FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT of 1934
For the quarterly period ended September 30, 2000
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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 _____________________
Commission file number
0-17549
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CNL Income Fund IV, Ltd.
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(Exact name of registrant as specified in its charter)
Florida 59-2854435
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
450 South Orange Avenue
Orlando, Florida 32801-3336
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number
(including area code) (407) 540-2000
------------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No _____
<PAGE>
CONTENTS
Page
Part I.
Item 1. Financial Statements:
Condensed Balance Sheets 1
Condensed Statements of Income 2
Condensed Statements of Partners' Capital 3
Condensed Statements of Cash Flows 4
Notes to Condensed Financial Statements 5-8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9-14
Item 3. Quantitative and Qualitative Disclosures About
Market Risk 14
Part II.
Other Information 15-16
<PAGE>
CNL INCOME FUND IV, LTD.
(A Florida Limited Partnership)
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
------------------- -------------------
<S> <C>
ASSETS
Land and buildings on operating leases, less
accumulated depreciation and allowance for loss
on land and building $ 13,041,591 $ 15,080,971
Net investment in direct financing leases 344,057 1,189,488
Investment in joint ventures 3,271,856 3,332,012
Cash and cash equivalents 3,777,569 725,493
Receivables, less allowance for doubtful accounts
of $272,118 and $215,029, respectively 56,360 141,675
Prepaid expenses 14,319 15,383
Lease costs, less accumulated amortization of
$22,534 and $26,113, respectively 1,410 29,031
Accrued rental income 247,200 314,266
------------------- -------------------
$ 20,754,362 $ 20,828,319
=================== ===================
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 34,808 $ 91,074
Accrued and escrowed real estate taxes payable 102,420 63,585
Distributions payable 3,325,000 600,000
Due to related parties 226,964 241,509
Rents paid in advance and deposits 13,732 64,792
------------------- -------------------
Total liabilities 3,702,924 1,060,960
Partners' capital 17,051,438 19,767,359
------------------- -------------------
$ 20,754,362 $ 20,828,319
=================== ===================
See accompanying notes to condensed financial statements.
<PAGE>
CNL INCOME FUND IV, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF INCOME
Quarter Ended Nine Months Ended
September 30, September 30,
2000 1999 2000 1999
------------- ------------ -------------- -------------
Revenues:
Rental income from operating leases $372,013 $ 515,904 $ 1,400,592 $ 1,509,297
Adjustment to accrued rental income -- -- (51,520 ) --
Earned income from direct financing leases 10,453 30,595 70,236 92,585
Contingent rental income 1,741 30,685 15,242 65,059
Interest and other income 28,914 7,288 59,912 24,257
------------- ------------ -------------- -------------
413,121 584,472 1,494,462 1,691,198
------------- ------------ -------------- -------------
Expenses:
General operating and administrative 49,805 31,987 146,938 103,577
Bad debt -- -- 12,685 --
Professional services 12,727 6,665 36,365 28,029
Real estate taxes 22,407 6,257 46,548 20,112
State and other taxes 10 1,635 17,759 17,030
Depreciation and amortization 90,941 102,486 320,925 307,490
Transaction costs -- 52,300 61,442 156,466
------------- ------------ -------------- -------------
175,890 201,330 642,662 632,704
------------- ------------ -------------- -------------
Income Before Equity in Earnings of Joint
Ventures, Gain on Sale of Land and
Buildings and Provision for Loss on Land
and Building 237,231 383,142 851,800 1,058,494
Equity in Earnings of Joint Ventures 71,069 69,847 210,199 216,463
Gain on Sale of Land and Buildings 582,112 -- 1,134,692 --
Provision for Loss on Land and Building -- -- (387,612 ) --
------------- ------------ -------------- -------------
Net Income $890,412 $ 452,989 $ 1,809,079 $ 1,274,957
============= ============ ============== =============
Allocation of Net Income:
General partners $ 6,368 $ 4,529 $ 2,459 $ 12,749
Limited partners 884,044 448,460 1,806,620 1,262,208
------------- ------------ -------------- -------------
$890,412 $ 452,989 $ 1,809,079 $ 1,274,957
============= ============ ============== =============
Net Income Per Limited Partner Unit $ 14.73 $ 7.47 $ 30.11 $ 21.04
============= ============ ============== =============
Weighted Average Number of Limited Partner
Units Outstanding 60,000 60,000 60,000 60,000
============= ============ ============== =============
See accompanying notes to condensed financial statements.
