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, 1996
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 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
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 V, Ltd. (the "Registrant" or the "Partnership") is a
limited partnership which was organized pursuant to the laws of the State of
Florida on August 17, 1988. 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 December 16, 1988, the
Partnership offered for sale up to $25,000,000 in limited partnership
interests (the "Units") (50,000 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 June 7, 1989, as of which date the
maximum offering proceeds of $25,000,000 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 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 $22,125,000, and were used to acquire 30 Properties, including
interests in three Properties owned by joint ventures in which the Partnership
is a co-venturer. During the year ended December 31, 1995, the Partnership
sold its Property in Myrtle Beach, South Carolina, to the tenant of the
Property and accepted a promissory note for the full sales price of the
Property. During the year ended December 31, 1996, the Partnership sold its
Property in St. Cloud, Florida, to the tenant of the Property and accepted
$100,000 in cash and a promissory note for the remaining sales price of the
Property. As a result of the above transactions, the Partnership currently
owns 28 Properties, including interests in three Properties owned by joint
ventures in which the Partnership is a co-venturer. 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 12 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 the joint ventures in which the Partnership is a co-venturer provide for
initial terms, ranging from seven to 20 years (the average being 18 years) and
expire between 2001 and 2009. All 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
$37,800 to $150,400. Generally, the leases provide for percentage rent, based
on sales in excess of a specified amount, to be paid annually. In addition, a
majority 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-fourth to five percent) of either the purchase price paid by the
Partnership for the Property or gross sales.
Generally, the leases of the Properties provide for two to 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
1
specified portion of the lease term has elapsed. Additionally, one lease
provides 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 that lease, the Partnership first must
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.
The tenant relating to the Property in Lebanon, New Hampshire, in which
the Partnership has a 66.5% interest, defaulted under the terms of its
agreement, and in February 1995, ceased operations of the restaurant on the
Property. The Partnership is currently seeking a replacement tenant.
In February 1994, the tenant of the Properties in Belding and South
Haven, Michigan, defaulted under the terms of its leases and a new operator
began occupying the Properties on a month-to-month basis for reduced rental
amounts. The new operator ceased operations of the Belding and South Haven
Properties in October 1994 and October 1995, respectively. The Partnership is
currently seeking replacement tenants for both Properties.
Major Tenants
During 1996, one lessee of the Partnership and its consolidated joint
venture, Shoney's, Inc., 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 December 31, 1996, Shoney's, Inc. was the lessee under leases relating to
four restaurants. It is anticipated that, based on the minimum rental
payments required by the leases, this lessee will continue to contribute more
than ten percent of the Partnership's total rental income in 1997 and
subsequent years. In addition, three Restaurant Chains, Perkins, Denny's and
Wendy's Old Fashioned Hamburger Restaurants, each accounted for more than ten
percent of the Partnership's total rental and mortgage interest income in 1996
(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). 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 and mortgage interest income to which the
Partnership is entitled under the terms of the leases and mortgage note. Any
failure of Shoney's, Inc. or these 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
The Partnership has entered into three separate joint venture
arrangements, CNL/Longacre Joint Venture, Cocoa Joint Venture and Halls Joint
Venture, to purchase and hold three Properties through such joint ventures.
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 proportion to each partner's percentage interest in the joint
venture. The Partnership and its joint venture partners are jointly and
severally liable for all debts, obligations, and other liabilities of the
joint ventures.
Each joint venture has an initial term of 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 unless terminated
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 has management control of the CNL/Longacre Joint Venture
and shares management control equally with affiliates of the General Partners
for Cocoa Joint Venture and Halls Joint Venture. 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,
2
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 CNL/Longacre Joint Venture, Cocoa Joint
Venture and Halls Joint Venture is distributed 66.5%, 43.0% and 49.0%,
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.
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 of one percent of the sum
of gross operating 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.
3
ITEM 2. PROPERTIES
As of December 31, 1996, the Partnership owned, either directly or
through joint venture arrangements, 28 Properties located in 12 states.
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 12,300
to 135,000 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. Generally, each of the Properties owned by the Partnership
includes a building that is one of a Restaurant Chain's approved designs. The
buildings generally are rectangular and are constructed from various
combinations of stucco, steel, wood, brick and tile. Building sizes range
from approximately 1,700 to 10,100 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 tenant as of December 31, 1996 (see Item 1. Business -
Major Tenants), are substantially the same as those described in Item 1.
Business - Leases.
Shoney's, Inc. leases two Shoney's restaurants and two Captain D's
restaurants with an initial term of 20 years (expiring in 2008) and average
minimum base annual rent of approximately $63,000 (ranging from approximately
$49,000 to $84,700).
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.
4
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
As of February 28, 1997, there were 2,494 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 transfers 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 1996 and 1995 other
than pursuant to the Plan, net of commissions (which ranged from zero to 19
percent).
1996 (1) 1995 (1)
--------------------- ---------------------
High Low Average High Low Average
------ ----- ------- ------ ----- -------
First Quarter $475 $402 $459 $475 $450 $472
Second Quarter 475 333 415 475 440 452
Third Quarter 475 350 432 475 415 442
Fourth Quarter 451 396 414 475 340 460
(1) A total of 592 and 1,133 Units were transferred other than pursuant to
the Plan for the years ended December 31, 1996 and 1995, 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, 1996 and 1995, the Partnership
declared cash distributions of $2,300,000 to the Limited Partners.
Distributions of $575,000 were declared at the close of each of the
Partnership's calendar quarters during 1996 and 1995 to the Limited Partners.
These amounts include monthly distributions made in arrears for the Limited
Partners electing to receive distributions on this basis. No amounts
distributed to partners for the years ended December 31, 1996 and 1995, 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 some Limited Partners, in accordance with their election, receive
monthly distributions, for an annual fee.
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ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Year Ended December 31:
Revenues (1) $ 2,279,880 $ 2,314,818 $ 2,354,981 $ 2,421,786 $ 2,474,896
Net income (2) 1,428,159 1,679,820 1,743,029 1,794,894 1,975,431
Cash distributions declared 2,300,000 2,300,000 2,300,000 2,300,000 2,300,000
Net income per Unit (2) 28.31 33.26 34.51 35.54 39.11
Cash distributions declared
per Unit 46.00 46.00 46.00 46.00 46.00
At December 31:
Total assets $20,133,002 $20,760,182 $21,299,865 $21,850,488 $21,749,120
Partners' capital 18,982,619 19,694,760 20,283,440 20,840,411 21,345,517
</TABLE>
(1) Revenues include equity in earnings of unconsolidated joint ventures and
minority interest in income or loss of the consolidated joint venture.
(2) Net income for the year ended December 31, 1996, includes $239,525 for a
provision for loss on land and buildings and $19,369 from a gain on sale
of land and buildings. Net income for the year ended December 31, 1995,
includes $5,924 from a gain on sale of land and building.
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 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 restaurant
Properties were to be constructed, which are leased primarily to operators of
selected national and regional fast-food and family-style Restaurant Chains.
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, 1996, the Partnership owned 28 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, 1996, 1995 and 1994, 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 $2,103,745,
$2,142,918 and $2,177,079 for the years ended December 31, 1996, 1995 and
1994, respectively. The decrease in cash from operations during 1996, and
1995, each as compared to the previous year, 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 during each of the respective
years. Cash from operations was also affected by the following during the
years ended December 31, 1996, 1995 and 1994.
During 1994, the tenant of the Properties in Belding and South Haven,
Michigan, continued to be in default under the terms of a promissory note with
the Partnership. In addition, in February 1994, the tenant defaulted under
the terms of its leases with the Partnership and vacated the Properties. As a
result, the Partnership established an allowance for doubtful accounts of
$138,716 for amounts relating to the note and other rental payments due to the
Partnership for these two Properties and a new operator began operating the
Properties on a month-to-month basis for reduced rental amounts. The new
operator ceased operations and rental payments in October 1994 and October
1995 for the Properties in Belding and South Haven, Michigan, respectively.
Due to the fact that the Partnership does not expect to receive any additional
amounts from the original tenant of these Properties, the Partnership
6
reversed all past due rental and other amounts relating to these two
Properties, and the related allowance for doubtful accounts of $153,800 during
1995.
Other sources and uses of capital included the following during the
years ended December 31, 1996, 1995 and 1994.
During the years ended December 31, 1996 and 1995, the Partnership
received $159,700 and $31,500, respectively, in capital contributions from the
corporate general partner in connection with the operations of the
Partnership. No such contributions were made during the year ended December
31, 1994. 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.
