<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
"This schedule contains summary financial information extracted from the balance
sheet of CNL Income Fund III, Ltd. at March 31, 1995, and its statement of
income for the quarter then ended and is qualified in its entirety by reference
to the Form 10-Q of CNL Income Fund III, Ltd. for the quarter ended March 31,
1995."
</LEGEND>
<CIK> 0000817845
<NAME> CNL INCOME FUND III, LTD.
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 478,357
<SECURITIES> 0
<RECEIVABLES> 421,065
<ALLOWANCES> 339,324
<INVENTORY> 0
<CURRENT-ASSETS> 562,716
<PP&E> 20,852,053
<DEPRECIATION> 3,009,258
<TOTAL-ASSETS> 19,760,653
<CURRENT-LIABILITIES> 694,592
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 18,919,875
<TOTAL-LIABILITY-AND-EQUITY> 19,760,653
<SALES> 0
<TOTAL-REVENUES> 620,089
<CGS> 0
<TOTAL-COSTS> 155,452
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 463,746
<INCOME-TAX> 0
<INCOME-CONTINUING> 463,746
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 463,746
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1995
-----------------------------------
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
0-16850
----------------------
CNL Income Fund III, Ltd.
- - - - - - --------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Florida 59-2809460
- - - - - - ----------------------------- -------------------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organiza- Identification No.)
tion)
400 E. South Street, #500
Orlando, Florida 32801
- - - - - - ----------------------------- -------------------------------
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number
(including area code) (407) 422-1574
-------------------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Sections 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for 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
--------- ---------
CONTENTS
--------
Part I Page
----
Item 1. Financial Statements:
Condensed Balance Sheets 1
Condensed Statements of Income 2
Condensed Statements of Partners' Capital 3
Condensed Statements of Cash Flows 4
Notes to Condensed Financial Statements 5
Item 2. Management's Discussion and Analysis
of Financial Condition and
Results of Operations 6-9
Part II
Other Information 10
<TABLE>
CNL INCOME FUND III, LTD.
(A Florida Limited Partnership)
CONDENSED BALANCE SHEETS
<CAPTION>
March 31, December 31,
ASSETS 1995 1994
----------- ------------
<S> <C> <C>
Land and buildings on operating
leases, less accumulated
depreciation of $3,009,258 and
$2,900,784 $17,842,795 $17,951,269
Investment in direct financing
lease 549,098 550,372
Investment in joint venture 669,652 689,326
Cash and cash equivalents 478,357 505,374
Receivables, less allowance for
doubtful accounts of $339,324
and $310,507 81,741 115,977
Prepaid expenses 2,618 3,823
Lease costs, less accumulated
amortization of $1,112 and $962 10,888 11,038
Accrued rental income 96,150 89,232
Other assets 29,354 29,354
----------- -----------
$19,760,653 $19,945,765
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 10,814 $ 19,293
Accrued and escrowed real estate
taxes payable 30,504 94,138
Distributions payable 594,000 594,000
Due to related parties 14,566 2,337
Rents paid in advance 44,708 38,864
----------- -----------
Total liabilities 694,592 748,632
Minority interest 146,186 147,004
Partners' capital 18,919,875 19,050,129
----------- -----------
$19,760,653 $19,945,765
=========== ===========
<FN>
See accompanying notes to financial statements.
</TABLE>
<TABLE>
CNL INCOME FUND III, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF INCOME
<CAPTION>
Quarter Ended
March 31,
1995 1994
-------- --------
<S> <C> <C>
Revenues:
Rental income from operating leases $562,798 $561,157
Earned income from direct financing
lease 18,116 17,475
Contingent rental income 33,773 28,330
Interest and other income 5,402 21,401
-------- --------
620,089 628,363
-------- --------
Expenses:
General operating and administrative 25,688 25,511
Professional services 4,069 6,027
Real estate taxes 5,981 -
Other taxes 11,090 -
Depreciation and amortization 108,624 108,619
-------- --------
155,452 140,157
-------- --------
Income Before Minority Interest in
Income of Consolidated Joint
Venture and Equity in Earnings of
Unconsolidated Joint Venture 464,637 488,206
Minority Interest in Income of
Consolidated Joint Venture (4,232) (4,339)
Equity in Earnings of Unconsolidated
Joint Venture 3,341 3,472
-------- --------
Net Income $463,746 $487,339
======== ========
Allocation of Net Income:
General partners $ 4,637 $ 4,873
Limited partners 459,109 482,466
-------- --------
$463,746 $487,339
======== ========
Net Income Per Limited Partner Unit $ 9.18 $ 9.65
======== ========
<FN>
See accompanying notes to financial statements.