<PAGE>
CNL INCOME FUND IV, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF PARTNERS' CAPITAL
Nine Months Ended Year Ended
September 30, December 31,
2000 1999
-------------------------- -----------------------
General partners:
Beginning balance $ 787,351 $ 769,078
Net income 2,459 18,273
-------------------------- -----------------------
789,810 787,351
-------------------------- -----------------------
Limited partners:
Beginning balance 18,980,008 19,570,922
Net income 1,806,620 1,809,086
Distributions ($75.42 and $40 per limited
partner unit, respectively) (4,525,000 ) (2,400,000 )
-------------------------- -----------------------
16,261,628 18,980,008
-------------------------- -----------------------
Total partners' capital $ 17,051,438 $ 19,767,359
========================== =======================
See accompanying notes to condensed financial statements.
<PAGE>
CNL INCOME FUND IV, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF CASH FLOWS
Nine Months Ended
September 30,
2000 1999
--------------- ----------------
Increase (Decrease) in Cash and Cash Equivalents
Net Cash Provided by Operating Activities $1,409,168 $1,868,820
--------------- ----------------
Cash Flows from Investing Activities:
Proceeds from sale of land and buildings 3,442,908 --
Investment in joint ventures -- (533,200 )
Decrease in restricted cash -- 533,598
Payment of lease costs -- (15,600 )
--------------- ----------------
Net cash provided by (used in) investing
activities 3,442,908 (15,202 )
--------------- ----------------
Cash Flows from Financing Activities:
Distributions to limited partners (1,800,000 ) (1,800,000 )
--------------- ----------------
Net cash used in financing activities (1,800,000 ) (1,800,000 )
--------------- ----------------
Net Increase in Cash and Cash Equivalents 3,052,076 53,618
Cash and Cash Equivalents at Beginning of Period 725,493 739,382
--------------- ----------------
Cash and Cash Equivalents at End of Period $3,777,569 $ 793,000
=============== ================
Supplemental Schedule of Non-Cash Investing and
Financing Activities:
Deferred real estate disposition fees incurred
and unpaid at end of period $ 103,457 $ --
=============== ================
Distributions declared and unpaid at end
of period $3,325,000 $ 600,000
=============== ================
</TABLE>
See accompanying notes to condensed financial statements.
<PAGE>
CNL INCOME FUND IV, LTD.
(A Florida Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS
Quarters and Nine Months Ended September 30, 2000 and 1999
1. Basis of Presentation:
The accompanying unaudited condensed financial statements have been
prepared in accordance with the instructions to Form 10-Q and do not
include all of the information and note disclosures required by
generally accepted accounting principles. The financial statements
reflect all adjustments, consisting of normal recurring adjustments,
which are, in the opinion of management, necessary to a fair statement
of the results for the interim periods presented. Operating results for
the quarter and nine months ended September 30, 2000, may not be
indicative of the results that may be expected for the year ending
December 31, 2000. Amounts as of December 31, 1999, included in the
financial statements, have been derived from audited financial
statements as of that date.
These unaudited financial statements should be read in conjunction with
the financial statements and notes thereto included in Form 10-K of CNL
Income Fund IV, Ltd. (the "Partnership") for the year ended December
31, 1999.
2. Land and Buildings on Operating Leases:
Land and buildings on operating leases consisted of the following at:
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
------------------- -------------------
<S> <C>
Land $ 6,529,801 $ 7,244,512
Buildings 10,834,308 11,986,556
------------------- -------------------
17,364,109 19,231,068
Less accumulated depreciation (3,934,906 ) (4,150,097 )
------------------- -------------------
13,429,203 15,080,971
Less allowance for loss on land and
building (387,612 ) --
------------------- -------------------
$ 13,041,591 $ 15,080,971
=================== ===================
</TABLE>
<PAGE>
CNL INCOME FUND IV, LTD.
