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, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-23974
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
Orlando, Florida 32801
(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code: (407) 650-1000
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 4,500,000 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. During the year
ended December 31, 1997, the Port of Palm Bay took possession of the Property in
Riviera Beach, Florida through a total right of way taking. In addition, during
the year ended December 31, 1997, Wood Ridge Real Estate Joint Venture
reinvested the remaining proceeds from the sales of the two Properties in 1996,
in a Taco Bell Property in Anniston, Alabama. In addition, the Partnership
entered into a joint venture arrangement, CNL Kingston Joint Venture, with
affiliates of the General Partners. During the year ended December 31, 1998, the
Partnership sold one Property in Madison, Alabama and two Properties in
Richmond, Virginia, and reinvested these proceeds along with the proceeds from
the right of way taking in December 1997 of the Property in Riviera Beach,
Florida, in a Property in Fayetteville, North Carolina, and in a joint venture
arrangement, Melbourne Joint Venture with an affiliate of the General Partners.
As a result of the above transactions, as of December 31, 1998, the Partnership
currently owned 57 Properties, including 15 wholly owned Properties consisting
of land only and interests in ten Properties owned by joint ventures in which
the Partnership is a co-venturer. The lessee of the 15 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. The Properties are leased on a triple-net basis
with the lessees responsible for all repairs and maintenance, property taxes,
insurance and utilities.
On March 11, 1999, the Partnership entered into an Agreement and Plan
of Merger with CNL American Properties Fund, Inc. ("APF"), pursuant to which the
Partnership would be merged with and into a subsidiary of APF (the "Merger").
APF is a real estate investment trust whose primary business is the ownership of
restaurant properties leased on a long-term, "triple-net" basis to operators of
national and regional restaurant chains. APF has agreed to issue shares of its
common stock, par value $0.01 per share (the "APF Shares"), as consideration for
the Merger. At a special meeting of the partners that is expected to be held in
the third quarter of 1999, Limited Partners holding in excess of 50% of the
Partnership's outstanding limited partnership interests must approve the Merger
prior to consummation of the transaction. If the Limited Partners at the special
meeting approve the Merger, APF will own the Properties and other assets of the
Partnership. See Item 8. Financial Statements and Supplementary Data -- Note 11.
Subsequent Event.
<PAGE>
In the event that the Limited Partners vote against the Merger, the
Partnership will hold its Properties until the General Partners determine that
the sale or other disposition of the Properties is advantageous in view of the
Partnership's investment objectives. In deciding whether to sell Properties, the
General Partners will consider factors such as potential capital appreciation,
net cash flow and federal income tax considerations. Certain lessees also have
been granted options to purchase Properties, generally at the Property's then
fair market value after a specified portion of the lease term has elapsed. The
Partnership has no obligation to sell all or any portion of a Property at any
particular time, except as may be required under property purchase options
granted to certain lessees.
Leases
Although there are variations in the specific terms of the leases, the
following is a summarized description of the general structure of the
Partnership's leases. Substantially all of 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 19 years) and expire between 2007 and 2018. The leases are, in
general, on a triple-net basis, with the lessees responsible for all repairs and
maintenance, property taxes, insurance and utilities. The leases of the
Properties provide for minimum base annual rental payments (payable in monthly
installments) ranging from approximately $18,900 to $203,600. The majority 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 15 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.
In April 1998, the Partnership entered into a joint venture
arrangement, Melbourne Joint Venture, with an affiliate of the General Partners,
to construct and hold one restaurant Property. The lease terms for this Property
are substantially the same as the Partnership's other leases as described above
in the first two paragraphs of this section.
In October 1998, the Partnership reinvested the net sales proceeds from
the sales of several Properties, in a Property located in Fayetteville, North
Carolina. The lease terms for this Property are substantially the same as the
Partnership's other leases, as described above in the first two paragraphs of
this section.
In June 1998 and in January 1999, three tenants, Long John Silver's,
Inc., Finest Foodservice, L.L.C., and BC Superior, L.L.C., filed for bankruptcy
and rejected the leases relating to six (four Long John Silver's and two Boston
Markets) of their eleven leases (including two Properties held by Woodridge Real
Estate Joint Venture) and ceased making rental payments to the Partnership on
the rejected leases. In December 1998, January and February 1999, the
Partnership entered into new leases for three of the six vacant Properties. In
connection therewith, the tenant for each Property has agreed to pay for all
costs necessary to convert these Properties into different restaurant concepts.
Conversion of these Properties is expected to be completed early in 1999. The
lease terms for each Property are substantially the same as the Partnership's
other leases as described above. The Partnership will not recognize rental and
earned income from the remaining three vacant Properties until new tenants for
these Properties are located or until the Properties are sold and the proceeds
from such sales are reinvested in additional Properties. While the tenants have
not rejected or affirmed the remaining five leases, there can be no assurance
that some or all of these leases will not be rejected in the future. As of March
11, 1999, the Partnership has continued receiving rental payments relating to
the five leases not rejected by the tenants. The lost revenues resulting from
the three remaining vacant Properties, as
<PAGE>
described above, and the possible rejection of the remaining five leases could
have an adverse effect on the results of operations of the Partnership if the
Partnership is not able to re-lease the Properties in a timely manner. The
General Partners are currently seeking either new tenants or purchasers for the
remaining three Properties.
Major Tenants
During 1998, five lessees of the Partnership, Flagstar Enterprises,
Inc., Foodmaker, Inc., Long John Silver's, Inc., Checkers Drive-In Restaurants,
Inc., and 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 ten Properties owned by joint ventures). As of December 31,
1998, Flagstar Enterprises, Inc. was the lessee under leases relating to six
restaurants, Foodmaker, Inc. was the lessee under leases relating to six
restaurants, Long John Silver's, Inc. was the lessee under leases relating to
five restaurants (excluding four restaurants for which this tenant rejected the
leases as a result of filing for bankruptcy, as described above), Checkers
Drive-In Restaurants, Inc. was the lessee under leases relating to 15
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, that Flagstar Enterprises, Inc., Foodmaker,
Inc., Checkers Drive-In Restaurants, Inc., and Golden Corral Corporation each
will continue to contribute more than ten percent of the Partnership's total
rental income in 1999. 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 1998 (including the
Partnership's share of rental income from ten Properties owned by joint
ventures). During 1998, Long John Silver's, Inc. filed for bankruptcy, as
described above. In 1999, it is anticipated that Hardee's, Denny's, Jack in the
Box, Checkers, and Golden Corral 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 if the Partnership is not able to re-lease the
Properties in a timely manner. No single tenant or group of affiliated tenants
lease Properties with an aggregate carrying value, excluding acquisition fees
and certain acquisition expenses, in excess of 20 percent of the total assets of
the Partnership.
Joint Venture Arrangements
As of January 1, 1998, the Partnership had entered into three separate
joint venture arrangements, Attalla Joint Venture, Salem Joint Venture, and CNL
Kingston Joint Venture, with affiliates of the General Partners to purchase,
construct, and hold three Properties and has entered into a joint venture
arrangement, Wood-Ridge Real Estate Joint Venture, with an affiliate of the
General Partners to purchase and hold six Properties. In April 1998, the
Partnership entered into an additional joint venture arrangement, Melbourne
Joint Venture, with an affiliate of the General Partners, to construct and hold
one restaurant 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.
Wood Ridge Real Estate Joint Venture, Attalla Joint Venture, and Salem
Joint Venture each have an initial term of 30 years and CNL Kingston Joint
Venture, and Melbourne Joint Venture each have an initial term of 20 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, Salem Joint Venture, CNL Kingston Joint Venture, and Melbourne 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.
<PAGE>
Net cash flow from operations of Attalla Joint Venture, Wood-Ridge Real
Estate Joint Venture, Salem Joint Venture, CNL Kingston Joint Venture, and
Melbourne Joint Venture is distributed 50 percent, 50 percent, 72.2%, 39.94%,
and 50 percent, respectively, to the Partnership and the balance is distributed
to each of the other joint venture partners. Any liquidation proceeds, after
paying joint venture debts and liabilities and funding reserves for contingent
liabilities, will be distributed first to the joint venture partners with
positive capital account balances in proportion to such balances until such
balances equal zero, and thereafter in proportion to each joint venture
partner's percentage interest in the joint venture.
Certain Management Services
CNL Fund Advisors, Inc., an affiliate of the General Partners, provides
certain services relating to management of the Partnership and its Properties
pursuant to a management agreement with the Partnership. Under this agreement,
CNL Fund Advisors, Inc. is responsible for collecting rental payments,
inspecting the Properties and the tenants' books and records, assisting the
Partnership in responding to tenant inquiries and notices and providing
information to the Partnership about the status of the leases and the
Properties. CNL Fund Advisors, Inc. also assists the General Partners in
negotiating the leases. For these services, the Partnership had agreed to pay
CNL Fund Advisors, Inc. 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.
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.
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
As of December 31, 1998, the Partnership owned, either directly or
through joint venture arrangements, 57 Properties, located in 16 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 15 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
<PAGE>
sizes of the buildings owned by the Partnership range from approximately 2,100
to 11,400 square feet. All buildings on Properties 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, 1998 (see Item 1. Business -
Major Tenants), are substantially the same as those described in Item 1.
Business - Leases.
Flagstar Enterprises, Inc. leases six Hardee's restaurants. The initial
term of each lease is 20 years (expiring in 2013) and the average minimum base
annual rent is approximately $69,500 (ranging from approximately $59,100 to
$81,800).
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 $85,300 (ranging from approximately $62,700 to
$103,200).
Long John Silver's, Inc. leases five Long John Silver's restaurants
(excluding four other Properties which were rejected by this tenant as described
above in Item 1. Business -- Leases). The initial term of each lease is 20 years
(expiring in 2014) and the average minimum base annual rent is approximately
$79,500 (ranging from approximately $50,500 to $90,000).
Checkers Drive-In Restaurants, Inc. leases 15 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 $33,800 (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.
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 $143,000
(ranging from approximately $108,400 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.
<PAGE>
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
As of March 11, 1999, there were 3,013 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. From inception through
December 31, 1998, the price paid for any Unit transferred pursuant to the Plan
was $9.50 per Unit. The price paid for any Unit transferred other than pursuant
to the Plan was subject to negotiation by the purchaser and the selling Limited
Partner. The Partnership will not redeem or repurchase Units.
The following table reflects, for each calendar quarter, the high, low
and average sales prices for transfers of Units during 1998 and 1997 other than
pursuant to the Plan, net of commissions.
<TABLE>
<CAPTION>
1998 (1) 1997 (1)
---------------------------------- ----------------------------------
High Low Average High Low Average
-------- -------- ---------- ------- ------- ----------
<S> <C>
First Quarter $9.50 $7.95 $8.99 $9.50 $8.21 $9.19
Second Quarter 9.95 8.75 9.32 8.60 6.90 7.85
Third Quarter (2) (2) (2) 9.50 8.03 8.66
Fourth Quarter 9.06 9.00 9.03 9.50 7.50 8.76
</TABLE>
(1) A total of 29,373 and 39,387 Units were transferred other than pursuant
to the Plan for the years ended December 31, 1998 and 1997,
respectively.
(2) No transfers of Units took place during the quarter other than pursuant
to the Plan.
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 each of the years ended December 31, 1998 and 1997, the Partnership
declared cash distributions of $3,712,520, to the Limited Partners.
Distributions of $928,130 were declared at the close of each of the
Partnership's calendar quarters during 1998 and 1997. No amounts distributed to
partners for the years ended December 31, 1998 and 1997, are required to be or
have been treated by the Partnership as a return of capital for purposes of
calculating the Limited Partners' return on their adjusted capital
contributions. No distributions have been made to the General Partners to date.
These amounts include monthly distributions made in arrears for the Limited
Partners electing to receive such distributions on this basis.
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.
