FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number
0-19141
CNL Income Fund V, Ltd.
(Exact name of registrant as specified in its charter)
Florida 59-2922869
(State or other jurisdiction (I.R.S. Employer
of incorporation or organiza- Identification No.)
tion)
400 E. South Street
Orlando, Florida 32801
- ---------------------------- -----------------
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number
(including area code) (407) 422-1574
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Sections 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes X No
<PAGE>
CONTENTS
Part I Page
Item 1. Financial Statements:
Condensed Balance Sheets 1
Condensed Statements of Income 2
Condensed Statements of Partners' Capital 3
Condensed Statements of Cash Flows 4
Notes to Condensed Financial Statements 5-9
Item 2. Management's Discussion and Analysis
of Financial Condition and
Results of Operations 10-15
Part II
Other Information 16
<PAGE>
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
CONDENSED BALANCE SHEETS
June 30, December 31,
ASSETS 1998 1997
----------- -----------
Land and buildings on operating
leases less accumulated
depreciation and allowance for
loss on land and building $10,517,431 $12,421,143
Net investment in direct financing
leases 2,253,064 2,277,481
Investment in joint ventures 1,967,263 1,558,709
Mortgage notes receivable, less
deferred gain of $321,374
and $323,157 1,746,486 1,758,167
Cash and cash equivalents 834,459 1,361,290
Receivables, less allowance for
doubtful accounts of $169,214
and $137,892 61,118 108,261
Prepaid expenses 10,450 9,307
Accrued rental income 204,015 169,726
Other assets 54,346 54,346
----------- -----------
$17,648,632 $19,718,430
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 1,381 $ 24,229
Accrued construction costs payable - 125,000
Accrued real estate taxes payable 6,884 93,392
Distributions payable 500,000 575,000
Due to related parties 219,747 143,867
Rents paid in advance 24,037 13,479
----------- -----------
Total liabilities 752,049 974,967
Minority interest 213,479 222,929
Partners' capital 16,683,104 18,520,534
----------- -----------
$17,648,632 $19,718,430
=========== ===========
See accompanying notes to condensed financial statements.
1
<PAGE>
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
June 30, June 30,
1998 1997 1998 1997
--------- --------- ---------- -------
<S> <C>
Revenues:
Rental income from
operating leases $ 285,286 $ 341,272 $ 611,506 $ 750,651
Earned income from direct
financing leases 42,802 38,995 102,343 84,467
Interest and other income 72,498 67,234 164,856 134,151
--------- --------- ---------- ----------
400,586 447,501 878,705 969,269
--------- --------- ---------- ----------
Expenses:
General operating and
administrative 38,763 38,406 77,317 76,549
Bad debt expense 5,882 9,007 5,882 9,007
Professional services 6,061 7,515 10,079 12,829
Real estate taxes 9,756 2,311 16,420 21,522
State and other taxes 1,911 168 9,658 11,897
Depreciation 62,771 83,225 129,977 166,800
--------- --------- ---------- ----------
125,144 140,632 249,333 298,604
--------- --------- ---------- ----------
Income Before Minority
Interest in Loss of Con-
solidated Joint Venture,
Equity in Earnings of
Unconsolidated Joint
Ventures, Gain on Sale of
Land and Buildings and
Provision for Loss on Land
and Building 275,442 306,869 629,372 670,665
Minority Interest in Loss of
Consolidated Joint Venture 4,033 4,582 9,450 10,032
Equity in Earnings of Uncon-
solidated Joint Ventures 36,882 11,382 72,103 22,405
Gain on Sale of Land and
Buildings 992 102,248 442,605 102,494
Provision for Loss on Land
and Building (152,633) (142,990) (152,633) (142,990)
--------- --------- ---------- ----------
Net Income $ 164,716 $ 282,091 $1,000,897 $ 662,606
========= ========= ========== ==========
Allocation of Net Income:
General partners $ (734) $ 683 $ 6,355 $ 4,488
Limited partners 165,450 281,408 994,542 658,118
--------- --------- ---------- ----------
$ 164,716 $ 282,091 $1,000,897 $ 662,606
========= ========= ========== ==========
Net Income Per Limited
Partner Unit $ 3.31 $ 5.63 $ 19.89 $ 13.16
========= ========= ========== ==========
Weighted Average Number
of Limited Partner Units
Outstanding 50,000 50,000 50,000 50,000
========= ========= ========== ==========
</TABLE>
See accompanying notes to condensed financial statements.