In August 1995, the Partnership sold its Property in Myrtle Beach, South
Carolina, to the tenant of the Property for $1,040,000, and in connection
therewith, accepted a promissory note in the principal sum of $1,040,000,
collateralized by a mortgage on the Property. The note bears interest at a
rate of 10.25% per annum and is being collected in 59 equal monthly
installments of $9,319, with a balloon payment of $1,006,004 due in July 2000.
Collections commenced August 1, 1995. In accordance with Statement of
Financial Accounting Standards No. 66, "Accounting for Sales of Real Estate,"
the Partnership recorded the sale of the Property using the installment sales
method. Therefore, the gain on the sale of the Property was deferred and is
being recognized as income proportionately as payments of principal under the
mortgage note are collected. The Partnership recognized a gain of $924 and
$1,571 for financial reporting purposes for the years ended December 31, 1996
and 1995, respectively, and had a deferred gain in the amount of $140,717 and
$141,641 at December 31, 1996 and 1995, respectively. The mortgage note
receivable balance relating to this Property at December 31, 1996 and 1995,
was $889,891 and $895,736, respectively, including accrued interest of $8,729
and $8,786, respectively, and net of the remaining deferred gain of $140,717
and $141,641, respectively. The General Partners anticipate that payments
collected under the mortgage note will be reinvested in additional Properties
or used for other Partnership purposes.
In addition, in October 1996, the Partnership sold its Property in St.
Cloud, Florida, to the tenant for $1,150,000. In connection therewith, the
Partnership received $100,000 in cash and accepted the remaining sales
proceeds in the form of a promissory note in the principal sum of $1,057,299,
representing the balance of the sales price of $1,050,000 plus tenant closing
costs in the amount of $7,299 the Partnership financed on behalf of the
tenant. The promissory note bears interest at a rate of 10.75% per annum, is
collateralized by a mortgage on the Property, and is being collected in 12
monthly installments of interest only and thereafter in 168 equal monthly
installments of principal and interest. This sale is also being accounted for
under the installment sales method for financial reporting purposes;
therefore, the gain on the sale of the Property was deferred and is being
recognized as income proportionately as payments of principal under the
mortgage note are collected. The Partnership recognized a gain of $18,445 for
financial reporting purposes for the year ended December 31, 1996, and had a
deferred gain in the amount of $183,802 at December 31, 1996. The mortgage
note receivable balance relating to this Property at December 31, 1996, was
$882,967, including accrued interest of $9,471, and net of the remaining
deferred gain of $183,802. Proceeds received from the collection of this
mortgage note will be distributed to the Limited Partners or will be used for
other Partnership purposes.
In January 1997, the Partnership sold its Property in Franklin,
Tennessee, for $980,000 and received net sales proceeds of $960,741, resulting
in a loss of approximately $169,463 for financial reporting purposes. The
Partnership intends to reinvest the net sales proceeds in a replacement
Property.
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.
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, 1996, the Partnership had
$362,922 invested in such short-term
7
investments as compared to $319,052 at December 31, 1995. The balance of
funds at December 31, 1996, will be used for the payment of distributions and
other liabilities.
During 1996, 1995 and 1994, affiliates of the General Partners incurred
on behalf of the Partnership $113,560, $114,204 and $126,417, respectively,
for certain operating expenses. As of December 31, 1996 and 1995, the
Partnership owed $121,464 and $61,519, respectively, to affiliates for such
amounts and accounting and administrative services. In addition, as of
December 31, 1996, the Partnership had incurred $34,500 in a real estate
disposition fee due to an affiliate as a result of its services in connection
with the sale of the Property in St. Cloud, Florida. Amounts payable to other
parties, including distributions payable, increased to $705,130 at December
31, 1996, from $673,098 at December 31, 1995, primarily as a result of the
Partnership continuing to accrue real estate taxes for its Properties located
in Belding and South Haven, Michigan, and Lebanon, New Hampshire. Liabilities
at December 31, 1996, to the extent they exceed cash and cash equivalents at
December 31, 1996, will be paid from future cash from operations, from amounts
collected under the mortgage notes described above or, in the event the
General Partners elect to make additional capital contributions, from future
General Partner contributions.
Based primarily on current and anticipated future cash from operations,
and to a lesser extent additional capital contributions from the General
Partners, the Partnership declared distributions to the Limited Partners of
$2,300,000 for each of the years ended December 31, 1996, 1995 and 1994. This
represents distributions of $46 per Unit for each of the years ended December
31, 1996, 1995 and 1994. No amounts distributed or to be distributed to the
Limited Partners for the years ended December 1996, 1995 and 1994, are
required to be or have been treated by the Partnership as a return of capital
for purposes of calculating the Limited Partners' return on their adjusted
capital contributions. The Partnership 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, the General Partners have obtained contingent
liability and property coverage for the Partnership. This insurance 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 generally 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 all leases of the Partnership's Properties are 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 1995 and 1994, the Partnership owned and leased 27 wholly owned
Properties (including one Property in Myrtle Beach, South Carolina, which was
sold in August 1995) and during 1996, the Partnership owned and leased 26
wholly owned Properties (including one Property in St. Cloud, Florida, which
was sold in October 1996). In addition, during 1996, 1995 and 1994, the
Partnership was a co-venturer in three separate joint ventures that each owned
and leased one Property. As of December 31, 1996, the Partnership owned,
either directly or through joint venture arrangements, 28 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 approximately $37,800 to $150,400. Generally, the
leases provide for percentage rent based on sales in excess of a specified
amount to be paid annually. In addition, a majority 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-fourth to five percent) of
either the purchase price paid by the Partnership for the Property or gross
sales. For further description of the Partnership's leases and Properties,
see Item 1. Business - Leases and Item 2. Properties, respectively.
8
During the years ended December 31, 1996, 1995 and 1994, the Partnership
and its consolidated joint venture, CNL/Longacre Joint Venture, earned
$1,931,573, $2,068,342 and $2,174,472, respectively, in rental income from
operating leases and earned income from direct financing leases. Rental
income in 1996, as compared to 1995, and rental income in 1995, as compared to
1994, decreased approximately $72,000 and $51,400, respectively, as a result
of the sale of its Property in Myrtle Beach, South Carolina, in August 1995,
as described above in "Liquidity and Capital Resources." In addition, rental
income in 1996, as compared to 1995, decreased approximately $23,000 as a
result of the of the Property in St. Cloud, Florida, in October 1996, as
discussed above in "Liquidity and Capital Resources".
Rental and earned income also decreased in 1996 as a result of the
Partnership establishing an allowance for doubtful accounts totalling
approximately $29,500 for rental and other amounts relating to the Hardee's
Properties located in Connorsville and Richmond, Indiana, which are leased by
the same tenant, due to financial difficulties the tenant is experiencing. As
of February 28, 1997, the Partnership was negotiating an agreement with the
tenant for the collection of past due amounts and will recognize such amounts
as income if collected. The Partnership is also in the process of negotiating
the sale of the Property in Richmond, Indiana, with the current tenant of the
Property.
In addition, rental and earned income decreased in 1996, 1995 and 1994,
by approximately $8,000, $51,000 and $36,700, respectively, as a result of the
fact that in February 1994, the former tenant of the Properties in Belding and
South Haven, Michigan, defaulted under the terms of its leases and the
Partnership began accepting reduced rent on a month-to-month basis from a new
operator as discussed above in Item 1. Business - Leases. The new operator
ceased operations and rental payments for the Property in Belding, Michigan,
in October 1994. In addition, in October 1995, the new operator ceased
operations of the Property in South Haven, Michigan, after becoming delinquent
with its rental payments. Due to the fact that the Partnership does not
expect to receive any additional amounts from the original tenant of these
Properties, the Partnership reversed all past due rental and other amounts
relating to these two Properties, and the related allowance for doubtful
accounts of approximately $153,800 for the year ended December 31, 1995. The
Partnership currently is not receiving any rental income relating to these two
Properties and the General Partners are seeking replacement tenants for these
Properties.
Rental income in 1996, 1995 and 1994, also continued to remain at
reduced amounts due to the fact that the tenant of the Property in Lebanon,
New Hampshire, defaulted under the terms of the lease and in February 1995,
ceased operations of the restaurant on the Property; therefore, the General
Partners are currently seeking a replacement tenant for this Property. Due to
the fact that the Partnership does not expect to receive any additional
amounts relating to this Property from the former tenant, the Partnership
reversed all past due rental and other amounts relating to this Property, and
the related allowance for doubtful accounts of approximately $275,500 during
1995.
Rental and earned income for 1997 is expected to remain at reduced
amounts until such time as the Partnership executes new leases for its
Properties in Belding and South Haven, Michigan, and Lebanon, New Hampshire.