<PAGE>
Item 6. Selected Financial Data
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994
------------- -------------- -------------- --------------- --------------
<S> <C>
Year ended December 31:
Revenues (1) $ 3,831,810 $ 4,268,693 $ 4,503,039 $ 4,406,707 $ 3,371,695
Net income (2) 3,199,087 3,665,940 3,916,329 3,751,237 2,932,075
Cash distributions declared 3,712,520 3,712,520 3,712,522 3,628,130 2,850,554
Net income per Unit (2) (3) 0.70 0.81 0.86 0.83 0.66
Cash distributions declared
per Unit (3) 0.83 0.83 0.83 0.81 0.65
At December 31:
Total assets $40,538,159 $40,984,624 $41,045,849 $40,838,104 $40,866,591
Partners' capital 39,475,724 39,989,157 40,035,737 39,831,930 39,708,823
</TABLE>
(1) Revenues include equity in earnings of the joint ventures and
adjustments to accrued rental income due to the tenants of certain
Properties filing for bankruptcy.
(2) Net income for the year ended December 31, 1998 includes $37,155 for a
provision for loss on building and $112,206 from gains on sales of land
and buildings. Net income for the year ended December 31, 1995,
includes $66,518 from loss on sale of land.
(3) Based on the weighted average number of Limited Partner Units
outstanding during each of the years ended December 31, 1998, 1997,
1996, 1995, and 1994.
The above selected financial data should be read in conjunction with
the financial statements and related notes contained in Item 8 hereof.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The Partnership was organized on 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 generally triple-net leases, with the lessee
responsible for all repairs and maintenance, property taxes, insurance and
utilities. As of December 31, 1998, the Partnership owned 57 Properties, either
directly or through joint venture arrangements.
Liquidity and Capital Resources
The Partnership's primary source of capital for the years ended
December 31, 1998, 1997, and 1996, was cash from operations (which includes cash
received from tenants, distributions from joint ventures and interest received,
less cash paid for expenses). Cash from operations was $3,514,544, $3,606,190,
and $3,706,296 for the years ended December 31, 1998, 1997, and 1996,
respectively. The decrease in cash from operations during 1998 and 1997, each as
compared to the previous year, is primarily a result of changes in income and
expenses as described in "Results of Operations" below and changes in the
Partnership's working capital during each of the respective years.
Other sources and uses of capital included the following during the
years ended December 31, 1998, 1997, and 1996.
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 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. In January 1997, the joint venture reinvested
$502,598 of the remaining net sales proceeds in an additional Property. During
1997, the Partnership and the other joint venture partner each received
approximately $52,000, representing a return of capital, for the remaining
uninvested net sales proceeds.
In September 1997, the Partnership entered into a joint venture
arrangement, CNL Kingston Joint Venture, with an affiliate of the Partnership
which has the same General Partners, to construct and hold one restaurant
Property. As of December 31, 1998, the Partnership owned a 39.94% interest in
the profits and losses of the joint venture.
In January 1998, the Partnership sold its Property in Madison, Alabama
and two Properties in Richmond, Virginia, to third parties for a total of
$1,667,462 and received net sales proceeds of $1,606,702, resulting in a total
gain of $70,798 for financial reporting purposes. These Properties were
originally acquired by the Partnership in 1993 and 1994, and had costs totaling
approximately $1,393,400, excluding acquisition fees and miscellaneous
acquisition expenses; therefore, the Partnership sold these Properties for a
total of $213,300 in excess of their original purchase prices. In April 1998,
the Partnership reinvested a portion of the net sales proceeds from the sale of
the Property in Madison, Alabama in a joint venture arrangement, as described
below. The Partnership distributed amounts sufficient to enable the Limited
Partners to pay federal and state income taxes, if any (at a level reasonably
assumed by the General Partners), resulting from these sales.
In April 1998, the Partnership reached an agreement to accept $360,000
for the Property in Riviera Beach, Florida, which was taken through a right of
way taking in December 1997. The Partnership had received preliminary sales
proceeds of $318,592 as of December 31, 1997. Upon agreement of the final sales
price of $360,000, and receipt of the remaining sales proceeds of $41,408, the
Partnership recognized a gain of $41,408 for financial reporting purposes. This
Property was originally acquired by the Partnership in 1994 and had a cost of
approximately $276,400, excluding acquisition fees and miscellaneous acquisition
expenses; therefore, the Partnership sold this Property for a total of
approximately $83,600 in excess of its original purchase price. In October 1998,
the Partnership reinvested the net sales proceeds from the right of way taking
of the Property in Riviera Beach, Florida in a Property in Fayetteville, North
Carolina, as described below.
In addition, in April 1998, the Partnership reinvested a portion of the
net sales proceeds from the sale of the Property in Madison, Alabama, as
described above, in a joint venture arrangement, Melbourne Joint Venture, with
an affiliate of the General Partners, to construct and hold one restaurant
Property, at a total cost of $1,052,552. During 1998, the Partnership
contributed amounts to purchase land and pay for construction costs relating to
the joint venture and has agreed to contribute additional amounts in 1999 for
additional construction costs. When funding is completed, the Partnership
expects to have an approximate 50 percent interest in the profits and losses of
the joint venture. As of December 31, 1998, the Partnership had a 50 percent
interest in the profits and losses of this joint venture.
In October 1998, the Partnership reinvested approximately $1,537,000 of
the net sales proceeds it received from the sales of the Properties in Richmond,
Virginia, the right of way taking of the Property in Riviera Beach, Florida, and
a portion of the net sales proceeds it received from the sale of the Property in
Madison, Alabama, along with additional funds held as cash and cash equivalents
at December 31, 1997, in a Property located in Fayetteville, North Carolina. The
Partnership acquired the Property from an affiliate of the General Partners. The
affiliate had purchased and temporarily held title to the Property in order to
facilitate the acquisition of the Property by the Partnership. The purchase
price paid by the Partnership represented the costs incurred by the affiliate to
acquire the Property, including closing costs.
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, rental income from the Partnership's Properties is invested
in money market accounts or other short-term, highly liquid investments pending
the Partnership's use of such funds to pay Partnership expenses or make
distributions to partners. At December 31, 1998, the Partnership had $949,056
invested in such short-term investments as compared to $1,285,777 at December
31, 1997. The decrease in cash is primarily attributable to the Partnership
investing a portion of the amounts held at December 31, 1997 in a Property in
Fayetteville, North Carolina, as described above. The funds remaining at
December 31, 1998, after the payment of distributions and other liabilities,
will be used to meet the Partnership's working capital and other needs. Total
liabilities at December 31, 1998, to the extent they exceed cash and cash
equivalents at December 31, 1998, will be paid from future cash from operations,
and in the event the General Partners elect to make additional contributions,
from future General Partner contributions.
During 1998, 1997, and 1996, the affiliates incurred on behalf of the
Partnership $113,352, $87,695, and $94,152, respectively, for certain operating
expenses. At December 31, 1998 and 1997, the Partnership owed $25,432 and
$7,853, respectively, to affiliates for such amounts and accounting and
administrative services and management fees. As of March 11, 1999, the
Partnership had reimbursed the affiliates all such amounts. Other liabilities,
including distributions payable, increased to $1,037,003 at December 31, 1998,
from $987,614 at December 31, 1997, primarily as a result of an increase in
rents paid in advance at December 31, 1998. Liabilities, at December 31, 1998,
to the extent they exceed cash and cash equivalents at December 31, 1998, will
be paid from future cash from operations.
Based primarily on current and future cash from operations, the
Partnership declared distributions to the Limited Partners of $3,712,520,
$3,712,520 and $3,712,522 for the years ended December 31, 1998, 1997, and 1996,
respectively. This represents distributions of $0.83 per Unit for each of the
years ended December 31, 1998, 1997, and 1996. No amounts distributed or to be
distributed to the Limited Partners for the years ended 1998, 1997, and 1996 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.
On March 11, 1999, the Partnership entered into an Agreement and Plan
of Merger with APF, pursuant to which the Partnership would be merged with and
into a subsidiary of APF. As consideration for the Merger, APF has agreed to
issue 4,313,041 APF Shares which, for the purposes of valuing the merger
consideration, have been valued by APF at $10.00 per APF Share, the price paid
by APF investors in APF's most recent public offering. In order to assist the
General Partners in evaluating the proposed merger consideration, the General
Partners retained Valuation Associates, a nationally recognized real estate
appraisal firm, to appraise the Partnership's restaurant property portfolio.
Based on Valuation Associates' appraisal, the Partnership's property portfolio
and other assets were valued on a going concern basis (meaning the Partnership
continues unchanged) at $42,435,559 as of December 31, 1998. Legg Mason Wood
Walker, Incorporated has rendered a fairness opinion that the APF Share
consideration, payable by APF, is fair to the Partnership from a financial point
of view. The APF Shares are expected to be listed for trading on the New York
Stock Exchange concurrently with the consummation of the Merger, and, therefore,
would be freely tradable at the option of the former Limited Partners. At a
special meeting of the partners that is expected to be held in the third quarter
of 1999, Limited Partners holding in excess of 50% of the Partnership's
outstanding limited partnership interests must approve the Merger prior to
consummation of the transaction. The General Partners intend to recommend that
the Limited Partners of the Partnership approve the Merger. In connection with
their recommendation, the General Partners will solicit the consent of the
Limited Partners at the special meeting.
Results of Operations
The Partnership owned and leased 50 wholly owned Properties during
1998, 1997, and 1996 (including one Property in Riviera Beach, Florida which was
condemned through a total right of way taking in December 1997 and two
Properties in Richmond, Virginia and one Property in Madison, Alabama, each sold
during the year ended December 31, 1998). In addition, during 1996, the
Partnership was a co-venturer in three joint ventures that owned and leased nine
Properties (including two Properties in Wood-Ridge Real Estate Joint Venture,
which were sold in September 1996), during 1997, the Partnership was a
co-venture in four separate joint ventures that owned and leased nine
Properties, and during 1998, the Partnership was a co-venturer in five separate
joint ventures that owned and leased ten Properties. As of December 31, 1998,
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), 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, 1998, 1997, and 1996, the
Partnership earned $3,359,955, $3,911,527, and $3,987,525, respectively, in
rental income from operating leases (net of adjustments to accrued rental
income) and earned income from direct financing leases from Properties wholly
owned by the Partnership.
The decrease in rental and earned income during 1998, as compared to
1997, is primarily attributable to a decrease of approximately $212,300 due to
the fact that in June 1998, Long John Silver's, Inc. filed for bankruptcy and
rejected the leases relating to four of the nine Properties leased by Long John
Silver's, Inc. As a result, this tenant ceased making rental payments on the
four rejected leases. The Partnership has continued receiving rental payments
relating to the leases not rejected by the tenant. In conjunction with the four
rejected leases, during 1998, the Partnership wrote off approximately $265,000
of accrued rental income (non-cash accounting adjustments relating to the
straight-lining of future scheduled rent increases over the lease term in
accordance with generally accepted accounting principles) relating to these four
Properties. The Partnership has since entered into new leases, each with a new
tenant, for two of the four vacant Properties. In connection therewith, the
tenant for each Property has agreed to pay for all costs necessary to convert
these Properties into different restaurant concepts. Conversion of these
Properties is expected to be completed early in 1999, at which point rental
payments are expected to commence. The General Partners are currently seeking
either replacement tenants or purchasers for the two remaining, vacant
Properties. The Partnership will not recognize any rental and earned income from
these Properties until replacement tenants for these Properties are located, or
until the Properties are sold and the proceeds from such sales are reinvested in
additional Properties. While Long John Silver's, Inc. has not rejected or
affirmed the remaining five leases, there can be no assurance that some or all
of these leases will be rejected in the future. The lost revenues resulting from
the two remaining vacant Properties, as described above, and the possible
rejection of the remaining five leases could have an adverse effect on the
results of operations of the Partnership, if the Partnership is not able to
re-lease these Properties in a timely manner.
