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, 1997
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number
0-19141
CNL Income Fund V, Ltd.
(Exact name of registrant as specified in its charter)
Florida 59-2922869
(State or other juris- (I.R.S. Employer
diction of incorporation Identification No.)
or organization)
400 E. South Street, #500
Orlando, Florida 32801
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number
(including area code) (407) 422-1574
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Sections 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes X No
<PAGE>
CONTENTS
Part I Page
Item 1. Financial Statements:
Condensed Balance Sheets 1
Condensed Statements of Income 2
Condensed Statements of Partners' Capital 3
Condensed Statements of Cash Flows 4
Notes to Condensed Financial Statements 5-8
Item 2. Management's Discussion and Analysis
of Financial Condition and
Results of Operations 9-16
Part II
Other Information 17
<PAGE>
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
CONDENSED BALANCE SHEETS
September 30, December 31,
ASSETS 1997 1996
------------- -----------
Land and buildings on operating
leases, less accumulated
depreciation of $2,128,783 and
$2,346,374 and allowance for
loss on land and building of
$213,052 and $179,326 $11,881,432 $15,190,278
Net investment in direct financing
leases 1,376,436 1,941,406
Investment in joint ventures 459,503 465,808
Mortgage note receivable, less
deferred gain of $323,761
and $324,519 1,770,276 1,772,858
Cash and cash equivalents 1,415,939 362,922
Restricted cash 2,484,723 -
Receivables, less allowance for
doubtful accounts of $137,892
and $37,743 42,312 57,934
Prepaid expenses 9,834 10,416
Accrued rental income 191,476 277,034
Other assets 54,346 54,346
----------- -----------
$19,686,277 $20,133,002
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 18,671 $ 25,366
Accrued construction costs payable 50,000 -
Accrued real estate taxes payable 102,327 104,764
Distributions payable 575,000 575,000
Due to related parties 125,064 155,964
Rents paid in advance 12,758 11,738
----------- -----------
Total liabilities 883,820 872,832
Commitments (Note 7)
Minority interest 261,427 277,551
Partners' capital 18,541,030 18,982,619
----------- -----------
$19,686,277 $20,133,002
=========== ===========
See accompanying notes to condensed financial statements.
1
<PAGE>
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Quarter Ended Nine Months Ended
September 30, September 30,
1997 1996 1997 1996
--------- --------- ---------- -------
<S> <C>
Revenues:
Rental income from
operating leases $ 344,772 $ 440,455 $1,042,771 $1,339,784
Earned income from direct
financing leases 33,396 46,316 117,863 139,386
Contingent rental income 15,404 17,156 68,056 57,443
Interest and other income 93,169 28,746 227,320 97,103
--------- --------- ---------- ----------
486,741 532,673 1,456,010 1,633,716
--------- --------- ---------- ----------
Expenses:
General operating and
administrative 52,181 41,075 128,730 139,306
Bad debt expense - - 9,007 -
Professional services 4,866 4,382 17,695 15,315
Real estate taxes 10,776 8,732 32,298 30,550
State and other taxes - - 11,897 12,492
Depreciation 82,425 95,221 249,225 285,663
--------- --------- --------- ----------
150,248 149,410 448,852 483,326
--------- --------- --------- ----------
Income Before Minority Interest
in Loss of Consolidated Joint
Venture, Equity in Earnings
of Unconsolidated Joint
Ventures, Gain on Sale of
Land and Buildings and
Provision for Loss on Land
and Building 336,493 383,263 1,007,158 1,150,390
Minority Interest in Loss of
Consolidated Joint Venture 6,092 5,220 16,124 18,328
Equity in Earnings of Uncon-
solidated Joint Ventures 11,144 11,408 33,549 33,641
Gain on Sale of Land and
Buildings 267,076 234 369,570 684
Provision for Loss on Land
and Building - - (142,990) -
--------- --------- ---------- ---------
Net Income $ 620,805 $ 400,125 $1,283,411 $1,203,043
========= ========= ========== ==========
Allocation of Net Income:
General partners $ 6,060 $ 4,001 $ 10,548 $ 12,030
Limited partners 614,745 396,124 1,272,863 1,191,013
--------- --------- ---------- ----------
$ 620,805 $ 400,125 $1,283,411 $1,203,043
========= ========= ========== ==========
Net Income Per Limited
Partner Unit $ 12.29 $ 7.92 $ 25.46 $ 23.82
========= ========= ========== ==========
Weighted Average Number
of Limited Partner Units
Outstanding 50,000 50,000 50,000 50,000
========= ========= ========== ==========
</TABLE>
See accompanying notes to condensed financial statements.
