 )
Gain on disposition of assets for financial
reporting purposes in excess of gain for tax
reporting purposes (158,699 ) (377,255 ) (13,664 )
Provision for write-down of assets 291,369 142,373 308,310
Direct financing leases recorded as operating
leases for tax reporting purposes 30,452 43,093 37,999
Equity in earning of unconsolidated joint ventures for
tax reporting purposes (less than) in excess of
equity in earnings of unconsolidated joint
ventures for financial reporting purposes (32,904 ) 4,135 4,201
Capitalization (deduction) of transaction costs
for tax reporting purposes -- (139,935 ) 125,291
Allowance for doubtful accounts (99,481 ) (18,951 ) 12,245
Accrued rental income (65,304 ) (52,148 ) (60,127 )
Capitalization of administrative expenses for tax
reporting purposes -- 255 --
Rents paid in advance (526 ) (985 ) (18 )
Minority interest in temporary differences of
consolidated joint venture -- 2,620 (55,146 )
Other (2,686 ) (8,745 ) --
-------------- -------------- ------------------
Net income for federal income tax purposes $ 895,506 $ 532,119 $ 1,758,776
============== ============== ==================
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2001, 2000, and 1999
10. Related Party Transactions:
--------------------------
One of the individual general partners, James M. Seneff, Jr., is one of
the principal shareholders of CNL Holdings, Inc. The other individual
general partner, Robert A. Bourne, serves as President and Treasurer of
CNL Financial Group, Inc., a wholly owned subsidiary of CNL Holdings,
Inc. CNL APF Partners, LP (the "Advisor") is a wholly owned subsidiary
of CNL American Properties Fund, Inc. ("APF"). CNL Fund Advisors, Inc.
a majority owned subsidiary of CNL Financial Group, Inc. until it
merged with and into APF effective September 1, 1999, served as the
Partnership's advisor until it assigned its rights and obligations
under a management agreement with the Partnership to the Advisor
effective July 1, 2000. The individual general partners are
stockholders and directors of APF.
The Advisor provides certain services relating to management of the
Partnership and its properties pursuant to a management agreement with
the Partnership. In connection therewith, the Partnership agreed to pay
the Advisor an annual, noncumulative, subordinated management fee of
one percent of the sum of gross revenues from properties wholly owned
by the Partnership and the Partnership's allocable share of gross
revenues from joint ventures, but not in excess of competitive fees for
comparable services in the same geographic area. These fees are
incurred and payable only after the limited partners receive their 10%
Preferred Return. Due to the fact that these fees are noncumulative, if
the limited partners do not receive their 10% Preferred Return in any
particular year, no management fees will be due or payable for such
year. As a result of such threshold, no management fees were incurred
during the years ended December 2000, 1999, and 1998.
The Advisor of the Partnership is also entitled to receive a deferred,
subordinated real estate disposition fee, payable upon the sale of one
or more properties based on the lesser of one-half of a competitive
real estate commission or three percent of the sales price if the
Advisor provides a substantial amount of services in connection with
the sale. However, if the net sales proceeds are reinvested in a
replacement property, no such real estate disposition fees will be
incurred until such replacement property is sold and the net sales
proceeds are distributed. The payment of the real estate disposition
fee is subordinated to the receipt by the limited partners of their
aggregate 10% Preferred Return, plus their adjusted capital
contributions. During the years ended December 31, 2001 and 2000, the
Partnership incurred deferred, subordinated real estate disposition
fees of $9,750 and $4,050, respectively, as the result of the sales of
properties during 2001 and 2000. No deferred, subordinated real
disposition fee was incurred for the year
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2001, 2000, and 1999
10. Related Party Transactions - Continued:
--------------------------------------
ended December 31, 1999 due to the reinvestment of net sales proceeds
in additional properties.
During the years ended December 31, 2001, 2000, and 1999, the Advisor
and its affiliates of the general partners, provided accounting and
administrative services to the Partnership on a day-to-day basis
including services during 2000 and 1999 relating to the proposed and
terminated merger. The Partnership incurred $140,658, $83,476, and
$97,136, for the years ended December 31, 2001, 2000, and 1999,
respectively, for such services.
The due to related parties consisted of the following at December 31:
2001 2000
----------------- ------------------
Due to the Advisor and its affiliates:
Accounting and administrative services
$ 4,885 $ 3,185
Deferred, subordinated real estate
disposition fee 113,700 103,950
----------------- ------------------
$ 118,585 $ 107,135
================= ==================
11. Concentration of Credit Risk:
----------------------------
The following schedule presents total rental, earned and mortgage
interest income from individual lessees, or affiliated groups of
lessees, each representing more than ten percent of the Partnership's
total rental, earned and mortgage interest income (including the
Partnership share of total rental and earned income from unconsolidated
joint ventures and the properties held as tenants-in-common with
affiliates of the general partners) for each of the years ended
December 31:
2001 2000 1999
----------- ----------- -----------
Slaymaker Group, Inc. $181,387 $ 182,817 $ 184,082
Golden Corral Corporation 163,831 195,511 195,511
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2001, 2000, and 1999
11. Concentration of Credit Risk - Continued:
----------------------------------------
In addition, the following schedule presents total rental, earned, and
mortgage interest income from individual restaurant chains, each
representing more than ten percent of the Partnership's total rental,
earned, and mortgage interest income (including the Partnership's share
of total rental and earned income 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:
2001 2000 1999
---------- ---------- ---------
Golden Corral Family Steakhouse
$192,721 $195,511 $195,511
Taco Bell 186,453 173,908 184,260
Tony Roma's 181,387 182,817 184,082
Although the Partnership's properties are geographically diverse
throughout the United States and the Partnership's lessees operate a
variety of restaurant concepts, default by any one of these lessees or
restaurant chains, could significantly impact the results of operations
of the Partnership if the Partnership is not able to re-lease the
properties in a timely manner.