(A Florida Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS
Quarters and Nine Months Ended September 30, 2000 and 1999
2. Land and Buildings on Operating Leases - Continued:
In June 2000, the Partnership sold its property in Detroit, Michigan to
the tenant for $1,095,000 and received net sales proceeds of
$1,089,325, resulting in a gain of approximately $552,600 for financial
reporting purposes. This property was originally acquired by the
Partnership in October 1988 and had a cost of approximately $614,500,
excluding acquisition fees and miscellaneous acquisition expenses;
therefore, the Partnership sold the property for approximately $474,800
in excess of its original purchase price. In connection with the sale,
the Partnership incurred a deferred, subordinated, real estate
disposition fee of $32,850 (see Note 3).
In July 2000, the Partnership sold its properties in Temple Terrace,
Florida and Punta Gorda, Florida, to third party for $2,353,583 and
received net sales proceeds of approximately $2,283,000 resulting in a
gain of approximately $582,100 for financial reporting purposes. These
properties were originally acquired by the Partnership in March of 1989
and had a cost of approximately $2,081,700 excluding acquisition fees
and miscellaneous acquisition expenses; therefore, the Partnership sold
the properties for approximately $201,300 in excess of their original
purchase prices. In connection with the sales, the Partnership incurred
deferred, subordinated, real estate disposition fees of $70,607. (see
Note 3)
During the nine months ended September 30, 2000, the Partnership
recorded a provision for loss on land and building of $387,612 relating
to the property in Palm Bay, Florida. The tenant of this property
vacated the property and discontinued the payment of rent. The
allowance represents the difference between the carrying value of the
property at September 30, 2000, and the estimated net realizable value
of the property.
3. Allocations and Distributions:
Generally, 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 not in
liquidation of the Partnership, to the extent distributed, will be
distributed first to the limited partners in an
<PAGE>
CNL INCOME FUND IV, LTD.
(A Florida Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS
Quarters and Nine Months Ended September 30, 2000 and 1999
3. Allocations and Distributions - Continued:
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 not in liquidation of the Partnership is, in general,
allocated in the same manner as net sales proceeds are distributable.
Any loss from the sale of a property not in liquidation of the
Partnership 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.
Generally, net sales proceeds from a liquidating sale of properties,
will be used in the following order: (i) first to pay and discharge all
of the Partnership's liabilities to creditors, (ii) second, to
establish reserves that may be deemed necessary for any anticipated or
unforeseen liabilities or obligations of the Partnership, (iii) third,
to pay all of the Partnership's liabilities, if any, to the general and
limited partners, (iv) fourth, after allocations of net income, gains
and/or losses, to distribute to the partners with positive capital
accounts balances, in proportion to such balances, up to amounts
sufficient to reduce such positive balances to zero, and (v)
thereafter, any funds remaining shall then be distributed 95 percent to
the limited partners and five percent to the general partners.
During the nine months ended September 30, 2000 and 1999, the
Partnership declared distributions to the limited partners of
$4,525,000 and $1,800,000, respectively ($3,325,000 and $600,000 for
the quarters ended September 30, 2000 and 1999, respectively.) This
represents distributions of $75.42 and $30.00 per unit for the nine
months ended September 30, 2000 and 1999, respectively ($55.42 and
$10.00 per unit for the quarters ended September 30, 2000 and 1999,
respectively.) Distributions for the nine months ended September 30,
2000, included $2,800,000 in a special distribution, as a result of the
distribution of net sales proceeds from the sale of the properties in
Temple Terrace and Punta Gorda, Florida and Detroit, Michigan. This
amount was applied toward the limited partners' 10% Preferred Return.
No distributions have been made to the general partners to date.
<PAGE>
CNL INCOME FUND IV, LTD.
(A Florida Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS
Quarters and Nine Months Ended September 30, 2000 and 1999
4. Related Party Transactions:
An affiliate of the Partnership is 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
affiliate provides a substantial amount of services in connection with
the sale. However, if the net sales proceeds are reinvested in a
replacement property, no such real estate disposition fees will be
incurred until such replacement property is sold and the net sales
proceeds are distributed. The payment of the real estate disposition
fee is subordinated to receipt by the limited partners of their
aggregate 10% preferred return, plus their adjusted capital
contributions. For the quarter and nine months ended September 30,
2000, the Partnership incurred $103,457 as deferred, subordinated, real
estate disposition fees as a result of the sale of properties (see Note
2). No deferred, subordinated, real estate disposition fees were
incurred for the quarter and nine months ended September 30, 1999.
