<PAGE>
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, 1999
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)
450 South Orange Avenue
Orlando, Florida 32801
(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code: (407) 540-2000
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
<PAGE>
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, totaled
$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, 1996, the Partnership sold its
Property in St. Cloud, Florida, to the tenant of the Property and accepted in
cash and a promissory note for the Property. During the year ended December 31,
1997, the Partnership sold its Properties in Franklin and Smyrna, Tennessee;
Salem, New Hampshire; Port St. Lucie and Tampa, Florida and Richmond, Indiana.
The Partnership reinvested a portion of these net sales proceeds in a Property
in Houston, Texas and a Property in Sandy, Utah. In addition, the Partnership
reinvested a portion of the net sales proceeds in a Property in Mesa, Arizona
and a Property in Vancouver, Washington, as tenants-in-common, with affiliates
of the General Partners. During the year ended December 31 1998, the Partnership
also sold its Properties in Port Orange, Florida and Tyler, Texas. The
Partnership used a portion of the sales proceeds to enter into a joint venture
arrangement, RTO Joint Venture, with an affiliate of the General Partners.
During the year ended December 31, 1999, the Partnership also sold its
Properties in Ithaca and Endicott, New York. The Partnership used the majority
of the net sales proceeds received from the sale of the Property in Ithaca, New
York to enter into a joint venture arrangement, Duluth Joint Venture, with
affiliates of the Partnership which have the same General Partners. In addition,
during 1999, Halls Joint Venture, in which the Partnership owns a 48.9%
interest, sold its Property. As a result of the above transactions, as of
December 31, 1999, the Partnership owned 23 Properties. The 23 Properties
include interests in four Properties owned by joint ventures in which the
Partnership is a co-venturer and two Properties owned with affiliates of the
General Partners as tenants-in-common. In addition, in March 2000, the
Partnership sold its Property in Belding, Michigan. Generally, the Properties
are leased on a triple-net basis with the lessees 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. 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.
On March 11, 1999, the Partnership entered into an Agreement and Plan of
Merger with CNL American Properties Fund, Inc. ("APF"), pursuant to which the
Partnership would be merged with and into a subsidiary of APF (the "Termination
of Merger"). APF is a real estate investment trust whose primary business is the
ownership of restaurant properties leased on a long-term, "triple-net" basis to
operators of national and regional restaurant chains. Under the Agreement and
Plan of Merger, APF was to issue shares of its common stock as consideration for
the Merger. On March 1, 2000, the General Partners and APF announced that they
had mutually agreed to terminate the Agreement and Plan of Merger. The agreement
to terminate the Agreement and Plan of Merger was based, in large part, on the
General Partners' concern that, in light of market conditions relating to
publicly traded real estate investment trusts, the value of the transaction had
diminished. As a result of such diminishment, the General Partners' ability to
unequivocally recommend voting for the transaction, in the exercise of their
fiduciary duties, had become questionable.
1
<PAGE>
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 12 to 20 years (the average being 19 years) and expire
between 2002 and 2019. All leases are generally on a triple-net basis, with the
lessees 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
$42,000 to $222,800. 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 (i) the percentage
rent calculated under the lease formula or (ii) a specified percentage (ranging
from one-fourth to five percent) of the purchase price paid by the Partnership
for the Property.
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.
Lessees of 19 of the Partnership's 23 Properties also have been granted options
to purchase Properties at the Property's then fair market value, or pursuant to
a formula based on the original cost of the Property, after a specified portion
of the lease term has elapsed. Fair market value will be determined through an
appraisal by an independent appraisal firm.
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 or a purchaser for this
Property.
In August 1998, the Partnership terminated the lease with the tenant of the
Property in Daleville, Indiana, due to financial difficulties the tenant was
experiencing. The Partnership is currently seeking a new tenant or purchaser for
this Property.
In December 1999, the Partnership entered into a joint venture arrangement,
Duluth Joint Venture, with affiliates of the General Partners, to hold one
restaurant Property. The lease terms for this Property are substantially the
same as the Partnership's other leases.
Major Tenants
During 1999, two lessees, Golden Corral Corporation and the Slaymaker
Group, Inc. each contributed more than ten percent of the Partnership's total
rental and mortgage interest income (including rental income from the
Partnership's consolidated joint venture and the Partnership's share of the
rental income from three Properties owned by unconsolidated joint ventures and
two Properties owned with affiliates of the General Partners as tenants-in-
common). As of December 31, 1999, Golden Corral Corporation was the lessee under
leases relating to two restaurants and Slaymaker Group, Inc. was the lessee
under a lease relating to one property. It is anticipated that, based on the
minimum rental payments required by the leases, these lessees will continue to
contribute more than ten percent of the Partnership's total rental and mortgage
interest income in 2000. In addition, three Restaurant Chains, Golden Corral,
Taco Bell, and Tony Roma's Famous For Ribs Restaurants, each accounted for more
than ten percent of the Partnership's total rental and mortgage interest income
in 1999 (including rental income from the Partnership's consolidated joint
venture and the Partnership's share of the rental income from three Properties
owned by unconsolidated joint ventures and two Properties owned with affiliates
of the General Partners as tenants-in-common). 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 these
lessees or these Restaurant Chains could materially affect the Partnership's
income if the Partnership is not able to re-lease the Properties in a timely
manner. No single tenant or group of affiliated tenants lease Properties with an
aggregate carrying value in excess of 20 percent of the total assets of the
Partnership.
2
<PAGE>
Joint Venture and Tenancy in Common Arrangements
The Partnership has entered into a joint venture arrangement, CNL/Longacre
Joint Venture, with an unaffiliated entity, to purchase and hold one Property
through such joint venture. The Partnership has also entered into three separate
joint venture arrangements: Cocoa Joint Venture with CNL Income Fund IV, Ltd.,
Halls Joint Venture with CNL Income Fund VII, Ltd., and RTO Joint Venture with
CNL Income Fund III, Ltd. Each joint venture was formed to purchase and hold one
Property. Each of the CNL Income Funds is an affiliate of the General Partners
and is a limited partnership organized pursuant to the laws of the State of
Florida.
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 has a 66.5% interest in CNL/Longacre Joint Venture, a
43 percent interest in Cocoa Joint Venture, a 48.9% interest in Halls Joint
Venture, and a 53.12% interest in RTO 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 15 to 20 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, Halls Joint Venture, and RTO 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, 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, Halls Joint Venture RTO Joint Venture is distributed 66.5%, 43.0 %,
48.9%, and 53.12%, respectively, to the Partnership and the balance is
distributed to each of the other joint venture partners. Any liquidation
proceeds, after paying joint venture debts and liabilities and funding reserves
for contingent liabilities, will be distributed first to the joint venture
partners with positive capital account balances in proportion to such balances
until such balances equal zero, and thereafter in proportion to each joint
venture partner's percentage interest in the joint venture.
In June 1999, Halls Joint Venture, in which the Partnership owns a 48.9%
interest, sold its Property to the tenant in accordance with the purchase option
under the lease agreement. The joint venture intends to reinvest the net sales
proceeds received from the sale, in an additional Property.
In addition, in December 1999, the Partnership entered into a joint venture
arrangement, Duluth Joint Venture, with affiliates of the General Partners, to
hold one Property. The joint venture arrangement provides for the Partnership
and its joint venture partners to share in all costs and benefits associated in
the joint venture in proportion to each partners' percentage interest in the
joint venture. The Partnership and its joint venture partners are also jointly
and severally liable for all debts, obligations and other liabilities of the
joint venture. The Partnership has a 12% interest in the profits and losses of
this joint venture.
In addition to the above joint venture agreements, in 1997, the Partnership
entered into two separate agreements, with affiliates of the General Partners to
purchase and hold the following Properties: a Property in Mesa, Arizona, as
tenants-in-common, with CNL Income Fund II, Ltd., and a Property in Vancouver,
Washington, as tenants-in-common, with CNL Income Fund, Ltd., CNL Income Fund
II, Ltd. and CNL Income Fund VI, Ltd. The affiliates are limited partnerships
organized pursuant to the laws of the State of Florida. The agreements provide
for the Partnership and the affiliates to share in the profits and losses of the
Properties in proportion to each party's percentage interest. The Partnership
owns a 42.09% and a 27.78% interest in the Property in Mesa, Arizona and the
Property in Vancouver, Washington, respectively. The tenancy in common agreement
restricts each party's ability to sell, transfer, or assign its interest in the
tenancy in common's Property without first offering it for sale to the remaining
party of the agreement.
3
<PAGE>
The use of joint venture and tenancy in common arrangements allows the
Partnership to fully invest its available funds at times at which it would not
have sufficient funds to purchase an additional property, or at times when a
suitable opportunity to purchase an additional property is not available. The
use of joint venture and tenancy in common arrangements also provides the
Partnership with increased diversification of its portfolio among a greater
number of properties. In addition, tenancy in common arrangements may allow the
Partnership to defer the gain for federal income tax purposes upon the sale of
the property if the proceeds are reinvested in an additional property.
Certain Management Services
CNL Fund Advisors, Inc., an affiliate of the General Partners, provides
certain services relating to management of the Partnership and its Properties
pursuant to a management agreement. Under this agreement, CNL Fund Advisors,
Inc. is 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 Fund Advisors, Inc. also
assists the General Partners in negotiating the leases. For these services, the
Partnership has agreed to pay CNL Fund Advisors, Inc. 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").
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.
Employees
The Partnership has no employees. The officers of CNL Realty Corporation
and the officers and employees of CNL American Properties Fund, Inc. ("APF"),
the parent company 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 Financial Group,
Inc. (formerly CNL Group, Inc.), a diversified real estate company, and its
affiliates, who may also perform certain services for the Partnership.
Item 2. Properties
As of December 31, 1999, the Partnership owned 23 Properties. Of the 23
Properties, 17 are owned by the Partnership in fee simple, four are owned
through joint venture arrangements and two are owned through tenancy in common
arrangements. See Item 1. Business - Joint Venture and Tenancy in Common
Arrangements. The Partnership is not permitted to encumber its Properties under
the terms of its partnership agreement. Reference is made to the Schedule of
Real Estate and Accumulated Depreciation 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.
4
<PAGE>
The following table lists the Properties owned by the Partnership as of
December 31, 1999 by state. More detailed information regarding the location of
the Properties is contained in the Schedule of Real Estate and Accumulated
Depreciation.
<TABLE>
<CAPTION>
State Number of Properties
----- --------------------
<S> <C>
Arizona 1
Florida 3
Georgia 2
Illinois 1
Indiana 3
Michigan 2
New Hampshire 1
Ohio 2
Texas 4
Utah 2
Washington 2
--
TOTAL PROPERTIES 23
==
</TABLE>
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. As of
December 31, 1999, the Partnership had no plans for renovation of the
Properties. Depreciation expense is computed for buildings and improvements
using the straight line method using depreciable lives of 31.5 and 40 years for
federal income tax purposes. As of December 31, 1999, the aggregate cost of the
Properties owned by the Partnership (including its consolidated joint venture)
and unconsolidated joint ventures (including Properties owned through tenancy in
common arrangements) for federal income tax purposes was $8,334,788 and
$3,772,210, respectively.
The following table lists the Properties owned by the Partnership as of
December 31, 1999 by Restaurant Chain.
<TABLE>
<CAPTION>
Restaurant Chain Number of Properties
---------------- --------------------
<S> <C>
Arby's 2
Boston Market 1
Burger King 1
Captain D's 2
Chevy's Fresh Mex 1
Denny's 3
Golden Corral 2
Hardee's 1
IHOP 1
Market Street Buffet & Bakery 1
Pizza Hut 1
Roadhouse Grill 1
Ruby Tuesday 1
Taco Bell 2
Tony Roma's 1
Waffle House 1
Wendy's 1
--
TOTAL PROPERTIES 23
==
</TABLE>
5
<PAGE>
The General Partners consider the Properties to be well-maintained and
sufficient for the Partnership's operations.
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.
Leases. The Partnership leases the Properties to operators of selected
national and regional fast-food restaurant chains. The leases are generally on a
long-term "triple net" basis, meaning that the tenant is responsible for
repairs, maintenance, property taxes, utilities and insurance. 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. The terms of the leases of the
Properties owned by the Partnership are described in Item 1. Business - Leases.
As of December 31, 1999, 1998, 1997, 1996, and 1995, the Properties were
87%, 88%, 93%, 90%, and 90% occupied, respectively. The following is a schedule
of the average rent per Property for the years ended December 31:
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Rental Revenues (1) $1,721,252 $1,710,326 $1,804,300 $2,119,765 $2,231,108
Properties (2) 20 23 24 27 28
Average Rent per
Property $ 86,063 $ 74,362 $ 75,179 $ 78,510 $ 79,682
</TABLE>
(1) Rental income includes the Partnership's share of rental income from the
Properties owned through joint venture arrangements and the Properties
owned through tenancy in common arrangements. Rental revenues have been
adjusted, as applicable, for any amounts for which the Partnership has
established an allowance for doubtful accounts.
(2) Excludes Properties that were vacant at December 31, and that did not
generate rental revenues during the year ended December 31.
The following is a schedule of lease expirations for leases in place as of
December 31, 1999 for each of the next ten years and thereafter.
<TABLE>
<CAPTION>
Percentage of
Expiration Number Annual Rental Gross Annual
Year of Leases Revenues Rental Income
---------- ------------- ------------- ---------------
<S> <C> <C> <C>
2000 -- $ -- --
2001 -- -- --
2002 1 63,360 4.30%
2003 -- -- --
2004 1 132,151 8.97%
2005 -- -- --
2006 -- -- --
2007 -- -- --
2008 5 250,146 16.97%
2009 5 361,493 24.53%
Thereafter 8 666,575 45.23%
----- ---------- -------
Total (1) 20 $1,473,725 100.00%
===== ========== =======
</TABLE>
(1) Excludes three Properties which were vacant at December 31, 1999.
6
<PAGE>
Leases with Major Tenants. The terms of each of the leases with the
Partnership's major tenants as of December 31, 1999 (see Item 1. Business -Major
Tenants), are substantially the same as those described in Item 1. Business -
Leases.
Slaymaker Group, Inc., leases one Tony Roma's restaurant pursuant to one
lease, with an initial term of 20 years (expiring in 2017). The minimum base
annual rent for the lease is $167,500.
Golden Corral Corporation leases two restaurants pursuant to two leases,
each with an initial term of 12 to 15 years (expiring 2002 and 2004) and average
minimum base annual rent of approximately $97,800 ($63,400 and $132,200,
respectively).
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.
Item 3. Legal Proceedings
On May 11, 1999, four limited partners in several CNL Income Funds served a
derivative and purported class action lawsuit filed April 22, 1999 against the
General Partners and APF in the Circuit Court of the Ninth Judicial Circuit of
Orange County, Florida, alleging that the General Partners breached their
fiduciary duties and violated provisions of certain of the CNL Income Fund
partnership agreements in connection with the proposed Merger. The plaintiffs
are seeking unspecified damages and equitable relief. On July 8, 1999, the
plaintiffs filed an amended complaint which, in addition to naming three
additional plaintiffs, includes allegations of aiding and abetting and
conspiring to breach fiduciary duties, negligence and breach of duty of good
faith against certain of the defendants and seeks additional equitable relief.
