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, 1995
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-17549
CNL INCOME FUND IV, LTD.
(Exact name of registrant as specified in its charter)
Florida 59-2854435
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
400 East South Street, Suite 500
Orlando, Florida 32801
(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code: (407) 422-1574
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
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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 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 IV, Ltd. (the "Registrant" or the "Partnership") is a
limited partnership which was organized pursuant to the laws of the State of
Florida on November 18, 1987. 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 May 6, 1988, the
Partnership offered for sale up to $30,000,000 in limited partnership
interests (the "Units") (60,000 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 December 30, 1988, as of which date the
maximum offering proceeds of $30,000,000 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 selected 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, totalled $26,550,000, and were used to acquire 40 Properties,
including interests in five Properties owned by joint ventures in which the
Partnership is a co-venturer. During the year ended December 31, 1994, the
Partnership sold its Property in York, Pennsylvania, and reinvested the
majority of the net sales proceeds in two Checkers Properties, consisting of
only land, located in Miami, Florida, and Douglasville, Georgia. The
remaining net sales proceeds were used to meet other working capital needs of
the Partnership. The lessee of the two Properties consisting of only land
owns the buildings currently on the land and has the right, if not in default
under the lease, to remove the buildings from the land at the end of the lease
terms. During the year ended December 31, 1995, the Partnership sold its
Property in Hastings, Michigan. As a result of the above transactions, as of
December 31, 1995, the Partnership owned 40 Properties, including interests in
five Properties owned by joint ventures in which the Partnership is a co-
venturer. During January 1996, the Partnership reinvested the net sales
proceeds from the sale of the Property in Hastings, Michigan, in a Property
located in Clinton, North Carolina, with affiliates of the General Partners as
tenants-in-common. Generally, the Properties are leased on a triple-net basis
with the lessee 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. In general, the General Partners plan to seek
the sale of some of the Properties commencing seven to 15 years after their
acquisition. 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.
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 joint ventures in which the Partnership is a co-venturer provide for
initial terms, ranging from five to 20 years (the average being 19 years), and
expire between 1998 and 2014. Generally, the leases are on a triple-net
basis, with the lessee responsible for all repairs and maintenance, property
taxes, insurance and utilities. The leases of the Properties provide for
minimum base annual rental payments (payable in monthly installments) ranging
from approximately $18,100 to $135,800. Generally, the leases provide for
percentage rent, based on sales in excess of a specified amount, to be paid
annually. In addition, some of the leases provide that commencing in the
sixth lease year the percentage rent will be an amount equal to the greater of
the percentage rent calculated under the lease formula or a specified
percentage (ranging from one-half to two percent) of the purchase price.
Generally, the leases of the Properties provide for two or four five-
year renewal options subject to the same terms and conditions as the initial
lease. Certain lessees also have been granted options to purchase Properties
at the Property's then fair market value, or pursuant to a formula based on
the original cost of the Property, after a specified portion of the lease term
has elapsed. Additionally, certain leases provide the lessee an option to
purchase up to a 49 percent interest in the Property, after a specified
portion of the lease term has elapsed, at an option purchase price similar to
those described above, multiplied by the percentage interest in the Property
with respect to which the option is being exercised.
The leases also generally provide that, in the event the Partnership
wishes to sell the Property subject to the lease, the Partnership must first
offer the lessee the right to purchase the Property on the same terms and
conditions, and for the same price, as any offer which the Partnership has
received for the sale of the Property.
In September 1994, the tenant of the Property in Leesburg, Florida,
ceased operations of the restaurant business located at the Property.
Currently, the Partnership is not receiving rental payments for this Property
and is seeking a replacement tenant.
In January 1996, the Partnership reinvested the net sales proceeds from
the sale of the Property in Hastings, Michigan, in a Property located in
Clinton, North Carolina, with affiliates of the General Partners, as tenants-
in-common, as described below in "Joint Venture Arrangements." The lease
terms for this Property are substantially the same as the Partnership's other
leases as described above in the first three paragraphs of this section.
Major Tenants
During 1995, two lessees of the Partnership, Shoney's, Inc. and Tampa
Foods, L. P., each contributed more than ten percent of the Partnership's
total rental income (including the Partnership's share of the rental income
from five Properties owned by joint ventures). As of December 31, 1995,
Shoney's, Inc. was the lessee under leases relating to six restaurants and
Tampa Foods, L. P. was the lessee under leases relating to three restaurants.
It is anticipated that, based on the minimum rental payments required by the
leases, Shoney's, Inc. and Tampa Foods, L. P. each will continue to contribute
more than ten percent of the Partnership's total rental income in 1996 and
subsequent years. In addition, three Restaurant Chains, Shoney's, Denny's and
Wendy's Old Fashioned Hamburger Restaurants, each accounted for more than ten
percent of the Partnership's total rental income in 1995 (including the
Partnership's share of the rental income from five Properties owned by joint
ventures). In subsequent years, it is anticipated that these three Restaurant
Chains each will continue to account for more than ten percent of the total
rental 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. No single tenant or group of affiliated
tenants lease Properties with an aggregate carrying value, excluding
acquisition fees and certain acquisition expenses, in excess of 20 percent of
the total assets of the Partnership.
Joint Venture Arrangements
As of December 31, 1992, the Partnership had entered into four separate
joint venture arrangements, Holland Joint Venture, Titusville Joint Venture,
Cocoa Joint Venture and Auburn Joint Venture, to purchase and hold four
Properties through such joint ventures. The remaining interests in these
joint ventures are held by affiliates of the Partnership which have the same
general partners.
On January 29, 1993, the Partnership entered into a joint venture
arrangement, Kingsville Real Estate Joint Venture, with an affiliate which has
the same general partners as the Partnership. The Partnership contributed the
land and building of one of its Properties to the joint venture and the
affiliate funded the costs of the renovation of the building in order to
convert it from a Hardee's restaurant to a Denny's Restaurant. The renovation
of the Property was completed in July 1993.
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 accordance with their respective percentage interests in the
joint venture. The Partnership and its joint venture partners are also
jointly and severally liable for all debts, obligations and other liabilities
of the joint venture.
Each joint venture has an initial term of approximately 20 to 30 years
and, after the expiration of the initial term, continues in existence from
year to year unless terminated at the option of either joint venturer or 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 of each joint venture equally
with affiliates of the General Partners. 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 Holland Joint Venture, Titusville Joint
Venture, Cocoa Joint Venture, Auburn Joint Venture and Kingsville Real Estate
Joint Venture is distributed 51.0%, 26.6%, 57.0%, 96.1% and 68.87%,
respectively, to the Partnership and the balance is distributed to each of the
other joint venture partners. 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 addition to the above joint venture agreements, in January 1996, the
Partnership entered into an agreement to hold a Property as tenants-in-common
with affiliates of the General Partners. The agreement provides for the
Partnership and the affiliates to share in the profits and losses of the
Property in proportion to each co-venturer's percentage interest. The
Partnership owns a 53.13% interest in this Property.
Certain Management Services
CNL Investment Company, an affiliate of the General Partners, provided
certain services relating to management of the Partnership and its Properties
pursuant to a management agreement with the Partnership through December 31,
1994. Under this agreement, CNL Investment Company was 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. CNL Investment Company also assisted the General
Partners in negotiating the leases. For these services, the Partnership had
agreed to pay CNL Investment Company an annual fee equal to one percent of the
sum of gross rental revenues from Properties wholly owned by the Partnership
plus the Partnership's allocable share of gross revenues of joint ventures in
which the Partnership is a co-venturer, but not in excess of competitive fees
for comparable services. 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").
Effective January 1, 1995, certain officers and employees of CNL
Investment Company became officers and employees of CNL Income Fund Advisors,
Inc., an affiliate of the General Partners, and CNL Investment Company
assigned its rights in, and its obligations under, the management agreement
with the Partnership to CNL Income Fund Advisors, Inc. In addition, effective
October 1, 1995, CNL Income Fund Advisors, Inc. assigned its rights in, and
its obligations under, the management agreement with the Partnership to CNL
Fund Advisors, Inc. 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.
At the time the Partnership elects to dispose of its Properties, other
than as a result of the exercise of tenant options to purchase Properties, the
Partnership will be in competition with other persons and entities to locate
purchasers for its Properties.
Employees
The Partnership has no employees. The officers of CNL Realty
Corporation and the officers and employees of CNL Fund Advisors, Inc. 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 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, 1995, the Partnership owned, either directly or
through joint venture arrangements, 40 Properties located in 14 states and the
District of Columbia. Reference is made to the Schedule of Real Estate and
Accumulated Depreciation filed with this report 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 14,000
to 99,000 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.
Buildings. Each of the Properties owned by the Partnership includes a
building that is one of a Restaurant Chain's approved designs. However, the
buildings located on the two Checkers Properties are owned by the tenant,
while the land parcels are owned by the Partnership. The buildings generally
are rectangular and are constructed from various combinations of stucco,
steel, wood, brick and tile. The sizes of buildings owned by the Partnership
range from approximately 1,700 to 6,300 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.
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.
Leases with Major Tenants. The terms of each of the leases with the
Partnership's major tenants as of December 31, 1995 (see Item 1. Business -
Major Tenants), are substantially the same as those described in Item 1.
Business - Leases.
Tampa Foods, L.P. leases three Wendy's restaurants. The initial term of
each lease is 20 years (expiring in 2008) and average minimum base rent is
approximately $104,900 (ranging from approximately $98,600 to $112,500).
Shoney's, Inc. leases four Shoney's restaurants and two Captain D's
restaurants. The initial term of each lease is 20 years (expiring in 2008)
and average minimum base rent is approximately $65,100 (ranging from
approximately $41,000 to $81,300).
The General Partners consider the Properties to be well-maintained and
sufficient for the Partnership's operations.
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
As of February 29, 1996, there were 2,937 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. Limited Partners
who wish to sell their Units may offer the Units for sale pursuant to the
Partnership's distribution reinvestment plan (the "Plan"), and Limited
Partners who wish to have their distributions used to acquire additional Units
(to the extent Units are available for purchase), may do so pursuant to such
Plan. The General Partners have the right to prohibit transfer of Units. The
price paid for any Unit transferred pursuant to the Plan has been $475 per
Unit. The price to be paid for any Unit transferred other than pursuant to
the Plan is 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 1995 and 1994 other
than pursuant to the Plan, net of commissions (which ranged from zero to
18.5%).
1995 (1) 1994 (1)
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High Low Average High Low Average
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First Quarter $475 $403 $465 $475 $352 $450
Second Quarter 432 395 419 475 375 437
Third Quarter 475 375 442 500 435 461
Fourth Quarter 500 390 465 475 404 440
(1) A total of 553 and 592 Units were transferred other than pursuant to
the Plan for the years ended December 31, 1995 and 1994, respectively.
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 each of the years ended December 31, 1995 and 1994, the Partnership
declared cash distributions of $2,760,000 to the Limited Partners.
Distributions of $690,000 were declared at the close of each of the
Partnership's calendar quarters during 1995 and 1994 to the Limited Partners.
No amounts distributed to partners for the years ended December 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. No distributions have been made to the
General Partners to date.
The Partnership intends to continue to make distributions of cash
available for distribution to the Limited Partners on a quarterly basis,
although the General Partners, in their sole discretion, may elect to pay
distributions monthly.
ITEM 6. SELECTED FINANCIAL DATA
1995 1994 1993 1992 1991
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Year ended
December 31:
Revenues (1) $ 2,871,572 $ 2,865,770 $ 2,933,727 $ 2,922,043 $ 2,837,501
Net income (2) 2,210,339 2,310,524 2,263,745 2,291,842 2,148,208
Cash distribu-
tions declared 2,760,000 2,760,000 2,760,000 2,760,000 2,760,000
Net income per
Unit (2) 36.48 38.13 37.35 37.82 35.45
Cash distribu-
tions declared
per Unit 46.00 46.00 46.00 46.00 46.00
At December 31:
Total assets $24,057,829 $24,598,179 $25,195,579 $24,954,682 $25,238,643
Long-term
obligations - - - - -
(1) Revenues include equity in earnings of joint ventures.
