FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT of 1934
For the quarterly period ended September 30, 2000
----------------------------
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
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CNL Income Fund V, Ltd.
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(Exact name of registrant as specified in its charter)
Florida 59-2922869
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
450 South Orange Avenue
Orlando, Florida 32801-3336
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number
(including area code) (407) 540-2000
-----------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No _________
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CONTENTS
<S><C>
Part I Page
Item 1. Financial Statements:
Condensed Balance Sheets 1
Condensed Statements of Income 2
Condensed Statements of Partners' Capital 3
Condensed Statements of Cash Flows 4
Notes to Condensed Financial Statements 5-8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9-14
Item 3. Quantitative and Qualitative Disclosures About
Market Risk 14
Part II
Other Information 15-16
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CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
CONDENSED BALANCE SHEETS
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<CAPTION>
September 30, December 31,
2000 1999
------------------ -------------------
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ASSETS
Land and buildings on operating leases, less accumulated
depreciation and allowance for loss on land and buildings $ 8,914,266 $ 9,208,302
Net investment in direct financing leases 1,639,648 1,670,966
Investment in joint ventures 2,145,388 2,534,850
Mortgage notes receivable, less deferred gain of $136,510 and
$137,303, respectively 880,202 868,309
Cash and cash equivalents 1,631,179 1,984,879
Receivables, less allowance for doubtful accounts
of $189,277 and $153,750, respectively 37,562 54,580
Prepaid expenses 6,304 4,458
Accrued rental income 339,200 300,090
Other assets 41,908 54,346
------------------ -------------------
$ 15,635,657 $ 16,680,780
================== ===================
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 45,690 $ 81,476
Accrued real estate taxes payable 11,945 4,201
Distributions payable 937,500 500,000
Due to related parties 202,141 348,888
Rents paid in advance 5,787 6,094
------------------ -------------------
Total liabilities 1,203,063 940,659
Minority interest 31,894 77,373
Partners' capital 14,400,700 15,662,748
------------------ -------------------
$ 15,635,657 $ 16,680,780
================== ===================
See accompanying notes to condensed financial statements.
</TABLE>
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF INCOME
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<CAPTION>
Quarter Ended Nine Months Ended
September 30, September 30,
2000 1999 2000 1999
------------- ------------- ------------- ------------
<S><C>
Revenues:
Rental income from operating leases $ 265,980 $ 265,985 $ 803,649 $ 816,925
Earned income from direct financing leases 30,498 45,547 109,919 137,147
Contingent rental income 15,251 14,177 32,299 38,922
Interest and other income 43,087 45,154 124,695 147,128
------------- ------------- ------------- ------------
354,816 370,863 1,070,562 1,140,122
------------- ------------- ------------- ------------
Expenses:
General operating and administrative 105,066 32,761 190,841 103,763
Bad debt expense -- -- 18,673 --
Professional services 46,097 12,772 62,189 31,354
Real estate taxes 6,887 8,816 27,370 25,303
State and other taxes 268 -- 7,012 6,404
Depreciation 57,059 60,067 172,521 184,246
Transaction costs -- 44,344 46,166 135,532
------------- ------------- ------------- ------------
215,377 158,760 524,772 486,602
------------- ------------- ------------- ------------
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 Assets 139,439 212,103 545,790 653,520
Minority Interest in Loss of Consolidated Joint
Venture 37,236 65,186 45,479 74,358
Equity in Earnings of Unconsolidated Joint
Ventures 35,168 54,476 115,844 283,741
Gain on Sale of Land and Buildings 116 318 793 395,740
Provision for Loss on Assets (32,454 ) (169,482 ) (32,454 ) (169,482 )
------------- ------------- ------------- ------------
Net Income $ 179,505 $ 162,601 $ 675,452 $1,237,877
============= ============= ============= ============
Allocation of Net Income:
General partners $ 1,141 $ 1,625 $ 6,101 $ 10,782
Limited partners 178,364 160,976 669,351 1,227,095
------------- ------------- ------------- ------------
$ 179,505 $ 162,601 $ 675,452 $1,237,877
============= ============= ============= ============
Net Income Per Limited Partner Unit $ 3.57 $ 3.22 $ 13.39 $ 24.54
============= ============= ============= ============
Weighted Average Number of Limited Partners
Units Outstanding 50,000 50,000 50,000 50,000
============= ============= ============= ============
See accompanying notes to condensed financial statements.