</TABLE>
<TABLE>
CNL INCOME FUND III, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF PARTNERS' CAPITAL
<CAPTION>
Quarter Ended Year Ended
March 31, December 31,
1995 1994
------------- ------------
<S> <C> <C>
General partners:
Beginning balance $ 289,252 $ 270,666
Net income 4,637 18,586
----------- -----------
293,889 289,252
----------- -----------
Limited partners:
Beginning balance 18,760,877 19,296,858
Net income 459,109 1,840,019
Distributions (594,000) (2,376,000)
----------- -----------
18,625,986 18,760,877
----------- -----------
Total partners' capital $18,919,875 $19,050,129
=========== ===========
<FN>
See accompanying notes to financial statements.
</TABLE>
<TABLE>
CNL INCOME FUND III, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF CASH FLOWS
<CAPTION>
Quarter Ended
March 31,
1995 1994
--------- ---------
<S> <C> <C>
Increase (Decrease) in Cash and Cash
Equivalents:
Net Cash Provided by Operating
Activities $ 572,033 $ 591,478
--------- ---------
Cash Flows from Investing
Activities:
Collections on loans - 6,903
Payment of lease costs - (4,000)
--------- ---------
Net cash provided by
investing activities - 2,903
--------- ---------
Cash Flows from Financing
Activities:
Distributions to limited
partners (594,000 ) (594,000)
Distributions to holders of
minority interest (5,050 ) (5,026)
--------- ---------
Net cash used in financing
activities (599,050 ) (599,026)
--------- ---------
Net Decrease in Cash and Cash
Equivalents (27,017 ) (4,645)
Cash and Cash Equivalents at Beginning
of Quarter 505,374 515,863
--------- ---------
Cash and Cash Equivalents at End of
Quarter $ 478,357 $ 511,218
========= =========
Supplemental Schedule of Non-Cash
Financing Activities:
Distributions declared and unpaid
at end of quarter $ 594,000 $ 594,000
========= =========
<FN>
See accompanying notes to financial statements.
</TABLE>
CNL INCOME FUND III, LTD.
(A Florida Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS
1. Basis of Presentation:
---------------------
The accompanying unaudited condensed financial statements have been
prepared in accordance with the instructions to Form 10-Q and do not
include all of the information and note disclosures required by
generally accepted accounting principles. The financial statements
reflect all adjustments, consisting of normal recurring adjustments,
which are, in the opinion of management, necessary to a fair statement
of the results for the interim periods presented. Operating results
for the quarter ended March 31, 1995, may not be indicative of the
results that may be expected for the year ending December 31, 1995.
These unaudited financial statements should be read in conjunction with
the financial statements and notes thereto included in Form 10-K of CNL
Income Fund III, Ltd. (the "Partnership") for the year ended December 31,
1994.
The Partnership accounts for its 69.07% interest in the accounts of
Tuscawilla Joint Venture under the full consolidation method. All
significant intercompany accounts and transactions have been eliminated.
Net income per limited partner unit is calculated based upon the
weighted average number of units of limited partnership interest
outstanding during each period. The weighted average number of
limited partner units outstanding for each of the quarters ended
March 31, 1995 and 1994 was 50,000.
In March 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 121, Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of. The
statement, which is effective for fiscal years beginning after December
15, 1995, requires that an entity review long-lived assets and certain
identifiable intangibles to be held and used for impairment whenever
events or changes in circumstances indicate that the carrying amount of
the asset may not be recoverable. The Partnership plans to adopt this
standard in 1996 and does not expect compliance with such standard to
have a material effect, if any, on the Partnership's financial position
or results of operations.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
CNL Income Fund III, Ltd. (the "Partnership") is a Florida limited
partnership that was organized on June 1, 1987, to acquire for cash, either
directly or through joint venture arrangements, both newly constructed and
existing restaurants, as well as land upon which restaurants were to be
constructed, which are leased primarily to operators of selected national and
regional fast-food restaurant chains (collectively, the "Properties"). The
leases generally are triple-net leases, with the lessees responsible for all
repairs and maintenance, property taxes, insurance and utilities. As of
March 31, 1995, the Partnership owned 32 Properties, including interests in
two Properties owned by joint ventures in which the Partnership is a
co-venturer.