As amended, the caption of the case is Jon Hale, Mary J. Hewitt, Charles A.
-------------------------------------
Hewitt, Gretchen M. Hewitt, Bernard J. Schulte, Edward M. and Margaret Berol
- ----------------------------------------------------------------------------
Trust, and Vicky Berol v. James M. Seneff, Jr., Robert A. Bourne, CNL Realty
- ----------------------------------------------------------------------------
Corporation, and CNL American Properties Fund, Inc., Case No. CIO-99-0003561.
- ----------------------------------------------------
On June 22, 1999, a limited partner of several CNL Income Funds served a
purported class action lawsuit filed April 29, 1999 against the General Partners
and APF, Ira Gaines, individually and on behalf of a class of persons similarly
----------------------------------------------------------------------
situated, v. CNL American Properties Fund, Inc., James M. Seneff, Jr., Robert A.
- --------------------------------------------------------------------------------
Bourne, CNL Realty Corporation, CNL Fund Advisors, Inc., CNL Financial
- ----------------------------------------------------------------------
Corporation a/k/a CNL Financial Corp., CNL Financial Services, Inc. and CNL
- ---------------------------------------------------------------------------
Group, Inc., Case NO. CIO-99-3796, in the Circuit Court of the Ninth Judicial
- -----------
Circuit of Orange County, Florida, alleging that the General Partners breached
their fiduciary duties and that APF aided and abetted their breach of fiduciary
duties in connection with the proposed Merger. The plaintiff is seeking
unspecified damages and equitable relief.
On September 23, 1999, Judge Lawrence Kirkwood entered an order
consolidating the two cases under the caption In re: CNL Income Funds
-----------------------
Litigation, Case No. 99-3561. Pursuant to this order, the plaintiffs in these
- ----------------------------
cases filed a consolidated and amended complaint on November 8, 1999. On
December 22, 1999, the General Partners and CNL Group, Inc. filed motions to
dismiss and motions to strike. On December 28, 2000, all of the defendants
filed a Joint Notice of Filing Form 8-K Reports and Suggestion of Mootness.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
7
<PAGE>
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
(a) As of March 15, 2000, there were 2,476 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. During 1999, Limited Partners who
wished to sell their Units may have offered the Units for sale pursuant to the
Partnership's distribution reinvestment plan (the "Plan"), and Limited Partners
who wished to have their distributions used to acquire additional Units (to the
extent Units were available for purchase), may have done so pursuant to such
Plan. The General Partners had the right to prohibit transfers of Units. From
inception through December 31, 1999, the price paid for any Unit transferred
pursuant to the Plan range from $376 to $475 per Unit. The price paid for any
Unit transferred other than pursuant to the Plan was 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 1999 and 1998 other than
pursuant to the Plan, net of commissions.
<TABLE>
<CAPTION>
1999 (1) 1998 (1)
---------------------- -----------------------
High Low Average High Low Average
---- ----- ------- ---- ------ -------
<S> <C> <C> <C> <C> <C> <C>
First Quarter $450 $328 $389 $475 $475 $475
Second Quarter 390 390 390 (2) (2) (2)
Third Quarter 440 299 361 500 390 447
Fourth Quarter 357 295 324 450 380 414
</TABLE>
(1) A total of 302 and 168 Units were transferred other than pursuant to the
Plan for the years ended December 31, 1999 and 1998, respectively.
(2) No transfer of Units took place during the quarter other than pursuant to
the Plan.
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 the years ended December 31, 1999 and 1998, the Partnership declared
cash distributions of $2,000,000 and $3,838,327, respectively, to the Limited
Partners. Distributions during 1998 included a special distribution of
$1,838,327, as a result of the distribution of net sales proceeds from the 1997
and 1998 sales of Properties in Tampa and Port Orange, Florida. This amount was
applied toward the Limited Partners' cumulative 10% Preferred Return. The
reduced number of Properties for which the Partnership receives rental payments,
reduced the Partnership's revenues. The decrease in Partnership revenues,
combined with the fact that a significant portion of the Partnership's expenses
are fixed in nature, resulted in a decrease in cash distributions to the Limited
Partners commencing in 1998. No amounts distributed to partners for the years
ended December 31, 1999 and 1998, are required to be or have been treated by the
Partnership as a return of capital for the purposes of calculating the Limited
Partners' return on their adjusted capital contributions. No distributions have
been made to the General Partners to date. As indicated in the chart below,
these distributions were declared at the close of each of the Partnership's
calendar quarters. These amounts include monthly distributions made in arrears
for the Limited Partners electing to receive such distributions on this basis.
<TABLE>
<CAPTION>
Quarter Ended 1999 1998
----------------------- ---------- ----------
<S> <C> <C>
March 31 $500,000 $2,338,327
June 30 500,000 500,000
September 30 500,000 500,000
December 31 500,000 500,000
</TABLE>
8
<PAGE>
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.
(b) Not applicable.
Item 6. Selected Financial Data
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Year ended December 31:
Revenues (1) $ 1,956,691 $ 2,024,231 $ 2,147,770 $ 2,279,880 $ 2,314,818
Net income (2) 1,435,646 1,544,895 1,731,915 1,428,159 1,679,820
Cash distributions
declared (3) 2,000,000 3,838,327 2,300,000 2,300,000 2,300,000
Net income per Unit (2) 28.51 30.70 34.40 28.31 33.26
Cash distributions
declared per Unit (3) 40.00 76.77 46.00 46.00 46.00
At December 31:
Total assets $16,680,780 $17,135,485 $19,718,430 $20,133,002 $20,760,182
Partners' capital 15,662,748 16,227,102 18,520,534 18,982,619 19,694,760
</TABLE>
(1) Revenues include equity in earnings of unconsolidated joint ventures and
minority interest in loss of the consolidated joint venture.
(2) Net income for the year ended December 31, 1999 includes $396,066 from
gains on the sales of land and building and provisions for loss on land and
buildings of $308,310. Net income for the year ended December 31, 1998,
includes $469,613 from gains on the sales of land and buildings, $25,500
for a loss on sale of land and building and $403,157 for a provision for
loss on land and building. Net income for the year ended December 31,
1997, includes $550,878 from gains on the sales of land and buildings,
$141,567 from a loss on the sale of land and building and $250,694 for a
provision for loss on land and building. Net income for the year ended
December 31, 1996, includes $19,369 from the gains on sale of land and
buildings and $239,525 for a provision for loss on land and buildings. Net
income for the year ended December 31, 1995, includes $5,924 from a gain on
sale of land and building.
(3) Distributions for the year ended December 31, 1998 include a special
distribution to the Limited Partners of $1,838,327 as a result of the
distribution of net sales proceeds from the sales of Properties.
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 generally triple-net leases, with the lessee generally
responsible for all repairs and maintenance, property taxes, insurance and
utilities. As of December 31, 1999, the Partnership owned 23 Properties, either
directly or indirectly through joint venture or tenancy in common arrangements.
9
<PAGE>
Capital Resources
During the years ended December 31, 1999, 1998, and 1997, the Partnership
generated cash from operations (which includes cash received from tenants,
distributions from joint ventures and interest received, less cash paid for
expenses) of $1,595,565, $1,649,735, and $1,813,231, respectively. The decrease
in cash from operations during 1999 and 1998, each as compared to the previous
year, was 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.
Other sources and uses of capital included the following during the years
ended December 31, 1999, 1998, and 1997.
During the year ended December 31, 1997, the Partnership received $106,000,
in capital contributions from the corporate General Partner in connection with
the operations of the Partnership. 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 1996, the Partnership sold its Property in St. Cloud, Florida, and
received $100,000 in cash and accepted a promissory note in the principal sum of
$1,057,299. The promissory note bore interest at a rate of 10.75% per annum, was
collateralized by a mortgage on the Property, and was being collected in 12
monthly installments of interest only and thereafter in 168 equal monthly
installments of principal and interest. This sale was being accounted for under
the installment sales method for financial reporting purposes; therefore, the
Partnership recognized a gain of $2,157 and $338 for financial reporting
purposes for the years ended December 31, 1998 and 1997, respectively. The
mortgage note receivable balance relating to this Property at December 31, 1998,
was $871,812, including accrued interest of $9,350, and net of the remaining
deferred gain of $181,308. During the year ended December 31, 1999, the
Partnership collected the outstanding balance of $1,043,770 relating to the
promissory note and in connection therewith, recognized the remaining gain of
$181,308 relating to this Property. Approximately $100,000 of the amount was
collected and was used to pay liabilities of the Partnership, including
quarterly distributions to the Limited Partners. The Partnership may use the
remaining net sales proceeds to pay liabilities of the Partnership, including
quarterly distributions to the Limited Partners or to reinvest in additional
Properties. The Partnership distributed 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.
In January 1997, the Partnership sold its Property in Franklin, Tennessee,
to the tenant, for $980,000 and received net sales proceeds of $960,741. Since
the Partnership had previously established an allowance for loss on land and
building of $169,463 as of December 31, 1996 relating to this Property, no loss
was recognized during 1997 as a result of this sale. The Partnership used
$360,000 of the net sales proceeds to pay liabilities of the Partnership,
including quarterly distributions to the Limited Partners. In addition, in June
1997, the Partnership entered into an operating agreement for the Property
located in South Haven, Michigan, with an operator to operate the Property as an
Arby's restaurant. In connection therewith, the Partnership used approximately
$120,400 of the net sales proceeds from the sale of the Property in Franklin,
Tennessee, to fund conversion costs associated with the Arby's Property. In
March 1998, the Partnership entered into a new lease for this Property with the
former operator as tenant to operate the Property as an Arby's. In December
1997, the Partnership reinvested approximately $244,800 of the net sales
proceeds in a Property located in Sandy, Utah, and approximately $150,000 in a
Property located in Vancouver, Washington, as tenants-in-common with affiliates
of the General Partners, as described below. The Partnership used the remaining
net sales proceeds from the sale of the Property in Franklin, Tennessee to pay
liabilities of the Partnership, including quarterly distributions to the Limited
Partners.
In June 1997, the Partnership terminated the leases with the tenant of the
Properties in Connorsville and Richmond, Indiana. In connection therewith, the
Partnership accepted a promissory note from the former tenant for $35,297 for
amounts relating to past due real estate taxes. The promissory note, which is
uncollateralized, bears interest at a rate of ten percent per annum and is being
collected in 36 monthly installments. Receivables at December 31, 1999 and 1998,
included $9,219 and $25,783, respectively, of such amounts. In July 1997, the
Partnership entered into a new lease for the Property in Connorsville, Indiana,
with a new tenant to operate the Property as an Arby's restaurant. In connection
therewith, the Partnership paid $125,000 in renovation costs during the year
ended December 31, 1998.
10
<PAGE>
During 1997, the Partnership sold its Properties in Smyrna, Tennessee;
Salem, New Hampshire; and Port St. Lucie and Tampa, Florida, for a total of
$4,020,172 and received net sales proceeds totaling $3,925,876, resulting in a
total gain of $549,516 for financial reporting purposes. These Properties were
originally acquired by the Partnership in 1989 and had a total cost of
approximately $3,503,900, excluding acquisition fees and miscellaneous
acquisition expenses; therefore, the Partnership sold these Properties for
approximately $422,000 in excess of their original purchase prices. The
Partnership used approximately $3,800,000 of the net sales proceeds to pay
liabilities of the Partnership, including quarterly distributions to the Limited
Partners, and to acquire additional wholly owned Properties and acquire
Properties with affiliates of the General Partners. The Partnership distributed
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.
During the year ended December 31, 1996, the Partnership established an
allowance for the Property in Richmond, Indiana, in the amount of $70,062 which
represented the difference between the Property's carrying value at December 31,
1996, and the estimated net realizable value of the Property based on an
anticipated sales price of this Property. In November 1997, the Partnership sold
this Property to a third party for $400,000 and received net sales proceeds of
$385,179. As a result of this transaction, the Partnership recognized a loss of
$141,567 for financial reporting purposes. In December 1997, the Partnership
reinvested the net sales proceeds in a Property as tenants-in-common with
affiliates of the General Partners, as described below.
During 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 totaling $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 totaling 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 addition, the Partnership incurred deferred,
subordinated, real estate disposition fees of $65,400 relating to the sales of
the Properties for which net sales proceeds were not reinvested in additional
Properties. The Partnership distributed $1,838,327 of the net sales proceeds
from the 1997 and 1998 sales of the Properties in Tampa, Florida, as described
above, and Port Orange, Florida, as a special distribution to the Limited
Partners in April 1998. In addition, in May 1998, the Partnership contributed
the net sales proceeds from the sale of the Property in Tyler, Texas in a joint
venture arrangement as described below. The Partnership distributed 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).
As described above, in May 1998, the Partnership entered into a joint
venture, RTO Joint Venture, with an affiliate of the General Partners, to
construct and hold one restaurant Property. As of December 31, 1999, the
Partnership had contributed $766,746 to purchase land and pay for construction
relating to the joint venture. Construction was completed and rent commenced in
December 1998. The Partnership holds a 53.12% interest in the profits and losses
of the joint venture.
In addition, in March 1999, the Partnership sold its Properties in Endicott
and Ithaca, New York to the tenant for a total of $1,125,000 and received net
sales proceeds of $1,113,759 resulting in a total gain of $213,503 for financial
reporting purposes. These Properties were originally acquired by the Partnership
in December 1989 and had costs totaling approximately $942,000, excluding
acquisition fees and miscellaneous acquisition expenses; therefore, the
Partnership sold the Properties for approximately $171,800 in excess on their
original purchase prices. In December 1999, the Partnership reinvested the net
sales proceeds received from the sale of the Property in Ithaca, New York, in a
joint venture arrangement, as described below. The Partnership may use the net
sales proceeds from the sale of the Property in Endicott, New York, to pay
liabilities of the Partnership, including quarterly distributions to the Limited
Partners or to reinvest in an additional Property. The Partnership distributed
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 sales.
In June 1999, Halls Joint Venture, in which the Partnership owns a 48.9%
interest, sold its Property to the tenant in accordance with the purchase option
under its lease agreement for $891,915, resulting in a gain to the joint venture
of approximately $239,300 for financial reporting purposes. The Property was
originally contributed to Halls Joint Venture in February 1990 and had a total
cost of approximately $672,000, excluding acquisition fees and miscellaneous
acquisition expenses; therefore, the joint venture sold the Property for
approximately $219,900 in excess of its original purchase price. The joint
venture intends to reinvest the net sales proceeds received from the sale, in an
additional Property.
