UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
(Mark One)
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1996
---------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________________ to ___________________
Commission file number 0-23974
CNL INCOME FUND XIV, LTD.
(Exact name of registrant as specified in its charter)
Florida 59-3143096
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
400 East South Street, Suite 500
Orlando, Florida 32801
(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code: (407) 422-1574
Securities registered pursuant to Section 12(b) of the Act:
Title of each class: Name of exchange on which registered:
None Not Applicable
Securities registered pursuant to Section 12(g) of the Act:
Units of limited partnership interest ($10 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 $10 per Unit.
DOCUMENTS INCORPORATED BY REFERENCE:
None
<PAGE>
PART I
Item 1. Business
CNL Income Fund XIV, Ltd. (the "Registrant" or the "Partnership") is a
limited partnership which was organized pursuant to the laws of the State of
Florida on September 25, 1992. 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 August 27, 1993, the
Partnership offered for sale up to $45,000,000 of limited partnership interests
(the "Units") (4,500,000 Units at $10 per Unit) pursuant to a registration
statement on Form S-11 under the Securities Act of 1933, as amended, effective
March 17, 1993. The offering terminated on February 22, 1994, at which date the
maximum proceeds of $45,000,000 had been received from investors who were
admitted to the Partnership as limited partners ("Limited Partners").
The Partnership was organized to acquire both newly constructed and
existing restaurant properties, as well as properties upon which restaurants
were to be constructed (the "Properties"), which are leased primarily to
operators of national and regional fast-food and family-style restaurant chains
(the "Restaurant Chains"). Net proceeds to the Partnership from its offering of
Units, after deduction of organizational and offering expenses, totalled
$39,606,055 and were used to acquire 54 Properties, including 18 Properties
consisting of land only and four Properties owned by joint ventures in which the
Partnership is a co-venturer, to pay acquisition fees totalling $2,475,000 to an
affiliate of the General Partners and to establish a working capital reserve for
Partnership purposes. During the year ended December 31, 1995, the tenant of the
Checkers Property in Knoxville, Tennessee, and the Checkers Property in Dallas,
Texas, exercised its option in accordance with the lease agreements to
substitute two other Properties for the Knoxville, Tennessee and Dallas, Texas
Properties. The Partnership sold the Knoxville and Dallas Properties to the
tenant and used the net sales proceeds to acquire two Checkers Properties in
Coral Springs and St. Petersburg, Florida. In addition, during the year ended
December 31, 1996, Wood-Ridge Real Estate Joint Venture, a joint venture in
which the Partnership is a co-venturer with an affiliate of the General
Partners, sold its two Properties to the tenant. The joint venture reinvested
the majority of the net sales proceeds in four Boston Market Properties (one of
which consisted of only land) and one Golden Corral Property. The building
portion of the Boston Market in Murfreesboro, Tennessee, is owned by the tenant.
As a result of the above transactions, as of December 31, 1996, the Partnership
currently owned 57 Properties, including 18 wholly owned Properties consisting
of land only and interests in seven Properties owned by joint ventures in which
the Partnership is a co-venturer. The lessee of the 18 wholly owned Properties
consisting of only land owns the buildings currently on the land and has the
right, if not in default under the lease, to remove the buildings from the land
at the end of the lease terms. Generally, the Properties are leased on a
triple-net basis with the lessee responsible for all repairs and maintenance,
property taxes, insurance and utilities.
The Partnership will hold its Properties until the General Partners
determine that the sale or other disposition of the Properties is advantageous
in view of the Partnership's investment objectives. In deciding whether to sell
Properties, the General Partners will consider factors such as potential capital
appreciation, net cash flow and federal income tax considerations. Certain
lessees also have been granted options to purchase Properties, generally at the
Property's then fair market value after a specified portion of the lease term
has elapsed. In general, the General Partners plan to seek the sale of some of
the Properties commencing seven to 12 years after their acquisition. The
Partnership has no obligation to sell all or any portion of a Property at any
particular time, except as may be required under property purchase options
granted to certain lessees.
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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 15 to 20 years (the average being approximately 20 years) and
expire between 2008 and 2015. The leases are, in general, on a triple-net basis,
with the lessee responsible for all repairs and maintenance, property taxes,
insurance and utilities. The leases of the Properties provide for minimum base
annual rental payments (payable in monthly installments) ranging from
approximately $18,900 to $203,600. All of the leases provide for percentage
rent, based on sales in excess of a specified amount. In addition, the majority
of the leases provide that, commencing in specified lease years (generally the
sixth or ninth lease year), the annual base rent required under the terms of the
lease will increase.
Generally, the leases of the Properties provide for two to five
five-year renewal options subject to the same terms and conditions as the
initial lease. Certain lessees also have been granted options to purchase
Properties at the Property's then fair market value after a specified portion of
the lease term has elapsed. Under the terms of certain leases, the option
purchase price may equal the Partnership's original cost to purchase the
Property (including acquisition costs), plus a specified percentage from the
date of the lease or a specified percentage of the Partnership's purchase price,
if that amount is greater than the Property's fair market value at the time the
purchase option is exercised.
The leases for the 18 wholly owned Properties consisting of only land
are substantially the same as those described above except that the leases
relate solely to the land associated with the Property, with the tenant owning
the buildings currently on the land and having the right, if not in default
under the lease, to remove the buildings from the land at the end of the lease
term.
During 1994, a temporary operator assumed operations of the restaurant
business located at the Property in Akron, Ohio Property and paid the
Partnership rent on a month-to-month basis. During 1995, a new temporary
operator assumed operations of the restaurant business for this Property and is
paying the Partnership rent on a month-to-month basis. The Partnership is
currently seeking a permanent replacement tenant for this Property.
In September 1996, Wood-Ridge Real Estate Joint Venture sold its two
Properties to the tenant of these Properties and in October 1996, the joint
venture reinvested the majority of net sales proceeds in five Properties. In
addition, in January 1997, the joint venture reinvested the majority of the
remaining net sales proceeds in a Taco Bell Property located in Anniston,
Alabama. The lease terms for these Properties are substantially the same as the
Partnership's other leases as described above in the first two paragraphs of
this section.
Major Tenants
During 1996, five lessees (or group of affiliated lessees) of the
Partnership, (i) Flagstar Enterprises, Inc. and Denny's, Inc. (which are
affiliated entities under common control of Flagstar Corporation) (hereinafter
referred to as Flagstar Corporation), (ii) Foodmaker, Inc., (iii) Long John
Silver's, Inc., (iv) Checkers Drive-In Restaurants, Inc. and (v) Golden Corral
Corporation, each contributed more than ten percent of the Partnership's total
rental income (including the Partnership's share of rental income from seven
Properties owned by joint ventures). As of December 31, 1996, Flagstar
Corporation was the lessee under leases relating to 11 restaurants, Foodmaker,
Inc. was the lessee under leases relating to six restaurants, Long John
Silver's, Inc. was the lessee under leases relating to nine restaurants,
Checkers Drive-In Restaurants, Inc. was the lessee under leases relating to
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18 restaurants and Golden Corral Corporation was the lessee under leases
relating to four restaurants. It is anticipated that, based on the minimum
rental payments required by the leases, these five lessees (or group of
affiliated lessees) each will continue to contribute more than ten percent of
the Partnership's total rental income in 1997 and subsequent years. In addition,
six Restaurant Chains, Hardee's, Denny's, Jack in the Box, Long John Silver's,
Checkers and Golden Corral Family Steakhouse Restaurants ("Golden Corral"), each
accounted for more than ten percent of the Partnership's total rental income
during 1996 (including the Partnership's share of rental income from seven
Properties owned by joint ventures). In subsequent years, it is anticipated that
these six Restaurant Chains each will account for more than ten percent of the
total rental income to which the Partnership is entitled under the terms of the
leases. Any failure of these lessees or Restaurant Chains could materially
affect the Partnership's income. No single tenant or group of affiliated tenants
lease Properties with an aggregate carrying value, excluding acquisition fees
and certain acquisition expenses, in excess of 20 percent of the total assets of
the Partnership.
Joint Venture Arrangements
The Partnership entered into a joint venture arrangement, Attalla Joint
Venture, with an affiliate of the General Partners to purchase and hold one
Property. In August 1994, the Partnership entered into a joint venture
arrangement, Wood-Ridge Real Estate Joint Venture, with an affiliate of the
General Partners to purchase and hold two Properties. In September 1996,
Wood-Ridge Real Estate Joint Venture sold its two Properties to the tenant of
its Properties and in October 1996, the joint venture reinvested the majority of
net sales proceeds in four Boston Market Properties (one of which consisted of
only land) and one Golden Corral Property. The building portion of the Boston
Market Property in Murfreesboro, Tennessee, is owned by the tenant. In addition,
in March 1995, the Partnership entered into a joint venture arrangement, Salem
Joint Venture, with an affiliate of the General Partners to renovate and hold
one Property. The joint venture arrangements provide for the Partnership and its
joint venture partners to share in all costs and benefits associated with the
joint ventures in accordance with their respective percentage interests in the
joint ventures. The Partnership and its joint venture partners are also jointly
and severally liable for all debts, obligations and other liabilities of the
joint ventures.
Each joint venture has an initial term of 30 years and, after the
expiration of the initial term, continues in existence from year to year unless
terminated at the option of either of the joint venturers or 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 unless agreed to by mutual agreement of the Partnership and its joint
venture partners to reinvest the sales proceeds in replacement Properties, and
by mutual agreement of the Partnership and its joint venture partners to
dissolve the joint venture.
The Partnership shares management control equally with an affiliate of
the General Partners for Attalla Joint Venture, Wood-Ridge Real Estate Joint
Venture and Salem 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 Attalla Joint Venture, Wood-Ridge Real
Estate Joint Venture and Salem Joint Venture is distributed 50 percent, 50
percent and 72.2%, 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
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balances until such balances equal zero, and thereafter in proportion to each
joint venture partner's percentage interest in the joint venture.
Certain Management Services
CNL Investment Company, an affiliate of the General Partners, provided
certain services relating to management of the Partnership and its Properties
pursuant to a management agreement with the Partnership through December 31,
1994. Under this agreement, CNL Investment Company was responsible for
collecting rental payments, inspecting the Properties and the tenants' books and
records, assisting the Partnership in responding to tenant inquiries and notices
and providing information to the Partnership about the status of the leases and
the Properties. CNL Investment Company also assisted the General Partners in
negotiating the leases. For these services, the Partnership had agreed to pay
CNL Investment Company an annual fee of one percent of the sum of gross rental
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.
Effective January 1, 1995, certain officers and employees of CNL
Investment Company became officers and employees of CNL Income Fund Advisors,
Inc., an affiliate of the General Partners and CNL Investment Company assigned
its rights in, and its obligations under, the management agreement with the
Partnership to CNL Income Fund Advisors, Inc. In addition, effective October 1,
1995, CNL Income Fund Advisors, Inc. assigned its rights in, and its obligations
under, the management agreement with the Partnership to CNL Fund Advisors, Inc.
All of the terms and conditions of the management agreement, including the
payment of fees, as described above, remain unchanged.
The management agreement continues until the Partnership no longer owns
an interest in any Properties unless terminated at an earlier date upon 60 days'
prior notice by either party.
Competition
The fast-food and family-style restaurant business is characterized by
intense competition. The restaurants on the Partnership's Properties compete
with independently owned restaurants, restaurants which are part of local
or regional chains and restaurants in other well-known national chains,
including those offering different types of food and service.
At the time the Partnership elects to dispose of its Properties, other
than as a result of the exercise of tenant options to purchase Properties, the
Partnership will be in competition with other persons and entities to locate
purchasers for its Properties.
Employees
The Partnership has no employees. The officers of CNL Realty
Corporation and the officers and employees of CNL Fund Advisors, Inc. perform
certain services for the Partnership. In addition, the General Partners have
available to them the resources and expertise of the officers and employees of
CNL Group, Inc., a diversified real estate company, and its affiliates, who may
also perform certain services for the Partnership.
Item 2. Properties
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As of December 31, 1996, the Partnership owned, either directly or
through joint venture arrangements, 57 Properties, located in 17 states.
Reference is made to the Schedule of Real Estate and Accumulated Depreciation
filed with this report for a listing of the Properties and their respective
costs, including acquisition fees and certain acquisition expenses.
Description of Properties
Land. The Partnership's Property sites range from approximately 15,900
to 100,100 square feet depending upon building size and local demographic
factors. Sites purchased by the Partnership are in locations zoned for
commercial use which have been reviewed for traffic patterns and volume.
Buildings. Each of the Properties owned by the Partnership includes a
building that is one of a Restaurant Chain's approved designs. However, the
buildings located on the 18 Checkers Properties owned by the Partnership and the
Boston Market Property owned by Wood-Ridge Real Estate Joint Venture are owned
by the tenants. The buildings generally are rectangular and are constructed from
various combinations of stucco, steel, wood, brick and tile. The sizes of the
buildings owned by the Partnership range from approximately 2,300 to 11,400
square feet. All buildings on Properties acquired by the Partnership are
freestanding and surrounded by paved parking areas. Buildings are suitable for
conversion to various uses, although modifications may be required prior to use
for other than restaurant operations.