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2001, 2000, and 1999
12. Selected Quarterly Financial Data:
---------------------------------
The following table presents selected unaudited quarterly financial
data for each full quarter during the years ended December 31, 2001 and
2000:
2001 Quarter First Second Third Fourth Year
----------------------- ---------------- --------------- ---------------- ------------- ----------------
Revenues (1) $ 421,535 $ 371,601 $ 383,613 $388,636 $ 1,565,385
Net income 430,209 152,796 214,166 148,802 945,973
Net income per
limited partner
unit 8.60 3.06 4.28 2.98 18.92
2000 Quarter First Second Third Fourth Year
----------------------- ---------------- --------------- ---------------- ------------- ----------------
Revenues (1) $ 392,366 $ 412,299 $ 427,220 $444,298 $ 1,676,183
Net income 218,805 277,142 179,505 294,118 969,570
Net income per
limited partner
unit 4.33 5.49 3.57 6.00 19.39
(1) Revenues include equity in earnings of unconsolidated joint
ventures and minority interest in loss of consolidated joint
venture.
13. Subsequent Events:
----------------
In January 2002, the Partnership sold its Properties in Huron, Ohio and
West Lebanon, New Hampshire to unrelated third parties for $210,000 and
$675,000, respectively, and received net sales proceeds of
approximately $202,000 and $634,300, respectively (see Note 3). In
January 2002, the Partnership recorded a gain of approximately $122,000
relating to the sale of the property in West Lebanon, New Hampshire.
Due to the fact that the Partnership had recorded provisions for
write-down of assets in previous years, no gain or loss was recorded in
2002 relating to the property in Huron, Ohio.
In addition, in January 2002, the Partnership sold its Property in
Bountiful, Utah to the tenant in accordance with the option under the
lease for $1,046,000 and received net sales proceeds of $1,008,600,
resulting in a gain of $449,700 (see Note 3).
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
The General Partners of the Registrant are James M. Seneff, Jr., Robert
A. Bourne and CNL Realty Corporation, a Florida corporation. The General
Partners manage and control the Partnership's affairs and have general
responsibility and the ultimate authority in all matters affecting the
Partnership's business. The Partnership has available to it the services,
personnel and experience of CNL Fund Advisors, Inc., CNL Financial Group, Inc.
and their affiliates, all of which are affiliates of the General Partners.
James M. Seneff, Jr., age 55. Since 1971, Mr. Seneff has been active in
the acquisition, development, and management of real estate projects and,
directly or through an affiliated entity, has served as a general partner or
co-venturer in over 100 real estate ventures. These ventures have involved the
financing, acquisition, construction, and leasing of restaurants, office
buildings, apartment complexes, hotels, and other real estate. Mr. Seneff has
served as Director and Chairman of the Board of CNL American Properties Fund,
Inc. ("APF"), a public, unlisted real estate investment trust, since 1994. Mr.
Seneff served as Chief Executive Officer of APF from 1994 through August 1999,
and has served as Co-Chief Executive Officer of APF since December 2000. Mr.
Seneff served as Chairman of the Board and Chief Executive Officer of CNL Fund
Advisors, Inc., formerly the Partnership's advisor, until it merged with a
wholly-owned subsidiary of APF in September 1999, and in June 2000, was
re-elected to those positions of CNL Fund Advisors, Inc. Mr. Seneff is a
principal stockholder of CNL Holdings, Inc., the parent company of CNL Financial
Group, Inc., a diversified real estate company, and has served as a Director,
Chairman of the Board and Chief Executive Officer of CNL Financial Group, Inc.
since its formation in 1980. CNL Financial Group, Inc. is the parent company,
either directly or indirectly through subsidiaries, of CNL Real Estate Services,
Inc., CNL Capital Markets, Inc., CNL Investment Company and CNL Securities Corp.
Mr. Seneff also serves as a Director, Chairman of the Board and Chief Executive
Officer of CNL Hospitality Properties, Inc., a public, unlisted real estate
investment trust, as well as, CNL Hospitality Corp., its advisor. In addition,
he serves as a Director, Chairman of the Board and Chief Executive Officer of
CNL Retirement Properties, Inc., a public, unlisted real estate investment trust
and its advisor, CNL Retirement Corp. Since 1992, Mr. Seneff has also served as
a Director, Chairman of the Board and Chief Executive Officer of Commercial Net
Lease Realty, Inc., a public real estate investment trust that is listed on the
New York Stock Exchange. Mr. Seneff has also served as a Director, Chairman of
the Board and Chief Executive Officer of CNL Securities Corp. since 1979; CNL
Investment Company since 1990; and CNL Institutional Advisors, Inc., a
registered investment advisor for pension plans, since 1990. Mr. Seneff formerly
served as a Director of First Union National Bank of Florida, N.A., and
currently serves as the Chairman of the Board of CNL Bank. Mr. Seneff previously
served on the Florida State Commission on Ethics and is a former member and past
Chairman of the State of Florida Investment Advisory Council, which recommends
to the Florida Board of Administration investments for various Florida employee
retirement funds. The Florida Board of Administration, Florida's principal
investment advisory and money management agency, oversees the investment of more
than $60 billion of retirement funds. Mr. Seneff received his degree in Business
Administration from Florida State University in 1968.