11
<PAGE>
In addition, in December 1999, the Partnership reinvested the net sales
proceeds from the sale of the Property in Ithaca, New York, as described above,
in a joint venture arrangement, Duluth Joint Venture, with affiliates of the
General Partners, to hold one restaurant Property. As of December 31, 1999, the
Partnership had contributed $129,978 and owned a 12 percent interest in the
profits and losses of the joint venture.
In March 2000, the Partnership sold its Property in Belding, Michigan, to a
third party, for $135,000 and received net sales proceeds of $124,346, resulting
in a loss of approximately $138,828 for financial reporting purposes, which the
Partnership recorded at December 31, 1999, as described below in "Results of
Operations." The Partnership intends to use the remaining net sales proceeds for
other Partnership purposes.
None of the Properties owned by the Partnership, or the joint ventures or
tenancy in common arrangements 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 and net sales
proceeds from the sale of Properties pending reinvestment in additional
Properties, distributions to the Limited Partners or use for the payment of
Partnership liabilities, are invested in money market accounts or other short-
term, highly liquid investments such as demand deposit accounts at commercial
banks, certificates of deposit and money market accounts with less than a 30-day
maturity date. At December 31, 1999, the Partnership had $1,984,879 invested in
such short-term investments as compared to $352,648 at December 31, 1998. The
increase in cash and cash equivalents during 1999, was primarily attributable to
the receipt of net sales proceeds relating to the sales of Properties during
1999, and the receipt of the remaining outstanding balance of the mortgage notes
receivable, as described above. As of December 31, 1999, the average interest
rate earned on the rental income deposited in demand deposit accounts at
commercial banks was approximately 2.43% annually. The funds remaining at
December 31, 1999, will be reinvested in additional Properties, distributed to
the Limited Partners or used for other Partnership purposes, as described above.
Short-Term Liquidity
The Partnership's short-term liquidity requirements consist primarily of
the operating expenses of the Partnership.
The Partnership's investment strategy of acquiring Properties for cash and
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 the leases of the Partnership's Properties are generally on a
triple-net basis, it is not anticipated that a permanent reserve for maintenance
and repairs will be established at this time. To the extent, however, that the
Partnership has insufficient funds for such purposes, the General Partners will
contribute to the Partnership an aggregate amount of up to one percent of the
offering proceeds for maintenance and repairs.
The Partnership generally distributes cash from operations remaining after
the payment of the operating expenses of the Partnership, to the extent that the
General Partners determine that such funds are available for distribution.
Based on current and anticipated future cash from operations, and (i) for the
years ended December 31, 1998 and 1997, a portion of the sales proceeds received
from the sales of the Properties, and (ii) for the year ended December 31, 1997,
additional capital contributions from the Corporate General Partner, the
Partnership declared distributions to the Limited Partners of $2,000,000,
$3,838,327, and $2,300,000 for the years ended December 31, 1999, 1998, and
1997, respectively. This represents distributions of $40, $77, and $46 per Unit
for the years ended December 31, 1999, 1998, and 1997, respectively.
Distributions for 1998 included $1,838,327 as a result of the distribution of
net sales proceeds from the 1997 and 1998 sales of Properties in Tampa and Port
Orange, Florida. 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 cumulative
preferred
12
<PAGE>
return. The reduced number of Properties for which the Partnership receives
rental payments reduced the Partnership's revenues. The decrease in Partnership
revenues, combined with the fact that a significant portion of the Partnership's
expenses are fixed in nature, resulted in a decrease in cash distributions to
the Limited Partners commencing in 1998. No amounts distributed to the Limited
Partners for the years ended December 1999, 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.
During 1999, 1998, and 1997, affiliates of the General Partners incurred on
behalf of the Partnership $122,719, $79,438, and $77,353, respectively, for
certain operating expenses. As of December 31, 1999 and 1998, the Partnership
owed $248,988 and $128,548, respectively, to affiliates for such amounts and
accounting and administrative services. In addition, during 1998 and 1997, the
Partnership incurred $65,400 and $34,500, respectively, in real estate
disposition fees due to an affiliate as a result of its services in connection
with the sale of the Properties in St. Cloud, Port Orange, and Tampa, Florida.
The payment of such fees is deferred until the Limited Partners have received
the sum of their 10% Preferred Return and their adjusted capital contributions.
Other liabilities, including distributions payable, increased to $591,771 at
December 31, 1999, from $524,019 at December 31, 1998, primarily due to the
Partnership accruing transaction costs relating to the proposed merger with CNL
American Properties Fund, Inc. ("APF"), as described below in "Termination of
Merger." Liabilities at December 31, 1999, to the extent they exceed cash and
cash equivalents, at December 31, 1999, will be paid from future cash from
operations, or in the event the General Partners elect to make additional
capital contributions, from future General Partner contributions.
Long-Term Liquidity
The Partnership has no long-term debt or other long-term liquidity
requirements.
Results of Operations
During 1997, the Partnership and its consolidated joint venture,
CNL/Longacre Joint Venture owned and leased 28 wholly owned Properties
(including six Properties, which were sold during the year ended December 31,
1997) and during 1998, the Partnership owned 22 wholly owned Properties
(including two Properties, which were sold during 1998). During 1999, the
Partnership and CNL/Longacre Joint Venture, owned 20 wholly owned Properties
(including two Properties, which were sold during 1999). In addition, during
1999, 1998, and 1997, the Partnership was a co-venturer in two separate
unconsolidated joint ventures that each owned and leased one Property (including
one Property in Halls Joint Venture, which was sold in June 1999). During 1997,
the Partnership owned and leased two Properties, with affiliates of the General
Partners, as tenants-in-common. In addition, during 1998, the Partnership was
also a co-venturer in an additional unconsolidated joint venture that owns one
Property. During 1999, the Partnership and its consolidated joint venture, was
also a co-venturer in an additional joint venture that owns one Property. As of
December 31, 1999, the Partnership owned, either directly or through joint
venture arrangements, 23 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
$42,000 to $222,800. 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 (i) the percentage
rent calculated under the lease formula or (ii) a specified percentage (ranging
from one-fourth to five percent) of the purchase price paid by the Partnership
for the Property. For further description of the Partnership's leases and
Properties, see Item 1. Business - Leases and Item 2. Properties, respectively.
During the years ended December 31, 1999, 1998, and 1997, the Partnership
and its consolidated joint venture earned $1,255,050, $1,367,303, and
$1,500,967, respectively, in rental income from operating leases and earned
income from direct financing leases. The decrease in rental and earned income
during the year ended December 31, 1999, as compared to 1998, and the decrease
during 1998, as compared to 1997, were partially attributable to a decrease of
approximately $78,400 and $506,900, respectively, as a result of the sale of
several Properties during 1998 and 1999, as described above in "Capital
Resources." During 1998, the decrease in rental income was partially offset by
an increase of approximately $299,900 due to the reinvestment of net sales
proceeds in various Properties during 1998 and 1997, as described above in
"Capital Resources."
13
<PAGE>
Rental and earned income also decreased during 1999 and 1998, each as
compared to the previous year, by approximately $12,800 and $39,100,
respectively, due to the fact that in August 1998, the Partnership terminated
the lease with the tenant of the Property in Daleville, Indiana, due to
financial difficulties the tenant was experiencing. The Partnership is currently
seeking a new tenant or purchaser for this Property. The Partnership will not
recognize any rental income relating to this Property until such time as the
Partnership executes a new lease or until the Property is sold and the proceeds
from such sale are reinvested in an additional Property.
Rental and earned income was lower in 1997, as compared to 1998, partially
due to the Partnership increasing its allowance for doubtful accounts during
1997 by approximately $57,700 for rental and other amounts relating to the
Hardee's Properties located in Connorsville and Richmond, Indiana, which were
leased by the same tenant, due to financial difficulties the tenant was
experiencing. In addition, rental and earned income decreased by approximately
$79,200 during 1997 due to the fact that the Partnership terminated the lease
with the former tenant of these Properties in June 1997 and the General Partners
agreed that they would cease collection efforts on past due rental amounts once
the former tenant of these Properties paid all amounts due under the promissory
note for past due real estate taxes described above in "Capital Resources." No
such allowance was established during 1999 or 1998 due to the fact that the
Partnership (i) re-leased the Property located in Connorsville, Indiana, to a
new tenant who began operating the Property after it was renovated into an
Arby's Property and (ii) sold the Property located in Richmond, Indiana, in
November 1997.
In October 1995, the tenant ceased operations of the Property in South
Haven, Michigan. In connection therewith, in June 1997, the Partnership incurred
renovation costs to convert the Property into an Arby's restaurant and entered
into an operating agreement. The decrease during 1999 and 1998, each as compared
to the previous year, was partially offset by the fact that in March 1998, the
Partnership entered into a new lease for this Property, and as a result, rental
and earned income increased by approximately $7,300 and $40,200 during 1999 and
1998, respectively.
Rental and earned income in 1999, 1998, and 1997 continued to remain at
reduced amounts due to the fact that the Partnership is not receiving any rental
income from the Properties in Belding, Michigan and Lebanon, New Hampshire, as a
result of the tenants defaulting under the terms of their leases and ceasing
operations of the restaurants on the Properties during 1994. The General
Partners are currently seeking either new tenants or purchasers for these
Properties. Rental and earned income for 2000 is expected to remain at reduced
amounts until such time as the Partnership executes new leases for these
Properties or until the Properties are sold and the proceeds from such sales are
reinvested in additional Properties.
For the years ended December 31, 1999, 1998, and 1997, the Partnership
earned $91,829, $133,179, and $233,663, respectively, in contingent rental
income. The decrease in contingent rental income during 1999, as compared to
1998, and the decrease during 1998, as compared to 1997, were partially
attributable to (i) the fact that the Partnership sold several Properties, whose
leases required the payment of contingent rental income and (ii) a decrease in
gross sales of certain restaurant Properties requiring the payment of contingent
rental income. The decrease in contingent rental income during 1998, as compared
to 1997, is also partially attributable to amounts collected during 1997, which
represented a percentage of the net operating income generated by the restaurant
under the operating agreement with the new operator of the Property located in
South Haven, Michigan. In March 1998, the Partnership entered into a new lease
for the Property in South Haven, Michigan, with this operator.
During the years ended December 31, 1999, 1998, and 1997, the Partnership
earned $193,571, $282,795, and $302,503, respectively, in interest and other
income. The decrease in interest and other income during 1999, as compared to
1998, is primarily attributable to the reduction in 1999 in the outstanding
balance of the mortgage note relating to the sale of the Property in St. Cloud,
Florida, as described in "Capital Resources." Interest income was higher during
1997 due to interest earned on the net sales proceeds relating to the sales of
several Properties temporarily invested in short-term liquid investments.
In addition, for the years ended December 31, 1999, 1998, and 1997, the
Partnership earned $337,698, $173,941, and $56,015, respectively, attributable
to net income earned by unconsolidated joint ventures in which the Partnership
is a co-venturer. The increase in net income earned by these joint ventures
during 1999, as compared to 1998, was primarily attributable to the fact that in
June 1999, Halls Joint Venture, in which the Partnership owns a 48.9% interest,
recognized a gain of approximately $239,300 for financial reporting purposes as
a result of the sale of its Property, as described above in "Capital Resources."
Because the joint venture intends to reinvest the sales proceeds in an
additional Property, the Partnership does not anticipate that the sale of the
Property will have a
14
<PAGE>
material adverse affect on results of operations of the Partnership. In
addition, the increase in net income earned by joint ventures during 1999 and
1998, each as compared to the previous year, was primarily attributable to the
fact that during 1998, the Partnership reinvested a portion of the net sales
proceeds it received from the 1997 and 1998 sales of several Properties in a
Property with affiliates of the General Partners, as tenants-in-common and
acquired an interest in RTO Joint Venture with an affiliate of the General
Partners, as described above in "Capital Resources."
During the year ended December 31, 1999, two lessees of the Partnership and
its consolidated joint venture, Golden Corral Corporation and Slaymaker Group,
Inc., each contributed more than ten percent of the Partnership's total rental
and mortgage interest income (including rental income from the Partnership's
consolidated joint venture and the Partnership's share of the rental income from
three Properties owned by unconsolidated joint ventures and two Properties owned
with affiliates of the General Partners as tenants-in-common). As of December
31, 1999, Golden Corral Corporation was the lessee under leases relating to two
restaurants and Slaymaker Group, Inc. was the lessee under a lease relating to
one property. It is anticipated that, based on the minimum rental payments
required by the leases, these lessees will continue to contribute more than ten
percent of the Partnership's total rental and mortgage interest income during
2000. In addition, three Restaurant Chains, Golden Corral, Taco Bell, and Tony
Roma's Famous for Ribs Restaurants, each accounted for more than ten percent of
the Partnership's total rental and mortgage interest income during 1999,
(including rental income from the Partnership's consolidated joint venture and
the Partnership's share of the rental income from three Properties owned by
unconsolidated joint ventures and two Properties owned with affiliates of the
General Partners as tenants-in-common). 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 these lessees or
Restaurant Chains could materially affect the Partnership's income if the
Partnership is not able to re-lease the Properties in a timely manner.
Operating expenses, including depreciation and amortization expense, were
$608,801, $520,292, and $574,472, for the years ended December 31, 1999, 1998,
and 1997, respectively. The increase in operating expenses during 1999, as
compared to 1998, was partially attributable to, and the decrease during 1998,
as compared to 1997, was partially offset by the fact that, the Partnership
incurred $125,291 and $14,644 during 1999 and 1998, respectively, in transaction
costs relating to the General Partners retaining financial and legal advisors to
assist them in evaluating and negotiating the proposed merger with APF, as
described below in "Termination of Merger." In addition, the increase in
operating expenses during 1999, as compared to 1998, was partially offset by,
and the decrease during 1998, as compared to 1997, was partially attributable
to, a decrease in depreciation expense due to the sales of several Properties
during 1999 and 1998. The decrease in operating expenses during 1998 was
partially attributable to a decrease in depreciation expense as a result of the
sales of Properties in 1998 and 1997, as described above in "Capital Resources."
Operating expenses were also higher during 1999 due to tenant defaults
under the terms of the lease arrangements for the Properties in Belding,
Michigan; Daleville, Indiana, and Lebanon, New Hampshire. The Partnership and
its consolidated joint venture have incurred and expect to continue to incur
operating expenses, such as repairs and maintenance, insurance, and real estate
taxes, relating to these Properties until the Properties are sold or re-leased
to new tenants.
In connection with the sale of its Properties in St. Cloud, Florida and
Myrtle Beach, South Carolina, during 1997 and 1996, respectively, as described
above in "Capital Resources," the Partnership recognized a gain for financial
reporting purposes of $182,563, $3,291, and $1,362, for the years ended December
31, 1999, 1998, and 1997, 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 gains on the sales was deferred and were being recognized as income
proportionately as payments under the mortgage notes were collected. The
increase in the gain recognized during 1999, was due to the fact that during
1999, the Partnership collected the outstanding balance relating to the
promissory note collateralized by the Property in St. Cloud, Florida, as
described above in "Capital Resources," which resulted in the recognition of the
remaining deferred gain on this Property. The balance of the deferred gain was
$137,303 at December 31, 1999, for financial reporting purposes and for federal
income tax purposes, $131,519 from the sale of the Property in Myrtle Beach,
South Carolina, is being recognized as payments under the mortgage note are
collected.