2
<PAGE>
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF PARTNERS' CAPITAL
Nine Months Ended Year Ended
September 30, December 31,
1997 1996
----------------- ------------
General partners:
Beginning balance $ 376,173 $ 203,960
Contributions - 159,700
Net income 10,548 12,513
----------- -----------
386,721 376,173
----------- -----------
Limited partners:
Beginning balance 18,606,446 19,490,800
Net income 1,272,863 1,415,646
Distributions ($34.50 and
$46.00 per limited partner
unit, respectively) (1,725,000) (2,300,000)
----------- -----------
18,154,309 18,606,446
----------- -----------
Total partners' capital $18,541,030 $18,982,619
=========== ===========
See accompanying notes to condensed financial statements.
3
<PAGE>
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF CASH FLOWS
Nine Months Ended
September 30,
1997 1996
----------- -------
Increase (Decrease) in Cash and
Cash Equivalents:
Net Cash Provided by Operating
Activities $ 1,297,828 $ 1,617,623
----------- -----------
Cash Flows from Investing
Activities:
Proceeds from sale of land and
buildings 4,082,166 -
Additions to land and building
on operating leases (120,365) -
Collections on mortgage note
receivable 5,503 4,969
Increase in restricted cash (2,487,115) -
----------- ----------
Net cash provided by
investing activities 1,480,189 4,969
----------- -----------
Cash Flows from Financing
Activities:
Contributions from general
partner - 159,700
Distributions to limited
partners (1,725,000) (1,725,000)
----------- -----------
Net cash used in
financing activities (1,725,000) (1,565,300)
----------- -----------
Net Increase in Cash and
Cash Equivalents 1,053,017 57,292
Cash and Cash Equivalents at
Beginning of Period 362,922 319,052
----------- -----------
Cash and Cash Equivalents at End of
Period $ 1,415,939 $ 376,344
=========== ===========
Supplemental Schedule of Non-Cash
Financing Activities:
Distributions declared and unpaid
at end of period $ 575,000 $ 575,000
=========== ===========
See accompanying notes to condensed financial statements.
4
<PAGE>
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS
Quarters and Nine Months Ended September 30, 1997 and 1996
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, 1997, may not be
indicative of the results that may be expected for the year ending
December 31, 1997. Amounts as of December 31, 1996, 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 V, Ltd. (the "Partnership") for the year ended December 31,
1996.
The Partnership accounts for its 66.5% interest in CNL/Longacre Joint
Venture using the consolidation method. Minority interest represents
the minority joint venture partner's proportionate share of the equity
in the Partnership's consolidated joint venture. All significant
intercompany accounts and transactions have been eliminated.
2. Land and Buildings on Operating Leases:
As of December 31, 1996, the Partnership recorded an allowance for loss
on land and building in the amount of $70,062 for financial reporting
purposes for the Hardees property in Richmond, Indiana. In addition, as
of September 30, 1997, the Partnership had increased the allowance for
loss on land and building by an additional $142,990 for such property.
The allowance represents the difference between (i) the property's
carrying value at September 30, 1997, and (ii) the general partners'
estimate of the net realizable value of the property based on the
general partners' anticipated sales price relating to this property.
In January 1997, the Partnership sold its property in Franklin,
Tennessee, to the tenant for $980,000 and received net sales proceeds
of $960,741. Since the Partnership had previously established an
allowance for loss on land and building as of December 31, 1996, in the
amount of $109,264 relating to this property, no loss was recognized in
January 1997 as a result of the sale.