Generally, a lessee is required, under the terms of its lease
agreement, to make such capital expenditures as may be reasonably necessary to
refurbish buildings, premises, signs and equipment so as to comply with the
lessee's obligations, if applicable, under the franchise agreement to reflect
the current commercial image of its Restaurant Chain. These capital expenditures
are required to be paid by the lessee during the term of the lease.
Leases with Major Tenants. The terms of each of the leases with the
Partnership's major tenants as of December 31, 1996 (see Item 1. Business -
Major Tenants), are substantially the same as those described in Item 1.
Business - Leases.
Flagstar Corporation leases seven Hardee's restaurants and four Denny's
restaurants. The initial term of each lease is 20 years (expiring in 2013) and
the average minimum base annual rent is approximately $76,500 (ranging from
approximately $59,100 to $100,900).
Foodmaker, Inc. leases six Jack in the Box restaurants. The initial
term of each lease is 18 years (expiring in 2011) and the average minimum base
annual rent is approximately $83,600 (ranging from approximately $62,200 to
$99,900).
Long John Silver's, Inc. leases nine Long John Silver's restaurants.
The initial term of each lease is 20 years (expiring in 2014) and the average
minimum base annual rent is approximately $81,100 (ranging from approximately
$50,500 to $117,500).
Checkers Drive-In Restaurants, Inc. leases 18 Checkers restaurants. The
initial term of each lease is 20 years (expiring between 2014 and 2015) and the
average minimum base annual rent is approximately $34,100 (ranging from
approximately $18,900 to $54,500). The tenant owns the buildings currently on
the land and has the right, if not in default under the leases, to remove the
buildings from the land at the end of the lease term.
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In addition, Golden Corral Corporation leases four Golden Corral
restaurants. The initial term of each lease is 15 years (expiring between 2008
and 2011) and the average minimum base annual rent is approximately $143,500
(ranging from approximately $110,200 to $203,600).
The General Partners consider the Properties to be well-maintained and
sufficient for the Partnership's operations.
Item 3. Legal Proceedings
Neither the Partnership, nor its General Partners or any affiliate of
the General Partners, nor any of their respective properties, is a party to, or
subject to, any material pending legal proceedings.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
As of February 28, 1997, there were 3,027 holders of record of the
Units. There is no public trading market for the Units, and it is not
anticipated that a public market for the Units will develop. Limited Partners
who wish to sell their Units may offer the Units for sale pursuant to the
Partnership's distribution reinvestment plan (the "Plan"), and Limited Partners
who wish to have their distributions used to acquire additional Units (to the
extent Units are available for purchase) may do so pursuant to such Plan. The
General Partners have the right to prohibit transfers of Units. Since inception,
the price paid for any Unit transferred pursuant to the Plan has been $9.50 per
Unit. The price to be paid for any Unit transferred other than pursuant to the
Plan is subject to negotiation by the purchaser and the selling Limited Partner.
The Partnership will not redeem or repurchase Units.
The following table reflects, for each calendar quarter, the high, low
and average sales prices for transfers of Units during 1996 and 1995 other than
pursuant to the Plan, net of commissions (which ranged from zero to 12.12%).
1996 (1) 1995 (1)
---------------------- ------------------------
High Low Average High Low Average
----- ----- ------- ------ ------ -------
First Quarter $9.50 $7.93 $8.91 $ 9.50 $ 9.50 $ 9.50
Second Quarter 9.50 9.50 9.50 9.50 8.25 8.88
Third Quarter 10.00 10.00 10.00 10.00 10.00 10.00
Fourth Quarter 9.20 7.25 8.23 9.50 8.12 9.41
(1) A total of 13,122 and 16,220 Units were transferred other than pursuant
to the Plan for the years ended December 31, 1996 and 1995,
respectively.
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The capital contribution per Unit was $10. 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, 1996 and 1995, the Partnership
declared cash distributions of $3,712,522 and $3,628,130, respectively, to the
Limited Partners. No amounts distributed to partners for the years ended
December 31, 1996 and 1995, are required to be or have been treated by the
Partnership as a return of capital for purposes of calculating the Limited
Partners' return on their adjusted capital contributions. No distributions have
been made to the General Partners to date. 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.
Quarter Ended 1996 1995
------------- ---------- ----------
March 31 $928,130 $900,000
June 30 928,130 900,000
September 30 928,132 900,000
December 31 928,130 928,130
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.
Item 6. Selected Financial Data
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992 (1)
------------- ------------- ------------- ------------- ------------
<S> <C>
Year Ended December 31:
Revenues (2) $ 4,503,039 $ 4,406,707 $ 3,371,695 $ 285,413 $ -
Net income (3) 3,916,329 3,751,237 2,932,075 242,446 -
Cash distributions declared 3,712,522 3,628,130 2,850,554 232,199 -
Net income per Unit (3) (4) 0.86 0.83 0.66 0.15 -
Cash distributions declared
per Unit (4) 0.83 0.81 0.65 0.15 -
At December 31:
Total assets $41,045,849 $40,838,104 $40,866,591 $26,142,541 $ 1,000
Partners' Capital 40,035,737 $39,831,930 $39,708,823 $25,321,617 $ 1,000
</TABLE>
(1) Selected financial data for 1992 represents the period September 25,
1992 (date of inception) through December 31, 1992.
(2) Revenues include equity in earnings of the joint ventures.
(3) Net income for the year ended December 31, 1995, includes $66,518 from
loss on sale of land.
(4) Based on the weighted average number of Limited Partner Units
outstanding during each of the years ended December 31, 1996, 1995 and
1994, and the period September 13, 1993 through December 31, 1993.
The above selected financial data should be read in conjunction with
the financial statements and related notes contained in Item 8 hereof.
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Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The Partnership was organized on September 25, 1992, to acquire for
cash, either directly or through joint venture arrangements, both newly
constructed and existing restaurant Properties, as well as land upon which
restaurant Properties were to be constructed, which are leased primarily to
operators of selected national and regional fast-food and family-style
Restaurant Chains. The leases are triple-net leases, with the lessee generally
responsible for all repairs and maintenance, property taxes, insurance and
utilities. As of December 31, 1996, the Partnership owned 57 Properties, either
directly or through joint venture arrangements.
Liquidity and Capital Resources
On August 27, 1993, the Partnership commenced an offering to the public
of up to 4,500,000 Units of limited partnership interest. The Partnership's
offering terminated on February 22, 1994, at which time the maximum proceeds of
$45,000,000 (4,500,000 Units) had been received from investors. The Partnership,
therefore, will derive no additional capital resources from the offering.
Net proceeds to the Partnership from its offering of Units, after
deduction of organizational and offering expenses, totalled $39,606,055. As of
December 31, 1994, approximately $37,994,000 had been used to invest, either
directly or through joint venture arrangements, in 53 Properties, one of which
was under construction at December 31, 1994, to pay acquisition fees to an
affiliate of the affiliate of the General Partners totalling $2,475,000, and to
pay certain acquisition expenses. During 1995, construction was completed on the
Property under construction at December 31, 1994. In March 1995, the Partnership
completed its acquisition of Properties by entering into a joint venture
arrangement, Salem Joint Venture, with an affiliate of the Partnership which has
the same General Partners, to renovate and hold one restaurant Property located
in Salem, Ohio. In connection therewith, the Partnership contributed
approximately $363,600 to the joint venture. Renovation of the restaurant was
completed in May 1995, and as of December 31, 1995, the Partnership owned a
72.2% interest in the profits and losses of the joint venture. Upon completion
of the Partnership's acquisition in March 1995, the remaining net offering
proceeds of approximately $393,000 were reserved for Partnership purposes.
The Partnership received notice in January 1995, from the tenant of two
of its Properties located in Knoxville, Tennessee, and Dallas, Texas, of the
tenant's intention to exercise its option, in accordance with its lease
agreement, to substitute other properties for these two Properties. In March
1995, the Partnership sold its two Properties in Knoxville, Tennessee and
Dallas, Texas, to the tenant for their original purchase prices, excluding
acquisition fees and miscellaneous acquisition expenses, and received net sales
proceeds totalling $696,012. The Partnership used the net sales proceeds, along
with other uninvested offering proceeds, to acquire two Checkers Properties in
Coral Springs and St. Petersburg, Florida, from the tenant. As a result of these
transactions, the Partnership recognized a loss of $66,518 for financial
reporting purposes primarily due to acquisition fees and miscellaneous
acquisition expenses that the Partnership had allocated to the Knoxville,
Tennessee, and Dallas, Texas Properties, and due to the accrued rental income
relating to future scheduled rent increases that the Partnership had previously
recorded and wrote off at the time of sale. The Partnership believes the two
replacement Properties will outperform the two original Properties, in terms of
the rent that will be payable to the Partnership, due to the tenant's strong
market penetration in Florida.
In September 1996, Wood-Ridge Real Estate Joint Venture, a joint
venture in which the Partnership owns a 50 percent interest, sold its two
Properties to the tenant for $5,020,878 and received net sales proceeds of
$5,001,180, resulting in a gain to the joint venture of approximately $261,100
for financial reporting purposes. These Properties were originally acquired by
Wood-Ridge Real Estate Joint
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Venture in September 1994 and had a combined, total cost of approximately
$4,302,500, excluding acquisition fees and miscellaneous acquisition expenses;
therefore, the joint venture sold these properties for approximately $698,700 in
excess of their original purchase price. In October 1996, Wood-Ridge Real Estate
Joint Venture reinvested $4,404,046 of the net sales proceeds it received from
the sale of its properties in September 1996. In January 1997, the joint venture
used a portion of the remaining net sales proceeds from the sales of the
Properties in 1996, to purchase an additional Property. The joint venture
expects to distribute the remaining net sales proceeds to the Partnership and
its co-venture partner on a pro-rata basis, during 1997.
Until Properties were acquired by the Partnership, all Partnership
proceeds were held in short-term, highly liquid investments which the General
Partners believed to have appropriate safety of principal. This investment
strategy provided high liquidity in order to facilitate the Partnership's use of
these funds to acquire Properties at such time as Properties suitable for
acquisition were located.
Currently, the Partnership's primary source of capital is cash from
operations (which includes cash received from tenants, distributions from joint
ventures and interest received, less cash paid for expenses). Cash from
operations was $3,706,296, $3,709,844 and $2,812,631 for the years ended
December 31, 1996, 1995 and 1994, respectively. The decrease in cash from
operations during 1996, as compared to 1995, and the increase in 1995, as
compared to 1994, is primarily a result of changes in income and expenses as
discussed in "Results of Operations" below and changes in the Partnership's
working capital during each of the respective years.
None of the Properties owned by the Partnership or the joint ventures
in which the Partnership owns an interest is or may be encumbered. Subject to
certain restrictions on borrowing, however, the Partnership may borrow funds but
will not encumber any of the Properties in connection with any such borrowing.
The Partnership will not borrow for the purpose of returning capital to the
Limited Partners. The Partnership will not borrow under arrangements that would
make the Limited Partners liable to creditors of the Partnership. The General
Partners further have represented that they will use their reasonable efforts to
structure any borrowing so that it will not constitute "acquisition
indebtedness" for federal income tax purposes and also will limit the
Partnership's outstanding indebtedness to three percent of the aggregate
adjusted tax basis of its Properties. 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, cash reserves and rental income from the Partnership's
Properties are invested in money market accounts or other short-term, highly
liquid investments pending the Partnership's use of such funds to pay
Partnership expenses or make distributions to partners. At December 31, 1996,
the Partnership had $1,462,012 invested in such short-term investments as
compared to $1,475,738 at December 31, 1995. The funds remaining at December 31,
1996, after the payment of distributions and other liabilities, will be used to
meet the Partnership's working capital and other needs.
During 1994, affiliates of the General Partners incurred on behalf of
the Partnership $330,585 for certain offering expenses. In addition, during 1995
and 1994, the affiliates incurred on behalf of the Partnership $577 and $27,694,
respectively, for certain acquisition expenses. During 1996, 1995 and 1994, the
affiliates incurred on behalf of the Partnership $94,152, $104,433 and $87,774,
respectively, for certain operating expenses. At December 31, 1996 and 1995, the
Partnership owed $1,651 and $6,869, respectively, to affiliates for such amounts
and accounting and administrative services and management fees. As of February
28, 1997, the Partnership had reimbursed the affiliates all such amounts. Other
liabilities, including distributions payable, increased to $1,008,461 at
December 31,
9
<PAGE>
1996, from $999,305 at December 31, 1995. The General Partners believe that the
Partnership has sufficient cash on hand to meet its current working capital
needs.
Based primarily on current and future cash from operations, the
Partnership declared distributions to the Limited Partners of $3,712,522,
$3,628,130 and $2,850,554 for the years ended December 31, 1996, 1995 and 1994,
respectively. This represents distributions of $0.83, $0.81 and $0.65 per Unit
for the years ended December 31, 1996, 1995 and 1994, respectively. No amounts
distributed or to be distributed to the Limited Partners for the years ended
1996, 1995 and 1994 are required to be or have been treated by the Partnership
as a return of capital for purposes of calculating the Limited Partners' return
of their adjusted capital contributions. The Partnership intends to continue to
make distributions of cash available for distribution to the Limited Partners on
a quarterly basis.