</TABLE>
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF PARTNERS' CAPITAL
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<CAPTION>
Nine Months Ended Year Ended
September 30, December 31,
2000 1999
-------------------------- ----------------------
<S><C>
General partners:
Beginning balance $ 514,026 $ 503,730
Net income 6,101 10,296
-------------------------- ----------------------
520,127 514,026
-------------------------- ----------------------
Limited partners:
Beginning balance 15,148,722 15,723,372
Net income 669,351 1,425,350
Distributions ($38.75 and $40.00 per
limited partner unit, respectively) (1,937,500 ) (2,000,000 )
-------------------------- ----------------------
13,880,573 15,148,722
-------------------------- ----------------------
Total partners' capital $ 14,400,700 $ 15,662,748
========================== ======================
See accompanying notes to condensed financial statements.
</TABLE>
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF CASH FLOWS
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<CAPTION>
Nine Months Ended
September 30,
2000 1999
----------------- ---------------
<S><C>
Increase (Decrease) in Cash and Cash Equivalents
Net Cash Provided by Operating Activities $ 664,751 $1,268,379
----------------- ---------------
Cash Flows from Investing Activities:
Proceeds from sale of land and buildings 126,947 1,113,759
Additions to land and building on operating lease -- --
Return of capital from joint venture 440,689 --
Investment in joint venture (91,851 ) --
Collections on mortgage notes receivable 5,764 1,050,519
----------------- ---------------
Net cash provided by investing activities 481,549 2,164,278
----------------- ---------------
Cash Flows from Financing Activities:
Distributions to limited partners (1,500,000 ) (1,500,000 )
----------------- ---------------
Net cash used in financing activities (1,500,000 ) (1,500,000 )
----------------- ---------------
Net Increase (Decrease) in Cash and Cash Equivalents (353,700 ) 1,932,657
Cash and Cash Equivalents at Beginning of Period 1,984,879 352,648
----------------- ---------------
Cash and Cash Equivalents at End of Period $ 1,631,179 $2,285,305
================= ===============
Supplemental Schedule of Non-Cash Investing and
Financing Activities:
Deferred real estate disposition fees incurred
and unpaid at end of period $ 4,050 $ --
================= ===============
Distributions declared and unpaid at end
of period $ 937,500 $ 500,000
================= ===============
See accompanying notes to condensed financial statements.
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CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS
Quarters and Nine Months Ended September 30, 2000 and 1999
1. Basis of Presentation:
The accompanying unaudited condensed financial statements have been
prepared in accordance with the instructions to Form 10-Q and do not
include all of the information and note disclosures required by
generally accepted accounting principles. The financial statements
reflect all adjustments, consisting of normal recurring adjustments,
which are, in the opinion of management, necessary to a fair statement
of the results for the interim periods presented. Operating results for
the quarter and nine months ended September 30, 2000 may not be
indicative of the results that may be expected for the year ending
December 31, 2000. Amounts as of December 31, 1999, included in the
financial statements, have been derived from audited financial
statements as of that date.
These unaudited financial statements should be read in conjunction with
the financial statements and notes thereto included in Form 10-K of CNL
Income Fund V, Ltd. (the "Partnership") for the year ended December 31,
1999.
The Partnership accounts for its 66.5% interest in CNL/Longacre Joint
Venture using the consolidation method. Minority interest represents
the minority joint venture partner's proportionate share of the equity
in the Partnership's consolidated joint venture. All significant
intercompany accounts and transactions have been eliminated.
Certain items in the prior year's financial statements have been
reclassified to conform to 2000 presentation. These reclassifications
had no effect on partners' capital or net income.