5
<PAGE>
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS - CONTINUED
Quarters and Nine Months Ended September 30, 1997 and 1996
2. Land and Buildings on Operating Leases - Continued:
In June 1997, the Partnership entered into an operating agreement for
the property located in South Haven, Michigan, with a new tenant to
operate the property as an Arby's restaurant. In connection therewith,
the Partnership funded approximately $120,400 in conversion costs
associated with this property.
In September 1997, the Partnership sold its property in Salem, New
Hampshire, to the tenant for $1,295,172 and received net sales proceeds
(net of $1,773 which represents prorated rent returned to the tenant)
of $1,270,365, resulting in a gain of approximately $141,508 for
financial reporting purposes. This property was originally acquired by
the Partnership in May 1989 and had a cost of approximately $1,085,100,
excluding acquisition fees and miscellaneous acquisition expenses;
therefore, the Partnership sold the property for approximately $187,000
in excess of its original purchase price.
In addition, in September 1997, the Partnership sold its property in
Port St. Lucie, Florida, to the tenant for $1,220,000 and received net
sales proceeds of $1,216,750, resulting in a gain of approximately
$125,309 for financial reporting purposes. This property was originally
acquired by the Partnership in November 1989 and had a cost of
approximately $1,176,100, excluding acquisition fees and miscellaneous
acquisition expenses; therefore, the Partnership sold the property for
approximately $40,700 in excess of its original purchase price.
3. Net Investment in Direct Financing Leases:
In May 1997, the Partnership sold its property in Smyrna, Tennessee, to
a third party for $655,000 and received net sales proceeds of $634,310,
resulting in a gain of approximately $101,995 for financial reporting
purposes. This property was originally acquired by the Partnership in
March 1989 and had a cost of approximately $569,500, excluding
acquisition fees and miscellaneous acquisition expenses; therefore, the
Partnership sold the property for approximately $64,800 in excess of
its original purchase price.
6
<PAGE>
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS - CONTINUED
Quarters and Nine Months Ended September 30, 1997 and 1996
4. Restricted Cash:
As of September 30, 1997, net sales proceeds of $2,487,115 from the
sales of the properties in Salem, New Hampshire and Port St. Lucie,
Florida, less escrow fees (net of accrued interest) of $2,392 were
being held in an interest-bearing escrow account pending the release of
funds by the escrow agent to acquire additional properties on behalf of
the Partnership.
5. Receivables:
In June 1997, the Partnership terminated the leases with the tenant of
the properties in Connorsville and Richmond, Indiana. In connection
therewith, the Partnership accepted a promissory note from this former
tenant for $35,297 for amounts relating to past due real estate taxes
the Partnership had accrued as a result of the former tenant's
financial difficulties. The promissory note is uncollateralized, bears
interest at a rate of ten percent per annum, and is being collected in
36 monthly installments. Receivables at September 30, 1997, included
$36,187 of such amounts, including accrued interest of $890 (See Note
7).
6. 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 at least one of the quarters ended September 30:
1997 1996
-------- --------
Shoney's, Inc. $180,044 $180,478
Golden Corral Corporation 146,633 146,633
Tampa Foods, L.P. 133,923 131,565
Great Midwestern Restaurants, Inc. 127,484 127,623
Although the Partnership's properties are geographically diverse
throughout the United States and the Partnership's lessees operate a
variety of restaurant concepts, default by any one of these lessee's
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.
7
<PAGE>
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS - CONTINUED
Quarters and Nine Months Ended September 30, 1997 and 1996
7. Commitments:
In July 1997, the Partnership entered into a new lease for the property
in Connorsville, Indiana, with a new tenant to operate the property as
an Arby's restaurant. In connection therewith, the Partnership has
agreed to fund up to $125,000 in renovation costs, of which $50,000 in
costs had been incurred and accrued as construction in process as of
September 30, 1997. The renovations are expected to be completed in
November 1997.
In July 1997, the Partnership entered into a purchase and sale
agreement with a third party to sell the Hardee's property located in
Richmond, Indiana. The general partners believe that the anticipated
sales price on this property exceeds the carrying cost associated with
the property. The sale of this property had not occurred as of
September 30, 1997.
