<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
(Mark One)
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from_______________ to _____________
Commission file number 0-23974
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)
450 South Orange Avenue
Orlando, Florida 32801
(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code: (407) 540-2000
Securities registered pursuant to Section 12 (b) of the Act:
Title of each class: Name of exchange on which registered:
None Not Applicable
Securities registered pursuant to section 12(g) of the Act:
Units of limited partnership interest ($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 for such Units. Each Unit was originally sold at $10 per Unit.
DOCUMENTS INCORPORATED BY REFERENCE:
None
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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, totaled
$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 totaling $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 these 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. During 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 1996, and a Taco Bell Property in
Anniston, Alabama, in 1997. 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, in 1997, 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 the 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. During 1999, the
Partnership sold one Property in each of Houston, Texas; Kansas City, Missouri;
Stockbridge, Georgia; and Shelby, North Carolina, and reinvested the majority of
the net sales proceeds in two joint venture arrangements, Bossier City Joint
Venture and Duluth Joint Venture, with affiliates of the General Partners.
As a result of the above transactions, as of December 31, 1999, the
Partnership owned 55 Properties. The 55 Properties include 13 wholly owned
Properties consisting of land only and interests in 12 Properties owned by joint
ventures in which the Partnership is a co-venturer. The lessee of the 13 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. During January 2000, the
Partnership reinvested the majority of the net sales proceeds it received from
the sale of the Property in Houston, Texas, in a Baker's Square Property located
in Niles, Illinois, as tenants-in-common with CNL Income Fund VI, Ltd., an
affiliate of the General Partners. The Properties are generally leased on a
triple-net basis with the lessees responsible for all repairs and maintenance,
property taxes, insurance and utilities.
The Partnership will hold its Properties until the General Partners
determine that the sale or other disposition of the Properties is advantageous
in view of the Partnership's investment objectives. In deciding whether to sell
Properties, the General Partners will consider factors such as potential capital
appreciation, net cash flow and federal income tax considerations. Certain
lessees also have been granted options to purchase Properties, generally at the
Property's then fair market value after a specified portion of the lease term
has elapsed. The Partnership has no obligation to sell all or any portion of a
Property at any particular time, except as may be required under property
purchase options granted to certain lessees.
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On March 11, 1999, the Partnership entered into an Agreement and Plan of
Merger with CNL American Properties Fund, Inc. ("APF"), pursuant to which the
Partnership would be merged with and into a subsidiary of APF (the "Termination
of Merger"). APF is a real estate investment trust whose primary business is the
ownership of restaurant properties leased on a long-term, "triple-net" basis to
operators of national and regional restaurant chains. Under the Agreement and
Plan of Merger, APF was to issue shares of its common stock as consideration for
the Merger. On March 1, 2000, the General Partners and APF announced that they
had mutually agreed to terminate the Agreement and Plan of Merger. The agreement
to terminate the Agreement and Plan of Merger was based, in large part, on the
General Partners' concern that, in light of market conditions relating to
publicly traded real estate investment trusts, the value of the transaction had
diminished. As a result of such diminishment, the General Partners' ability to
unequivocally recommend voting for the transaction, in the exercise of their
fiduciary duties, had become questionable.
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 10 to 20 years (the average being
approximately 18 years) and expire between 2007 and 2019. 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 $20,500 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.
Lessees of 40 of the Partnership's 55 Properties 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. Fair market value will be
determined through an appraisal by an independent appraisal firm. 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 13 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 November and December 1999, the Partnership entered into two separate
joint venture arrangements, Bossier City Joint Venture with CNL Income Fund
VIII, Ltd. and CNL Income Fund XII, Ltd., and Duluth Joint Venture, with CNL
Income Fund V, Ltd., CNL Income Fund VII, Ltd., and CNL Income Fund XV, Ltd.
Each of the CNL Income Funds is an affiliate of the General Partners and a
Florida limited partnership. Each joint venture was formed to purchase and hold
one restaurant Property. The lease terms for these Properties are substantially
the same as the Partnership's other leases as described above.
In January 2000, the Partnership reinvested the majority of the net sales
proceeds it received from the sale of the Property in Houston, Texas, in a
Property located in Niles, Illinois with CNL Income Fund VI, Ltd., a Florida
limited partnership and affiliate of the General Partners, as tenants-in-common,
as described below in "Joint Venture and Tenancy in Common Arrangements." The
lease terms for this Property are substantially the same as the Partnership's
other leases, as described above.
During 1998 and 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 seven (five Long John Silver's and two Boston Markets) of
their eleven leases (including two Properties held by Wood-Ridge Real Estate
Joint Venture) and ceased making rental payments to the Partnership on the
rejected leases. Between December 1998 and April 1999, the Partnership entered
into new leases for four of the seven vacant Properties. In connection
therewith, the tenant for each Property
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agreed to pay for all costs necessary to convert these Properties into different
restaurant concepts. The conversions of these Properties were completed in 1999.
The lease terms for each Property are substantially the same as the
Partnership's other leases as described above. In addition, during 1999, the
Partnership sold two of the vacant Properties. In August 1999, Long John
Silver's, Inc. assumed and affirmed its four remaining leases, and the
Partnership has continued receiving rental payments relating to these four
leases. The Partnership will not recognize rental and earned income from the
remaining vacant Property until a new tenant for the Property is located or
until the Property is sold and the proceeds from such sale are reinvested in an
additional Property. The lost revenues resulting from the remaining vacant
Property, as described above, could have an adverse effect on the results of
operations of the Partnership if the Partnership is not able to re-lease the
Property in a timely manner. The General Partners are currently seeking either a
new tenant or a purchaser for the remaining vacant Property.
In October 1999, the lease relating to the Long John Silver's Property in
Marion, Ohio was amended to reduce the 1999 scheduled rent increase from 15
percent to 5 percent. In addition, in October 1999, the lease relating to the
Long John Silver's Property in Houston, Texas was amended to eliminate the 1999
scheduled rent increase. The remaining scheduled rent increases relating to
these leases remain unchanged.