2. Land and Buildings on Operating Leases:
Land and buildings on operating leases consisted of the following at:
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<CAPTION>
September 30, December 31,
2000 1999
--------------------- -----------------------
<S><C>
Land $ 4,649,824 $ 4,763,707
Buildings 6,840,336 7,405,142
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11,490,160 12,168,849
Less accumulated depreciation (2,059,845 ) (1,998,386 )
--------------------- -----------------------
9,430,315 10,170,463
Less allowance for loss on land and
buildings (516,049 ) (962,161 )
--------------------- -----------------------
$ 8,914,266 $ 9,208,302
===================== =======================
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CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS
Quarters and Nine Months Ended September 30, 2000 and 1999
2. Land and Buildings on Operating Leases - Continued:
During the nine months ended September 30, 2000, the Partnership sold
its property in Belding, Michigan, to a third party for $135,000 and
received net sales proceeds of approximately $126,900 resulting in a
loss of approximately $446,100 for financial reporting purposes. Due to
the fact that as of December 31, 1999, the Partnership had recorded an
allowance for loss on building of approximately $446,100, no gain or
loss was recorded for financial reporting purposes during the nine
months ended September 30, 2000. In connection with the sale, the
Partnership incurred a deferred, subordinated, real estate disposition
fee of $4,050 (see Note 5).
3. Investment in Joint Ventures:
In June 1999, Halls Joint Venture, in which the Partnership owned a
48.9% interest, sold its property to the tenant in accordance with the
purchase option under the lease agreement. As of September 30, 2000,
the Partnership and the joint venture partner had liquidated the joint
venture and the Partnership had received approximately $440,700
representing its pro rata share of the liquidation proceeds of the
joint venture.
In October 2000, the Partnership acquired the remaining 33.5% interest
in CNL/Longacre Joint Venture from its joint venture partner in
accordance with the terms of the joint venture agreement. In connection
therewith, the Partnership liquidated the joint venture and recorded a
loss on liquidation of approximately $32,500, for financial reporting
purposes. The Partnership recorded the expected loss as a provision for
loss on asset as of September 30, 2000.
4. Allocations and Distributions:
Generally, all net income and net losses of the Partnership, excluding
gains and losses from the sale of properties, are allocated 99 percent
to the limited partners and one percent to the general partners.
Distributions of net cash flow are made 99 percent to the limited
partners and one percent to the general partners; provided, however,
that the one percent of net cash flow to be distributed to the general
partners is subordinated to receipt by the limited partners of an
aggregate, ten percent, cumulative, noncompounded annual return on
their adjusted capital contributions (the "10% Preferred Return").
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS
Quarters and Nine Months Ended September 30, 2000 and 1999
4. Allocations and Distributions - Continued:
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.
During the nine months ended September 30, 2000 and 1999, the
Partnership declared distributions to the limited partners of
$1,937,500 and $1,500,000, respectively ($937,500 and $500,000 for the
quarters ended September 30, 2000 and 1999, respectively.) This
represents distributions of $38.75 and $30.00 per unit for the nine
months ended September 30, 2000 and 1999, respectively ($18.75 and
$10.00 per unit for the quarters ended September 30, 2000 and 1999,
respectively). Distributions for the nine months ended September 30,
2000, included $500,000 in a special distribution, as a result of the
distribution of net sales proceeds from the sale of the properties in
Belding, Michigan; Hall, Tennessee; Ithaca, New York and St. Cloud,
Florida. This amount was applied toward the limited partners' 10%
Preferred Return. No distributions have been made to the general
partners to date.
CNL INCOME FUND V, LTD.
(A Florida Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS
Quarters and Nine Months Ended September 30, 2000 and 1999
5. Related Party Transactions:
An affiliate of the Partnership is entitled to receive a deferred,
subordinated real estate disposition fee, payable upon the sale of one
or more properties based on the lesser of one-half of a competitive
real estate commission or three percent of the sales price if the
affiliate provides a substantial amount of services in connection with
the sale. However, if the net sales proceeds are reinvested in a
replacement property, no such real estate disposition fees will be
incurred until such replacement property is sold and the net sales
proceeds are distributed. The payment of the real estate disposition
fee is subordinated to receipt by the limited partners of their
aggregate 10% preferred return, plus their adjusted capital
contributions. During the nine months ended September 30, 2000, the
Partnership incurred a deferred, subordinated, real estate disposition
fee of $4,050 as a result of the sale of a property (see Note 2). No
deferred, subordinated, real estate disposition fees were incurred
during the nine months ended September 30, 1999.
6. Termination of Merger:
On March 1, 2000, the general partners and CNL American Properties
Fund, Inc. ("APF") mutually agreed to terminate the Agreement and Plan
of Merger entered into in March 1999. The general partners are
continuing to evaluate strategic alternatives for the Partnership,
including alternatives to provide liquidity to the limited partners.