The General Partners believe that the Properties are adequately covered
by insurance. In addition, the General Partners have obtained contingent
liability and property coverage for the Partnership. This insurance is intended
to reduce the Partnership's exposure in the unlikely event a tenant's insurance
policy lapses or is insufficient to cover a claim relating to the Property.
The Partnership's investment strategy of acquiring Properties for cash
and 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 believe that the Partnership has sufficient working capital reserves at
this time. In addition, because leases of the Partnership's Properties are on a
triple-net basis, it is not anticipated that a permanent reserve for maintenance
and repairs will be established at this time. To the extent, however, that the
Partnership has insufficient funds for such purposes, the General Partners will
contribute to the Partnership an aggregate amount of up to one percent of the
offering proceeds for maintenance and repairs. The General Partners have the
right to cause the Partnership to maintain additional reserves if, in their
discretion, they determine such reserves are required to meet the Partnership's
working capital needs.
The General Partners have the right, but not the obligation, to make
additional capital contributions if they deem it appropriate in connection with
the operations of the Partnership.
Results of Operations
The Partnership owned and leased 50 wholly owned Properties during
1994, 52 wholly owned Properties (including one Property in Knoxville,
Tennessee, and one Property in Dallas, Texas, which were sold in March 1995)
during 1995, and 50 wholly owned Properties during 1996. In addition, during
1994, the Partnership was a co-venturer in two joint ventures that owned and
leased three Properties, during 1995, the Partnership was a co-venturer in three
separate joint ventures that owned and leased a total of four Properties, and
during 1996, the Partnership was a co-venturer in three joint ventures that
owned and leased nine Properties (including two Properties in WoodRidge Real
Estate Joint Venture, which were sold in September 1996). As of December 31,
1996, the Partnership owned, either directly or through joint venture
arrangements, 57 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
$18,900 to $203,600. All of the leases provide for percentage rent based on
sales in excess of a specified amount. In addition, the majority of the leases
provide that, commencing in specified lease years (generally the sixth or ninth
lease year),
10
<PAGE>
the annual base rent required under the terms of the lease will increase. 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, 1996, 1995 and 1994, the
Partnership earned $3,987,525, $4,015,564 and $3,135,388, respectively, in
rental income from operating leases and earned income from direct financing
leases from Properties wholly owned by the Partnership. The increase in rental
and earned income during 1995, as compared to 1994, is primarily attributable to
the acquisition of additional Properties in 1994, and the fact that, with the
exception of the two Properties sold in March 1995, the Properties owned at
December 31, 1994, were operational for a full year in 1995, as compared to a
partial year in 1994. The decrease in rental and earned income during 1996, as
compared to 1995, was primarily attributable to, and the increase during 1995,
as compared to 1994, was partially offset by, the fact that during 1994, the
Partnership's former tenant of the Property in Akron, Ohio, ceased operating the
restaurant located on the Property, and subsequently, various temporary
operators have assumed the restaurant operations and paid the Partnership rent
on a month-to-month basis. As a result of these transactions, during 1994, the
Partnership wrote off certain uncollectible rental amounts due from the former
tenant and subsequently recorded monthly rental amounts as collected from the
temporary operators. The Partnership is currently seeking a permanent
replacement tenant for this Property. As a result of the lease termination with
the original tenant, the building portion of this lease was reclassified from a
direct financing lease to an operating lease during 1995.
In addition, for the years ended December 31, 1996, 1995 and 1994, the
Partnership earned $459,137, $338,717 and $35,480, respectively, attributable to
net income earned by joint ventures in which the Partnership is a co-venturer.
The increase in net income earned by joint ventures during 1996, as compared to
1995, is primarily attributable to the fact that in September 1996, Wood-Ridge
Real Estate Joint Venture, in which the Partnership owns a 50 percent interest,
recognized a gain of approximately $261,100 for financial reporting purposes as
a result of the sale of its Properties in September 1996, as described above in
"Liquidity and Capital Resources". Due to the fact that the joint venture
reinvested the majority of the net sales proceeds in five Properties in October
1996, the Partnership does not anticipate that the sale of the two Properties
will have a material adverse effect on operations. The increase in net income
earned by joint ventures during 1995, as compared to 1994, is primarily
attributable to the fact that in March 1995, the Partnership invested in a joint
venture, Salem Joint Venture, which became operational in May 1995. In addition,
the two Properties in Wood-Ridge Real Estate Joint Venture, which were sold
in September 1996, and which were initially acquired in August 1994, did not
become operational until November 1994.
During 1996, five lessees (or group of affiliated lessees) of the
Partnership, (i) Flagstar Enterprises, Inc. and Denny's, Inc. (which are
affiliated entities under common control of Flagstar Corporation) (hereinafter
referred to as Flagstar Corporation), (ii) Foodmaker, Inc., (iii) Long John
Silver's, Inc., (iv) Checkers Drive-In Restaurants, Inc. and (v) Golden Corral
Corporation, each contributed more than ten percent of the Partnership's total
rental income (including the Partnership's share of rental income from seven
Properties owned by joint ventures). As of December 31, 1996, Flagstar
Corporation was the lessee under leases relating to 11 restaurants, Foodmaker,
Inc. was the lessee under leases relating to six restaurants, Long John
Silver's, Inc. was the lessee under leases relating to nine restaurants,
Checkers Drive-In Restaurants, Inc. was the lessee under leases relating to 18
restaurants and Golden Corral Corporation was the lessee under leases relating
to four restaurants. It is anticipated that based on the minimum rental payments
required by the leases, these five lessees (or group of affiliated lessees) each
will continue to contribute more than ten percent of the Partnership's total
rental income in 1997 and subsequent years. In addition, six Restaurant Chains,
Hardee's, Denny's, Jack in the Box, Long John Silver's, Checkers and Golden
Corral, each accounted for more than ten percent of the Partnership's total
rental income during 1996 (including the Partnership's share of rental
11
<PAGE>
income from seven Properties owned by joint ventures). In subsequent years, it
is anticipated that these six Restaurant Chains each will account for more than
ten percent of the total rental income to which the Partnership is entitled
under the terms of the leases. Any failure of these lessees or Restaurant Chains
could materially affect the Partnership's income.
During the years ended December 31, 1996, 1995 and 1994, the
Partnership also earned $44,089, $50,724 and $200,499, respectively, in interest
income from investments in money market accounts or other short-term, highly
liquid investments. The decrease in interest income during 1996 and 1995, as
compared to 1994, is primarily attributable to the decrease in the amount of
funds invested in short-term, liquid investments due to the acquisition of
Properties during 1995 and 1994.
Operating expenses, including depreciation and amortization expense,
were $586,710, $588,952 and $439,620 for the years ended December 31, 1996, 1995
and 1994, respectively. The increase in operating expenses during 1995, as
compared to 1994, was primarily attributable to (i) an increase in accounting
and administrative expenses associated with operating the Partnership and its
Properties (ii) the Partnership's incurring additional taxes relating to the
filing of various state tax returns during 1995 and (iii) the General Partners'
obtaining contingent liability and property coverage for the Partnership as
discussed above in the "Liquidity and Capital Resources". The increase in
operating expenses during 1995, as compared to 1994, was partially attributable
to an increase in depreciation expense as a result of the acquisition of
additional Properties during 1994. Operating expense also increased during 1995,
as compared to 1994, as a result of an increase in management fees as a result
of the increase in rental revenues, as described above.
As a result of the former tenant of the Property in Akron, Ohio,
defaulting under the terms of its lease during 1994, the Partnership incurred
real estate taxes relating to this Property during the years ended December 31,
1996 and 1995. Currently, the Partnership is seeking a permanent replacement
tenant for this Property.
As a result of the sales of the Properties in Knoxville, Tennessee, and
Dallas, Texas, as described above in "Liquidity and Capital Resources," the
Partnership recognized a loss for financial reporting purposes of $66,518 for
the year ended December 31, 1995. The loss was primarily due to acquisition fees
and miscellaneous acquisition expenses the Partnership had allocated to these
Properties and due to accrued rental income relating to future scheduled rent
increases that the Partnership had recorded and wrote off at the time of the
sale. No Properties were sold during 1996 and 1994.
Effective January 1, 1996, the Partnership adopted Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." The statement
requires that an entity review long-lived assets and certain identifiable
intangibles, to be held and used, for impairment whenever events or changes in
circumstances indicate that the carrying amount of the asset may not be
recoverable. Adoption of this standard had no material effect on the
Partnership's financial position or results of operations.
The Partnership's leases as of December 31, 1996, are, in general,
triple-net leases and contain provisions that the General Partners believe
mitigate the adverse effect of inflation. Such provisions include clauses
requiring the payment of percentage rent based on certain restaurant sales above
a specified level and/or automatic increases in base rent at specified times
during the term of the lease. Management expects that increases in restaurant
sales volumes due to inflation and real sales growth should result in an
increase in rental income over time. Continued inflation also may cause capital
appreciation of the Partnership's Properties. Inflation and changing prices,
however, also may have an adverse impact on the sales of the restaurants and on
potential capital appreciation of the Properties.
12
<PAGE>
Item 8. Financial Statements and Supplementary Data
13
<PAGE>
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
CONTENTS
Page
----
Report of Independent Accountants 13
Financial Statements:
Balance Sheets 14
Statements of Income 15
Statements of Partners' Capital 16
Statements of Cash Flows 17
Notes to Financial Statements 20
14
<PAGE>
Report of Independent Accountants
To the Partners
CNL Income Fund XIV, Ltd.
We have audited the financial statements and the financial statement schedule of
CNL Income Fund XIV, Ltd. (a Florida limited partnership) listed in Item 14(a)
of this Form 10-K. These financial statements and financial statement schedule
are the responsibility of the Partnership's management. Our responsibility is to
express an opinion on these financial statements and financial statement
schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of CNL Income Fund XIV, Ltd. as of
December 31, 1996 and 1995, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1996 in conformity
with generally accepted accounting principles. In addition, in our opinion, the
financial statement schedule referred to above, when considered in relation to
the basic financial statements taken as a whole, presents fairly, in all
material respects, the information required to be included therein.
Orlando, Florida
January 22, 1997
15
<PAGE>
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
BALANCE SHEETS
December 31,
ASSETS 1996 1995
------ ----------- -------
Land and buildings on operating
leases, less accumulated
depreciation $25,852,484 $26,189,665
Net investment in direct
financing leases 9,125,272 9,200,070
Investment in joint ventures 3,201,156 3,075,675
Cash and cash equivalents 1,462,012 1,475,738
Receivables 23,477 9,531
Prepaid expenses 8,243 3,441
Organization costs, less
accumulated amortization of
$6,599 and $4,599 3,401 5,401
Accrued rental income 1,369,804 878,583
----------- -----------
$41,045,849 $40,838,104
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 5,447 $ 3,657
Accrued and escrowed real estate
taxes payable 12,364 22,562
Distributions payable 928,130 928,130
Due to related parties 1,651 6,869
Rents paid in advance 62,520 44,956
----------- -----------
Total liabilities 1,010,112 1,006,174
Commitment (Note 11)
Partners' capital 40,035,737 39,831,930
----------- -----------
$41,045,849 $40,838,104
=========== ===========
See accompanying notes to financial statements.