In addition, rental and earned income decreased by approximately
$162,600 in 1998, as compared to 1997, as a result of the 1998 sales of the
Properties in Madison, Alabama and Richmond, Virginia and the 1997 right of way
taking of the Property in Riviera Beach, Florida. The decrease in rental and
earned income was partially offset by the fact that in October 1998, the
Partnership reinvested the majority of the net sales proceeds from the sale of
the above
<PAGE>
Properties in a Property in Fayetteville, North Carolina, as described above in
"Liquidity and Capital Resources." In addition, the decrease during 1998 is
partially offset by an increase in rental income relating to the Property in
Akron, Ohio, as described below, being operational for a full year in 1998 as
compared to a partial year in 1997.
The decrease in rental and earned income during 1997, as compared to
1996, was primarily attributable to the fact that during May 1997, the temporary
operator of the Property in Akron, Ohio, ceased restaurant operations and
vacated the Property. The Partnership ceased recording rental income and wrote
off the related allowance for doubtful accounts. The Partnership entered into a
long-term, triple-net lease for this Property with the operator of an Arlington
Big Boy in September 1997, and rental income commenced in December 1997.
The decrease in rental and earned income during 1997 as compared to
1996, was partially due to the fact that the Partnership wrote off accrued rent
relating to the Property in Madison, Alabama to adjust the carrying value of the
asset to the net proceeds received from the sale of this Property in January
1998.
During the years ended December 31, 1998, 1997, and 1996, the
Partnership also earned $63,776, $21,617, and $7,014, respectively, in
contingent rental income. The increase in contingent rental income during 1998
and 1997, each as compared to the previous year, is primarily attributable to
increased gross sales of certain restaurant Properties requiring the payments of
contingent rental income.
In addition, for the years ended December 31, 1998, 1997, and 1996, the
Partnership earned $317,654, $309,879, and $459,137, 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 1998, as
compared to 1997, is primarily attributable to the fact that CNL Kingston Joint
Venture was operational for a full year in 1998, as compared to a partial year
in 1997. The decrease in net income earned by joint ventures during 1997 as
compared to 1996, 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."
During the year ended December 31, 1998, five lessees (or group of
affiliated lessees) of the Partnership, Flagstar Enterprises, Inc., Foodmaker,
Inc., Long John Silver's, Inc., Checkers Drive-In Restaurants, Inc., and 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 ten
Properties owned by joint ventures). As of December 31, 1998, Flagstar
Enterprises, Inc. was the lessee under leases relating to six restaurants,
Foodmaker, Inc. was the lessee under leases relating to six restaurants, Long
John Silver's, Inc. was the lessee under leases relating to five restaurants
(excluding the four leases rejected by this tenant, as described above),
Checkers Drive-In Restaurants, Inc. was the lessee under leases relating to 15
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, that Flagstar Enterprises, Inc., Foodmaker, Inc.,
Checkers Drive-In Restaurants, Inc., and Golden Corral Corporation each will
continue to contribute more than ten percent of the Partnership's total rental
income in 1999. In addition, during the year ended December 31, 1998, 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 (including the Partnership's share of rental
income from ten Properties owned by joint ventures). During 1998, Long John
Silver's, Inc. filed for bankruptcy, as described above. In 1999, it is
anticipated that Hardee's, Denny's, Jack in the Box, Checkers, and Golden Corral
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 if
the Partnership is not able to re-lease the Properties in a timely manner.
In addition, during the years ended December 31, 1998, 1997, and 1996,
the Partnership earned $90,425, $47,287, and $56,377, respectively in interest
and other income. The increase in interest and other income during 1998, as
compared to 1997, is primarily due to an increase in interest income earned on
net sales proceeds relating to the sales of several Properties during 1998
described above, pending the reinvestment of the net sales proceeds in
additional Properties.
Operating expenses, including depreciation and amortization expense,
were $707,774, $602,753, and $586,710 for the years ended December 31, 1998,
1997, and 1996, respectively. The increase in operating expenses during the year
ended December 31, 1998, as compared to the year ended December 31, 1997, is
partially attributable to the fact that the Partnership accrued insurance and
real estate tax expenses as a result of Long John Silver's, Inc. filing for
bankruptcy and rejecting the leases relating to four Properties in June 1998, as
described above. In addition, the increase in operating expenses during 1998, is
partially attributable to an increase in depreciation expense due to the fact
that during 1998, the Partnership reclassified these assets from net investment
in direct financing leases to land and buildings on operating leases. In
accordance with Statement of Financial Accounting Standards No. 13, "Accounting
for Leases," the Partnership recorded the reclassified assets at the lower of
original cost, present fair value, or present carrying amount, which resulted in
a loss on termination of direct financing lease of $21,873 for financial
reporting purposes during the year ended December 31, 1998. No such loss was
recorded during 1997 and 1996. The Partnership has since entered into new
leases, each with a new tenant, for two of the four Properties, as described
above. The new tenants are responsible for real estate taxes, insurance and
maintenance relating to their respective Properties; therefore, the General
Partners do not anticipate the Partnership will incur these expenses for these
two Properties in the future. However, the Partnership will continue to incur
certain expenses, such as real estate taxes, insurance and maintenance relating
to the two remaining, vacant Properties until new tenants or purchasers are
located. The Partnership is currently seeking either new tenants or purchasers
for these Properties.
In addition, the increase in operating expenses for 1998, is also
partially due to the fact that the Partnership incurred $25,231 in transaction
costs related to the General Partners retaining financial and legal advisors to
assist them in evaluating and negotiating the proposed Merger with APF, as
described above in "Liquidity and Capital Resources." If the Limited Partners
reject the Merger, the Partnership will bear the portion of the transaction
costs based upon the percentage of "For" votes and the General Partners will
bear the portion of such transaction costs based upon the percentage of
"Against" votes and abstentions.
The increase in operating expenses during 1997, as compared to 1996,
was primarily attributable to the fact that the Partnership recorded bad debt
expense of $10,500 during 1997 relating to the Property in Akron, Ohio. Due to
the fact that the temporary operator ceased operating the Property in May, 1997,
as described above in "Liquidity and Capital Resources," the General Partners
ceased further collection efforts of these past due amounts.
As a result of the former tenant of the Property in Akron, Ohio,
defaulting under the terms of its lease during 1994 and the Partnership leasing
the Property to temporary operators who subsequently ceased operating the
Property, the Partnership incurred real estate taxes during the years ended
December 31, 1998, 1997, and 1996. The Partnership entered into a long-term,
triple-net lease for this Property with the operator of an Arlington Big Boy in
September 1997, and rental income commenced in December 1997. The new tenant is
responsible for real estate taxes; therefore, the General Partners do not
anticipate the Partnership will incur these expenses in the future.
As a result of the sales of several Properties and the receipt of
proceeds from the right of way taking of the Property in Riviera Beach, Florida,
as described above in "Liquidity and Capital Resources," the Partnership
recognized gains totaling $112,206 for financial reporting purposes during the
year ended December 31, 1998. No Properties were sold during 1997 and 1996.
At December 31, 1998, the Partnership recorded a provision for loss on
building in the amount of $37,155 for financial reporting purposes relating to a
Long John Silver's Property whose lease was rejected by the tenant, as described
above. The tenant of this Property filed for bankruptcy and ceased payment of
rents under the terms of its lease agreement. The allowance represents the
difference between the carrying value of the Property at December 31, 1998 and
the estimated net realizable value for the Property.
The Partnership's leases as of December 31, 1998, 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.
<PAGE>
Year 2000
The Year 2000 problem is the result of information technology systems
and embedded systems (products which are made with microprocessor (computer)
chips such as HVAC systems, physical security systems and elevators) using a
two-digit format, as opposed to four digits, to indicate the year. Such
information technology and embedded systems may be unable to properly recognize
and process date-sensitive information beginning January 1, 2000.
The Partnership currently does not have any information technology
systems. Affiliates of the General Partners provide all services requiring the
use of information technology systems pursuant to a management agreement with
the Partnership. The maintenance of embedded systems, if any, at the
Partnership's Properties is the responsibility of the tenants of the Properties
in accordance with the terms of the Partnership's leases. The General Partners
and affiliates have established a team dedicated to reviewing the internal
information technology systems used in the operation of the Partnership, and the
information technology and embedded systems and the Year 2000 compliance plans
of the Partnership's tenants, significant suppliers, financial institutions and
transfer agent.
The information technology infrastructure of the affiliates of the
General Partners consists of a network of personal computers and servers that
were obtained from major suppliers. The affiliates utilize various
administrative and financial software applications on that infrastructure to
perform the business functions of the Partnership. The inability of the General
Partners and affiliates to identify and timely correct material Year 2000
deficiencies in the software and/or infrastructure could result in an
interruption in, or failure of, certain of the Partnership's business activities
or operations. Accordingly, the General Partners and affiliates have requested
and are evaluating documentation from the suppliers of the software and
infrastructure of the affiliates regarding the Year 2000 compliance of their
products that are used in the business activities or operations of the
Partnership. The General Partners and affiliates have not yet received
sufficient certifications to be assured that the suppliers have fully considered
and mitigated any potential material impact of the Year 2000 deficiencies. The
costs expected to be incurred by the General Partners and affiliates to become
Year 2000 compliant will be incurred by the General Partners and affiliates;
therefore, these costs will have no impact on the Partnership's financial
position or results of operations.
The Partnership has material third party relationships with its
tenants, financial institutions and transfer agent. The Partnership depends on
its tenants for rents and cash flows, its financial institutions for
availability of cash and its transfer agent to maintain and track investor
information. If any of these third parties are unable to meet their obligations
to the Partnership because of the Year 2000 deficiencies, such a failure may
have a material impact on the Partnership. Accordingly, the General Partners
have requested and are evaluating documentation from the Partnership's tenants,
financial institutions, and transfer agent relating to their Year 2000
compliance plans. The General Partners have not yet received sufficient
certifications to be assured that the tenants, financial institutions, and
transfer agent have fully considered and mitigated any potential material impact
of the Year 2000 deficiencies. Therefore, the General Partners do not, at this
time, know of the potential costs to the Partnership of any adverse impact or
effect of any Year 2000 deficiencies by these third parties.
The General Partners currently expect that all year 2000 compliance
testing and any necessary remedial measures on the information technology
systems used in the business activities and operations of the Partnership will
be completed prior to June 30, 1999. Based on the progress the General Partners
and affiliates have made in identifying and addressing the Partnership's Year
2000 issues and the plan and timeline to complete the compliance program, the
General Partners do not foresee significant risks associated with the
Partnership's Year 2000 compliance at this time. Because the General Partners
and affiliates are still evaluating the status of the information technology
systems used in business activities and operations of the Partnership and the
systems of the third parties with which the Partnership conducts its business,
the General Partners have not yet developed a comprehensive contingency plan and
are unable to identify "the most reasonably likely worst case scenario" at this
time. If the General Partners identify significant risks related to the
Partnership's Year 2000 compliance or if the Partnership's Year 2000 compliance
program's progress deviates substantially from the anticipated timeline, the
General Partners will develop appropriate contingency plans.
<PAGE>
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Not applicable.
Item 8. Financial Statements and Supplementary Data
<PAGE>
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
CONTENTS
Page
Report of Independent Accountants
Financial Statements:
Balance Sheets
Statements of Income
Statements of Partners' Capital
Statements of Cash Flows
Notes to Financial Statements
<PAGE>
Report of Independent Accountants
To the Partners
CNL Income Fund XIV, Ltd.
In our opinion, the financial statements listed in the index appearing under
item 14(a)(1) present fairly, in all material respects, the financial position
of CNL Income Fund XIV, Ltd. (a Florida limited partnership) at December 31,
1998 and 1997, and the results of its operations and its cash flows for each of
the three years in the period ended December 31, 1998 in conformity with
generally accepted accounting principles. In addition, in our opinion, the
financial statement schedule listed in the index appearing under item 14(a)(2)
presents fairly, in all material respects, the information set forth therein
when read in conjunction with the related financial statements. These financial
statements and the financial statement schedule are the responsibility of the
Partnership's management; our responsibility is to express an opinion on these
financial statements and the financial statement schedule based on our audits.