8. Subsequent Event:
In October 1997, the Partnership received $106,000 in capital
contributions from the corporate general partner in connection with the
operations of the Partnership.
In addition, in October 1997, the Partnership reinvested approximately
$460,200 of the net sales proceeds from the sale in January 1997, of
the property in Franklin, Tennessee, in a Boston Market property in
Mesa, Arizona, as tenants-in-common with an affiliate of the general
partners. In connection therewith, the Partnership and its affiliate
entered into an agreement whereby each co-venturer will share in the
profits and losses of the property in proportion to each co-venturer's
interest. The Partnership owns an approximate 43 percent interest in
the property.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
CNL Income Fund V, Ltd. (the "Partnership") is a Florida limited
partnership that was organized on August 17, 1988, to acquire for cash, either
directly or through joint venture arrangements, both newly constructed and
existing restaurant properties, as well as land upon which 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 are generally triple- net leases, with the lessees responsible for
all repairs and maintenance, property taxes, insurance and utilities. As of
September 30, 1997, the Partnership owned 24 Properties, including interests in
three Properties owned by joint ventures in which the Partnership is a
co-venturer.
Liquidity and Capital Resources
The Partnership's primary source of capital for the nine months ended
September 30, 1997 and 1996, 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). In addition, another source of
capital for the nine months ended September 30, 1997, included proceeds from the
sales of Properties, as discussed below. Cash from operations was $1,297,828 and
$1,617,623 for the nine months ended September 30, 1997 and 1996, respectively.
The decrease in cash from operations for the nine months ended September 30,
1997, is primarily a result of changes in income and expenses as discussed in
"Results of Operations" below and changes in the Partnership's working capital.
Other sources and uses of capital included the following during the
nine months ended September 30, 1997 and 1996.
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 nine months ended September 30,
1996, the Partnership received $159,700 in capital contributions from the
corporate general partner in connection with the operations of the Partnership.
No such contributions were received during the nine months ended September 30,
1997. In October 1997, the Partnership received $106,000 in contributions from
the corporate general partner in connection with the operations of the
Partnership.
In January 1997, the Partnership sold its Property in Franklin,
Tennessee, to the tenant for $980,000 and received net sales proceeds of
$960,741. Since the Partnership had previously established an allowance for loss
on land and building relating to this Property, no gain or loss was recognized
in January 1997 as a result of the sale. The Partnership has used $360,000 of
the net sales proceeds to pay liabilities of the Partnership, including
quarterly distributions to the limited partners. In October 1997, the
Partnership reinvested approximately $460,200 of the remaining net sales
proceeds in a Boston Market Property in Mesa, Arizona, as
9
<PAGE>
Liquidity and Capital Resources - Continued
tenants-in-common with an affiliate of the general partners. In connection
therewith, the Partnership and its affiliate entered into an agreement whereby
each co-venturer will share in the profits and losses of the Property in
proportion to each co- venturer's interest. The Partnership owns an approximate
43 percent interest in the Property.
In addition, in May 1997, the Partnership sold its Property in Smyrna,
Tennessee, to a third party for $655,000 and received net sales proceeds of
$634,310, resulting in a gain of approximately $101,995 for financial reporting
purposes. This Property was originally acquired by the Partnership in March 1989
and had a cost of approximately $569,500, excluding acquisition fees and
miscellaneous acquisition expenses; therefore, the Partnership sold the Property
for approximately $64,800 in excess of its original purchase price. The
Partnership anticipates that it will distribute amounts sufficient to enable the
limited partners to pay federal and state income taxes, if any (at a level
reasonably assumed by the general partners), resulting from the sale. The
Partnership used approximately $82,500 of the net sales proceeds to pay
liabilities of the Partnership, including quarterly distributions to the limited
partners and intends to reinvest the remaining net sales proceeds in the form of
renovations to several Properties held by the Partnership.