Major Tenants
During 1999, five lessees of the Partnership, Flagstar Enterprises, Inc.,
Jack in the Box 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 and earned income (including the Partnership's
share of rental and earned income from twelve Properties owned by joint
ventures). As of December 31, 1999, Flagstar Enterprises, Inc. was the lessee
under leases relating to six restaurants, Jack in the Box Inc. was the lessee
under leases relating to six restaurants, Long John Silver's, Inc. was the
lessee under leases relating to four restaurants (excluding one restaurant for
which this tenant rejected the lease as a result of filing for bankruptcy, as
described above), Checkers Drive-In Restaurants, Inc. was the lessee under
leases relating to 13 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 these five lessees will
each continue to contribute more than ten percent of the Partnership's total
rental income in 2000. 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 and earned income during 1999
(including the Partnership's share of rental and earned income from twelve
Properties owned by joint ventures). During 1998, Long John Silver's, Inc. filed
for bankruptcy, as described above. In 2000, it is anticipated that these six
Restaurant Chains each will continue to account for more than ten percent of the
total rental and earned 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 in excess of 20
percent of the total assets of the Partnership.
Joint Venture and Tenancy in Common Arrangements
The Partnership has entered into the following joint venture arrangements:
Attalla Joint Venture and Salem Joint Venture, each with CNL Income Fund XIII,
Ltd.; CNL Kingston Joint Venture with CNL Income Fund XVII, Ltd.; Melbourne
Joint Venture with CNL Income Fund VI, Ltd.; Bossier City Joint Venture with CNL
Income Fund VIII, Ltd. and CNL Income Fund XII, Ltd.; Duluth Joint Venture with
CNL Income Fund V, Ltd., CNL Income Fund VII, Ltd., and CNL Income Fund XV,
Ltd.; Wood-Ridge Real Estate Joint Venture, with CNL Income Fund XV, Ltd. Each
of the CNL Income Funds is an affiliate of the General Partners. Attalla Joint
Venture, Salem Joint Venture, Kingston Joint Venture, Melbourne Joint Venture,
Bossier City Joint Venture and Duluth Joint Venture were formed to purchase or
construct and hold one restaurant Property each. Wood-Ridge Real Estate Joint
Venture, was formed to purchase and hold six Properties.
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 has a 50 percent interest in Attalla Joint Venture, a
72.2% interest in Salem Joint Venture, a 39.94% interest in CNL Kingston Joint
Venture, a 50 percent interest in Melbourne Joint Venture, an 11 percent
interest in Bossier City Joint Venture, a 44% interest in Duluth Joint Venture,
and a 50 percent interest in Wood-Ridge Real Estate Joint Venture. The
Partnership and its joint venture partners are also jointly and severally liable
for all debts, obligations and other liabilities of the joint ventures. The
affiliates are limited partnerships organized pursuant to the laws of the State
of Florida.
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Wood-Ridge Real Estate Joint Venture, Attalla Joint Venture, Salem Joint
Venture, Bossier City Joint Venture and Duluth 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 affiliates of the
General Partners for each joint venture. The joint venture agreements restrict
each venturer's ability to sell, transfer or assign its joint venture interest
without first offering it for sale to its joint venture partner, either upon
such terms and conditions as to which the venturers may agree or, in the event
the venturers cannot agree, on the same terms and conditions as any offer from a
third party to purchase such joint venture interest.
Net cash flow from operations of Attalla Joint Venture, Wood-Ridge Real
Estate Joint Venture, Salem Joint Venture, CNL Kingston Joint Venture, Melbourne
Joint Venture, Bossier City Joint Venture, and Duluth Joint Venture is
distributed 50 percent, 50 percent, 72.2%, 39.94%, 50 percent, 11 percent, and
44 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.
In addition to the above joint venture agreements, in January 2000, the
Partnership entered into an agreement to hold a Baker's Square Property as
tenants-in-common with CNL Income Fund VI, Ltd., an affiliate of the General
Partners. The agreement provides for the Partnership and the affiliate to share
in the profits and losses of the Property in proportion to each co-venturer's
percentage interest. The Partnership owns an approximate 26 percent interest in
this Property.
The use of joint venture and tenancy in common arrangements allows the
Partnership to fully invest its available funds at times at which it would not
have sufficient funds to purchase an additional property, or at times when a
suitable opportunity to purchase an additional property is not available. The
use of joint venture and tenancy in common arrangements also provides the
Partnership with increased diversification of its portfolio among a greater
number of properties. In addition, tenancy in common arrangements may allow the
Partnership to defer the gain for federal income tax purposes upon the sale of a
Property if the proceeds are reinvested in an additional Property.
Certain Management Services
CNL Fund Advisors, Inc., an affiliate of the General Partners, provides
certain services relating to management of the Partnership and its Properties
pursuant to a management agreement 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.
Employees
The Partnership has no employees. The officers of CNL Realty Corporation
and the officers and employees of CNL American Properties Fund, Inc. ("APF"),
the parent company of CNL Fund Advisors, Inc., perform certain services for the
Partnership. In addition, the General Partners have available to them the
resources and expertise of
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the officers and employees of CNL Financial Group, Inc.(formerly CNL Group,
Inc.), a diversified real estate company, and its affiliates, who may also
perform certain services for the Partnership.
Item 2. Properties
As of December 31, 1999, the Partnership owned 55 Properties. Of the 55
Properties, 43 are owned by the Partnership in fee simple and 12 are owned
through joint venture arrangements. See Item 1. Business - Joint Venture
Arrangements. The Partnership is not permitted to encumber its Properties under
the terms of its partnership agreement. Reference is made to the Schedule of
Real Estate and Accumulated Depreciation for a listing of the Properties and
their respective costs, including acquisition fees and certain acquisition
expenses.
Description of Properties
Land. The Partnership's Property sites range from approximately 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.
The following table lists the Properties owned by the Partnership as of
December 31, 1999 by state. More detailed information regarding the location of
the Properties is contained in the Schedule of Real Estate and Accumulated
Depreciation.
State Number of Properties
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Alabama 4
Arizona 3
Colorado 1
Florida 9
Georgia 5
Kansas 2
Louisiana 2
Minnesota 1
Mississippi 1
North Carolina 7
Nevada 1
Ohio 5
South Carolina 1
Tennessee 5
Texas 8
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TOTAL PROPERTIES 55
======
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 13 Checkers Properties owned by the Partnership are
owned by the tenants. The buildings generally are rectangular and are
constructed from various combinations of stucco, steel, wood, brick and tile.
The sizes of the buildings owned by the Partnership range from approximately
2,100 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. As of December 31, 1999, the Partnership had no plans for
renovation of the Properties. Depreciation expense is computed for buildings and
improvements using the straight-line method using depreciable lives of 40 years
for federal income tax purposes. As of December 31, 1999, the aggregate cost of
the Properties owned by the Partnership and joint ventures for federal income
tax purposes was $17,193,699 and $5,238,453, respectively.