2
<PAGE>
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF PARTNERS' CAPITAL
Six Months Ended Year Ended
June 30, December 31,
1998 1997
---------------- -----------
General partners:
Beginning balance $ 493,982 $ 376,173
Contributions - 106,000
Net income 6,355 11,809
----------- -----------
500,337 493,982
----------- -----------
Limited partners:
Beginning balance 18,026,552 18,606,446
Net income 994,542 1,720,106
Distributions ($56.77 and
$46.00 per limited partner
unit, respectively) (2,838,327) (2,300,000)
----------- -----------
16,182,767 18,026,552
----------- -----------
Total partners' capital $16,683,104 $18,520,534
=========== ===========
See accompanying notes to condensed financial statements.
3
<PAGE>
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF CASH FLOWS
Six Months Ended
June 30,
1998 1997
----------- -------
Increase (Decrease) in Cash and
Cash Equivalents:
Net Cash Provided by Operating
Activities $ 812,900 $ 871,846
----------- -----------
Cash Flows from Investing
Activities:
Proceeds from sale of land and
buildings 2,125,220 1,595,051
Additions to land and building
on operating lease (125,000) -
Investment in joint venture (437,308) -
Collections on mortgage notes
receivable 10,684 3,622
----------- -----------
Net cash provided by
investing activities 1,573,596 1,598,673
----------- -----------
Cash Flows from Financing
Activities:
Distributions to limited
partners (2,913,327) (1,150,000)
----------- -----------
Net cash used in
financing activities (2,913,327) (1,150,000)
----------- -----------
Net Increase (Decrease) in Cash and
Cash Equivalents (526,831) 1,320,519
Cash and Cash Equivalents at
Beginning of Period 1,361,290 362,922
----------- -----------
Cash and Cash Equivalents at End of
Period $ 834,459 $ 1,683,441
=========== ===========
Supplemental Schedule of Non-Cash
Investing and Financing Activities:
Deferred real estate disposition
fees incurred and unpaid at
end of period $ 65,400 $ -
=========== ==========
Distributions declared and unpaid
at end of period $ 500,000 $ 575,000
=========== ===========
See accompanying notes to condensed financial statements.
4
<PAGE>
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS
Quarters and Six Months Ended June 30, 1998 and 1997
1. Basis of Presentation:
The accompanying unaudited condensed financial statements have been
prepared in accordance with the instructions to Form 10-Q and do not
include all of the information and note disclosures required by
generally accepted accounting principles. The financial statements
reflect all adjustments, consisting of normal recurring adjustments,
which are, in the opinion of management, necessary to a fair statement
of the results for the interim periods presented. Operating results for
the quarter and six months ended June 30, 1998, may not be indicative
of the results that may be expected for the year ending December 31,
1998. Amounts as of December 31, 1997, included in the financial
statements, have been derived from audited financial statements as of
that date.
These unaudited financial statements should be read in conjunction with
the financial statements and notes thereto included in Form 10-K of CNL
Income Fund V, Ltd. (the "Partnership") for the year ended December 31,
1997.
The Partnership accounts for its 66.5% interest in CNL/Longacre Joint
Venture using the consolidation method. Minority interest represents
the minority joint venture partner's proportionate share of the equity
in the Partnership's consolidated joint venture. All significant
intercompany accounts and transactions have been eliminated.
Certain items in the prior year's financial statements have been
reclassified to conform to 1998 presentation. These reclassifications
had not effect on partners' capital or net income.
2. Land and Buildings on Operating Leases:
Land and buildings on operating leases consisted of the following at:
June 30, December 31,
1998 1997
Land $ 5,226,572 $ 6,069,665
Buildings 7,452,663 8,546,530
----------- -----------
12,679,235 14,616,195
Less accumulated
depreciation (1,758,477) (1,944,358)
----------- -----------
10,920,758 12,671,837
Less allowance for loss
on land and buildings ( 403,327) (250,694)
----------- -----------
$10,517,431 $12,421,143
=========== ===========
5
<PAGE>
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS - CONTINUED
Quarters and Six Months Ended June 30, 1998 and 1997
2. Land and Buildings on Operating Leases - Continued:
During the six months ended June 30, 1998, the Partnership sold its
properties in Port Orange, Florida, and Tyler, Texas to the tenants for
a total of $2,180,000 and received net sales proceeds of $2,125,220,
resulting in a total gain of $440,822 for financial reporting purposes.