5. Termination of Merger
On March 1, 2000, the general partners and CNL American Properties
Fund, Inc. ("APF") mutually agreed to terminate the Agreement and Plan
of Merger entered into in March 1999. The general partners are
continuing to evaluate strategic alternatives for the Partnership,
including alternatives to provide liquidity to the limited partners.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
CNL Income Fund IV, Ltd. (the "Partnership") is a Florida limited
partnership that 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 restaurants were to
be constructed, which are leased primarily to operators of national and regional
fast-food and family-style restaurant chains (collectively, the "Properties").
The leases generally are triple-net leases, with the lessees responsible for all
repairs and maintenance, property taxes, insurance and utilities. As of
September 30, 2000, the Partnership owned 35 Properties, which included
interests in six Properties owned by joint ventures in which the Partnership is
a co-venturer and two Properties owned with affiliates as tenants-in-common.
Capital Resources
The Partnership's primary source of capital for the nine months ended
September 30, 2000 and 1999 was cash from operations (which includes cash
received from tenants, distributions from joint ventures, and interest and other
income received, less cash paid for expenses). Cash from operations was
$1,409,168 and $1,868,820 for the nine months ended September 30, 2000 and 1999,
respectively. The decrease in cash from operations for the nine months ended
September 30, 2000 was primarily a result of changes in revenues and expense as
described below in "Results of Operations" and a change in the Partnership's
working capital.
Other sources and uses of capital included the following during the
nine months ended September 30, 2000.
In June 2000, the Partnership sold its Property in Detroit, Michigan,
to the tenant for $1,095,000 and received net sales proceeds of $1,089,325,
resulting in a gain of approximately $552,600 for financial reporting purposes.
This Property was originally acquired by the Partnership in October 1988 and had
a cost of approximately $614,500, excluding acquisition fees and miscellaneous
acquisition expenses; therefore, the Partnership sold this Property for
approximately $474,800 in excess of its original purchase price. In connection
with the sale, the Partnership incurred a deferred, real estate disposition fee
of $32,850. The Partnership distributed the majority of the net sales proceeds
to the limited partners, as described below.
In July 2000, the Partnership sold its Properties in Temple Terrace and
Punta Gorda, Florida to a third party for $2,353,583 and received net sales
proceeds of approximately $2,283,000, resulting in a gain of $582,100 for
financial reporting purposes. These Properties were originally acquired by the
Partnership in March 1989 and had a cost of approximately $2,081,700, excluding
acquisition fees and miscellaneous acquisition expenses; therefore, the
Partnership sold these Properties for approximately $201,300 in excess of their
original purchase prices. In connection with the sales, the Partnership incurred
deferred, real estate disposition fees of $70,607. The Partnership distributed
the majority of the net sales proceeds to the limited partners, as described
below.
Currently, rental income from the Partnership's Properties and any net
sales proceeds from the sale of Properties pending distribution to limited
partners, are invested in money market accounts or other short-term, highly
liquid investments, such as demand deposit accounts at commercial banks and
certificates of deposit with less than a 30-day maturity date, pending the
Partnership's use of such funds to pay Partnership expenses or to make
distributions to the partners. At September 30, 2000, the Partnership had
$3,777,569 invested in such short-term investments, as compared to $725,493 at
December 31, 1999. The increase in cash and cash equivalents was primarily due
to the receipt of net sales proceeds from the sale of the Partnership's
Properties as described above. The funds remaining at September 30, 2000, after
payment of distributions and other liabilities will be used to meet the
Partnership's working capital and other needs.
Short-Term Liquidity
The Partnership's short-term liquidity requirements consist primarily
of the operating expenses of the Partnership.
The Partnership's investment strategy of acquiring Properties for cash
and leasing them under triple-net leases to operators who generally meet
specified financial standards minimizes the Partnership's operating expenses.
The general partners believe that the leases will continue to generate cash flow
in excess of operating expenses.