16
<PAGE>
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Year Ended December 31,
1996 1995 1994
---------- ---------- ----------
<S> <C>
Revenues:
Rental income from
operating leases $2,960,909 $2,980,928 $2,284,929
Earned income from direct
financing leases 1,026,616 1,034,636 850,459
Interest and other income 56,377 52,426 200,827
---------- ---------- ----------
4,043,902 4,067,990 3,336,215
---------- ---------- ----------
Expenses:
General operating and
administrative 162,163 143,138 109,698
Professional services 24,138 31,270 35,882
Bad debt expense - 12,619 -
Management fees to
related parties 38,785 38,832 28,340
Real estate taxes 3,426 8,116 -
State and other taxes 18,109 14,865 1,859
Loss on termination of
direct financing lease - - 6,201
Depreciation and
amortization 340,089 340,112 257,640
---------- ---------- ----------
586,710 588,952 439,620
---------- ---------- ----------
Income Before Equity in
Earnings of Joint
Ventures and Loss on
Sale of Land 3,457,192 3,479,038 2,896,595
Equity in Earnings of Joint
Ventures 459,137 338,717 35,480
Loss on Sale of Land - (66,518) -
---------- ---------- ---------
Net Income $3,916,329 $3,751,237 $2,932,075
========== ========== ==========
Allocation of Net Income:
General partners $ 39,163 $ 38,073 $ 29,321
Limited partners 3,877,166 3,713,164 2,902,754
---------- ---------- ----------
$3,916,329 $3,751,237 $2,932,075
========== ========== ==========
Net Income Per Limited
Partner Unit $ 0.86 $ 0.83 $ 0.66
========== ========== ==========
Weighted Average Number
of Limited Partner
Units Outstanding 4,500,000 4,500,000 4,383,150
========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
17
<PAGE>
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
STATEMENTS OF PARTNERS' CAPITAL
Years Ended December 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
General Partners Limited Partners
-------------------- ------------------------------------------------------
Accumu- Accumu-
Contri- lated Contri- Distri- lated Syndication
butions Earnings butions butions Earnings Costs Total
------- -------- ----------- ------------ ----------- ----------- --------
<S> <C>
Balance, December 31, 1993 $1,000 $ 2,424 $28,781,226 $ (232,199) $ 240,022 $(3,470,856) $25,321,617
Contributions from limited
partners - - 16,218,774 - - - 16,218,774
Distributions to limited
partners ($0.65 per limited
partner unit) - - - (2,850,554) - - (2,850,554)
Syndication costs - - - - - (1,913,089) (1,913,089)
Net income - 29,321 - 2,902,754 - 2,932,075
------ ------- ----------- ------------ ----------- ----------- -----------
Balance, December 31, 1994 1,000 31,745 45,000,000 (3,082,753) 3,142,776 (5,383,945) 39,708,823
Distributions to limited
partners ($0.81 per limited
partner unit) - - - (3,628,130) - - (3,628,130)
Net income - 38,073 - - 3,713,164 - 3,751,237
------ ------- ----------- ------------ ----------- ----------- -----------
Balance, December 31, 1995 1,000 69,818 45,000,000 (6,710,883) 6,855,940 (5,383,945) 39,831,930
Distributions to limited
partners ($0.83 per limited
partner unit) - - - (3,712,522) - - (3,712,522)
Net income - 39,163 - - 3,877,166 - 3,916,329
------ ------- ----------- ------------ ----------- ----------- -----------
Balance, December 31, 1996 $1,000 $108,981 $45,000,000 $(10,423,405) $10,733,106 $(5,383,945) $40,035,737
====== ======== =========== ============ =========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
18
<PAGE>
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31,
1996 1995 1994
------------ ------------ --------
<S> <C>
Increase (Decrease) in Cash and
Cash Equivalents:
Cash Flows From Operating
Activities:
Cash received from tenants $ 3,572,793 $ 3,626,651 $ 2,755,395
Distributions from joint
ventures 340,299 270,406 35,269
Cash paid for expenses (250,885) (237,937) (178,532)
Interest received 44,089 50,724 200,499
------------ ------------ ------------
Net cash provided by
operating activities 3,706,296 3,709,844 2,812,631
------------ ------------ ------------
Cash Flows From Investing
Activities:
Proceeds from sale of land - 696,012 -
Additions to land and
buildings on
operating leases - (964,073) (11,856,803)
Investment in direct
financing leases - (75,352) (5,561,748)
Investment in joint
ventures (7,500) (1,087,218) (1,561,988)
Other - 5,530 (2,434)
------------ ------------ ------------
Net cash used in
investing activities (7,500) (1,425,101) (18,982,973)
------------ ------------ ------------
Cash Flows From Financing
Activities:
Reimbursement of acqui-
sition, and syndication
costs paid by related
parties on behalf of
the Partnership - (577) (376,738)
Contributions from
limited partners - - 16,214,900
Distributions to
limited partners (3,712,522) (3,543,751) (2,229,952)
Payment of syndication
costs - - (1,618,477)
------------ ------------ ------------
Net cash provided
by (used in)
financing activities (3,712,522) (3,544,328) 11,989,733
------------ ------------ ------------
Net Decrease in Cash and Cash
Equivalents (13,726) (1,259,585) (4,180,609)
Cash and Cash Equivalents at
Beginning of Year 1,475,738 2,735,323 6,915,932
------------ ------------ ------------
Cash and Cash Equivalents at
End of Year $ 1,462,012 $ 1,475,738 $ 2,735,323
============ ============ ============
</TABLE>
See accompanying notes to financial statements.
19
<PAGE>
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
STATEMENTS OF CASH FLOWS - CONTINUED
<TABLE>
<CAPTION>
Year Ended December 31,
1996 1995 1994
------------ ------------ ------------
<S> <C>
Reconciliation of Net Income to
Net Cash Provided by Operating
Activities:
Net income $ 3,916,329 $ 3,751,237 $ 2,932,075
------------ ------------ ------------
Adjustments to reconcile net
income to net cash provided
by operating activities:
Loss on termination of
direct financing lease - - 6,201
Depreciation 337,181 337,393 255,640
Amortization 2,908 2,719 2,000
Equity in earnings of
joint ventures, net of
distributions (118,889) (68,311) (211)
Loss on sale of land - 66,518 -
Decrease (increase) in
receivables (13,946) 36,872 (40,283)
Increase in prepaid
expenses (4,802) (3,441) -
Decrease in net investment
in direct financing
leases 74,798 66,778 40,368
Increase in accrued
rental income (491,221) (497,969) (377,206)
Decrease in other assets - 3,315 -
Increase (decrease) in
accounts payable (8,408) 22,223 290
Increase (decrease) in due to related parties,
excluding reimbursement of acquisition and
syndication costs paid
on behalf of the Partnership (5,218) 6,869 (7,629)
Increase (decrease) in
rents paid in advance 17,564 (14,359) 1,386
------------ ------------ ------------
Total adjustments (210,033) (41,393) (119,444)
------------ ------------ ------------
Net Cash Provided by Operating
Activities $ 3,706,296 $ 3,709,844 $ 2,812,631
============ ============ ============
</TABLE>
See accompanying notes to financial statements.
20
<PAGE>
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
STATEMENTS OF CASH FLOWS - CONTINUED
<TABLE>
<CAPTION> Year Ended December 31,
1996 1995 1994
------------ ------------ ------------
<S> <C>
Supplemental Schedule of Non-Cash
Investing and Financing
Activities:
Related parties paid certain acquisition,
and syndication costs on behalf of
the Partnership as follows:
Acquisition costs $ - $ 577 $ 27,694
Syndication costs - - 330,585
------------ ------------ ------------
$ - $ 577 $ 358,279
============ ============ ============
Distributions declared and
unpaid at December 31 $ 928,130 $ 928,130 $ 843,751
============ ============ ============
</TABLE>
See accompanying notes to financial statements.
21
<PAGE>
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
Years Ended December 31, 1996, 1995 and 1994
1. Significant Accounting Policies:
Organization and Nature of Business - CNL Income Fund XIV, 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. Under the terms
of a registration statement filed with the Securities and Exchange
Commission, the Partnership was authorized to sell a maximum of
4,500,000 units ($45,000,000) of limited partnership interest. A total
of 4,500,000 units ($45,000,000) of limited partnership interest were
sold.
The general partners of the Partnership are CNL Realty Corporation (the
"Corporate General Partner"), James M. Seneff, Jr. and Robert A.
Bourne. Mr. Seneff and Mr. Bourne are also 50 percent shareholders of
the Corporate General Partner. The general partners have
responsibility for managing the day-to-day operations of the
Partnership.
Real Estate and Lease Accounting - The Partnership records the
acquisition of land and buildings at cost, including acquisition and
closing costs. Land and buildings are leased to unrelated third parties
on a triple-net basis, whereby the tenant is generally responsible for
all operating expenses relating to the property, including property
taxes, insurance, maintenance and repairs. The leases are accounted for
using either the direct financing or the operating methods. Such
methods are described below:
Direct financing method - The leases accounted for using the
direct financing method are recorded at their net investment
(which at the inception of the lease generally represents the
cost of the asset) (Note 4). Unearned income is deferred and
amortized to income over the lease terms so as to produce a
constant periodic rate of return on the Partnership's net
investment in the leases.
Operating method - Land and building leases accounted for
using the operating method are recorded at cost, revenue is
recognized as rentals are earned and depreciation is charged
to operations as incurred. Buildings are depreciated on the
straight-line method over their estimated useful lives of 30
years. When scheduled rentals
22
<PAGE>
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1996, 1995 and 1994
1. Significant Accounting Policies - Continued:
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.
Accrued rental income represents the aggregate amount of
income recognized on a straight-line basis in excess of
scheduled rental payments to date.
When the properties are sold, the related cost and accumulated
depreciation for operating leases and the net investment for direct
financing leases, plus any accrued rental income, are removed from the
accounts and gains or losses from sales are reflected in income. The
general partners of the Partnership review properties for impairment
whenever events or changes in circumstances indicate that the carrying
amount of the assets may not be recoverable through operations. The
general partners determine whether an impairment in value has occurred
by comparing the estimated future undiscounted cash flows, including
the residual value of the property, with the carrying cost of the
individual property. If an impairment is indicated, a loss will be
recorded for the amount by which the carrying value of the asset
exceeds its fair market value.
Investment in Joint Ventures - The Partnership accounts for its
interests in Attalla Joint Venture, Wood-Ridge Real Estate Joint
Venture and Salem Joint Venture 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
23
<PAGE>
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1996, 1995 and 1994
1. Significant Accounting Policies - Continued:
institution with high credit standing; therefore, the Partnership
believes it is not exposed to any significant credit risk on cash and
cash equivalents.
Organization Costs - Organization costs are amortized over five years
using the straight-line method.
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 property.
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 (Note 6).
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 management estimates relate to the allowance for doubtful
accounts and future cash flows associated with long-lived assets.
Actual results could differ from those estimates.
Reclassification - Certain items in the prior years' financial
statements have been reclassified to conform to 1996 presentation.
These reclassifications had no effect on partners' capital or net
income.
New Accounting Standard - Effective January 1, 1996, the Partnership
adopted Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of." The statement requires that an entity review
long-lived assets and certain identifiable intangibles, to be held and
used, for impairment whenever events or changes in circumstances
indicate that the carrying amount of the asset may not be recoverable.
Adoption of this standard had no material effect on the Partnership's
financial position or results of operations.
24
<PAGE>
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1996, 1995 and 1994
2. Leases:
The Partnership leases its land or 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." Thirty-four of the leases are classified as operating leases
and 16 of the leases have been classified as direct financing leases.
For the leases classified as direct financing leases, the building
portions of the property leases are accounted for as direct financing
leases while the land portions of 12 of the leases are operating
leases. Substantially all leases are for 15 to 20 years and provide for
minimum and contingent rentals. In addition, the tenant 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:
1996 1995
----------- -----------
Land $16,723,493 $16,723,493
Buildings 10,087,524 10,087,524
----------- -----------
26,811,017 26,811,017
Less accumulated
depreciation (958,533) (621,352)
----------- -----------
$25,852,484 $26,189,665
=========== ===========
In January 1995, the Partnership received notice from the tenant of two
of its properties located in Knoxville, Tennessee, and Dallas, Texas,
of the tenant's intention to exercise its option, in accordance with
its lease agreement, to substitute other properties for these two
properties. In March 1995, the Partnership sold its two properties in
Knoxville, Tennessee and Dallas, Texas, to the tenant for its original
purchase price, excluding acquisition fees and miscellaneous
acquisition expenses, and received net sales
25
<PAGE>
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1996, 1995 and 1994
3. Land and Buildings on Operating Leases - Continued:
proceeds totalling $696,012. The Partnership used the net sales
proceeds, along with approximately $63,600 of other uninvested offering
proceeds, to acquire two Checkers properties in Coral Springs and St.
Petersburg, Florida, from the tenant. As a result of these
transactions, during the year ended December 31, 1995 the Partnership
recognized a loss of $66,518 for financial reporting purposes primarily
due to acquisition fees and miscellaneous acquisition expenses the
Partnership had allocated to the Knoxville, Tennessee and Dallas, Texas
properties and due to the accrued rental income relating to future
scheduled rent increases that the Partnership had recorded and wrote
off at the time of sale. Generally, the leases provide for escalating
guaranteed minimum rents throughout the lease term. Income from these
scheduled rent increases is recognized on a straight-line basis over
the terms of the leases. For the years ended December 31, 1996, 1995
and 1994, the Partnership recognized $491,221, $497,969 and $377,206,
respectively, of such rental income.
The following is a schedule of the future minimum lease payments to be
received on noncancellable operating leases at December 31, 1996:
1997 $ 2,399,674
1998 2,406,028
1999 2,574,956
2000 2,646,984
2001 2,666,180
Thereafter 34,889,100
-----------
$47,582,922
===========
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's gross sales.
26
<PAGE>
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1996, 1995 and 1994
4. Net Investment in Direct Financing Leases:
The following lists the components of the net investment in direct
financing leases at December 31:
1996 1995
------------ ------------
Minimum lease payments
receivable $ 19,723,241 $ 20,824,664
Estimated residual
values 2,842,002 2,842,002
Less unearned income (13,439,971) (14,466,596)
------------ ------------
Net investment in
direct financing
leases $ 9,125,272 $ 9,200,070
============ ============
The following is a schedule of future minimum lease payments to be
received on direct financing leases at December 31, 1996:
1997 $ 1,101,414
1998 1,104,743
1999 1,122,218
2000 1,129,246
2001 1,132,069
Thereafter 14,133,551
-----------
$19,723,241
===========
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).
During the year ended December 31, 1994, one of the Partnership's
leases was terminated. As a result of the lease termination, the
Partnership reclassified this lease from a direct financing lease to an
operating lease, whereby the property was recorded at cost. Due to the
fact that the net carrying value of the property as a direct financing
lease exceeded the cost of the property, the Partnership recognized a
loss of $6,201 for financial reporting purposes for the year ended
December 31, 1994.
