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, 1998
------------------------
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
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
<PAGE>
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 5-8
Item 2. Management's Discussion and Analysis
of Financial Condition and
Results of Operations 9-13
Part II
Other Information 14
<PAGE>
CNL INCOME FUND III, LTD.
(A Florida Limited Partnership)
CONDENSED BALANCE SHEETS
March 31, December 31,
ASSETS 1998 1997
------ ----------- ------------
Land and buildings on operating
leases, less accumulated
depreciation of $2,876,442 and
$3,341,624 and allowance for
loss on land and building of
$240,663 in 1998 and 1997 $12,795,485 $14,635,583
Investment in direct financing
leases 923,561 926,862
Investment in joint ventures 1,590,531 1,179,762
Mortgage note receivable 678,528 681,687
Cash and cash equivalents 2,653,819 493,118
Restricted cash - 251,879
Receivables, less allowance for
doubtful accounts of $150,000
and $154,469 70,917 102,420
Prepaid expenses 9,089 14,361
Lease costs, less accumulated
amortization of $2,912 and
$2,762 9,088 9,238
Accrued rental income, less
allowance for doubtful accounts
of $15,384 for 1998 and 1997 169,943 154,738
Other assets 29,354 29,354
----------- -----------
$18,930,315 $18,479,002
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 3,403 $ 5,219
Escrowed real estate taxes payable 10,975 11,897
Distributions payable 1,977,747 594,000
Due to related parties 159,834 97,388
Rents paid in advance and deposits 28,822 20,745
----------- -----------
Total liabilities 2,180,781 729,249
Minority interest 137,912 138,617
Partners' capital 16,611,622 17,611,136
----------- -----------
$18,930,315 $18,479,002
=========== ===========
See accompanying notes to condensed financial statements.
1
<PAGE>
CNL INCOME FUND III, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF INCOME
Quarter Ended
March 31,
1998 1997
-------- ---------
Revenues:
Rental income from operating leases $421,125 $498,727
Earned income from direct financing
lease 33,866 34,318
Contingent rental income 12,833 51,791
Interest and other income 41,182 11,155
-------- --------
509,006 595,991
-------- --------
Expenses:
General operating and administrative 31,780 36,115
Professional services 4,610 8,054
Real estate taxes 4,229 3,028
State and other taxes 11,516 9,280
Depreciation and amortization 80,417 97,706
-------- --------
132,552 154,183
-------- --------
Income Before Minority Interest in Income
of Consolidated Joint Venture, Equity in
Earnings (Loss) of Unconsolidated Joint
Ventures, Gain on Sale of Land and
Buildings and Provision for Loss on
Land and Building 376,454 441,808
Minority Interest in Income of Consolidated
Joint Venture (4,345) (4,229)
Equity in Earnings (Loss) of Unconsolidated
Joint Ventures 22,751 (1,514)
Gain on Sale of Land and Buildings 583,373 365,195
Provision for Loss on Land and Building - (32,819)
-------- --------
Net Income $978,233 $768,441
======== ========
Allocation of Net Income:
General partners $ 8,558 $ 5,990
Limited partners 969,675 762,451
-------- --------
$978,233 $768,441
======== ========
Net Income Per Limited Partner Unit $ 19.39 $ 15.25
======== ========
Weighted Average Number of Limited Partner
Units Outstanding 50,000 50,000
======== ========
See accompanying notes to condensed financial statements.
2
<PAGE>
CNL INCOME FUND III, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF PARTNERS' CAPITAL
Quarter Ended Year Ended
March 31, December 31,
1998 1997
------------- -----------
General partners:
Beginning balance $ 339,611 $ 321,305
Net income 8,558 18,306
----------- -----------
348,169 339,611
----------- -----------
Limited partners:
Beginning balance 17,271,525 17,273,996
Net income 969,675 2,373,529
Distributions ($39.55 and
$47.52 per limited partner
unit, respectively) (1,977,747) (2,376,000)
----------- -----------
16,263,453 17,271,525
----------- -----------
Total partners' capital $16,611,622 $17,611,136
=========== ===========
See accompanying notes to condensed financial statements.