For the years ended December 31, 1996, 1995 and 1994, the Partnership
earned $130,167, $104,455 and $115,011, respectively, in contingent rental
income. The increase in contingent rental income during 1996, as compared to
1995, is partially attributable to increased gross sales of certain restaurant
Properties requiring the payment of contingent rent. The decrease in
contingent rental income during 1995, as compared to 1994, is primarily
attributable to a decrease in gross sales of certain restaurant Properties
whose leases require the payment of contingent rental income.
During the years ended December 31, 1996, 1995 and 1994, the Partnership
earned $147,804, $83,180 and $11,002, respectively, in interest and other
income. The increase in interest and other income during 1996 and 1995, each
as compared to the previous year, was primarily attributable to the interest
earned on the mortgage notes receivable accepted in connection with the sales
of the Property in Myrtle Beach, South Carolina, in August 1995, and the sale
of the Property in St. Cloud, Florida, in October 1996.
9
In addition, for the years ended December 31, 1996, 1995 and 1994, the
Partnership earned $46,452, $47,018 and $47,219, respectively, attributable to
net income earned by unconsolidated joint ventures in which the Partnership is
a co-venturer.
During the years ended December 31, 1996, 1995 and 1994, one lessee of
the Partnership and its consolidated joint venture, Shoney's, Inc.,
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 December 31, 1996, Shoney's, Inc. was
the lessee under leases relating to four restaurants. It is anticipated that,
based on the minimum rental payments required by the leases, this lessee will
continue to contribute more than ten percent of the Partnership's total rental
income during 1997 and subsequent years. In addition, three Restaurant
Chains, Perkins, Denny's and Wendy's Old Fashioned Hamburger Restaurants, each
accounted for more than ten percent of the Partnership's total rental and
mortgage interest income in 1996 (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). 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 and
mortgage interest income to which the Partnership is entitled under the terms
of the leases and mortgage note. Any failure of Shoney's, Inc. or these
Restaurant Chains could materially affect the Partnership's income.
Operating expenses, including depreciation and amortization expense,
were $631,565, $640,922 and $611,952 for the years ended December 31, 1996,
1995 and 1994, respectively. The decrease in operating expenses during 1996,
as compared to 1995, is partially attributable to, and the increase during
1995, as compared to 1994, is partially offset by, a decrease in depreciation
expense due to the sale of the Partnership's Property in Myrtle Beach, South
Carolina, in August 1995, as discussed above in "Liquidity and Capital
Resources". Operating expenses also decreased during 1996, as compared to
1995, due to a decrease in depreciation expense due to the sale of the
Partnership's Property in St. Cloud, Florida, in October 1996, as discussed
above in "Liquidity and Capital Resources".
The decrease in operating expenses during 1996, as compared to 1995, is
partially offset by, and the increase during 1995, as compared to 1994, is
partially attributable to, an increase in accounting and administrative
expenses associated with operating the Partnership and its Properties and an
increase in 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."
During the year ended December 31, 1994, the Partnership recorded a loss
upon the termination of the leases relating to the Properties in Belding and
South Haven, Michigan. As a result of the lease terminations, the Partnership
reclassified these leases from direct financing leases to operating leases,
whereby the Properties were recorded at cost. Due to the fact that the net
carrying value of the Properties as direct financing leases exceeded the cost
of the Properties, the Partnership recognized a loss during 1994 for financial
reporting purposes only. In addition, the Partnership accrued approximately
$17,000, $26,500 and $38,900 during the years ended December 31, 1996, 1995
and 1994, respectively, for real estate taxes relating to these two
Properties.
Operating expenses during 1996 and 1995 also included approximately
$23,800 and $20,600, respectively, in real estate taxes relating to the
Property in Lebanon, New Hampshire, as to which the tenant defaulted under the
terms of its lease and in February 1995, ceased operations of the restaurant
Property. During 1994, the Partnership collected escrowed real estate taxes
from the tenant sufficient to pay the 1994 taxes; therefore, no expense was
recorded for 1994.
Due to the tenants defaulting under the terms of their lease agreements,
the Partnership expects to continue to incur real estate taxes, insurance and
maintenance expense for its Properties in Belding and South Haven, Michigan,
and the Property in Lebanon, New Hampshire, until such time as a new lease is
executed for each Property.
In connection with the sale of its Properties in St. Cloud, Florida and
Myrtle Beach, South Carolina, during 1996 and 1995, respectively, as described
above in "Liquidity and Capital Resources," the Partnership recognized a gain
for financial reporting purposes of $19,369 and $1,571 for the years ended
December 31, 1996 and 1995,
10
respectively. In accordance with Statement of Financial Accounting Standards
No. 66, "Accounting for Sales of Real Estate," the Partnership recorded the
sales using the installment sales method. As such, the gain on the sales was
deferred and is being recognized as income proportionately as payments under
the mortgage notes are collected. Therefore, the balance of the deferred gain
of $324,519 at December 31, 1996, will be recognized as income in future
periods as payments are collected. For federal income tax purposes, gains of
approximately $194,100 and $136,900 from the sale of the Properties in St.
Cloud, Florida, and Myrtle Beach, South Carolina, respectively, were also
deferred and are being recognized as payments under the mortgage notes are
collected. In October 1995, the Partnership also sold a portion of the land
relating to its Property in Daleville, Indiana, as the result of a right of
way taking and recognized a gain for financial reporting purposes of $4,353
during the year ended December 31, 1995. No Properties were sold during the
year ended December 31, 1994.
At December 31, 1996, the Partnership established an allowance for loss
on land and building in the amount of $169,463 for financial reporting
purposes. The allowance represents the difference between (i) the Property's
carrying value at December 31, 1996, plus the additional rental income
(accrued rental income) that the Partnership had recognized since inception of
the lease relating to the straight-lining of future scheduled rent increases
minus (ii) the net realizable value of $960,741 received as net sales proceeds
in conjunction with the sale of the property in January 1997, as discussed
above in "Liquidity and Capital Resources".
In addition, during 1996, the Partnership established an allowance for
loss on land and building for its Property in Richmond, Indiana. The
allowance of $70,062 represents the difference between the Property's carrying
value at December 31, 1996, and the estimated fair value of the Property based
on an anticipated sales price of this Property to the current tenant.
Effective January 1, 1996, the Partnership adopted 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
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's leases as of December 31, 1996, 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 sales of the
restaurants and on potential capital appreciation of the Properties.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
11
CNL INCOME FUND V, 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 19
12
Report of Independent Accountants
To the Partners
CNL Income Fund V, Ltd.
We have audited the financial statements and the financial statement schedules
of CNL Income Fund V, 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 V, Ltd. as of
December 31, 1996 and 1995, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1996 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 27, 1997
13
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
BALANCE SHEETS
December 31,
ASSETS 1996 1995
----------- -----------
Land and buildings on operating
leases, less accumulated
depreciation and allowance for
loss on land and buildings $15,190,278 $16,640,635
Net investment in direct financing
leases 1,941,406 1,987,793
Investment in joint ventures 465,808 473,138
Mortgage notes receivable, less
deferred gain 1,772,858 895,736
Cash and cash equivalents 362,922 319,052
Receivables, less allowance for
doubtful accounts of $37,743 and
$4,490 57,934 68,204
Prepaid expenses 10,416 11,921
Accrued rental income 277,034 309,357
Other assets 54,346 54,346
----------- -----------
$20,133,002 $20,760,182
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 25,366 $ 13,963
Accrued and escrowed real estate
taxes payable 104,764 84,135
Distributions payable 575,000 575,000
Due to related parties 155,964 61,519
Rents paid in advance 11,738 29,370
----------- -----------
Total liabilities 872,832 763,987
Minority interest 277,551 301,435
Partners' capital 18,982,619 19,694,760
----------- -----------
$20,133,002 $20,760,182
=========== ===========
See accompanying notes to financial statements.