In June 1997, the Partnership terminated the leases with the tenant of
the Properties in Connorsville and Richmond, Indiana. In connection therewith,
the Partnership accepted a promissory note from this former tenant for $35,297
for amounts relating to past due real estate taxes the Partnership had accrued
as a result of the former tenant's financial difficulties. The promissory note,
which is uncollateralized, bears interest at a rate of ten percent per annum,
and is being collected in 36 monthly installments. Receivables at September 30,
1997, included $36,187 of such amounts, including accrued interest of $890.
In June 1997, the Partnership entered into an operating agreement for
the Property located in South Haven, Michigan, with a new tenant to operate the
Property as an Arby's restaurant. In connection therewith, the Partnership
funded approximately $120,400 in conversion costs associated with this Property.
In September 1997, the Partnership sold its Property in Salem, New
Hampshire, to the tenant for $1,295,172 and received net sales proceeds (net of
$1,773 which represents prorated rent returned to the tenant) of $1,270,365,
resulting in a gain of approximately $141,508 for financial reporting purposes.
This Property was originally acquired by the Partnership in May 1989 and had a
cost of approximately $1,085,100, excluding acquisition fees and miscellaneous
acquisition expenses; therefore, the Partnership sold the Property for
approximately $187,000 in excess of its original purchase price. As of September
30, 1997, the net sales proceeds of $1,270,365 less escrow fees (net of accrued
interest) of $1,179, were being held in an interest-bearing escrow account
pending the
10
<PAGE>
Liquidity and Capital Resources - Continued
release of funds by the escrow agent to acquire an additional Property. The
general partners believe that the transaction, or a portion thereof, relating to
the sale of the Property in Salem, New Hampshire, and the reinvestment of the
proceeds will qualify as a like-kind exchange transaction for federal income tax
purposes. However, the Partnership will distribute amounts sufficient to enable
the limited partners to pay federal and state (at a level reasonably assumed by
the general partners) income taxes, if any, resulting from the sale.
In September 1997, the Partnership sold its Property in Port St. Lucie,
Florida for $1,220,000 and received net sales proceeds of $1,216,750, resulting
in a gain of approximately $125,309 for financial reporting purposes. This
Property was originally acquired by the Partnership in November 1989 and had a
cost of approximately $1,176,100, excluding acquisition fees and miscellaneous
acquisition expenses; therefore, the Partnership sold the Property for
approximately $40,700 in excess of its original purchase price. As of September
30, 1997, the net sales proceeds of $1,216,750 less escrow fees (net of accrued
interest) of $1,213, were being held in an interest-bearing escrow account
pending the release of funds by the escrow agent to acquire an additional
Property. The general partners believe that the transaction, or a portion
thereof, relating to the sale of the Property in Port St. Lucie, Florida, and
the reinvestment of the proceeds will qualify as a like-kind exchange
transaction for federal income tax purposes. However, the Partnership will
distribute amounts sufficient to enable the limited partners to pay federal and
state (at a level reasonably assumed by the general partners) income taxes, if
any, resulting from the sale.
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 September 30, 1997, the Partnership had
$1,415,939 invested in such short-term investments as compared to $362,922 at
December 31, 1996. The increase in cash and cash equivalents for the nine months
ended September 30, 1997, is primarily attributable to the receipt of net sales
proceeds relating to the sales of the Properties in Franklin and Smyrna,
Tennessee, as discussed above. The funds remaining at September 30, 1997, will
be used to reinvest in additional Properties, as discussed above, and to pay
distributions and other liabilities.
Total liabilities of the Partnership increased to $883,820 at September
30, 1997, from $872,832 at December 31, 1996, primarily as the result of amounts
accrued during the nine months ended September 1997, for renovation costs
relating to the Partnership's Property located in Connorsville, Indiana, as
discussed below. The increase in liabilities during the nine months ended
September 1997, is partially offset by a decrease in amounts due to related
parties. Liabilities at September 30, 1997, to the extent they
11
<PAGE>
Liquidity and Capital Resources - Continued
exceed cash and cash equivalents at September 30, 1997, less amounts to be
reinvested in additional Properties, as described above, will be paid from
future cash from operations and, in the event the general partners elect to make
additional capital contributions, from future general partner capital
contributions.