Robert A. Bourne, age 54. Mr. Bourne has participated as a general
partner or co-venturer in over 100 real estate ventures involved in the
financing, acquisition, construction, and leasing of restaurants, office
buildings, apartment complexes, hotels, and other real estate. Mr. Bourne is
Director of the Board of Directors of APF. Mr. Bourne served as President of APF
from 1994 through February 1999. He also served as Treasurer from February 1999
through August 1999 and from May 1994 through December 1994. He also served in
various executive positions with CNL Fund Advisors, Inc. prior to its merger
with a wholly-owned subsidiary of APF including, President from 1994 through
September 1997, and Director from 1994 through August 1999. Mr. Bourne serves as
President and Treasurer of CNL Financial Group, Inc.; Director, Vice Chairman of
the Board, President and Treasurer of CNL Hospitality Properties, Inc., a
public, unlisted real estate investment trust; as well as, Director, Vice
Chairman of the Board, President and Treasurer of CNL Hospitality Corp., its
advisor. In addition, Mr. Bourne serves as Director, Vice Chairman of the Board,
President and Treasurer of CNL Retirement Properties, Inc., a public, unlisted
real estate investment trust; as well as, a Director, Vice Chairman of the
Board, President and Treasurer of its advisor, CNL Retirement Corp. Mr. Bourne
also serves as a Director of CNL Bank. He has served as a Director since 1992,
Vice Chairman of the Board since February 1996, Secretary and Treasurer from
February 1996 through 1997, and President from July 1992 through February 1996,
of Commercial Net Lease Realty, Inc., a public real estate investment trust
listed on the New York Stock Exchange. Mr. Bourne also serves as Director,
President and Treasurer for various affiliates of CNL Financial Group, Inc.
including, CNL Investment Company, CNL Securities Corp. and CNL Institutional
Advisors, Inc., a registered investment advisor for pension plans. Mr. Bourne
began his career as a certified public accountant employed by Coopers & Lybrand,
Certified Public Accountants, from 1971 through 1978, where he attained the
position of Tax Manager in 1975. Mr. Bourne graduated from Florida State
University in 1970 where he received a B.A. in Accounting, with honors.
Curtis B. McWilliams, age 46. Mr. McWilliams has served as Co-Chief
Executive Officer of APF since December 2000 and previously served as Chief
Executive Officer from September 1999 through December 2000. Prior to the
acquisition of CNL Fund Advisors, Inc., Mr. McWilliams served as President of
APF from February 1999 until September 1999. From February 1998 to February
1999, he served as Executive Vice President of APF. Mr. McWilliams joined CNL
Financial Group, Inc. in April 1997 and served as an Executive Vice President
from October 1997 until September 1999. In addition, Mr. McWilliams served as
President of CNL Fund Advisors, Inc. and CNL Financial Services, Inc. from April
1997 until the acquisition of such entities by wholly-owned subsidiaries of APF
in September 1999. From September 1983 through March 1997, Mr. McWilliams was
employed by Merrill Lynch & Co. The majority of his career at Merrill Lynch &
Co. was in the Investment Banking division where he served as a Managing
Director. Mr. McWilliams received a B.S.E. in Chemical Engineering from
Princeton University in 1977 and a Master of Business Administration degree with
a concentration in finance from the University of Chicago in 1983.
Steven D. Shackelford, age 38. Mr. Shackelford was promoted to
Executive Vice President of APF in June 2000. He served as Senior Vice President
from September 1999 until his promotion in June 2000. Mr. Shackelford has served
as Chief Financial Officer since January 1997 and has served as Secretary and
Treasurer of APF since September 1999. He also served as Chief Financial Officer
of CNL Fund Advisors, Inc. from September 1996 to September 1999. From March
1995 to July 1996, Mr. Shackelford was a senior manager in the national office
of Price Waterhouse LLP where he was responsible for advising foreign clients
seeking to raise capital and a public listing in the United States. From August
1992 to March 1995, he was a manager in the Paris, France office of Price
Waterhouse, serving several multi-national clients. Mr. Shackelford was an audit
staff and senior from 1986 to 1992 in the Orlando, Florida office of Price
Waterhouse. Mr. Shackelford received a Bachelor of Arts degree in Accounting,
with honors, and a Master of Business Administration degree from Florida State
University and is a certified public accountant.
Item 11. Executive Compensation
Other than as described in Item 13, the Partnership has not paid and
does not intend to pay any executive compensation to the General Partners or any
of their affiliates. There are no compensatory plans or arrangements regarding
termination of employment or change of control.
Item 12. Security Ownership of Certain Beneficial Owners and Management
As of March 15, 2002, no person was known to the Registrant to be a
beneficial owner of more than five percent of the Units.
The following table sets forth, as of March 15, 2002, the beneficial
ownership interests of the General Partners in the Registrant.
Title of Class Name of Partner Percent of Class
-------------- --------------- ----------------
General Partnership Interests James M. Seneff, Jr. 45%
Robert A. Bourne 45%
CNL Realty Corporation 10%
--------
100%
========
Neither the General Partners, nor any of their affiliates, owns any
interest in the Registrant, except as noted above.