7. Subsequent Event:
In October 2000, the Partnership sold its 12 percent interest in Duluth
Joint Venture to CNL Income Fund VII, Ltd., a Florida general
partnership and an affiliate of the Partnership. The net proceeds
received exceeded the basis of the interest in the joint venture.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
CNL Income Fund V, Ltd. (the "Partnership") is a Florida limited
partnership that was organized on August 17, 1988, to acquire for cash, either
directly or through joint venture arrangements, both newly constructed and
existing restaurants, as well as land upon which restaurants were to be
constructed, which are leased primarily to operators of national and regional
fast-food and family-style restaurant chains (collectively, the "Properties").
The leases generally are triple-net leases, with the lessees responsible for all
repairs and maintenance, property taxes, insurance and utilities. As of
September 30, 2000, the Partnership owned 22 Properties, which included
interests in four Properties owned by joint ventures in which the Partnership is
a co-venturer and two Properties owned with affiliates as tenants-in-common.
Capital Resources
During the nine months ended September 30, 2000 and 1999, the
Partnership generated cash from operations (which includes cash received from
tenants, distributions from joint ventures, and interest and other income
received, less cash paid for expenses). Cash from operations was $664,751 and
$1,268,379 for the nine months ended September 30, 2000 and 1999, respectively.
The decrease in cash from operations for the nine months ended September 30,
2000 was a result of changes in income and expenses, as described in "Results of
Operations" below, and changes in the Partnership's working capital.
Other sources and uses of capital included the following during the
nine months ended September 30, 2000.
During the nine months ended September 30, 2000, the Partnership sold
its Property in Belding, Michigan to a third party for $135,000 and received net
sales proceeds of approximately $126,900 resulting in a loss of approximately
$446,100 for financial reporting purposes. Due to the fact that as of December
31, 1999, the Partnership had recorded an allowance for loss on building of
approximately $446,100, no gain or loss was recorded for financial reporting
purposes during the nine months ended September 30, 2000. In connection with the
sale, the Partnership incurred a deferred, subordinated, real estate disposition
fee of $4,050. The Partnership distributed the majority of the net sales
proceeds to the limited partners, as described below.
In June 1999, Halls Joint Venture, in which the Partnership owned a
48.9% interest, sold its Property to the tenant in accordance with the purchase
option under the lease agreement. As of September 30, 2000, the Partnership and
the joint venture partner had liquidated the joint venture and the Partnership
had received approximately $440,700 representing its pro rata share of the
liquidation proceeds of the joint venture. The Partnership will use these
liquidation proceeds to pay liabilities of the Partnership and for other needs.
In October 2000, the Partnership acquired the remaining 33.5% interest
in CNL/Longacre Joint Venture from its joint venture partner in accordance with
the terms of the joint venture agreement. In connection therewith, the
Partnership liquidated the joint venture and recorded a loss on liquidation of
approximately $32,500, for financial reporting purposes. The Partnership
recorded the expected loss as a provision for loss on asset as of September 30,
2000.
In October 2000, the Partnership sold its 12 percent interest in Duluth
Joint Venture to CNL Income Fund VII, Ltd., a Florida general partnership and an
affiliate of the Partnership. The net proceeds received exceeded the basis of
the interest in the joint venture.
Currently, rental income from the Partnership's Properties and net
sales proceeds from the sale of Properties pending distributions to limited
partners are invested in money market accounts or other short-term, highly
liquid investments, such as demand deposit accounts at commercial banks and
certificates of deposit, with less than a 30-day maturity date, pending the
Partnership's use of such funds to pay Partnership expenses and to make
distributions to the partners. At September 30, 2000, the Partnership had
$1,631,179 invested in such short-term investments, as compared to $1,984,879 at
December 31, 1999. The funds remaining at September 30, 2000 after payment of
distributions for the quarter ended September 30, 2000, and other liabilities
will be used to meet the Partnership's working capital and other needs.
Short-Term Liquidity
The Partnership's short-term liquidity requirements consist primarily
of the operating expenses of the Partnership.
The Partnership's investment strategy of acquiring Properties for cash
and leasing them under triple-net leases to operators who meet specified
financial standards minimizes the Partnership's operating expenses. The general
partners believe that the leases will continue to generate cash flow in excess
of operating expenses.