3
<PAGE>
CNL INCOME FUND III, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF CASH FLOWS
Quarter Ended
March 31,
1998 1997
----------- ------------
Increase (Decrease) in Cash and Cash
Equivalents:
Net Cash Provided by Operating
Activities $ 501,741 $ 467,241
----------- -----------
Cash Flows from Investing
Activities:
Proceeds from sale of land and
buildings 2,424,977 1,786,939
Investment in joint venture (415,586) -
Collections on note receivable 3,242 -
Decrease (increase) in
restricted cash 245,377 (1,305,671)
----------- -----------
Net cash provided by
investing activities 2,258,010 481,268
----------- -----------
Cash Flows from Financing
Activities:
Distributions to limited
partners (594,000) (594,000)
Distributions to holders of
minority interest (5,050) (5,050)
----------- -----------
Net cash used in
financing activities (599,050) (599,050)
----------- -----------
Net Increase in Cash and Cash
Equivalents 2,160,701 349,459
Cash and Cash Equivalents at Beginning
of Quarter 493,118 57,751
----------- -----------
Cash and Cash Equivalents at End of
Quarter $ 2,653,819 $ 407,210
=========== ===========
Supplemental Schedule of Non-Cash
Investing and Financing Activities:
Deferred real estate disposition
fees incurred and unpaid at end
of quarter $ 53,400 $ 15,150
=========== ===========
Distributions declared and unpaid
at end of quarter $ 1,977,747 $ 594,000
=========== ===========
See accompanying notes to condensed financial statements.
4
<PAGE>
CNL INCOME FUND III, LTD.
(A Florida Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS
Quarters Ended March 31, 1998 and 1997
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, 1998, may not be indicative of the results
that may be expected for the year ending December 31, 1998. Amounts as
of December 31, 1997, included in the financial statements, have been
derived from audited financial statements as of that date.
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, 1997.
The Partnership accounts for its 69.07% interest in Tuscawilla Joint
Venture using the consolidation method. Minority interest represents
the minority joint venture partners' proportionate share of the equity
in the Partnership's consolidated joint venture. All significant
intercompany accounts and transactions have been eliminated.
2. Land and Buildings on Operating Leases:
During the quarter ended March 31, 1998, the Partnership sold its
properties in Daytona Beach, Fernandina Beach and Punta Gorda, Florida,
to the tenants, for a total of approximately $2,455,000 and received
net sales proceeds of $2,424,977, resulting in a total gain of $583,373
for financial reporting purposes. These properties were origi-nally
acquired by the Partnership in 1988 and had costs totalling
approximately $2,148,500, excluding acquisition fees and miscellaneous
acquisition expenses; therefore, the Partnership sold these properties
for a total of approximately $276,500 in excess of their original
purchase prices. In connection with the sales of the properties in
Daytona Beach and Fernandina Beach, Florida, the Partnership incurred
deferred, subordinated, real estate disposition fees of $53,400. (See
Note 5).
5
<PAGE>
CNL INCOME FUND III, LTD.
(A Florida Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS - CONTINUED
Quarters Ended March 31, 1998 and 1997
3. Investment in Joint Ventures:
In January 1998, the Partnership acquired a 25.84% interest in a
property located in Overland Park, Kansas, as tenants-in-common with
affiliates of the general partners. The Partnership accounts for its
investment in this property using the equity method since the
Partnership shares control with affiliates, and amounts relating to its
investment are included in investment in joint ventures.