Liquidity and Capital Resources
- - - - - - -------------------------------
The Partnership's primary source of capital for the quarters ended
March 31, 1995 and 1994, was cash from operations (which includes cash
received from tenants, distributions from joint ventures, and interest
and other income received, less cash paid for expenses). Cash from
operations was $572,033 and $591,478 for the quarters ended March 31, 1995
and 1994, respectively. The decrease in cash from operations for the
quarter ended March 31, 1995, is primarily a result of changes in income
and expenses as discussed in "Results of Operations" below.
In August 1994, the Partnership entered into an agreement with the
tenant of the Po Folks Property in Hagerstown, Maryland, providing for the
payment to the Partnership of $250,525 of past due rental amounts on a weekly
basis over a period of approximately 60 months. During the quarter ended
March 31, 1995, the tenant discontinued payment of the base rental income as
provided in its lease agreement. In addition, as of March 31, 1995, the
Partnership had not received any payments relating to the $250,525 of past
due rental amounts and was negotiating to sell the Property and accept a
promissory note for a portion of the sales price. In connection with the
sale, the Partnership is expected to accept a settlement of ten percent of
the gross arrearages due, or approximately $27,500. The amount of arrearages
included in receivables at March 31, 1995 and December 31, 1994, is $27,529
and $0, respectively, which is net of an allowance for doubtful accounts of
$247,762 and $234,443, respectively.
During 1994, the Partnership received a judgment in bankruptcy relating
to the former tenant of the Property in Canton Township, Michigan, for an
amount equal to $3,324 as payment in full of all past due amounts owed to the
Partnership. Payment was due in 60 monthly installments of $66, including
interest at a rate of seven percent per annum, commencing on November 1, 1994.
The Partnership received no payments relating to this judgment and negotiated
with the former tenant a reduced lump sum settlement of $2,588, which was
received during the quarter ended March 31, 1995.
Currently, rental income from the Partnership's Properties is invested
in money market accounts and other short-term, highly liquid investments
pending the Partnership's use of such funds to pay Partnership expenses or
to make distributions to the partners. At March 31, 1995, the Partnership
had $478,357 invested in such short-term investments as compared to $505,374
at December 31, 1994. The funds remaining at March 31, 1995, will be used
towards the payment of distributions and other liabilities.
Total liabilities of the Partnership, including distributions payable,
decreased to $694,592 at March 31, 1995, from $748,632 at December 31, 1994,
primarily as a result of the Partnership's payment of real estate taxes
accrued at December 31, 1994, relating to the Property in Chicago, Illinois,
which the Partnership paid due to the tenant's default under the terms of its
lease. Liabilities also decreased as a result of the Partnership's payment
of real estate taxes that had been escrowed at December 31, 1994. Liabilities
at March 31, 1995, to the extent they exceed cash and cash equivalents at
March 31, 1995, will be paid from future cash from operations and, in the
event the general partners elect to make additional capital contributions,
from future general partner capital contributions.
Based on current and anticipated future cash from operations, the
Partnership declared distributions to limited partners of $594,000 for each of
the quarters ended March 31, 1995 and 1994. This represents distributions for
each applicable quarter of $11.88 per unit. No distributions were made to the
general partners for the quarters ended March 31, 1995 and 1994. No amounts
distributed or to be distributed to the limited partners for the quarters
ended March 31, 1995 and 1994, are required to be or have been treated by the
Partnership as a return of capital for purposes of calculating the limited
partners' return on their adjusted capital contributions.
The Partnership's investment strategy of acquiring Properties for cash
and leasing them under triple-net leases to operators who generally meet
specified financial standards minimizes the Partnership's operating expenses.
The general partners believe that the leases will continue to generate cash
flow in excess of operating expenses.
The general partners have the right, but not the obligation, to make
additional capital contributions if they deem it appropriate in connection
with the operations of the Partnership.