As a result of the sales of several Properties as described above in
"Capital Resources," the Partnership recognized gains totaling $213,503,
$440,822 and $549,516 during 1999, 1998 and 1997, respectively, for financial
15
<PAGE>
reporting purposes. The gains for 1997, were partially offset by a loss of
$141,567 for financial reporting purposes, resulting from the November 1997 sale
of the Property in Richmond, Indiana.
During 1999, 1998 and 1997, the Partnership established allowances for loss
on land and buildings of $169,482, $403,157 and $250,694, respectively, for
financial reporting purposes, relating to Properties which became vacant and for
which the Partnership has not successfully re-leased. The allowances represent
the difference between the net carrying value at December 31, 1999, 1998 and
1997, and their current estimated net realizable values.
In addition, during the year ended December 31, 1999, the Partnership
recorded an additional provision for loss on building in the amount of $138,828
for financial reporting purposes relating to the Property in Belding, Michigan.
The allowance represents the difference between the carrying value of the
Property at December 31, 1999, and the net sales proceeds from the sale of the
Property to a third party in March 2000.
The Partnership's leases as of December 31, 1999, 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
(for certain Properties) 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.
Termination of Merger
On March 11, 1999, the Partnership entered into an Agreement and Plan of
Merger with APF, pursuant to which the Partnership would be merged with and into
a subsidiary of APF. Under the Agreement and Plan of Merger, APF was to issue
shares of its common stock as consideration for the Merger. On March 1, 2000,
the General Partners and APF announced that they had mutually agreed to
terminate the Agreement and Plan of Merger. The agreement to terminate the
Agreement and Plan of Merger was based, in large part, on the General Partners'
concern that, in light of market conditions relating to publicly traded real
estate investment trusts, the value of the transaction had diminished. As a
result of such diminishment, the General Partners' ability to unequivocally
recommend voting for the transaction, in the exercise of their fiduciary duties,
had become questionable.
Overview of Year 2000 Problem
The year 2000 problem concerns the inability of information and non-
information technology systems to properly recognize and process date-sensitive
information beyond January 1, 2000. The failure to accurately recognize the year
2000 could result in a variety of problems from data miscalculations to the
failure of entire systems.
Status
The Partnership generally does not directly own information technology
systems. The General Partners and their affiliates generally provide all
services requiring the use of information and some non-information technology
systems. In early 1998, affiliates of the General Partners formed a year 2000
committee ("the Y2K Team") that assessed the readiness of any systems that are
date sensitive and completed upgrades for the hardware equipment and software
that was not year 2000 compliant, as necessary. The cost for these upgrades and
other remedial measures is the responsibility of the General Partners and their
affiliates. The General Partners and their affiliates do not expect that the
Partnership will incur any costs in connection with the year 2000 remedial
measures. In addition, the Y2K Team requested and received certifications of
compliance from other companies with which the General Partners, their
affiliates, and the Partnership have material third party relationships.
In assessing the risks presented by the year 2000 problem, the Y2K Team
identified potential worst case scenarios involving the future of the
information and non-information technology systems used by the Partnership's
transfer agent, financial institutions and tenants. As of January 14, 2000, the
General Partners and their affiliates have tested the information and non-
information technology systems used by the Partnership and have not experienced
material disruption or other significant problems. In addition, as of the same
date, the General Partners
16
<PAGE>
are not aware of any material year 2000 problems relating to information and
non-information technology systems of third parties with which the Partnership
maintains material relationships, including those of the Partnership's transfer
agent, financial institutions and tenants. In addition, in the Partnership's
interactions with its transfer agent, financial institutions and tenants, the
systems of these third parties have functioned normally. Until the Partnership's
first distribution in 2000 and the delivery of the information by the transfer
agent to stockholders in early 2000, the General Partners will continue to
monitor the year 2000 compliance of the transfer agent. In addition, the General
Partners will continue to monitor the systems used by the Partnership and to
maintain contact with third parties with which the Partnership has material
relationships with respect to year 2000 compliance and any year 2000 issues that
may arise at a later date. The General Partners will develop contingency plans
relating to ongoing year 2000 issues at the time that such issues are identified
and such plans are deemed necessary.
Based on the information provided to the Y2K Team, the upgrades and
remedial measures by the General Partners and their affiliates, and the normal
functioning to date of information and non-information technology systems used
by the Partnership and those third parties, the General Partners do not foresee
significant risks associated with its year 2000 compliance at this time. In
addition, the General Partners and their affiliates do not expect to incur any
additional costs in connection with the year 2000 remedial efforts. However,
there can be no assurance that the General Partners and their affiliates or any
third parties will not have ongoing year 2000 issues that may have adverse
effects on the Partnership.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
The Partnership has provided a fixed rate mortgage note to a borrower. The
General Partners believe that the estimated fair value of the mortgage note at
December 31, 1999 approximated the outstanding principal amount. The Partnership
is exposed to equity loss in the event of changes in interest rates. The
following table presents the expected cash flows of principal that are sensitive
to these changes.
<TABLE>
<CAPTION>
Mortgage Note
Fixed Rate
-------------
<S> <C>
2000 $ 997,096
2001 --
2002 --
2003 --
2004 --
Thereafter --
---------
$ 997,096
=========
</TABLE>
Item 8. Financial Statements and Supplementary Data
17
<PAGE>
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
CONTENTS
--------
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Certified Public Accountants 19
Financial Statements:
Balance Sheets 20
Statements of Income 21
Statements of Partners' Capital 22
Statements of Cash Flows 23
Notes to Financial Statements 25
</TABLE>
18
<PAGE>
Report of Independent Certified Public Accountants
--------------------------------------------------
To the Partners
CNL Income Fund V, Ltd.
In our opinion, the financial statements listed in the index appearing under
item 14(a)(1) present fairly, in all material respects, the financial position
of CNL Income Fund V, Ltd. (a Florida limited partnership) at December 31, 1999
and 1998, and the results of its operations and its cash flows for each of the
three years in the period ended December 31, 1999 in conformity with accounting
principles generally accepted in the United States. In addition, in our opinion,
the financial statement schedules listed in the index appearing under item
14(a)(2) presents fairly, in all material respects, the information set forth
therein when read in conjunction with the related financial statements. 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 of these statements in accordance with auditing
standards generally accepted in the United States which 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, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion expressed
above.
/s/ PricewaterhouseCoopers LLP
Orlando, Florida
February 4, 2000, except for Note 12 for which the date is March 1, 2000.
19
<PAGE>
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
BALANCE SHEETS
--------------
<TABLE>
<CAPTION>
December 31,
1999 1998
------------ ------------
<S> <C> <C>
ASSETS
------
Land and buildings on operating leases, less
accumulated depreciation and allowance
for loss on land and buildings $ 9,208,302 $10,660,128
Net investment in direct financing leases 1,670,966 1,708,966
Investment in joint ventures 2,534,850 2,282,012
Mortgage notes receivable, less deferred gain 868,309 1,748,060
Cash and cash equivalents 1,984,879 352,648
Receivables, less allowance for doubtful
accounts of $153,750 and $141,505,
respectively 54,580 87,490
Prepaid expenses 4,458 1,872
Accrued rental income 300,090 239,963
Other assets 54,346 54,346
----------- -----------
$16,680,780 $17,135,485
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
- ---------------------------------
Accounts payable $ 81,476 $ 7,546
Accrued and escrowed real estate taxes
payable 4,201 10,361
Distributions payable 500,000 500,000
Due to related parties 348,888 228,448
Rents paid in advance and deposits 6,094 6,112
----------- -----------
Total liabilities 940,659 752,467
Minority interest 77,373 155,916
Partners' capital 15,662,748 16,227,102
----------- -----------
$16,680,780 $17,135,485
=========== ===========
</TABLE>
See accompanying notes to financial statements.
20
<PAGE>
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
STATEMENTS OF INCOME
--------------------
<TABLE>
<CAPTION>
Year Ended December 31,
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Revenues:
Rental income from operating leases $ 1,077,199 $ 1,168,301 $ 1,343,833
Earned income from direct financing leases 177,851 199,002 157,134
Contingent rental income 91,829 133,179 233,663
Interest and other income 193,571 282,795 302,503
------------ ------------ ------------
1,540,450 1,783,277 2,037,133
------------ ------------ ------------
Expenses:
General operating and administrative 150,715 166,878 166,346
Professional services 48,751 20,542 23,172
Bad debt expense -- 5,882 9,007
Real estate taxes 33,857 35,434 39,619
State and other taxes 6,927 9,658 11,897
Depreciation and amortization 243,260 267,254 324,431
Transaction costs 125,291 14,644 --
------------ ------------ ------------
608,801 520,292 574,472
------------ ------------ ------------
Income Before Minority Interest in Loss of Consolidated
Joint Venture, Equity in Earnings Of Unconsolidated Joint
Ventures, Gain on Sale of Land and Buildings and Provision
for Loss on Land and Buildings 931,649 1,262,985 1,462,661
Minority Interest in Loss of Consolidated Joint Venture 78,543 67,013 54,622
Equity in Earnings of Unconsolidated Joint Ventures 337,698 173,941 56,015
Gain on Sale of Land and Buildings 396,066 444,113 409,311
Provision for Loss on Land and Buildings (308,310) (403,157) (250,694)
------------ ------------ ------------
Net Income $ 1,435,646 $ 1,544,895 $ 1,731,915
============ ============ ============
Allocation of Net Income
General partners $ 10,296 $ 9,748 $ 11,809
Limited partners 1,425,350 1,535,147 1,720,106
------------ ------------ ------------
$ 1,435,646 1,544,895 $ 1,731,915
============ ============ ============
Net Income Per Limited Partner Unit $ 28.51 $ 30.70 $ 34.40
------------ ------------ ------------
Weighted Average Number of Limited Partner Units Outstanding 50,000 50,000 50,000
============ ============ ============
</TABLE>
See accompanying notes to financial statements.
21
<PAGE>
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
STATEMENTS OF PARTNERS' CAPITAL
-------------------------------
Years Ended December 31, 1999, 1998, and 1997
<TABLE>
<CAPTION>
General Partners Limited Partners
---------------------------- --------------------------------------------------------------
Accumulated Accumulated Syndication
Contributions Earnings Contributions Distributions Earnings Costs
------------- ----------- ------------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1996 $ 237,200 $ 138,973 $ 25,000,000 $ (17,468,240) $13,939,686 $ (2,865,000)
Contributions from
general partner 106,000 -- -- -- -- --
Distributions to limited
partners ($46 per
limited partner unit) -- -- -- (2,300,000) -- --
Net Income -- 11,809 -- -- 1,720,106 --
----------- ----------- ------------- ------------- ----------- ------------
Balance, December 31, 1997 343,200 150,782 25,000,000 (19,768,240) 15,659,792 (2,865,000)
Distributions to limited
partners ($77 per
limited partner unit) -- -- -- (3,838,327) -- --
Net income -- 9,748 -- -- 1,535,147 --
----------- ----------- ------------- ------------- ----------- ------------
Balance, December 31, 1998 343,200 160,530 25,000,000 (23,606,567) 17,194,939 (2,865,000)
Distributions to limited
partners ($40 per
limited partner unit) -- -- -- (2,000,000) -- --
Net income -- 10,296 -- -- 1,425,350 --
----------- ----------- ------------- ------------- ----------- ------------
Balance, December 31, 1999 $ 343,200 $ 170,826 $ 25,000,000 $ (25,606,567) $18,620,289 $ (2,865,000)
=========== =========== ============= ============= =========== ============
<CAPTION>
Total
-----------
<S> <C>
Balance, December 31, 1996 $18,982,619
Contributions from
general partner 106,000
Distributions to limited
partners ($46 per
limited partner unit) (2,300,000)
Net Income 1,731,915
-----------
Balance, December 31, 1997 18,520,534
Distributions to limited
partners ($77 per
limited partner unit) (3,838,327)
Net income 1,544,895
-----------
Balance, December 31, 1998 16,227,102
Distributions to limited
partners ($40 per
limited partner unit) (2,000,000)
Net income 1,435,646
-----------
Balance, December 31, 1999 $15,662,748
===========
</TABLE>
See accompanying notes to financial statements.
22
<PAGE>
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
STATEMENTS OF CASH FLOWS
------------------------
<TABLE>
<CAPTION>
Year Ended December 31,
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Increase (Decrease) in Cash and Cash Equivalents:
Cash Flows from Operating Activities:
Cash received from tenants $ 1,353,143 $ 1,490,412 $ 1,771,467
Distributions from unconsolidated joint ventures 214,838 215,839 53,176
Cash paid for expenses (168,342) (331,363) (305,341)
Interest received 195,926 274,847 293,929
------------ ------------ ------------
Net cash provided by operating activities 1,595,565 1,649,735 1,813,231
------------ ------------ ------------
Cash Flows from Investing Activities:
Proceeds from sale of land and buildings 1,113,759 2,125,220 5,271,796
Additions to land and buildings on operating leases -- (125,000) (1,900,790)
Investment in direct financing leases -- -- (911,072)
Investment in joint venture (129,978) (765,201) (1,090,062)
Collections on mortgage notes receivable 1,052,885 19,931 9,265
------------ ------------ ------------
Net cash provided by investing activities 2,036,666 1,254,950 1,379,137
------------ ------------ ------------
Cash Flows from Financing Activities:
Contributions from general partner -- -- 106,000
Distributions to limited partners (2,000,000) (3,913,327) (2,300,000)
------------ ----------- ------------
Net cash used in financing activities (2,000,000) (3,913,327) (2,194,000)
------------ ----------- ------------
Net Increase (Decrease) in Cash and Cash Equivalents 1,632,231 (1,008,642) 998,368
Cash and Cash Equivalents at Beginning of Year 352,648 1,361,290 362,922
------------ ------------ ------------
Cash and Cash Equivalents at End of Year $ 1,984,879 $ 352,648 $ 1,361,290
============ ============ ============
</TABLE>
See accompanying notes to financial statements.