Item 13. Certain Relationships and Related Transactions
The table below summarizes the types, recipients, methods of
computation and amounts of compensation, fees and distributions paid or payable
by the Partnership to the General Partners and their affiliates for the year
ended December 31, 2001, exclusive of any distributions to which the General
Partners or their affiliates may be entitled by reason of their purchase and
ownership of Units.
Amount Incurred
Type of Compensation For the Year
and Recipient Method of Computation Ended December 31, 2001
- ---------------------------------- -------------------------------------- ------------------------------
Reimbursement to affiliates Operating expenses are reimbursed at Accounting and
for operating expenses the lower of cost or 90% of the administra-tive services:
prevailing rate at which comparable $140,658
services could have been obtained in
the same geographic area.
Affiliates of the General Partners
from time to time incur certain
operating expenses on behalf of the
Partnership for which the
Partnership reimburses the
affiliates without interest.
Annual, subordinated One percent of the sum of gross $-0-
management fee to affiliates operating revenues from Properties
` wholly owned by the Partnership plus
the Partnership's allocable share of
gross revenues of joint ventures in
which the Partnership is a
co-venturer, subordinated to certain
minimum returns to the Limited
Partners. The management fee will
not exceed competitive fees for
comparable services. Due to the
fact that these fees are
noncumulative if the Limited
Partners do not receive their 10%
Preferred Return in any particular
year, no management fees will be due
or payable for such year.
Amount Incurred
Type of Compensation For the Year
and Recipient Method of Computation Ended December 31, 2001
- --------------------------------- -------------------------------------- ------------------------------
Deferred, subordinated real A deferred, subordinated real estate $9,750
estate disposition fee payable disposition fee, payable upon sale
to affiliates of one or more Properties, in an
amount equal to the lesser of (i)
one-half of a competitive real
estate commission, or (ii) three
percent of the sales price of such
Property or Properties. Payment of
such fee shall be made only if
affiliates of the General Partners
provide a substantial amount of
services in connection with the sale
of a Property or Properties and
shall be subordinated to certain
minimum returns to the Limited
Partners. However, if the net sales
proceeds are reinvested in a
replacement Property, no such real
estate disposition fee will be
incurred until such replacement
Property is sold and the net sales
proceeds are distributed.
General Partners' deferred, A deferred, subordinated share equal $-0-
subordinated share of to one percent of Partnership
Partnership net cash flow distributions of net cash flow,
subordinated to certain minimum
returns to the Limited Partners.
General Partners' deferred, A deferred, subordinated share equal $-0-
subordinated share of to five percent of Partnership
Partnership net sales proceeds distributions of such net sales
from a sale or sales not in proceeds, subordinated to certain
liquidation of the Partnership minimum returns to the Limited
Partners.
Amount Incurred
Type of Compensation For the Year
And Recipient Method of Computation Ended December 31, 2001
- --------------------------------- -------------------------------------- ------------------------------
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.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) The following documents are filed as part of this report.
1. Financial Statements
Report of Independent Certified Public Accountants
Balance Sheets at December 31, 2001 and 2000
Statements of Income for the years ended December 31, 2001,
2000, and 1999
Statements of Partners' Capital for the years ended December
31, 2001, 2000, and 1999
Statements of Cash Flows for the years ended December 31,2001,
2000, and 1999
Notes to Financial Statements
2. Financial Statement Schedules
Schedule II - Valuation and Qualifying Accounts for the years
ended December 31, 2001, 2000, and 1999
Schedule III - Real Estate and Accumulated Depreciation at
December 31, 2001
Notes to Schedule III - Real Estate and Accumulated
Depreciation at December 31, 2001
All other Schedules are omitted as the required information is
inapplicable or is presented in the financial statements or
notes thereto.
3. Exhibits
3.1 Amended and Restated Affidavit and Certificate of
Limited Partnership of CNL Income Fund V, Ltd.
(Included as Exhibit 3.1 to Form 10-K filed with the
Securities and Exchange Commission on March 31, 1994,
and incorporated herein by reference.)
4.1 Amended and Restated Affidavit and Certificate of
Limited Partnership of CNL Income Fund V, Ltd.
(Included as Exhibit 3.1 to Form 10-K filed with the
Securities and Exchange Commission on March 31, 1994,
and incorporated herein by reference.)
4.2 Amended and Restated Certificate and Agreement of
Limited Partnership of CNL Income Fund V, Ltd.
(Included as Exhibit 4.2 to Form 10-K filed with the
Securities and Exchange Commission on March 31, 1994,
and incorporated herein by reference.)
10.1 Management Agreement (Included as Exhibit 10.1 to
From 10-K filed with the Securities and Exchange
Commission on March 31, 1994, and incorporated herein
by reference.)
10.2 Assignment of Management Agreement from CNL
Investment Company to CNL Income Fund Advisors, Inc.
(Included as Exhibit 10.2 to Form 10-K filed with the
Securities and Exchange Commission on March 30, 1995,
and incorporated herein by reference.)
10.3 Assignment of Management Agreement from CNL Income
Fund Advisors, Inc. to CNL Fund Advisors, Inc.
(Included as Exhibit 10.3 to Form 10-K filed with the
Securities and Exchange Commission on April 1, 1996,
and incorporated herein by reference.)
10.4 Assignment of Management Agreement from CNL Fund
Advisors, Inc. to CNL APF Partners, LP. (Included as
Exhibit 10.4 to Form 10-Q filed with the Securities
and Exchange Commission on August 9, 2001, and
incorporated herein by reference.)