14
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
STATEMENTS OF INCOME
Year Ended December 31,
1996 1995 1994
---------- ---------- ----------
Revenues:
Rental income from operating leases $1,746,021 $1,878,584 $1,980,954
Earned income from direct financing
leases 185,552 189,758 193,518
Contingent rental income 130,167 104,455 115,011
Interest and other income 147,804 83,180 11,002
---------- ---------- ----------
2,209,544 2,255,977 2,300,485
---------- ---------- ----------
Expenses:
General operating and administra-
tive 178,991 157,741 94,279
Professional services 22,605 20,741 24,641
Bad debt expense - 1,541 4,788
Real estate taxes 40,711 47,182 36,926
State and other taxes 12,492 15,982 17,740
Loss on termination of direct
financing leases - - 30,431
Depreciation and amortization 376,766 397,735 403,147
---------- ---------- ----------
631,565 640,922 611,952
---------- ---------- ----------
Income Before Minority Interest
in Loss of Consolidated Joint
Venture, Equity in Earnings of
Unconsolidated Joint Ventures,
Gain on Sale of Land and
Building and Provision for Loss
on Land and Buildings 1,577,979 1,615,055 1,688,533
Minority Interest in Loss of
Consolidated Joint Venture 23,884 11,823 7,277
Equity in Earnings of Unconsoli-
dated Joint Ventures 46,452 47,018 47,219
Gain on Sale of Land and Buildings 19,369 5,924 -
Provision for Loss on Land and
Buildings (239,525) - -
---------- ---------- ----------
Net Income $1,428,159 $1,679,820 $1,743,029
========== ========== ==========
Allocation of Net Income:
General partners $ 12,513 $ 16,754 $ 17,430
Limited partners 1,415,646 1,663,066 1,725,599
---------- ---------- ----------
$1,428,159 $1,679,820 $1,743,029
========== ========== ==========
Net Income Per Limited Partner Unit $ 28.31 $ 33.26 $ 34.51
========== ========== ==========
Weighted Average Number of Limited
Partner Units Outstanding 50,000 50,000 50,000
========== ========== ==========
See accompanying notes to financial statements.
15
<TABLE>
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
STATEMENTS OF PARTNERS' CAPITAL
Years Ended December 31, 1996, 1995 and 1994
<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,
1993 $ 46,000 $ 92,276 $25,000,000 $(10,568,240) $ 9,135,375 $(2,865,000) $20,840,411
Distributions to
limited partners
($46 per limited
partner unit) - - - (2,300,000) - - (2,300,000)
Net income - 17,430 - - 1,725,599 - 1,743,029
-------- -------- ----------- ------------ ----------- ----------- -----------
Balance, December 31,
1994 46,000 109,706 25,000,000 (12,868,240) 10,860,974 (2,865,000) 20,283,440
Contributions from
general partner 31,500 - - - - - 31,500
Distributions to
limited partners
($46 per limited
partner unit) - - - (2,300,000) - - (2,300,000)
Net income - 16,754 - - 1,663,066 - 1,679,820
-------- -------- ----------- ------------ ----------- ----------- -----------
Balance, December 31,
1995 77,500 126,460 25,000,000 (15,168,240) 12,524,040 (2,865,000) 19,694,760
Contributions from
general partner 159,700 - - - - - 159,700
Distributions to
limited partners
($46 per limited
partner unit) - - - (2,300,000) - - (2,300,000)
Net income - 12,513 - - 1,415,646 - 1,428,159
-------- -------- ----------- ------------ ----------- ----------- -----------
Balance, December 31,
1996 $237,200 $138,973 $25,000,000 $(17,468,240) $13,939,686 $(2,865,000) $18,982,619
======== ======== =========== ============ =========== =========== ===========
See accompanying notes to financial statements.
16
</TABLE>
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
STATEMENTS OF CASH FLOWS
Year Ended December 31,
1996 1995 1994
----------- ----------- -----------
Increase (Decrease) in Cash and
Cash Equivalents:
Cash Flows from Operating
Activities:
Cash received from tenants $ 2,083,722 $ 2,216,111 $ 2,272,510
Distributions from uncon-
solidated joint ventures 53,782 53,405 52,701
Cash paid for expenses (161,730) (173,597) (155,948)
Interest received 127,971 46,999 7,816
----------- ----------- -----------
Net cash provided by
operating activities 2,103,745 2,142,918 2,177,079
----------- ----------- -----------
Cash Flows from Investing
Activities:
Proceeds from sale of land
and building 100,000 - -
Proceeds from sale of
portion of land for
right of way purposes - 7,625 -
Collections on mortgage
note receivable 6,713 11,409 -
Other (26,288) - -
----------- ----------- -----------
Net cash provided by
investing activities 80,425 19,034 -
----------- ----------- -----------
Cash Flows from Financing
Activities:
Contributions from general
partner 159,700 31,500 -
Distributions to limited
partners (2,300,000) (2,300,000) (2,300,000)
----------- ----------- -----------
Net cash used in
financing activities (2,140,300) (2,268,500) (2,300,000)
----------- ----------- -----------
Net Increase (Decrease) in Cash
and Cash Equivalents 43,870 (106,548) (122,921)
Cash and Cash Equivalents at
Beginning of Year 319,052 425,600 548,521
----------- ----------- -----------
Cash and Cash Equivalents at End
of Year $ 362,922 $ 319,052 $ 425,600
=========== =========== ===========
See accompanying notes to financial statements.
17
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
STATEMENTS OF CASH FLOWS - CONTINUED
Year Ended December 31,
1996 1995 1994
----------- ----------- -----------
Reconciliation of Net Income to
Net Cash Provided by Operating
Activities:
Net income $ 1,428,159 $ 1,679,820 $ 1,743,029
----------- ----------- -----------
Adjustments to reconcile net
income to net cash provided
by operating activities:
Loss on termination of
direct financing leases - - 30,431
Depreciation 376,766 397,735 402,980
Minority interest in loss
of consolidated joint
venture (23,884) (11,823) (7,277)
Amortization - - 167
Equity in earnings of
unconsolidated joint
ventures, net of
distributions 7,330 6,387 5,482
Gain on sale of land
and building (19,369) (5,924) -
Provisions for loss on
land and buildings 239,525 - -
Increase in accrued
interest on mortgage
note receivable (9,414) (8,786) -
Decrease in receivables 10,270 13,527 13,656
Decrease (increase) in
prepaid expenses 1,505 (534) 1,383
Decrease in net investment
in direct financing
leases 46,387 42,180 38,532
Increase in accrued rental
income (27,875) (30,484) (64,929)
Increase in accounts payable
and accrued expenses 32,032 9,730 3,982
Increase in due to related
parties 59,945 41,585 10,513
Increase (decrease) in
rents paid in advance (17,632) 9,505 (870)
----------- ----------- -----------
Total adjustments 675,586 463,098 434,050
----------- ----------- -----------
Net Cash Provided by Operating
Activities $ 2,103,745 $ 2,142,918 $ 2,177,079
=========== =========== ===========
Supplemental Schedule of Non-Cash
Investing and Financing
Activities:
Mortgage note accepted
in connection with sale
of land and building $ 1,057,299 $ 1,040,000 $ -
=========== =========== ===========
Distributions declared and
unpaid at December 31 $ 575,000 $ 575,000 $ 575,000
=========== =========== ===========
See accompanying notes to financial statements.
18
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
Years Ended December 31, 1996, 1995 and 1994
1. Significant Accounting Policies:
Organization and Nature of Business - CNL Income Fund V, 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.
Real Estate and Lease Accounting - The Partnership records the
acquisition of land and buildings at cost, including acquisition and
closing costs. Land and buildings are leased to unrelated third parties
on a triple-net 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 methods. Such
methods are described below:
Direct financing method - The leases accounted for using the
direct financing method are recorded at their net investment
(which at the inception of the lease generally represents
the cost of the asset) (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 leases.
Operating method - Land and building leases accounted for
using the operating method are recorded at cost, revenue is
recognized as rentals are earned and depreciation is charged
to operations as incurred. Buildings are depreciated on the
straight-line method over their estimated useful lives of 30
years. When scheduled rentals vary during the lease term,
income is recognized on a straight-line basis so as to
produce a constant periodic rent over the lease term
commencing on the date the property is placed in service.
19
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1996, 1995 and 1994
1. Significant Accounting Policies - Continued:
Accrued rental income represents the aggregate amount of
income recognized on a straight-line basis in excess of
scheduled rental payments to date.
When the properties are sold, the related cost and accumulated
depreciation for operating leases and the net investment for direct
financing leases, plus any accrued rental income, are removed from the
accounts and gains or losses from sales are reflected in income. The
general partners of the Partnership review properties for impairment
whenever events or changes in circumstances indicate that the carrying
amount of the assets may not be recoverable through operations. The
general partners determine whether an impairment in value has occurred
by comparing the estimated future undiscounted cash flows, including the
residual value of the property, with the carrying cost of the individual
property. Although the general partners have made their best estimate
of these factors based on current conditions, it is reasonably possible
that changes could occur in the near term which could adversely affect
the general partners' estimate of net cash flows expected to be
generated from its properties and the need for asset impairment write-
downs. If an impairment is indicated, a loss will be recorded for the
amount by which the carrying value of the asset exceeds its fair market
value.
When the collection of amounts recorded as rental or other income are
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 accounts for its 66.5%
interest in CNL/Longacre Joint Venture, a Florida general partnership,
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.