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The following table lists the Properties owned by the Partnership as of
December 31, 1999 by Restaurant Chain.
Restaurant Chain Number of Properties
---------------- --------------------
5 & Diner 1
Bennigan's 1
Big Boy 1
Boston Market 2
Burger King 1
Checkers 13
Denny's 6
East Side Mario's 1
El Ranchito Restaurant 1
Golden Corral 4
Hardee's 6
IHOP 1
Jack in the Box 6
LeeAnn Chin Chinese Cuisine 1
Long John Silver's 5
Other 1
Razzleberries 1
Roadhouse Grill 1
Taco Bell 2
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TOTAL PROPERTIES 55
=======
The General Partners consider the Properties to be well-maintained and
sufficient for the Partnership's operations.
The General Partners believe that the Properties are adequately covered by
insurance. In addition, the General Partners have obtained contingent liability
and property coverage for the Partnership. This insurance is intended to reduce
the Partnership's exposure in the unlikely event a tenant's insurance policy
lapses or is insufficient to cover a claim relating to the Property.
Leases. The Partnership leases the Properties to operators of selected
national and regional fast-food restaurant chains. The leases are generally on a
long-term "triple net" basis, meaning that the tenant is responsible for
repairs, maintenance, property taxes, utilities and insurance. Generally, a
lessee is required, under the terms of its lease agreement, to make such capital
expenditures as may be reasonably necessary to refurbish buildings, premises,
signs and equipment so as to comply with the lessee's obligations, if
applicable, under the franchise agreement to reflect the current commercial
image of its Restaurant Chain. These capital expenditures are required to be
paid by the lessee during the term of the lease. The terms of the leases of the
Properties owned by the Partnership are described in Item 1. Business - Leases.
At December 31, 1999 and 1998, 98% and 93%, respectively, of the Properties
were occupied. At December 31, 1997, 1996, and 1995, all of the Properties were
occupied. The following is a schedule of the average rent per Property for each
of the years ended December 31:
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
------------- ------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Rental Revenues (1) $4,190,352 $3,805,764 $4,283,030 $4,347,586 $4,376,790
Properties 55 57 58 57 54
Average Rent per
Property $ 76,188 $ 66,768 $ 73,845 $ 76,273 $ 81,052
</TABLE>
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(1) Rental income includes the Partnership's share of rental income from the
Properties owned through joint venture arrangements. Rental revenues have
been adjusted, as applicable, for any amounts for which the Partnership has
established an allowance for doubtful accounts.
The following is a schedule of lease expirations for leases in place as of
December 31, 1999 for the next ten years and thereafter.
<TABLE>
<CAPTION>
Percentage of
Expiration Number Annual Rental Gross Annual
Year of Leases Revenues Rental Income
--------------- -------------- ---------------- ---------------------
<S> <C> <C> <C>
2000 -- $ -- --
2001 -- -- --
2002 -- -- --
2003 -- -- --
2004 -- -- --
2005 -- -- --
2006 -- -- --
2007 1 76,992 1.91%
2008 2 336,389 8.36%
2009 1 127,367 3.17%
Thereafter 50 3,480,314 86.56%
--------- ---------- ---------
Total (1) 54 $4,021,062 100.00%
========= ========== =========
</TABLE>
(1) Excludes one Property which was vacant at December 31, 1999.
Leases with Major Tenants. The terms of each of the leases with the
Partnership's major tenants as of December 31, 1999 (see Item 1. Business -Major
Tenants), are substantially the same as those described in Item 1. Business -
Leases.
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).
Jack in the Box Inc. leases six Jack in the Box restaurants. The initial
term of each lease is 18 years (expiring in 2011) and the average minimum base
annual rent is approximately $83,600 (ranging from approximately $62,200 to
$99,900).
Long John Silver's, Inc. leases four Long John Silver's restaurants
(excluding one Property which was 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
$74,100 (ranging from approximately $31,100 to $90,000).
Checkers Drive-In Restaurants, Inc. leases 13 Checkers restaurants. The
initial term of each lease is 20 years (expiring between 2014 and 2015) and the
average minimum base annual rent is approximately $34,800 (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 $107,700 to $203,600).
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
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regional chains, and restaurants in other well-known national chains, including
those offering different types of food and service.
Item 3. Legal Proceedings
On May 11, 1999, four limited partners in several CNL Income Funds served a
derivative and purported class action lawsuit filed April 22, 1999 against the
General Partners and APF in the Circuit Court of the Ninth Judicial Circuit of
Orange County, Florida, alleging that the General Partners breached their
fiduciary duties and violated provisions of certain of the CNL Income Fund
partnership agreements in connection with the proposed Merger. The plaintiffs
are seeking unspecified damages and equitable relief. On July 8, 1999, the
plaintiffs filed an amended complaint which, in addition to naming three
additional plaintiffs, includes allegations of aiding and abetting and
conspiring to breach fiduciary duties, negligence and breach of duty of good
faith against certain of the defendants and seeks additional equitable relief.
As amended, the caption of the case is Jon Hale, Mary J. Hewitt, Charles A.
-------------------------------------
Hewitt, Gretchen M. Hewitt, Bernard J. Schulte, Edward M. and Margaret Berol
- ----------------------------------------------------------------------------
Trust, and Vicky Berol v. James M. Seneff, Jr., Robert A. Bourne, CNL Realty
- ----------------------------------------------------------------------------
Corporation, and CNL American Properties Fund, Inc., Case No. CIO-99-0003561.
- ----------------------------------------------------
On June 22, 1999, a limited partner of several CNL Income Funds served a
purported class action lawsuit filed April 29, 1999 against the General Partners
and APF, Ira Gaines, individually and on behalf of a class of persons similarly
----------------------------------------------------------------------
situated, v. CNL American Properties Fund, Inc., James M. Seneff, Jr., Robert A.
- --------------------------------------------------------------------------------
Bourne, CNL Realty Corporation, CNL Fund Advisors, Inc., CNL Financial
- ----------------------------------------------------------------------
Corporation a/k/a CNL Financial Corp., CNL Financial Services, Inc. and CNL
- ---------------------------------------------------------------------------
Group, Inc., Case NO. CIO-99-3796, in the Circuit Court of the Ninth Judicial
- -----------
Circuit of Orange County, Florida, alleging that the General Partners breached
their fiduciary duties and that APF aided and abetted their breach of fiduciary
duties in connection with the proposed Merger. The plaintiff is seeking
unspecified damages and equitable relief.