We conducted our audits of these statements in accordance with generally
accepted auditing standards which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
Orlando, Florida
January 22, 1999, except for Note 11 for which the date is March 11, 1999
<PAGE>
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
1998 1997
----------------- -----------------
<S> <C>
ASSETS
Land and buildings on operating leases, less
accumulated depreciation and allowance
for loss on building $26,509,264 $25,217,725
Net investment in direct financing leases 7,300,102 9,041,485
Investment in joint ventures 3,813,175 3,271,739
Cash and cash equivalents 949,056 1,285,777
Restricted cash -- 318,592
Receivables, less allowance for doubtful
accounts of $1,105 in 1998 62,824 19,912
Prepaid expenses 8,389 7,915
Organization costs, less accumulated
amortization of $10,000 and $8,599 -- 1,401
Accrued rental income less allowance for
doubtful accounts of $12,622 and $6,295 1,895,349 1,820,078
----------------- -----------------
$40,538,159 $40,984,624
================= =================
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 2,577 $ 10,258
Accrued and escrowed real estate taxes
payable 18,198 19,570
Distributions payable 928,130 928,130
Due to related parties 25,432 7,853
Rents paid in advance and deposits 88,098 29,656
----------------- -----------------
Total liabilities 1,062,435 995,467
Partners' capital 39,475,724 39,989,157
----------------- -----------------
$40,538,159 $40,984,624
================= =================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Year Ended December 31,
1998 1997 1996
--------------- --------------- ---------------
<S> <C>
Revenues:
Rental income from operating leases $ 2,792,931 $ 2,872,283 $ 2,953,895
Adjustments to accrued rental income (277,319 ) -- --
Earned income from direct financing leases 844,343 1,017,627 1,026,616
Contingent rental income 63,776 21,617 7,014
Interest and other income 90,425 47,287 56,377
--------------- --------------- ---------------
3,514,156 3,958,814 4,043,902
--------------- --------------- ---------------
Expenses:
General operating and administrative 168,184 154,654 162,163
Professional services 34,309 29,746 24,138
Bad debt expense -- 10,500 --
Management fees to related parties 37,430 38,626 38,785
Real estate taxes 17,435 7,192 3,426
State and other taxes 22,498 21,874 18,109
Loss on termination of direct financing lease 21,873 -- --
Depreciation and amortization 380,814 340,161 340,089
Transaction costs 25,231 -- --
--------------- --------------- ---------------
707,774 602,753 586,710
--------------- --------------- ---------------
Income Before Equity in Earnings of Joint Ventures,
Gain on Land and Building from Right of Way
Taking, Gain on Sale of Land and Building, and
Provision for Loss on Building 2,806,382 3,356,061 3,457,192
Equity in Earnings of Joint Ventures 317,654 309,879 459,137
Gain on Land and Building from Right of Way
Taking 41,408 -- --
Gain on Sale of Land and Building 70,798 -- --
Provision for Loss on Building (37,155 ) -- --
--------------- --------------- ---------------
Net Income $ 3,199,087 $ 3,665,940 $ 3,916,329
=============== =============== ===============
Allocation of Net Income:
General partners $ 31,093 $ 36,659 $ 39,163
Limited partners 3,167,994 3,629,281 3,877,166
--------------- --------------- ---------------
$ 3,199,087 $ 3,665,940 $ 3,916,329
=============== =============== ===============
Net Income Per Limited Partner Unit $0.70 $ 0.81 $ 0 .86
=============== =============== ===============
Weighted Average Number of Limited Partner
Units Outstanding 4,500,000 4,500,000 4,500,000
=============== =============== ===============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
STATEMENTS OF PARTNERS' CAPITAL
Years Ended December 31, 1998, 1997, and 1996
<TABLE>
<CAPTION>
General Partners Limited Partners
------------------------- -----------------------------------------------------
Accumulated Accumulated Syndication
Contributions Earnings Contributions Distributions Earnings Costs Total
------------- ----------- ------------- --------------- ------------ ------------ -------------
<S> <C>
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
Distributions to limited
partners ($0.83 per
limited partner unit) -- -- -- (3,712,520 ) -- -- (3,712,520 )
Net income -- 36,659 -- -- 3,629,281 -- 3,665,940
------------ ------------ ------------ --------------- ----------- -------------- -------------
Balance, December 31, 1997 1,000 145,640 45,000,000 (14,135,925 ) 14,362,387 (5,383,945 ) 39,989,157
Distributions to limited
partners ($0.83 per
limited partner unit) -- -- -- (3,712,520 ) -- -- (3,712,520 )
Net income -- 31,093 -- -- 3,167,994 -- 3,199,087
------------ ------------ ------------ --------------- ----------- ----------- -------------
Balance, December 31, 1998 $ 1,000 $ 176,733 $ 45,000,000 $ (17,848,445 ) $17,530,381 $ (5,383,945 ) $ 39,475,724
============ ============ ============ =============== =========== ============== ==============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31,
1998 1997 1996
---------------- ---------------- ----------------
<S> <C>
Increase (Decrease) in Cash and Cash
Equivalents:
Cash Flows from Operating Activities:
Cash received from tenants $3,391,042 $3,501,064 $ 3,572,793
Distributions from joint ventures 343,684 308,220 340,299
Cash paid for expenses (293,428 ) (243,326 ) (250,885)
Interest received 73,246 40,232 44,089
---------------- ---------------- ----------------
Net cash provided by operating
activities 3,514,544 3,606,190 3,706,296
---------------- ---------------- ----------------
Cash Flows from Investing Activities:
Proceeds from sale of land and building 1,606,702 -- --
Proceeds received from right of way taking 41,408 318,592 --
Additions to land and buildings on
operating leases (605,712 ) -- --
Investment in direct financing leases (931,237 ) -- --
Investment in joint ventures (568,498 ) (121,855 ) (7,500)
Return of capital from joint venture -- 51,950 --
Decrease (increase) in restricted cash 318,592 (318,592 ) --
---------------- ---------------- ----------------
Net cash used in investing activities (138,745 ) (69,905 ) (7,500)
---------------- ---------------- ----------------
Cash Flows from Financing Activities:
Distributions to limited partners (3,712,520 ) (3,712,520 ) (3,712,522)
---------------- ---------------- ----------------
Net cash used in financing activities (3,712,520 ) (3,712,520 ) (3,712,522)
---------------- ---------------- ----------------
Net Decrease in Cash and Cash Equivalents (336,721 ) (176,235 ) (13,726)
Cash and Cash Equivalents at Beginning of Year 1,285,777 1,462,012 1,475,738
---------------- ---------------- ----------------
Cash and Cash Equivalents at End of Year $ 949,056 $1,285,777 $ 1,462,012
================ ================ ================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
STATEMENTS OF CASH FLOWS - CONTINUED
<TABLE>
<CAPTION>
Year Ended December 31,
1998 1997 1996
--------------- --------------- ---------------
<S> <C>
Reconciliation of Net Income to Net Cash
Provided by Operating Activities:
Net income $3,199,087 $3,665,940 $3,916,329
--------------- --------------- ---------------
Adjustments to reconcile net income to
net cash provided by operating
activities:
Bad debt expense -- 10,500 --
Loss on termination of direct
financing lease 21,873 -- --
Depreciation 378,381 337,180 337,181
Amortization 2,433 2,981 2,908
Equity in earnings of joint ventures,
net of distributions 26,030 (1,659 ) (118,889 )
Gain on land and building from
right of way taking (41,408 ) -- --
Gain on sale of land and building (70,798 ) -- --
Provision for loss on building 37,155 -- --
Decrease in net investment in direct
financing leases 82,359 83,787 74,798
Increase in receivables (38,232 ) (6,935 ) (13,946 )
Decrease (increase) in prepaid
expenses (474 ) 328 (4,802 )
Increase in accrued rental income (148,845 ) (471,287 ) (491,221 )
Increase (decrease) in accounts
payable and accrued expenses (9,038 ) 12,017 (8,408 )
Increase (decrease) in due to related
parties 17,579 6,202 (5,218 )
Increase (decrease) in rents paid in
advance and deposits 58,442 (32,864 ) 17,564
--------------- --------------- ---------------
Total adjustments 315,457 (59,750 ) (210,033 )
--------------- --------------- ---------------
Net Cash Provided by Operating Activities $3,514,544 $3,606,190 $3,706,296
=============== =============== ===============
Supplemental Schedule of Non-Cash
Financing Activities:
Distributions declared and unpaid at
December 31 $ 928,130 $ 928,130 $ 928,130
=============== =============== ===============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
Years Ended December 31, 1998, 1997, and 1996
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.
The general partners of the Partnership are CNL Realty Corporation (the
"Corporate General Partner"), James M. Seneff, Jr. and Robert A.
Bourne. Mr. Seneff and Mr. Bourne are also 50 percent shareholders of
the Corporate General Partner. The general partners have responsibility
for managing the day-to-day operations of the Partnership.
Real Estate and Lease Accounting - The Partnership records the
acquisition of land and buildings at cost, including acquisition and
closing costs. Land and buildings are leased to unrelated third parties
on a triple-net basis, whereby the tenant is generally responsible for
all operating expenses relating to the property, including property
taxes, insurance, maintenance and repairs. The leases are accounted for
using either the direct financing or the operating methods. Such
methods are described below:
Direct financing method - The leases accounted for using the
direct financing method are recorded at their net investment
(which at the inception of the lease generally represents the
cost of the asset) (Note 4). Unearned income is deferred and
amortized to income over the lease terms so as to produce a
constant periodic rate of return on the Partnership's net
investment in the leases.
Operating method - Land and building leases accounted for
using the operating method are recorded at cost, revenue is
recognized as rentals are earned and depreciation is charged
to operations as incurred. Buildings are depreciated on the
straight-line method over their estimated useful lives of 30
years. When scheduled rentals vary during the lease term,
income is recognized on a straight-line basis so as to produce
a constant periodic rent over the lease term commencing on the
date the property is placed in service.
<PAGE>
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1998, 1997, and 1996
1. Significant Accounting Policies - Continued:
Accrued rental income represents the aggregate amount
of income recognized on a straight-line basis in excess of
scheduled rental payments to date. Whenever a tenant defaults
under the terms of its lease, or events or changes in
circumstance indicate that the tenant will not lease the
property through the end of the lease term, the Partnership
either reserves or writes- off the cumulative accrued rental
income balance.
When the properties are sold, the related cost and accumulated
depreciation for operating leases and the net investment for direct
financing leases, plus any accrued rental income, are removed from the
accounts and gains or losses from sales are reflected in income. The
general partners of the Partnership review properties for impairment
whenever events or changes in circumstances indicate that the carrying
amount of the assets may not be recoverable through operations. The
general partners determine whether an impairment in value has occurred
by comparing the estimated future undiscounted cash flows, including
the residual value of the property, with the carrying cost of the
individual property. If an impairment is indicated, the assets are
adjusted to their fair value. Although the general partners have made
their best estimate of these factors based on current conditions, it is
reasonably possible that changes could occur in the near term which
could adversely affect the general partners' best estimate of net cash
flows expected to be generated from its properties and the need for
asset impairment write downs.
When the collection of amounts recorded as rental or other income is
considered to be doubtful, an adjustment is made to increase the
allowance for doubtful accounts, which is netted against receivables,
and to decrease rental or other income or increase bad debt expense for
the current period, although the Partnership continues to pursue
collection of such amounts. If amounts are subsequently determined to
be uncollectible, the corresponding receivable and allowance for
doubtful accounts are decreased accordingly.
Investment in Joint Ventures - The Partnership accounts for its
interests in Attalla Joint Venture, Wood-Ridge Real Estate Joint
Venture, Salem Joint Venture, Melbourne Joint Venture, and CNL Kingston
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.
<PAGE>
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1998, 1997, and 1996
1. Significant Accounting Policies - Continued:
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 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 were 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.
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 1998 presentation.
These reclassifications had no effect on partners' capital or net
income.