The general partners have the right, but not the obligation, to make
additional capital contributions if they deem it appropriate in connection with
the operations of the Partnership.
Total liabilities of the Partnership increased to $1,203,063 at
September 30, 2000, from $940,659 at December 31, 1999. The increase in
liabilities was primarily attributable to the Partnership accruing a special
distribution of net sales proceeds of $500,000 from the sale of the Properties
in Belding, Michigan; Halls, Tennessee; Ithaca, New York and St. Cloud, Florida,
as described below, payable to the limited partners at September 30, 2000. The
increase in liabilities was partially offset by a decrease in accounts payable
and amounts due from related parties at September 30, 2000, as compared to
December 31, 1999. The general partners believe that the Partnership has
sufficient cash on hand to meet its working capital needs.
The Partnership generally distributes cash from operations remaining
after the payment of 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 for the nine
months ended September 30, 2000, a portion of the proceeds received from the
sale of the Property described above and the sale of Properties during 1999, as
described below, the Partnership declared distributions to limited partners of
$1,937,500 and $1,500,000 for the nine months ended September 30, 2000 and 1999,
respectively ($937,500 and $500,000 for the quarters ended September 30, 2000
and 1999, respectively.) This represents distributions of $38.75 and $30.00 per
unit for the nine months ended September 30, 2000 and 1999, respectively ($18.75
and $10.00 for the quarters ended September 30, 2000 and 1999, respectively.)
The distribution for the quarter ended September 30, 2000, included $500,000 of
net sales proceeds from the sale of the Properties in Belding, Michigan; Halls,
Tennessee; Ithaca, New York and St. Cloud, 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 return. As a result of the sale of
the Properties, the Partnership's total revenue was reduced and is expected to
remain reduced in subsequent periods, while the majority of the Partnership's
operating expenses remained and are expected to remain fixed. Therefore,
distributions of net cash flow were adjusted commencing during the quarter ended
September 30, 2000. No distributions were made to the general partners for the
quarters and nine months ended September 30, 2000 and 1999. No amounts
distributed to the limited partners for the nine months ended September 30, 2000
and 1999, are required to be or have been treated by the Partnership as a return
of capital for purposes of calculating the limited partners' return on their
adjusted capital contributions. The Partnership intends to continue to make
distributions of cash available for distribution to the limited partners on a
quarterly basis.
Long-Term Liquidity
The Partnership has no long-term debt or other long-term liquidity
requirements.
Results of Operations
During the nine months ended September 30, 1999, the Partnership and
its consolidated joint venture, CNL/Longacre Joint Venture, owned and leased 20
wholly owned Properties (which included two Properties which were sold in March
1999), and during the nine months ended September 30, 2000, the Partnership and
CNL/Longacre Joint Venture owned and leased 18 wholly owned Properties
(including one Property which was sold in during 2000) to operators of fast-food
and family-style restaurant chains. In connection therewith, during the nine
months ended September 30, 2000 and 1999, the Partnership and CNL/Longacre Joint
Venture earned $913,568 and $954,072, respectively, in rental income from
operating leases and earned income from direct financing leases, $296,478 and
$311,532 of which was earned during the quarters ended September 30, 2000 and
1999, respectively. The decrease in rental and earned income during the quarter
and nine months ended September 30, 2000, as compared to the quarter and nine
months ended September 30, 1999, was partially attributable to a decrease in
rental and earned income of approximately $14,000 and $24,200 during the quarter
and nine months ended September 30, 2000, respectively, due to the fact that
during the quarter and nine months ended September 30, 2000, the Partnership
established an allowance for doubtful accounts for past due rental amounts
relating to the Property in Huron, Ohio, in accordance with Partnership policy.
The general partners will continue to pursue collection of past due rental
amounts and will recognize such amounts as income if collected. Rental and
earned income also decreased during the nine months ended September 30, 2000, as
compared to the nine months ended September 30, 1999, by approximately $19,500
as a result of the sales of Properties during 1999 and 2000.