On September 23, 1999, Judge Lawrence Kirkwood entered an order
consolidating the two cases under the caption In re: CNL Income Funds
-----------------------
Litigation, Case No. 99-3561. Pursuant to this order, the plaintiffs in these
- ----------------------------
cases filed a consolidated and amended complaint on November 8, 1999. On
December 22, 1999, the General Partners and CNL Group, inc. filed motions to
dismiss and motions to strike. On December 28, 1999, APF and CNL Fund Advisors,
Inc. filed motions to dismiss. On March 6, 2000, all of the defendants filed a
Joint Notice of Filing Form 8-K Reports and Suggestion of Mootness.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
(a) As of March 15, 2000, there were 3,012 holders of record of the Units.
There is no public trading market for the Units, and it is not anticipated that
a public market for the Units will develop. During 1999, Limited Partners who
wished to sell their Units may have offered the Units for sale pursuant to the
Partnership's distribution reinvestment plan (the "Plan"), and Limited Partners
who wished to have their distributions used to acquire additional Units ( to the
extent Units were available for purchase) may have done so pursuant to such
Plan. The General Partners have the right to prohibit transfers of Units. From
inception through December 31, 1999, the price paid for any Unit transferred
pursuant to the Plan ranged from $8.51 to $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.
8
<PAGE>
The following table reflects, for each calendar quarter, the high, low and
average sales prices for transfers of Units during 1999 and 1998 other than
pursuant to the Plan, net of commissions.
<TABLE>
<CAPTION>
1999(1) 1998(1)
------------------------------------------------- ----------------------------------------------------
High Low Average High Low Average
----------- ------------- ------------- ----------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
First Quarter (2) (2) (2) $9.50 $7.95 $8.99
Second Quarter $8.62 $8.62 $8.62 9.95 8.75 9.32
Third Quarter 8.29 7.17 7.76 (2) (2) (2)
Fourth Quarter 8.41 7.56 7.88 9.06 9.00 9.03
</TABLE>
(1) A total of 16,664 and 29,373 Units were transferred other than pursuant to
the Plan for the years ended December 31, 1999 and 1998, 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, 1999 and 1998, 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 calendar quarters during
1999 and 1998. No amounts distributed to partners for the years ended December
31, 1999 and 1998, are required to be or have been treated by the Partnership as
a return of capital for 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.
(b) Not applicable.
Item 6. Selected Financial Data
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
--------------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Year ended December
31:
Revenues (1) $ 4,191,709 $ 3,831,810 $ 4,268,693 $ 4,503,039 $ 4,406,707
Net income (2) 3,071,122 3,199,087 3,665,940 3,916,329 3,751,237
Cash distributions
declared 3,712,520 3,712,520 3,712,520 3,712,522 3,628,130
Net income per Unit (2)(3) 0.68 0.70 0.81 0.86 0.83
Cash distributions
declared per Unit
(3) 0.83 0.83 0.83 0.83 0.81
At December 31:
Total assets $40,072,897 $40,538,159 $40,984,624 $41,045,849 $40,838,104
Partners' capital 38,834,326 39,475,724 39,989,157 40,035,737 39,831,930
</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.
9
<PAGE>
(2) Net income for the year ended December 31, 1999 includes $37,369 from gains
on the sales of land and buildings, $182,089 from losses on sales of land
and buildings and $27,211 for a provision for loss on land and building.
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, 1999, 1998, 1997, 1996, and
1995.
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, 1999, the Partnership owned 55 Properties, either directly or through joint
venture arrangements.
Capital Resources
The Partnership's primary source of capital for the years ended December
31, 1999, 1998, and 1997, 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 $3,545,471, $3,514,544, and
$3,606,190 for the years ended December 31, 1999, 1998, and 1997, respectively.
The increase in cash from operations during 1999 and the decrease during 1998,
each as compared to the previous year, was 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, 1999, 1998, and 1997.
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 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, 1999, 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. 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.
10
<PAGE>
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, 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. As
of December 31, 1999, the Partnership had contributed approximately $539,100, of
which approximately $44,100 was contributed during 1999, to the joint venture to
purchase land and pay for construction costs relating to the joint venture. As
of December 31, 1999, the Partnership owned a 50 percent interest in the profits
and losses of the joint venture.
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 October 1998, the Partnership reinvested approximately $1,537,000 of the
net sales proceeds received from the sale 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 received from the sale of the Property
in Madison, Alabama, along with additional funds 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.
In May 1999, the Partnership sold its Property in Stockbridge, Georgia, to
a third party for $700,000 and received net sales proceeds of $696,300. As a
result of this transaction, the Partnership recognized a loss of $60,882 for
financial reporting purposes. During 1999, the Partnership reinvested a portion
of the net sales proceeds in Bossier City Joint Venture and Duluth Joint
Venture, as described below. The Partnership intends to use the remaining net
sales proceeds to pay Partnership liabilities.
In November 1999, the Partnership sold its Property in Shelby, North
Carolina, to a third party for $527,370 and received net sales proceeds of
$494,178. As a result of this transaction, the Partnership recognized a loss of
$121,207 for financial reporting purposes. In December 1999, the Partnership
reinvested these net sales proceeds in Duluth Joint Venture, as described below.
In December 1999, the Partnership sold its Property Kansas City, Missouri
to a related party for $270,000 and received net sales proceeds of $268,450,
resulting in a gain of $20,718 for financial reporting purposes. This Property
was originally acquired by the Partnership in 1994 at a cost of approximately
$209,300, excluding acquisition fees and miscellaneous acquisition expenses;
therefore, the Partnership sold this Property for approximately $59,200 in
excess of its original purchase price. In December 1999, the Partnership
reinvested a portion of these net sales proceeds in Duluth Joint Venture, as
described below. The Partnership intends to reinvest the remaining net sales
proceeds in an additional Property. The Partnership will distribute amounts
sufficient to enable the Limited Partners to pay federal and state income taxes,
if any (at a level reasonably assumed by the General Partners), resulting from
the sale.