27
<PAGE>
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1996, 1995 and 1994
5. Investment in Joint Ventures:
The Partnership owns a 50 percent interest in the profits and losses of
Attalla Joint Venture. The remaining interest in this joint venture is
held by an affiliate of the Partnership which has the same general
partners.
In August 1994, the Partnership entered into a joint venture
arrangement, Wood-Ridge Real Estate Joint Venture, with an affiliate of
the Partnership which has the same general partners to construct and
hold two restaurant properties. As of December 31, 1994, the
Partnership and its co-venture partner had each contributed $1,430,290,
excluding acquisition fees and miscellaneous acquisition expenses.
During the year ended December 31, 1995, the Partnership contributed
$720,993, excluding acquisition fees and miscellaneous acquisition
expenses, to Wood-Ridge Real Estate Joint Venture to fund construction
costs relating to the two properties owned by the joint venture.
Construction was completed for the joint venture's properties, and as
of December 31, 1995, the Partnership owned a 50 percent interest in
the profits and losses of the joint venture.
In September 1996, Wood-Ridge Real Estate Joint Venture sold its two
properties to the tenant of these properties for $5,020,878 and
received net sales proceeds of $5,001,180, resulting in a gain to the
joint venture of approximately $261,100 for financial reporting
purposes. These properties were originally acquired by Wood-Ridge Real
Estate Joint Venture in September 1994 and had a combined, total cost
of approximately $4,302,500, excluding acquisition fees and
miscellaneous acquisition expenses; therefore, the joint venture sold
these properties for approximately $698,700 in excess of their original
purchase price.
In October 1996, Wood-Ridge Real Estate Joint Venture reinvested
$4,404,046 of the net sales proceeds in five properties. As of December
31, 1996, the Partnership owned a 50 percent interest in the profits
and losses of the joint venture. In January 1997, the joint venture
used a portion of the remaining net sales proceeds to purchase an
additional property. The joint venture expects to distribute the
remaining net sales proceeds to the Partnership and its co-venture
partner on a pro-rata basis in 1997.
In March 1995, the Partnership entered into a joint venture
arrangement, Salem Joint Venture, with an affiliate of the Partnership
which has the same general partners, to renovate
28
<PAGE>
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1996, 1995 and 1994
5. Investment in Joint Ventures - Continued:
and hold one restaurant property. As of December 31, 1995, the
Partnership and its co-venture partner had contributed $363,598 and
$140,000, respectively, excluding acquisition fees and miscellaneous
acquisition expenses, to purchase land and fund renovation costs
relating to the property owned by the joint venture. Construction was
completed for the joint venture's property, and as of December 31,
1995, the Partnership owned a 72.2% interest in the profits and losses
of the joint venture. As of December 31, 1996, Attalla Joint Venture
and Salem Joint Venture each own and lease one property, and Wood-Ridge
Real Estate Joint Venture owns and leases five properties, to operators
of fast-food or familystyle restaurants. The following presents the
joint ventures' condensed financial information at December 31:
1996 1995
---------- -----------
Land and buildings on
operating leases,
less accumulated
depreciation $5,102,901 $3,882,341
Net investment in direct
financing leases 367,661 1,792,208
Cash 818 687
Restricted cash 595,426 -
Receivables 7,037 33,694
Accrued rental income 62,163 149,600
Other assets 15,390 119
Liabilities 33,565 1,839
Partners' capital 6,117,831 5,856,810
Revenues 690,225 706,262
Gain on sale of land and
buildings 261,106 -
Net income 887,177 658,460
The Partnership recognized income totalling $459,137, $338,717 and
$35,480 for the years ended December 31, 1996, 1995 and 1994,
respectively, from these joint ventures.
6. Syndication Costs:
Syndication costs consisting of legal fees, commissions, the marketing
support and due diligence expense reimbursement fee, printing and other
expenses incurred in connection with the
29
<PAGE>
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1996, 1995 and 1994
6. Syndication Costs - Continued:
offering totalled $5,383,945. These offering expenses were charged to
the limited partners' capital accounts to reflect the net capital
proceeds of the offering.
7. Allocations and Distributions:
Generally, all net income and net losses of the Partnership, excluding
gains and losses from the sale of properties, are allocated 99 percent
to the limited partners and one percent to the general partners.
Distributions of net cash flow are made 99 percent to the limited
partners and one percent to the general partners; provided, however,
that the one percent of net cash flow to be distributed to the general
partners is subordinated to receipt by the limited partners of an
aggregate, ten percent, cumulative, noncompounded annual return on
their invested capital contributions (the "Limited Partners' 10%
Return").
Generally, net sales proceeds from the sale of properties, to the
extent distributed, will be distributed first to the limited partners
in an amount sufficient to provide them with their Limited Partners'
10% 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 is, in general,
allocated in the same manner as net sales proceeds are distributable.
Any loss from the sale of a property is, in general, allocated first,
on a pro rata basis, to partners with positive balances in their
capital accounts, and thereafter, 95 percent to the limited partners
and five percent to the general partners.
During the years ended December 31, 1996, 1995 and 1994, the
Partnership declared distributions to the limited partners of
$3,712,522, $3,628,130 and $2,850,554, respectively. No distributions
have been made to the general partners to date.
30
<PAGE>
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1996, 1995 and 1994
8. Income Taxes:
The following is a reconciliation of net income for financial reporting
purposes to net income for federal income tax purposes for the years
ended December 31:
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C>
Net income for financial
reporting purposes $3,916,329 $3,751,237 $2,932,075
Depreciation for tax
reporting purposes
in excess of depreci-
ation for financial
reporting purposes (130,766) (130,551) (114,765)
Direct financing leases
recorded as operating
leases for tax
reporting purposes 74,798 66,778 40,368
Loss on sale of land for
financial reporting
purposes in excess of
loss for tax
reporting purposes - 66,518 -
Loss on termination of
direct financing lease - - 6,201
Equity in earnings of joint ventures
for financial reporting purposes
in excess of equity in earnings
of joint ventures for
tax reporting purposes (174,253) (80,207) (5,819)
Accrued rental income (491,221) (497,969) (377,206)
Rents paid in advance 17,564 (14,359) 1,386
Other 23,878 718 -
---------- ---------- ---------
Net income for federal
income tax purposes $3,236,329 $3,162,165 $2,482,240
========== ========== ==========
</TABLE>
31
<PAGE>
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1996, 1995 and 1994
9. Related Party Transactions:
One of the individual general partners, James M. Seneff, Jr., is one of
the principal shareholders of CNL Group, Inc., the parent company of
CNL Securities Corp., CNL Investment Company and CNL Fund Advisors,
Inc. The other individual general partner, Robert A. Bourne, is the
president of CNL Securities Corp., CNL Investment Company and CNL Fund
Advisors, Inc. CNL Income Fund Advisors, Inc. was a wholly owned
subsidiary of CNL Group, Inc. until its merger, effective January 1,
1996, with CNL Fund Advisors, Inc. During the years ended December 31,
1996, 1995 and 1994, CNL Investment Company, CNL Income Fund Advisors,
Inc. and CNL Fund Advisors, Inc. (hereinafter referred to collectively
as the "Affiliates") and CNL Securities Corp. each performed certain
services for the Partnership, as described below.
For the year ended December 31, 1994, the Partnership incurred
$1,378,596 in syndication costs due to CNL Securities Corp. for
services in connection with selling limited partnership interests. A
substantial portion of these amounts ($1,291,584) was paid as
commissions to other broker-dealers.
In addition, for the year ended December 31, 1994, the Partnership
incurred $81,094 as a marketing support and due diligence expense
reimbursement fee due to CNL Securities Corp. This fee equals 0.5% of
the original limited partner contributions of $45,000,000. The majority
of this fee was reallowed to other broker-dealers and all bona fide due
diligence expenses were paid from such fee.
Additionally, the Partnership incurred $892,033 for the year ended
December 31, 1994 in acquisition fees due to CNL Investment Company for
services in finding, negotiating and acquiring properties on behalf of
the Partnership. These fees represent 5.5% percent of the original
capital contributions of $45,000,000.
During the years ended December 31, 1996, 1995 and 1994, certain
Affiliates acted as manager of the Partnership's properties pursuant to
a management agreement with the Partnership. In connection therewith,
the Partnership agreed to pay the Affiliates a 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. The management fee, which will not exceed fees
which are competitive for similar services in
32
<PAGE>
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1996, 1995 and 1994
9. Related Party Transactions - Continued:
the same geographic area, may or may not be taken, in whole or in part
as to any year, in the sole discretion of the Affiliates. All or any
portion of the management fee not taken as to any fiscal year shall be
deferred without interest and may be taken in such other fiscal year as
the Affiliates shall determine. The Partnership incurred management
fees of $38,785, $38,832 and $28,340 for the years ended December 31,
1996, 1995 and 1994, respectively.
Certain Affiliates are also entitled to receive a deferred,
subordinated real estate disposition fee, payable upon the sale of one
or more properties, based on the lesser of one-half of a competitive
real estate commission or three percent of the sales price if
Affiliates provide a substantial amount of services in connection with
the sale. However, if the net sales proceeds are reinvested in a
replacement property, no such real estate disposition fees will be
incurred until such replacement property is sold and the net sales
proceeds are distributed. The payment of the real estate disposition
fee is subordinated to receipt by the limited partners of their
aggregate Limited Partners' 10% Return plus their invested capital
contributions. No deferred, subordinated real estate disposition fees
have been incurred since inception.
During the years ended December 31, 1996, 1995 and 1994, the Affiliates
provided accounting and administrative services to the Partnership
(including accounting and administrative services in connection with
the offering of units) on a day-to-day basis. For the years ended
December 31, 1996, 1995 and 1994, the expenses incurred for these
services were classified as follows:
1996 1995 1994
-------- -------- --------
Syndication costs $ - $ - $122,815
General operating
and administrative
expenses 96,082 75,263 56,461
-------- -------- --------
$ 96,082 $ 75,263 $179,276
======== ======== ========
The due to related parties at December 31, 1996 and 1995, totalled
$1,611 and $6,869, respectively.
33
<PAGE>
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1996, 1995 and 1994
10. Concentration of Credit Risk:
The following schedule presents total rental and earned 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's share of total rental and earned
income from joint ventures) for at least one of the years ended
December 31:
1996 1995 1994
-------- -------- --------
Flagstar Enterprises,
Inc. and Denny's,
Inc. $879,594 $882,060 $861,455
Long John Silver's,
Inc. 853,992 860,391 551,913
Checkers Drive-In
Restaurants, Inc. 732,941 732,196 548,687
Foodmaker, Inc. 556,100 551,800 552,320
Golden Corral
Corporation 476,350 466,737 349,973
In addition, the following schedule presents total rental and earned
income from individual restaurant chains, each representing more than
ten percent of the Partnership's total rental and earned income
(including the Partnership's share of total rental and earned income
from joint ventures) for at least one of the years ended December 31:
1996 1995 1994
-------- -------- --------
Long John Silver's $853,992 $860,391 $551,913
Checkers Drive-in
Restaurants 732,941 732,196 548,687
Denny's 615,021 592,660 495,061
Jack in the Box 556,100 551,800 552,320
Hardee's 498,655 500,235 501,681
Golden Corral
Family Steakhouse
Restaurants 476,350 466,737 349,973
34
<PAGE>
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1996, 1995 and 1994
10. Concentration of Credit Risk - Continued:
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 lessee or restaurant
chain contributing more than ten percent of the Partnership's revenues
could significantly impact the results of operations of the
Partnership. However, the general partners believe that the risk of
such a default is reduced due to the essential or important nature of
these properties for the on-going operations of the lessees.
11. Commitment:
During 1996, the Partnership entered into an agreement with the tenant
of the Checkers property in Richmond, Virginia, to sell the property.
The general partners believe that the anticipated sales price exceeds
the Partnership's cost attributable to the property. As of January 22,
1997, the sale had not occurred.
35
<PAGE>
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
The General Partners of the Registrant are James M. Seneff, Jr., Robert
A. Bourne and CNL Realty Corporation, a Florida corporation. The General
Partners manage and control the Partnership's affairs and have general
responsibility and the ultimate authority in all matters affecting the
Partnership's business. The Partnership has available to it the services,
personnel and experience of CNL Fund Advisors, Inc., CNL Group, Inc. and their
affiliates, all of which are affiliates of the General Partners.
James M. Seneff, Jr., age 50, is a principal stockholder of CNL Group,
Inc., a diversified real estate company, and has served as its Chairman of the
Board of Directors, director and Chief Executive Officer since its formation in
1980. CNL Group, Inc. is the parent company of CNL Securities Corp., CNL
Investment Company, CNL Fund Advisors, Inc., and prior to its merger with CNL
Fund Advisors, Inc., effective January 1, 1996, CNL Income Fund Advisors, Inc.