The following presents the combined, condensed financial information
for all of the Partnership's investments in joint ventures at:
March 31, December 31,
1998 1997
Land and building on
operating leases, less
accumulated depreciation
and allowance for loss
on land and building $3,147,512 $3,152,962
Net investment in direct
financing leases 2,609,507 1,003,680
Cash 4,874 16,481
Receivables 560 -
Accrued rental income 29,128 11,621
Other assets 1,480 1,480
Liabilities 13,423 18,722
Partners' capital 5,779,638 4,167,502
Revenues 142,404 82,837
Net income (loss) 129,029 (157,912)
The Partnership recognized income totalling $22,751 and a loss of
$1,514 for the quarters ended March 31, 1998 and 1997, respectively,
from these joint ventures.
4. Allocations and Distributions:
Generally, all net income and net losses of the Partnership, excluding
gains and losses from the sale of properties, are allocated 99 percent
to the limited partners and one percent to the general partners.
Distributions of net cash flow are made 99 percent 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 is subordinated to receipt by the limited partners of an
aggregate, ten percent, noncumulative, noncompounded annual return on
their adjusted capital contributions (the "10% Preferred Return").
6
<PAGE>
CNL INCOME FUND III, LTD.
(A Florida Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS - CONTINUED
Quarters Ended March 31, 1998 and 1997
4. Allocations and Distributions - Continued:
Generally, net sales proceeds from the sale of properties, to the
extent distributed, will be distributed first to the limited partners
in an amount sufficient to provide them with their cumulative 10%
Preferred Return, plus the return of their adjusted capital
contributions. The general partners will then receive, 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 will be distributed 95
percent to the limited partners and five percent to the general
partners. Any gain from the sale of a property is, in general,
allocated in the same manner as net sales proceeds are distributable.
Any loss from the sale of a property is, in general, allocated first,
on a pro rata basis, to partners with positive balances in their
capital accounts; and thereafter, 95 percent to the limited partners
and five percent to the general partners.
During the quarters ended March 31, 1998 and 1997, the Partnership
declared distributions to the limited partners of $1,977,747 and
$594,000, respectively. This represents distributions for the quarters
ended March 31, 1998 and 1997 of $39.55 and $11.88 per unit,
respectively. The distribution for the quarter ended March 31, 1998,
includes $1,477,747 as a result of the distribution of net sales
proceeds from the sale of the Properties in Fernandina Beach and
Daytona Beach, Florida. This amount was applied toward the limited
partners' 10% Preferred Return. No distributions have been made to the
general partners to date.
5. Related Party Transactions:
Certain affiliates are 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 affiliates
provide a substantial amount of services in connection with the sale.
Payment of the real estate disposition fee is subordinated to receipt
by the limited partners of their aggregate ten percent preferred
return, plus their adjusted capital contributions. For the quarters
ended March 31, 1998 and 1997, the Partnership incurred $53,400 and
$15,150, respectively, in deferred, subordinated, real estate
disposition fees as a result of the sale of properties in 1998 and
1997.
7
<PAGE>
CNL INCOME FUND III, LTD.
(A Florida Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS - CONTINUED
Quarters Ended March 31, 1998 and 1997
6. Subsequent Event:
In May 1998, the Partnership entered into a joint venture arrangement,
RTO Joint Venture, with an affiliate of the Partnership which has the
same general partners, to construct and hold one restaurant property,
at a total cost of $1,420,379. The Partnership has agreed to contribute
approximately $665,900 to the joint venture for an estimated 47 percent
interest in the profits and losses of the joint venture.
8
<PAGE>
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 restaurant properties, 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. 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, 1998, the Partnership owned 28
Properties, including interests in two Properties owned by joint ventures in
which the Partnership is a co-venturer and two Properties owned with affiliates
as tenants-in-common.
Liquidity and Capital Resources
During the quarters ended March 31, 1998 and 1997, the Partnership
generated cash from operations (which includes cash received from tenants,
distributions from joint ventures, and interest and other income received, less
cash paid for expenses) of $501,741 and $467,241, respectively. The increase in
cash from operations for the quarter ended March 31, 1998, is primarily a result
of changes in the Partnership's working capital.