In addition, in December 1999, the Partnership sold its Property in
Houston, Texas to a third party for $387,812 and received net sales proceeds of
$385,673, resulting in a gain of $16,651 for financial reporting purposes. This
Property was originally acquired by the Partnership in 1994 at a cost of
approximately $311,800, excluding acquisition fees and miscellaneous acquisition
expenses; therefore, the Partnership sold this Property for approximately
$73,900 in excess of its original purchases price. As of December 31, 1999, the
net sales proceeds were being held in an interest-bearing escrow account pending
the release of funds by the escrow agent to acquire an additional Property. In
January 2000, the Partnership reinvested these net sales proceeds in a Property
in Niles, Illinois, as tenants-in-common with CNL Income Fund VI, Ltd., an
affiliate of the General Partners. The Partnership acquired this Property from
CNL BB Corp., 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. The General Partners believe that the
transaction, or a portion thereof, relating to the sale of the Property in
Houston,
11
<PAGE>
Texas, and the reinvestment of the net sales proceeds, will qualify as a like-
kind exchange transaction for federal income tax purposes. However, the
Partnership will distribute amounts sufficient to enable the Limited Partners to
pay federal and state income taxes, if any (at a level reasonably assumed by the
General Partners), resulting from the sale.
In November 1999, the Partnership reinvested a portion of the net sales
proceeds from the sale of the Property in Stockbridge, Georgia, in a joint
venture arrangement, Bossier City Joint Venture, with CNL Income Fund VII, Ltd.
and CNL Income Fund XII, Ltd., both Florida limited partnerships and affiliates
of the General Partners, to purchase and hold one restaurant Property. As of
December 31, 1999, the Partnership had contributed approximately $145,100 and
had an 11 percent interest in the profits and losses of the joint venture.
In addition, in December 1999, the Partnership reinvested the net sales
proceeds from the sale of the Property in Shelby, North Carolina and a portion
of the net sales proceeds from the sales of the Properties in Stockbridge,
Georgia and Kansas City, Missouri, in a joint venture arrangement, Duluth Joint
Venture, with CNL Income Fund V, Ltd., CNL Income Fund VII, Ltd., and CNL Income
Fund XV, Ltd., each Florida limited partnerships and affiliates of the General
Partners, to construct and hold on restaurant Property. As of December 31, 1999,
the Partnership had contributed approximately $476,600 to purchase land and pay
for construction costs relating to this joint venture. The Partnership has
agreed to contribute additional amounts during 2000 to pay for addition
construction costs. As of December 31, 1999, the Partnership had a 44 percent
interest in the profits and losses of the joint venture. When funding is
completed, the Partnership expects to have an approximate 44 percent interest in
the profits and losses of the joint venture.
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 and net sales
proceeds are invested in money market accounts or other short-term, highly
liquid investments such as demand deposit accounts at commercial banks,
certificates of deposit and money market accounts with less than a 30-day
maturity date, pending the Partnership's use of such funds to pay Partnership
expenses, to make distributions to partners, or to reinvest in additional
Properties. At December 31, 1999, the Partnership had $1,543,691 invested in
such short-term investments as compared to $949,056 at December 31, 1998. The
increase in cash was primarily attributable to the Partnership's receipt of net
sales proceeds from the sale of several Properties, as described above. As of
December 31, 1999, the average interest rate earned on the rental income
deposited in demand deposit accounts at commercial banks was approximately four
percent annually. The funds remaining at December 31, 1999, after the payment of
distributions and other liabilities, will be used to invest in additional
Properties and to meet the Partnership's working capital and other needs.
Short-Term Liquidity
The Partnership's short-term liquidity requirements consist primarily of
the operating expenses of the Partnership.
The Partnership's investment strategy of acquiring Properties for cash and
leasing them under triple-net leases to operators who 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
12
<PAGE>
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.
The Partnership generally distributes cash from operations remaining after
the payment of the operating expenses of the Partnership, to the extent that the
General Partners determine that such funds are available for distribution. Based
primarily on current and future cash from operations, the Partnership declared
distributions to the Limited Partners of $3,712,520 for each of the years ended
December 31, 1999, 1998, and 1997. This represents distributions of $0.83 per
Unit for each of the years ended December 31, 1999, 1998, and 1997. No amounts
distributed to the Limited Partners for the years ended 1999, 1998, and 1997 are
required to be or have been treated by the Partnership as a return of capital
for purposes of calculating the Limited Partners' return 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.
During 1999, 1998, and 1997, the affiliates incurred on behalf of the
Partnership $178,306, $113,352, and $87,695, respectively, for certain operating
expenses. At December 31, 1999 and 1998, the Partnership owed $76,976 and
$25,432, respectively, to affiliates for such amounts and accounting and
administrative services and management fees. As of March 15, 2000, the
Partnership had reimbursed the affiliates all such amounts. Other liabilities,
including distributions payable, increased to $1,161,595 at December 31, 1999,
from $1,037,003 at December 31, 1998, primarily as a result of the Partnership
accruing transaction costs relating to the proposed Merger with APF, as
described in "Termination of Merger." The General Partners believe that the
Partnership has sufficient cash on hand to meet its current working capital
needs.
Long-Term Liquidity
The Partnership has no long-term debt or other long-term liquidity
requirements.
Results of Operations
The Partnership owned and leased 50 wholly owned Properties during 1998 and
1997 (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) and the Partnership owned and leased 47 wholly
owned Properties during 1999 (including four Properties that were sold during
1999). In addition, during 1997, the Partnership was a co-venturer in four
separate joint ventures that owned and leased nine Properties; during 1998, the
Partnership was a co-venturer in five separate joint ventures that owned and
leased ten Properties; and during 1999, the Partnership was a co-venturer in six
separate joint ventures that owned and leased 12 Properties. As of December 31,
1999, the Partnership owned, either directly or through joint venture
arrangements, 55 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 $20,500 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.
For further description of the Partnership's leases and Properties, see Item 1.
Business - Leases and Item 2. Properties, respectively.
During the years ended December 31, 1999, 1998, and 1997, the Partnership
earned $3,692,965, $3,359,955, and $3,889,910, respectively, in rental income
from operating leases (net of adjustments to accrued rental income) and earned
income from direct financing leases from its wholly owned Properties.
Rental and earned income was lower during 1998, as compared to 1997 and
1999, primarily 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
it leased. As a result, this tenant ceased making rental payments on the four
rejected leases. In connection 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 effect of the write-off was
partially offset by a decrease during 1999, due to the fact that in September
1999, Long John Silver's, Inc.