<PAGE>
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1998, 1997, and 1996
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." Some of the leases are classified as operating leases and some
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 the majority 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:
<TABLE>
<CAPTION>
1998 1997
----------------- -----------------
<S> <C>
Land $16,195,936 $ 16,425,914
Buildings 12,024,577 10,087,524
----------------- -----------------
28,220,513 26,513,438
Less accumulated depreciation (1,674,094 ) (1,295,713 )
----------------- -----------------
26,546,419 25,217,725
Less allowance for loss on building (37,155 ) --
----------------- -----------------
$26,509,264 $ 25,217,725
================= =================
</TABLE>
During the year ended December 31, 1998, the Partnership sold its
property in Madison, Alabama and two properties in Richmond, Virginia,
to third parties for a total of $1,667,462 and received net sales
proceeds of $1,606,702, resulting in a total gain of $70,798 for
financial reporting purposes. These properties were originally acquired
by the Partnership in 1993 and 1994, and had costs totalling
approximately $1,393,400, excluding acquisition fees and miscellaneous
acquisition expenses; therefore, the Partnership sold these properties
for a total of approximately $213,300 in excess of their original
purchase prices.
<PAGE>
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1998, 1997, and 1996
3. Land and Buildings on Operating Leases - Continued:
In addition, in April 1998, the Partnership reached an agreement to
accept $360,000 for the property in Riviera Beach, Florida, which was
taken through a right of way taking in December 31, 1997. The
Partnership had received preliminary sales proceeds of $318,592 as of
December 31, 1997. Upon agreement of the final sales price of $360,000,
and receipt of the remaining sales proceeds of $41,408, the Partnership
recognized a gain of $41,408 for financial reporting purposes. This
property was originally acquired by the Partnership in 1994 and had a
cost of approximately $276,400, excluding acquisition fees and
miscellaneous acquisition expenses; therefore, the Partnership sold
this property for a total of approximately $83,600 in excess of its
original purchase price.
In October 1998, the Partnership reinvested approximately $1,537,000 of
the net sales proceeds it received from the sales of the properties in
Richmond, Virginia and the right of way taking of the property in
Riviera Beach, Florida, and a portion of the net sales proceeds it
received from the sale of the property in Madison, Alabama, in a
property located in Fayetteville, North Carolina.
At December 31, 1998, the Partnership recorded a provision for loss on
building in the amount of $37,155 for financial reporting purposes
relating to a Long John Silver's Property. The tenant of this Property
filed for bankruptcy and ceased payment of rents under the terms of its
lease agreement. The allowance represents the difference between the
carrying value of the Property at December 31, 1998 and the estimated
net realizable value for the Property.
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, 1998, 1997, and 1996, the Partnership
recognized $148,845 (net of $6,327 in reserves and $277,319 in
write-offs), $471,287 (net of $6,295 in reserves), and $491,221,
respectively, of such rental income.
<PAGE>
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1998, 1997, and 1996
3. Land and Buildings on Operating Leases - Continued:
The following is a schedule of the future minimum lease payments to be
received on noncancellable operating leases at December 31, 1998:
1999 $2,486,272
2000 2,538,562
2001 2,557,759
2002 2,615,117
2003 2,632,784
Thereafter 27,438,256
-----------------
$40,268,750
=================
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.
4. Net Investment in Direct Financing Leases:
The following lists the components of the net investment in direct
financing leases at December 31:
<TABLE>
<CAPTION>
1998 1997
----------------- -----------------
<S> <C>
Minimum lease payments
receivable $ 14,282,003 $ 18,621,827
Estimated residual values 2,373,313 2,842,002
Less unearned income (9,355,214 ) (12,422,344)
----------------- -----------------
Net investment in direct
financing leases $ 7,300,102 $ 9,041,485
================= =================
</TABLE>
<PAGE>
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1998, 1997, and 1996
4. Net Investment in Direct Financing Leases - Continued:
The following is a schedule of future minimum lease payments to be
received on direct financing leases at December 31, 1998:
1999 $ 898,054
2000 899,947
2001 902,770
2002 911,239
2003 914,901
Thereafter 9,755,092
-----------------
$14,282,003
=================
The above table does not include future minimum lease payments for
renewal periods or for contingent rental payments that may become due
in future periods (see Note 3).
In January 1998, the Partnership sold its property in Madison, Alabama,
for which the building portion had been classified as a direct
financing lease. In connection therewith, the gross investment (minimum
lease payments receivable and the estimated residual value) and
unearned income relating to the building were removed from the accounts
(see Note 3).
In June 1998, four of the Partnership's leases with Long John Silver's,
Inc. were rejected in connection with the tenant filing for bankruptcy.
As a result, the Partnership reclassified these assets from net
investment in direct financing leases to land and buildings on
operating leases. In accordance with Statement of Financial Accounting
Standards No. 13, "Accounting for Leases," in June 1998, the
Partnership recorded the reclassified assets at the lower of original
cost, present fair value, or present carrying amount, which resulted in
a loss on termination of direct financing lease of $21,873 for
financial reporting purposes.
5. Investment in Joint Ventures:
The Partnership owns a 50 percent, a 72.2% and a 50 percent interest in
the profits and losses of Attalla Joint Venture, Salem Joint Venture
and Wood-Ridge Real Estate Joint Venture, respectively. The remaining
interests in these joint ventures are held by affiliates of the
Partnership which have the same general partners.
<PAGE>
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1998, 1997, and 1996
5. Investment in Joint Ventures - Continued:
In January 1997, Wood-Ridge Real Estate Joint Venture reinvested
$502,598 of the remaining net sales proceeds, from the 1996 sales of
two properties, in a Taco Bell property in Anniston, Alabama. During
the year ended December 31, 1997, the Partnership and the other joint
venture partner had each received approximately $52,000, representing a
return of capital, for the remaining uninvested net sales proceeds. As
of December 31, 1998, the Partnership owned a 50 percent interest in
the profits and losses of this joint venture.
In September 1997, the Partnership entered into a joint venture
arrangement, CNL Kingston Joint Venture, with an affiliate of the
general partners, to construct and hold one restaurant property. In
connection therewith, the Partnership contributed amounts to CNL
Kingston Joint Venture to fund construction costs relating to the
property owned by the joint venture. As of December 31, 1998, the
Partnership owned a 39.94% interest in the profits and losses of the
joint venture. The Partnership accounts for its investment in this
joint venture under the equity method since the Partnership shares
control with an affiliate.
In April 1998, the Partnership entered into a joint venture
arrangement, Melbourne Joint Venture, with an affiliate of the general
partners, to construct and hold one restaurant property, at a total
cost of $1,052,552. During 1998, the Partnership contributed amounts to
purchase land and pay for construction costs relating to the joint
venture and has agreed to contribute additional amounts in 1999 for
additional construction costs. As of December 31, 1998, the Partnership
owned a 50 percent interest in the profits and losses of this joint
venture. When funding is complete, the Partnership expects to have an
approximate 50 percent interest in the profits and losses of the joint
venture. The Partnership accounts for its investment in this joint
venture under the equity method since the Partnership shares control
with an affiliate.
<PAGE>
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1998, 1997, and 1996
5. Investment in Joint Ventures - Continued:
As of December 31, 1998, Attalla Joint Venture, Salem Joint Venture,
CNL Kingston Joint Venture, and Melbourne Joint Venture each owned and
leased one property, and Wood-Ridge Real Estate Joint Venture owned and
leased six properties, to operators of fast-food or family-style
restaurants. The following presents the joint ventures' condensed
financial information at December 31:
<TABLE>
<CAPTION>
1998 1997
--------------- ---------------
<S> <C>
Land and buildings on operating
leases, less accumulated
depreciation $6,913,765 $6,008,240
Net investment in direct financing
lease 360,790 364,479
Cash 87,922 13,842
Receivables 47,545 2,571
Accrued rental income 194,526 150,621
Other assets 1,055 1,257
Liabilities 171,590 231,061
Partners' capital 7,434,013 6,309,949
Revenues 750,147 712,004
Net income 615,127 588,835
</TABLE>
The Partnership recognized income totalling $317,654, $309,879, and
$459,137 for the years ended December 31, 1998, 1997, and 1996,
respectively, from these joint ventures.
6. Restricted Cash:
In December 1997, the Partnership received preliminary sales proceeds
of $318,592 for the property in Riviera Beach, Florida which was taken
through a right of way taking. In October 1998, the Partnership
reinvested these proceeds in a property in Fayetteville, North Carolina
(see Note 3).
<PAGE>
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1998, 1997, and 1996
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 sales of properties not in
liquidation of the Partnership, to the extent distributed, will be
distributed first to the limited partners in an amount sufficient to
provide them with their 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 a sale of a property not in
liquidation of the Partnership is, in general, allocated in the same
manner as net sales proceeds are distributable. Any loss from the sale
of a property is, in general, allocated first, on a pro rata basis, to
partners with positive balances in their capital accounts, and
thereafter, 95 percent to the limited partners and five percent to the
general partners.
Generally, net sales proceeds from a sale of properties, in liquidation
of the Partnership will be used in the following order: i) first to pay
and discharge all of the Partnership's liabilities to creditors, ii)
second, to establish reserves that may be deemed necessary for any
anticipated or unforeseen liabilities or obligations of the
Partnership, iii) third, to pay all of the Partnership's liabilities,
if any, to the general and limited partners, iv) fourth, after
allocations of net income, gains and/or losses, to the partners with
positive capital account balances, in proportion to such balances, up
to amounts sufficient to reduce such positive balances to zero, and v)
thereafter, any funds remaining shall then be distributed 95 percent to
the limited partners and five percent to the general partners.
During each of the years ended December 31, 1998 and 1997, the
Partnership declared distributions to the limited partners of
$3,712,520 and during the year ended December 31, 1996, the Partnership
declared distributions to the limited partners of $3,712,522. No
distributions have been made to the general partners to date.
<PAGE>
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1998, 1997, and 1996
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>
1998 1997 1996
-------------- -------------- ---------------
<S> <C>
Net income for financial reporting
purposes $3,199,087 $3,665,940 $3,916,329
Depreciation for tax reporting purposes in
excess of depreciation for financial
reporting purposes (77,202 ) (130,766 ) (130,766 )
Direct financing leases recorded as
operating leases for tax reporting
purposes 82,359 83,787 74,798
Gain on sale of land and building for tax
reporting purposes in excess of gain
for financial reporting purposes 94,442 -- --
Gain on land and building from right of
way (41,408 ) -- --
taking deferred for tax reporting
purposes
Allowance for loss on building 37,155 -- --
Equity in earnings of joint ventures
for financial reporting
purposes less than (in excess of)
equity in earnings of joint
ventures for tax reporting purposes 35,645 3,109 (174,253 )
Capitalization of transaction costs for
tax 25,231 -- --
reporting purposes
Allowance for doubtful accounts 1,105 -- --
Accrued rental income (148,845 ) (471,287 ) (491,221 )
Loss on lease termination of direct
financing lease 21,873 -- --
Rents paid in advance 53,442 (32,864 ) 17,564
Other 1,034 (21,988 ) 23,878
-------------- -------------- ---------------
Net income for federal income tax
purposes $3,283,918 $ 3,095,931 $ 3,236,329
============== ============== ===============
</TABLE>
<PAGE>
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1998, 1997, and 1996
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 majority stockholder
of CNL Fund Advisors, Inc. The other individual general partner, Robert
A. Bourne, serves as treasurer, director and vice chairman of the board
of directors of CNL Fund Advisors, Inc. During the years ended December
31, 1998, 1997, and 1996, CNL Fund Advisors, Inc. (hereinafter referred
to as the "Affiliate") performed certain services for the Partnership,
as described below.
During the years ended December 31, 1998, 1997, and 1996, the Affiliate
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 Affiliate 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 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 Affiliate. 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 $37,430,
$38,626, and $38,785 for the years ended December 31, 1998, 1997, and
1996, respectively.