(b) The Registrant filed no reports on Form 8-K during
the period from October 1, 2001 through December 31,
2001.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on the 22nd day of
March, 2002.
CNL INCOME FUND V, LTD.
By: CNL REALTY CORPORATION
General Partner
/s/ Robert A. Bourne
-----------------------------------
ROBERT A. BOURNE, President
By: ROBERT A. BOURNE
General Partner
/s/ Robert A. Bourne
-----------------------------------
ROBERT A. BOURNE
By: JAMES M. SENEFF, JR.
General Partner
/s/ James M. Seneff, Jr.
-----------------------------------
JAMES M. SENEFF, JR.
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signature Title Date
/s/ Robert A. Bourne President, Treasurer and Director March 22, 2002
- ------------------------------------
Robert A. Bourne (Principal Financial and Accounting
Officer)
/s/ James M. Seneff, Jr. Chief Executive Officer and Director March 22, 2002
- ------------------------------------
James M. Seneff, Jr. (Principal Executive Officer)
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
Years Ended December 31, 2001, 2000, and 1999
Additions Deductions
---------------------------------- ----------------------------
Collected
or Deter-
Balance at Charged to Charged to Deemed mined to Balance
Beginning Costs and Other Uncollec- be Col- at End
Year Description of Year Expenses Accounts tible lectible of Year
- ---------- ----------------- -------------- --------------- ---------------- ------------- ------------ ------------
1999 Allowance for
doubtful
accounts (a) $ 141,505 $ -- $ 13,070 (b) $ -- $ 825 $ 153,750
- ---------- ============== =============== ================ ============= ============ ============
2000 Allowance for
doubtful
accounts (a) $ 153,750 $ -- $ 47,400 (b) $ -- $ 66,351 $ 134,799
- ---------- ============== =============== ================ ============= ============ ============
2001 Allowance for
doubtful
accounts (a) $ 134,799 $ -- $ 35,317 (b) $ 134,799 (c) $ -- $ 35,317
- ---------- ============== =============== ================ ============= ============ ============
(a) deducted from receivables on the balance sheet.
(b) reduction of rental and other income.
(c) amounts written off as uncollectible.
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 2001
Costs Capitalized
Subsequent To
Initial Cost Acquisition
------------------------- --------------------
Encum- Buildings and Improve- Carrying
brances Land Improvements ments Costs
---------- ----------- ------------ ---------- --------
Properties the Partnership
has Invested in Under
Operating Leases:
Arby's Restaurants:
Connorsville, Indiana - $279,665 - $591,137 -
South Haven, Michigan - 120,847 599,339 120,363 -
Burger King Restaurant:
Lawrenceville, Georgia (l) - 482,071 - 368,415 -
Captain D's Restaurant:
Belleville, Illinois - 186,050 383,781 - -
Denny's Restaurant:
New Castle, Indiana - 117,394 471,340 - -
Huron, Ohio - 21,448 193,325
Golden Corral Family
Steakhouse Restaurants:
Livingston, Texas - 156,382 429,107 - -
Victoria, Texas - 504,787 742,216 - -
IHOP:
Houston, Texas - 513,384 671,713 - -
Pizza Hut Restaurant:
Mexia, Texas - 237,944 200,501 - -
Taco Bell Restaurants:
Bountiful, Utah - 330,164 - 319,511 -
Centralia, Washington - 215,302 - 378,836 -
Tony Romas:
Sandy, Utah - 595,330 - - -
Wendy's Old Fashioned
Hamburger Restaurants:
Tampa, Florida - 336,216 462,401 - -
Other:
West Lebanon, New Hampshire -g) (k) 255,389 - 518,697 -
----------- ------------ ---------- --------
$4,352,373 $4,153,723 $2,296,959 -
=========== ============ ========== ========
Costs Capitalized
Subsequent To
Initial Cost Acquisition
------------------------- --------------------
Encum- Building and Improve- Carrying
brances Land Improvements ments Costs
---------- ----------- ------------ ---------- --------
Property of Joint Venture in
Which the Partnership has a
43% Interest and has
Invested in Under an
Operating Lease:
Waffle House Restaurant:
Cocoa, Florida - $183,229 $192,857 - -
=========== ============ ========== ========
Property in Which the
Partnership has a 42.09%
Interest as Tenants-in-Common
and has Invested in Under an
Operating Lease:
Del Taco Restaurant:
Mesa, Arizona (j) - $440,842 - - -
=========== ============ ========== ========
Property in Which the
Partnership has a 27.78%
Interest as Tenants-in-Common
and has Invested in Under an
Operating Lease:
Chevy's Fresh Mex Restaurant:
Vancouver, Washington - $875,659 $1,389,366 - -
=========== ============ ========== ========
Property of Joint Venture in Which
the Partnership has a 53.12%
Interest and has Invested in
Under an Operating Lease:
Ruby Tuesday's Restaurant:
Orlando, Florida - $623,496 - - -
=========== ============ ========== ========
Costs Capitalized
Subsequent to
Initial Cost Acquisition
------------------------- --------------------
Encum- Building and Improve- Carrying
brances Land Improvements ments Costs
---------- ----------- ------------ ---------- --------
Properties the Partnership
has Invested in Under
Direct Financing Leases:
Captain D's Restaurant
Zanesville, Ohio - $99,651 $390,518 - -
Tony Romas:
Sandy, Utah - - 911,072 - -
----------- ------------ ---------- --------
$99,651 $1,301,590 - -
=========== ============ ========== ========
Property of Joint Venture
in Which the Partnership