Rental and earned income during the quarters and nine months ended
September 30, 2000 and 1999 remained at reduced amounts due to the fact that the
Partnership did not receive any rental income relating to the Properties in
Daleville, Indiana and Lebanon, New Hampshire. Rental and earned income are
expected to remain at reduced amounts until such time as the Partnership
executes new leases or until the Properties are sold and the proceeds from such
sales are reinvested in additional Properties. The Partnership is currently
seeking either new tenants or purchasers for these Properties.
During the nine months ended September 30, 1999, the Partnership owned
and leased three Properties indirectly through joint venture arrangements
(including one Property in Halls Joint Venture, which was sold in June 1999) and
two Properties as tenants-in-common with affiliates of the general partners.
During the nine months ended September 30, 2000, the Partnership owned and
leased three Properties indirectly through joint venture arrangements and two
Properties as tenants-in-common, with affiliates of the general partners. In
connection therewith, the Partnership earned $115,844 and $283,741,
respectively, $35,168 and $54,476 of which was earned during the quarters ended
September 30, 2000 and 1999, respectively. The decrease in net income earned by
these joint ventures during the nine months ended September 30, 2000, as
compared to the nine months ended September 30, 1999, was primarily attributable
to the fact that in June 1999, Halls Joint Venture, in which the Partnership
owned a 48.9% interest, recognized a gain of approximately $239,300 for
financial reporting purposes as a result of the sale of its Property in June
1999. During the nine months ended September 30, 2000, Halls Joint Venture was
dissolved as discussed above in "Capital Resources."
In addition, the decrease in net income earned by joint ventures during
the quarter and nine months ended September 30, 2000 was partially attributable
to the fact that in 1998, a tenant of a Property in which the Partnership owns a
42.09% interest with an affiliate of the general partners, as tenants-in-common,
filed for bankruptcy and, rejected the lease relating to the only Property
leased by this tenant. As a result, this tenant discontinued making rental
payments on the rejected lease. As a result of the tenant rejecting the lease,
rental and earned income of this joint venture decreased by approximately
$31,500 during the quarter and nine months ended September 30, 2000. In
addition, the joint venture reversed approximately $31,500 of accrued rental
income. The accrued rental income was the accumulated amount of non-cash
accounting adjustments previously recorded in order to recognize future
scheduled rent increases as income evenly over the term of the lease. The
tenants-in-common will not recognize any rental and earned income from this
vacant Property until a new tenant for this Property is located. The lost
revenues resulting from the rejected and vacant Property could have an adverse
effect on the results of operation of the tenants-in-common if the
tenants-in-common is not able to re-lease the Property in a timely manner. The
tenants-in-common are currently seeking a new tenant or purchaser for the
rejected and vacant Property.
During the nine months ended September 30, 2000 and 1999, the
Partnership earned $124,695 and $147,128, respectively, in interest and other
income, $43,087 and $45,154 of which was earned during the quarters ended
September 30, 2000 and 1999, respectively. The decrease in interest and other
income during the nine months ended September 30, 2000, as compared to the nine
months ended September 30, 1999, was primarily attributable to the fact that
during the nine months ended September 30, 1999, the Partnership collected the
outstanding balance relating to the promissory note the Partnership accepted in
connection with the sale of its Property in St.
Cloud, Florida in 1996.
Operating expenses, including depreciation expense, were $524,772 and
$486,602 for the nine months ended September 30, 2000 and 1999, respectively, of
which $215,377 and $158,760 were incurred for the quarters ended September 30,
2000 and 1999, respectively. Operating expenses increased during the quarter and
nine months ended September 30, 2000, as compared to the quarter and nine months
ended September 30, 1999, due to the fact that CNL/Longacre Joint Venture, the
Partnership's consolidated joint venture, paid $60,000 as settlement for a
lawsuit against the consolidated joint venture. Even though the Partnership and
CNL/Longacre Joint Venture believed there was no merit to the lawsuit, they
elected to pay a settlement to avoid incurring large legal fees to defend this
lawsuit. Operating expenses also increased due to an increase in fees related to
settling the lawsuit. The Partnership and CNL/Longacre Joint Venture do not
anticipate incurring additional costs relating to this lawsuit.
The increase in operating expenses during the nine months ended
September 30, 2000 was partially due to the fact that the Partnership recorded
approximately $18,100 in bad debt expense and accrued approximately $5,400 in
real estate tax expense relating to the Property in Huron, Ohio. The general
partners will continue to pursue collection of such amounts and will record such
amounts as income when collected. In addition, the increase in operating
expenses during the quarter and nine months ended September 30, 2000, was
partially due to an increase in administrative expenses for servicing the
Partnership and its Properties.