23
<PAGE>
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
STATEMENTS OF CASH FLOWS - CONTINUED
------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31,
1999 1998 1997
----------- ------------ -------------
<S> <C> <C> <C>
Reconciliation of Net Income to Net Cash
Provided by Operating Activities:
Net Income $ 1,435,646 $ 1,544,895 $ 1,731,915
----------- ------------ ------------
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 243,260 267,254 324,431
Minority interest in loss of consolidated
joint venture (78,543) (67,013) (54,622)
Equity in earnings of unconsolidated joint
ventures, net of distributions (122,860) 41,898 (2,839)
Gain on sale of land and buildings (396,066) (444,113) (409,311)
Bad debt expense -- 5,882 9,007
Provisions for loss on land and buildings 308,310 403,157 250,694
Decrease in net investment in direct
financing leases 38,000 38,017 42,682
Decrease (increase) in accrued interest on
mortgage note receivable 9,429 (6,533) 6,788
Decrease (increase) in receivables 31,982 17,333 (43,006)
Decrease (increase) in prepaid expenses (2,586) 7,435 1,109
Increase in accrued rental income (60,127) (70,237) (19,527)
Increase (decrease) in accounts payable
and accrued expenses 67,770 (100,554) (12,509)
Increase (decrease) in due to related parties 121,368 19,181 (13,322)
Increase (decrease) in rents paid in advance
and deposits (18) (6,867) 1,741
----------- ------------ ------------
Total adjustments 159,919 104,840 81,316
----------- ------------ ------------
Net Cash Provided by Operating Activities $ 1,595,565 $ 1,649,735 $ 1,813,231
=========== ============ ============
Supplemental Schedule of Non-Cash Investing
and Financing Activities:
Deferred real estate disposition fees
incurred and unpaid at end of year $ -- $ 65,400 $ --
=========== ============ ============
Distributions declared and unpaid at
December 31 $ 500,000 $ 500,000 $ 575,000
=========== ============ ============
</TABLE>
See accompanying notes to financial statements.
24
<PAGE>
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
-----------------------------
Years Ended December 31, 1999, 1998, and 1997
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 generally 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.
25
<PAGE>
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
-----------------------------------------
Years Ended December 31, 1999, 1998, and 1997
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. Whenever a tenant
defaults under the terms of its lease, or events or changes
in circumstance indicate that the tenant will not lease the
property through the end of the lease term, the Partnership
either reserves or reverses the cumulative accrued rental
income balance.
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. If an impairment is
indicated, the assets are adjusted to their fair value. 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.
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.
26
<PAGE>
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED.
-----------------------------------------
Years Ended December 31, 1999, 1998, and 1997
1. Significant Accounting Policies - Continued:
-------------------------------------------
The Partnership accounts for its interest in Cocoa Joint Venture, Halls
Joint Venture, RTO Joint Venture, Duluth Joint Venture, and a property in
each of Mesa, Arizona and Vancouver, Washington, held as tenants-in-common
with affiliates of the general partners, 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.
27
<PAGE>
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
-----------------------------------------
Years Ended December 31, 1999, 1998, and 1997
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, some leases have been classified
as direct financing leases. Substantially all leases are for 12 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 five
successive five-year periods subject to the same terms and conditions as
the initial lease. Most leases also allow the tenant to purchase the
property at fair market value after a specified portion of the lease has
elapsed.
3. Land and Buildings on Operating Leases:
--------------------------------------
Land and buildings on operating leases consisted of the following at
December 31:
<TABLE>
<CAPTION>
1999 1998
-------------- --------------
<S> <C> <C>
Land $ 4,763,707 $ 5,352,136
Buildings 7,405,142 7,857,598
-------------- --------------
12,168,849 13,209,734
Less accumulated depreciation (1,998,386) (1,895,755)
-------------- --------------
10,170,463 11,313,979
Less allowance for loss on
land and buildings (962,161) (653,851)
-------------- --------------
$ 9,208,302 $10,660,128
============== ==============
</TABLE>
28
<PAGE>
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
-----------------------------------------
Years Ended December 31, 1999, 1998, and 1997
3. Land and Buildings on Operating Leases - Continued:
--------------------------------------------------
During the year ended December 31, 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 totaling $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 totaling 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 10).
In July 1997, the Partnership entered into a new lease for the property in
Connorsville, Indiana, with a new tenant to operate the property as an
Arby's restaurant. In connection therewith, during 1998, the Partnership
paid $125,000 in renovation costs
In 1997, the Partnership established an allowance for loss on land and
buildings of $99,023, for financial reporting purposes, relating to the
property in Lebanon, New Hampshire. Due to the fact that the Partnership
has not been able to successfully re-lease this property, at December 31,
1998, the Partnership increased the allowance by $122,875 for this property
which is owned by the Partnership's consolidated joint venture,
CNL/Longacre Joint Venture. At December 31, 1998, the Partnership also
established an allowance for loss on land and building of $124,670 relating
to the property located in Daleville, Indiana, due to the fact that the
tenant terminated the lease with the Partnership. In addition, during
1999, CNL/Longacre Joint Venture increased its allowance by $169,482 for
the property in Lebanon, New Hampshire, based on a change in the estimated
net realizable value for the property. The allowances represent the
difference between the net carrying values of the properties at December
31, 1998 and 1999, respectively, and estimated net realizable values of
these properties.
In addition, in 1997, the Partnership established an allowance for loss on
building of $151,671 for financial reporting purposes, relating to the
property in Belding, Michigan. The Partnership increased the allowance by
$155,612 during 1998 based on a change in the estimated net realizable
value for the property. In addition, during 1999, the Partnership
increased the allowance by $138,828 which represents the difference between
the carrying value of the property at December 31, 1999 and the net sales
proceeds from the sale of the property to a third party in March 2000 (see
Note 13).
During the year ended December 31, 1999, the Partnership sold its
properties in Endicott and Ithaca, New York to the tenant for a total of
$1,125,000 and received net sales
29
<PAGE>
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
-----------------------------------------
Years Ended December 31, 1999, 1998, and 1997
3. Land and Buildings on Operating Leases - Continued:
--------------------------------------------------
proceeds of $1,113,759, resulting in a total gain of $213,503 for financial
reporting purposes. These properties were originally acquired by the
Partnership in December 1989 and had costs totaling approximately $942,000,
excluding acquisition fees and miscellaneous acquisition expenses;
therefore, the Partnership sold these properties for a total of
approximately $171,800 in excess of their original purchase price.
Some leases provide for escalating guaranteed minimum rents throughout the
lease terms. Income from these scheduled rent increases is recognized on a
straight-line basis over the terms of the leases. For the years ended
December 31, 1999, 1998, and 1997, the Partnership recognized $60,127,
$70,237, and $19,527, 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, 1999:
<TABLE>
<S> <C>
2000 $ 1,011,773
2001 1,011,773
2002 957,742
2003 987,672
2004 990,720
Thereafter 7,167,350
------------
$12,127,030
============
</TABLE>
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.
30
<PAGE>
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
-----------------------------------------
Years Ended December 31, 1999, 1998, and 1997
4. Net Investment Direct Financing Leases:
--------------------------------------
The following lists the components of the net investment in direct
financing leases at December 31:
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Minimum lease payments
receivable $ 3,039,591 $ 3,260,110
Estimated residual values 566,502 566,502
Less unearned income (1,935,127) (2,117,646)
----------- -----------
Net investment in direct
financing leases $ 1,670,966 $ 1,708,966
=========== ===========
</TABLE>
The following is a schedule of future minimum lease payments to be received
on direct financing leases at December 31, 1999:
<TABLE>
<S> <C>
2000 $ 220,518
2001 220,518
2002 220,518
2003 220,518
2004 220,518
Thereafter 1,937,001
----------
$3,039,591
==========
</TABLE>
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).
In June 1998, the Partnership terminated its lease with the tenant of the
property in Daleville, Indiana. As a result, the Partnership reclassified
these assets from net investment in direct financing lease to land and
building on operating lease. In accordance with Statement of Financial
Accounting Standards #13, "Accounting for Leases," the Partnership recorded
the reclassified assets at the lower of original cost, present fair value,
or present carrying value. No loss on termination of direct financing
lease was recorded for financial reporting purposes.
31
<PAGE>
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
-----------------------------------------
Years Ended December 31, 1999, 1998, and 1997
5. Investment in Joint Ventures:
----------------------------
As of December 31, 1999, the Partnership had a 43 percent, 48.9%, 53.12%,
and 12 percent interest in the profits and losses of Cocoa Joint Venture,
Halls Joint Venture, RTO Joint Venture and Duluth Joint Venture,
respectively. The remaining interests in these joint ventures are held by
affiliates of the Partnership which have the same general partners.
In addition, the Partnership owns a property in each of Mesa, Arizona and
Vancouver, Washington, as tenants-in-common with affiliates of the general
partners. As of December 31, 1999, the Partnership owned a 42.09% and a
27.78% interest in the properties, respectively.
In May, 1998, the Partnership entered into a joint venture arrangement, RTO
Joint Venture, with an affiliate of the general partners, to construct and
hold one restaurant property. Construction was completed and rent
commenced in December 1998. As of December 31, 1999, the Partnership had
contributed $766,746 to the joint venture. The Partnership holds a 53.12%
interest in the profits and losses of the joint venture.
In June 1999, Halls Joint Venture, in which the Partnership owns a 48.9%
interest, sold its property to the tenant in accordance with the purchase
option under the lease agreement for $891,915. This resulted in a gain to
the joint venture of approximately $239,300 for financial reporting
purposes. The property was originally contributed to Halls Joint Venture
in February 1990 and had a total cost of approximately $672,000, excluding
acquisition fees and miscellaneous acquisition expenses; therefore, the
joint venture sold the property for approximately $219,900 in excess of its
original purchase price.
In December 1999, the Partnership entered into a joint venture arrangement,
Duluth Joint Venture, with an affiliate of the general partners, to hold
one restaurant property. As of December 31, 1999, the Partnership had
contributed $129,978 to the joint venture. The Partnership holds a 12
percent interest in the profits and losses of the joint venture.
Cocoa Joint Venture, RTO Joint Venture, Duluth Joint Venture, and the
Partnership and affiliates as tenants-in-common in two separate tenancy-in-
common arrangements, each own and lease one property to an operator of
national fast-food or family-style restaurants.
32
<PAGE>
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
-----------------------------------------
Years Ended December 31, 1999, 1998, and 1997
5. Investment in Joint Ventures - Continued:
----------------------------------------
The following presents the combined condensed financial information for all
of the Partnership's investments in joint ventures at December 31:
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Land and buildings on operating
leases, less accumulated
depreciation $5,234,614 $4,812,568
Net investment in direct financing
lease 808,773 817,525
Cash 934,873 17,992
Receivables 13,051 5,168
Prepaid expenses 823 458
Accrued rental income 106,225 112,279
Liabilities 59,298 46,398
Partners' capital 7,039,061 5,719,592
Revenues 634,266 555,103
Net income 780,488 454,922
Gain on sale of land and building 239,336 --
</TABLE>
The Partnership recognized income totaling $337,698, $173,941, and $56,015
for the years ended December 31, 1999, 1998, and 1997, 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 $991,332 due in July 2000. 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 $1,255, $1,134, and $1,024, for the years ended
December 31, 1999, 1998, and 1997, respectively.
33
<PAGE>
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
-----------------------------------------
Years Ended December 31, 1999, 1998, and 1997
6. Mortgage Notes Receivable - Continued:
-------------------------------------
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 was collateralized
by a mortgage on the property. The promissory note bore interest at a rate
of 10.75% per annum and was being collected in 12 monthly installments of
interest only, and thereafter in 168 equal monthly installments of
principal and interest. 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 $2,157 and $338
for the years ended December 31, 1998 and 1997, respectively. During the
year ended December 31, 1999, the Partnership collected the outstanding
balance of $1,043,770 relating to the promissory note and in connection
therewith, recognized the remaining gain of $181,308 relating to the
property sale.
The mortgage notes receivable consisted of the following at December 31:
<TABLE>
<CAPTION>
1999 1998
--------- ----------
<S> <C> <C>
Principal balance $ 997,096 $2,049,981
Accrued interest receivable 8,516 17,945
Less deferred gains on sale of land
and buildings (137,303) (319,866)
--------- ----------
$ 868,309 $1,748,060
========= ==========
</TABLE>
The general partners believe that the estimated fair values of mortgage
notes receivable at December 31, 1999 and 1998, 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. Receivables:
-----------
In June 1997, the Partnership terminated the leases with the tenant of the
properties in Connorsville and Richmond, Indiana. In connection therewith,
the Partnership accepted a promissory note from the former tenant for
$35,297 for amounts relating to past due real estate taxes. The promissory
note is uncollateralized, bears interest at a rate of ten percent per
annum, and is being collected in 36 monthly installments. Receivables at
34
<PAGE>
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
-----------------------------------------
Years Ended December 31, 1999, 1998, and 1997
7. Receivables - Continued:
-----------------------
December 31, 1999 and 1998, included $9,219 and $25,783, respectively of
such amounts, including accrued interest of $76 in 1999.
8. 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 not in
liquidation of the Partnership, to the extent distributed, will be
distributed first to the limited partners in an amount sufficient to
provide them with their 10% Preferred Return, plus the return of their
adjusted capital contributions. The general partners will then receive, to
the extent previously subordinated and unpaid, a one percent interest in
all prior distributions of net cash flow and a return of their capital
contributions. Any remaining sales proceeds will be distributed 95 percent
to the limited partners and five percent to the general partners.
Any gain from the sale of a property not in liquidation of the Partnership
is, in general, allocated in the same manner as net sales proceeds are
distributable. Any loss from the sale of a property is, in general,
allocated first, on a pro rata basis, to partners with positive balances in
their capital accounts; and thereafter, 95 percent to the limited partners
and five percent to the general partners.
Generally, net sales proceeds from a liquidating sale of properties, will
be used in the following order: (i) first to pay and discharge all of the
Partnership's liabilities to creditors, (ii) second, to establish reserves
that may be deemed necessary for any anticipated or unforeseen liabilities
or obligations of the Partnership, (iii) third, to pay all of the
Partnership's liabilities, if any, to the general and limited partners,
(iv) fourth, after allocations of net income, gains and/or losses, to
distribute to the partners with positive capital accounts balances, in
proportion to such balances, up to amount sufficient to reduce such
positive balances to zero, and (v) thereafter, any funds remaining shall
then be distributed 95 percent to the limited partners and five percent to
the general partners.
35
<PAGE>
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
-----------------------------------------
Years Ended December 31, 1999, 1998, and 1997
8. Allocations and Distributions - Continued:
-----------------------------------------
During the years ended December 31, 1999, 1998, and 1997, the Partnership
declared distributions to the limited partners of $2,000,000, $3,838,327,
and $2,300,000, respectively. Distributions for 1998 included $1,838,327
as a result of the distribution of net sales proceeds from the 1997 and
1998 sales 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.