In July 1997, the Partnership entered into a new lease for the Property
in Connorsville, Indiana, with a new tenant to operate the Property as an Arby's
restaurant. In connection therewith, the Partnership has agreed to fund up to
$125,000 in renovation costs, of which $50,000 in costs had been incurred and
accrued as construction in process as of September 30, 1997. The renovations are
expected to be completed in November 1997.
In July 1997, the Partnership entered into a purchase and sale
agreement with a third party to sell the Hardee's Property located in Richmond,
Indiana. The general partners believe that the anticipated sales price on this
Property exceeds the carrying cost associated with the Property. The sale of
this Property had not occurred as of September 30, 1997.
Based on current and anticipated future cash from operations,
additional capital contributions from the corporate general partner received in
October 1997 described above, and during the nine months ended September 30,
1996, and, for the nine months ended September 30, 1997, a portion of the
proceeds received from the sales of the Properties in Franklin and Smyrna,
Tennessee, the Partnership declared distributions to limited partners of
$1,725,000 for each of the nine months ended September 30, 1997 and 1996
($575,000 for each of the quarters ended September 30, 1997 and 1996). This
represents distributions for each applicable nine months of $34.50 per unit
($11.50 per unit for each applicable quarter). No distributions were made to the
general partners for the quarters and nine months ended September 30, 1997 and
1996. No amounts distributed or to be distributed to the limited partners for
the nine months ended September 30, 1997 and 1996, are required to be or have
been treated by the Partnership as a return of capital for purposes of
calculating the limited partners' return on their adjusted capital
contributions. The Partnership intends to continue to make distributions of cash
available for distribution to the limited partners on a quarterly basis.
The Partnership's investment strategy of acquiring Properties for cash
and leasing them under triple-net leases to operators who generally meet
specified financial standards minimizes the Partnership's operating expenses.
The general partners believe that the leases will continue to generate cash flow
in excess of operating expenses.
12
<PAGE>
Results of Operations
During the nine months ended September 30, 1996, the Partnership and
its consolidated joint venture, CNL/Longacre Joint Venture, owned and leased 27
wholly owned Properties (including one Property in St. Cloud, Florida, which was
sold in October 1996) and during the nine months ended September 30, 1997, the
Partnership and CNL/Longacre Joint Venture owned and leased 26 wholly owned
Properties (including four Properties in Franklin, Tennessee, Smyrna, Tennessee,
Salem, New Hampshire and Port St. Lucie, Florida, one of which was sold in each
of January and May, and two of which were sold in September 1997 to operators of
fast-food and family-style restaurant chains. In connection therewith, during
the nine months ended September 30, 1997 and 1996, the Partnership and
CNL/Longacre Joint Venture earned $1,160,634 and $1,479,170, respectively, in
rental income from operating leases and earned income from direct financing
leases, $378,168 and $486,771 of which was earned during the quarters ended
September 30, 1997 and 1996, respectively. Rental income during the quarter and
nine months ended September 30, 1997 decreased approximately $75,400 and
$196,300, respectively, as compared to the quarter and nine months ended
September 1996, as a result of the sale of the Property in St. Cloud, Florida,
in October 1996, and the sales of the Properties in Franklin, Tennessee; Smyrna,
Tennessee; Salem, New Hampshire, and Port St. Lucie, Florida, during the nine
months ended September 30, 1997. The general partners believe that the decrease
in rental and earned income will be offset by an increase in rental and earned
income resulting from the reinvestment of the net sales proceeds received from
the sales of the Properties in Smyrna, Tennessee; Salem, New Hampshire, Port St.
Lucie, Florida, and the remaining net sales proceeds from the sale of the
Property in Franklin, Tennessee. In October 1997, the Partnership reinvested a
portion of the remaining net sales proceeds from the sale of the Property in
Franklin, Tennessee, in a Boston Market Property in Mesa, Arizona, as
tenants-in-common with an affiliate of the general partners as discussed above
in "Liquidity and Capital Resources".