(2) Net income for the years ended December 31, 1995 and 1994,
includes $128,547 and $128,592, respectively, from gains on sale
of land and buildings.
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 November 18, 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 restaurant
Properties were to be constructed, which are leased primarily to operators of
selected national and regional fast-food and family-style Restaurant Chains.
Substantially all of the leases are triple-net leases, with the lessee
generally responsible for all repairs and maintenance, property taxes,
insurance and utilities. As of December 31, 1995, the Partnership owned 40
Properties, either directly or indirectly through joint venture arrangements.
Liquidity and Capital Resources
The Partnership's primary source of capital for the years ended December
31, 1995, 1994 and 1993, was cash from operations (which includes cash
received from tenants, distributions from joint ventures and interest
received, less cash paid for expenses). Cash from operations was $2,670,393,
$2,544,211 and $2,653,559 for the years ended December 31, 1995, 1994 and
1993, respectively. The increase in cash from operations during 1995, as
compared to 1994, and the decrease during 1994, as compared to 1993, are
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.
Cash from operations during the years ended December 31, 1995, 1994 and
1993, was affected by the following. In October 1992, the Partnership
accepted a promissory note from the former tenant of the Property in Maywood,
Illinois, for $175,000 for amounts due relating to past due rents and real
estate taxes and other expenses the Partnership has incurred as a result of
the former tenant's having defaulted under the terms of the lease. The note
is non-interest bearing and is payable in 36 monthly installments of $2,500
through September 1995, and thereafter in eight monthly installments of
$10,000, with the balance due and payable on February 20, 1996. The
Partnership discounted the note to a principal balance of $138,094 using an
interest rate of ten percent. Receivables at December 31, 1994, included
$104,931 of such amount, including accrued interest of $2,519. During 1995,
the former tenant defaulted under the terms of the note. Because of the
financial difficulties that the former tenant is currently experiencing, the
Partnership has established an allowance for doubtful accounts for the full
amount of unpaid principal and interest of $111,031 relating to this note;
therefore, no amounts were included in receivables at December 31, 1995. The
Partnership will continue to pursue collection of these amounts and will
recognize such amounts reserved as income if collected.
Other sources and uses of capital included the following during the
years ended December 31, 1995, 1994 and 1993.
During the year ended December 31, 1993, the Partnership incurred
$34,011 in costs associated with the conversion of the restaurant located on
the Property in Maywood, Illinois, into two separate facilities, one of which
is a non-restaurant facility. In addition, the Partnership incurred $8,400 in
lease costs associated with locating a new tenant for the Maywood Property.
The renovation of the Property was completed during May 1993.
In April 1994, the Partnership sold its Property in York, Pennsylvania,
for $712,000, resulting in a gain of $128,592 for financial reporting
purposes. This Property was originally acquired by the Partnership in
December 1988 and had a cost of approximately $611,400, excluding acquisition
fees and miscellaneous acquisition expenses; therefore, the Partnership sold
the Property for approximately $100,600 in excess of its original purchase
price. In June and December 1994, the Partnership reinvested $174,336 and
$365,458, respectively, of the net sales proceeds in Properties in Miami,
Florida, and Douglasville, Georgia, respectively. The tenant of these two
Properties owns the buildings located on the Properties and the Partnership
owns the land parcels. The remaining net sales proceeds were used to meet
other working capital needs of the Partnership.
In December 1995, the Partnership sold its Property in Hastings,
Michigan, for $520,000 and received net sales proceeds of $518,650, resulting
in a gain of $128,547 for financial reporting purposes. This Property was
originally acquired by the Partnership in August 1988 and had a cost of
approximately $419,600, excluding acquisition fees and miscellaneous
acquisition expenses; therefore, the Partnership sold the Property for
approximately $99,100 in excess of its original purchase price. At December
31, 1995, the net sales proceeds were being held in an interest bearing escrow
account pending the release of funds by the escrow agent to acquire an
additional Property or to return the funds to the Partnership. In January
1996, the Partnership reinvested the net sales proceeds, along with additional
funds, in a Property located in Clinton, North Carolina, with affiliates of
the General Partners as tenants-in-common.
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. During the year ended December 31,
1993, the Partnership received $77,500 in capital contributions from the
corporate General Partner which were used primarily for the payment of various
expenses, including past due real estate taxes relating to the Property in
Maywood, Illinois, as a result of the former tenant's default under the terms
of its lease with the Partnership. No such contributions were received during
the years ended December 31, 1995 and 1994.
Currently, rental income from the Partnership's Properties is invested
in money market accounts or 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 December 31, 1995, the Partnership had
$485,864 invested in such short-term investments, as compared to $579,574 at
December 31, 1994. The funds remaining at December 31, 1995, will be used for
the payment of distributions and other liabilities.
None of the Properties owned by the Partnership or the joint ventures 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.
During 1995, 1994 and 1993, affiliates of the General Partners, incurred
on behalf of the Partnership $101,876, $95,935 and $200,046, respectively, for
certain operating expenses. As of December 31, 1995, the Partnership owed
$27,166 to affiliates for such amounts and accounting and administrative
services. Amounts payable to other parties, including distributions payable,
decreased to $724,628 at December 31, 1995, from $725,448 at December 31,
1994. Total liabilities at December 31, 1995, to the extent they exceed cash
and cash equivalents at December 31, 1995, will be paid from future cash from
operations, from any proceeds received on the note due from the former tenant
of the Maywood Property or, in the event the General Partners elect to make
additional contributions, from future General Partner contributions.
Based primarily on current and anticipated future cash from operations,
and to a lesser extent additional capital contributions received from the
General Partners and uninvested net sales proceeds from the sale of the
Properties added to working capital, the Partnership declared distributions to
the Limited Partners of $2,760,000 for each of the years ended December 31,
1995, 1994 and 1993. This represents distributions of $46 per Unit for each
of the years ended December 31, 1995, 1994 and 1993. The Partnership intends
to continue to make distributions of cash available for distribution to the
Limited Partners on a quarterly basis.
The General Partners believe that the Properties are adequately covered
by insurance. In addition, during 1995, the General Partners obtained
contingent liability and property coverage for the Partnership. This
insurance policy 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.
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.
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 for 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.
Results of Operations
During 1993, the Partnership owned and leased 36 wholly owned Properties
(including one Property in Kingsville, Texas, which was contributed to
Kingsville Real Estate Joint Venture in exchange for a 69.27% interest in the
profits and losses of the joint venture, in January 1993), during 1994, the
Partnership owned and leased 37 wholly owned Properties (including one
Property in York, Pennsylvania, which was sold in April 1994) and during 1995,
the Partnership owned and leased 36 wholly owned Properties (including one
Property in Hastings, Michigan, which was sold in December 1995). In
addition, during 1995, 1994 and 1993, the Partnership was a co-venturer in
five separate joint ventures that each owned and leased one Property. As of
December 31, 1995, the Partnership owned, either directly or through joint
venture arrangements, 40 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
$18,100 to $135,800. Generally, the leases provide for percentage rent based
on sales in excess of a specified amount to be paid annually. In addition,
some of the leases provide that, commencing in the sixth lease year the
percentage rent will be an amount equal to the greater of the percentage rent
calculated under the lease formula or a specified percentage (ranging from
one-half to two percent) of the purchase price. For 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, 1995, 1994 and 1993, the Partnership
earned $2,510,406, $2,480,031 and $2,601,217, respectively, in rental income
from operating leases and earned income from direct financing leases from its
wholly owned Properties described above. Rental income in 1995 and 1994, each
as compared to the prior year, decreased approximately $2,800 and $38,100,
respectively, as a result of the fact that the Partnership sold one Property
in York, Pennsylvania, in April 1994, and one Property in Hastings, Michigan,
in December 1995 and due to the fact that the Partnership deemed certain rent
receivable amounts relating to the York Property uncollectible during 1994.
As described above in "Liquidity and Capital Resources," the Partnership
reinvested the majority of the sales proceeds from the sale of the York
Property in two Properties in Miami, Florida, and Douglasville, Georgia, in
June and December 1994, respectively. As a result of the Partnership
acquiring these Properties and entering into long-term, triple-net leases for
each of the Properties, rental income during 1995 and 1994, each as compared
to the prior year, increased approximately $52,000 and approximately $15,300,
respectively.
Rental income was also affected in 1994 due to the fact that in May and
June 1993, the Partnership re-leased its Property in Maywood, Illinois, to two
separate operators under two separate leases. Due to the fact that rental
income for the year ended December 31, 1994, includes a full year of rental
income from these two leases, as compared to a partial year in 1993, rental
income increased approximately $17,500 in 1994.
In addition, rental income during 1995 and 1994, was affected by the
fact that in September 1994, the tenant of the Property in Leesburg, Florida,
ceased operations of the restaurant business located at the Property and
defaulted under the terms of its lease. As a result, rental income in 1995
and 1994, each as compared to the prior period, decreased approximately
$70,000 and $51,000, respectively, including adjustments for amounts included
in receivables for which the Partnership established an allowance for doubtful
accounts in 1994. The original lease agreement provided for scheduled rent
increases in minimum base rent during the term of the lease; therefore, in
prior periods, the Partnership had recognized "accrued rental income" for the
variance between (i) minimum base rental income recognized on a straight-line
basis over the term of the lease so as to produce a constant periodic rent and
(ii) scheduled rents due under the lease. As a result of the tenant's
default, in 1994, the Partnership reversed the cumulative amount of accrued
rental income of $30,200 relating to this Property due to the fact that the
Partnership does not anticipate receiving future scheduled rent increases.
Currently, the Partnership is continuing to pursue the collection of amounts
due under the lease agreement and the collection of past due rents, and is
seeking a replacement tenant for this Property.
Base rental and earned income also decreased approximately $28,200
during 1994, as compared to 1993, due to the fact that effective January 1994,
the leases relating to the Properties in Dundee, Michigan, and Marion and
Union Township, Ohio, were amended to provide for the payment of reduced
annual rent with no scheduled rent increases. However, the lease amendments
provide for lower percentage rent breakpoints, as compared to the original
lease agreements, a change that is designed to result in higher annual
percentage rent payments at any time that percentage rent becomes due. The
General Partners anticipate that total rental payments under the amended
leases will be equal to or greater than the original leases during the terms
of the leases. As a result of the lease amendments, the building portion of
the lease relating to the Property in Marion, Ohio, was reclassified from a
direct financing lease to an operating lease.
For the years ended December 31, 1995, 1994 and 1993, the Partnership
earned $94,101, $105,416 and $70,198, respectively, in contingent rental
income from the Partnership's wholly owned Properties. The decrease in
contingent rental income in 1995, as compared to 1994, is primarily
attributable to a decrease in gross sales for a certain restaurant Property
whose lease requires the payment of contingent rental income. The increase in
contingent rental income during 1994, as compared to 1993, was primarily
attributable to the lower percentage rental breakpoints provided for in the
lease amendments for the Properties in Dundee, Michigan, and Marion and Union
Township, Ohio, as described above. In addition, contingent rental income
increased in 1994 as a result of increased gross sales of certain restaurant
Properties requiring the payment of contingent rental income.
In addition, for the years ended December 31, 1995, 1994 and 1993, the
Partnership earned $245,778, $247,197 and $235,457, respectively, attributable
to net income earned by joint ventures in which the Partnership is a co-
venturer. The increase in net income earned by joint ventures in 1994, as
compared to 1993, is primarily attributable to the fact that Kingsville Real
Estate Joint Venture, a joint venture to which the Partnership contributed the
land and building of its Property in Kingsville, Texas, as described in Item
1. Business - Joint Venture Arrangements, became operational in July 1993.
The increase in the Partnership's share of net income earned by joint ventures
in 1994, as compared to 1993, was partially offset by the fact that during
1993, Auburn Joint Venture accepted a promissory note from its tenant to
reimburse the joint venture certain legal fees that the joint venture incurred
in previous years. The joint venture had previously expensed such amounts;
therefore, as a result of recovering these expenses, the joint venture
recorded such amounts as other income during 1993.