These properties were originally acquired by the Partnership in 1988
and 1989 and had costs totalling approximately $1,791,300, excluding
acquisition fees and miscellaneous acquisition expenses; therefore, the
Partnership sold these properties for a total of approximately $333,900
in excess of their original purchase prices. In connection with the
sale of the properties, the Partnership incurred deferred,
subordinated, real estate disposition fees of $65,400 (see Note 5).
As of December 31, 1997, the Partnership had established an allowance
for loss on land and buildings of $250,694, for financial reporting
purposes, relating to the properties in Belding, Michigan and Lebanon,
New Hampshire. During the six months ended June 30, 1998, the
Partnership increased the allowance by $152,633 for the property in
Belding, Michigan. The allowances represent the difference between the
carrying values of the properties at June 30, 1998 and current
estimates of net realizable values for these properties.
3. Investment in Joint Ventures:
In May 1998, the Partnership reinvested the majority of the net sales
proceeds from the sale of the property in Tyler, Texas, in RTO Joint
Venture, with an affiliate of the Partnership which has the same
general partners, to construct and hold one restaurant property. As of
June 30, 1998, the Partnership and its co-venture partner had
contributed $437,308 and $386,096 respectively, to purchase land and
pay for construction relating to the joint venture. The Partnership and
its co-venture partner have agreed to contribute approximately $317,100
and $279,900, respectively, in additional construction costs to the
joint venture. When construction is completed, the Partnership expects
to have an approximate 53 percent interest in the profits and losses of
the joint venture. The Partnership accounts for its investment in this
joint venture under the equity method since the Partnership shares
control with an affiliate.
6
<PAGE>
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS - CONTINUED
Quarters and Six Months Ended June 30, 1998 and 1997
3. Investment in Joint Ventures - Continued:
The following presents the combined, condensed financial information
for all of the Partnership's joint ventures and properties held as
tenants-in-common at:
June 30, December 31,
1998 1997
Land and buildings on
operating leases, less
accumulated depreciation $5,051,963 $4,277,972
Cash 7,352 24,994
Receivables 3,930 4,417
Prepaid expenses 513 270
Accrued rental income 85,614 68,819
Liabilities 14,603 1,250
Partners' capital 5,134,769 4,375,222
Revenues 249,511 151,242
Net income 199,250 121,605
The Partnership recognized income totalling $72,103 and $22,405 for the
six months ended June 30, 1998 and 1997, respectively, from these joint
ventures, $36,882 and $11,382 of which was earned during the quarters
ended June 30, 1998 and 1997, respectively.
4. Allocations and Distributions:
Generally, all net income and net losses of the Partnership, excluding
gains and losses from the sale of properties, are allocated 99 percent
to the limited partners and one percent to the general partners.
Distributions of net cash flow are made 99 percent to the limited
partners and one percent to the general partners; provided, however,
that the one percent of net cash flow to be distributed to the general
partners is subordinated to receipt by the limited partners of an
aggregate, ten percent, 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.
7
<PAGE>
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS - CONTINUED
Quarters and Six Months Ended June 30, 1998 and 1997
4. 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 the six months ended June 30, 1998 and 1997, the Partnership
declared distributions to the limited partners of $2,838,327 and
$1,150,000, respectively, ($500,000 and $575,000 for the quarters ended
June 30, 1998 and 1997, respectively). This represents distributions
for the six months ended June 30, 1998 and 1997 of $56.77 and $23.00
per unit, respectively ($10.00 and $11.50 per unit for the quarters
ended June 30, 1998 and 1997, respectively). Distributions for the six
months ended June 30, 1998, include $1,838,327 as a result of the
distribution of net sales proceeds from the sale of the properties in
Tampa and Port Orange, Florida. This amount was applied toward the
limited partners' 10% Preferred Return. No distributions have been made
to the general partners to date.
5. Related Party Transactions:
An affiliate of the Partnership is entitled to receive a deferred,
subordinated real estate disposition fee, payable upon the sale of one
or more properties based on the lesser of one-half of a competitive
real estate commission or three percent of the sales price if the
affiliate provides a substantial amount of services in connection with
the sale. Payment of the real estate disposition fee is subordinated to
receipt by the limited partners of their aggregate 10% Preferred
Return, plus their adjusted capital contributions. For the six months
ended June 30, 1998, the Partnership incurred $65,400 in deferred,
subordinated, real estate disposition fees as a result of the sale of
properties (see Note 2). No deferred, subordinated, real estate
disposition fees were incurred for the six months ended June 30, 1997.