Other sources and uses of capital included the following during the
quarter ended March 31, 1998.
In January 1998, the Partnership used the net sales proceeds from the
1997 sale of the Property in Mason City, Iowa to acquire a Property located in
Overland Park, Kansas, as tenants-in-common with affiliates of the general
partners. In connection therewith, the Partnership and the affiliates entered
into an agreement whereby each co-venturer will share in the profits and losses
of the Property in proportion to its applicable percentage interest. As of March
31, 1998, the Partnership owned an approximate 25.84% interest in this Property.
During the quarter ended March 31, 1998, the Partnership sold its
Properties in Daytona Beach, Fernandina Beach and Punta Gorda, Florida, to the
tenants for a total of approximately $2,455,000 and received net sales proceeds
of $2,424,977, resulting in gains of $583,373 for financial reporting purposes.
These Properties were originally acquired by the Partnership in 1988 and had
costs totalling approximately $2,148,500, excluding acquisition fees and
miscellaneous acquisition expenses; therefore, the Partnership sold these
Properties for a total of approximately $276,500 in excess of their original
purchase prices. In connection with the sales of the Properties in Daytona Beach
and Fernandina Beach, Florida, the
9
<PAGE>
Liquidity and Capital Resources - Continued
Partnership incurred deferred, subordinated, real estate disposition fees of
$53,400. The Partnership distributed $1,477,747 of the net sales proceeds as a
special distribution of net sales proceeds from the sales of Properties to the
limited partners and will use the remaining net sales proceeds to reinvest in
additional Properties.
In May 1998, the Partnership entered into a joint venture arrangement,
RTO Joint Venture, with an affiliate of the Partnership which has the same
general partners, to construct and hold one restaurant Property, at a total cost
of $1,420,379. The Partnership has agreed to contribute approximately $665,900
to the joint venture for an estimated 47 percent interest in the profits and
losses of the joint venture.
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, 1998, the Partnership had $2,653,819
invested in such short-term investments, as compared to $493,118 at December 31,
1997. The increase in cash and cash equivalents at March 31, 1998, is primarily
attributable to the receipt of net sales proceeds relating to the sale of the
Properties in Daytona Beach, Fernandina Beach, and Punta Gorda, Florida, as
described above. The funds remaining at March 31, 1998, will be used to pay
distributions and other liabilities and to acquire additional Properties.
Total liabilities of the Partnership, including distributions payable,
increased to $2,180,781 at March 31, 1998, from $729,249 at December 31, 1997,
primarily as a result of the Partnership's accruing a special distribution of
net sales proceeds totalling $1,477,747 from the sales of the Properties in
Fernandina Beach and Daytona Beach, Florida, payable to the limited partners at
March 31, 1998. The general partners believe that the Partnership has sufficient
cash on hand to meet its current working capital needs.
Based on current and anticipated future cash from operations, proceeds
received from the sales of several Properties during 1998 and 1997, and for the
quarter ended March 31, 1997, the loan received from the corporate general
partner in April 1997, the Partnership declared distributions to limited
partners of $1,977,747 and $594,000 for the quarters ended March 31, 1998 and
1997, respectively. This represents distributions of $39.55 and $11.88 per unit
for the quarters ended March 31, 1998 and 1997, respectively. Distributions for
the quarter ended March 31, 1998, include $1,477,747 as a result of the
distribution of net sales proceeds from the sale of the Properties in Fernandina
Beach and Daytona Beach, Florida. As a result of the sale of the Properties,
10
<PAGE>
Liquidity and Capital Resources - Continued
the Partnership's total revenue was reduced, while the majority of the
Partnership's operating expenses remained fixed. Therefore, distributions of net
cash flow were adjusted for the quarter ended March 31, 1998 and are expected to
remain at this level. This special distribution was effectively a return of a
portion of the limited partners' investment, although, in accordance with the
Partnership agreement, it was applied to the limited partners' unpaid preferred
return. No distributions were made to the general partners for the quarters
ended March 31, 1998 and 1997. No amounts distributed to the limited partners
for the quarters ended March 31, 1998 and 1997, are required to be or have been
treated by the Partnership as a return of capital for purposes of calculating
the limited partners' return on their adjusted capital contributions. The
Partnership intends to continue to make distributions of cash available for
distribution to the limited partners on a quarterly basis.