Rental and earned income also decreased during the nine months ended
September 30, 1997, as compared to the nine months ended September 30, 1996, as
a result of the Partnership increasing its allowance for doubtful accounts by
approximately $87,300 and $9,200 during the nine months ended September 30,
1997, and 1996, respectively, for rental amounts relating to the Hardee's
Properties located in Connorsville and Richmond, Indiana, which were leased by
the same tenant, due to financial difficulties the tenant was experiencing. In
addition, as a result of the fact that the Partnership terminated the lease with
the former tenant in June 1997, as discussed above in "Liquidity and Capital
Resources", rental and earned income decreased approximately $43,600 for the
quarter and nine months ended September 30, 1997. The Partnership does not
intend to continue to pursue the collection of these rental and other amounts
due from the former tenant unless the former tenant defaults under the
promissory note described above in "Liquidity and Capital Resources".
13
<PAGE>
Results of Operations - Continued
Rental and earned income during the quarters and nine months ended
September 30, 1997 and 1996, respectively, continued to remain at reduced
amounts due to the fact that the Partnership is not receiving any rental income
relating to the Properties in Belding, Michigan, and Lebanon, New Hampshire.
Rental and earned income are expected to remain at reduced amounts until
replacement tenants are located for the Properties in Belding, Michigan and
Lebanon, New Hampshire, which had not been released as of September 30, 1997.
For the nine months ended September 30, 1997 and 1996, the Partnership
also earned $68,056 and $57,443, respectively, in contingent rental income,
$15,404 and $17,156 of which was earned during the quarters ended September 30,
1997 and 1996, respectively. The increase in contingent rental income during the
nine months ended September 30, 1997, as compared to the nine months ended
September 30, 1996, is primarily attributable to an increase in gross sales
relating to certain restaurant Properties, the leases of which require the
payment of contingent rent.
In addition, for the nine months ended September 30, 1997 and 1996, the
Partnership owned and leased two Properties indirectly through other joint
venture arrangements. In connection therewith, the Partnership earned $33,549
and $33,641, respectively, attributable to net income earned by unconsolidated
joint ventures in which the Partnership is a co-venturer, $11,144 and $11,408 of
which was earned during the quarters ended September 30, 1997 and 1996,
respectively.
Interest and other income was $227,320 and $97,103 for the nine months
ended September 30, 1997 and 1996, respectively, $93,169 and $28,746 of which
was earned during the quarters ended September 30, 1997 and 1996, respectively.
The increase in interest and other income during the quarter and nine months
ended September 30, 1997, as compared to the quarter and nine months ended
September 30, 1996, is primarily attributable to the interest earned on the
mortgage note receivable accepted in connection with the sale of the Property in
St. Cloud, Florida, in October 1996 and the interest earned on the sales
proceeds received from the sale of the Properties in Franklin and Smyrna,
Tennessee, which had not been reinvested as of September 30, 1997.
During the nine months ended September 30, 1997, four lessees of the
Partnership and its consolidated joint venture, Shoney's, Inc., Golden Corral
Corporation, Great Midwestern Restaurants, Inc. and Tampa Foods, L.P., each
contributed more than ten percent of the Partnership's total rental income
(including rental income from the Partnership's consolidated joint venture and
the Partnership's share of the rental income from two Properties owned by
unconsolidated joint ventures). As of September 30, 1997, Shoney's, Inc. was the
lessee under leases relating to three restaurants, Golden Corral Corporation was
the lessee under leases relating to two restaurants, Great Midwestern
Restaurants, Inc. was the lessee under the leases relating to three restaurants,
and
14
<PAGE>
Results of Operations - Continued
Tampa Foods, L.P. was the lessee under leases relating to two restaurants. It is
anticipated that, based on the minimum rental payments required by the leases,
these lessees will continue to contribute more than ten percent of the
Partnership's total rental income during the remainder of 1997 and subsequent
years. Any failure of these lessees could materially affect the Partnership's
income.
Operating expenses, including depreciation expense, were $448,852 and
$483,326 for the nine months ended September 30, 1997 and 1996, respectively, of
which $150,248 and $149,410 were incurred for the quarters ended September 30,
1997 and 1996, respectively. The decrease in operating expenses during the nine
months ended September 30, 1997, as compared to the nine months ended September
30, 1996, is partially due to a decrease in depreciation expense due to the
sales of the Properties in St. Cloud, Florida, in October 1996 and Franklin,
Tennessee, Salem, New Hampshire, and Port St. Lucie, Florida, during the nine
months ended September 30, 1997. The decrease in operating expenses is also
attributable to a decrease in accounting and administrative expenses associated
with operating the Partnership and its Properties.