In January 1996, the Partnership reinvested the net sales proceeds it
received from the sale of the Property in Hastings, Michigan, in a Property in
Clinton, North Carolina, with affiliates as tenants-in-common. In connection
therewith, the Partnership and its affiliates will share the profits and
losses of the Property in proportion to each co-venturer's interest. As such,
the Partnership has a 53.13% interest in this Property. Therefore, the
General Partners expect net income earned by joint ventures to increase in
1996 and subsequent years.
During the year ended December 31, 1995, two of the Partnership's
lessees, Shoney's, Inc. and Tampa Foods, L.P., each contributed more than ten
percent of the Partnership's total rental income (including the Partnership's
share of the rental income from five Properties owned by joint ventures). As
of December 31, 1995, Shoney's, Inc. was the lessee under leases relating to
six restaurants and Tampa Foods L.P. was the lessee under leases relating to
three restaurants. It is anticipated that, based on the minimum rental
payments required by the leases, Shoney's, Inc. and Tampa Foods, L.P. each
will continue to contribute more than ten percent of the Partnership's total
rental income during 1996 and subsequent years. In addition, three Restaurant
Chains, Shoney's, Denny's and Wendy's Old Fashioned Hamburger Restaurants,
each accounted for more than ten percent of the Partnership's total rental
income in 1995 (including the Partnership's share of the rental income from
five Properties owned by joint ventures). In subsequent years, it is
anticipated that these three Restaurant Chains each will continue to account
for more than ten percent of the total rental 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.
Operating expenses, including depreciation and amortization expense,
were $789,780, $683,838 and $669,982 for the years ended December 31, 1995,
1994 and 1993, respectively. Operating expenses increased in 1995, as
compared to 1994, primarily as a result of the fact that the Partnership's
former tenant of the Property in Maywood, Illinois, defaulted under the terms
of its promissory note with the Partnership, as described above in "Liquidity
and Capital Resources," and the Partnership recorded a bad debt expense and
established an allowance for doubtful accounts of $102,431. The Partnership
is continuing to pursue collection of these amounts and will record such
amounts as income if collected.
In addition, as the result of the former tenant of the Maywood Property
defaulting under the terms of its lease, during 1993, the Partnership incurred
certain expenses, such as real estate taxes, insurance and maintenance
relating to this Property totalling approximately $34,000. Although the
Partnership re-leased this Property to two new operators subject to two
separate leases during 1993, the Partnership recorded approximately $34,000 in
1994, in additional costs relating to this Property for which the former
tenant was responsible, including approximately $13,200 in interest relating
to past due real estate taxes and $20,000 relating to prior years' real estate
taxes paid by the Partnership that were deemed uncollectible and charged to
real estate tax expense in 1994. However, the Partnership did recover $5,000
of this amount in 1995 and reduced real estate tax expense accordingly.
In connection with one of the two new leases entered into during 1993
for the Property in Maywood, Illinois, the Partnership is responsible for the
proportionate share of real estate taxes and insurance expense. In connection
therewith, the Partnership incurred approximately $23,700, $18,400 and $5,800
for real estate taxes and insurance expense during 1995, 1994 and 1993,
respectively. In addition, during 1995, the Partnership paid approximately
$9,300 for real estate taxes that are the responsibility of the other tenant
of the Maywood Property, due to a shortage of amounts collected from the
tenant for the payment of their proportionate share of real estate taxes. The
Partnership expensed this amount as real estate tax expense and established an
allowance for doubtful accounts due to the uncertainty of the collection of
such amount. The Partnership intends to pursue collection of this amount and
will record such amount as income if collected.
As a result of the former tenant of the Property in Leesburg, Florida,
defaulting under the terms of its lease, the Partnership also incurred certain
expenses, such as real estate taxes, insurance and maintenance, of
approximately $10,700 and $12,400 relating to this Property during 1995 and
1994, respectively. The Partnership expects to continue to incur expenses for
this Property until a replacement tenant is located. As described above, the
Partnership is continuing to pursue collection of amounts due under the lease
with the original tenant and will record any such amounts as income if
collected. In addition, the Partnership is currently seeking a replacement
tenant.
Operating expenses during the year ended December 31, 1995, also
increased as a result of an increase in (i) accounting and administrative
expenses associated with operating the Partnership and its Properties and (ii)
insurance expense as a result of the General Partners' obtaining contingent
liability and property coverage for the Partnership as discussed above in
"Liquidity and Capital Resources." The increase in operating expenses in
1994, as compared to 1993, was partially offset by a decrease in
administrative expenses associated with both the processing services provided
for investors and a decrease in mailings to investors during 1994.
Depreciation expense decreased during 1995 and 1994, each as compared to
the prior period, approximately $4,400 and $9,200, respectively, as a result
of the sale of the Property in York, Pennsylvania, in April 1994. In
addition, depreciation expense increased approximately $13,300 during 1994, as
compared to 1993, as a result of the reclassification of the building portion
of the lease relating to the Property in Marion, Ohio, from a direct financing
lease to an operating lease, as described above.
As a result of the sale of the Property in Hastings, Michigan, in
December 1995, and the Property in York, Pennsylvania, in April 1994, the
Partnership recognized gains for financial reporting purposes of $128,547 and
$128,592, respectively, for the years ended December 31, 1995 and 1994,
respectively. No Properties were sold during the year ended December 31,
1993.
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 will adopt this standard in 1996. The
General Partners believe that adoption of this standard currently would not
have had a material effect on the Partnership's financial position or results
of operations.
The Partnership's leases as of December 31, 1995, 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. Management expects that increases in
restaurant sales volumes due to inflation and real sales growth should result
in an increase in rental income over time. Continued inflation also may cause
capital appreciation of the Partnership's Properties. Inflation and changing
prices, however, also may have an adverse impact on the operating margins of
the restaurants and on potential capital appreciation of the Properties.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
CNL INCOME FUND IV, LTD.
(A Florida Limited Partnership)
CONTENTS
--------
Page
----
Report of Independent Accountants 13
Financial Statements:
Balance Sheets 14
Statements of Income 15
Statements of Partners' Capital 16
Statements of Cash Flows 17
Notes to Financial Statements 20
Report of Independent Accountants
---------------------------------
To the Partners
CNL Income Fund IV, Ltd.
We have audited the financial statements and financial statement schedules of
CNL Income Fund IV, Ltd. (a Florida limited partnership) listed in Item 14(a)
of this Form 10-K. 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 in accordance with generally accepted auditing
standards. Those standards 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. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of CNL Income Fund IV, Ltd. as
of December 31, 1995 and 1994, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1995 in
conformity with generally accepted accounting principles. In addition, in our
opinion, the financial statement schedules referred to above, when considered
in relation to the basic financial statements taken as a whole, present
fairly, in all material respects, the information required to be included
therein.
/s/Coopers & Lybrand L.L.P.
Orlando, Florida
January 18, 1996
CNL INCOME FUND IV, LTD.
(A Florida Limited Partnership)
BALANCE SHEETS
--------------
December 31,
ASSETS 1995 1994
------ ----------- -----------
Land and buildings on operating
leases, less accumulated
depreciation $18,944,694 $19,769,836
Net investment in direct
financing leases 1,334,489 1,362,368
Investment in joint ventures 2,374,684 2,399,912
Cash and cash equivalents 485,864 579,574
Restricted cash 518,150 -
Receivables, less allowance for
doubtful accounts of $166,866
and $44,844 94,870 188,321
Prepaid expenses 9,733 7,986
Lease costs, less accumulated
amortization of $13,291 and
$9,897 10,653 8,233
Accrued rental income 284,692 281,949
----------- -----------
$24,057,829 $24,598,179
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
- ---------------------------------
Accounts payable $ 12,672 $ 8,703
Accrued and escrowed real
estate taxes payable 21,956 26,745
Distributions payable 690,000 690,000
Due to related parties 27,166 1,175
Rents paid in advance and
deposits 17,871 33,731
----------- -----------
Total liabilities 769,665 760,354
Partners' capital 23,288,164 23,837,825
----------- -----------
$24,057,829 $24,598,179
=========== ===========
See accompanying notes to financial statements.
CNL INCOME FUND IV, LTD.
(A Florida Limited Partnership)
STATEMENTS OF INCOME
--------------------
Year Ended December 31,
1995 1994 1993
---------- ---------- ----------
Revenues:
Rental income from operating
leases $2,373,386 $2,340,297 $2,420,936
Earned income from direct
financing leases 137,020 139,734 180,281
Contingent rental income 94,101 105,416 70,198
Interest and other income 21,287 33,126 26,855
---------- ---------- ----------
2,625,794 2,618,573 2,698,270
---------- ---------- ----------
Expenses:
General operating and
administrative 140,374 125,768 143,429
Professional services 31,287 28,449 34,067
Bad debt expense 102,431 2,128 -
Real estate taxes 37,745 47,659 13,367
State and other taxes 19,006 16,029 18,926
Depreciation and amortization 458,937 463,805 460,193
---------- ---------- ----------
789,780 683,838 669,982
---------- ---------- ----------
Income Before Equity in Earnings
of Joint Ventures and Gain on
Sale of Land and Buildings 1,836,014 1,934,735 2,028,288
Equity in Earnings of Joint
Ventures 245,778 247,197 235,457
Gain on Sale of Land and Buildings 128,547 128,592 -
---------- ---------- ----------
Net Income $2,210,339 $2,310,524 $2,263,745
========== ========== ==========
Allocation of Net Income:
General partners $ 21,590 $ 22,507 $ 22,637
Limited partners 2,188,749 2,288,017 2,241,108
---------- ---------- ----------
$2,210,339 $2,310,524 $2,263,745
========== ========== ==========
Net Income Per Limited Partner
Unit $ 36.48 $ 38.13 $ 37.35
========== ========== ==========
Weighted Average Number of
Limited Partner Units
Outstanding 60,000 60,000 60,000
========== ========== ==========
See accompanying notes to financial statements.
<TABLE>
CNL INCOME FUND IV, LTD.
(A Florida Limited Partnership)
STATEMENTS OF PARTNERS' CAPITAL
-------------------------------
Years Ended December 31, 1995, 1994 and 1993
<CAPTION>
General Partners Limited Partners
------------------- -----------------------------------------------------
Accumu- Accumu-
Contri- lated Contri- Distri- lated Syndication
butions Earnings butions butions Earnings Costs Total
-------- -------- ----------- ------------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1992 $164,004 $ 93,900 $30,000,000 $(11,407,963) $ 9,296,115 $(3,440,000) $24,706,056
Contributions from
general partner 77,500 - - - - - 77,500
Distributions to limited
partners ($46 per
limited partner unit) - - - (2,760,000) - - (2,760,000)
Net income - 22,637 - - 2,241,108 - 2,263,745
-------- -------- ----------- ------------ ----------- ----------- -----------
Balance, December 31, 1993 241,504 116,537 30,000,000 (14,167,963) 11,537,223 (3,440,000) 24,287,301
Distributions to limited
partners ($46 per
limited partner unit) - - - (2,760,000) - - (2,760,000)
Net income - 22,507 - - 2,288,017 - 2,310,524
-------- -------- ----------- ------------ ----------- ----------- -----------
Balance, December 31, 1994 241,504 139,044 30,000,000 (16,927,963) 13,825,240 (3,440,000) 23,837,825
Distributions to limited
partners ($46 per
limited partner unit) - - - (2,760,000) - - (2,760,000)
Net income - 21,590 - - 2,188,749 - 2,210,339
-------- -------- ----------- ------------ ----------- ----------- -----------
Balance, December 31, 1995 $241,504 $160,634 $30,000,000 $(19,687,963) $16,013,989 $(3,440,000) $23,288,164
======== ======== =========== ============ =========== =========== ===========
See accompanying notes to financial statements.