The general partners have the right, but not the obligation, to make
additional capital contributions if they deem it appropriate in connection with
the operations of the Partnership.
Total liabilities of the Partnership, including distributions payable,
increased to $3,702,924 at September 30, 2000 from $1,060,960 at December 31,
1999. The increase in liabilities at September 30, 2000, as compared to December
31, 1999, was primarily attributable to accruing a special distribution of net
sales proceeds of $2,800,000 from the sale of the Properties in Temple Terrace,
Punta Gorda, Florida, and Detroit, Michigan as described above, payable to the
limited partners at September 30, 2000. Liabilities at September 30, 2000, to
the extent they exceed cash and cash equivalents at September 30, 2000, will be
paid from future cash from operations and, in the event the general partners
elect to make additional capital contributions or loans to the Partnership, from
future general partner capital contributions or loans. The general partners
believe that the Partnership has sufficient cash on hand to meet its working
capital needs.
Based on current and anticipated future cash from operations, and for
the nine months ended September 30, 2000, a portion of the proceeds received
from the sale of the Properties described above, the Partnership declared
distributions to limited partners of $4,525,000 and $1,800,000 for the nine
months ended September 30, 2000 and 1999, respectively ($3,325,000 and $600,000
for the quarters ended September 30, 2000 and 1999, respectively.) This
represents distributions of $75.42 and $30.00 per unit for the nine months ended
September 30, 2000 and 1999, respectively ($55.42 and $10.00 for the quarters
ended September 30, 2000 and 1999, respectively.) The distribution for the
quarter ended September 30, 2000, included $2,800,000 of net sales proceeds from
the sale of the Properties in Temple Terrace and Punta Gorda, Florida and
Detroit, Michigan. This special distribution was effectively a return of a
portion of the limited partners' investment, although, in accordance with the
Partnership agreement, it was applied to the limited partners' unpaid preferred
return. As a result of the sale of the Properties, the Partnership's total
revenue was reduced and is expected to remain reduced in subsequent periods,
while the majority of the Partnership's operating expenses remained and are
expected to remain fixed. Therefore, distributions of net cash flow were
adjusted commencing during the quarter ended September 30, 2000. No
distributions were made to the general partners for the quarters and nine months
ended September 30, 2000 and 1999. No amounts distributed to the limited
partners for the nine months ended September 30, 2000 and 1999, are required to
be or have been treated by the Partnership as a return of capital for purposes
of calculating the limited partners' return on their adjusted capital
contributions. The Partnership intends to continue to make distributions of cash
available for distribution to the limited partners on a quarterly basis.
Long-Term Liquidity
The Partnership has no long-term debt or other long-term liquidity
requirements.
Results of Operations
During the nine months ended September 30, 2000 and 1999, the
Partnership owned and leased 30 wholly owned Properties (which included three
Properties sold in 2000) generally to operators of fast-food and family-style
restaurant chains. In connection therewith, during the nine months ended
September 30, 2000 and 1999, the Partnership earned $1,419,308 and $1,601,882,
respectively, in rental income from operating leases (net of adjustments to
accrued rental income) and earned income from direct financing leases, $382,466
and $546,499 of which was earned during the quarters ended September 30, 2000
and 1999, respectively. The decrease in rental and earned income for the quarter
and nine months ended September 30, 2000 was partially due to a decrease in
rental and earned income of approximately $28,700 during the quarter and nine
months ended September 30, 2000, due to the fact that in 1998 the tenant of the
Property in Richmond, Virginia filed for bankruptcy and, during the quarter and
nine months ended September 30, 2000, rejected the lease relating to this
Property, which was the only Property leased by this tenant. As a result, the
tenant discontinued making rental payments on the rejected lease. In conjunction
with the rejected lease, during the quarter and nine months ended September 30,
2000, the Partnership reversed approximately $38,700 of accrued rental income.
The accrued rental income was the accumulated amount of non-cash accounting
adjustments previously recorded in order to recognize future scheduled rent
increases as income evenly over the term of the lease. The Partnership will not
recognize any rental and earned income from this vacant Property until a new
tenant for this Property is located or until the Property is sold and the
proceeds from such sale are reinvested in an additional Property. The general
partners are currently seeking either a new tenant or purchaser for the vacant
Property whose lease was rejected. The lost revenues resulting from the rejected
and vacant Property could have an adverse effect on the results of operations of
the Partnership if the Partnership is not able to re-lease the Property in a
timely manner.