Results of Operations
- - - - - - ---------------------
During the quarters ended March 31, 1995 and 1994, the Partnership and
its consolidated joint venture, Tuscawilla Joint Venture, earned $580,914 and
$578,632, respectively, in rental income from operating leases and earned
income from the direct financing lease. In addition, for the quarters ended
March 31, 1995 and 1994, the Partnership earned $33,773 and $28,330,
respectively, in contingent rental income. The increase in rental and earned
income during the quarter ended March 31, 1995, as compared to the quarter
ended March 31, 1994, was partially attributable to an increase of approxi-
mately $26,700 as the result of the Partnership's increasing its allowance
for doubtful accounts by approximately $9,600 during the quarter ended
March 31, 1995, as compared to approximately $36,300 during the quarter ended
March 31, 1994, for rental amounts relating to the Po Folks Property in
Hagerstown, Maryland, as discussed above in "Liquidity and Capital Resources."
The increase in rental and earned income during the quarter ended March
31, 1995, as compared to the quarter ended March 31, 1994, was partially
offset by a decrease of approximately $16,700 as the result of the
Partnership's increasing its allowance for doubtful accounts for rental amounts
relating to the Property in Page, Arizona. In addition, rental and earned
income decreased approximately $8,400 during the quarter ended March 31, 1995,
as compared to the quarter ended March 31, 1994, due to the fact that in 1994,
the lease relating to the Property in Hazard, Kentucky, was amended to provide
for payment of reduced annual base rent with no scheduled rent increases.
However, the lease amendment provides for a lower percentage rent breakpoint,
as compared to the original lease agreement, which is designed to result in
higher annual percentage rent payments at any time that percentage rent
becomes payable. Total rental payments under the amended lease are expected
to equal or be greater than the original lease.
The increase in contingent rental income during the quarter ended March
31, 1995, as compared to the quarter ended March 31, 1994, is partially
attributable to increased gross sales of certain restaurant Properties
requiring the payment of contingent rental income. Contingent rental income
also increased as the result of a lower percentage rent breakpoint provided
for in the lease amendment for the Property in Hazard, Kentucky, as described
above.
For the quarters ended March 31, 1995 and 1994, the Partnership also
earned $3,341 and $3,472, respectively, attributable to net income earned by
Titusville Joint Venture in which the Partnership is a co-venturer.
Interest and other income during the quarter ended March 31, 1995,
decreased to $5,402, as compared to $21,401 for the quarter ended March 31,
1994, primarily as the result of proceeds received by the Partnership during
the quarter ended March 31, 1994, for the taking of an easement relating to
one of its Properties. No such transaction occurred during the quarter ended
March 31, 1995.
Operating expenses, excluding depreciation and amortization, were
$46,828 and $31,538 (7.6% and 5.0% of gross revenues, including equity in
earnings of the unconsolidated joint venture and net of minority interest in
consolidated joint venture) for the quarters ended March 31, 1995 and 1994,
respectively. The increase in operating expenses during the quarter ended
March 31, 1995, as compared to the quarter ended March 31, 1994, is primarily
attributable to the Partnership's payment of certain taxes relating to the
filing of various state tax returns during the quarter ended March 31, 1995,
which in the previous year were paid during the quarter ended June 30, 1994.
Operating expenses also increased during the quarter ended March 31, 1995,
due to the Partnership's accruing real estate taxes relating to the Property
in Chicago, Illinois. Payment of these taxes remains the responsibility of
the tenant of this Property; however, because of the current financial
difficulties of the tenant, the general partners believe the tenant's ability
to pay these expenses is doubtful. The Partnership intends to pursue
collection from the tenant of any such amounts paid by the Partnership and
will recognize such amounts as income if collected.
The increase in operating expenses was partially offset by a decrease in
administrative expenses associated with the processing services provided for
investors.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings. Inapplicable.
-----------------
Item 2. Changes in Securities. Inapplicable.
---------------------
Item 3. Defaults upon Senior Securities. Inapplicable.
-------------------------------
Item 4. Submission of Matters to a Vote of Security Holders.
---------------------------------------------------
Inapplicable.
Item 5. Other Information. Inapplicable.
-----------------
Item 6. Exhibits and Reports on Form 8-K.
--------------------------------
(a) Exhibits - None.
(b) No reports on Form 8-K were filed during the quarter ended
March 31, 1995.
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
DATED this 8th day of May, 1995.
CNL INCOME FUND III, LTD.
By: CNL REALTY CORPORATION
General Partner
By: /s/ James M. Seneff, Jr.
-------------------------
JAMES M. SENEFF, JR.
President and Principal
Executive Officer
By: /s/ Robert A. Bourne
-------------------------
ROBERT A. BOURNE
Treasurer and Principal
Financial Officer