</TABLE>
CNL INCOME FUND IV, LTD.
(A Florida Limited Partnership)
STATEMENTS OF CASH FLOWS
------------------------
Year Ended December 31,
1995 1994 1993
----------- ----------- -----------
Increase (Decrease) in Cash and
Cash Equivalents:
Cash Flows from Operating
Activities:
Cash received from tenants $ 2,586,716 $ 2,582,954 $ 2,668,516
Distributions from joint
ventures 271,006 255,478 221,678
Cash paid for expenses (205,759) (318,821) (257,965)
Interest received 18,430 24,600 21,330
----------- ----------- -----------
Net cash provided by
operating activities 2,670,393 2,544,211 2,653,559
----------- ----------- -----------
Cash Flows from Investing
Activities:
Additions to land and
buildings on operating
leases (1,628) (537,317) (34,011)
Proceeds from sale of
land and buildings 518,650 712,000 -
Increase in restricted cash (518,150) - -
Payment of lease costs (1,800) (360) (10,560)
----------- ----------- -----------
Net cash provided by
(used in) investing
activities (2,928) 174,323 (44,571)
----------- ----------- -----------
Cash Flows from Financing
Activities:
Reimbursement of acqui-
sition costs paid by
related parties on
behalf of the Partner-
ship (1,175) - -
Contributions from general
partner - - 77,500
Distributions to limited
partners (2,760,000) (2,760,000) (2,070,000)
----------- ----------- -----------
Net cash used in
financing activities (2,761,175) (2,760,000) (1,992,500)
----------- ----------- -----------
Net Increase (Decrease) in Cash
and Cash Equivalents (93,710) (41,466) 616,488
Cash and Cash Equivalents at
Beginning of Year 579,574 621,040 4,552
----------- ----------- -----------
Cash and Cash Equivalents at End
of Year $ 485,864 $ 579,574 $ 621,040
=========== =========== ===========
Reconciliation of Net Income to
Net Cash Provided by Operating
Activities:
Net income $ 2,210,339 $ 2,310,524 $ 2,263,745
----------- ----------- -----------
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation 455,543 460,411 456,639
Amortization 3,394 3,394 3,554
Equity in earnings of
joint ventures, net
of distributions 25,228 9,189 (14,687)
Gain on sale of land and
buildings (128,547) (128,592) -
Decrease in receivables 93,451 1,280 99
Increase in prepaid
expenses (1,747) (2,420) (94)
Decrease in net invest-
ment in direct
financing leases 27,879 25,165 28,504
Decrease (increase) in
accrued rental income (22,921) 15,301 (56,013)
Decrease in accounts
payable and accrued
expenses (3,532) (125,825) (42,265)
Increase (decrease) in
due to related parties,
excluding reimbursement
of acquisition costs
paid on behalf of the
Partnership 27,166 (908) (5,497)
Increase (decrease) in
rents paid in advance
and deposits (15,860) (23,308) 19,574
----------- ----------- -----------
Total adjustments 460,054 233,687 389,814
----------- ----------- -----------
Net Cash Provided by Operating
Activities $ 2,670,393 $ 2,544,211 $ 2,653,559
=========== =========== ===========
Supplemental Schedule of Non-Cash
Investing and Financing
Activities:
Acquisition costs paid by
an affiliate on behalf
of the Partnership $ - $ 1,175 $ -
=========== =========== ===========
Land and building, net of
accumulated depreciation,
contributed to Kingsville
Real Estate Joint Venture $ - $ - $ 500,548
=========== =========== ===========
Net investment in direct
financing lease reclassi-
fied as building on
operating lease as a
result of lease amendment $ - $ 334,665 $ -
=========== =========== ===========
Land costs incurred and
unpaid at December 31 $ - $ 1,302 $ -
=========== =========== ===========
Lease costs incurred and
unpaid at December 31 $ 4,014 $ - $ -
=========== =========== ===========
Distributions declared
and unpaid at December 31 $ 690,000 $ 690,000 $ 690,000
=========== =========== ===========
See accompanying notes to financial statements.
CNL INCOME FUND IV, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
-----------------------------
Years Ended December 31, 1995, 1994 and 1993
1. Significant Accounting Policies:
-------------------------------
Organization and Nature of Business - CNL Income Fund IV, 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 percent shareholders of the
Corporate General Partner. The general partners have responsibility for
managing the day-to-day operations of the Partnership.
Land and Buildings on Operating Leases - Generally, land and buildings
on operating leases are stated at cost. Buildings are depreciated using
the straight-line method over their estimated useful lives ranging from
25 to 30 years. When properties are sold, the related cost and
accumulated depreciation are removed from the accounts and gains or
losses from sales are reflected in income in accordance with Statement
of Financial Accounting Standards No. 66, "Accounting for Sales of Real
Estate." The properties will be written down to net realizable value in
the event the general partners believe that the undepreciated cost
cannot be recovered through operations. The general partners determine
whether an impairment in value has occurred by comparing the estimated
undiscounted future cash flows with the carrying cost of the individual
properties.
Lease Accounting and Rental Income - Land and buildings are leased to
others on a triple-net lease 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 method. Such methods are described below:
Direct financing method - Leases accounted for using the
direct financing method are recorded at their net investment
(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 lease.
Operating method - Generally, land and buildings are
recorded at cost, revenue is recognized as rentals are
earned and depreciation is charged to operations as
incurred. When scheduled rentals vary during the lease
term, income is recognized on a straight-line basis over the
lease term so as to produce a constant periodic rent.
Accrued rental income is the aggregate difference between
the scheduled rents which vary during the lease term and the
income recognized on a straight-line basis.
When the collection of amounts recorded as rental or other income is
considered to be doubtful, an adjustment is made to increase the
allowance for doubtful accounts, which is netted against receivables,
and to decrease rental or other income or increase bad debt expense for
the current period, 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 - The Partnership is a partner in five
joint ventures and accounts for its investments using the equity method
since the Partnership shares control equally with affiliates which have
the same general partners.
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, money market funds and overnight repurchase
agreements 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. The Partnership limits investment of temporary cash
investments to financial institutions with high credit standing;
therefore, the Partnership believes it is not exposed to any significant
credit risk on cash and cash equivalents.
Lease Costs - Brokerage fees associated with negotiating new leases are
amortized over the terms of the new leases using the straight-line
method.
Income Taxes - Under Section 701 of the Internal Revenue Code, all
income, expenses and tax credit items flow through to the partners for
tax purposes. Therefore, no provision for federal income taxes is
provided in the accompanying financial statements. The Partnership is
subject to certain state taxes on its income and property.
Additionally, for tax purposes, syndication costs are included in
Partnership equity and in the basis of each partner's investment. For
financial reporting purposes, syndication costs are netted against
partners' capital and represent a reduction of Partnership equity and a
reduction in the basis of each partner's investment.
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. Actual results could differ from those
estimates.
Reclassification - Certain items in the prior years' financial
statements have been reclassified to conform to 1995 presentation.
These reclassifications had no effect on partners' capital or net
income.
New Accounting Standard - 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 will adopt this standard in 1996. The
general partners believe that adoption of this standard currently would
not have had a material effect on the Partnership's financial position
or results of operations.
2. Leases:
------
The Partnership leases its land or 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, two leases have been classified as direct financing leases.
For the leases classified as direct financing leases, the building
portions of the property leases are accounted for as direct financing
leases while the land portion of one of these leases is an operating
lease. Substantially all leases are for 15 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 or 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:
1995 1994
----------- -----------
Land $ 8,704,309 $ 8,834,987
Buildings 13,285,534 13,601,706
----------- -----------
21,989,843 22,436,693
Less accumulated
depreciation (3,045,149) (2,666,857)
----------- -----------
$18,944,694 $19,769,836
=========== ===========
In April 1994, the Partnership sold its property in York, Pennsylvania,
for $712,000, resulting in a gain of $128,592 for financial reporting
purposes. This property was originally acquired by the Partnership in
December 1988 and had a cost of approximately $611,400, excluding
acquisition fees and miscellaneous acquisition expenses; therefore, the
Partnership sold the property for approximately $100,600 in excess of
its original purchase price. In June and December 1994, the Partnership
reinvested a total of $539,794 of the net sales proceeds in land of two
properties in Miami, Florida, and Douglasville, Georgia, respectively.
The tenant owns the buildings located on these land parcels and has the
right, if not in default under the lease, to remove the buildings from
the land at the end of the lease terms.
In December 1995, the Partnership sold its property in Hastings,
Michigan, for $520,000 and received net sales proceeds of $518,650,
resulting in a gain of $128,547 for financial reporting purposes. This
property was originally acquired by the Partnership in August 1988 and
had a cost of approximately $419,600, excluding acquisition fees and
miscellaneous acquisition expenses; the Partnership sold the property
for approximately $99,100 in excess of its original purchase price.
Some leases provide for escalating guaranteed minimum rents throughout
the lease terms. Income from these scheduled rent increases is
recognized on a straight-line basis over the terms of the leases. For
the years ended December 31, 1995, 1994 and 1993, the Partnership
recognized $22,921, $14,859 and $56,013, respectively, of such rental
income. Income recognized during 1994 was reduced by $30,160 as a
result of the Partnership's reversing accrued rental income relating to
the lease for the property in Leesburg, Florida, which was terminated
during 1994.
The following is a schedule of the future minimum lease payments to be
received on noncancellable operating leases at December 31, 1995:
1996 $ 2,299,426
1997 2,301,226
1998 2,288,246
1999 2,306,409
2000 2,312,933
Thereafter 18,016,242
-----------
$29,524,482
===========
4. Net Investment in Direct Financing Leases:
-----------------------------------------
The following lists the components of the net investment in direct
financing leases at December 31:
1995 1994
----------- -----------
Minimum lease payments
receivable $ 2,155,488 $ 2,320,387
Estimated residual values 527,829 527,829
Less unearned income (1,348,828) (1,485,848)
----------- -----------
Net investment in direct
financing leases $ 1,334,489 $ 1,362,368
=========== ===========
The following is a schedule of future minimum lease payments to be
received on direct financing leases at December 31, 1995:
1996 $ 164,899
1997 164,899
1998 164,899
1999 164,899
2000 164,899
Thereafter 1,330,993
----------
$2,155,488
==========
5. Investment in Joint Ventures:
----------------------------
The Partnership has a 51 percent, a 26.6%, a 57 percent and a 96.1%
interest in the profits and losses of Holland Joint Venture, Titusville
Joint Venture, Cocoa Joint Venture and Auburn Joint Venture,
respectively. On January 29, 1993, the Partnership contributed the land
and building of its property in Kingsville, Texas, to a joint venture,
Kingsville Real Estate Joint Venture, in exchange for a 69.27% interest
in the profits and losses of the joint venture. The remaining 30.73%
interest was acquired by an affiliate in consideration of the
affiliate's funding the costs of the renovation of the building in order
to convert it from a Hardee's restaurant to a Denny's restaurant. The
renovation of the property was completed in July 1993. During 1994, the
Partnership's co-venture partner contributed an additional amount to the
joint venture for payment of the final construction costs; therefore,
the Partnership now owns a 68.87% interest in the profits and losses of
this joint venture.
The remaining interests in these joint ventures are held by affiliates
of the Partnership which have the same general partners. Holland Joint
Venture, Titusville Joint Venture, Cocoa Joint Venture, Auburn Joint
Venture and Kingsville Real Estate Joint Venture each own and lease one
property to an operator of national fast-food or family-style
restaurants.