Mr. Seneff is Chief Executive Officer, and has been a director and registered
principal of CNL Securities Corp., which served as the managing dealer in the
Partnership's offering of units, since its formation in 1979. Mr. Seneff also
has held the position of President and a director of CNL Management Company, a
registered investment advisor, since its formation in 1976, has served as Chief
Executive Officer and Chairman of the Board of CNL Investment Company, and Chief
Executive Officer and Chairman of the Board of Commercial Net Lease Realty, Inc.
since 1992, has served as the Chairman of the Board and the Chief Executive
Officer of CNL Realty Advisors, Inc. since its inception in 1991, served as
Chairman of the Board and Chief Executive Officer of CNL Income Fund Advisors,
Inc. since its inception in 1994 through December 31, 1995, has served as
Chairman of the Board and Chief Executive Officer of CNL Fund Advisors, Inc.
since its inception in 1994, and has held the position of Chief Executive
Officer and a director of CNL Institutional Advisors, Inc., a registered
investment advisor, since its inception in 1990. In addition, Mr. Seneff has
served as Chairman of the Board and Chief Executive Officer of CNL American
Properties Fund, Inc. since 1994, and has served as Chairman of the Board and
Chief Executive Officer of CNL American Realty Fund, Inc. since 1996 and of CNL
Real Estate Advisors, Inc. since January 1997. Mr. Seneff previously served on
the Florida State Commission on Ethics and is a former member and past Chairman
of the State of Florida Investment Advisory Council, which recommends to the
Florida Board of Administration investments for various Florida employee
retirement funds. The Florida Board of Administration, Florida's principal
investment advisory and money management agency, oversees the investment of more
than $40 billion of retirement funds. Since 1971, Mr. Seneff has been active in
the acquisition, development and management of real estate projects and,
directly or through an affiliated entity, has served as a general partner or
joint venturer in over 100 real estate ventures involved in the financing,
acquisition, construction and rental of office buildings, apartment complexes,
restaurants, hotels and other real estate. Included in these real estate
ventures are approximately 65 privately offered real estate limited partnerships
in which Mr. Seneff, directly or through an affiliated entity, serves or has
served as a general partner. Also included are CNL Income Fund, Ltd., CNL Income
Fund II, Ltd., CNL Income Fund III, Ltd., CNL Income Fund IV, Ltd., CNL Income
Fund V, Ltd., CNL Income Fund VI, Ltd., CNL Income Fund VII, Ltd., CNL Income
Fund VIII, Ltd., CNL Income Fund IX, Ltd., CNL Income Fund X, Ltd., CNL Income
Fund XI, Ltd., CNL Income Fund XII, Ltd., CNL Income Fund XIII,
36
<PAGE>
Ltd., CNL Income Fund XV, Ltd., CNL Income Fund XVI, Ltd., CNL Income Fund XVII,
Ltd. and CNL Income Fund XVIII, Ltd. (the "CNL Income Fund Partnerships"),
public real estate limited partnerships with investment objectives similar to
those of the Partnership, in which Mr. Seneff serves as a general partner. Mr.
Seneff received his degree in Business Administration from Florida State
University in 1968.
Robert A. Bourne, age 49, is President and Treasurer of CNL Group,
Inc., President, a director and a registered principal of CNL Securities Corp.,
President and a director of CNL Investment Company, CNL Fund Advisors, Inc., and
prior to its merger with CNL Fund Advisors, Inc., effective January 1, 1996, CNL
Income Fund Advisors, Inc., and President, Chief Investment Officer and a
director of CNL Institutional Advisors, Inc., a registered investment advisor.
Mr. Bourne also has served as a director since 1992, as President from July 1992
to February 1996, and since February 1996, as Vice Chairman of the Board of
Directors, Secretary and Treasurer of Commercial Net Lease Realty, Inc. In
addition, Mr. Bourne has served as a director since its inception in 1991, as
President from 1991 to February 1996, as Secretary from February 1996 to July
1996, and since February 1996, as Treasurer and Vice Chairman of CNL Realty
Advisors, Inc. In addition, Mr. Bourne has served as President and a director of
CNL American Properties Fund, Inc. since 1994, and has served as President and a
director of CNL American Realty Fund, Inc. since 1996 and of CNL Real Estate
Advisors, Inc since January 1997. Upon graduation from Florida State University
in 1970, where he received a B.A. in Accounting, with honors, Mr. Bourne worked
as a certified public accountant and, from September 1971 through December 1978,
was employed by Coopers & Lybrand, Certified Public Accountants, where he held
the position of tax manager beginning in 1975. From January 1979 until June
1982, Mr. Bourne was a partner in the accounting firm of Cross & Bourne and from
July 1982 through January 1987, he was a partner in the accounting firm of
Bourne & Rose, P.A., Certified Public Accountants. Mr. Bourne, who joined CNL
Securities Corp. in 1979, has participated as a general partner or joint
venturer in over 100 real estate ventures involved in the financing,
acquisition, construction and rental of office buildings, apartment complexes,
restaurants, hotels and other real estate. Included in these real estate
ventures are approximately 64 privately offered real estate limited partnerships
in which Mr. Bourne, directly or through an affiliated entity, serves or has
served as a general partner. Also included are the CNL Income Fund Partnerships,
public real estate limited partnerships with investment objectives similar to
those of the Partnership, in which Mr. Bourne serves as a general partner.
CNL Realty Corporation is a corporation organized on November 26, 1985,
under the laws of the State of Florida. Its sole directors and shareholders are
James M. Seneff, Jr. and Robert A. Bourne, the individual General Partners. CNL
Realty Corporation was organized to serve as the corporate general partner of
real estate limited partnerships, such as the Partnership, organized by one or
both of the individual General Partners. CNL Realty Corporation currently serves
as the corporate general partner of the CNL Income Fund Partnerships.
CNL Fund Advisors, Inc., provides certain management services in
connection with the Partnership and its Properties. CNL Fund Advisors, Inc. is a
corporation organized in 1994 under the laws of the State of Florida, and its
principal office is located at 400 East South Street, Suite 500, Orlando,
Florida 32801. CNL Fund Advisors, Inc. is a wholly owned subsidiary of CNL
Group, Inc., a diversified real estate company, and was organized to perform
property acquisition, property management and other services.
CNL Group, Inc., which is the parent company of the CNL Fund Advisors,
Inc., is a diversified real estate corporation organized in 1980 under the laws
of the State of Florida. Other subsidiaries and affiliates of CNL Group, Inc.
include a property development and management company, two investment advisory
companies, and seven corporations organized as strategic business units. James
M. Seneff, Jr.,
37
<PAGE>
an individual General Partner of the Partnership, is the Chairman of the Board,
Chief Executive Officer, and a director of CNL Group, Inc. Mr. Seneff and his
wife own all of the outstanding shares of CNL Group, Inc.
The following persons serve as operating officers of CNL Group, Inc. or
its affiliates or subsidiaries in the discretion of the Boards of Directors of
those companies, but, except as specifically indicated, do not serve as members
of the Boards of Directors of those entities. The Boards of Directors have the
responsibility for creating and implementing the policies of CNL Group, Inc. and
its affiliated companies.
John T. Walker, age 38, joined CNL Group, Inc. in September 1994, as
Senior Vice President, responsible for Research and Development. He currently
serves as the Chief Operating Officer and Executive Vice President of CNL Fund
Advisors, Inc. and CNL American Properties Fund, Inc. and serves as Executive
Vice President of CNL American Realty Fund, Inc. and CNL Real Estate Advisors,
Inc. From May 1992 to May 1994, he was Executive Vice President for Finance and
Administration and Chief Financial Officer of Z Music, Inc., a cable television
network which was subsequently acquired by Gaylord Entertainment, where he was
responsible for overall financial and administrative management and planning.
From January 1990 through April 1992, Mr. Walker was Chief Financial Officer of
the First Baptist Church in Orlando, Florida. From April 1984 through December
1989, he was a partner in the accounting firm of Chastang, Ferrell & Walker,
P.A., where he was the partner in charge of audit and consulting services, and
from 1981 to 1984, Mr. Walker was a Senior Consultant/Audit Senior at Price
Waterhouse. Mr. Walker is a Cum Laude graduate of Wake Forest University with a
B.S. in Accountancy and is a certified public accountant.
Lynn E. Rose, age 48, a certified public accountant, has served as
Chief Financial Officer of CNL Group, Inc. since December 1993, has served as
Secretary of CNL Group, Inc. since 1987, and served as Controller of CNL Group,
Inc. from 1987 until December 1993. In addition, Ms. Rose has served as Chief
Financial Officer and Secretary of CNL Securities Corp. since July 1994. She
has served as Chief Operating Officer, Vice President and Secretary of CNL
Corporate Services, Inc. since November 1994. Ms. Rose also has served as Chief
Financial Officer and Secretary of CNL Institutional Advisors, Inc. since its
inception in 1990, a director of CNL Realty Advisors, Inc. since its inception
in 1991, Secretary of CNL Realty Advisors, Inc. since its inception in 1991
(excluding February 1996 to July 1996), Treasurer of CNL Realty Advisors, Inc.
from 1991 to February 1996, Secretary and Treasurer of Commercial Net Lease
Realty, Inc. from 1992 to February 1996, Secretary of CNL Income Fund Advisors,
Inc. since its inception in 1994 to December 1995, and a director, Secretary and
Treasurer of CNL Fund Advisors, Inc. since 1994 and has served as a director,
Secretary and Treasurer of CNL Real Estate Advisors, Inc. since January 1997.
Ms. Rose also has served as Secretary and Treasurer of CNL American Properties
Fund, Inc. since 1994, and has served as Secretary and Treasurer of CNL American
Realty Fund, Inc. since 1996. Ms. Rose also currently serves as Secretary for
approximately 50 additional corporations. Ms. Rose oversees the management
information services, administration, legal compliance, accounting, tenant
compliance, and reporting for over 250 corporations, partnerships, and joint
ventures. Prior to joining CNL, Ms. Rose was a partner with Robert A. Bourne in
the accounting firm of Bourne & Rose, P.A., Certified Public Accountants. Ms.
Rose holds a B.A. in Sociology from the University of Central Florida and is a
registered financial and operations principal of CNL Securities Corp. She was
licensed as a certified public accountant in 1979.
Jeanne A. Wall, age 38, has served as Chief Operating Officer of CNL
Investment Company and of CNL Securities Corp. since November 1994 and
previously served as Executive Vice President of CNL Investment Company since
January 1991. In 1984, Ms. Wall joined CNL Securities Corp. as its Partnership
Administrator. In 1985, Ms. Wall became Vice President of CNL Securities Corp.
and, in
38
<PAGE>
1987, she became a Senior Vice President of CNL Securities Corp. In this
capacity, Ms. Wall serves as national marketing and sales director and oversees
the national marketing plan for the CNL investment programs. In addition, Ms.
Wall oversees the partnership administration and investor services for programs
offered through participating brokers. Ms. Wall also has served as Senior Vice
President of CNL Institutional Advisors, Inc., a registered investment advisor,
from 1990 to 1993, as Vice President of CNL Realty Advisors, Inc. since its
inception in 1991, as Vice President of Commercial Net Lease Realty, Inc. since
1992, as Executive Vice President of CNL Income Fund Advisors, Inc. from its
inception in 1994 to December 1995, as Executive Vice President of CNL Fund
Advisors, Inc. since 1994, and as Executive Vice President of CNL American
Properties Fund, Inc. since 1994. In addition, Ms. Wall has served as Executive
Vice President of CNL Real Estate Advisors, Inc. since January 1997 and as
Executive Vice President of CNL American Realty Fund, Inc. since 1996. Ms. Wall
holds a B.A. in Business Administration from Linfield College and is a
registered principal of CNL Securities Corp. Ms. Wall currently serves as a
trustee on the board of the Investment Program Association and on the Direct
Participation Program committee for the National Association of Securities
Dealers (NASD).
Steven D. Shackelford, age 33, has served as Chief Financial Officer of
CNL Fund Advisors, Inc. since September 1996. Mr. Shackelford joined CNL Group,
Inc. in September 1996. He also currently serves as the Chief Financial Officer
of CNL American Properties Fund, Inc. From March 1995 to July 1996, he was a
senior manager in the national office of Price Waterhouse where he was
responsible for advising foreign clients seeking to raise capital and a public
listing in the United States. From August 1992 to March 1995, he served as a
manager in the Price Waterhouse, Paris, France office serving several
multinational clients. Mr. Shackelford was an audit staff and senior from 1986
to 1992 in the Orlando, Florida office of Price Waterhouse. Mr Shackelford
received a B.A. in Accounting, with honors, and a Masters of Business
Administration from Florida State University and is a certified public
accountant.
39
<PAGE>
Item 11. Executive Compensation
Other than as described in Item 13, the Partnership has not paid and
does not intend to pay any executive compensation to the General Partners or any
of their affiliates. There are no compensatory plans or arrangements regarding
termination of employment or change of control.
Item 12. Security Ownership of Certain Beneficial Owners and Management
As of February 28, 1997, no person was known to the Registrant to be a
beneficial owner of more than five percent of the Units.
The following table sets forth, as of February 28, 1997, the beneficial
ownership interests of the General Partners in the Registrant.
Title of Class Name of Partner Percent of Class
-------------- --------------- ----------------
General Partnership Interests James M. Seneff, Jr. 45%
Robert A. Bourne 45%
CNL Realty Corporation 10%
----
100%
====
Neither the General Partners, nor any of their affiliates, owns any
interest in the Registrant, except as noted above. There are no arrangements
which at a subsequent date may result in a change in control of the Registrant.