has a 53.12% Interest and
has Invested in Under a
Direct Financing Lease:
Ruby Tuesday's Restaurant:
Orlando, Florida - - $820,202 - -
=========== ============ ========== ========
Property in Which the Partnership
has a 42.09% Interest as
Tenants-in-Common and has
Invested in Under a
Direct Financing Lease:
Del Taco Restaurant:
Mesa, Arizona (j) - - $650,622 - -
=========== ============ ========== ========
Net Cost Basis at Which Life on Which
Carried at Close of Period (c) Depreciation in
- ---------------------------------------- Date Latest Income
Buildings and Accumulated of Con- Date Statement is
Land Improvements Total Depreciation structionAcquired Computed
- ------------- ------------ ----------- ----------- ------- ------- ------------
$279,665 $591,137 $870,802 $216,811 1989 03/89 (b)
120,847 719,702 840,549 213,644 1989 03/89 (i)
482,071 301,937 784,008 153,185 1989 04/89 (b)
186,050 383,781 569,831 163,640 1988 03/89 (b)
117,394 471,340 588,734 150,279 1989 02/89 (h)
21,448 193,325 214,773 13,347 1971 05/89 (l)
156,382 429,107 585,489 176,409 1986 09/89 (b)
504,787 742,216 1,247,003 297,738 1989 12/89 (b)
513,384 671,713 1,185,097 91,739 1997 11/97 (b)
237,944 200,501 438,445 85,213 1985 03/89 (b)
330,164 319,511 649,675 131,798 1989 05/89 (b)
215,302 378,836 594,138 152,587 1989 08/89 (b)
595,330 (f) 595,330 (d) 1997 12/97 (d)
336,216 462,401 798,617 197,805 1987 02/89 (b)
255,389 518,697 774,086 261,848 1989 03/89 (b)
- ------------- ------------ ----------- -----------
$4,352,373 $6,384,204 $10,736,577 $2,306,043
============= ============ =========== ===========
Net Cost Basis at Which Life on Which
Carried at Close of Period (c) Depreciation in
- ---------------------------------------- Date Latest Income
Building and Accumulated of Con- Date Statement is
Land Improvements Total Depreciation structionAcquired Computed
- ------------- ------------ ----------- ----------- ------- ------- ------------
$183,229 $192,857 $376,086 $77,193 1986 12/89 (b)
============= ============ =========== ===========
$440,842 (f) $440,842 (d) 1997 10/97 (d)
============= ===========
$875,659 $1,389,366 $2,265,025 $185,375 1994 12/97 (b)
============= ============ =========== ===========
$623,496 (f) $623,496 (d) 1998 05/98 (d)
============= ===========
Net Cost Basis at Which Life on Which
Carried at Close of Period (c) Depreciation In
- ---------------------------------------- Date Latest Income
Building and Accumulated of Con- Date Statement is
Land Improvements Total Depreciation structionAcquired Computed
- ------------- ------------ ----------- ----------- ------- ------- ------------
(f) (f) (f) (e) 1988 03/89 (e)
- (f) (f) (d) 1997 12/97 (d)
- (f) (f) (d) 1998 05/98 (d)
- (f) (f) (d) 1997 10/97 (d)
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 2001
Costs Capitalized
Subsequent To
Initial Cost Acquisition
------------------------- --------------------
Encum- Buildings and Improve- Carrying
brances Land Improvements ments Costs
---------- ----------- ------------ ---------- --------
Properties the Partnership
has Invested in Under
Operating Leases:
Arby's Restaurants:
Connorsville, Indiana - $279,665 - $591,137 -
South Haven, Michigan - 120,847 599,339 120,363 -
Burger King Restaurant:
Lawrenceville, Georgia (l) - 482,071 - 368,415 -
Captain D's Restaurant:
Belleville, Illinois - 186,050 383,781 - -
Denny's Restaurant:
New Castle, Indiana - 117,394 471,340 - -
Huron, Ohio - 21,448 193,325
Golden Corral Family
Steakhouse Restaurants:
Livingston, Texas - 156,382 429,107 - -
Victoria, Texas - 504,787 742,216 - -
IHOP:
Houston, Texas - 513,384 671,713 - -
Pizza Hut Restaurant:
Mexia, Texas - 237,944 200,501 - -
Taco Bell Restaurants:
Bountiful, Utah - 330,164 - 319,511 -
Centralia, Washington - 215,302 - 378,836 -
Tony Romas:
Sandy, Utah - 595,330 - - -
Wendy's Old Fashioned
Hamburger Restaurants:
Tampa, Florida - 336,216 462,401 - -
Other:
West Lebanon, New Hampshire -g) (k) 255,389 - 518,697 -
----------- ------------ ---------- --------
$4,352,373 $4,153,723 $2,296,959 -
=========== ============ ========== ========
Costs Capitalized
Subsequent To
Initial Cost Acquisition
------------------------- --------------------
Encum- Building and Improve- Carrying
brances Land Improvements ments Costs
---------- ----------- ------------ ---------- --------
Property of Joint Venture in
Which the Partnership has a
43% Interest and has
Invested in Under an
Operating Lease:
Waffle House Restaurant:
Cocoa, Florida - $183,229 $192,857 - -
=========== ============ ========== ========
Property in Which the
Partnership has a 42.09%
Interest as Tenants-in-Common
and has Invested in Under an
Operating Lease:
Del Taco Restaurant:
Mesa, Arizona (j) - $440,842 - - -
=========== ============ ========== ========
Property in Which the
Partnership has a 27.78%
Interest as Tenants-in-Common
and has Invested in Under an
Operating Lease:
Chevy's Fresh Mex Restaurant:
Vancouver, Washington - $875,659 $1,389,366 - -
=========== ============ ========== ========
Property of Joint Venture in Which
the Partnership has a 53.12%
Interest and has Invested in
Under an Operating Lease:
Ruby Tuesday's Restaurant:
Orlando, Florida - $623,496 - - -
=========== ============ ========== ========
Costs Capitalized