36
<PAGE>
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
-----------------------------------------
Years Ended December 31, 1999, 1998, and 1997
9. Income Taxes:
------------
The following is a reconciliation of net income for financial reporting
purposes to net income for federal income tax purposes for the years ended
December 31:
<TABLE>
<CAPTION>
1999 1998 1997
---------------- ---------------- -----------------
<S> <C> <C> <C>
Net income for financial reporting purposes $1,435,646 $1,544,895 $1,731,915
Depreciation for tax reporting purposes less tan (in
excess of) depreciation for financial reporting purposes (35,961) 18,802 (23,618)
Gain on disposition of land and buildings for financial
reporting purposes in excess of gain for tax reporting
purposes (13,664) (16,347) (354,648)
Allowance for loss on land and buildings 308,310 403,157 250,694
Direct financing leases recorded as operating leases for
tax reporting purposes 37,999 38,017 42,682
Equity in earning of unconsolidated joint ventures for
tax reporting purposes in excess of (less than) equity
in earnings of unconsolidated joint ventures for
financial reporting purposes 4,201 10,795 (1,914)
Capitalization of transaction costs for tax reporting
purposes 125,291 14,644 --
Allowance for doubtful accounts 12,245 3,613 100,149
Accrued rental income (60,127) (70,237) (19,527)
Capitalization of administrative expenses for tax
reporting purposes -- 22,990 --
Rents paid in advance (18) (6,867) 1,241
Minority interest in temporary differences of
consolidated joint venture (55,146) (84,622) (41,515)
Other -- 1,705 36,721
---------------- ---------------- -----------------
Net income for federal income tax purposes $1,758,776 $1,880,545 $1,722,180
================ ================ =================
</TABLE>
37
<PAGE>
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
-----------------------------------------
Years Ended December 31, 1999, 1998, and 1997
10. Related Party Transactions:
--------------------------
One of the individual general partners, James M. Seneff, Jr., is one of the
principal shareholders of CNL Holdings, Inc. The other individual general
partner, Robert A. Bourne, serves as President and Treasurer of CNL
Financial Group, Inc., a wholly owned subsidiary of CNL Holdings, Inc., CNL
Fund Advisors, Inc. (the "Advisor") was a majority owned subsidiary of CNL
Financial Group, Inc. until it merged with CNL American Properties Fund,
Inc. ("APF"), effective September 1, 1999. The individual general partners
are stockholders and directors of APF.
The Advisor provides certain services relating to management of the
Partnership and its properties pursuant to a management agreement with the
Partnership. In connection therewith, the Partnership agreed to pay the
Advisor 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 in the same geographic area. These fees are incurred and 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 1999,
1998, and 1997.
The Advisor of the Partnership is 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 Advisor
provides a substantial amount of services in connection with the sale.
However, if the net sales proceeds are reinvested in a replacement
property, no such real estate disposition fees will be incurred until such
replacement property is sold and the net sales proceeds are distributed.
The payment of the real estate disposition fee is subordinated to the
receipt by the limited partners of their aggregate 10% Preferred Return,
plus their adjusted capital contributions. During the year ended December
31, 1998, the Partnership incurred a deferred, subordinated real estate
disposition fee of $65,400, as the result of the sale of property during
1998. No deferred, subordinated real
38
<PAGE>
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
-----------------------------------------
Years Ended December 31, 1999, 1998, and 1997
10. Related Party Transactions - Continued:
--------------------------------------
disposition fee was incurred for the year ended December 31, 1999 and 1997
due to the reinvestment of net sales proceeds in additional properties.
During the years ended December 31, 1999, 1998, and 1997, the Advisor and
its provided accounting and administrative services to the Partnership on a
day-to-day basis including services relating to the proposed and terminated
merger described in Note 12. The Partnership incurred $97,136, $94,611,
and $80,145 for the years ended December 31, 1999, 1998, and 1997,
respectively, for such services.
The due to related parties consisted of the following at December 31:
<TABLE>
<CAPTION>
1999 1998
---------------- -----------------
<S> <C> <C>
Due to the Advisor and its affiliates::
Expenditures incurred on behalf of the
Partnership $153,743 $ 77,907
Accounting and administrative services
95,245 50,641
Deferred, subordinated real estate
disposition fee 99,900 99,900
---------------- -----------------
$348,888 $228,448
================ =================
</TABLE>
11. Concentration of Credit Risk:
-----------------------------
The following schedule presents total rental and earned income (including
mortgage interest income) from individual lessees, or affiliated groups of
lessees, each representing more than ten percent of the Partnership's total
rental and earned income (including the Partnership share of total rental
and earned income from unconsolidated joint ventures and the properties
held as tenants-in-common with affiliates of the general partners) for each
of the years ended December 31:
<TABLE>
<CAPTION>
1999 1998 1997
-------------- --------------- ---------------
<S> <C> <C> <C>
Golden Corral Corporation $195,511 $195,511 $195,511
Slaymaker Group, Inc. 184,082 N/A N/A
Shoney's, Inc N/A N/A 229,795
</TABLE>
39
<PAGE>
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
-----------------------------------------
Years Ended December 31, 1999, 1998, and 1997
11. Concentration of Credit Risk - Continued:
----------------------------------------
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 and mortgage interest income (including the Partnership's
share of total rental and earned income from joint ventures and the
properties held as tenants-in-common with affiliates of the general
partners) for each of the years ended December 31:
<TABLE>
<CAPTION>
1999 1998 1997
-------------- --------------- -----------------
<S> <C> <C> <C>
Golden Corral Family Steakhouse $195,511 $195,511 $ N/A
Taco Bell 184,260 N/A N/A
Tony Roma's 184,082 184,082 N/A
Wendy's Old Fashioned Hamburger Restaurant N/A 220,347 302,253
Denny's N/A N/A 312,510
Perkins N/A N/A 228,492
</TABLE>
The information denoted by N/A indicates that for each period presented,
the tenant and the chains did not represent more than ten percent of the
Partnership's total rental and earned income (including mortgage interest
income).
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 if the Partnership is not able to re-lease the properties in a
timely manner.
12. Termination of Merger:
---------------------
On March 11, 1999, the Partnership entered into an Agreement and Plan of
Merger with CNL American Properties Fund, Inc. ("APF"), pursuant to which
the Partnership would be merged with and into a subsidiary of APF (the
"Merger"). Under the Agreement and Plan of Merger, APF was to issue shares
of its common stock as consideration for the Merger. On March 1, 2000, the
General Partners and APF announced that they had mutually agreed to
terminate the Agreement and Plan of Merger. The agreement to terminate the
Agreement and Plan of Merger was based, in large part, on the General
40
<PAGE>
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
-----------------------------------------
Years Ended December 31, 1999, 1998, and 1997
12. Termination of Merger - Continued:
---------------------------------
Partners' concern that, in light of market conditions relating to publicly
traded real estate investment trusts, the value of the transaction had
diminished. As a result of such diminishment, the General Partners'
ability to unequivocally recommend voting for the transaction, in the
exercise of their fiduciary duties, had become questionable.
13. Subsequent Event:
----------------
In March 2000, the Partnership sold its property in Belding, Michigan, to a
third party, for $135,000 and received net sales proceeds of $124,346,
resulting in a loss of $138,828 for financial reporting purposes which the
Partnership recorded at December 31, 1999 (see Note 3).
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 Financial Group, Inc. and their affiliates, all of
which are affiliates of the General Partners.
James M. Seneff, Jr., age 53, 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 co-
venturer in over 100 real estate ventures. These ventures have involved the
financing, acquisition, construction, and leasing of restaurants, office
buildings, apartment complexes, hotels, and other real estate. Mr. Seneff is a
principal stockholder of CNL Holdings, Inc., the parent company of CNL Financial
Group, Inc. (formerly CNL Group, Inc.), a diversified real estate company, and
has served as a director, Chairman of the Board and Chief Executive Officer of
CNL Financial Group, Inc. since its formation in 1980. Mr. Seneff has served as
a director and Chairman of the Board since inception in 1994, and served as
Chief Executive Officer from 1994 through August 1999, of CNL American
Properties Fund, Inc., a public, unlisted real estate investment trust. He also
served as a director, Chairman of the Board and Chief Executive Officer of CNL
Fund Advisors, Inc., the advisor to CNL American Properties Fund, Inc. until it
merged with the company in September 1999. In addition, he serves as a director,
Chairman of the Board and Chief Executive Officer of CNL Health Care Properties,
Inc., as well as CNL Health Care Corp., the advisor to the company. He also
serves as director, Chairman of the Board and Chief Executive
41
<PAGE>
Officer of CNL Hospitality Properties, Inc., a public, unlisted real estate
investment trust, as well as CNL Hospitality Corp., its advisor. Since 1992, Mr.
Seneff has served as Chairman of the Board and Chief Executive Officer of
Commercial Net Lease Realty, Inc., a public real estate investment trust that is
listed on the New York Stock Exchange. Mr. Seneff has also served as a director,
Chairman of the Board and Chief Executive Officer of the following affiliated
companies since formation: CNL Securities Corp., since 1979; CNL Investment
Company, since 1990; and CNL Institutional Advisors, a registered investment
advisor for pension plans, since 1990. Mr. Seneff formerly served as a director
of First Union National Bank of Florida, N.A., and currently serves as the
Chairman of the Board of CNLBank. Mr. Seneff 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 is Florida's principal investment advisory and
money management agency and oversees the investment of more than $60 billion of
retirement funds. Mr. Seneff received his degree in Business Administration from
Florida State University in 1968.
Robert A. Bourne, age 52, Since joining CNL Securities Corp. in 1979, Mr.
Bourne has participated as a general partner or co-venturer in over 100 real
estate ventures involved in the financing, acquisition, construction, and
leasing of restaurants, office buildings, apartment complexes, hotels, and other
real estate. Mr. Bourne is the President and Treasurer of CNL Financial Group,
Inc. (formerly CNL Group, Inc.). Mr. Bourne has served as a director since
inception in 1994, President from 1994 through February 1999, Treasurer from
February 1999 through August 1999, and Vice Chairman of the Board since February
1999 of CNL American Properties Fund, Inc., a public, unlisted real estate
investment trust. He also served in the following positions for CNL Fund
Advisors, Inc., the advisor to CNL American Properties Fund, Inc. prior to its
merger with CNL American Properties Fund, Inc.: director from 1994 through
August 1999, Treasurer from July 1998 through August 1999, President from 1994
through September 1997, and Vice Chairman of the Board from September 1997
through August 1999. Mr. Bourne is a director and President of CNL Health Care
Properties, Inc., as well as a director and President of CNL Health Care Corp.,
the advisor to the company. He is also a director, Vice Chairman of the Board
and President of CNL Hospitality Properties, Inc., a public, unlisted real
estate investment trust, as well as CNL Hospitality Corp., its advisor. Mr.
Bourne also serves as a director of CNLBank. He has served as a director since
1992, Vice Chairman of the Board since February 1996, Secretary and Treasurer
from February 1996 through 1997, and President from July 1992 through February
1996, of Commercial Net Lease Realty Inc., a public real estate investment trust
listed on the New York Stock Exchange. Mr. Bourne holds the following positions
for these affiliates of CNL Financial Group, Inc.: director, President and
Treasurer of CNL Investment Company; director, President, Treasurer, and
Registered Principal of CNL Securities Corp., a subsidiary of CNL Investment
Company and director, President, Treasurer, and Chief Investment Officer of CNL
Institutional Advisors, Inc., a registered investment advisor for pension plans.
Mr. Bourne began his career as a certified public accountant employed by Coopers
& Lybrand, Certified Public Accountants, from 1971 through 1978, where he
attained the position of tax manager in 1975. Mr. Bourne graduated from Florida
State University in 1970 where he received a B.A. in Accounting, with honors.
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 is located at 450 South Orange Avenue, Orlando, Florida 32801.
CNL Fund Advisors, Inc. was a majority owned subsidiary of CNL Financial Group,
Inc., until its merger effective September 1, 1999. On September 1, 1999, CNL
American Properties Fund, Inc. acquired CNL Fund Advisors, Inc. and was
organized to perform property acquisition, property management and other
services.
CNL Financial Group, Inc., which was the parent company of CNL Fund
Advisors, Inc. through August 1999, was organized in 1980 under the laws of the
State of Florida. CNL Financial Group, Inc. is a diversified real estate
company which provides a wide range of real estate, development and financial
services to companies in the United States through the activities of its
subsidiaries. These activities are primarily focused on the franchised
restaurant and hospitality industries. 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 Financial Group, Inc. Mr. Seneff and
his wife own all of the outstanding shares of CNL Holdings, Inc., the Parent
company of CNL Financial Group, Inc.
42
<PAGE>
The following persons serve as operating officers of CNL Financial 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 Financial Group, Inc. and its affiliated companies.
Curtis B. McWilliams, age 44, joined CNL Financial Group, Inc. in April
1997 and served as an Executive Vice President through August 1999. He serves
as Chief Executive Officer of CNL American Properties Fund, Inc. and CNL Fund
Advisors, Inc. In addition, Mr. McWilliams served as President of CNL Fund
Advisors, Inc. and as President of the Restaurant and Financial Services Groups
within CNL Financial Group, Inc. through August 1999. Mr. McWilliams served as
President of CNL American Properties Fund, Inc. from February 1999 through
August 1999 and previously served as Executive Vice President from February 1998
through February 1999. From September 1983 through March 1997, Mr. McWilliams
was employed by Merrill Lynch & Co., most recently as Chairman of Merrill
Lynch's Private Advisory Services until March 1997. Mr. McWilliams received a
B.S.E. in Chemical Engineering from Princeton University in 1977 and a Masters
of Business Administration with a concentration in finance from the University
of Chicago in 1983.
John T. Walker, age 41, serves as President and Chief Operating Officer of
CNL American Properties Fund, Inc. and CNL Fund Advisors, Inc. He served as
Executive Vice President of CNL American Properties Fund, Inc. from January 1996
through August 1999, as Chief Operating Officer since March 1995 through August
1999, and previously served as Senior Vice President from December 1994 through
August 1999. In addition, Mr. Walker has served as Executive Vice President of
CNL Fund Advisors, Inc. since January 1996 through August 1999, Chief Operating
Officer from April 1995 through August 1999, and previously served as Senior
Vice President from November 1994 through January 1996. In addition, Mr. Walker
previously served as Executive Vice President of CNL Hospitality Properties,
Inc. and CNL Hospitality Advisors, Inc. As of September 1, 1999, Mr. Walker
serves as President for CNL American Properties Fund, Inc. From May 1992 to May
1994, Mr. Walker, a certified public accountant, was Executive Vice President
for Finance and Administration and Chief Financial Officer of Z Music, Inc., a
cable television network (subsequently acquired by Gaylord Entertainment), where
he was responsible for overall financial and administrative management and
planning. From January 1990 through April 1992, Mr. Walker was Chief Financial
Officer of the First Baptist Church in Orlando, Florida. From April 1984
through December 1989, he was a partner in the accounting firm of Chastang,
Ferrell & Walker, P.A., where he was the partner in charge of audit and
consulting services, and from 1981 to 1984, Mr. Walker was a Senior
Consultant/Audit Senior at Price Waterhouse. Mr. Walker is a Cum Laude graduate
of Wake Forest University with a B.S. in Accountancy and is a certified public
accountant.