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 quarter ended March 31, 1997, the Partnership and its
consolidated joint venture, Tuscawilla Joint Venture, owned and leased 31 wholly
owned Properties (including five Properties which were sold in 1997) and during
the quarter ended March 31, 1998, the Partnership and its consolidated joint
venture owned and leased 30 wholly owned Properties (including the Properties in
Daytona Beach, Florida; Fernandina Beach, Florida and Punta Gorda, Florida,
which were sold in 1998, respectively) to operators of fast-food and
family-style restaurant chains. In connection therewith, during the quarters
ended March 31, 1998 and 1997, the Partnership and Tuscawilla Joint Venture
earned $454,991 and $533,045, respectively, in rental income from operating
leases and earned income from the direct financing leases for these Properties.
The decrease in rental and earned income during the quarter ended March 31,
1998, as compared to the quarter ended March 31, 1997, is primarily attributable
to a decrease of approximately $116,300 as a result of the sales during 1997 of
the Properties in Bradenton, Florida; Kissimmee, Florida; Roswell, Georgia and
Mason City, Iowa and the sales during 1998 of the Properties in Daytona Beach,
Florida; Fernandina Beach, Florida and Punta Gorda, Florida. The decrease in
rental income was partially offset by an increase of approximately $38,800 due
to the reinvestment of the majority of the net sales proceeds from the 1997 sale
of the Property in Bradenton, Florida, in a Property in Fayetteville, North
Carolina
11
<PAGE>
Results of Operations - Continued
in June 1997. The Partnership reinvested the net sales proceeds from the sales
of the Properties in Kissimmee, Florida, Roswell, Georgia and Mason City, Iowa,
in Properties held as tenants-in-common with affiliates of the general partners
resulting in an increase in equity in earnings of joint venture as described
below.
Rental and earned income during the quarters ended March 31, 1998 and
1997, continued to remain at reduced amounts due to the fact that the
Partnership is not receiving any rental income relating to the Po Folks Property
in Hagerstown, Maryland. The Partnership is currently seeking a buyer or a
replacement tenant for this Property.
During the quarters ended March 31, 1998 and 1997, the Partnership also
earned $12,833 and $51,791, respectively, in contingent rental income. The
decrease in contingent rental income during the quarter ended March 31, 1998, as
compared to the quarter ended March 31, 1997, is primarily attributable to the
sale of two Properties, one in Kissimmee, Florida and one in Mason City, Iowa,
in April and October 1997, respectively, the leases of which require the payment
of contingent rent during the quarter ended March 31, 1997.
In addition, during the quarters ended March 31, 1998 and 1997, the
Partnership earned $41,182 and $11,155, respectively, in interest and other
income. The increase in interest and other income during the quarter ended March
31, 1998, was partially attributable to the interest earned on the sales
proceeds received from the sale of the Properties in Daytona Beach, Florida;
Fernandina Beach, Florida and Punta Gorda, Florida, which had not been either
reinvested or used for other Partnership purposes as of March 31, 1998. In
addition, interest and other income increased during the quarter ended March 31,
1998, as a result of the interest earned on the mortgage note receivable
accepted in connection with the sale of the Property in Roswell, Georgia, in
June 1997.