Item 13. Certain Relationships and Related Transactions
The table below summarizes the types, recipients, methods of
computation and amounts of compensation, fees and distributions paid or payable
by the Partnership to the General Partners and their affiliates for the year
ended December 31, 1996, exclusive of any distributions to which the General
Partners or their affiliates may be entitled by reason of their purchase and
ownership of Units.
<TABLE>
<CAPTION>
Amount Incurred
Type of Compensation For the Year
and Recipient Method of Computation Ended December 31, 1996
-------------------- --------------------- -----------------------
<S> <C>
Reimbursement to affiliates Operating expenses are Operating expenses
for operating expenses reimbursed at the lower of incurred on behalf of the
cost or 90 percent of the Partnership: $94,152
prevailing rate at which
comparable services could Accounting and
have been obtained in the administrative services:
same geographic area. $96,082
Affiliates of the General
Partners from time to time
incur certain operating
expenses on behalf of the
Partnership for which the
</TABLE>
40
<PAGE>
Partnership reimburses the
affiliates without interest.
41
<PAGE>
<TABLE>
<CAPTION>
Amount Incurred
Type of Compensation For the Year
and Recipient Method of Computation Ended December 31, 1996
-------------------- --------------------- -----------------------
<S> <C>
Annual management fee to One percent of the sum of $38,785
affiliates 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. The
management fee, which will
not exceed competitive fees
for comparable services in
the same geographic area,
may or may not be taken, in
whole or in part as to any
year, in the sole discretion of
affiliates of the General
Partners. All or any portion
of the management fee not
taken as to any fiscal year
shall be deferred without
interest and may be taken in
such other fiscal year as the
affiliates shall determine.
Deferred, subordinated real A deferred, subordinated real $ -0-
estate disposition fee estate disposition fee,
payable to affiliates payable upon sale of 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
</TABLE>
42
<PAGE>
replacement property, no
such real estate disposition
fee will be recorded until
such replacement property is
sold and the net sales
proceeds are distributed.
43
<PAGE>
<TABLE>
<CAPTION>
Amount Incurred
Type of Compensation For the Year
and Recipient Method of Computation Ended December 31, 1996
-------------------- --------------------- -----------------------
<S> <C>
General Partners' deferred, A deferred, subordinated $ - 0 -
sub-ordinated share of share equal to one percent of
Partnership net cash flow Partnership distributions of
net cash flow, subordinated
to certain minimum returns
to the Limited Partners.
General Partners' deferred, A deferred, subordinated $ -0-
sub-ordinated share of share equal to five percent of
Partnership net sales Partnership distributions of
proceeds from a sale or sales such net sales proceeds,
subordinated to certain
minimum returns to the
Limited Partners.
</TABLE>
44
<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 Accountants
Balance Sheets at December 31, 1996 and 1995
Statements of Income for the years ended December 31, 1996,
1995 and 1994
Statements of Partners' Capital for the years ended December
31, 1996, 1995 and 1994
Statements of Cash Flows for the years ended December 31,
1996, 1995 and 1994
Notes to Financial Statements
2. Financial Statement Schedule
Schedule III - Real Estate and Accumulated Depreciation at
December 31, 1996
Notes to Schedule III - Real Estate and Accumulated
Depreciation at December 31, 1996
All other Schedules are omitted as the required information is
inapplicable or is presented in the financial statements or
notes thereto.
3. Exhibits
3.1 Affidavit and Certificate of Limited Partnership of
CNL Income Fund XIV, Ltd. (Included as Exhibit 3.2 to
Registration Statement No. 33-53672-01 on Form S-11
and incorporated herein by reference.)
4.1 Affidavit and Certificate of Limited Partnership of
CNL Income Fund XIV, Ltd. (Included as Exhibit 3.2 to
Registration Statement No. 33-53672-01 on Form S-11
and incorporated herein by reference.)
4.2 Amended and Restated Agreement of Limited Partnership
of CNL Income Fund XIV, Ltd. (Included as Exhibit 4.2
to Form 10-K filed with the Securities and Exchange
Commission on April 13, 1994, and incorporated herein
by reference.)
10.1 Management Agreement between CNL Income Fund XIV,
Ltd. and CNL Investment Company (Included as Exhibit
10.1 to Form 10-K filed with the Securities and
Exchange Commission on April 13, 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
45
<PAGE>
the Securities and Exchange Commission on March 30,
1995, and incorporated herein by reference.)
46
<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.)
(b) The Registrant filed no reports on Form 8-K during the period
October 1, 1996 through December 31, 1996.
47
<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 21st day of
March, 1997.
CNL INCOME FUND XIV, 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.
Signature Title Date
--------- ----- ----
/s/ Robert A. Bourne President, Treasurer and Director March 21, 1997
- -------------------- (Principal Financial and Accounting
Robert A. Bourne Officer)
/s/ James M. Seneff, Jr. Chief Executive Officer and Director March 21, 1997
- ------------------------ (Principal Executive Officer)
James M. Seneff, Jr.
<PAGE>
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1996
<TABLE>
<CAPTION>
Costs Capitalized
Subsequent
Initial Cost To Acquisition
------------------------------ -----------------------
Buildings
Encum- and Improve- Carrying
brances Land Improvements ments Costs
------- ----------- ------------ ---------- --------
<S> <C>
Properties the Partnership
has Invested in Under
Operating Leases:
Burger King Restaurant:
Alliance, Ohio - $ 210,290 $ - $ - $ -
Checkers Drive-In Restaurants:
Boynton Beach, Florida - 501,606 - - -
Chamblee, Georgia - 332,737 - - -
Delray Beach, Florida - 193,110 - - -
Foley, Alabama - 197,821 - - -
Houston, Texas - 335,232 - - -
Huntsville, Alabama - 362,907 - - -
Kansas City, Missouri - 225,071 - - -
Marietta, Georgia - 332,418 - - -
Merriam, Kansas - 305,896 - - -
Norcross, Georgia - 474,262 - - -
Orlando, Florida - 559,646 - - -
Pensacola, Florida - 296,726 - - -
Richmond, Virginia - 411,521 - - -
Richmond, Virginia - 378,735 - - -
Riviera Beach, Florida - 297,579 - - -
Suwannee, Georgia - 269,643 - - -
St. Petersburg, Florida - 338,396 - - -
Coral Springs, Florida - 421,221 - - -
Denny's Restaurants:
Albemarle, North Carolina - 202,363 447,278 - -
Bullhead City, Arizona - 282,086 623,778 152,416 -
Topeka, Kansas - 420,446 - - -
Tempe, Arizona - 881,047 - - -
East Side Mario's Restaurant:
Columbus, Ohio - 698,046 - 1,019,581 -
Golden Corral Family
Steakhouse Restaurants:
Burlington, North Carolina - 931,962 - 975,218 -
Wilson, North Carolina - 415,390 - 833,156 -
Greeley, Colorado - 303,170 - 965,024 -
Hardee's Restaurants:
Franklin, Tennessee - 201,441 423,569 - -
Nashville, Tennessee - 315,087 - - -
Nashville, Tennessee - 296,341 485,974 - -
Batesville, Mississippi - 186,404 453,720 - -
Jacksonville, Florida - 385,903 409,773 - -
Madison, Alabama - 192,522 - - -
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Life
Gross Amount at Which Carried on Which
at Close of Period (c) Depreciation
--------------------------------------- in Latest
Buildings Date Income
and Accumulated of Con- Date Statement is
Land Improvements Total Depreciation struction Acquired Computed
----------- ------------ ----------- ------------ --------- -------- ------------
<S> <C>
Properties the Partnership
has Invested in Under
Operating Leases:
Burger King Restaurant:
Alliance, Ohio $ 210,290 $ - $ 210,290 $ - 1994 07/94 -
Checkers Drive-In Restaurants:
Boynton Beach, Florida 501,606 - 501,606 (d) - 03/94 (d)
Chamblee, Georgia 332,737 - 332,737 (d) - 03/94 (d)
Delray Beach, Florida 193,110 - 193,110 (d) - 03/94 (d)
Foley, Alabama 197,821 - 197,821 (d) - 03/94 (d)
Houston, Texas 335,232 - 335,232 (d) - 03/94 (d)
Huntsville, Alabama 362,907 - 362,907 (d) - 03/94 (d)
Kansas City, Missouri 225,071 - 225,071 (d) - 03/94 (d)
Marietta, Georgia 332,418 - 332,418 (d) - 03/94 (d)
Merriam, Kansas 305,896 - 305,896 (d) - 03/94 (d)
Norcross, Georgia 474,262 - 474,262 (d) - 03/94 (d)
Orlando, Florida 559,646 - 559,646 (d) - 03/94 (d)
Pensacola, Florida 296,726 - 296,726 (d) - 03/94 (d)
Richmond, Virginia 411,521 - 411,521 (d) - 03/94 (d)
Richmond, Virginia 378,735 - 378,735 (d) - 03/94 (d)
Riviera Beach, Florida 297,579 - 297,579 (d) - 03/94 (d)
Suwannee, Georgia 269,643 - 269,643 (d) - 03/94 (d)
St. Petersburg, Florida 338,396 - 338,396 (d) - 03/95 (d)
Coral Springs, Florida 421,221 - 421,221 (d) - 03/95 (d)
Denny's Restaurants:
Albemarle, North Carolina 202,363 447,278 649,641 48,619 1992 09/93 (b)
Bullhead City, Arizona 282,086 776,194 1,058,280 78,609 1988 09/93 (b)
Topeka, Kansas 420,446 (g) 420,446 (e) 1994 10/93 (e)
Tempe, Arizona 881,047 (g) 881,047 (e) 1994 11/93 (e)
East Side Mario's Restaurant:
Columbus, Ohio 698,046 1,019,581 1,717,627 72,760 1994 06/94 (b)
Golden Corral Family
Steakhouse Restaurants:
Burlington, North Carolina 931,962 975,218 1,907,180 97,611 1993 10/93 (b)
Wilson, North Carolina 415,390 833,156 1,248,546 89,009 1993 10/93 (b)
Greeley, Colorado 303,170 965,024 1,268,194 66,009 1994 08/94 (b)
Hardee's Restaurants:
Franklin, Tennessee 201,441 423,569 625,010 44,385 1993 11/93 (b)
Nashville, Tennessee 315,087 (g) 315,087 (e) 1993 11/93 (e)
Nashville, Tennessee 296,341 485,974 782,315 50,923 1993 11/93 (b)
Batesville, Mississippi 186,404 453,720 640,124 46,118 1993 12/93 (b)
Jacksonville, Florida 385,903 409,773 795,676 41,651 1993 12/93 (b)
Madison, Alabama 192,522 (g) 192,522 (e) 1993 12/93 (e)
</TABLE>
F-2
<PAGE>
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION - CONTINUED
December 31, 1996
<TABLE>
<CAPTION>
Costs Capitalized
Subsequent
Initial Cost To Acquisition
------------------------------ -----------------------
Buildings
Encum- and Improve- Carrying
brances Land Improvements ments Costs
------- ----------- ------------ ---------- --------
<S> <C>
Jack in the Box Restaurants:
Mesquite, Texas - 449,442 528,882 - -
Plano, Texas - 423,092 467,253 - -
Farmers Branch, Texas - 465,235 525,470 - -
Fort Worth, Texas - 297,688 551,394 - -
Fort Worth, Texas - 257,393 419,245 - -
Long John Silver's Restaurants:
Apopka, Florida - 320,435 - - -
Houston, Texas - 411,403 - - -
Stockbridge, Georgia - 295,839 - - -
Albemarle, North Carolina - 214,623 - - -
Houston, Texas - 342,971 - - -
Marion, Ohio - 321,032 - - -
Las Vegas, Nevada - 520,884 - - -
Shoney's Restaurant:
Akron, Ohio (h) - 246,431 805,793 - -
----------- ---------- ---------- -------
$16,723,493 $6,142,129 $3,945,395 $ -
=========== ========== ========== =======
Property of Joint Venture
in Which the Partnership
has a 50% Interest and has
Invested in Under an
Operating Lease:
Hardee's Restaurant:
Attalla, Alabama - $ 196,274 $ 434,428 $ - $ -
=========== ========== ========== =======
Properties of Joint Venture
in Which the Partnership
has a 50% Interest and has
Invested in Under Operating
Leases:
Boston Market Restaurants:
Murfreesboro, Tennessee - $ 398,313 $ - $ - $ -
Matthews, North Carolina - 409,942 737,391 - -
Raleigh, North Carolina - 518,507 542,919 - -
Blaine, Minnesota - 253,934 531,509 - -
Golden Corral Family
Steakhouse Restaurant:
Paris, Texas - 303,420 708,112 - -
----------- ---------- ---------- -------
$ 1,884,116 $2,519,931 $ - $ -
=========== ========== ========== =======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Life
Gross Amount at Which Carried on Which
at Close of Period (c) Depreciation
--------------------------------------- in Latest
Buildings Date of Income
and Accumulated Con- Date Statement is
Land Improvements Total Depreciation struction Acquired Computed