The following presents the joint ventures' combined, condensed financial
information at December 31:
1995 1994
---------- ----------
Land and buildings on
operating leases,
less accumulated
depreciation $2,829,115 $2,886,592
Net investment in
direct financing
leases 874,650 887,840
Cash 7,697 10,439
Receivables 34,683 41,748
Prepaid expenses 1,324 -
Accrued rental income 139,301 109,218
Other assets 35,501 41,501
Liabilities 18,890 10,396
Partners' capital 3,903,381 3,966,942
Revenues 434,150 430,806
Net income 357,511 358,754
The Partnership recognized income totalling $245,778, $247,197 and
$235,457 for the years ended December 31, 1995, 1994 and 1993,
respectively, from these joint ventures.
6. Restricted Cash:
---------------
As of December 31, 1995, net sales proceeds of $518,150 from the sale of
the property in Hastings, Michigan, was being held in an interest-
bearing escrow account pending the release of funds by the escrow agent
to acquire an additional property or to return the funds to the
Partnership.
7. Receivables:
-----------
In October 1992, the Partnership accepted a promissory note from a
former tenant for $175,000 for amounts due relating to past due rents
and real estate taxes and other expenses the Partnership incurred as a
result of the former tenant's default under the terms of its lease of
the property in Maywood, Illinois. The note is non-interest bearing and
is payable in 36 monthly installments of $2,500 through September 1995,
and thereafter in eight monthly installments of $10,000, with the
balance due and payable on February 20, 1996. The Partnership
discounted the note to a principal balance of $138,094 using an interest
rate of ten percent. Receivables at December 31, 1994 included $104,931
of such amounts, including accrued interest of $2,519. During 1995, the
former tenant defaulted under the terms of the note. Due to the
financial difficulties that the former tenant is currently experiencing,
the Partnership has established an allowance for doubtful accounts for
the full amount of unpaid principal and interest of $111,031 relating to
this note; therefore, no amounts were included in receivables at
December 31, 1995.
8. Allocations and Distributions:
-----------------------------
All net income and net losses of the Partnership, excluding gains and
losses from the sale of property, 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, cumulative, noncompounded annual return on their adjusted
capital contributions (the "10% Preferred Return").
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 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 each of the years ended December 31, 1995, 1994 and 1993, the
Partnership declared distributions to the limited partners of
$2,760,000. No distributions have been made to the general partners to
date.
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:
1995 1994 1993
---------- ---------- ----------
Net income for financial
reporting purposes $2,210,339 $2,310,524 $2,263,745
Depreciation for tax
reporting purposes in
excess of depreciation
for financial reporting
purposes (16,933) (16,251) (29,276)
Direct financing leases
recorded as operating
leases for tax reporting
purposes 27,879 25,165 28,504
Gain on sale of land and
buildings for financial
reporting purposes in
excess of gain for tax
reporting purposes (128,547) (4,225) -
Equity in earnings of
joint ventures for tax
reporting purposes less
than equity in earnings
of joint ventures for
financial reporting
purposes (22,624) (36,826) (35,682)
Allowance for doubtful
accounts 122,022 3,026 41,818
Accrued rental income (22,921) 15,301 (56,013)
Rents paid in advance (15,860) (7,843) 16,476
---------- ---------- ----------
Net income for federal
income tax purposes $2,153,355 $2,288,871 $2,229,572
========== ========== ==========
10. Related Party Transactions:
--------------------------
One of the individual general partners, James M. Seneff, Jr., is one of
the principal shareholders of CNL Group, Inc., the parent company of CNL
Investment Company and CNL Fund Advisors, Inc. The other individual
general partner, Robert A. Bourne, is the president of CNL Investment
Company and CNL Fund Advisors, Inc. CNL Income Fund Advisors, Inc. was
a wholly owned subsidiary of CNL Group, Inc. until its merger, effective
January 1, 1996, with CNL Fund Advisors, Inc. During the years ended
December 31, 1995, 1994 and 1993, CNL Investment Company, CNL Income
Fund Advisors, Inc. and CNL Fund Advisors, Inc. (hereinafter referred to
collectively as the "Affiliates") each performed certain services for
the Partnership, as described below.
During the years ended December 31, 1995, 1994 and 1993, certain
Affiliates acted as manager of the Partnership's properties pursuant to
a management agreement with the Partnership. In connection therewith,
the Partnership agreed to pay the Affiliates a management fee of one
percent of the sum of gross revenues from properties wholly owned by the
Partnership and the Partnership's allocable share of gross revenues from
joint ventures, but not in excess of competitive fees for comparable
services. These fees are payable only after the limited partners
receive their 10% Preferred Return. Due to the subordinated nature of
these fees, no management fees have been incurred since inception.
Certain Affiliates are 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 Affiliates
provide a substantial amount of services in connection with the sale.
In addition, the real estate disposition fee is subordinated to receipt
by the limited partners of their aggregate 10% Preferred Return, plus
their adjusted capital contributions. No deferred, subordinated real
estate disposition fees have been incurred since inception.
During the years ended December 31, 1995, 1994 and 1993, the Affiliates
provided accounting and administrative services to the Partnership on a
day-to-day basis. The Partnership incurred $79,776, $49,816 and $42,764
for the years ended December 31, 1995, 1994 and 1993, respectively, for
such services.
The due to related parties consisted of the following at December 31:
1995 1994
------- -------
Due to Affiliates:
Expenditures incurred on
behalf of the Partnership $16,543 $ -
Accounting and administrative
services 10,623 -
------- -------
27,166 -
------- -------
Due to other affiliate:
Expenditures incurred on
behalf of the Partnership - 1,175
------- -------
$27,166 $ 1,175
======= =======
11. Concentration of Credit Risk:
----------------------------
The following schedule presents total rental and earned income from
individual lessees, each representing more than ten percent of the
Partnership's total rental and earned income (including the
Partnership's share of total rental and earned income from joint
ventures), for the years ended December 31:
1995 1994 1993
-------- -------- --------
Shoney's, Inc. $423,124 $419,918 $412,840
Tampa Foods, L.P. 320,883 321,487 324,127
In addition, the following schedule presents total rental and earned
income from individual restaurant chains, each representing more than
ten percent of the Partnership's total rental and earned income
(including the Partnership's share of total rental and earned income
from joint ventures) for at least one of the years ended December 31:
1995 1994 1993
-------- -------- --------
Shoney's $559,710 $555,436 $553,655
Wendy's Old Fashioned
Hamburger Restaurants 525,948 526,344 528,842
Denny's 358,467 358,405 311,608
Taco Bell 251,273 265,981 303,851
Although the Partnership's properties are geographically diverse and the
Partnership's lessees operate a variety of restaurant concepts, failure
of any of these lessees or restaurant chains could significantly impact
the results of operations of the Partnership. However, the general
partners believe that the risk of such a default is reduced due to the
essential or important nature of these properties for the on-going
operations of the lessees.
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 Investment Company, CNL Fund Advisors, Inc.,
and CNL Group, Inc. and its affiliates, all of which are affiliates of the
General Partners. In addition, during 1995, the Partnership had available to
it the services, personnel and experience of CNL Income Fund Advisors, Inc.,
prior to its merger with CNL Fund Advisors Inc., effective January 1, 1996.
James M. Seneff, Jr., age 49, is a principal stockholder of CNL Group,
Inc., a diversified real estate company, and has served as its Chairman of the
Board of Directors and Chief Executive Officer since its formation in 1973.
CNL Group, Inc. is the parent company of CNL Securities Corp., CNL Investment
Company, CNL Fund Advisors, Inc., and prior to its merger with CNL Fund
Advisors, Inc., effective January 1, 1996, CNL Income Fund Advisors, Inc. Mr.
Seneff has been a director and registered principal of CNL Securities Corp.,
which served as the managing dealer in the Partnership's offering of Units,
since its formation in 1979. Mr. Seneff also has held the position of
President and a director of CNL Management Company, a registered investment
advisor, since its formation in 1976, has served as Chairman of the Board and
Chief Executive Officer of CNL Investment Company and Chief Executive Officer
and Chairman of the Board of Commercial Net Lease Realty, Inc. since 1992, has
served as Chairman of the Board and Chief Executive Officer of CNL Realty
Advisors, Inc. since its inception in 1991, served as Chairman of the Board
and Chief Executive Officer of CNL Income Fund Advisors, Inc. since its
inception in 1994 through December 31, 1995, has served as Chairman of the
Board and Chief Executive Officer of CNL Fund Advisors, Inc. since its
inception in 1994, and has held the position of Chief Executive Officer and a
director of CNL Institutional Advisors, Inc., a registered investment advisor,
since its inception in 1990. Mr. Seneff previously served on the Florida
State Commission on Ethics and is a former member and past Chairman of the
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 $40 billion of
retirement funds. 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 joint venturer in
approximately 100 real estate ventures involved in the financing, acquisition,
construction and rental of office buildings, apartment complexes, restaurants,
hotels and other real estate. Included in these 100 real estate ventures are
approximately 57 privately offered real estate limited partnerships in which
Mr. Seneff, directly or through an affiliated entity, serves or has served as
a general partner. Also included are CNL Income Fund, Ltd., CNL Income Fund
II, Ltd., CNL Income Fund III, Ltd., CNL Income Fund V, Ltd., CNL Income Fund
VI, Ltd., CNL Income Fund VII, Ltd., CNL Income Fund VIII, Ltd., CNL Income
Fund IX, Ltd., CNL Income Fund X, Ltd., CNL Income Fund XI, Ltd., CNL Income
Fund XII, Ltd., CNL Income Fund XIII, Ltd., CNL Income Fund XIV, Ltd., CNL
Income Fund XV, Ltd., CNL Income Fund XVI, Ltd., CNL Income Fund XVII, Ltd.
and CNL Income Fund XVIII, Ltd. (the "CNL Income Fund Partnerships"), public
real estate limited partnerships with investment objectives similar to those
of the Partnership, in which Mr. Seneff serves as a general partner. Mr.
Seneff received his degree in Business Administration from Florida State
University in 1968.
Robert A. Bourne, age 48, is President and Treasurer of CNL Group, Inc.,
President, a director and a registered principal of CNL Securities Corp.,
President and a director of CNL Investment Company, CNL Fund Advisors, Inc.,
and prior to its merger with CNL Fund Advisors, Inc., effective January 1,
1996, CNL Income Fund Advisors, Inc., and President, Chief Investment Officer
and a director of CNL Institutional Advisors, Inc., a registered investment
advisor. Mr. Bourne also has served as a director since 1992, as President
from July 1992 to February 1996, and as Vice Chairman of the Board of
Directors, Secretary and Treasurer since February 1996, of Commercial Net
Lease Realty, Inc. In addition, Mr. Bourne has served as a director since
its inception in 1991, as President from 1991 to February 1996, and as
Secretary and Treasurer since February 1996, of CNL Realty Advisors, Inc.
Upon graduation from Florida State University in 1970, where he received a
B.A. in Accounting, with honors, Mr. Bourne worked as a certified public
accountant and, from September 1971 through December 1978, was employed by
Coopers & Lybrand, Certified Public Accountants, where he held the position of
tax manager beginning in 1975. From January 1979 until June 1982, Mr. Bourne
was a partner in the accounting firm of Cross & Bourne and from July 1982
through January 1987, he was a partner in the accounting firm of Bourne &
Rose, P. A., Certified Public Accountants. Mr. Bourne, who joined CNL
Securities Corp. in 1979, has participated as a general partner or joint
venturer in approximately 100 real estate ventures involved in the financing,
acquisition, construction and rental of office buildings, apartment complexes,
restaurants, hotels and other real estate. Included in these 100 real estate
ventures are approximately 57 privately offered real estate limited
partnerships in which Mr. Bourne, directly or through an affiliated entity,
serves or has served as a general partner. Also included are the CNL Income
Fund Partnerships, public real estate limited partnerships with investment
objectives similar to those of the Partnership, in which Mr. Bourne serves as
a general partner.