8
<PAGE>
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS - CONTINUED
Quarters and Six Months Ended June 30, 1998 and 1997
6. Concentration of Credit Risk:
The following schedule presents total rental and earned income from
individual lessees, each representing more than ten percent of the
Partnership's total rental, earned and interest income (including the
Partnership's share of total rental and earned income from joint
ventures and the properties held as tenants-in-common), for at least
one of the six months ended June 30:
1998 1997
-------- ------
Golden Corral Corporation $ 97,756 $97,756
Slaymaker Group, Inc. 92,735 -
Shoney's, Inc. 69,487 130,293
Tampa Foods, L.P. 47,339 89,601
London Development Corporation - 89,480
In addition, the following schedule presents total rental, earned and
interest income from individual restaurant chains, each representing
more than ten percent of the Partnership's total rental, earned income
and interest income from its properties (including the Partnership's
share of total rental and earned income from joint ventures and the
properties held as tenants-in-common) and mortgage notes for at least
one of the six months ended June 30:
1998 1997
-------- ------
Golden Corral Family
Steakhouse Restaurants $ 97,756 $ 97,756
Tony Roma's Famous for Ribs 92,735 -
Wendy's Old Fashioned
Hamburger Restaurants 86,336 129,597
Denny's 74,256 153,339
Perkins 25,961 89,480
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
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.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
CNL Income Fund V, Ltd. (the "Partnership") is a Florida limited
partnership that was organized on August 17, 1988, to acquire for cash, either
directly or through joint venture arrangements, both newly constructed and
existing restaurant properties, as well as land upon which restaurants were to
be constructed, which are leased primarily to operators of national and regional
fast-food and family-style restaurant chains (collectively, the "Properties").
The leases are generally triple-net leases, with the lessees responsible for all
repairs and maintenance, property taxes, insurance and utilities. As of June 30,
1998, the Partnership owned 25 Properties, including interests in four
Properties owned by joint ventures in which the Partnership is a co-venturer and
two Properties owned with affiliates as tenants-in-common.
Liquidity and Capital Resources
During the six months ended June 30, 1998 and 1997, the Partnership
generated cash from operations (which includes cash received from tenants,
distributions from joint ventures, and interest and other income received, less
cash paid for expenses) of $812,900 and $871,846, respectively. The decrease in
cash from operations for the six months ended June 30, 1998, is primarily a
result of changes in the Partnership's working capital.
Other sources and uses of capital included the following during the six
months ended June 30, 1998.
In July 1997, the Partnership entered into a new lease for the Property
in Connersville, Indiana, with a new tenant to operate the Property as an Arby's
restaurant. In connection therewith, during the six months ended June 30, 1998,
the Partnership paid $125,000 in renovation costs, which had been incurred and
accrued as construction costs payable at December 31, 1997.
During the six months ended June 30, 1998, the Partnership sold its
Properties in Port Orange, Florida, and Tyler, Texas to the tenants for a total
of $2,180,000 and received net sales proceeds of $2,125,220, resulting in a
total gain of $440,822 for financial reporting purposes. These Properties were
originally acquired by the Partnership in 1988 and 1989 and had costs totalling
approximately $1,791,300, excluding acquisition fees and miscellaneous
acquisition expenses; therefore, the Partnership sold the Properties for
approximately $333,900 in excess of their original purchase prices. In
connection with the sales, the Partnership incurred deferred, subordinated, real
estate disposition fees of $65,400. The Partnership distributed $1,838,327 of
the net sales proceeds from the 1997 and 1998 sales of the Properties in Tampa
and Port Orange, Florida, respectively, as a
10
<PAGE>
Liquidity and Capital Resources - Continued
special distribution to the limited partners. In addition, in May 1998, the
Partnership reinvested the remainder of the net sales proceeds from the sale of
the Property in Tyler, Texas in a joint venture arrangement as described below.
The Partnership anticipates that it will distribute amounts sufficient to enable
the limited partners to pay federal and state income taxes, if any (at a level
reasonably assumed by the general partners), resulting from the sale of the
Properties in Port Orange, Florida and Tyler, Texas. The Partnership will use
the remaining net sales proceeds to fund additional amounts to RTO Joint
Venture, as described below, and to meet the Partnership's working capital and
other needs.