The Affiliate is also entitled to receive a deferred, subordinated real
estate disposition fee, payable upon the sale of one or more
properties, based on the lesser of one-half of a competitive real
estate commission or three percent of the sales price if the Affiliate
provides a substantial amount of services in connection with the sale.
However, if the net sales proceeds are reinvested in a replacement
property, no such real estate disposition fees will be incurred until
such replacement property is sold and the net sales proceeds are
distributed. The payment of the real estate disposition fee is
subordinated to receipt by the limited partners of their aggregate
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, 1998, 1997, and 1996, the Affiliate
provided accounting and administrative services to the Partnership on a
day-to-day basis. The Partnership incurred $110,618, $89,910, and
$96,082 for the years ended December 31, 1998, 1997, and 1996,
respectively, for such services.
<PAGE>
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1998, 1997, and 1996
9. Related Party Transactions - Continued:
During 1998, the Partnership acquired a property for a purchase price
of approximately $1,537,000 from CNL First Corp., an affiliate of the
general partners. CNL First Corp. had purchased and temporarily held
title to this property in order to facilitate the acquisition of the
property by the Partnership. The purchase price paid by the Partnership
represented the costs incurred by CNL First Corp. to acquire and carry
the property, including closing costs.
The due to related parties at December 31, 1998 and 1997, totalled
$25,432 and $7,853, respectively.
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 each of the years ended December 31:
<TABLE>
<CAPTION>
1998 1997 1996
------------- -------------- -------------
<S> <C>
Long John Silver's, Inc. $634,121 $850,159 $853,992
Checkers Drive-In
Restaurants, Inc. 628,816 724,612 732,941
Foodmaker, Inc. 574,481 562,725 556,100
Golden Corral Corporation 534,624 520,911 476,350
Flagstar Enterprises, Inc. 427,801 483,606 498,655
Denny's, Inc. N/A 379,767 380,939
</TABLE>
<PAGE>
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1998, 1997, and 1996
10. Concentration of Credit Risk - Continued:
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 each of the years ended December 31:
<TABLE>
<CAPTION>
1998 1997 1996
------------- ------------- -------------
<S> <C>
Long John Silver's $634,121 $850,159 $853,992
Checkers Drive-in
Restaurants 628,816 724,612 732,941
Denny's 625,101 618,154 615,021
Jack in the Box 574,481 562,725 556,100
Golden Corral Family
Steakhouse Restaurants 534,624 520,911 476,350
Hardee's 427,801 483,606 498,655
</TABLE>
The information denoted by N/A indicates that for each period
presented, the tenant or group of affiliated tenants and the chains did
not represent more than ten percent of the Partnership's total rental
and earned income.
Although the Partnership's properties are geographically diverse
throughout the United States and the Partnership's lessees operate a
variety of restaurant concepts, default by any lessee or restaurant
chain contributing more than ten percent of the Partnership's revenues
could significantly impact the results of operations of the Partnership
if the Partnership is not able to re-lease the properties in a timely
manner.
In June 1998, Long John Silver's, Inc. filed for bankruptcy and
rejected the leases relating to four of its nine leases and ceased
making rental payments to the Partnership on the rejected leases. The
Partnership will not recognize any rental and earned income from these
Properties until new tenants for these Properties are located, or until
the Properties are sold and the proceeds from such sales are reinvested
in additional Properties. While Long John Silver's, Inc. has not
rejected or affirmed the remaining five leases, there can be no
assurance that some or all of these leases will not be rejected in the
future. The lost revenues resulting from the four leases that were
rejected, as described above, and the possible rejection of the
remaining five leases could have an adverse effect on the results of
operations of the Partnership if the Partnership is not able to
re-lease these properties in a timely manner. The Partnership entered
into new leases, each with a new tenant, for two of the four rejected
leases.
<PAGE>
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1998, 1997, and 1996
11. Subsequent Event:
On March 11, 1999, the Partnership entered into an Agreement and Plan
of Merger with CNL American Properties Fund, Inc. ("APF"), pursuant to
which the Partnership would be merged with and into a subsidiary of APF
(the "Merger"). As consideration for the Merger, APF has agreed to
issue 4,313,041 shares of its common stock, par value $0.01 per shares
(the "APF Shares") which, for the purposes of valuing the merger
consideration, have been valued by APF at $10.00 per APF Share, the
price paid by APF investors in APF's most recent public offering. In
order to assist the general partners in evaluating the proposed merger
consideration, the general partners retained Valuation Associates, a
nationally recognized real estate appraisal firm, to appraise the
Partnership's restaurant property portfolio. Based on Valuation
Associates' appraisal, the Partnership's property portfolio and other
assets were valued on a going concern basis (meaning the Partnership
continues unchanged) at $42,435,559 as of December 31, 1998. Legg Mason
Wood Walker, Incorporated has rendered a fairness opinion that the APF
Share consideration, payable by APF, is fair to the Partnership from a
financial point of view. The APF Shares are expected to be listed for
trading on the New York Stock Exchange concurrently with the
consummation of the Merger, and, therefore, would be freely tradable at
the option of the former limited partners. At a special meeting of the
partners that is expected to be held in the third quarter of 1999,
limited partners holding in excess of 50% of the Partnership's
outstanding limited partnership interests must approve the Merger prior
to consummation of the transaction. The general partners intend to
recommend that the limited partners of the Partnership approve the
Merger. In connection with their recommendation, the general partners
will solicit the consent of the limited partners at the special
meeting. If the limited partners reject the Merger, the Partnership
will bear the portion of the transaction costs based upon the
percentage of "For" votes and the general partners will bear the
portion of such transaction costs based upon the percentage of
"Against" votes and abstentions.
<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 52, is a principal stockholder of CNL Group,
Inc., a diversified real estate company, and has served as its Chairman of the
Board of Directors, a director and Chief Executive Officer since its formation
in 1980. Mr. Seneff has been Chairman of the Board of Directors, director, and
Chief Executive Officer of CNL Securities Corp. since its formation in 1979. Mr.
Seneff also has held the position of Chairman of the Board of Directors, Chief
Executive Officer, President and director of CNL Management Company, a
registered investment advisor, since its formation in 1976, has served as Chief
Executive Officer, Chairman of the Board and a director of CNL Investment
Company, has served as Chief Executive Officer, a director and Chairman of the
Board of Directors of Commercial Net Lease Realty, Inc., a publicly-traded REIT,
listed on the NYSE, since 1992, served as Chief Executive Officer, a director
and Chairman of the Board of Directors of CNL Realty Advisors, Inc. from its
inception in May 1992 through December 1997, at which time such company merged
with Commercial Net Lease Realty, Inc., and has held the position of Chief
Executive Officer, Chairman of the Board and a director of CNL Institutional
Advisors, Inc., a registered investment advisor, since its inception in December
1990. Mr. Seneff has served as Chairman of the Board of Directors of CNL
American Properties Fund, Inc. since December 1994 and as a director and Chief
Executive Officer since May 1994. Mr. Seneff has served as Chairman of the
Board, Chief Executive Officer and a director of CNL Fund Advisors, Inc. since
March 1994. Mr. Seneff has served as Chairman of the Board, Chief Executive
Officer and a director of CNL Hospitality Properties, Inc. since June 1996 and
of CNL Hospitality Advisors, Inc. since January 1997. Mr. Seneff has also served
as Chairman of the Board, Chief Executive Officer and a director of CNL Health
Care Properties, Inc. since December 1997 and CNL Health Care Advisors, Inc.
since July 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 advises 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 then $60 billion of retirement funds.
Mr. Seneff has served as a member of the board of directors of First Union
National Bank of Florida since May 1998 and has served as a member of the
Orlando Advisory Board of First Union National Bank of Florida since March 1994.
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 restaurants, office buildings, apartment complexes, 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, 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 51, is President and Treasurer of CNL Group,
Inc., President, Treasurer, a director, and a registered principal of CNL
Securities Corp., President, Treasurer, and a director of CNL Investment
Company, and Chief Investment Officer, a director and Treasurer of CNL
Institutional Advisors, Inc., a registered investment advisor. Mr. Bourne served
as President of CNL Institutional Advisor, Inc. from the date of its inception
through July 1997. Mr. Bourne served as President of Commercial Net Lease
Realty, Inc. from July 1992 through February 1996, served as Secretary and
Treasurer from February 1996 through December 1997, and has served as a director
since July 1992 and as Vice Chairman of the Board of Directors since February
1996. In addition, Mr. Bourne served as President of CNL Realty Advisors, Inc.
from May 1992 through February 1996, served as Treasurer from February 1996
through December 1997, served as a director from May 1992 through December 31,
1997 and served as Vice Chairman from February 1996 through December 1997, at
which time such company merged with Commercial Net Lease Realty, Inc. Mr. Bourne
has served as a Vice Chairman of the Board of Directors and Treasurer of CNL
American Properties Fund, Inc. since February 1999, has served as a director
since May 1994 and previously served as President from May 1994 through February
1999. Mr. Bourne has served as a director of CNL Fund Advisors, Inc. since March
1994, has served as Treasurer and Vice Chairman of the Board of Directors since
September 1997, and previously served as President from March 1994 through
September 1997. Mr. Bourne has served as President and a director of CNL
Hospitality Properties, Inc. since June 1996 and of CNL Hospitality Advisors,
Inc. since January 1997. Mr. Bourne has served as President and director of CNL
Health Care Properties, Inc. since December 1997 and CNL Health Care Advisors,
Inc. since July 1997. 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
restaurants, office buildings, apartment complexes, 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. Mr. Bourne formerly was a
certified public accountant with Coopers & Lybrand and a partner in the firm of
Bourne & Rose, P.A. Mr. Bourne received a B.A. in Accounting, with honors, from
Florida State University in 1970.
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, Orlando, Florida 32801.
CNL Fund Advisors, Inc. is a majority owned subsidiary of CNL Group, Inc., a
diversified real estate company, and was organized to perform property
acquisition, property management and other services.
CNL Group, Inc., which is the parent company of CNL Fund Advisors,
Inc., was organized in 1980 under the laws of the State of Florida. CNL Group,
Inc. is a diversified real estate company which provides a wide range of real
estate, development and financial services to companies in the United States
through the activities of its subsidiaries. These activities are primarily
focused on the franchised restaurant and hospitality industries. James M.
Seneff, Jr., an individual General Partner of the Partnership, is the Chairman
of the Board, Chief Executive Officer, and a director of CNL 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.
Curtis B. McWilliams, age 43, joined CNL Group, Inc. in April 1997 and
currently serves as an Executive Vice President. In addition, Mr. McWilliams has
served as President of CNL Fund Advisors, Inc. and as President of the
Restaurant and Financial Services Groups within CNL Group, Inc. since April
1997. Mr. McWilliams has served as President of CNL American Properties Fund,
Inc. since February 1999 and previously served as Executive Vice President from
February 1998 through February 1999. From September 1983 through March 1997, Mr.
McWilliams was employed by Merrill Lynch & Co., most recently as Chairman of
Merrill Lynch's Private Advisory Services until March 1997. Mr. McWilliams
received a B.S.E. in Chemical Engineering from Princeton University in 1977 and
a Masters of Business Administration with a concentration in finance from the
University of Chicago in 1983.
John T. Walker, age 40, has served as Executive Vice President of CNL
American Properties Fund, Inc. since January 1996, as Chief Operating Officer
since March 1995, and previously served as Senior Vice President since December
1994. In addition, Mr. Walker has served as Executive Vice President of CNL Fund
Advisors, Inc. since January 1996, Chief Operating Officer since April 1995, and
previously served as Senior Vice President from November 1994 through January
1996. In addition, Mr. Walker previously served as Executive Vice President of
CNL Hospitality Properties, Inc. and CNL Hospitality Advisors, Inc. From May
1992 to May 1994, Mr. Walker, a certified public accountant, was Executive Vice
President for Finance and Administration and Chief Financial Officer of Z Music,
Inc., a cable television network (subsequently acquired by Gaylord
Entertainment), where he was responsible for overall financial and
administrative management and planning. From January 1990 through April 1992,
Mr. Walker was Chief Financial Officer of the First Baptist Church in Orlando,
Florida. From April 1984 through December 1989, he was a partner in the
accounting firm of Chastang, Ferrell & Walker, P.A., where he was the partner in
charge of audit and consulting services, and from 1981 to 1984, Mr. Walker was a
Senior Consultant/Audit Senior at Price Waterhouse. Mr. Walker is a Cum Laude
graduate of Wake Forest University with a B.S. in Accountancy and is a certified
public accountant.