Subsequent to
Initial Cost Acquisition
------------------------- --------------------
Encum- Building and Improve- Carrying
brances Land Improvements ments Costs
---------- ----------- ------------ ---------- --------
Properties the Partnership
has Invested in Under
Direct Financing Leases:
Captain D's Restaurant
Zanesville, Ohio - $99,651 $390,518 - -
Tony Romas:
Sandy, Utah - - 911,072 - -
----------- ------------ ---------- --------
$99,651 $1,301,590 - -
=========== ============ ========== ========
Property of Joint Venture
in Which the Partnership
has a 53.12% Interest and
has Invested in Under a
Direct Financing Lease:
Ruby Tuesday's Restaurant:
Orlando, Florida - - $820,202 - -
=========== ============ ========== ========
Property in Which the Partnership
has a 42.09% Interest as
Tenants-in-Common and has
Invested in Under a
Direct Financing Lease:
Del Taco Restaurant:
Mesa, Arizona (j) - - $650,622 - -
=========== ============ ========== ========
Net Cost Basis at Which Life on Which
Carried at Close of Period (c) Depreciation in
- ---------------------------------------- Date Latest Income
Buildings and Accumulated of Con- Date Statement is
Land Improvements Total Depreciation structionAcquired Computed
- ------------- ------------ ----------- ----------- ------- ------- ------------
$279,665 $591,137 $870,802 $216,811 1989 03/89 (b)
120,847 719,702 840,549 213,644 1989 03/89 (i)
482,071 301,937 784,008 153,185 1989 04/89 (b)
186,050 383,781 569,831 163,640 1988 03/89 (b)
117,394 471,340 588,734 150,279 1989 02/89 (h)
21,448 193,325 214,773 13,347 1971 05/89 (l)
156,382 429,107 585,489 176,409 1986 09/89 (b)
504,787 742,216 1,247,003 297,738 1989 12/89 (b)
513,384 671,713 1,185,097 91,739 1997 11/97 (b)
237,944 200,501 438,445 85,213 1985 03/89 (b)
330,164 319,511 649,675 131,798 1989 05/89 (b)
215,302 378,836 594,138 152,587 1989 08/89 (b)
595,330 (f) 595,330 (d) 1997 12/97 (d)
336,216 462,401 798,617 197,805 1987 02/89 (b)
255,389 518,697 774,086 261,848 1989 03/89 (b)
- ------------- ------------ ----------- -----------
$4,352,373 $6,384,204 $10,736,577 $2,306,043
============= ============ =========== ===========
Net Cost Basis at Which Life on Which
Carried at Close of Period (c) Depreciation in
- ---------------------------------------- Date Latest Income
Building and Accumulated of Con- Date Statement is
Land Improvements Total Depreciation structionAcquired Computed
- ------------- ------------ ----------- ----------- ------- ------- ------------
$183,229 $192,857 $376,086 $77,193 1986 12/89 (b)
============= ============ =========== ===========
$440,842 (f) $440,842 (d) 1997 10/97 (d)
============= ===========
$875,659 $1,389,366 $2,265,025 $185,375 1994 12/97 (b)
============= ============ =========== ===========
$623,496 (f) $623,496 (d) 1998 05/98 (d)
============= ===========
Net Cost Basis at Which Life on Which
Carried at Close of Period (c) Depreciation In
- ---------------------------------------- Date Latest Income
Building and Accumulated of Con- Date Statement is
Land Improvements Total Depreciation structionAcquired Computed
- ------------- ------------ ----------- ----------- ------- ------- ------------
(f) (f) (f) (e) 1988 03/89 (e)
- (f) (f) (d) 1997 12/97 (d)
- (f) (f) (d) 1998 05/98 (d)
- (f) (f) (d) 1997 10/97 (d)
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED
DEPRECIATION - CONTINUED
December 31, 2001
(a) Transactions in real estate and accumulated depreciation during 2001,
2000 and 1999, are summarized as follows:
Accumulated
Cost Depreciation
---------------- -------------------
Properties the Partnership has Invested in Under
Operating Leases:
Balance, December 31, 1998 $ 12,555,884 $ 1,895,755
Dispositions (1,040,885 ) (140,629 )
Provision for write-down of assets (308,310 ) --
Depreciation expense -- 243,260
---------------- ----------------
Balance, December 31, 1999 11,206,689 1,998,386
Acquisition 20,000 --
Disposition (232,578 ) (111,062 )
Provision for write-down of assets (109,919 ) --
Depreciation expense -- 229,245
---------------- ----------------
Balance, December 31, 2000 10,884,192 2,116,569
Acquisition 371,418 --
Disposition (295,909 ) (40,371 )
Provision for write-down of assets (223,124 ) --
Depreciation expense -- 229,845
---------------- ----------------
Balance, December 31, 2001 $ 10,736,577 $ 2,306,043
================ ================
Property of Joint Venture in Which the Partnership has a 43%
Interest and has Invested in Under an Operating Lease:
Balance, December 1998 $ 376,086 $ 57,909
Depreciation expense -- 6,428
---------------- ----------------
Balance, December 31, 1999 376,086 64,337
Depreciation expense -- 6,428
---------------- ----------------
Balance, December 31, 2000 376,086 70,765
Depreciation expense -- 6,428
---------------- ----------------
Balance, December 31, 2001 $ 376,086 $ 77,193
================ ================
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED
DEPRECIATION - CONTINUED
December 31, 2001
Accumulated
Cost Depreciation
---------------- ----------------
Property of Joint Venture in Which the Partnership has a 53.12%
Interest and has Invested in Under an Operating Lease:
Balance, December 31, 1998 $ -- $ --
Acquisition 623,496 --
Depreciation expense (d) -- --