20
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1996, 1995 and 1994
1. Significant Accounting Policies - Continued:
The Partnership's investments in Cocoa Joint Venture and Halls Joint
Venture are accounted for using the equity method since the Partnership
shares control 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 and money market funds (some of which are 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.
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 properties.
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. The more significant areas requiring
the use of estimates relate to the allowance for doubtful accounts and
future cash flows associated with long-lived assets. Actual results
could differ from those estimates.
21
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1996, 1995 and 1994
1. Significant Accounting Policies - Continued:
Reclassification - Certain items in the prior years' financial
statements have been reclassified to conform to 1996 presentation.
These reclassifications had no effect on partners' capital or net
income.
New Accounting Standard - Effective January 1, 1996, the Partnership
adopted 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 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.
2. Leases:
The Partnership leases its 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, four leases have
been classified as direct financing leases. 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 to 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.
22
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1996, 1995 and 1994
3. Land and Buildings on Operating Leases:
Land and buildings on operating leases consisted of the following at
December 31:
1996 1995
----------- -----------
Land $ 7,284,070 $ 7,666,704
Buildings 10,431,908 11,102,384
----------- -----------
17,715,978 18,769,088
Less accumulated
depreciation (2,346,374) (2,128,453)
----------- -----------
15,369,604 16,640,635
Less allowance for loss
on land and buildings (179,326) -
----------- -----------
$15,190,278 $16,640,635
=========== ===========
In August 1995, the Partnership sold its property in Myrtle Beach, South
Carolina, to the tenant for $1,040,000 and accepted the sales proceeds
in the form of a promissory note (Note 6). The total carrying value of
the property was $896,788, including acquisition fees and miscellaneous
acquisition expenses and net of accumulated depreciation. As a result
of this sale being accounted for using the installment sales method for
financial reporting purposes as required by Statement of Financial
Accounting Standards No. 66, "Accounting for Sales of Real Estate," the
Partnership recognized a gain of $924 and $1,571 for the years ended
December 31, 1996 and 1995, respectively, and had a deferred gain in the
amount of $140,717 and $141,641 at December 31, 1996 and 1995,
respectively (Note 6).
In October 1996, the Partnership sold its property in St. Cloud,
Florida, to the tenant for $1,150,000. In connection therewith, the
Partnership received $100,000 in cash and accepted the remaining sales
proceeds in the form of a promissory note (Note 6). The total carrying
value of the property was $894,265, including acquisition fees and
miscellaneous acquisition expenses and net of accumulated depreciation.
As a result of this sale being accounted for under the installment sales
method for financial reporting purposes, as described above, the
Partnership recognized a gain of $18,445 for the year ended December 31,
1996, and had a deferred gain in the amount of $183,802 at December 31,
1996 (Note 6).
23
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1996, 1995 and 1994
3. Land and Buildings on Operating Leases - Continued:
In addition, at December 31, 1996, the Partnership established an
allowance for loss on land and building in the amount of $109,264 and
wrote-off accrued rental income of $60,199 for financial reporting
purposes for the properties in Franklin, Tennessee and Richmond,
Indiana. The allowance for the Franklin, Tennessee property represents
the difference between (i) the property's carrying value at December 31,
1996, plus the accrued rental income that the Partnership had recognized
since the option of the lease relating to the straight-lining of future
scheduled rent increases minus (ii) the net realizable value of $960,741
received as net sales proceeds in conjunction with the sale of the
property in January 1997 (See Note 11). The allowance established for
the Richmond, Indiana, property, in the amount of $70,062, represents
the difference between the property's carrying value at December 31,
1996, and the general partners' estimate of net realizable value the
property based on an anticipated sales price of this property to the
current tenant.
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, 1996, 1995 and 1994 the Partnership
recognized $27,875, $30,484 and $64,929, respectively, of such rental
income.
The following is a schedule of the future minimum lease payments to be
received on noncancellable operating leases at December 31, 1996:
1997 $ 1,550,207
1998 1,518,124
1999 1,525,001
2000 1,549,914
2001 1,523,848
Thereafter 10,149,473
-----------
$17,816,567
===========
Since lease renewal periods are exercisable at the option of the tenant,
the above table only presents future minimum lease payments due during
the initial lease terms. In addition, this table does not include any
amounts for future contingent rentals which may be received on the
leases based on a percentage of the tenant gross sales.
24
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1996, 1995 and 1994
4. Net Investment in Direct Financing Leases:
The following lists the components of the net investment in direct
financing leases at December 31:
1996 1995
----------- -----------
Minimum lease payments
receivable $ 2,811,323 $ 3,043,263
Estimated residual
values 828,783 828,783
Less unearned income (1,698,700) (1,884,253)
----------- -----------
Net investment in direct
financing leases $ 1,941,406 $ 1,987,793
=========== ===========
The following is a schedule of future minimum lease payments to be
received on direct financing leases at December 31, 1996:
1997 $ 231,938
1998 231,938
1999 231,938
2000 231,938
2001 231,938
Thereafter 1,651,633
----------
$2,811,323
==========
In October 1995, the Partnership sold a portion of land relating to its
Property in Daleville, Indiana, in connection with a right of way taking
and received sales proceeds of $7,625. In connection therewith, the
Partnership recognized a gain of $4,353 for financial reporting purposes
for the year ended December 31, 1995.
The above table does not include future minimum lease payments for
renewal periods or for contingent rental payments that may become due in
future periods (see Note 3).
5. Investment in Joint Ventures:
The Partnership has a 43 percent and a 49 percent interest in the
profits and losses of Cocoa Joint Venture and Halls Joint Venture,
respectively. The remaining interests in these joint ventures are held
by affiliates of the Partnership which have the same general partners.
25
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1996, 1995 and 1994
5. Investment in Joint Ventures - Continued:
Cocoa Joint Venture and Halls 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:
1996 1995
---------- ----------
Land and buildings on
operating leases, less
accumulated depreciation $ 946,406 $ 967,182
Cash 561 112
Prepaid expenses 251 80
Accrued rental income 63,806 58,970
Liabilities 880 447
Partners' capital 1,010,144 1,025,897
Revenues 123,689 124,356
Net income 98,949 100,215
The Partnership recognized income totalling $46,452, $47,018 and $47,219
for the years ended December 31, 1996, 1995 and 1994, respectively, from
these joint ventures.
6. Mortgage Notes Receivable:
In connection with the sale in 1995 of its property in Myrtle Beach,
South Carolina, the Partnership accepted a promissory note in the
principal sum of $1,040,000, collateralized by a mortgage on the
property. The promissory note bears interest at 10.25% per annum and is
being collected in 59 equal monthly installments of $9,319, including
interest, with a balloon payment of $1,006,004 due in July 2000.
In addition, in connection with the sale in 1996 of its property in St.
Cloud, Florida, the Partnership accepted a promissory note in the
principal sum of $1,057,299, representing the balance of the sales price
of $1,050,000 plus tenant closing costs in the amount of $7,299 that the
Partnership financed on behalf of the tenant. The note is
collateralized by a mortgage on the property. The promissory note bears
interest at a rate of 10.75% per annum and is being collected in 12
monthly installments of interest only, and thereafter in 168 equal
monthly installments of principal and interest.
26
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1996, 1995 and 1994
6. Mortgage Notes Receivable - Continued:
The mortgage notes receivable consisted of the following at December 31:
1996 1995
---------- ----------
Principal balance $2,079,177 $1,028,591
Accrued interest
receivable 18,200 8,786
Less deferred gain
on sale of land
and building (324,519) (141,641)
---------- ----------
$1,772,858 $ 895,736
========== ==========
The general partners believe that the estimated fair values of mortgage
notes receivable at December 31, 1996 and 1995, approximate the
outstanding principal amount based on estimated current rates at which
similar loans would be made to borrowers with similar credit and for
similar maturities.
7. Allocations and Distributions:
Generally, all net income and net losses of the Partnership, excluding
gains and losses from the sale of properties, are allocated 99 percent
to the limited partners and one percent to the general partners.
Distributions of net cash flow are made 99 percent to the limited
partners and one percent to the general partners; provided, however,
that the one percent of net cash flow to be distributed to the general
partners is subordinated to receipt by the limited partners of an
aggregate, ten percent, 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.
27
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1996, 1995 and 1994
7. Allocations and Distributions - Continued:
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, 1996, 1995 and 1994, the
Partnership declared distributions to the limited partners of
$2,300,000. No distributions have been made to the general partners to
date.