<S> <C> -------- ------------ --------- ------------ --------- -------- ------------
Jack in the Box Restaurants:
Mesquite, Texas 449,442 528,882 978,324 55,420 1992 11/93 (b)
Plano, Texas 423,092 467,253 890,345 48,023 1992 11/93 (b)
Farmers Branch, Texas 465,235 525,470 990,705 53,986 1988 12/93 (b)
Fort Worth, Texas 297,688 551,394 849,082 55,693 1992 12/93 (b)
Fort Worth, Texas 257,393 419,245 676,638 43,073 1983 12/93 (b)
Long John Silver's Restaurants:
Apopka, Florida 320,435 (g) 320,435 (e) 1994 03/94 (e)
Houston, Texas 411,403 (g) 411,403 (e) 1993 03/94 (e)
Stockbridge, Georgia 295,839 (g) 295,839 (e) 1993 03/94 (e)
Albemarle, North Carolina 214,623 (g) 214,623 (e) 1994 04/94 (e)
Houston, Texas 342,971 (g) 342,971 (e) 1994 04/94 (e)
Marion, Ohio 321,032 (g) 321,032 (e) 1994 06/94 (e)
Las Vegas, Nevada 520,884 (g) 520,884 (e) 1994 07/94 (e)
Shoney's Restaurant:
Akron, Ohio (h) 246,431 805,793 1,052,224 66,644 1993 10/93 (b)
----------- ----------- ----------- --------
$16,723,493 $10,087,524 $26,811,017 $958,533
=========== =========== =========== ========
Property of Joint Venture
in Which the Partnership
has a 50% Interest and has
Invested in Under an
Operating Lease:
Hardee's Restaurant:
Attalla, Alabama $ 196,274 $ 434,428 $ 630,702 $ 44,157 1993 11/93 (b)
=========== =========== =========== ========
Properties of Joint Venture
in Which the Partnership
has a 50% Interest and has
Invested in Under Operating
Leases:
Boston Market Restaurants:
Murfreesboro, Tennessee $ 398,313 $ - $ 398,313 (d) 1996 10/96 (d)
Matthews, North Carolina 409,942 737,391 1,147,333 $ 5,645 1994 10/96 (b)
Raleigh, North Carolina 518,507 542,919 1,061,426 4,157 1994 10/96 (b)
Blaine, Minnesota 253,934 531,509 785,443 4,069 1996 10/96 (b)
Golden Corral Family
Steakhouse Restaurant:
Paris, Texas 303,420 708,112 1,011,532 5,582 1996 10/96 (b)
----------- ----------- ----------- --------
$ 1,884,116 $ 2,519,931 $ 4,404,047 $ 19,453
=========== =========== =========== ========
</TABLE>
F-3
<PAGE>
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION - CONTINUED
December 31, 1996
<TABLE>
<CAPTION>
Costs Capitalized
Subsequent
Initial Cost To Acquisition
------------------------------ -----------------------
Buildings
Encum- and Improve- Carrying
brances Land Improvements ments Costs
------- ----------- ------------ ---------- --------
<S> <C>
Property of Joint Venture
in Which the Partnership
has a 72.2% Interest and has
Invested in Under Operating
Lease:
Denny's Restaurant:
Salem, Ohio - $ 131,762 $ - $ - $ -
=========== ========== ========== =======
Properties the Partnership
has Invested in Under
Direct Financing Leases:
Burger King Restaurant:
Alliance, Ohio - $ - $ 535,949 $ - $ -
Denny's Restaurants:
Winslow, Arizona - 199,767 788,202 - -
Topeka, Kansas - - - 489,014 -
Tempe, Arizona - - - 585,382 -
Hardee's Restaurants:
Nashville, Tennessee - - 553,400 - -
Madison, Alabama - - 516,061 - -
Jack in the Box Restaurant:
Shreveport, Louisiana - 240,811 848,338 - -
Long John Silver's Restaurants:
Apopka, Florida - - 506,493 - -
Houston, Texas - - 449,633 - -
Laurens, South Carolina - 96,752 386,284 - -
Stockbridge, Georgia - - 499,428 - -
Albemarle, North Carolina - - - 384,045 -
Houston, Texas - - 508,497 - -
Marion, Ohio - - 463,504 - -
Shelby, North Carolina - 147,087 508,674 - -
Las Vegas, Nevada - - 607,433 - -
----------- ---------- ---------- -------
$ 684,417 $7,171,896 $1,458,441 $ -
=========== ========== ========== =======
Property of Joint Venture
in Which the Partnership
has a 72.2% Interest and
has Invested in Under a
Direct Financing Lease:
Denny's Restaurant:
Salem, Ohio - $ - $ - $ 371,836 $ -
=========== ========== ========== =======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Life
Gross Amount at Which Carried on Which
at Close of Period (c) Depreciation
--------------------------------------- in Latest
Buildings Date Income
and Accumulated of Con- Date Statement is
Land Improvements Total Depreciation struction Acquired Computed
----------- ------------ ----------- ------------ --------- -------- ------------
<S> <C>
Property of Joint Venture
in Which the Partnership
has a 72.2% Interest and has
Invested in Under Operating
Lease:
Denny's Restaurant:
Salem, Ohio $ 131,762 (g) $ 131,762 (e) 1991 03/95 (e)
=========== ===========
Properties the Partnership
has Invested in Under
Direct Financing Leases:
Burger King Restaurant:
Alliance, Ohio (g) (g) (g) (e) 1994 07/94 (e)
Denny's Restaurants:
Winslow, Arizona (g) (g) (g) (f) 1993 09/93 (f)
Topeka, Kansas (g) (g) (g) (e) 1994 10/93 (e)
Tempe, Arizona (g) (g) (g) (e) 1994 11/93 (e)
Hardee's Restaurants:
Nashville, Tennessee (g) (g) (g) (e) 1993 11/93 (e)
Madison, Alabama (g) (g) (g) (e) 1993 12/93 (e)
Jack in the Box Restaurant:
Shreveport, Louisiana (g) (g) (g) (f) 1993 11/93 (f)
Long John Silver's Restaurants:
Apopka, Florida (g) (g) (g) (e) 1994 03/94 (e)
Houston, Texas (g) (g) (g) (e) 1993 03/94 (e)
Laurens, South Carolina (g) (g) (g) (f) 1994 03/94 (f)
Stockbridge, Georgia (g) (g) (g) (e) 1993 03/94 (e)
Albemarle, North Carolina (g) (g) (g) (e) 1994 04/94 (e)
Houston, Texas (g) (g) (g) (e) 1994 04/94 (e)
Marion, Ohio (g) (g) (g) (e) 1994 06/94 (e)
Shelby, North Carolina (g) (g) (g) (f) 1994 06/94 (f)
Las Vegas, Nevada (g) (g) (g) (e) 1994 07/94 (e)
Property of Joint Venture
in Which the Partnership
has a 72.2% Interest and
has Invested in Under a
Direct Financing Lease:
(g) (g) (g) (e) 1991 03/95 (e)
Denny's Restaurant:
Salem, Ohio
</TABLE>
F-4
<PAGE>
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1996
(a) Transactions in real estate and accumulated depreciation during 1996,
1995 and 1994 are summarized as follows:
Accumulated
Cost Depreciation
---- ------------
Properties the Partnership
has Invested in Under
Operating Leases:
Balance, December 31, 1993 $14,248,328 $ 28,319
Acquisitions 12,567,965 -
Depreciation expense - 255,640
----------- --------
Balance, December 31, 1994 26,816,293 283,959
Acquisitions 743,861 -
Dispositions (749,137) -
Depreciation expense - 337,393
----------- --------
Balance, December 31, 1995 26,811,017 621,352
Depreciation expense - 337,181
----------- --------
Balance, December 31, 1996 $26,811,017 $958,533
=========== ========
Property of Joint Venture in
Which the Partnership has a
50% Interest and has Invested
in Under an Operating Lease:
Balance, December 31, 1993 $ 630,317 $ 714
Acquisitions 385 -
Depreciation expense - 14,481
----------- --------
Balance, December 31, 1994 630,702 15,195
Depreciation expense - 14,480
----------- --------
Balance, December 31, 1995 630,702 29,675
Depreciation expense - 14,482
----------- --------
Balance, December 31, 1996 $ 630,702 $ 44,157
=========== ========
F-5
<PAGE>
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED
DEPRECIATION - CONTINUED
December 31, 1996
Accumulated
Cost Depreciation
---- ------------
Properties of Joint Venture in
Which the Partnership has a
50% Interest and has Invested
in Under Operating Leases:
Balance, December 31, 1993 $ - $ -
Acquisitions 3,988,577 -
Depreciation expense - 1,596
----------- --------
Balance, December 31, 1994 3,988,577 1,596
Acquisitions 295,307 -
Reclassified to direct
financing lease (1,108,290) -
Depreciation expense - 24,446
----------- --------
Balance, December 31, 1995 3,175,594 26,042
Dispositions (3,175,594) (43,711)
Acquisitions 4,404,047 -
Depreciation expense - 37,122
----------- --------
Balance, December 31, 1996 $ 4,404,047 $ 19,453
=========== ========
Property of Joint Venture
in Which the Partnership
has a 72.2% Interest and
has Invested in Under
an Operating Lease:
Balance, December 31, 1994 $ - $ -
Acquisition 131,762 -
Depreciation expense (e) - -
----------- -------
Balance, December 31, 1995 131,762 -
Depreciation expense (e) - -
----------- -------
Balance, December 31, 1996 $ 131,762 $ -
=========== =======
(b) Depreciation expense is computed for buildings and improvements based
upon estimated lives of 30 years. All of the leases are treated as
operating leases for federal income tax purposes.
(c) As of December 31, 1996, the aggregate cost of the Properties owned by
the Partnership and joint ventures for federal income tax purposes was
$36,178,896 and $5,188,102, respectively. All of the leases are treated
as operating leases for federal income tax purposes.
(d) The building portion of this property is owned by the tenant;
therefore, depreciation is not applicable.
F-6
<PAGE>
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED
DEPRECIATION - CONTINUED
December 31, 1996
(e) 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 net investment in direct financing
leases; therefore, depreciation is not applicable.
(f) For financial reporting purposes, the lease for the land and building
has been recorded as a direct financing lease. The cost of the land and
building has been included in net investment in direct financing
leases; therefore, depreciation is not applicable.
(g) For financial reporting purposes, certain components of the lease
relating to land and building have been recorded as a direct financing
lease. Accordingly, costs relating to these components of this lease
are not shown.
(h) Effective August 1994, the lease for this property was terminated,
resulting in the lease being reclassified as an operating lease. The
Partnership does not believe this in indicative of an impairment in the
carrying value of the Property.
F-7
<PAGE>
EXHIBITS
<PAGE>
EXHIBIT INDEX
Exhibit Number
3.1 Affidavit and Certificate of Limited Partnership of CNL Income
Fund XV, Ltd. (Included as Exhibit 3.1 to Registration
Statement No. 33-69968 on Form S-11 and incorporated herein by
reference.)
4.1 Affidavit and Certificate of Limited Partnership of CNL Income
Fund XV, Ltd. (Included as Exhibit 3.1 to Registration
Statement No. 33-69968 on Form S-11 and incorporated herein by
reference.)
4.2 Amended and Restated Agreement of Limited Partnership of CNL
Income Fund XV, Ltd. (Included as Exhibit 4.2 to Form 10-K
filed with the Securities and Exchange Commission on March 30,
1995, and incorporated herein by reference.)
10.1 Management Agreement between CNL Income Fund XV, Ltd. and CNL
Investment Company (Included as Exhibit 10.1 to Form 10-K
filed with the Securities and Exchange Commission on March 30,
1996, and incorporated herein by reference.)
10.2 Assignment of Management Agreement from CNL Investment Company
to CNL Income Fund Advisors, Inc. (Included as Exhibit 10.2 to
Form 10-K filed with the Securities and Exchange Commission on
March 30, 1995, and incorporated herein by reference.)
10.3 Assignment of Management Agreement from CNL Income Fund
Advisors, Inc. to CNL Fund Advisors, Inc. (Included as exhibit
10.3 to Form 10-K filed with the Securities and Exchange
Commission on April 1, 1996, and incorporated herein by
reference.)
i
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
balance sheet of CNL Income Fund XIV, Ltd. at December 31, 1996, and its
statement of income for the year then ended and is qualified in its
entirety by reference to the Form 10-K of CNL Income Fund XIV, Ltd. for
the year ended December 31, 1996.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 1,462,012
<SECURITIES> 0
<RECEIVABLES> 23,447
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 26,811,017
<DEPRECIATION> 958,533
<TOTAL-ASSETS> 41,045,849
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 40,035,737
<TOTAL-LIABILITY-AND-EQUITY> 41,045,849
<SALES> 0
<TOTAL-REVENUES> 4,043,902
<CGS> 0
<TOTAL-COSTS> 586,710
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 3,916,329
<INCOME-TAX> 0
<INCOME-CONTINUING> 3,916,329
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,916,329
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>Due to the nature of its industry, CNL Income Fund XIV, Ltd. has an
unclassified balance sheet; therefore, no values are shown above for
current assets and current liabilities.
</FN>
</TABLE>