Lynn E. Rose, age 50, a certified public accountant, has served as
Secretary of CNL American Properties Fund, Inc. since December 1994 and served
as Treasurer from December 1994 through February 1999. Ms. Rose has served as a
director and Secretary of CNL Fund Advisors, Inc. since March 1994, and as
Treasurer from the date of its inception through June 30, 1997. Ms. Rose has
served as Secretary of CNL Group, Inc. since 1987, as Chief Financial Officer of
CNL Group, Inc. since December 1993, 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, as Treasurer of CNL Realty Advisors, Inc. from 1991 to February 1996, and
as Secretary and a director of CNL Realty Advisors, Inc. since its inception in
1991 until December 31, 1997, at which time CNL Realty Advisors, Inc. merged
with Commercial Net Lease Realty, Inc. In addition, Ms. Rose served as Secretary
and Treasurer of Commercial Net Lease Realty, Inc. from 1992 to February 1996.
Ms. Rose also serves as Secretary and Treasurer of CNL Hospitality Properties,
Inc. and CNL Health Care Properties, Inc. and as Secretary, Treasurer and a
director of CNL Hospitality Advisors, Inc. and CNL Health Care Advisors, Inc.
Ms. Rose also currently serves as Secretary for approximately 50 additional
corporations. Ms. Rose oversees the 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.
Jeanne A. Wall, age 40, has served as Executive Vice President of CNL
American Properties Fund, Inc. since December 1994. Ms. Wall has served as
Executive Vice President of CNL Fund Advisors, Inc. since November 1994, and
previously served as Vice President from March 1994 through November 1994. Ms.
Wall has served as Chief Operating Officer of CNL Investment Company and of CNL
Securities Corp. since November 1994 and has served as Executive Vice President
of CNL Investment Company since January 1991. Ms. Wall joined CNL Securities
Corp. in 1984. In 1985, Ms. Wall became Vice President of CNL Securities Corp.
In 1987, she became Senior Vice President and in July 1997 she became Executive
Vice President of CNL Securities Corp. In this capacity, Ms. Wall serves as
national marketing and sales director and oversees the national marketing plan
for the CNL investment programs. In addition, Ms. Wall oversees product
development, partnership administration and investor services for programs
offered through participating brokers and corporate communications for CNL
Group, Inc. and its affiliates. 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 until December 31, 1997, at which time CNL Realty Advisors,
Inc. merged with Commercial Net Lease Realty, Inc., and served as Vice President
of Commercial Net Lease Realty, Inc. from 1992 through December 31, 1997. In
addition, Ms. Wall serves as Executive Vice President of CNL Hospitality
Properties, Inc., CNL Hospitality Advisors, Inc., CNL Health Care Properties,
Inc. and CNL Health Care Advisors, Inc. 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 35, a certified public accountant, has
served as Chief Financial Officer of CNL American Properties Fund, Inc. since
January 1997 and as Chief Financial Officer of CNL Fund Advisors, Inc. since
September 1996. From March 1995 to July 1996, Mr. Shackelford was a senior
manager in the national office of Price Waterhouse where he was responsible for
advising foreign clients seeking to raise capital and a public listing in the
United States. From August 1992 to March 1995, he served as a manager in the
Price Waterhouse, Paris, France office
<PAGE>
serving several multinational clients. Mr. Shackelford was an audit staff and
audit senior from 1986 to 1992 in the Orlando, Florida office of Price
Waterhouse. Mr. Shackelford received a B.A. in Accounting, with honors, and a
Masters of Business Administration from Florida State University.
Item 11. Executive Compensation
Other than as described in Item 13, the Partnership has not paid and
does not intend to pay any executive compensation to the General Partners or any
of their affiliates. There are no compensatory plans or arrangements regarding
termination of employment or change of control.
Item 12. Security Ownership of Certain Beneficial Owners and Management
As of March 11, 1999, no person was known to the Registrant to be a
beneficial owner of more than five percent of the Units.
The following table sets forth, as of March 11, 1999, the beneficial
ownership interests of the General Partners in the Registrant.
<TABLE>
<CAPTION>
Title of Class Name of Partner Percent of Class
<S> <C>
General Partnership Interests James M. Seneff, Jr. 45%
Robert A. Bourne 45%
CNL Realty Corporation 10%
----
100%
</TABLE>
Neither the General Partners, nor any of their affiliates, owns any
interest in the Registrant, except as noted above. On March 11, 1999, the
Registrant entered into an Agreement and Plan of Merger with CNL American
Properties Fund, Inc. ("APF") pursuant to which the Registrant would be merged
with and into a subsidiary of APF (the "Merger"). For further discussion, see
Item 8. Financial Statements and Supplementary Data -- Note 11.
Subsequent Event.
<PAGE>
Item 13. Certain Relationships and Related Transactions
The table below summarizes the types, recipients, methods of
computation and amounts of compensation, fees and distributions paid or payable
by the Partnership to the General Partners and their affiliates for the year
ended December 31, 1998, 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, 1998
----------------------- --------------------- -----------------------
<S> <C>
Reimbursement to affiliates for Operating expenses are reimbursed Operating expenses incurred on
operating expenses at the lower of cost or 90 percent behalf of the Partnership:
of the prevailing rate at which $113,352
comparable services could have been
obtained in the same geographic Accounting and administrative
area. Affiliates of the General services: $110,618
Partners from time to time incur
certain operating expenses on
behalf of the Partnership for which
the Partnership reimburses the
affiliates without interest.
Annual management fee to affiliates One percent of the sum of gross $37,430
operating revenues from Properties
wholly owned by the Partnership
plus the Partner-ship's allocable
share of gross revenues of joint
ventures in which the Partnership
is a co-venturer. The management
fee, which will not exceed
competi-tive 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.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Amount Incurred
Type of Compensation For the Year
and Recipient Method of Computation Ended December 31, 1998
----------------------- --------------------- -----------------------
<S> <C>
Deferred, subordinated real estate A deferred, subordinated real $ -0 -
disposition fee payable to affiliates estate disposition fee, 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 replacement Property, no such
real estate disposition fee will
be recorded until such replacement
Property is sold and the net sales
proceeds are distributed.
General Partners' deferred, A deferred, subordinated share $ -0-
sub-ordinated share of Partnership net equal to one percent of Partnership
cash flow distributions of net cash flow,
subordinated to certain minimum
returns to the Limited Partners.
General Partners' deferred, A deferred, subordinated share $ -0-
sub-ordinated share of Partnership net equal to five percent of
sales proceeds from a sale or sales of Partnership distributions of such
properties not in liquidation of the net sales proceeds, subordinated to
Partnership certain minimum returns to the
Limited Partners.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Amount Incurred
Type of Compensation For the Year
and Recipient Method of Computation Ended December 31, 1998
----------------------- --------------------- -----------------------
<S> <C>
General Partners' share of Partnership Distributions of net sales proceeds $ -0-
net sales proceeds from a sale or sales from a sale or sales of
in liquidation of the Partnership substantially all of the
Partnership's assets will be
distributed in the following order
or priority: (i) first, to pay all
debts and liabilities of the
Partnership and to establish
reserves; (ii) second, to Partners
with positive capital account
balances, determined after the
allocation of net income, net
loss, gain and loss, in proportion
to such balances, up to amounts
sufficient to reduce such balances
to zero; and (iii) thereafter, 95%
to the Limited Partners and 5% to
the General Partners.
</TABLE>
As discussed above in Item 8. Financial Statements and Supplementary
Data -- Note 11. Subsequent Event, the Registrant has entered into an Agreement
and Plan of Merger, dated March 11, 1999, with APF pursuant to which the
Registrant would be merged with and into a subsidiary of APF in exchange for the
issuance of APF Shares. The APF Shares are expected to be listed for trading on
the New York Stock Exchange concurrently with the consummation of the Merger. If
the Merger is approved by Limited Partners holding units greater than 50% of the
outstanding units of the Registrant, the General Partners of the Registrant
would receive certain benefits. For instance, following the Merger, James M.
Seneff, Jr. and Robert A. Bourne, the individual General Partners, will continue
to serve as directors of APF, with Mr. Seneff serving as Chairman and Mr. Bourne
serving as Vice Chairman. As APF directors, they may also be entitled to receive
stock options under any stock option plan adopted by APF.
<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, 1998 and 1997
Statements of Income for the years ended December 31, 1998,
1997, and 1996
Statements of Partners' Capital for the years ended December
31, 1998, 1997, and 1996
Statements of Cash Flows for the years ended December 31,
1998, 1997, and 1996
Notes to Financial Statements
2. Financial Statement Schedule
Schedule III - Real Estate and Accumulated Depreciation at
December 31, 1998
Notes to Schedule III - Real Estate and Accumulated
Depreciation at December 31, 1998
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 the
Securities and Exchange Commission on March 30, 1995,
and incorporated herein by reference.)
<PAGE>
10.3 Assignment of Management Agreement from CNL Income
Fund Advisors, Inc. to CNL Fund Advisors, Inc.
(Included as Exhibit 10.3 to Form 10-K filed with the
Securities and Exchange Commission on April 1, 1996,
and incorporated herein by reference.)
27 Financial Data Schedule (Filed herewith.)
(b) The Registrant filed no reports on Form 8-K during the period
October 1, 1998 through December 31, 1998.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on the 27th day of
March, 1999.