CNL Realty Corporation is a corporation organized on November 26, 1985,
under the laws of the State of Florida. Its sole directors and shareholders
are James M. Seneff, Jr. and Robert A. Bourne, the individual General
Partners. CNL Realty Corporation was organized to serve as the corporate
general partner of real estate limited partnerships, such as the Partnership,
organized by one or both of the individual General Partners. CNL Realty
Corporation currently serves as the corporate general partner of CNL Income
Fund Partnerships.
CNL Investment Company, which through December 31, 1994, provided
certain management services in connection with the Partnership and its
Properties, is a corporation organized in 1990 under the laws of the State of
Florida. Its principal office is located at 400 East South Street, Suite 500,
Orlando, Florida 32801. CNL Investment Company is a wholly owned subsidiary
of CNL Group, Inc., a diversified real estate company, and was organized to
perform property acquisition, property management and other services.
CNL Income Fund Advisors, Inc., for the period January 1, 1995 through
September 30, 1995, provided certain management services in connection with
the Partnership and its Properties following the assignment by CNL Investment
Company of its rights and obligations under the management agreement. CNL
Income Fund Advisors, Inc. was a corporation organized in 1994 under the laws
of the State of Florida, and its principal office was located at 400 East
South Street, Suite 500, Orlando, Florida 32801. CNL Income Fund Advisors,
Inc. was a wholly owned subsidiary of CNL Group, Inc., a diversified real
estate company, and was organized to perform property acquisition, property
management and other services. CNL Income Fund Advisors, Inc. merged with CNL
Fund Advisors, Inc. effective January 1, 1996.
CNL Fund Advisors, Inc., effective October 1, 1995 began providing
certain management services in connection with the Partnership and its
Properties following the assignment by CNL Income Fund Advisors, Inc. of its
rights and obligations under the management agreement. CNL Fund Advisors,
Inc. is a corporation organized in 1994 under the laws of the State of
Florida, and its principal office is located at 400 East South Street, Suite
500, Orlando, Florida 32801. CNL Fund Advisors, Inc. is a wholly owned
subsidiary of CNL Group, Inc., a diversified real estate company, and was
organized to perform property acquisition, property management and other
services.
CNL Group, Inc., which is the parent company of CNL Investment Company
and CNL Fund Advisors, Inc., is a diversified real estate corporation
organized in 1980 under the laws of the State of Florida. Other subsidiaries
and affiliates of CNL Group, Inc. include a property development and
management company, two investment advisory companies, and six corporations
organized as strategic business units. James M. Seneff, Jr., an individual
General Partner of the Partnership, is the Chairman of the Board, Chief
Executive Officer, and a director of CNL Group, Inc. Mr. Seneff and his wife
own all of the outstanding shares of CNL Group, Inc.
The following persons serve as operating officers of CNL Group, Inc. or
its affiliates or subsidiaries in the discretion of the Boards of Directors of
those companies, but, except as specifically indicated, do not serve as
members of the Boards of Directors of those entities. The Boards of Directors
have the responsibility for creating and implementing the policies of
CNL Group, Inc. and its affiliated companies.
John T. Walker, age 37, joined CNL Group, Inc. in September 1994, as
Senior Vice President, responsible for Research and Development. He currently
serves as the Chief Operating Officer and Executive Vice President of CNL Fund
Advisors, Inc. and CNL American Properties Fund, Inc. From May 1992 to May
1994, he was Executive Vice President for Finance and Administration and Chief
Financial Officer of Z Music, Inc., a television network which was
subsequently acquired by Gaylord Entertainment, where he was responsible for
overall financial and administrative management and planning. From January
1990 through April 1992, Mr. Walker was Chief Financial Officer of the First
Baptist Church in Orlando, Florida. From April 1984 through December 1989, he
was a partner in the accounting firm of Chastang, Ferrell & Walker, P.A.,
where he was the partner in charge of audit and consulting services, and from
1981 to 1984, Mr. Walker was a Senior Consultant/Audit Senior at Price
Waterhouse. Mr. Walker is a Cum Laude graduate of Wake Forest University with
a B.S. in Accountancy and is a Certified Public Accountant.
Lynn E. Rose, age 47, a certified public accountant, has served as Chief
Financial Officer and Secretary of CNL Group, Inc. since December 1993, and
served as Controller and Secretary of CNL Group, Inc. from 1987 until December
1993. She has served as Chief Operating Officer of CNL Corporate Services,
Inc. since November 1994. Ms. Rose also has served as Chief Financial Officer
of CNL Institutional Advisors, Inc. since its inception in 1990, a director of
CNL Realty Advisors, Inc. since its inception in 1991, Secretary and Treasurer
of CNL Realty Advisors, Inc. from 1991 to February 1996, Secretary and
Treasurer of Commercial Net Lease Realty, Inc. from 1992 to February 1996,
Secretary of CNL Income Fund Advisors, Inc. since its inception in 1994 to
December 1995, and Secretary and Treasurer of CNL Fund Advisors, Inc. since
its inception in 1994. Ms. Rose also has served as Chief Financial Officer,
Secretary and Treasurer of CNL American Properties Fund, Inc. since its
inception in 1994. In addition, Ms. Rose oversees the management information
services, administration, legal compliance, accounting, tenant compliance, and
reporting for over 200 corporations, partnerships, and joint ventures. Prior
to joining CNL, Ms. Rose was a partner with Robert A. Bourne in the accounting
firm of Bourne & Rose, P.A., Certified Public Accountants. Ms. Rose holds a
B.A. in Sociology from the University of Central Florida and is a registered
financial and operations principal of CNL Securities Corp. She was licensed as
a Certified Public Accountant in 1979.
Jeanne A. Wall, age 37, has served as Chief Operating Officer of
CNL Investment Company and of CNL Securities Corp. since November 1994 and
previously served as Executive Vice President of CNL Investment Company since
January 1991. In 1984, Ms. Wall joined CNL Securities Corp. as its Partnership
Administrator. In 1985, Ms. Wall became Vice President of CNL Securities
Corp. and, in 1987, she became a Senior Vice President of CNL Securities Corp.
In this capacity, Ms. Wall serves as national marketing director and oversees
the national marketing plan for the CNL investment programs. In addition, Ms.
Wall oversees the partnership administration and investor services for
programs offered through participating brokers. Ms. Wall also has served as
Senior Vice President of CNL Institutional Advisors, Inc., a registered
investment advisor, from 1990 to 1993, as Vice President of CNL Realty
Advisors, Inc. since its inception in 1991, as Vice President of Commercial
Net Lease Realty, Inc. since 1992, as Executive Vice President of CNL Income
Fund Advisors, Inc. from its inception in 1994 to December 1995, as Executive
Vice President of CNL Fund Advisors, Inc. since its inception in 1994, and as
Executive Vice President of CNL American Properties, Inc. since its inception
in 1994. Ms. Wall holds a B.A. in Business Administration from Linfield
College and is a registered principal of CNL Securities Corp. Ms. Wall
currently serves as a trustee on the board of the Investment Program
Association and on the Direct Participation Program committee for the National
Association of Securities Dealers (NASD).
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 February 29, 1996, 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 February 29, 1996, 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. There are no arrangements
which at a subsequent date may result in a change in control of the
Registrant.
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, 1995, exclusive of any distributions to which the General
Partners or their affiliates may be entitled by reason of their purchase and
ownership of Units.
Type of Amount Incurred
Compensation Method of For the Year
and Recipient Computation Ended December 31, 1995
------------- ----------- -----------------------
Reimbursement to Operating expenses are Operating expenses
affiliates for reimbursed at the lower incurred on behalf of
operating expenses of cost or 90 percent the Partnership:
of the prevailing rate $101,876
at which comparable
services could have Accounting and
been obtained in the administrative services:
same geographic area. $79,776
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 $ - 0 -
management fee to of gross operating
affiliates revenues from
Properties wholly owned
by the Partnership plus
the Partnership's
allocable share of
gross revenues of joint
ventures in which the
Partnership is a co-
venturer, subordinated
to certain minimum
returns to the Limited
Partners. The
management fee will not
exceed competitive fees
for comparable
services.
Deferred, A deferred, $ - 0 -
subordinated real subordinated real
estate disposition estate disposition fee,
fee payable to payable upon sale of
affiliates 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.
General Partners' A deferred, $ - 0 -
deferred, sub- subordinated share
ordinated share of equal to one percent of
Partnership net cash Partnership
flow distributions of net
cash flow, subordinated
to certain minimum
returns to the Limited
Partners.
General Partners' A deferred, $ - 0 -
deferred, sub- subordinated share
ordinated share of equal to five percent
Partnership net sales of Partnership
proceeds from a sale distributions of such
or sales net sales proceeds,
subordinated to certain
minimum returns to the
Limited 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 Accountants
Balance Sheets at December 31, 1995 and 1994
Statements of Income for the years ended December 31, 1995, 1994
and 1993
Statements of Partners' Capital for the years ended December 31,
1995, 1994 and 1993
Statements of Cash Flows for the years ended December 31, 1995,
1994 and 1993
Notes to Financial Statements
2. Financial Statement Schedules
Schedule II - Valuation and Qualifying Accounts for the years
ended December 31, 1995, 1994 and 1993
Schedule III - Real Estate and Accumulated Depreciation at
December 31, 1995
Notes to Schedule III - Real Estate and Accumulated Depreciation
at December 31, 1995
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 Certificate of Limited Partnership of CNL Income Fund IV,
Ltd. (Included as Exhibit 3.1 in Amendment No. 1 to
Registration Statement No. 33-20249 on Form S-11 and
incorporated herein by reference.)
3.2 Amended and Restated Agreement and Certificate of Limited
Partnership of CNL Income Fund IV, Ltd. (Included as Exhibit
3.2 to Form 10-K filed with the Securities and Exchange
Commission on March 31, 1994, and incorporated herein by
reference.)
4.1 Certificate of Limited Partnership of CNL Income Fund IV,
Ltd. (Included as Exhibit 3.1 in Amendment No. 1 to
Registration Statement No. 33-20249 on Form S-11 and
incorporated herein by reference.)
4.2 Amended and Restated Agreement and Certificate of Limited
Partnership of CNL Income Fund IV, Ltd. (Included as Exhibit
3.2 and incorporated herein by reference.)
10.1 Property Management Agreement (Included as Exhibit 10.1 to
Form 10-K filed with the Securities and Exchange Commission
on March 31, 1994, and incorporated herein by reference.)
10.2 Assignment of Property 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 Property Management Agreement from CNL Income
Fund Advisors, Inc. to CNL Fund Advisors, Inc. (Filed
herewith.)
(b) The Registrant filed no reports on Form 8-K during the period from
October 1, 1995 through December 31, 1995.
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 28th day
of March, 1996.
CNL INCOME FUND IV, 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 March 28, 1996
- ------------------------ Director (Principal
Robert A. Bourne Financial and Accounting
Officer)
/s/ James M. Seneff, Jr. Chief Executive Officer March 28, 1996
- ------------------------ and Director (Principal
James M. Seneff, Jr. Executive Officer)
CNL INCOME FUND IV, LTD.
(A Florida Limited Partnership)
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
-----------------------------------------------
Years Ended December 31, 1995, 1994 and 1993
Additions
---------------------
Balance at Charged to Charged to Balance
Beginning Costs and Other at End
Year Description of Year Expenses Accounts Deductions of Year
- ---- ----------- ---------- ---------- ---------- ---------- --------
1993 Allowance for
doubtful
accounts (a) $ - $ - $41,818 $ - $ 41,818
======= ======== ======= ======= ========
1994 Allowance for
doubtful
accounts (a) $41,818 $ 1,165 $43,679(b) $41,818(c) $ 44,844
======= ======== ======= ======= ========
1995 Allowance for
doubtful
accounts (a) $44,844 $111,687 $24,138(b) $13,803(c) $166,866
======= ======== ======= ======= ========
(a) Deducted from receivables on the balance sheet.