13
<PAGE>
rejected an additional lease and ceased making rental payments on the lease. The
Partnership has continued to receive rental payments relating to the four leases
not rejected by the tenant. The Partnership has entered into new leases, each
with a new tenant, for two of the five vacant Properties. In connection with the
new leases, the tenant for each Property agreed to pay for all costs necessary
to convert the Properties into different restaurant concepts. Conversion of both
Properties was completed in March 1999, at which time rental payments commenced
resulting in an increase in rental and earned income during 1999, as compared to
1998. In May and November 1999, the Partnership sold two of the vacant
Properties and invested the majority of the net sales proceeds in Bossier City
Joint Venture and Duluth Joint Venture in November and December 1999,
respectively, as described in "Capital Resources." The Partnership intends to
use the remaining net sales proceeds to pay Partnership liabilities. In August
1999, Long John Silver's, Inc. assumed and affirmed its four remaining leases,
and the Partnership has continued receiving rental payments relating to these
four leases. The Partnership will not recognize any rental and earned income
from the remaining vacant Property until a replacement tenant for this Property
is located or until the Property is sold and the proceeds from the sale are
reinvested in an additional Property. The lost revenues resulting from the
remaining vacant Property, could have an adverse effect on the results of
operations of the Partnership, if the Partnership is not able to re-lease the
Property in a timely manner.
The increase in rental and earned income during 1999, was partially offset
by, and the decrease during 1998, as compared to 1997, was partially due to, a
decrease in rental and earned income as a result of the 1997 right of way taking
of the Property in Riviera Beach, Florida, the 1998 sales of the Properties in
Madison, Alabama and Richmond, Virginia, and the 1999 sales of the Properties in
Shelby, North Carolina; Kansas City, Missouri; and Houston, Texas. The decrease
in rental and earned income due to the above sales was partially offset by the
fact that in October 1998, the Partnership reinvested the majority of the net
sales proceeds from the 1998 sales in a Property in Fayetteville, North
Carolina. The Partnership reinvested the remaining net sales proceeds from the
1998 sales in Melbourne Joint Venture, as described in "Capital Resources."
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 during 1997. 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 1998, as compared to 1997, was partially offset by an increase in
rental income relating to this Property being operational for a full year in
1998 as compared to a partial year in 1997.
During the years ended December 31, 1999, 1998, and 1997, the Partnership
also earned $49,928, $63,776, and $21,617, respectively, in contingent rental
income. Contingent rental income was lower during 1999 than during 1998,
primarily due to the fact that during 1999, the Partnership adjusted estimated
contingent rental amounts accrued at December 31, 1998, to actual amounts due in
1999. The increase in contingent rental income during 1998, as compared to 1997,
was 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, 1999, 1998, and 1997, the
Partnership earned $373,434, $317,654, and $309,879, 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 1999, as
compared to 1998, was partially due to the fact that Melbourne Joint Venture was
operational for a full year during 1999, as compared to a partial year during
1998. In addition, the increase during 1999 was partially attributable to the
Partnership investing in Bossier City Joint Venture, as described in "Capital
Resources." The increase in net income earned by joint ventures during 1998, as
compared to 1997, was 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.
During the year ended December 31, 1999, five lessees (or group of
affiliated lessees) of the Partnership, Flagstar Enterprises, Inc., Jack in the
Box 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 and earned income (including the Partnership's share
of rental and earned income from 12 Properties owned by joint ventures). As of
December 31, 1999, Flagstar Enterprises, Inc. was the lessee under leases
relating to six restaurants, Jack in the Box Inc. was the lessee under leases
relating to six restaurants, Long John Silver's, Inc. was the lessee under
leases relating to four restaurants (excluding the one lease rejected by this
tenant, as described above), Checkers Drive-In Restaurants, Inc. was the lessee
under leases relating to 13 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 these five lessees
will each continue to contribute more than ten percent of the Partnership's
total rental
14
<PAGE>
and earned income in 2000. In addition, during the year ended December 31, 1999,
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 and earned income (including the Partnership's share
of rental and earned income from 12 Properties owned by joint ventures). During
1998, Long John Silver's, Inc. filed for bankruptcy, as described above. In
2000, it is anticipated that these six Restaurant Chains will each continue to
account for more than ten percent of the total rental and earned 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.
During the years ended December 31, 1999, 1998, and 1997, the Partnership
earned $75,382, $90,425, and $47,287, respectively in interest and other income.
Interest and other income was higher during 1998, as compared to 1999 and 1997,
due to the fact that the Partnership earned interest income 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
$948,656, $707,774, and $602,753 for the years ended December 31, 1999, 1998,
and 1997, respectively. The increase in operating expenses during 1999 and 1998,
each as compared to the previous year, was primarily due to the fact that the
Partnership incurred $214,611 and $25,231 during 1999 and 1998, respectively, 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 in "Termination of Merger."
In addition, the increase in operating expenses during 1999 and 1998, each
as compared to the previous year, was partially attributable to an increase in
depreciation expense due to the fact that Long John Silver's, Inc. filed for
bankruptcy and during 1999 and 1998, rejected the leases relating to one
Property and four Properties, respectively, as described above. In connection
with the bankruptcy, 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, for financial
reporting purposes of $20,119 and $21,873 during 1999 and 1998, respectively. No
such loss was recorded during 1997.
In addition, during 1999 and 1998, the Partnership incurred certain
expenses, such as real estate taxes, insurance and maintenance relating to the
five Properties whose leases were rejected by the tenant, as described above.
The Partnership has entered into new leases with new tenants, for two of the
five rejected Properties and has sold two of the vacant Properties. The new
tenants are responsible for real estate taxes, insurance, and maintenance
relating to the respective Properties in accordance with the terms of their
leases; therefore, the General Partners do not anticipate the Partnership will
incur these expenses for these four Properties in the future. However, the
Partnership will continue to incur certain expenses, such as real estate taxes,
insurance, and maintenance relating to the remaining vacant Property until a new
tenant or purchaser is located. Due to the fact that Long John Silver's, Inc.
assumed and affirmed its four remaining leases, as described above, Long John
Silver's, Inc. will be responsible for real estate taxes, insurance and
maintenance relating to these Properties; therefore, the General Partners do not
anticipate that the Partnership will incur these expenses for these Properties
in the future.
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 and 1997. 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 as described above in
"Capital Resources," the Partnership recognized a net loss of $144,720 for
financial reporting purposed during 1999. 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 "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.