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.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C>
/s/ Robert A. Bourne President, Treasurer and Director March 27, 1999
- ---------------------------
Robert A. Bourne (Principal Financial and Accounting
Officer)
/s/ James M. Seneff, Jr. Chief Executive Officer and Director March 27, 1999
- ---------------------------
James M. Seneff, Jr. (Principal Executive Officer)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1998
<S> <C>
Costs Capitalized
Subsequent To
Initial Cost Acquisition
---------------------------- -------------------
Encum- Buildings and Improve- Carrying
brances Land Improvements ments Costs
----------- ------------ ------------- ---------- --------
Properties the Partnership
has Invested in Under
Operating Leases:
Bennigan's Restaurant:
Fayetteville, North Carolinaa - $605,712 - - -
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 - - -
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 - - -
El Ranchito Restaurant:
Albemarle,
North Carolina (j) - 214,623 370,149 - -
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 - -
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 (j) - 295,839 476,053 - -
Houston, Texas - 342,971 - - -
Marion, Ohio - 321,032 - - -
Las Vegas, Nevada (i) - 520,884 582,175 - -
Shelby, North Carolina (k)(m) - 147,088 508,676 - -
Shoney's Restaurant:
Akron, Ohio (h) - 246,431 805,793 - -
------------ ------------ ------------ --------
$16,195,936 $8,079,182 $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 - 303,608 685,064 - -
Taco Bell Restaurants:
Anniston, Alabama - 173,395 329,202 - -
------------ ------------ ------------ --------
$2,057,699 $2,826,085 - -
============ ============ ============ ========
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 - - -
============ ============ ============ ========
Property of Joint Venture
in Which the Partnership
has a 39.94% Interest and has
Invested in Under Operating
Lease:
Taco Bell Restaurants:
Kingston, Tennessee - $189,452 - $328,445 -
============ ============ ============ ========
Property of Joint Venture
in Which the Partnership
has a 50% Interest and has
Invested in Under Operating
Lease:
5 & Diner Restaurant:
Melbourne, Florida - $439,281 - $603,584 -
============ ============ ============ ========
Properties the Partnership has
Invested in Under Direct
Financing Leases:
Bennigan's Restaurant:
Fayetteville, North Carolina - - $931,239 - -
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 - -
Jack in the Box Restaurant:
Shreveport, Louisiana - 240,811 848,338 - -
Long John Silver's Restaurants:
Apopka, Florida - - 506,493 - -
Houston, Texas - - 449,633 - -
Laruens, South Carolina - 96,752 386,284 - -
Houston, Texas - - 508,497 - -
Marion, Ohio - - 463,504 - -
------------ ------------ ------------ --------
$537,330 $5,971,539 $1,074,396 -
============ ============ ============ ========
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 -
============ ============ ============ ========
Gross Amount at Which Life on Which
Carried at Close of Period (c) Depreciation in
----------------------------------------- Date Latest Income
Buildings and Accumulated of Con- Date Statement is
Land Improvements Total Depreciation struction Acquired Computed
------------ ------------- ------------ ------------ --------- -------- ----------------
$605,712 (g) $605,712 (e) 1983 10/98 (e)
210,290 (g) 210,290 (e) 1994 07/94 (e)
501,606 - 501,606 (d) - 03/94 (d)
332,737 - 332,737 (d) - 03/94 (d)
193,110 - 193,110 (d) - 03/94 (d)
197,821 - 197,821 (d) - 03/94 (d)
335,232 - 335,232 (d) - 03/94 (d)
362,907 - 362,907 (d) - 03/94 (d)
225,071 - 225,071 (d) - 03/94 (d)
332,418 - 332,418 (d) - 03/94 (d)
305,896 - 305,896 (d) - 03/94 (d)
474,262 - 474,262 (d) - 03/94 (d)
559,646 - 559,646 (d) - 03/94 (d)
296,726 - 296,726 (d) - 03/94 (d)
269,643 - 269,643 (d) - 03/94 (d)
338,396 - 338,396 (d) - 03/95 (d)
421,221 - 421,221 (d) - 03/95 (d)
202,363 447,278 649,641 78,437 1992 09/93 (b)
282,086 776,194 1,058,280 130,780 1988 09/93 (b)
420,446 (g) 420,446 (e) 1994 10/93 (e)
881,047 (g) 881,047 (e) 1994 11/93 (e)
214,623 370,149 584,772 7,836 1994 04/94 (j)
698,046 1,019,581 1,717,627 140,732 1994 06/94 (b)
931,962 975,218 1,907,180 162,625 1993 10/93 (b)
415,390 833,156 1,248,546 144,553 1993 10/93 (b)
303,170 965,024 1,268,194 130,344 1994 08/94 (b)
201,441 423,569 625,010 72,622 1993 11/93 (b)
315,087 (g) 315,087 (e) 1993 11/93 (e)
296,341 485,974 782,315 83,321 1993 11/93 (b)
186,404 453,720 640,124 76,366 1993 12/93 (b)
385,903 409,773 795,676 68,969 1993 12/93 (b)
449,442 528,882 978,324 90,679 1992 11/93 (b)
423,092 467,253 890,345 79,173 1992 11/93 (b)
465,235 525,470 990,705 89,018 1988 12/93 (b)
297,688 551,394 849,082 92,453 1992 12/93 (b)
257,393 419,245 676,638 71,023 1983 12/93 (b)
320,435 (g) 320,435 (e) 1994 03/94 (e)
411,403 (g) 411,403 (e) 1993 03/94 (e)
295,839 476,053 771,892 10,097 1993 03/94 (j)
342,971 (g) 342,971 (e) 1994 04/94 (e)
321,032 (g) 321,032 (e) 1994 06/94 (e)
520,884 582,175 1,103,059 12,411 1994 07/94 (i)
147,088 508,676 655,764 10,857 1994 06/94 (k)
246,431 805,793 1,052,224 121,798 1993 10/93 (b)
- ----------- ------------- ------------ ------------
$16,195,936 $12,024,577 $28,220,513 $1,674,094
=========== ============= ============ ============
$196,274 $434,428 $630,702 $73,118 1993 11/93 (b)
=========== ============= ============ ============
398,313 - 398,313 (d) 1996 10/96 (d)
409,942 737,391 1,147,333 54,805 1994 10/96 (b)
518,507 542,919 1,061,426 40,351 1994 10/96 (b)
253,934 531,509 785,443 39,503 1996 10/96 (b)
303,608 685,064 988,672 50,916 1996 10/96 (b)
173,395 329,202 502,597 21,694 1993 01/97 (b)
- ----------- ------------- ------------ ------------
$2,057,699 $2,826,085 $4,883,784 $207,269
=========== ============= ============ ============
$131,762 (g) $131,762 (e) 1991 03/95 (e)
=========== ============
$189,452 $328,445 $517,897 $11,921 1997 11/97 (b)
=========== ============= ============ ============
$439,281 $603,584 $1,042,865 $937 1998 04/98 (b)
=========== ============= ============ ============
(g) (g) (g) (e) 1983 10/98 (e)
- (g) (g) (e) 1994 07/94 (e)
(g) (g) (g) (f) 1993 09/93 (f)
- (g) (g) (e) 1994 10/93 (e)
- (g) (g) (e) 1994 11/93 (e)
- (g) (g) (e) 1993 11/93 (e)
(g) (g) (g) (f) 1993 11/93 (f)
- (g) (g) (e) 1994 03/94 (e)
- (g) (g) (e) 1993 03/94 (e)
(g) (g) (g) (f) 1994 03/94 (f)
- (g) (g) (e) 1994 04/94 (e)
- (g) (g) (e) 1994 06/94 (e)
- (g) (g) (e) 1991 03/95 (e)
</TABLE>
<PAGE>
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1998
(a) Transactions in real estate and accumulated depreciation during 1998,
1997 and 1996 are summarized as follows:
<TABLE>
<CAPTION>
Accumulated
Cost Depreciation
-------------- ---------------
<S> <C>
Properties the Partnership has Invested
in Under Operating Leases:
Balance, December 31, 1995 $ 26,811,017 $ 621,352
Depreciation expense -- 337,181
-------------- ---------------
Balance, December 31, 1996 26,811,017 958,533
Depreciation expense -- 337,180
Dispositions (297,579) --
-------------- ---------------
Balance, December 31, 1997 26,513,438 1,295,713
Acquisitions 605,712 --
Dispositions (982,778) --
Reclassified from direct financing lease 2,084,141 --
Depreciation expense -- 378,381
-------------- ---------------
Balance, December 31, 1998 $ 28,220,513 $ 1,674,094
============== ===============
Property of Joint Venture in Which the
Partnership has a 50% Interest and
has Invested in Under an Operating
Lease:
Balance, December 31, 1995 $ 630,702 $ 29,675
Depreciation expense -- 14,482
-------------- ---------------
Balance, December 31, 1996 630,702 44,157
Depreciation expense -- 14,481
-------------- ---------------
Balance, December 31, 1997 630,702 58,638
Depreciation expense -- 14,480
-------------- ---------------
Balance, December 31, 1998 $ 630,702 $ 73,118
============== ===============
</TABLE>
<PAGE>
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED
DEPRECIATION - CONTINUED
December 31, 1998
<TABLE>
<CAPTION>
Accumulated
Cost Depreciation
-------------- ----------------
<S> <C>
Properties of Joint Venture in Which
the Partnership has a 50%
Interest and has Invested in
Under Operating Leases:
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
Acquisitions 502,597 --
Depreciation expense -- 94,718
-------------- ----------------
Balance, December 31, 1997 4,906,644 114,171
Dispositions (22,860) --
Depreciation expense -- 93,098
-------------- ----------------
Balance, December 31, 1998 $4,883,784 $ 207,269
============== ================
Properties of Joint Venture in Which
the Partnership has a 72.2%
Interest and has Invested in
Under an Operating Lease:
Balance, December 31, 1995 $ 131,762 $ --
Depreciation expense (e) -- --
-------------- ---------------
Balance, December 31, 1996 131,762 --
Depreciation expense (e) -- --
-------------- ---------------
Balance, December 31, 1997 131,762 --
Depreciation expense (e) -- --
-------------- ---------------
Balance, December 31, 1998 $ 131,762 $ --
============== ===============
</TABLE>
<PAGE>
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED
DEPRECIATION - CONTINUED
December 31, 1998
<TABLE>
<CAPTION>
Accumulated
Cost Depreciation
-------------- ---------------
<S> <C>
Property of Joint Venture in Which
the Partnership has a 39.94%
Interest and has Invested in
Under an Operating Lease:
Balance, December 31, 1996 $ -- $ --
Acquisition 512,925 --
Depreciation expense -- 984
-------------- ---------------
Balance, December 31, 1997 512,925 984
Acquisition 4,972 --
Depreciation expense -- 10,937
-------------- ---------------
Balance, December 31, 1998 $ 517,897 $ 11,921
============== ===============
Property of Joint Venture in Which the Partnership has a 50% Interest
and has Invested in Under an Operating Lease:
Balance, December 31, 1997 $ -- $ --
Acquisition 1,042,865 --
Depreciation expense -- 937
-------------- ---------------
Balance, December 31, 1998 $1,042,865 $ 937
============== ===============
</TABLE>
(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, 1998, the aggregate cost of the Properties owned
by the Partnership and joint ventures for federal income tax purposes
was $34,382,479 and $7,187,628, 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.
(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.
<PAGE>
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED
DEPRECIATION - CONTINUED
December 31, 1998
(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.
(i) Effective June 1998, the lease for this Property was terminated,
resulting in the reclassification of the building portion of the
lease as an operating lease. The building was recorded at net book
value as of June 11, 1998 and depreciated over its remaining
estimated life of approximately 26 years.
(j) Effective June 1998, the lease for this Property was terminated,
resulting in the reclassification of the building portion of the
lease as an operating lease. The building was recorded at net book
value as of June 14, 1998 and depreciated over its remaining
estimated life of approximately 26 years.
(k) Effective June 1998, the lease for this Property was terminated,
resulting in the reclassification of the land and building portions
of the lease as an operating lease. The land and building were
recorded at original cost and the building is being depreciated over
its remaining estimated life of approximately 26 years.
(l) During the year ended December 31, 1998, the Partnership purchased
land and building from CNL First Corp., an affiliate of the General
Partners, for an aggregate cost of $1,537,000.
(m) For financial reporting purposes the undepreciated cost of the
Property in Shelby, Ohio was written down to net realizable value due
to an impairment in value. The Partnership recognized the impairment
by recording an allowance for loss on building in the amount of
$37,155 at December 31, 1998. The tenant of this Property filed for
bankruptcy and ceased payment of rents under the terms of its lease
agreement. The impairment at December 31, 1998 represents the
difference between the Property's carrying value and the estimated
net realizable value of the Property. The cost of the Property
presented on this schedule is the gross amount at which the Property
was carried at December 31, 1998, excluding the allowance for loss on
building.
<PAGE>
EXHIBITS
<PAGE>
EXHIBIT INDEX
Exhibit Number
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 the Securities and Exchange Commission on
March 30, 1995, and incorporated herein by reference.)
10.3 Assignment of Management Agreement from CNL Income Fund
Advisors, Inc. to CNL Fund Advisors, Inc. (Included as Exhibit
10.3 to Form 10-K filed with the Securities and Exchange
Commission on April 1, 1996, and incorporated herein by
reference.)
27 Financial Data Schedule (Filed herewith.)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the balance
sheet of CNL Income Fund XIV, Ltd. at December 31, 1998, 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, 1998.
</LEGEND>
<S> <C>
<PERIOD-TYPE> year
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 949,056
<SECURITIES> 0
<RECEIVABLES> 63,929
<ALLOWANCES> 1,105
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 28,183,358
<DEPRECIATION> 1,674,094
<TOTAL-ASSETS> 40,538,159
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 39,475,724
<TOTAL-LIABILITY-AND-EQUITY> 40,538,159
<SALES> 0
<TOTAL-REVENUES> 3,514,156
<CGS> 0
<TOTAL-COSTS> 707,774
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 3,199,087
<INCOME-TAX> 0
<INCOME-CONTINUING> 3,199,087
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,199,087
<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>