The decrease in rental and earned income during the quarter and nine
months ended September 30, 2000 was also due to a decrease in rental and earned
income of approximately $19,500 and $58,500, for the quarter and nine months
ended September 30, 2000, respectively, due to the fact that in December 1999,
the Property in Topeka, Kansas vacated the Property and discontinued making
rental payments. The Partnership will not recognize any rental and earned income
relating to this Property until the Partnership finds a new tenant for this
Property or sells the Property and reinvests the net sales proceeds in an
additional Property. The Partnership is currently seeking either a replacement
tenant or purchaser for this Property.
Rental and earned income decreased during the quarter and nine months
ended September 30, 2000 by approximately $20,000 due to the fact that in May
2000, the tenant of the Property in Palm Bay, Florida vacated the Property and
discontinued making rental payments. In addition, during the nine months ended
September 30, 2000, the Partnership reversed approximately $12,830 of accrued
rental income. The accrued rental income was the accumulated amount of non-cash
accounting adjustments previously recorded in order to recognize future
scheduled rent increases as income evenly over the term of the lease. No such
amounts were reversed during the nine months ended September 30, 1999. The
general partners will continue to pursue collection of past due rental amounts
relating to this Property and will recognize such amounts as income if
collected. The Partnership will not recognize any rental and earned income
relating to this Property until the Partnership finds a new tenant for this
Property or sells the Property and reinvests the net sales proceeds in an
additional Property. The Partnership is currently seeking either a replacement
tenant or purchaser for this Property. The decrease in rental and earned income
during the nine months ended September 30, 2000, was partially offset by the
fact that during the nine months ended September 30, 2000, the Partnership
collected and recognized as income approximately $39,000 in past due rental
amounts from the guarantor of the former tenant of the Property in Palm Bay,
Florida.
The decrease in rental and earned income during the quarter and nine
months ended September 30, 2000, was partially offset by an increase of
approximately $11,400 during the nine months ended September 30, 2000 due to the
fact that the Partnership collected and recognized as income past due rental
amounts for which the Partnership had previously established an allowance for
doubtful accounts relating to its Properties in Dundee, Michigan and Marion,
Ohio.
Rental and earned income also decreased by approximately $71,800 and
$73,200, respectively, during the quarter and nine months ended September 30,
2000 due to the fact that in June 2000, the Partnership sold its Property in
Detroit, Michigan and in July 2000 also sold its Properties in Temple Terrace
and Punta Gorda, Florida, as described above in "Capital Resources."
During the nine months ended September 30, 2000 and 1999, the
Partnership also earned $15,242 and $65,059, respectively, in contingent rental
income, $1,741 and $30,685 of which was earned during the quarters ended
September 20, 2000 and 1999, respectively. The decrease in contingent rental
income during the quarter and nine months ended September 30, 2000 was primarily
attributable to a decrease in gross sales of certain restaurant properties, the
leases of which require the payment of contingent rental income.
During the nine months ended September 30, 2000 and 1999, the
Partnership owned and leased six Properties through joint venture arrangements
and two Properties as tenants-in-common with affiliates of the general partners.
In connection therewith, during the nine months ended September 30, 2000 and
1999, the Partnership earned $210,199 and $216,463, respectively, $71,069 and
$69,847 of which was earned during the quarters ended September 30, 2000 and
1999, respectively. Net income earned by joint ventures during the nine months
ended September 30, 2000, was less than that earned during the nine months ended
September 30, 1999, due to the fact that during the nine months ended September
30, 2000, Auburn Joint Venture adjusted estimated contingent rental amounts
accrued at December 31, 1999, to actual amounts received.