28
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1996, 1995 and 1994
8. 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:
1996 1995 1994
---------- ---------- ----------
Net income for financial
reporting purposes $1,428,159 $1,679,820 $1,743,029
Depreciation for tax
reporting purposes in
excess of depreciation
for financial reporting
purposes (28,058) (26,980) (31,009)
Gain on disposition of
land and buildings for
financial reporting
purposes in excess of
gain for tax reporting
purposes (1,606) (69) -
Allowance for loss on
land and buildings 239,525 - -
Direct financing leases
recorded as operating
leases for tax reporting
purposes 46,387 42,180 38,532
Loss on termination of
direct financing leases - - 30,431
Equity in earnings of
unconsolidated joint
ventures for tax
reporting purposes less
than equity in earnings
of unconsolidated joint
ventures for financial
reporting purposes (1,900) (2,926) (3,954)
Allowance for doubtful
accounts 33,254 (150,480) 35,321
Accrued rental income (27,875) (30,484) (64,929)
Rents paid in advance (17,632) 9,505 (870)
Minority interest in
timing differences of
consolidated joint
venture (343) (370) (370)
---------- ---------- ----------
Net income for federal
income tax purposes $1,669,911 $1,520,196 $1,746,181
========== ========== ==========
29
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1996, 1995 and 1994
9. 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, 1996, 1995 and 1994, 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, 1996, 1995 and 1994, 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 an annual, noncumulative,
subordinated 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 will be
incurred and will be payable only after the limited partners receive
their 10% Preferred Return. Due to the fact that these fees are
noncumulative, if the limited partners do not receive their 10%
Preferred Return in any particular year, no management fees will be due
or payable for such year. As a result of such threshold, no management
fees were incurred during the years ended December 1996, 1995 and 1994.
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. 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
30
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1996, 1995 and 1994
9. Related Party Transactions - Continued:
aggregate 10% Preferred Return, plus their adjusted capital
contributions. During the year ended December 31, 1996, the
Partnership incurred a deferred, subordinated real estate disposition
fee of $34,500 as the result of the sale of the Property in St. Cloud,
Florida. No deferred, subordinated real estate disposition fees were
incurred for the years ended December 31, 1995 and 1994.
During the years ended December 31, 1996, 1995 and 1994, the Affiliates
provided accounting and administrative services to the Partnership on a
day-to-day basis. The Partnership incurred $83,563, $83,882 and $47,314
for the years ended December 31, 1996, 1995 and 1994, respectively, for
such services.
The due to related parties consisted of the following at December 31:
1996 1995
-------- --------
Due to Affiliates:
Expenditures incurred on
behalf of the Partnership $ 78,407 $ 36,618
Accounting and administrative
services 43,057 24,901
Deferred, subordinated real
estate disposition fee 34,500 -
-------- --------
$155,964 $ 61,519
======== ========
10. Concentration of Credit Risk:
For the years ended December 31, 1996, 1995 and 1994, total rental and
earned income from Shoney's, Inc. was $241,119, $247,353 and $248,176,
respectively, 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).
In addition, the following schedule presents total rental and earned
income (including mortgage interest income) from individual restaurant
chains, each representing more than ten percent of the Partnership's
total rental and earned income
31
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1996, 1995 and 1994
10. Concentration of Credit Risk - Continued:
and mortgage interest 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:
1996 1995 1994
-------- -------- --------
Denny's $310,021 $314,057 $307,596
Wendy's Old Fashioned
Hamburger Restaurant 293,817 278,127 280,075
Perkins 163,875 226,898 278,754
Hardees 144,991 183,123 237,671
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 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.
11. Subsequent Event:
In January 1997, the Partnership sold its property in Franklin,
Tennessee, for $980,000 and received net sales proceeds of $960,741,
resulting in a loss of approximately $169,463 for financial reporting
purposes which the Partnership recorded at December 31, 1996 (See Note
3).
32
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 Fund Advisors, Inc., CNL Group, Inc. and their
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 50, is a principal stockholder of CNL Group,
Inc., a diversified real estate company, and has served as its Chairman of the
Board of Directors, director and Chief Executive Officer since its formation
in 1980. 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 is Chief Executive Officer, and 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
Chief Executive Officer and Chairman of the Board of CNL Investment Company,
and Chief Executive Officer and Chairman of the Board of Commercial Net Lease
Realty, Inc. since 1992, has served as the Chairman of the Board and the 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. In addition, Mr.
Seneff has served as Chairman of the Board and Chief Executive Officer of CNL
American Properties Fund, Inc. since 1994, and has served as Chairman of the
Board and Chief Executive Officer of CNL American Realty Fund, Inc. since 1996
and of CNL Real Estate Advisors, Inc. since January 1997. Mr. Seneff
previously served on the Florida State Commission on Ethics and is a former
member and past Chairman of the State of 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 over 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 real estate ventures are approximately 65
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 IV, 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.
33
Robert A. Bourne, age 49, 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 since February 1996, as Vice Chairman of
the Board of Directors, Secretary and Treasurer 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, as Secretary from
February 1996 to July 1996, and since February 1996, as Treasurer and Vice
Chairman of CNL Realty Advisors, Inc. In addition, Mr. Bourne has served as
President and a director of CNL American Properties Fund, Inc. since 1994, and
has served as President and a director of CNL American Realty Fund, Inc. since
1996 and of CNL Real Estate Advisors, Inc. since January 1997. 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 over 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 real estate ventures are approximately 64
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 the CNL
Income Fund Partnerships.
CNL Fund Advisors, Inc., provides certain management services in
connection with the Partnership and its Properties. CNL Fund Advisors, Inc.
is a corporation organized in 1994 under the laws of the State of Florida, and
its principal office 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 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 seven 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 38, 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. and serves as Executive
Vice President of CNL American Realty Fund, Inc. and CNL Real Estate Advisors,
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 cable
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
34
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 48, a certified public accountant, has served as Chief
Financial Officer of CNL Group, Inc. since December 1993, has served as
Secretary of CNL Group, Inc. since 1987, and served as Controller of CNL
Group, Inc. from 1987 until December 1993. In addition, Ms. Rose has served
as Chief Financial Officer and Secretary of CNL Securities Corp. since July
1994. She has served as Chief Operating Officer, Vice President and Secretary
of CNL Corporate Services, Inc. since November 1994. Ms. Rose also has served
as Chief Financial Officer and Secretary of CNL Institutional Advisors, Inc.
since its inception in 1990, a director of CNL Realty Advisors, Inc. since its
inception in 1991, Secretary of CNL Realty Advisors, Inc. since its inception
in 1991 (excluding February 1996 to July 1996), 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 a
director, Secretary and Treasurer of CNL Fund Advisors, Inc. since 1994 and
has served as a director, Secretary and Treasurer of CNL Real Estate Advisors,
Inc. since January 1997. Ms. Rose also has served as Secretary and Treasurer
of CNL American Properties Fund, Inc. since 1994, and has served as Secretary
and Treasurer of CNL American Realty Fund, Inc. since 1996. Ms. Rose also
currently serves as Secretary for approximately 50 additional corporations.
Ms. Rose oversees the management information services, administration, legal
compliance, accounting, tenant compliance, and reporting for over 250
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 38, 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 and sales 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 1994, and as
Executive Vice President of CNL American Properties Fund, Inc. since 1994. In
addition, Ms. Wall has served as Executive Vice President of CNL Real Estate
Advisors, Inc. since January 1997 and as Executive Vice President of CNL
American Realty Fund, Inc. since 1996. 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).
Steven D. Shackelford, age 33, has served as Chief Financial Officer of
CNL Fund Advisors, Inc. since September 1996. Mr. Shackelford joined CNL
Group, Inc. in September 1996. He also currently serves as the Chief
Financial Officer of CNL American Properties Fund, Inc. From March 1995 to
July 1996, he was a senior manager in the national office of Price Waterhouse
where he was responsible for advising foreign clients seeking to raise capital
and a public listing in the United States. From August 1992 to March 1995, he
served as a manager in the Price Waterhouse, Paris, France office serving
several multinational clients. Mr. Shackelford was an audit staff and senior
from 1986 to 1992 in the Orlando, Florida office of Price Waterhouse. Mr
Shackelford received a B.A. in Accounting, with honors, and a Masters of
Business Administration from Florida State University and is a certified
public accountant.
35
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 28, 1997, 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 28, 1997, 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.
36
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, 1996, exclusive of any distributions to which the General
Partners or their affiliates may be entitled by reason of their purchase and
ownership of Units.
Amount Incurred
Type of Compensation For the Year
and Recipient Method of Computation Ended December 31, 1996
-------------------- --------------------- -----------------------
Reimbursement to Operating expenses are Operating expenses
affiliates for reimbursed at the lower incurred on behalf of
operating expenses of cost or 90 percent of the Partnership:
the prevailing rate at $113,560
which comparable services
could have been obtained Accounting and
in the same geographic administrative
area. Affiliates of the services: $83,563
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 of $ - 0 -
management fee to gross operating revenues
affiliates 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. Due to the
fact that these fees are
noncumulative, if the
Limited Partners do not
receive their 10%
Preferred Return in any
particular year, no
management fees will be
due or payable for such
year.