15
<PAGE>
At December 31, 1999 and 1998, the Partnership recorded provisions for
losses on buildings in the amount of $27,211 and $37,155, respectively, for
financial reporting purposes relating to two Long John Silver's Properties whose
leases were rejected by the tenant, as described above. The tenant of these
Properties filed for bankruptcy and ceased payment of rents under the terms of
its lease agreements. The allowances represent the difference between the
carrying value of the Properties at December 31, 1999 and 1998 and the
respective estimated net realizable value for the Properties. During 1999, the
Partnership sold one of the Long John Silver's Properties, as described in
"Capital Resources." No such allowance was established during the year ended
December 31, 1997.
The Partnership's leases as of December 31, 1999, are, in general, triple-
net leases and contain provisions that the General Partners believe mitigate the
adverse effect of inflation. Such provisions include clauses requiring the
payment of percentage rent based on certain restaurant sales above a specified
level and/or automatic increases in base rent at specified times during the term
of the lease. Management expects that increases in restaurant sales volumes due
to inflation and real sales growth should result in an increase in rental income
over time. Continued inflation also may cause capital appreciation of the
Partnership's Properties. Inflation and changing prices, however, also may have
an adverse impact on the sales of the restaurants and on potential capital
appreciation of the Properties.
Termination of Merger
On March 11, 1999, the Partnership entered into an Agreement and Plan of
Merger with APF, pursuant to which the Partnership would be merged with and into
a subsidiary of APF. Under the Agreement and Plan of Merger, APF was to issue
shares of its common stock as consideration for the Merger. On March 1, 2000,
the General Partners and APF announced that they had mutually agreed to
terminate the Agreement and Plan of Merger. The agreement to terminate the
Agreement and Plan of Merger was based, in large part, on the General Partners'
concern that, in light of market conditions relating to publicly traded real
estate investment trusts, the value of the transaction had diminished. As a
result of such diminishment, the General Partners' ability to unequivocally
recommend voting for the transaction, in the exercise of their fiduciary duties,
had become questionable.
Overview of Year 2000 Problem
- -----------------------------
The year 2000 problem concerns the inability of information and non-
information technology systems to properly recognize and process date-sensitive
information beyond January 1, 2000. The failure to accurately recognize the year
2000 could result in a variety of problems from data miscalculations to the
failure of entire systems.
Status
The Partnership generally does not directly own information technology
systems. The General Partners and their affiliates generally provide all
services requiring the use of information and some non-information technology
systems. In early 1998, affiliates of the General Partners formed a year 2000
committee ("the Y2K Team") that assessed the readiness of any systems that are
date sensitive and completed upgrades for the hardware equipment and software
that was not year 2000 compliant, as necessary. The cost for these upgrades and
other remedial measures is the responsibility of the General Partners and their
affiliates. The General Partners and their affiliates do not expect that the
Partnership will incur any costs in connection with the year 2000 remedial
measures. In addition, the Y2K Team requested and received certifications of
compliance from other companies with which the General Partners, their
affiliates, and the Partnership have material third party relationships.
In assessing the risks presented by the year 2000 problem, the Y2K Team
identified potential worst case scenarios involving the future of the
information and non-information technology systems used by the Partnership's
transfer agent, financial institutions and tenants. As of January 14, 2000, the
General Partners and their affiliates have tested the information and non-
information technology systems used by the Partnership and have not experienced
material disruption or other significant problems. In addition, as of the same
date, the General Partners are not aware of any material year 2000 problems
relating to information and non-information technology systems of third parties
with which the Partnership maintains material relationships, including those of
the Partnership's transfer agent, financial institutions and tenants. In
addition, in the Partnership's interactions with its transfer agent, financial
institutions and tenants, the systems of these third parties have functioned
normally. Until the Partnership's first distribution in 2000 and the delivery of
the information by the transfer agent to stockholders in early 2000, the General
Partners will continue to monitor the year 2000 compliance of the transfer
agent. In addition, the General Partners will continue to monitor the systems
used by the Partnership and to maintain contact with third parties with
16
<PAGE>
which the Partnership has material relationships with respect to year 2000
compliance and any year 2000 issues that may arise at a later date. The General
Partners will develop contingency plans relating to ongoing year 2000 issues at
the time that such issues are identified and such plans are deemed necessary.
Based on the information provided to the Y2K Team, the upgrades and
remedial measures by the General Partners and their affiliates, and the normal
functioning to date of information and non-information technology systems used
by the Partnership and those third parties, the General Partners do not foresee
significant risks associated with its year 2000 compliance at this time. In
addition, the General Partners and their affiliates do not expect to incur any
additional costs in connection with the year 2000 remedial efforts. However,
there can be no assurance that the General Partners and their affiliates or any
third parties will not have ongoing year 2000 issues that may have adverse
effects on the Partnership.
Item 7A. Quantitative and qualitative Disclosures About Market Risk.
Not applicable
Item 8. Financial Statements and Supplementary Data
17
<PAGE>
CNL INCOME FUND XIV, LTD
(A Florida Limited Partnership)
CONTENTS
--------
<TABLE>
<CAPTION>
Page
-----
<S> <C>
Report of Independent Certified Public Accountants 19
Financial Statements:
Balance Sheets 20
Statements of Income 21
Statements of Partners' Capital 22
Statements of Cash Flows 23
Notes to Financial Statements 25
</TABLE>
18
<PAGE>
Report of Independent Certified Public Accountants
--------------------------------------------------
To the Partners
CNL Income Fund 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,
1999 and 1998, and the results of its operations and its cash flows for each of
the three years in the period ended December 31,1999 in conformity with
accounting principles generally accepted in the United States. In addition, in
our opinion, the financial statement 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 auditing standards generally accepted in the United States,
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles use
and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
Orlando, Florida
February 4, 2000, except for Note 11 for which the date is March 1, 2000.