Operating expenses, including depreciation and amortization,
were $642,662 and $632,704 for the nine months ended September 30, 2000 and
1999, respectively, of which $175,890 and $201,330 were incurred during the
quarters ended September 30, 2000 and 1999, respectively. The decrease in
operating expenses during the quarter ended September 30, 2000 was primarily
attributable to, and the increase in operating expenses during the nine months
ended September 30, 2000, was partially offset by the fact that the Partnership
incurred less transaction costs during the quarter and nine months ended
September 30, 2000, relating to the general partners retaining financial and
legal advisors to assist them in evaluating and negotiating the proposed merger
with CNL American Properties Fund, Inc. ("APF") due to the termination of the
proposed merger, as described in "Termination of Merger" below. The decrease in
operating expenses during the quarter ended September 30, 2000 was partially
offset by, and the increase during the nine months ended September 30, 2000 was
partially attributable to, an increase in administrative expenses for servicing
the Partnership and its Properties and incurring expenses such as legal fees,
insurance, real estate taxes and repairs and maintenance relating to the
Properties in Topeka, Kansas and Palm Bay, Florida, for which the tenant
defaulted under the terms of its lease agreements, as described above. The
increase in operating expenses was also due to an increase in amortization
expense due to the Partnership expensing the balance of unamortized lease costs
relating to the Partnership's Property in Palm Bay, Florida, for which the
tenant defaulted under the terms of its lease agreement, as described above. The
Partnership has incurred and expects to incur operating expenses, such as
repairs and maintenance, insurance and real estate taxes relating to these two
Properties until they are sold or re-leased to new tenants. The general partners
are currently seeking new tenants or purchasers for these Properties.
The increase in operating expenses during the nine months ended
September 30, 2000 was also partially due to the fact that during the nine
months ended September 30, 2000, the Partnership recorded bad debt expense
relating to past due rental amounts for the Property in Topeka, Kansas. The
tenant vacated this Property and discontinued operations in December 1999. No
such amounts were recorded during the nine months ended September 30, 1999. The
general partners will continue to pursue collection of past due rental amounts
relating to this Property and will recognize such amounts as income if
collected. The general partners are currently seeking either a new tenant or
purchaser for this Property.
As a result of the sale of the Properties in Temple Terrace and Punta
Gorda, Florida, during the quarter and nine months ended September 30, 2000, as
described above in "Capital Resources," the Partnership recognized a gain of
approximately $582,100 for financial reporting purposes. During the nine months
ended September 30, 2000, the Partnership sold a Property in Detroit, Michigan
and recognized a gain of approximately $552,600 for financial reporting
purposes. No Properties were sold during the quarter and nine months ended
September 30, 1999.
During the nine months ended September 30, 2000, the Partnership
recorded a provision for loss on land and building of $387,612 for financial
reporting purposes relating to the Property in Palm Bay, Florida. The tenant of
this Property vacated the Property and discontinued payment of rents. The
allowance represented the difference between the carrying value of the Property
at September 30, 2000, and the estimated net realizable value of the Property.
No such allowance was recorded during the nine months ended September 30, 1999.
Termination of Merger
On March 1, 2000, the general partners and APF mutually agreed to
terminate the Agreement and Plan of Merger entered into in March 1999. The
general partners are continuing to evaluate strategic alternatives for the
Partnership, including alternatives to provide liquidity to the limited
partners.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings. Inapplicable.
Item 2. Changes in Securities. Inapplicable.
Item 3. Defaults upon Senior Securities. Inapplicable.
Item 4. Submission of Matters to a Vote of Security Holders. Inapplicable.
Item 5. Other Information. Inapplicable.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
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 to Form 10-K filed with the
Securities and Exchange Commission on March 31, 1994,
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.)
<PAGE>
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.
(Included as Exhibit 10.3 to Form 10-K filed with the
Securities and Exchange Commission on April 1, 1996,
and incorporated herein by reference.)
27 Financial Data Schedule (Filed herewith.)
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended
September 30, 2000.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
DATED this 10th day of November, 2000.
CNL INCOME FUND IV, LTD.
By: CNL REALTY CORPORATION
General Partner
By:/s/ James M. Seneff, Jr.
--------------------------
JAMES M. SENEFF, JR.
Chief Executive Officer
(Principal Executive Officer)
By:/s/ Robert A. Bourne
--------------------------
ROBERT A. BOURNE
President and Treasurer
(Principal Financial and
Accounting Officer)