Deferred, subordinated A deferred, subordinated $34,500
real estate disposition real estate disposition
fee payable to fee, 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
37
Amount Incurred
Type of Compensation For the Year
and Recipient Method of Computation Ended December 31, 1996
-------------------- --------------------- -----------------------
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.
However, if the net sales
proceeds are reinvested
in a replacement
property, no such real
estate disposition fee
will be incurred until
such replacement property
is sold and the net sales
proceeds are distributed.
General Partners' A deferred, subordinated $ - 0 -
deferred, subordinated share equal to one
share of Partnership percent of Partnership
net cash flow distributions of net cash
flow, subordinated to
certain minimum returns
to the Limited Partners.
General Partners' A deferred, subordinated $ - 0 -
deferred, subordinated share equal to five
share of Partnership percent of Partnership
net sales proceeds from distributions of such net
a sale or sales sales proceeds,
subordinated to certain
minimum returns to the
Limited Partners.
38
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, 1996 and 1995
Statements of Income for the years ended December 31, 1996, 1995
and 1994
Statements of Partners' Capital for the years ended December 31,
1996, 1995 and 1994
Statements of Cash Flows for the years ended December 31, 1996,
1995 and 1994
Notes to Financial Statements
2. Financial Statement Schedules
Schedule III - Real Estate and Accumulated Depreciation at
December 31, 1996
Notes to Schedule III - Real Estate and Accumulated Depreciation
at December 31, 1996
Schedule IV - Mortgage Loans on Real Estate at December 31, 1996
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 Amended and Restated Affidavit and Certificate of Limited
Partnership of CNL Income Fund V, Ltd. (Included as Exhibit 3.1 to
Form 10-K filed with the Securities and Exchange Commission on
March 31, 1994, and incorporated herein by reference.)
4.1 Amended and Restated Affidavit and Certificate of Limited
Partnership of CNL Income Fund V, Ltd. (Included as Exhibit 3.1 to
Form 10-K filed with the Securities and Exchange Commission on
March 31, 1994, and incorporated herein by reference.)
4.2 Amended and Restated Certificate and Agreement of Limited
Partnership of CNL Income Fund V, Ltd. (Included as Exhibit 4.2
to Form 10-K filed with the Securities and Exchange Commission on
March 31, 1994, and incorporated herein by reference.)
10.1 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 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 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.)
39
(b) The Registrant filed no reports on Form 8-K during the period from
October 1, 1996 through December 31, 1996.
40
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 26th day
of March, 1997.
CNL INCOME FUND V, 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 26, 1997
- ------------------------ Director (Principal
Robert A. Bourne Financial and
Accounting Officer)
/s/ James M. Seneff, Jr. Chief Executive Officer March 26 , 1997
- ------------------------ and Director (Principal
James M. Seneff, Jr. Executive Officer)
<TABLE>
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
Years Ended December 31, 1996, 1995 and 1994
<CAPTION>
Additions Deductions
--------------------- ---------------------
Collected
Charged or Deter-
Balance at to Costs Charged Deemed mined to Balance
Beginning and to Other Uncollec- be Col- at End
Year Description of Year Expenses Accounts tible lectible of Year
- ---- ----------- ---------- -------- ----------- ----------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
1994 Allowance for
doubtful
accounts (a) $275,492 $ 4,788 $150,184(b) $ - $ - $430,464
======== ======= ======== ======== ======= ========
1995 Allowance for
doubtful
accounts (a) $430,464 $ - $ 19,561(b) $445,535(c) $ - $ 4,490
======== ======= ======== ======== ======= ========
1996 Allowance for
doubtful
accounts (a) $ 4,490 $ - $ 46,493(b) $ 5,846(c) $ 7,394 $ 37,743
======== ======= ======== ======== ======= ========
(a) Deducted from receivables on the balance sheet.
(b) Reduction of rental and other income.
(c) Amounts written off as uncollectible.
F-1
</TABLE>
<TABLE>
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1996
<CAPTION>
Costs Capitalized
Subsequent
Initial Cost To Acquisition
----------------------- -------------------
Buildings
Encum- and Improve- Carrying
brances Land Improvements ments Costs
------- ---------- ------------ ---------- --------
<S> <C> <C> <C> <C> <C>
Properties the Partnership
has Invested in Under
Operating Leases:
Burger King Restaurant:
Lawrenceville, Georgia - $ 482,070 $ - $ 368,416 $ -
Captain D's Restaurant:
Belleville, Illinois - 186,050 383,781 - -
Denny's Restaurant:
New Castle, Indiana - 117,394 471,340 - -
Port Orange, Florida - 530,689 506,630 53,247 -
Golden Corral Family
Steakhouse Restaurants:
Livingston, Texas - 156,382 429,107 - -
Victoria, Texas - 504,787 742,216 - -
Hardee's Restaurants:
Richmond, Indiana - 267,763 - 474,121 -
Belding, Michigan - 113,884 564,805 - -
Connorsville, Indiana - 279,665 - 466,137 -
South Haven, Michigan - 120,847 599,339 - -
KFC Restaurant:
Salem, New Hampshire - 654,024 - 511,053 -
Perkins Restaurants:
Port St. Lucie, Florida - 586,159 - 674,446 -
Pizza Hut Restaurant:
Mexia, Texas - 237,944 200,501 - -
Shoney's Restaurant:
Tyler, Texas - 312,404 533,990 - -
Taco Bell Restaurants:
Bountiful, Utah - 330,164 - 319,511 -
Centralia, Washington - 215,302 - 378,836 -
<CAPTION>
Life
Gross Amount at Which Carried on Which
at Close of Period (c) Depreciation
------------------------------------- in Latest
Buildings Date Income
and Accumulated of Con- Date Statement is
Land Improvements Total Depreciation struction Acquired Computed
---------- ------------ ----------- ------------ --------- -------- ------------
<C> <C> <C> <C> <C> <C> <C>
$ 482,070 $ 368,416 $ 850,486 $ 92,104 1989 04/89 (b)
186,050 383,781 569,831 99,677 1988 03/89 (b)
117,394 471,340 588,734 56,354 1989 02/89 (g)
530,689 559,877 1,090,566 137,931 1989 07/89 (b)
156,382 429,107 585,489 104,891 1986 09/89 (b)
504,787 742,216 1,247,003 174,035 1989 12/89 (b)
267,763 474,121 741,884 121,823 1989 02/89 (b)
113,884 564,805 678,689 65,632 1989 03/89 (h)
279,665 466,137 745,802 115,301 1989 03/89 (b)
120,847 599,339 720,186 69,644 1989 03/89 (h)
654,024 511,053 1,165,077 117,826 1990 05/89 (b)
586,159 674,446 1,260,605 152,687 1990 11/89 (b)
237,944 200,501 438,445 51,796 1985 03/89 (b)
312,404 533,990 846,394 137,948 1988 03/89 (b)
330,164 319,511 649,675 78,547 1989 05/89 (b)
215,302 378,836 594,138 89,448 1989 08/89 (b)
F-2
</TABLE>
<TABLE>
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION - CONTINUED
December 31, 1996
<CAPTION>
Costs Capitalized
Subsequent
Initial Cost To Acquisition
----------------------- -------------------
Buildings
Encum- and Improve- Carrying
brances Land Improvements ments Costs
------- ---------- ------------ ---------- --------
<S> <C> <C> <C> <C> <C>
Wendy's Old Fashioned
Hamburger Restaurants:
Tampa, Florida - 336,218 462,400 - -
Tampa, Florida - 290,479 430,134 - -
Endicott, New York - 277,965 243,839 - -
Ithaca, New York - 310,462 208,618 - -
Other:
Lebanon, New Hampshire (e) - 448,724 - 696,741 -
Franklin, Tennessee (f) - 524,694 - 712,700 -
---------- ---------- ---------- --------
$7,284,070 $5,776,700 $4,655,208 $ -
========== ========== ========== ========
Property of Joint Venture
in Which the Partnership
has a 43% Interest and has
Invested in Under an
Operating Lease:
Waffle House Restaurant:
Cocoa, Florida - $ 183,229 $ 192,857 $ - $ -
========== ========== ========== ========
Property of Joint Venture
in Which the Partnership
has a 49% Interest and
has Invested in Under
an Operating Lease:
Burger King Restaurant:
Knoxville, Tennessee - $ 283,961 $ 430,406 $ - $ -
========== ========== ========== ========
Properties the Partnership
has Invested in Under
Direct Financing Leases:
Captain D's Restaurant:
Zanesville, Ohio - $ 99,651 $ 390,518 $ - $ -
Denny's Restaurants:
Dalesville, Indiana - 125,562 458,914 - -
Huron, Ohio - 27,418 456,139 - -
Shoney's Restaurant:
Smyrna, Tennessee - 129,757 480,003 - -
---------- ---------- ---------- --------
$ 382,388 $1,785,574 $ - $ -
========== ========== ========== ========
<CAPTION>
Life