The decrease in operating expenses during the nine months ended
September 30, 1997, as compared to the nine months ended September 30, 1996, was
partially offset by an increase of approximately $9,000 for bad debt expense
recorded by the Partnership in 1997, relating to past due rental amounts for the
Properties located in Connorsville and Richmond, Indiana. The Partnership does
not intend to continue to pursue the collection of such amounts unless the
former tenant defaults under the promissory note, as described above in
"Liquidity and Capital Resources".
Due to the tenants defaulting under the terms of their lease agreements
for the Property in Belding, Michigan, and the Property in Lebanon, New
Hampshire, the Partnership and its consolidated joint venture, CNL/Longacre
Joint Venture, expect to continue to incur operating expenses relating to such
Properties until such time as a new lease is executed for each Property.
As a result of the sale of the Property in Myrtle Beach, South
Carolina, in August 1995, and recording the gain using the installment method,
the Partnership recognized a gain for financial reporting purposes of $259 and
$758 during the quarter and nine months ended September 30, 1997, respectively.
In May 1997, the Partnership sold its Property in Smyrna, Tennessee, as
described above in "Liquidity and Capital Resources," and recognized a gain for
financial reporting purposes of $101,995 during the nine months ended September
30, 1997.
15
<PAGE>
Results of Operations - Continued
In September 1997, the Partnership sold its Properties in Salem, New
Hampshire, and Port St. Lucie, Florida, as described above in "Liquidity and
Capital Resources," and recognized gains for financial reporting purposes of
$266,817 during the quarter and nine months ended September 30, 1997.
In addition, during the quarter and nine months ended September 30,
1997, the Partnership recorded an allowance for loss on land and building of
$142,990, for financial reporting purposes, relating to the Hardee's Property in
Richmond, Indiana. The loss represents the difference between the Property's
carrying value and the estimated net realizable value, based on the anticipated
sales price of this Property.
16
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings. Inapplicable.
Item 2. Changes in Securities. Inapplicable.
Item 3. Defaults upon Senior Securities. Inapplicable.
Item 4. Submission of Matters to a Vote of Security Holders.
Inapplicable.
Item 5. Other Information. Inapplicable.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits - None.
(b) No reports on Form 8-K were filed during the quarter
ended September 30, 1997.
17
<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 30th day of October, 1997.
CNL INCOME FUND V, LTD.
By: CNL REALTY CORPORATION
General Partner
By: /s/ James M. Seneff, Jr.
------------------------------
JAMES M. SENEFF, JR.
Chief Executive Officer
(Principal Executive Officer)
By: /s/ Robert A. Bourne
------------------------------
ROBERT A. BOURNE
President and Treasurer
(Principal Financial and
Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the balance
sheet of CNL Income Fund V, Ltd. at September 30, 1997, and its statement of
income for the nine months then ended and is qualified in its entirety by
reference to the Form 10Q of CNL Income Fund V, Ltd. for the nine months ended
September 30, 1997.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 3,900,662<F2>
<SECURITIES> 0
<RECEIVABLES> 180,204
<ALLOWANCES> 137,892
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 14,010,215
<DEPRECIATION> 2,128,783
<TOTAL-ASSETS> 19,686,277
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 18,541,030
<TOTAL-LIABILITY-AND-EQUITY> 19,686,277
<SALES> 0
<TOTAL-REVENUES> 1,456,010
<CGS> 0
<TOTAL-COSTS> 439,845
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 9,007
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,283,411
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,283,411
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,283,411
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F2>Cash balance includes $2,484,723 in restricted cash.
<F1>Due to the nature of its industry, CNL Income Fund V, Ltd. has an unclassified
balance sheet; therefore, no values are shown above for current assets and
current liabilities.
</FN>
</TABLE>