As described above, in May 1998, the Partnership reinvested the
majority of the net sales proceeds from the sale of the Property in Tyler, Texas
in RTO Joint Venture, with an affiliate of the Partnership which has the same
general partners, to construct and hold one restaurant Property. As of June 30,
1998, the Partnership and its co-venture partner had contributed $437,308 and
$386,096, respectively, to purchase land and pay for construction relating to
the joint venture. The Partnership and its co-venture partner have agreed to
contribute approximately $317,100 and $279,900, respectively, in construction
costs to the joint venture. When construction is completed, the Partnership
expects to have an approximate 53 percent interest in the profits and losses of
the joint venture.
Currently, rental income from the Partnership's Properties is invested
in money market accounts 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 June 30, 1998, the Partnership had $834,459
invested in such short-term investments as compared to $1,361,290 at December
31, 1997. The decrease in cash and cash equivalents is primarily attributable to
the fact that the Partnership used amounts held at December 31, 1997 relating to
the net sales proceeds received from the 1997 sale of the Property in Tampa,
Florida, to make distributions to limited partners during the six months ended
June 30, 1998. The funds remaining at June 30, 1998, will be used to pay
distributions and other liabilities.
Total liabilities of the Partnership decreased to $752,049 at June 30,
1998, from $974,967 at December 31, 1997, partially due to a decrease in
construction costs payable as a result of the payment during the six months
ended June 30, 1998, of construction costs accrued at December 31, 1997, for
renovation costs relating to the Partnership's Property located in Connorsville,
Indiana, as described above. The decrease in liabilities is also partially
attributable to a decrease in distributions payable to the limited partners at
June 30, 1998 as compared to December 31, 1997. The general partners believe
that the Partnership has sufficient cash on hand to meet its current working
capital needs.
11
<PAGE>
Liquidity and Capital Resources - Continued
Based on current and anticipated future cash from operations, and for
the six months ended June 30, 1998, proceeds received from the sales of
Properties, the Partnership declared distributions to limited partners of
$2,838,327 and $1,150,000 for the six months ended June 30, 1998 and 1997,
respectively ($500,000 and $575,000 for the quarters ended June 30, 1998 and
1997, respectively). This represents distributions for the six months ended June
30, 1998 and 1997 of $56.77 and $23.00 per unit, respectively ($10.00 and $11.50
per unit for the quarters ended June 30, 1998 and 1997, respectively).
Distributions for the six months ended June 30, 1998, include $1,838,327 as a
result of the distribution of net sales proceeds from the sale of Properties, as
described above. This special distribution was effectively a return of a portion
of the limited partners' investment, although, in accordance with the
Partnership agreement, it was applied to the limited partners' unpaid preferred
return. As a result of the sale of the Properties, the Partnership's total
revenue was reduced, while the majority of the Partnership's operating expenses
remained fixed. Therefore, distributions of net cash flow were adjusted for the
quarter and six months ended June 30, 1998. No distributions were made to the
general partners for the quarters and six months ended June 30, 1998 and 1997.
No amounts distributed to the limited partners for the six months ended June 30,
1998 and 1997, are required to be or have been treated by the Partnership as a
return of capital for purposes of calculating the limited partners' return on
their adjusted capital contributions. The Partnership intends to continue to
make distributions of cash available for distribution to the limited partners on
a quarterly basis.
The Partnership's investment strategy of acquiring Properties for cash
and leasing them under triple-net leases to operators who generally meet
specified financial standards minimizes the Partnership's operating expenses.
The general partners believe that the leases will continue to generate cash flow
in excess of operating expenses.
The general partners have the right, but not the obligation, to make
additional capital contributions if they deem it appropriate in connection with
the operations of the Partnership.