Gross Amount at Which Carried on Which
at Close of Period (c) Depreciation
------------------------------------- in Latest
Buildings Date Income
and Accumulated of Con- Date Statement is
Land Improvements Total Depreciation struction Acquired Computed
---------- ------------ ----------- ------------ --------- -------- ------------
<C> <C> <C> <C> <C> <C> <C>
336,218 462,400 798,618 120,738 1987 02/89 (b)
290,479 430,134 720,613 112,910 1980 02/89 (b)
277,965 243,839 521,804 57,572 1976 12/89 (b)
310,462 208,618 519,080 49,256 1977 12/89 (b)
448,724 696,741 1,145,465 173,218 1989 03/89 (b)
524,694 712,700 1,237,394 167,036 1989 06/89 (b)
---------- ----------- ----------- ----------
$7,284,070 $10,431,908 $17,715,978 $2,346,374
========== =========== =========== ==========
$ 183,229 $ 192,857 $ 376,086 $ 45,053 1986 12/89 (b)
========== =========== =========== ==========
$ 283,961 $ 430,406 $ 714,367 $ 98,994 1985 01/90 (b)
========== =========== =========== ==========
(d) (d) (d) (d) 1988 03/89 (d)
(d) (d) (d) (d) 1974 02/89 (d)
(d) (d) (d) (d) 1971 05/89 (d)
(d) (d) (d) (d) 1988 03/89 (d)
F-3
</TABLE>
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1996
(a) Transactions in real estate and accumulated depreciation during 1996,
1995 and 1994, are summarized as follows:
Accumulated
Cost (i) Depreciation
----------- ------------
Properties the Partnership has
Invested in Under Operating
Leases:
Balance, December 31, 1993 $17,820,609 $1,470,080
Reclassified from direct
financing leases 1,987,609 -
Depreciation expense - 402,980
----------- ----------
Balance, December 31, 1994 19,808,218 1,873,060
Depreciation expense - 397,735
Dispositions (1,039,130) (142,342)
----------- ----------
Balance, December 31, 1995 18,769,088 2,128,453
Disposition (1,053,110) (158,845)
Depreciation expense - 376,766
----------- ----------
Balance, December 31, 1996 $17,715,978 $2,346,374
=========== ==========
Property of Joint Venture in
Which the Partnership has a
43% Interest and has Invested
in Under an Operating Lease:
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
Depreciation expense - 6,429
----------- ----------
Balance, December 31, 1996 $ 376,086 $ 45,053
=========== ==========
Property of Joint Venture in
Which the Partnership has a
49% Interest and has Invested
in Under an Operating Lease:
Balance, December 31, 1993 $ 714,367 $ 55,953
Depreciation expense - 14,347
----------- ----------
Balance, December 31, 1994 714,367 70,300
Depreciation expense - 14,347
----------- ----------
Balance, December 31, 1995 714,367 84,647
Depreciation expense - 14,347
----------- ----------
Balance, December 31, 1996 $ 714,367 $ 98,994
=========== ==========
F-4
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED
DEPRECIATION - CONTINUED
December 31, 1996
(b) Depreciation expense is computed for buildings and improvements based
upon estimated lives of 30 years.
(c) As of December 31, 1996, the aggregate cost of the Properties owned by
the Partnership and its consolidated joint venture, and the
unconsolidated joint ventures for federal income tax purposes was
$19,503,382 and $1,090,453, respectively. All of the leases are treated
as operating leases for federal income tax purposes.
(d) 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 net investment in direct financing leases,
therefore, the cost is not shown. Depreciation is not applicable.
(e) The restaurant on the property in Lebanon, New Hampshire, was converted
from a Ponderosa Steakhouse restaurant to a local, independent
restaurant in 1992.
(f) The restaurant on the property in Franklin, Tennessee, was converted
from a Po Folks restaurant to a local bank in 1993.
(g) 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 its remaining estimated life of
approximately 25 years.
(h) Effective February 1, 1994, the lease for this property was terminated,
resulting in the lease's reclassification as an operating lease.
(i) For financial reporting purposes, the undepreciated cost of the
Properties in Franklin, Tennessee, and Rochester, Indiana, was written
down to net realizable value due to an anticipated impairment in value.
The Partnership recognized the impairment by recording an allowance for
loss on land and building in the amount of $109,264 and $70,062, for the
Properties in Franklin, Tennessee, and Rochester, Indiana, respectively,
at December 31, 1996. The impairment at December 31, 1996, on the
Franklin, Tennessee Property, is based on the sales proceeds received
from the tenant in January 1997. The impairment at December 31, 1996,
on the Richmond, Indiana Property, is based on an anticipated sales
price of this Property to the tenant. The cost of the Properties
presented on this schedule is the gross amount at which the Properties
were carried at December 31, 1996, excluding the allowance for loss on
land and buildings.
F-5
<TABLE>
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
SCHEDULE IV - MORTGAGE LOANS ON REAL ESTATE
December 31, 1996
<CAPTION>
Principal
Amount
of Loan
Carrying Subject to
Final Periodic Face Amount of Delinquent
Interest Maturity Payment Prior Amount of Mortgage Principal
Description Rate Date Terms Liens Mortgage (1) or Interest
- -------------------------- -------- ------------ -------- ----- ---------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Perkins - Myrtle Beach, FL
First Mortgage 10.25% July 2000 (2) $ - $1,040,000 $ 889,891 $ -
Ponderosa - St. Cloud, FL
First Mortgage 10.75% October 2011 (3) - 1,057,299 882,967 -
----- ---------- ---------- -----------
Total $ - $2,097,299 $1,772,858(4) $ -
===== ========== ========== ===========
</TABLE>
(1) The tax carrying value of the notes are $1,767,448, which are net of
deferred gains of $311,729.
(2) Monthly payments of principal and interest at an annual rate of 10.25%,
with a balloon payment at maturity of $1,006,004.
(3) Twelve monthly payments of interest only and 168 equal monthly payments
of principal and interest at an annual rate of 10.75%.
(4) The changes in the carrying amounts are summarized as follows:
1996 1995 1994
---------- ---------- ----------
Balance at beginning of
period $ 895,736 $ - $ -
New mortgage loan 1,057,299 1,040,000 -
Accrued interest 9,414 8,786 -
Collections of principal (6,713) (11,409) -
Deferred gain on sale
of land and building (182,878) (141,641) -
---------- ---------- ----------
Balance at end of period $1,772,858 $ 895,736 $ -
========== ========== ==========
F-6
EXHIBITS
EXHIBIT INDEX
Exhibit Number Page
3.1 Amended and Restated Affidavit and Certificate of Limited
Partnership of CNL Income Fund V, Ltd. (Included as
Exhibit 3.1 to Form 10-K filed with the Securities and
Exchange Commission on March 31, 1994, and incorporated
herein by reference.)
4.1 Amended and Restated Affidavit and Certificate of Limited
Partnership of CNL Income Fund V, Ltd. (Included as
Exhibit 3.1 to Form 10-K filed with the Securities and
Exchange Commission on March 31, 1994, and incorporated
herein by reference.)
4.2 Amended and Restated Certificate and Agreement of Limited
Partnership of CNL Income Fund V, Ltd. (Included as
Exhibit 4.2 to Form 10-K filed with the Securities and
Exchange Commission on March 31, 1994, and incorporated
herein by reference.)
10.1 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 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 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.)
i
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the balance
sheet of CNL Income Fund V, Ltd. at December 31, 1996, 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 V, Ltd. for the year ended December 31, 1996.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 362,922
<SECURITIES> 0
<RECEIVABLES> 95,677
<ALLOWANCES> 37,743
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 17,536,652
<DEPRECIATION> 2,346,374
<TOTAL-ASSETS> 20,133,002
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 18,982,619
<TOTAL-LIABILITY-AND-EQUITY> 20,133,002
<SALES> 0
<TOTAL-REVENUES> 2,209,544
<CGS> 0
<TOTAL-COSTS> 631,565
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,428,159
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,428,159
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,428,159
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>Due to the nature of its industry, CNL Income Fund V, Ltd. has an
unclassified balance sheet; therefore, no values are shown for current assets
and current liabilities.
</FN>
</TABLE>