The increase in operating expenses during the quarter and nine months
ended September 30, 2000 was partially offset by the fact that the Partnership
incurred less transaction costs during the quarter and nine months ended
September 30, 2000, related to the general partners retaining financial and
legal advisors to assist them in evaluating and negotiating the proposed merger
with CNL American Properties Fund, Inc. ("APF") due to the termination of the
proposed merger, as described below in "Termination of Merger." In addition, the
increase during the quarter and nine months ended September 30, 2000 was
partially offset by a decrease in depreciation expense as a result of the sale
of two properties in 1999, and one Property in January 2000.
Due to tenant defaults under the terms of their lease agreements for
the Properties in Daleville, Indiana, and Lebanon, New Hampshire, the
Partnership and its consolidated joint venture, CNL/Longacre Joint Venture, have
incurred and expect to continue to incur operating expenses such as repairs and
maintenance, insurance, and real estate tax expenses, relating to these
Properties until the Properties are sold or re-leased to new tenants. The
Partnership is currently seeking new tenants or purchasers for these Properties.
As a result of the sale of the Properties in Myrtle Beach, South
Carolina and St. Cloud, Florida in 1995 and 1996, respectively, and recording
the gains from such sales using the installment method, the Partnership
recognized gains for financial reporting purposes of $793 and $182,237 during
the nine months ended September 30, 2000 and 1999, respectively, $116 and $318
of which were recognized during the quarters ended September 30, 2000 and 1999,
respectively. The gain recognized during the nine months ended September 30,
1999 was higher than that recognized during the nine months ended September 30,
2000, due to the fact that during the nine months ended September 30, 1999, the
Partnership collected an advance payment of principal relating to the Property
in St. Cloud, Florida, which accelerated the recognition of the gain for
financial reporting purposes. In addition, as a result of the sales of the
Properties in Endicott and Ithaca, New York, the Partnership recognized a gain
of $213,503 for financial reporting purposes during the nine months ended
September 30, 1999.
During the quarter and nine months ended September 30, 2000, the
Partnership recorded a provision for loss of approximately $32,500 relating to
the anticipated loss in liquidation of a joint venture interest resulting from
the acquisition of the other joint venture partner's interest in CNL/Longacre
Joint Venture in October 2000, and the subsequent liquidation of the joint
venture.
As of December 31, 1998, the Partnership had established an allowance
for loss on land and building of $221,897 for financial reporting purposes
relating to the Property in Lebanon, New Hampshire, owned by the Partnership's
consolidated joint venture, CNL/Longacre Joint Venture. During the quarter and
nine months ended September 30, 1999, the Partnership increased the allowance by
$169,482 for this Property. The allowance represented the difference between the
net carrying value of the Property at September 30, 1999 and the current
estimate of net realizable value of this Property.
Termination of Merger
On March 1, 2000, the general partners and APF mutually agreed to
terminate the Agreement and Plan of Merger entered into in March 1999. The
general partners are continuing to evaluate strategic alternatives for the
Partnership, including alternatives to provide liquidity to the limited
partners.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
No material changes in the Partnership's market risk occurred from
December 31, 1999 through September 30, 2000. Information regarding the
Partnership's market risk at December 31, 1999 is included in its Annual Report
on Form 10-K for the year ended December 31, 1999.
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings. Inapplicable.
Item 2. Changes in Securities. Inapplicable.
Item 3. Default upon Senior Securities. Inapplicable.
Item 4. Submission of Matters to a Vote of Security Holders. Inapplicable.
Item 5. Other Information. Inapplicable.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
3.1 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.)
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter
ended September 30, 2000.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
DATED this 10th day of November, 2000
CNL INCOME FUND V, LTD.
By: CNL REALTY CORPORATION
General Partner
By: /s/ James M. Seneff, Jr.
-------------------------------------
JAMES M. SENEFF, JR.
Chief Executive Officer
(Principal Executive Officer)
By: /s/ Robert A. Bourne
-------------------------------------
ROBERT A. BOURNE
President and Treasurer
(Principal Financial and
Accounting Officer)