Results of Operations
During the six months ended June 30, 1997, the Partnership and its
consolidated joint venture, CNL/Longacre Joint Venture, owned and leased 26
wholly owned Properties (including six Properties which were sold during 1997)
and during the six months ended June 30, 1998, the Partnership and CNL/Longacre
Joint Venture owned and leased 22 wholly owned Properties (including two
Properties sold in 1998) to operators of fast-food and family-style restaurant
chains. In connection therewith, during the six months ended June 30, 1998 and
1997, the Partnership and CNL/Longacre Joint Venture earned $713,849 and
$835,118, respectively, in rental income from operating leases and earned income
from direct financing leases,
12
<PAGE>
Results of Operations - Continued
$328,088 and $380,267 of which was earned during the quarters ended June 30,
1998 and 1997, respectively. Rental and earned income decreased approximately
$159,200 and $321,700 during the quarter and six months ended June 30, 1998,
respectively, as compared to the quarter and six months ended June 30, 1997, as
a result of the sales of Properties during 1997 and 1998.
The decrease in rental income was partially offset by an increase of
approximately $81,200 and $162,400 during the quarter and six months ended June
30, 1998, respectively, due to the reinvestment of a portion of net sales
proceeds from the 1997 sales of two Properties in Houston, Texas and Sandy,
Utah, in January 1998 and February 1998, respectively. The decrease in rental
income was also partially offset by an increase of approximately $33,000 and
$44,300 during the quarter and six months ended June 30, 1998, respectively due
to re-leasing the Property in Connorsville, Indiana to a new tenant with rent
commencing in November 1997. No rental income was recognized relating to this
Property during the six months ended June 30, 1997 due to financial difficulties
the former tenant was experiencing.
Rental and earned income during the six months ended June 30, 1998 and
1997, continued to remain at reduced amounts due to the fact that the
Partnership is not receiving any rental income relating to the Properties in
Belding, Michigan, and Lebanon, New Hampshire. The general partners are
currently seeking purchasers or replacement tenants for these Properties. Rental
and earned income are expected to remain at reduced amounts until such time as
the Partnership locates a purchaser for the Properties or executes new leases
for the Properties in Belding, Michigan and Lebanon, New Hampshire.
During the six months ended June 30, 1997, the Partnership owned and
leased two Properties indirectly through other joint venture arrangements.
During the six months ended June 30, 1998, the Partnership owned and leased two
Properties as tenants-in-common with affiliates of the general partners and
three Properties indirectly through joint venture arrangements. In connection
therewith, during the six months ended June 30, 1998 and 1997, the Partnership
earned $72,103 and $22,405, respectively, attributable to net income earned by
unconsolidated joint ventures in which the Partnership is a co-venturer, $36,882
and $11,382 of which were earned during the quarters ended June 30, 1998 and
1997, respectively. The increase in net income earned by these joint ventures
during the quarter and six months ended June 30, 1998, as compared to the
quarter and six months ended June 30, 1997, is primarily attributable to the
fact that subsequent to June 30, 1997, the Partnership reinvested a portion of
the net sales proceeds it received from the 1997 and 1998 sales of several
Properties in two Properties in Mesa, Arizona and Vancouver, Washington, with
affiliates of the general partners as tenants-in-common and acquired an interest
in RTO Joint Venture with an affiliate of the Partnership which has the same
general partners, as described above in "Liquidity and Capital Resources."
13
<PAGE>
Results of Operations - Continued
During at least one of the six months ended June 30, 1998 and 1997,
five lessees of the Partnership and its consolidated joint venture, Slaymaker
Group, Inc., Golden Corral Corporation, Shoney's, Inc., London Development
Corporation and Tampa Foods, L.P., each contributed more than ten percent of the
Partnership's total rental income (including rental income from the
Partnership's consolidated joint venture, the Partnership's share of the rental
income from three Properties owned by unconsolidated joint ventures in which the
Partnership is a co-venturer and two Properties owned with affiliates as
tenants-in-common). As of June 30, 1998, Slaymaker Group, Inc. was the lessee
under a lease relating to one restaurant, Golden Corral Corporation was the
lessee under the leases relating to two restaurants, Shoney's, Inc. was the
lessee under the leases relating to four restaurants, Tampa Foods, L.P. was the
lessee under the leases relating to two restaurants and London Development
Corporation was the lessee under the leases relating to one restaurant. It is
anticipated that based on the minimum rental payments required by the leases,
Slaymaker Group, Inc. and Golden Corral Corporation each will continue to
contribute more than ten percent of the Partnership's total rental income during
the remainder of 1998 and subsequent years. In addition, during at least one of
the six months ended June 30, 1998 and 1997, five restaurant chains, Wendy's Old
Fashioned Hamburger Restaurants ("Wendy's"), Golden Corral Family Steakhouse
Restaurants ("Golden Corral"), Denny's, Perkins and Tony Roma's Famous for Ribs
Restaurant ("Tony Roma's"), each accounted for more than ten percent of the
Partnership's total rental income. It is anticipated that, based on the minimum
rental payments required by the leases, Wendy's, Golden Corral and Tony Roma's
each will continue to contribute more than ten percent of the Partnership's
total rental income during the remainder of 1998 and subsequent years. Any
failure of these lessees or restaurant chains could materially affect the
Partnership's income.