For the quarters ended March 31, 1998 and 1997, the Partnership owned
and leased one Property indirectly through a joint venture arrangement. In
addition, during the quarter ended March 31, 1998, the Partnership owned and
leased three Properties as tenants-in-common with affiliates of the general
partners. In connection therewith, during the quarters ended March 31, 1998 and
1997, the Partnership earned income of $22,751 and recorded a loss of $1,514,
respectively, attributable to net income and losses recorded by these joint
ventures. The increase in net income earned by joint ventures during the quarter
ended March 31, 1998, as compared to the quarter ended March 31, 1997, is
partially due to the fact that in July and December 1997, the Partnership
reinvested a portion of the net sales proceeds it received from the 1997 sales
of several Properties in a Property in Englewood,
12
<PAGE>
Results of Operations - Continued
Colorado, and a Property in Miami, Florida, respectively, with affiliates of the
general partners as tenants-in-common. In addition, the increase in net income
earned by joint ventures during the quarter ended March 31, 1998, is partially
attributable to the fact that in January 1998, the Partnership reinvested the
net sales proceeds it received from the 1997 sale of a Property, in a Property
in Overland Park, Kansas, with affiliates of the general partners as
tenants-in-common.
The increase in net income earned by these joint ventures is partially
offset by the fact that, during July 1997, the operator of the Property owned by
Titusville Joint Venture vacated the Property and ceased operations. In
conjunction therewith, the joint venture recorded real estate tax expense during
the quarter ended March 31, 1998. No such real estate tax expense was incurred
during the quarter ended March 31, 1997. The joint venture has ceased collection
efforts of these amounts and is currently seeking either a replacement tenant or
purchaser for this Property.
Operating expenses, including depreciation and amortization expense,
were $132,552 and $154,183 for the quarters ended March 31, 1998 and 1997,
respectively. The decrease in operating expenses during the quarter ended March
31, 1998, as compared to the quarter ended March 31, 1997, is primarily
attributable to a decrease in depreciation expense due to the sales of several
Properties during 1998 and 1997.
As a result of the sales of three Properties, as described above in
"Liquidity and Capital Resources," and one Property during the quarters ended
March 31, 1998 and 1997, respectively, the Partnership recognized a total gain
of $583,373 and $365,195, respectively, for financial reporting purposes.
In addition, during the quarter ended March 31, 1997, the Partnership
recorded an allowance for loss on land and building of $32,819, for financial
reporting purposes, relating to the Po Folks Property in Hagerstown, Maryland.
The loss represents the difference between the Property's carrying value at
March 31, 1997 and the estimated net realizable value, based on the estimated
sales price of this Property.
13
<PAGE>
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, 1998.
14
<PAGE>
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 13th day of May, 1998.
CNL INCOME FUND III, LTD.
By: CNL REALTY CORPORATION
General Partner
By: /s/ James M. Seneff, Jr.
-----------------------------
JAMES M. SENEFF, JR.
Chief Executive Officer
(Principal Executive Officer)
By: /s/ Robert A. Bourne
-----------------------------
ROBERT A. BOURNE
President and Treasurer
(Principal Financial and
Accounting Officer)
<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, 1998, and its statement of
income for the three months then ended and is qualified in its entirety by
reference to the Form 10Q of CNL Income Fund III, Ltd. for the three months
ended March 31, 1998.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 2,653,819
<SECURITIES> 0
<RECEIVABLES> 220,917
<ALLOWANCES> 150,000
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 15,671,927
<DEPRECIATION> 2,876,442
<TOTAL-ASSETS> 18,930,315
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 16,611,622
<TOTAL-LIABILITY-AND-EQUITY> 18,930,315
<SALES> 0
<TOTAL-REVENUES> 509,006
<CGS> 0
<TOTAL-COSTS> 132,552
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 978,233
<INCOME-TAX> 0
<INCOME-CONTINUING> 978,233
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 978,233
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>Due to the nature of its industry, CNL Income Fund III, ltd. has an
unclassified balance sheet; therefore, no values are shown above for current
assets and current liabilities.
</FN>
</TABLE>