(b) Reduction of rental and other income.
(c) Amounts written off as uncollectible.
CNL INCOME FUND IV, LTD.
(A Florida Limited Partnership)
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
-------------------------------------------------------
December 31, 1995
(A) (B) (C) (D) (E)
Costs Capitalized
Subsequent
Initial Cost To Acquisition
----------------------- -------------------
Buildings
Encum- and Improve- Carrying
brances Land Improvements ments Costs
------- ---------- ------------ --------- ---------
Properties the Partner-
ship has Invested in
Under Operating Leases:
Captain D's
Restaurants:
Alexander City, AL - $ 120,210 $ 279,689 $ - $ -
Oak Ridge, TN - 169,951 281,686 - -
Checkers Drive-In Restaurants:
Miami, FL - 174,336 - - -
Douglasville, GA - 365,784 - - -
Denny's Restaurants:
Marion, OH - 135,407 334,665 - -
Dundee, MI - 251,650 - 372,278 -
Union Township, OH - 300,179 630,608 - -
Golden Corral Family
Steakhouse Restau-
rants:
Franklin, IN - 107,560 586,375 - -
Streator, IL - 161,616 650,934 - -
Hardee's Restaurants:
Winchester, IN - 287,769 - 442,785 -
Portland, IN - 187,928 - 532,931 -
Jack in the Box
Restaurant:
San Antonio, TX - 352,957 - 368,702 -
Pizza Hut Restaurants:
Memphis, TX - 26,510 231,874 - -
Carthage, TX - 40,444 232,823 - -
Crystal City, TX - 8,826 178,570 - -
Sequin, TX - 63,708 184,279 - -
Washington, D.C. - 191,737 - - -
Perkins Restaurants:
Leesburg, FL - 409,840 282,290 89,112 -
Palm Bay, FL - 469,927 365,128 310,676 -
Shoney's Restaurants:
Alexander City, AL - 202,438 428,406 - -
Topeka, KS - 292,407 465,321 - -
Brookhaven, MS - 312,574 452,601 - -
Auburn, AL - 363,432 426,123 - -
Tampa, FL - 316,697 - 894,659 -
Taco Bell Restaurants:
Edgewood, MD - 440,355 - 523,478 -
Naples, FL - 141,188 236,224 57,565 -
Ft. Myers, FL - 232,853 332,911 68,928 -
Wendy's Old Fashioned
Hamburger Restaurants:
Detroit, MI - 192,814 462,793 - -
Mechanicsville, VA - 346,627 502,117 - -
Tampa, FL - 514,121 373,365 - -
Tampa, FL - 530,456 432,958 - -
Tampa, FL - 476,755 368,405 - -
Other Restaurant:
Corpus Christi, TX - 204,287 - 460,803 -
Maywood, IL (i) - 310,966 - 443,472 -
---------- ---------- ---------- --------
$8,704,309 $8,720,145 $4,565,389 $ -
========== ========== ========== ========
Property of Joint Venture
in Which the Partnership
has a 51% Interest and
has Invested in Under
an Operating Lease:
Denny's Restaurant:
Holland, MI - $ 295,987 $ - $ 780,451 $ -
========== ========== ========== ========
Property of Joint Venture
in Which the Partnership
has a 26.6% Interest and
has Invested in Under an
Operating Lease:
Po Folks Restaurant:
Titusville, FL - $ 271,350 $ - $ 750,985 $ -
========== ========== ========== ========
Property of Joint Venture
in Which the Partnership
has a 57% Interest and
has Invested in Under
an Operating Lease:
Waffle House Restaurant:
Cocoa, FL - $ 183,229 $ 192,857 $ - $ -
========== ========== ========== ========
Property of Joint Venture
in Which the Partnership
has a 96.1% Interest and
has Invested in Under an
Operating Lease:
KFC Restaurant:
Auburn, MA - $ 484,362 $ - $ - $ -
========== ========== ========== ========
Property of Joint Venture
in Which the Partnership
has a 68.87% Interest
and has Invested in
Under an Operating Lease:
Denny's Restaurant:
Kingsville, TX - $ 171,061 $ - $ 99,128 $ -
========== ========== ========== ========
Properties the Partnership
has Invested in Under
Direct Financing Leases:
Pizza Hut Restaurant:
Washington, D.C. - $ - $ 459,543 $ - $ -
Shoney's Restaurant:
Punta Gorda, FL - 210,438 770,826 39,193 -
---------- ---------- ---------- --------
$ 210,438 $1,230,369 $ 39,193 $ -
========== ========== ========== ========
Property of Joint Venture
in Which the Partnership
has a 96.1% Interest and
has Invested in Under a
Direct Financing Lease:
KFC Restaurant:
Auburn, MA - $ - $ - $ 434,947 $ -
========== ========== ========== ========
Property of Joint Venture
in Which the Partnership
has a 68.87% Interest and
has Invested in Under a
Direct Financing Lease:
Denny's Restaurant:
Kingsville, TX - $ - $ - $ 535,489 $ -
========== ========== ========== ========
CNL INCOME FUND IV, LTD.
(A Florida Limited Partnership)
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
-------------------------------------------------------
December 31, 1995
(F) (G) (H) (I)
Gross Amount at Which Carried
at Close of Period (c)
------------------------------------
Buildings
and Accumulated
Land Improvements Total Depreciation
---------- ------------ ----------- ------------
Properties the Partnership
has Invested in Under
Operating Leases:
Captain D's Restaurants:
Alexander City, AL $ 120,210 $ 279,689 $ 399,899 $ 65,491
Oak Ridge, TN 169,951 281,686 451,637 65,984
Checkers Drive-In
Restaurants:
Miami, FL 174,336 - 174,336 (g)
Douglasville, GA 365,784 - 365,784 (g)
Denny's Restaurants:
Marion, OH 135,407 334,665 470,072 26,684
Dundee, MI 251,650 372,278 623,928 88,933
Union Township, OH 300,179 630,608 930,787 149,769
Golden Corral Family
Steakhouse Restaurants:
Franklin, IN 107,560 586,375 693,935 146,594
Streator, IL 161,616 650,934 812,550 159,117
Hardee's Restaurants:
Winchester, IN 287,769 442,785 730,554 105,112
Portland, IN 187,928 532,931 720,859 110,312
Jack in the Box Restaurant:
San Antonio, TX 352,957 368,702 721,659 83,982
Pizza Hut Restaurants:
Memphis, TX 26,510 231,874 258,384 56,358
Carthage, TX 40,444 232,823 273,267 56,589
Crystal City, TX 8,826 178,570 187,396 43,403
Sequin, TX 63,708 184,279 247,987 44,790
Washington, D.C. 191,737 (f) 191,737 -
Perkins Restaurants:
Leesburg, FL 409,840 371,402 781,242 86,145
Palm Bay, FL 469,927 675,804 1,145,731 156,749
Shoney's Restaurants:
Alexander City, AL 202,438 428,406 630,844 100,313
Topeka, KS 292,407 465,321 757,728 109,000
Brookhaven, MS 312,574 452,601 765,175 106,020
Auburn, AL 363,432 426,123 789,555 99,818
Tampa, FL 316,697 894,659 1,211,356 193,843
Taco Bell Restaurants:
Edgewood, MD 440,355 523,478 963,833 119,964
Naples, FL 141,188 293,789 434,977 65,593
Ft. Myers, FL 232,853 401,839 634,692 90,203
Wendy's Old Fashioned
Hamburger Restaurants:
Detroit, MI 192,814 462,793 655,607 110,556
Mechanicsville, VA 346,627 502,117 848,744 118,555
Tampa, FL 514,121 373,365 887,486 87,194
Tampa, FL 530,456 432,958 963,414 101,110
Tampa, FL 476,755 368,405 845,160 86,036
Other Restaurant:
Corpus Christi, TX 204,287 460,803 665,090 109,710
Maywood, IL (i) 310,966 443,472 754,438 101,222
---------- ----------- ----------- ----------
$8,704,309 $13,285,534 $21,989,843 $3,045,149
========== =========== =========== ==========
Property of Joint Venture
in Which the Partnership
has a 51% Interest and
has Invested in Under an
Operating Lease:
Denny's Restaurant:
Holland, MI $ 295,987 $ 780,451 $ 1,076,438 $ 186,441
========== =========== =========== ==========
Property of Joint Venture
in Which the Partnership
has a 26.6% Interest and
has Invested in Under an
Operating Lease:
Po Folks Restaurant:
Titusville, FL $ 271,350 $ 750,985 $ 1,022,335 $ 175,230
========== =========== =========== ==========
Property of Joint Venture
in Which the Partnership
has a 57% Interest and
has Invested in Under an
Operating Lease:
Waffle House Restaurant:
Cocoa, FL $ 183,229 $ 192,857 $ 376,086 $ 38,624
========== =========== =========== ==========
Property of Joint Venture
in Which the Partnership
has a 96.1% Interest and
has Invested in Under an
Operating Lease:
KFC Restaurant:
Auburn, MA $ 484,362 (f) $ 484,362 $ -
========== =========== ==========
Property of Joint Venture
in Which the Partnership
has a 68.87% Interest and
has Invested in Under an
Operating Lease:
Denny's Restaurant:
Kingsville, TX $ 270,189 (f) $ 270,189 $ -
========== =========== ==========
Properties the Partnership
has Invested in Under
Direct Financing Leases:
Pizza Hut Restaurant:
Washington, D.C. - (f) (f) (d)
Shoney's Restaurant:
Punta Gorda, FL (f) (f) (f) (e)
Property of Joint Venture in
Which the Partnership has a
96.1% Interest and has Invested
in Under a Direct Financing
Lease:
KFC Restaurant:
Auburn, MA - (f) (f) (d)
Property of Joint Venture in
Which the Partnership has a
68.87% Interest and has Invested
in Under a Direct Financing
Lease:
Denny's Restaurant:
Kingsville, TX - (f) (f) (d)
CNL INCOME FUND IV, LTD.