Operating expenses, including depreciation expense, were $249,333 and
$298,604 for the six months ended June 30, 1998 and 1997, respectively, of which
$125,144 and $140,632 were incurred for the quarters ended June 30, 1998 and
1997, respectively. The decrease in operating expenses during the quarter and
six months ended June 30, 1998, as compared to the quarter and six months ended
June 30, 1997, was primarily attributable to a decrease in depreciation expense
due to the sales of several Properties during 1997 and 1998.
Due to the tenants defaulting during 1995 under the terms of their
lease agreements for the Property in Belding, Michigan, and the Property in
Lebanon, New Hampshire, the Partnership and its consolidated joint venture,
CNL/Longacre Joint Venture, expect to continue to incur operating expenses
relating to such Properties until the Properties are sold or leased to new
tenants.
14
<PAGE>
Results of Operations - Continued
As a result of the sale of the Properties in Myrtle Beach, South
Carolina and St. Cloud, Florida in August 1995 and October 1996, respectively,
and recording the gains from such sales using the installment method, the
Partnership recognized gains for financial reporting purposes of $1,783 and
$499, during the six months ended June 30, 1998 and 1997, respectively, $992 and
$253 of which were recognized during the quarters ended June 30, 1998 and 1997,
respectively.
As a result of the sales of two Properties during the six months ended
June 30, 1998, as described above in "Liquidity and Capital Resources," the
Partnership recognized total gains of $440,822 for financial reporting purposes.
As a result of the sale of one Property during the quarter and six months ended
June 30, 1997, the Partnership recognized a gain of $101,995 for financial
reporting purposes.
During the quarter and six months ended June 30, 1997, the Partnership
recorded an allowance for loss on land and building of $142,990 for financial
reporting purposes, relating to the Property in Richmond, Indiana. The loss
represented the difference between the Property's carrying value at June 30,
1997 and the estimated net realizable value based on the estimated sales price
of this Property. This Property was sold in November 1997. In addition, during
the quarter and six months ended June 30, 1998, the Partnership established an
allowance for loss on land and building of $152,633 for financial reporting
purposes relating to the Property in Belding, Michigan. The loss represents the
difference between the Property's carrying value at June 30, 1998 and the
current estimate of net realizable value at June 30, 1998.
15
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings. Inapplicable.
Item 2. Changes in Securities. Inapplicable.
Item 3. Defaults upon Senior Securities. Inapplicable.
Item 4. Submission of Matters to a Vote of Security Holders.
Inapplicable.
Item 5. Other Information. Inapplicable.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits - None.
(b) No reports on Form 8-K were filed during the quarter
ended June 30, 1998.
16
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
DATED this 4th day of August, 1998.
CNL INCOME FUND V, LTD.
By: CNL REALTY CORPORATION
General Partner
By: /s/ James M. Seneff, Jr.
----------------------------
JAMES M. SENEFF, JR.
Chief Executive Officer
(Principal Executive Officer)
By: /s/ Robert A. Bourne
-----------------------------
ROBERT A. BOURNE
President and Treasurer
(Principal Financial and
Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the balance
sheet of CNL Income Fund V, Ltd. at June 30, 1998, and its statement of income
for the six months then ended and is qualified in its entirety by reference to
the Form 10Q of CNL Income Fund V, Ltd. for the six months ended June 30, 1998.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 834,459
<SECURITIES> 0
<RECEIVABLES> 230,332
<ALLOWANCES> 169,214
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 12,275,908
<DEPRECIATION> 1,758,477
<TOTAL-ASSETS> 17,648,632
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 16,683,104
<TOTAL-LIABILITY-AND-EQUITY> 17,648,632
<SALES> 0
<TOTAL-REVENUES> 878,705
<CGS> 0
<TOTAL-COSTS> 243,451
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 5,882
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,000,897
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,000,897
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,000,897
<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 above for current
assets and current liabilities.
</FN>
</TABLE>