---------------- ----------------
Balance, December 31, 1999 $ 623,496 $ --
Depreciation (d) -- --
---------------- ----------------
Balance, December 31, 2000 623,496 --
Depreciation (d) -- --
---------------- ----------------
Balance, December 31, 2001 $ 623,496 $ --
================ ================
Property in Which the Partnership has a 42.09% Interest as
Tenants-in-Common and has Invested in Under an Operating Lease:
Balance, December 31, 1998 $ 1,091,464 $ 25,837
Depreciation Expense -- 21,687
---------------- -----------------
Balance, December 31, 1999 1,091,464 47,524
Depreciation expense -- 21,687
---------------- -----------------
Balance, December 31, 2000 1,091,464 69,211
Depreciation expense -- 14,699
Reclassification to direct financing lease (650,622 ) (83,910 )
---------------- -----------------
Balance, December 31, 2001 $ 440,842 $ --
================ =================
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED
DEPRECIATION - CONTINUED
December 31, 2001
Accumulated
Cost Depreciation
---------------- -----------------
Property of in Which the Partnership has a 27.78% Interest as
Tenants-in-Common and has Invested in Under an Operating Lease:
Balance, December 31, 1998 $ 2,265,025 $ 46,436
Depreciation expense -- 46,313
---------------- -----------------
Balance, December 31, 1999 2,265,025 92,749
Depreciation expense -- 46,313
---------------- -----------------
Balance, December 31, 2000 2,265,025 139,062
Depreciation expense -- 46,313
---------------- -----------------
Balance, December 31, 2001 $ 2,265,025 $ 185,375
================ =================
(b) Depreciation expense is computed for buildings and improvements based
upon estimated lives of 30 years.
(c) As of December 31, 2001, the aggregate cost of the Properties owned by
the Partnership and its consolidated joint venture, and the
unconsolidated joint ventures for federal income tax purposes was
$12,376,486 and $5,175,275, respectively. All of the leases are treated
as operating leases for federal income tax purposes.
(d) The portion of the lease relating to the building has been recorded as
a direct financing lease. The cost of the building has been included in
the net investment in direct financing leases; therefore, depreciation
is not applicable.
(e) The lease for land and building has been recorded as a direct financing
lease. The cost of the land and building has been included in net
investment in direct financing leases; therefore, depreciation is not
applicable.
(f) Certain components of the lease relating to the land and building have
been recorded as a direct financing lease. Accordingly, costs related
to these components of this lease are not shown.
(g) The restaurant on the Property in West Lebanon, New Hampshire, was
converted from a Ponderosa Steakhouse restaurant to a local,
independent restaurant in 1992.
(h) Effective January 1994, the lease for this Property was amended,
resulting in the reclassification of the building portion of the lease
as an operating lease. The building was recorded at net book value as
of January 1, 1994, and depreciated over its remaining estimated life
of approximately 25 years.
(i) Effective February 1994, the lease for this Property was terminated,
resulting in the lease's reclassification as an operating lease. The
building was recorded at net book value as of February 1994 and will be
depreciated over its remaining estimated life of approximately 25
years.
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED
DEPRECIATION - CONTINUED
December 31, 2001
(j) During the year ended December 31, 1997, the Partnership and an
affiliate, as tenants-in-common, purchased land and building from CNL
BB Corp., an affiliate of the General Partners, for an aggregate cost
of $1,091,464. Effective September 15, 2001, the lease for this
Property was re-leased, resulting in a reclassification of the building
portion of the lease as a capital lease.
(k) The undepreciated cost of the Property in Lebanon, New Hampshire, was
written down to net realizable value due to an impairment in value. The
Partnership recognized the impairments by recording a provision for
write-down of assets in the amount of $169,482, $122,874 and $99,022 at
December 31, 1999, 1998 and 1997, respectively. The impairments
represented the difference between the Property's carrying value and
the General Partners' estimated net realizable value of the Property at
December 31, 1999, 1998 and 1997, respectively. The cost of the
Property presented on this schedule is the net amount at which the
Property was carried at December 31, 2001, including the provisions for
write-down of assets.
(l) The undepreciated cost of the Property in Lawrenceville, Georgia, was
written down to net realizable value due to an impairment in value. The
Partnership recognized the impairment by recording a provision for
write-down of assets in the amount $66,479 at December 31, 2001. The
impairment represented the difference between the Property's carrying
value and the General Partners' estimated net realizable value of the
Property at December 31, 2001. The cost of the Property presented on
this schedule is the net amount at which the Property was carried at
December 31, 2001, including the provision for write-down of assets.