Lynn E. Rose, age 51, Ms. Rose served as Secretary of CNL American
Properties Fund, Inc., a public, unlisted real estate investment trust, from
1994 through August 1999, and served as Treasurer from 1994 through February
1999. She also served as Treasurer of CNL Fund Advisors, Inc., from 1994
through July 1998, and served as Secretary and a director from 1994 through
August 1999, at which point it merged with CNL American Properties Fund, Inc.
In addition, she is Secretary and Treasurer of CNL Health Care Properties, Inc.,
and serves as Secretary of its subsidiaries. In addition, she serves as
Secretary, Treasurer and a director of CNL Health Care Corp., the advisor. to
the company. Ms. Rose also serves as Secretary and Treasurer of CNL Hospitality
Properties, Inc., a public, unlisted real estate investment trust, as Secretary,
Treasurer and a director of CNL Hospitality Corp., its Advisor, and as Secretary
of the subsidiaries of the company. Ms. Rose served as Secretary and Treasurer
of Commercial Net Lease Realty, Inc., a public real estate investment trust
listed on the New York Stock Exchange, from 1992 to February 1996, and as
Secretary and a director of CNL Realty Advisors, Inc., its advisor, from its
inception in 1991 through 1997. She also served as Treasurer of CNL Realty
Advisors, Inc. from 1991 through February 1996. Ms. Rose, a certified public
accountant, has served as Secretary of CNL Financial Group, Inc. (formerly CNL
Group, Inc.) since 1987, served as Controller from 1987 to 1993 and has served
as Chief Financial Officer since 1993. She also serves as Secretary of the
subsidiaries of CNL Financial Group, Inc. and holds various other offices in the
subsidiaries. In addition, she serves as Secretary for approximately 50
additional corporations affiliated with CNL Financial Group, Inc. and its
subsidiaries. Ms. Rose oversees the tax and legal compliance for over 375
corporations, partnerships and joint ventures, and the accounting and financial
reporting for over 200 entities. 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. She was licensed as a certified public accountant in 1979.
43
<PAGE>
Jeanne A. Wall, age 41, Ms. Wall served as Executive Vice President of CNL
American Properties Fund, Inc., a public, unlisted real estate investment trust,
from 1994 through August 1999, and as Executive Vice President of CNL Fund
Advisors, Inc., its advisor, from 1994 through August 1999, at which point it
merged with CNL American Properties Fund, Inc. Ms. Wall also serves as
Executive Vice President of CNL Health Care Properties, Inc. and CNL Health Care
Corp., the Advisor to the Company. Ms. Wall also serves as Executive Vice
President of CNL Hospitality Properties, Inc., a public, unlisted real estate
investment trust, and serves as Executive Vice President and a director of CNL
Hospitality Corp., its advisor. She also serves as a director for CNLBank. Ms.
Wall serves as Executive Vice President of CNL Financial Group, Inc. (formerly
CNL Group, Inc.). Ms. Wall has served as Chief Operating Officer of CNL
Investment Company and of CNL Securities Corp. since 1994 and has served as
Executive Vice President of CNL Investment Company since January 1991. In 1984,
Ms. Wall joined CNL Securities Corp. and in 1985, became Vice President. In
1987, she became a Senior Vice President and in July 1997, became Executive 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 product development,
communications and investor services for programs offered through participating
brokers. Ms. Wall also served as Senior Vice President of CNL Institutional
Advisors Inc., a registered investment advisor, from 1990 to 1993. Ms. Wall
served as Vice President of Commercial Net Lease Realty, Inc., a public real
estate investment trust listed on the New York Stock Exchange, from 1992 through
1997, and served as Vice President of CNL Realty Advisors, Inc. from its
inception in 1991 through 1997. Ms. Wall currently serves as a trustee on the
Board of the Investment Program Association, is a member of the Corporate
Advisory Council for the International Association for Financial Planning and is
a member of IWF, International Women's Forum. In addition, she previously
served on the Direct Participation Program committee for the National
Association of Securities Dealers, Inc. Ms. Wall holds a B.A. in Business
Administration from Linfield College and is a registered principal of CNL
Securities Corp.
Steven D. Shackelford, age 36, a certified public accountant, serves as
Senior Vice President, Chief Financial Officer, and Secretary of CNL American
Properties Fund, Inc. and CNL Fund Advisors, Inc. He served as Chief Financial
Officer of CNL American Properties Fund, Inc. from January 1997 and as Chief
Financial Officer of CNL Fund Advisors, Inc. since September 1996 through August
1999. From March 1995 to July 1996, Mr. Shackelford 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 audit 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.
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 March 15, 2000, 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 March 15, 2000, the beneficial
ownership interests of the General Partners in the Registrant.
<TABLE>
<CAPTION>
Percent
Title of Class Name of Partner of Class
-------------- --------------- --------
<S> <C> <C>
General Partnership Interests James M. Seneff, Jr. 45%
Robert A. Bourne 45%
CNL Realty Corporation 10%
--------
100%
========
</TABLE>
Neither the General Partners, nor any of their affiliates, owns any
interest in the Registrant, except as noted above.
44
<PAGE>
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, 1999, exclusive of any distributions to which the General Partners
or their affiliates may be entitled by reason of their purchase and ownership of
Units.
<TABLE>
<CAPTION>
Amount Incurred
Type of Compensation For the Year
and Recipient Method of Computation Ended December 31, 1999
- -------------------------------- ---------------------------------------- ---------------------------------
<S> <C> <C>
Reimbursement to affiliates Operating expenses are reimbursed at Operating expenses incurred on
for operating expenses the lower of cost or 90 percent of behalf of the Partnership:
the prevailing rate at which $122,719
comparable services could have been
obtained in the same geographic area. Accounting and administra-tive
Affiliates of the General Partners services: $97,136
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 gross $ -0-
management fee to affiliates 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, 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.
</TABLE>
45
<PAGE>
<TABLE>
<CAPTION>
Amount Incurred
Type of Compensation For the Year
and Recipient Method of Computation Ended December 31, 1999
- ------------------------------- ---------------------------------------- ---------------------------------
<S> <C> <C>
Deferred, subordinated real A deferred, subordinated real estate $-0-
estate disposition fee disposition fee, payable upon sale of
payable to affiliates one or more Properties, in an amount
equal to the lesser of (i) one-half
of a competitive real estate
commission, or (ii) three percent of
the sales price of such Property or
Properties. Payment of such fee
shall be made only if affiliates of
the General Partners provide a
substantial amount of services in
connection with the sale of a
Property or Properties and shall be
subordinated to certain minimum
returns to the Limited Partners.
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' deferred, A deferred, subordinated share equal $-0-
subordinated share of to one percent of Partnership
Partnership net cash flow distributions of net cash flow,
subordinated to certain minimum
returns to the Limited Partners.
General Partners' deferred, A deferred, subordinated share equal $-0-
subordinated share of to five percent of Partnership
Partnership net sales distributions of such net sales
proceeds from a sale or sales proceeds, subordinated to certain
not in liquidation of the minimum returns to the Limited
Partnership Partners.
</TABLE>
46
<PAGE>
<TABLE>
<CAPTION>
Amount Incurred
Type of Compensation For the Year
And Recipient Method of Computation Ended December 31, 1999
- ------------------------------- ---------------------------------------- ---------------------------------
<S> <C> <C>
General Partners' share of Distributions of net sales proceeds $-0-
Partnership net sales from a sale or sales of substantially
proceeds from a sale or sales all of the Partnership's assets will
in liquidation of the be distributed in the following order
Partnership or priority: (i) first, to pay all
debts and liabilities of the
Partnership and to establish
reserves; (ii) second, to Partners
with positive capital account
balances, determined after the
allocation of net income, net loss,
gain and loss, in proportion to such
balances, up to amounts sufficient to
reduce such balances to zero; and
(iii) thereafter, 95% to the Limited
Partners and 5% to the General
Partners.
</TABLE>
47
<PAGE>
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 Certified Public Accountants
Balance Sheets at December 31, 1999 and 1998
Statements of Income for the years ended December 31, 1999, 1998, and
1997
Statements of Partners' Capital for the years ended December 31, 1999,
1998, and 1997
Statements of Cash Flows for the years ended December 31, 1999, 1998,
and 1997
Notes to Financial Statements
2. Financial Statement Schedules
Schedule II - Valuation and Qualifying Accounts for the years ended
December 31, 1999, 1998, and 1997
Schedule III - Real Estate and Accumulated Depreciation at December
31, 1999
Notes to Schedule III - Real Estate and Accumulated Depreciation at
December 31, 1999
Schedule IV - Mortgage Loans on Real Estate at December 31, 1999
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 From 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.)
48
<PAGE>
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.)
27 Financial Data Schedule (Filed herewith.)
(b) The Registrant filed no reports on Form 8-K during the period from
October 1, 1999 through December 31, 1999.
49
<PAGE>
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 27th day of
March, 2000.
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.
<PAGE>
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.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Robert A. Bourne President, Treasurer and Director March 27, 2000
- ------------------------------------
Robert A. Bourne (Principal Financial and Accounting
Officer)
/s/ James M. Seneff, Jr. Chief Executive Officer and Director March 27, 2000
- ------------------------------------
James M. Seneff, Jr. (Principal Executive Officer)
</TABLE>
<PAGE>
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
-----------------------------------------------
Years Ended December 31, 1999, 1998, and 1997
<TABLE>
<CAPTION>
Additions Deductions
---------------------------- -----------------------------
Collected
or Deter-
Balance at Charged to Charged to Deemed mined to Balance
Beginning Costs and Other Uncollec- be Col- at End
Year Description of Year Expenses Accounts tible lectible of Year
- --- ------------- ------------ ------------ ------------ ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1997 Allowance for
doubtful
accounts (a) $ 37,743 $9,007 $92,395 (b) $ -- (c) $ 1,253 $137,892
============= ============ ============ =========== =========== ==========
1998 Allowance for
doubtful
accounts (a) $137,892 $ -- $17,303 (b) $3,094 (c) $10,596 $141,505
============= ============ ============ =========== =========== ==========
1999 Allowance for
doubtful
accounts (a) $141,505 $ -- $13,070 (b) $ -- $ 825 $153,750
============= ============ ============ =========== =========== ==========
</TABLE>
(a) deducted from receivables on the balance sheet.
(b) reduction of rental and other income.
(c) amounts written off as uncollectible.
F-1
<PAGE>
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
-------------------------------------------------------
December 31, 1999
<TABLE>
<CAPTION>
Costs Capitalized
Subsequent To
Initial Cost Acquisition
--------------------------- ------------------------
Encum- Buildings 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:
Daleville, Indiana (l) (n) - 125,562 404,935 - -
New Castle, Indiana - 117,394 471,340 - -
Golden Corral Family
Steakhouse Restaurants:
Livingston, Texas - 156,382 429,107 - -
Victoria, Texas - 504,787 742,216 - -
Hardee's Restaurants:
Belding, Michigan (j) - 113,884 564,805 - -
Connorsville, Indiana - 279,665 - 591,137 -
South Haven, Michigan - 120,847 599,339 120,363 -
IHOP:
Houston, Texas - 513,384 671,713 - -
Pizza Hut Restaurant:
Mexia, Texas - 237,944 200,501 - -
Taco Bell Restaurants:
Bountiful, Utah - 330,164 - 319,511 -
Centralia, Washington - 215,302 - 378,836 -
Tony Romas:
Sandy, Utah - 595,330 - - -
Wendy's Old Fashioned
Hamburger Restaurants:
Tampa, Florida - 336,216 462,401 - -
Other:
Lebanon, New Hampshire (g) (m) - 448,726 - 696,741 -
---------- ---------- ---------- ---------
$4,763,707 $4,930,138 $2,475,004 -
========== ========== ========== =========
<CAPTION>
Life on Which
Gross Amount at Which Depreciation in
Carried at Close of Period (c) Date Latest Income
--------------------------------------
Buildings and Accumulated of Con- Date Statement is
Land Improvements Total Depreciation struction Acquired Computed
---------- ------------- ----------- ------------ --------- -------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Properties the Partnership
has Invested in Under
Operating Leases:
Burger King Restaurant:
Lawrenceville, Georgia $ 482,070 $ 368,416 $ 850,486 $ 128,946 1989 04/89 (b)
Captain D's Restaurant:
Belleville, Illinois 186,050 383,781 569,831 138,054 1988 03/89 (b)
Denny's Restaurant:
Daleville, Indiana (l) (n) 125,562 404,935 530,497 26,378 1974 02/89 (l)
New Castle, Indiana 117,394 471,340 588,734 112,708 1989 02/89 (h)
Golden Corral Family
Steakhouse Restaurants:
Livingston, Texas 156,382 429,107 585,489 147,802 1986 09/89 (b)
Victoria, Texas 504,787 742,216 1,247,003 248,257 1989 12/89 (b)
Hardee's Restaurants:
Belding, Michigan (j) 113,884 564,805 678,689 109,721 1989 03/89 (i)
Connorsville, Indiana 279,665 591,137 870,802 174,228 1989 03/89 (b)
South Haven, Michigan 120,847 719,702 840,549 154,743 1989 03/89 (i)
IHOP:
Houston, Texas 513,384 671,713 1,185,097 46,958 1997 11/97 (b)
Pizza Hut Restaurant:
Mexia, Texas 237,944 200,501 438,445 71,846 1985 03/89 (b)
Taco Bell Restaurants:
Bountiful, Utah 330,164 319,511 649,675 110,498 1989 05/89 (b)
Centralia, Washington 215,302 378,836 594,138 127,331 1989 08/89 (b)
Tony Romas:
Sandy, Utah 595,330 (f) 595,330 (d) 1997 12/97 (d)
Wendy's Old Fashioned
Hamburger Restaurants:
Tampa, Florida 336,216 462,401 798,617 166,977 1987 02/89 (b)
Other:
Lebanon, New Hampshire (g) (m) 448,726 696,741 1,145,467 233,939 1989 03/89 (b)
---------- ---------- ----------- ----------
$4,763,707 $7,405,142 $12,168,849 $1,998,386
========== ========== =========== ==========
</TABLE>
F-2
<PAGE>
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION - CONTINUED
-------------------------------------------------------------------
December 31, 1999
<TABLE>
<CAPTION>
Costs Capitalized
Subsequent To
Initial Cost Acquisition
------------------------- ---------------------
Encum- Building and Improve- Carrying
brances Land Improvements ments Costs
------- ---------- ------------ ----------- --------
<S> <C> <C> <C> <C> <C>
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 in Which the Partnership
has a 42.09% Interest as
Tenants-in-Common and has
Invested in Under an
Operating Lease:
Boston Market Restaurant:
Mesa, Arizona (k) - $ 440,842 $ 650,622 - -
========== ========== ========== ========
Property in Which the Partnership
has a 27.78% Interest as
Tenants-in-Common and has
Invested in Under an
Operating Lease:
Chevy's Fresh Mex Restaurant:
Vancouver, Washington - $ 875,659 $1,389,366 - -
========== ========== ========== ========
Property of Joint Venture
in Which the Partnership
has a 53.12% Interest and has
Invested in Under an
Operating Lease:
Ruby Tuesday's Restaurant:
Orlando, Florida - $ 623,496 - - -
========== ========== ========== ========