(A Florida Limited Partnership)
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
-------------------------------------------------------
December 31, 1995
(J) (K) (L)
Life
on Which
Depreciation
in Latest
Date Income
of Con- Date Statement is
struction Acquired Computed
--------- -------- ------------
Properties the Partnership
has Invested in Under
Operating Leases:
Captain D's Restaurants:
Alexander City, AL 1988 12/88 (b)
Oak Ridge, TN 1988 12/88 (b)
Checkers Drive-In
Restaurants:
Miami, FL - 06/94 (g)
Douglasville, GA - 12/94 (g)
Denny's Restaurants:
Marion, OH 1989 10/88 (h)
Dundee, MI 1988 10/88 (b)
Union Township, OH 1987 11/88 (b)
Golden Corral Family
Steakhouse Restaurants:
Franklin, IN 1988 06/88 (b)
Streator, IL 1988 08/88 (b)
Hardee's Restaurants:
Winchester, IN 1988 07/88 (b)
Portland, IN 1989 11/88 (b)
Jack in the Box Restaurant:
San Antonio, TX 1989 11/88 (b)
Pizza Hut Restaurants:
Memphis, TX 1985 09/88 (b)
Carthage, TX 1981 09/88 (b)
Crystal City, TX 1981 09/88 (b)
Sequin, TX 1974 09/88 (b)
Washington, D.C. 1986 01/89 (d)
Perkins Restaurants:
Leesburg, FL 1989 12/88 (b)
Palm Bay, FL 1989 12/88 (b)
Shoney's Restaurants:
Alexander City, AL 1988 12/88 (b)
Topeka, KS 1988 12/88 (b)
Brookhaven, MS 1988 12/88 (b)
Auburn, AL 1988 12/88 (b)
Tampa, FL 1989 02/89 (b)
Taco Bell Restaurants:
Edgewood, MD 1989 10/88 (b)
Naples, FL 1981 12/88 (b)
Ft. Myers, FL 1977 12/88 (b)
Wendy's Old Fashioned
Hamburger Restaurants:
Detroit, MI 1983 10/88 (b)
Mechanicsville, VA 1988 12/88 (b)
Tampa, FL 1980 12/88 (b)
Tampa, FL 1984 12/88 (b)
Tampa, FL 1987 12/88 (b)
Other Restaurant:
Corpus Christi, TX 1988 10/88 (b)
Maywood, IL (i) 1988 09/88 (b)
Property of Joint Venture in
Which the Partnership has a
51% Interest and has Invested
in Under an Operating Lease:
Denny's Restaurant:
Holland, MI 1988 11/88 (b)
Property of Joint Venture in
Which the Partnership has a
26.6% Interest and has Invested
in Under an Operating Lease:
Po Folks Restaurant:
Titusville, FL 1988 12/88 (b)
Property of Joint Venture in
Which the Partnership has a
57% Interest and has Invested
in Under an Operating Lease:
Waffle House Restaurant:
Cocoa, FL 1986 12/89 (b)
Property of Joint Venture in
Which the Partnership has a
96.1% Interest and has Invested
in Under an Operating Lease:
KFC Restaurant:
Auburn, MA 1989 5/89 (d)
Property of Joint Venture in
Which the Partnership has a
68.87% Interest and has Invested
in Under an Operating Lease:
Denny's Restaurant:
Kingsville, TX 1988 10/88 (d)
Properties the Partnership
has Invested in Under Direct
Financing Leases:
Pizza Hut Restaurant:
Washington, D.C. 1986 01/89 (d)
Shoney's Restaurant:
Punta Gorda, FL 1989 02/89 (e)
Property of Joint Venture in
Which the Partnership has a
96.1% Interest and has Invested
in Under a Direct Financing
Lease:
KFC Restaurant:
Auburn, MA 1989 05/89 (d)
Property of Joint Venture in
Which the Partnership has a
68.87% Interest and has Invested
in Under a Direct Financing
Lease:
Denny's Restaurant:
Kingsville, TX 1988 10/88 (d)
CNL INCOME FUND IV, LTD.
(A Florida Limited Partnership)
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
----------------------------------------------------------------
December 31, 1995
(a) Transactions in real estate and accumulated depreciation during 1995,
1994 and 1993, are summarized as follows:
Accumulated
Cost Depreciation
----------- ------------
Properties the Partnership
has Invested in Under
Operating Leases:
Balance, December 31, 1992 $22,734,702 $1,872,330
Acquisitions 34,011 -
Transfer to joint venture (554,251) (53,703)
Depreciation expense - 456,639
----------- ----------
Balance, December 31, 1993 22,214,462 2,275,266
Dispositions (652,228) (68,820)
Acquisitions 539,794 -
Reclassified to operating
lease 334,665 -
Depreciation expense - 460,411
----------- ----------
Balance, December 31, 1994 22,436,693 2,666,857
Dispositions (447,176) (77,251)
Additional costs
capitalized 326 -
Depreciation expense - 455,543
----------- ----------
Balance, December 31, 1995 $21,989,843 $3,045,149
=========== ==========
Property of Joint Venture
in Which the Partnership
has a 51% Interest and
has Invested in Under
an Operating Lease:
Balance, December 31, 1992 $ 1,076,438 $ 108,396
Depreciation expense - 26,015
----------- ----------
Balance, December 31, 1993 1,076,438 134,411
Depreciation expense - 26,015
----------- ----------
Balance, December 31, 1994 1,076,438 160,426
Depreciation expense - 26,015
----------- ----------
Balance, December 31, 1995 $ 1,076,438 $ 186,441
=========== ==========
Property of Joint Venture
in Which the Partnership
has a 26.6% Interest and
has Invested in Under
an Operating Lease:
Balance, December 31, 1992 $ 1,022,335 $ 100,132
Depreciation expense - 25,032
----------- ----------
Balance, December 31, 1993 1,022,335 125,164
Depreciation expense - 25,033
----------- ----------
Balance, December 31, 1994 1,022,335 150,197
Depreciation expense - 25,033
----------- ----------
Balance, December 31, 1995 $ 1,022,335 $ 175,230
=========== ==========
Property of Joint Venture
in Which the Partnership
has a 57% Interest and
has Invested in Under
an Operating Lease:
Balance, December 31, 1992 $ 376,086 $ 19,338
Depreciation expense - 6,429
----------- ----------
Balance, December 31, 1993 376,086 25,767
Depreciation expense - 6,428
----------- ----------
Balance, December 31, 1994 376,086 32,195
Depreciation expense - 6,429
----------- ----------
Balance, December 31, 1995 $ 376,086 $ 38,624
=========== ==========
Property of Joint Venture
in Which the Partnership
has a 96.1% Interest and
has Invested in Under
an Operating Lease:
Balance, December 31, 1992 $ 484,362 $ -
Depreciation expense (d) - -
----------- ----------
Balance, December 31, 1993 484,362 -
Depreciation expense (d) - -
----------- ----------
Balance, December 31, 1994 484,362 -
Depreciation expense - -
----------- ----------
Balance, December 31, 1995 $ 484,362 $ -
=========== ==========
Property of Joint Venture
in Which the Partnership
has a 68.87% Interest and
has Invested in Under
an Operating Lease:
Balance, December 31, 1992 $ - $ -
Acquisition 270,189 -
Depreciation expense (d) - -
----------- ----------
Balance, December 31, 1993 270,189 -
Depreciation expense (d) - -
----------- ----------
Balance, December 31, 1994 270,189 -
Depreciation expense - -
----------- ----------
Balance, December 31, 1995 $ 270,189 $ -
=========== ==========
(b) Depreciation expense is computed for buildings and improvements based
upon estimated lives of 30 years.
(c) As of December 31, 1995, the aggregate cost of the Properties owned by
the Partnership and joint ventures for federal income tax purposes was
$23,318,542 and $4,149,152, respectively. All of the leases are
treated as operating leases for federal income tax purposes.
(d) For financial reporting purposes, 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) For financial reporting purposes, the lease for the land and building
has been recorded as a direct financing lease. The cost of the land
and building has been included in the net investment in direct
financing leases, therefore, depreciation is not applicable.
(f) For financial reporting purposes, certain components of the lease
relating to land and building have been recorded as a direct financing
lease. Accordingly, costs relating to these components are not shown.
(g) The building portion of this property is owned by the tenant;
therefore, depreciation is not applicable.
(h) Effective January 1, 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 remaining estimated life of
approximately 25 years.
(i) The restaurant on the property in Maywood, Illinois, was converted to
a Dunkin Donuts restaurant and a Holsum Bread bakery in 1993.
EXHIBITS
EXHIBIT INDEX
Exhibit Number
- --------------
3.1 Certificate of Limited Partnership of CNL Income Fund IV, Ltd.
(Included as Exhibit 3.1 in Amendment No. 1 to Registration
Statement No. 33-20249 on Form S-11 and incorporated herein by
reference.)
3.2 Amended and Restated Agreement and Certificate of Limited
Partnership of CNL Income Fund IV, Ltd. (Included as Exhibit 3.2
to Form 10-K filed with the Securities and Exchange Commission on
March 31, 1994, and incorporated herein by reference.)
4.1 Certificate of Limited Partnership of CNL Income Fund IV, Ltd.
(Included as Exhibit 3.1 in Amendment No. 1 to Registration
Statement No. 33-20249 on Form S-11 and incorporated herein by
reference.)
4.2 Amended and Restated Agreement and Certificate of Limited
Partnership of CNL Income Fund IV, Ltd. (Included as Exhibit 3.2
and incorporated herein by reference.)
10.1 Property Management Agreement (Included as Exhibit 10.1 to Form
10-K filed with the Securities and Exchange Commission on March
31, 1994, and incorporated herein by reference.)
10.2 Assignment of Property 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 Property Management Agreement from CNL Income Fund
Advisors, Inc. to CNL Fund Advisors, Inc. (Filed herewith.)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the balance
sheet of CNL Income Fund IV, Ltd. at December 31, 1995, and its statement of
income for the year then ended and is qualified in its entirety by reference to
the Form 10-K of CNL Income Fund IV, Ltd. for the year ended December 31, 1995.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 1,004,014
<SECURITIES> 0
<RECEIVABLES> 261,736
<ALLOWANCES> 166,866
<INVENTORY> 0
<CURRENT-ASSETS> 1,108,617
<PP&E> 21,989,843
<DEPRECIATION> 3,045,149
<TOTAL-ASSETS> 24,057,829
<CURRENT-LIABILITIES> 769,665
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 23,288,164
<TOTAL-LIABILITY-AND-EQUITY> 24,057,829
<SALES> 0
<TOTAL-REVENUES> 2,625,794
<CGS> 0
<TOTAL-COSTS> 687,349
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 102,431
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,210,339
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,210,339
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,210,339
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
ASSIGNMENT
THIS ASSIGNMENT made this 1st day of October, 1995 by and between CNL
INCOME FUND ADVISORS, INC., a Florida corporation ("Assignor") and CNL FUND
ADVISORS, INC., a Florida corporation ("Assignee").
WITNESSETH:
WHEREAS, the CNL Investment Company entered into that certain Property
Management Agreement, dated May 6, 1988 with CNL Income Fund IV, Ltd.
("Agreement"); and
WHEREAS, CNL Investment Company assigned its rights, duties and
obligations under the Agreement to Assignor by Assignment dated January 1,
1995; and
WHEREAS, the Assignor desires to assign its rights, duties and
obligations under the Agreement to Assignee, and Assignee desires to accept
such assignment and assume Assignors duties and obligations under the
Agreement, as assigned.
NOW, THEREFORE, the parties agree as follows:
1. ASSIGNMENT. Assignor hereby assigns and transfers to Assignee, all
of Assignor's rights, title and interest in, to, and under the Agreement as
assigned. Any funds or property of CNL Income Fund IV, Ltd. in Assignor's
possession shall be, or have been, delivered to Assignee upon the full
execution of this Assignment.
2. ACCEPTANCE AND ASSUMPTION. Assignee hereby accepts the
foregoing assignment and further hereby assumes and agrees to perform, from
and after October 1, 1995, all duties, obligations and responsibilities of the
property manager arising under the Agreement.
3. REPRESENTATIONS.
(a) Assignor hereby represents and warrants to Assignee:
(i) that the Agreement is in full force and effect;
(ii) that Assignor has fully performed all of its duties
under the Agreement through the date of this
Assignment;
(iii) that Assignor has no notice or knowledge of any claim,
cost, or liability (other than as specifically
contemplated under the Agreement, all of which have
been satisfied or discharged) which arose under the
Agreement or which may arise after the date hereof;
and
(iv) that this Assignment has been duly authorized by all
requisite corporate action and has been properly
executed by duly authorized officers of Assignor.
(b) CNL Income Fund IV, Ltd. hereby represents and warrants to
Assignee that the Agreement is in full force and effect, and that
no defaults or violations of such Agreement exist as of the date
of this Assignment.
IN WITNESS WHEREOF, this Assignment is executed the date above first
written.
ASSIGNOR:
CNL INCOME FUND ADVISORS, INC.,
a Florida corporation
By: /s/Robert A. Bourne
-----------------------------
Robert A. Bourne, President
ASSIGNEE:
CNL FUND ADVISORS, INC.,
a Florida corporation
By: /s/Robert A. Bourne
-----------------------------
Robert A. Bourne, President
CONSENT AND JOINDER
CNL Income Fund IV, Ltd. hereby consents to the foregoing Assignment and
joins in such agreement for the purpose of making the representations set
forth in subparagraph 3(b) thereof.
CNL INCOME FUND IV, LTD.,
a Florida limited partnership
By: /s/Robert A. Bourne
-----------------------------
Robert A. Bourne, General Partner