Property of Joint Venture
in Which the Partnership
has a 12% Interest and has
Invested in Under an
Operating Lease:
Roadhouse Grill:
Duluth, Georgia - $1,083,153 - - -
========== ========== ========== ========
<CAPTION>
Life on Which
Gross Amount at Which Depreciation in
Carried at Close of Period (c) Date Latest Income
--------------------------------------
Buildings and Accumulated of Con- Date Statement is
Land Improvements Total Depreciation struction Acquired Computed
---------- ------------- ----------- ------------ --------- -------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
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 $ 376,086 $ 64,337 1986 12/89 (b)
========== ========== ========== =========
Property in Which the Partnership
has a 42.09% Interest as
Tenants-in-Common and has
Invested in Under an
Operating Lease:
Boston Market Restaurant:
Mesa, Arizona (k) $ 440,842 $ 650,622 $1,091,464 $ 47,524 1997 10/97 (b)
========== ========== ========== =========
Property in Which the Partnership
has a 27.78% Interest as
Tenants-in-Common and has
Invested in Under an
Operating Lease:
Chevy's Fresh Mex Restaurant:
Vancouver, Washington $ 875,659 $1,389,366 $2,265,025 $ 92,749 1994 12/97 (b)
========== ========== ========== =========
Property of Joint Venture
in Which the Partnership
has a 53.12% Interest and has
Invested in Under an
Operating Lease:
Ruby Tuesday's Restaurant:
Orlando, Florida $ 623,496 (f) $ 623,496 (d) 1998 05/98 (d)
========== ==========
Property of Joint Venture
in Which the Partnership
has a 12% Interest and has
Invested in Under an
Operating Lease:
Roadhouse Grill:
Duluth, Georgia $1,083,153 (o) $1,083,153 (p) (o) 12/99 (p)
========== ==========
</TABLE>
F-3
<PAGE>
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION - CONTINUED
-------------------------------------------------------------------
December 31, 1999
<TABLE>
<CAPTION>
Cost Capitalized
Subsequent to
Initial Cost Acquisition
---------------------------- -----------------------
Encum- Building and Improve- Carrying
brances Land Improvements ments Costs
------- ---------- -------------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Properties the Partnership
has Invested in Under
Direct Financing Leases:
Captain D's Restaurant
Zanesville, Ohio - $ 99,651 $ 390,518 - -
Denny's Restaurant:
Huron, Ohio - 27,418 456,139 - -
Tony Romas:
Sandy, Utah - - 911,072 - -
-------- ---------- --------- ---------
$127,069 $1,757,729 - -
======== ========== ========= =========
Property of Joint Venture
in Which the Partnership
has a 53.12% Interest and
has Invested in Under a
Direct Financing Lease:
Ruby Tuesday's Restaurant:
Orlando, Florida - - $ 820,202 - -
======== ========== ========= =========
<CAPTION>
Life on Which
Gross Amount at Which Depreciation in
Carried at Close of Period (c) Date Latest Income
--------------------------------------
Buildings and Accumulated of Con- Date Statement is
Land Improvements Total Depreciation struction Acquired Computed
---------- ------------- ----------- ------------ --------- -------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Properties the Partnership
has Invested in Under
Direct Financing Leases:
Captain D's Restaurant
Zanesville, Ohio (f) (f) (f) (e) 1988 03/89 (e)
Denny's Restaurant:
Huron, Ohio (f) (f) (f) (e) 1971 05/89 (e)
Tony Romas:
Sandy, Utah - (f) (f) (d) 1997 12/97 (d)
Property of Joint Venture
in Which the Partnership
has a 53.12% Interest and
has Invested in Under a
Direct Financing Lease:
Ruby Tuesday's Restaurant:
Orlando, Florida - (f) (f) (d) 1998 05/98 (d)
</TABLE>
F-4
<PAGE>
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED
---------------------------------------------------
DEPRECIATION - CONTINUED
------------------------
December 31, 1999
(a) Transactions in real estate and accumulated depreciation during 1999, 1998
and 1997, are summarized as follows:
<TABLE>
<CAPTION>
Accumulated
Cost Depreciation
------------------- ---------------------
<S> <C> <C>
Properties the Partnership has Invested in Under Operating
Leases:
Balance, December 31, 1996 $17,715,978 $2,346,374
Dispositions (3,099,783) (726,447)
Depreciation Expense (j)(n) -- 324,431
------------------- ---------------------
Balance, December 31, 1997 14,616,195 1,944,358
Reclassification from direct financing lease 530,497 --
Dispositions (1,936,958) (315,857)
Depreciation expense (j)(m)(n) -- 267,254
------------------- ---------------------
Balance, December 31, 1998 13,209,734 1,895,755
Dispositions (1,040,885) (140,629)
Depreciation expense -- 243,260
------------------- ---------------------
Balance, December 31, 1999 $12,168,849 $1,998,386
=================== =====================
Property of Joint Venture in Which the Partnership has a 43%
Interest and has Invested in Under an Operating Lease:
Balance, December 31, 1996 $ 376,086 $ 45,053
Depreciation expense -- 6,428
------------------- ---------------------
Balance, December 1997 376,086 51,481
Depreciation expense -- 6,428
------------------- ---------------------
Balance, December 31, 1998 376,086 57,909
Depreciation expense -- 6,428
------------------- ---------------------
Balance, December 31, 1999 $ 376,086 $ 64,337
=================== =====================
</TABLE>
F-5
<PAGE>
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED
---------------------------------------------------
DEPRECIATION - CONTINUED
------------------------
December 31, 1999
<TABLE>
<CAPTION>
Accumulated
Cost Depreciation
------------------------ ------------------------
<S> <C> <C>
Property of Joint Venture in Which the Partnership has
48.90% Interest and has Invested in Under Operating
Leases:
Balance, December 31, 1996 $ 714,367 $ 98,994
Depreciation expense -- 14,347
------------------------ ------------------------
Balance, December 31, 1997 714,367 113,341
Depreciation expense -- 14,347
------------------------ ------------------------
Balance, December 31, 1998 714,367 127,688
Disposition (714,367) (133,744)
Depreciation expense -- 6,056
------------------------ ------------------------
Balance, December 31, 1999 (q) $ -- $ --
======================== ========================
Property of Joint Venture in Which the Partnership has
a 42.09% Interest as Tenants-in-common and has
Invested in Under an Operating Lease:
Balance, December 31, 1996 $ -- $ --
Acquisition 1,091,464 --
Depreciation expense -- 4,021
------------------------ ------------------------
Balance, December 31, 1997 1,091,464 4,021
Depreciation Expense -- 21,816
------------------------ ------------------------
Balance, December 31, 1998 1,091,464 25,837
Depreciation expense -- 21,687
------------------------ ------------------------
Balance, December 31, 1999 $1,091,464 $ 47,524
======================== ========================
Property of Joint Venture in Which the Partnership has a 27.78%
Interest as Tenants-in-common and has Invested in Under an
Operating Lease:
Balance, December 31, 1996 $ -- $ --
Acquisition 2,265,025 --
Depreciation expense -- 127
------------------------ ------------------------
Balance, December 31, 1997 2,265,025 127
Depreciation expense -- 46,309
------------------------ ------------------------
Balance, December 31, 1998 2,265,025 46,436
Depreciation expense -- 46,313
------------------------ ------------------------
Balance, December 31, 1999 $2,265,025 $ 92,749
======================== ========================
</TABLE>
F-6
<PAGE>
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED
---------------------------------------------------
DEPRECIATION - CONTINUED
------------------------
December 31, 1999
<TABLE>
<CAPTION>
Accumulated
Cost Depreciation
------------------------ ----------------------------
<S> <C> <C>
Property of Joint Venture in Which the Partnership has a
53.12% Interest and has Invested in Under an Operating Lease:
Balance, December 31, 1997 $ -- $ --
Acquisition 623,496 --
Depreciation expense (d) -- --
------------------------ ----------------------------
Balance, December 31, 1998 623,496 --
Depreciation (d) -- --
------------------------ ----------------------------
Balance, December 31, 1999 $ 623,496 $ --
======================== ============================
Property of Joint Venture in Which the Partnership has a 12%
Interest and has Invested in Under an Operating Lease:
Balance, December 31, 1998 $ -- $ --
Acquisition (o) 1,083,153 --
Depreciation expense (p) -- --
------------------------ ----------------------------
Balance, December 31, 1999 $ 1,083,153 $ --
======================== ============================
</TABLE>
(b) Depreciation expense is computed for buildings and improvements based upon
estimated lives of 30 years.
(c) As of December 31, 1999, 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 $12,649,043 and
$7,425,882, respectively. All of the leases are treated as operating
leases for federal income tax purposes.
(d) For financial reporting purposes, the portion of the lease relating to the
building has been recorded as a direct financing lease. The cost of the
building has been included in the net investment in direct financing
leases; therefore, depreciation is not applicable.
(e) For financial reporting purposes, the lease for 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,
depreciation is not applicable.
(f) For financial reporting purposes, certain components of the lease relating
to the land and building have been recorded as a direct financing lease.
Accordingly, costs related to these components of this lease are not shown.
F-7
<PAGE>
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED
---------------------------------------------------
DEPRECIATION - CONTINUED
------------------------
December 31, 1999
(g) The restaurant on the Property in Lebanon, New Hampshire, was converted
from a Ponderosa Steakhouse restaurant to a local, independent restaurant
in 1992.
(h) Effective January 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.
(i) Effective February 1994, the lease for this Property was terminated,
resulting in the lease's reclassification as an operating lease. The
building was recorded at net book value as of February 1994 and will be
depreciated over its remaining estimated life of approximately 25 years.
(j) For financial reporting purposes, the undepreciated cost of the Property in
Belding, Michigan, was written down to net realizable value to due an
impairment in value. The Partnership recognized the impairment by
recording an allowance for loss on building in the amount of $307,283 as of
December 31, 1998. The impairment at December 31, 1998 represented the
difference between the Property's carrying value and estimated net
realizable value of the Property. The Partnership increased the allowance
by $138,828 during 1999. This increase was based on the difference between
the estimated net value of the Property at December 31, 1999, and the net
sales proceeds from the sale of the Property to a third party in March
2000. The cost of the Property presented on this schedule is the gross
amount at which the Property was carried at December 31, 1999, excluding
the allowance for loss on building.
(k) During the year ended December 31, 1997, the Partnership and an affiliate,
as tenants-in-common, purchased land and building from CNL BB Corp., an
affiliate of the General Partners, for an aggregate cost of $1,091,464.
(l) Effective March 1998, the lease for this property was terminated, resulting
in the lease being reclassified as an operating lease. The building was
recorded at net book value as of March 1998, and will be depreciated over
its remaining estimated life of approximately 20 years.
(m) For financial reporting proposes, the undepreciated cost of the Property in
Lebanon, New Hampshire, was written down to net realizable value due to an
impairment in value. The Partnership recognized the impairments by
recording an allowance for loss on land and building in the amount of
$169,482 and $221,898 at December 31, 1999 and 1998, respectively. The
impairments represent the difference between the Property's carrying value
and the estimated net realizable value of the Property at December 31, 1999
and 1998, respectively. The cost of the Property presented on this
schedule is the gross amount at which the Property was carried at December
31, 1999, excluding the allowances for loss on land and building.
(n) For financial reporting purposes, the undepreciated cost of the Property in
Daleville, Indiana, was written down to net realizable value due to an
impairment in value. The Partnership recognized the impairment by
recording an allowance for loss on the building in the amount of $124,670
for the year ended December 31, 1998. The impairment at December 31, 1998,
represents the difference between the Property's carrying value and the
estimated net realizable value of the Property. The cost of the Property
presented on this schedule is the gross amount at which the Property was
carried at December 31, 1999, excluding the allowance for loss on the
building.
(o) Building scheduled for completion in 2000.
F-8
<PAGE>
(p) Property was not placed in service as of December 31, 1999; therefore, no
depreciation was taken.
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED
---------------------------------------------------
DEPRECIATION - CONTINUED
------------------------
December 31, 1999
(q) During the year ended December 31, 1999, Halls Joint Venture, in which the
Partnership owns a 48.9% interest, sold its Property to the tenant in
accordance with the purchase option under the lease agreement. The joint
venture intends to reinvest the net sales proceeds in an additional
Property.
F-9
<PAGE>
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
SCHEDULE IV - MORTGAGE LOANS ON REAL ESTATE
-------------------------------------------
December 31, 1999
<TABLE>
<CAPTION>
Principal
Amount
of Loans
Subject to
Carrying Delinquent
Final Periodic Face Amount of Principal or
Interest Maturity Payment Prior Amount of Mortgages Description
Rate Date Terms Liens Mortgages (1) Interest
---------- ---------- ---------- ------- ----------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Perkins-
Myrtle Beach, FL
First Mortgage 10.25% July 2000 (2) $ -- $1,040,000 $ 868,309 (3) $ --
======= ============ =========== ==============
</TABLE>
(1) Carrying amount consists of outstanding principal plus
accrued interest less a deferred gain. The tax carrying
value of the note is $883,312, which is net of a deferred
gains of $131,519.
(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) The changes in the carrying amounts are summarized as
follows:
<TABLE>
<CAPTION>
1999 1998 1997
--------------- ------------- -------------
<S> <C> <C> <C>
Balance at beginning of period $ 1,748,060 $1,758,167 $1,772,858
Interest earned 129,936 223,031 211,263
Collections of principal and interest (1,192,250) (236,429) (227,316)
Recognition of deferred gain on sale of
land and building 182,563 3,291 1,362
--------------- ------------- -------------
Balance at end of period $ 868,309 $1,748,060 $1,758,167
=============== ============= =============
</TABLE>
F-10
<PAGE>
EXHIBIT INDEX
Exhibit Number
- --------------
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.)
27 Financial Data Schedule (Filed herewith.)
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the balance
sheet of CNL Income Fund V, Ltd. at December 31, 1999, and its statement of
income for the twelve months then ended and is qualified in its entirety by
reference to the Form 10-K of CNL Income Fund V, Ltd. for the twelve months
ended December 31, 1999.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 1,984,879
<SECURITIES> 0
<RECEIVABLES> 208,330
<ALLOWANCES> 153,750
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 11,206,688
<DEPRECIATION> 1,998,386
<TOTAL-ASSETS> 16,680,780
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 15,662,748
<TOTAL-LIABILITY-AND-EQUITY> 16,680,780
<SALES> 0
<TOTAL-REVENUES> 1,540,450
<CGS> 0
<TOTAL-COSTS> 608,801
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,435,646
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,435,646
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,435,646
<EPS-BASIC> 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>