19
<PAGE>
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
BALANCE SHEETS
--------------
<TABLE>
<CAPTION>
December 31,
1999 1998
------------------- ------------------
<S> <C> <C>
ASSETS
------
Land and buildings on operating leases, less
accumulated depreciation and allowance
for loss on buildings $24,579,081 $26,509,264
Net Investment in direct financing leases 6,779,642 7,300,102
Investment in joint ventures 4,502,838 3,813,175
Cash and cash equivalents 1,543,691 949,056
Restricted cash 383,368 --
Receivables, less allowance for doubtful accounts of
$6,703 and $1,105, respectively 86,811 62,824
Due from related parties 5,040 --
Prepaid expenses 17,393 8,389
Lease costs, less accumulated amortization of $3,548
in 1999 29,452 --
Accrued rental income less allowance for doubtful
accounts of $12,622 in 1999 and 1998 2,145,581 1,895,349
----------------- -----------------
$40,072,897 $40,538,159
================= =================
LIABILITIES AND PARTNERS' CAPITAL
- ---------------------------------
Accounts payable $ 137,749 $ 2,577
Accrued and escrowed real estate taxes
payable 28,520 18,198
Distributions payable 928,130 928,130
Due to related parties 76,976 25,432
Rents paid in advance and deposits 67,196 88,098
----------------- -----------------
Total liabilities 1,238,571 1,062,435
Partners' capital 38,834,326 39,475,724
----------------- -----------------
$40,072,897 $40,538,159
================= =================
</TABLE>
See accompanying notes to financial statements.
20
<PAGE>
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
STATEMENTS OF INCOME
--------------------
<TABLE>
<CAPTION>
Year Ended December 31,
1999 1998 1997
-------------- --------------- --------------
<S> <C> <C> <C>
Revenues:
Rental income from operating leases $2,876,498 $2,792,931 $2,872,283
Adjustments to accrued rental income -- (277,319) --
Earned income from direct financing leases 816,467 844,343 1,017,627
Contingent rental income 49,928 63,776 21,617
Interest and other income 75,382 90,425 47,287
-------------- --------------- --------------
3,818,275 3,514,156 3,958,814
-------------- --------------- --------------
Expenses:
General operating and administrative 181,011 168,184 154,654
Professional services 46,238 34,309 29,746
Bad debt expense -- -- 10,500
Management fees to related parties 39,473 37,430 38,626
Real estate taxes 22,148 17,435 7,192
State and other taxes 33,353 22,498 21,874
Loss on termination of direct financing lease 20,119 21,873 --
Depreciation and amortization 391,703 380,814 340,161
Transaction costs 214,611 25,231 --
-------------- --------------- --------------
948,656 707,774 602,753
-------------- --------------- --------------
Income Before Equity in Earnings of Joint Ventures, Gain
on Land and Building from Right of Way Taking, Gain
(Loss) on Sale of Land and Buildings, and Provision for
Loss on Buildings 2,869,619 2,806,382 3,356,061
Equity in Earnings of Joint Ventures 373,434 317,654 309,879
Gain on Land and Building from Right of Way Taking -- 41,408 --
Gain (Loss) on Sale of Land and Buildings (144,720) 70,798 --
Provision for Loss on Buildings (27,211) (37,155) --
-------------- --------------- --------------
Net Income $3,071,122 $3,199,087 $3,665,940
============== =============== ==============
Allocation of Net Income:
General partners $ 31,522 $ 31,093 $ 36,659
Limited partners 3,039,600 3,167,994 3,629,281
-------------- --------------- --------------
$3,071,122 $3,199,087 $3,665,940
============== =============== ==============
Net Income Per Limited Partner Unit $ 0.68 $ 0.70 $ 0.81
============== =============== ==============
Weighted Average Number of Limited Partner Units
Outstanding 4,500,000 4,500,000 4,500,000
============== =============== ==============
</TABLE>
See accompanying notes to financial statements
21
<PAGE>
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
STATEMENTS OF PARTNERS' CAPITAL
-------------------------------
Years Ended December 31, 1999, 1998 and 1997
<TABLE>
<CAPTION>
General Partners Limited Partners
-------------------------- ---------------------------------------------------------
Accumulated Accumulated Syndication
Contributions Earnings Contributions Distributions Earnings Costs Total
------------- ----------- ------------- ------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
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
Distributions to limited
partners ($0.83 per
limited partner unit) -- -- -- (3,712,520) -- -- (3,712,520)
Net income -- 31,522 -- -- 3,039,600 -- 3,071,122
------------- ----------- ------------- ------------- ------------ ------------ ------------
Balance, December 31, 1999 $ 1,000 $ 208,255 $ 45,000,000 $ (21,560,965) $ 20,569,981 $ (5,383,945) $ 38,834,326
============= =========== ============= ============= ============ ============ ============
</TABLE>
See accompanying notes to financial statements.
22
<PAGE>
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
STATEMENTS OF CASH FLOWS
------------------------
<TABLE>
<CAPTION>
Year Ended December 31,
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Increase ( Decrease) in Cash and Cash Equivalents:
Cash Flows from Operating Activities:
Cash received from tenants $ 3,504,076 $ 3,391,042 $ 3,501,064
Distributions from joint ventures 348,560 343,684 308,220
Cash paid for expenses (348,555) (293,428) (243,326)
Interest received 41,390 73,246 40,232
----------- ----------- -----------
Net cash provided by operating activities 3,545,471 3,514,544 3,606,190
----------- ----------- -----------
Cash Flows from Investing Activities:
Proceeds from sale of land and building 1,844,601 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 (665,821) (568,498) (121,855)
Return of capital from joint venture -- -- 51,950
Decrease (increase) in restricted cash (384,096) 318,592 (318,592)
Payment of lease costs (33,000) -- --
----------- ----------- -----------
Net cash provided by (used in) investing
activities 761,684 (138,745) (69,905)
----------- ----------- -----------
Cash Flows from Financing Activities:
Distributions to limited partners (3,712,520) (3,712,520) (3,712,520)
----------- ----------- -----------
Net cash used in financing activities (3,712,520) (3,712,520) (3,712,520)
----------- ----------- -----------
Net Increase (Decrease) in Cash and Cash
Equivalents 594,635 (336,721) (176,235)
Cash and Cash Equivalents at Beginning of Year 949,056 1,285,777 1,462,012
----------- ----------- -----------
Cash and Cash Equivalents at End of Year $ 1,543,691 $ 949,056 $ 1,285,777
=========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
23
<PAGE>
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
STATEMENTS OF CASH FLOWS - CONTINUED
------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31,
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Reconciliation of Net Income to Net Cash Provided
by Operating Activities
Net income $ 3,071,122 $ 3,199,087 $ 3,665,940
----------- ----------- -----------
Adjustments to reconcile net income to net
cash provided by operating activities:
Loss on termination of direct financing lease 20,119 21,873 --
Depreciation 387,123 378,381 337,180
Amortization 4,580 2,433 2,981
Equity in earnings of joint ventures, net
of distributions (24,874) 26,030 (1,659)
Gain on land and building from right of way
taking -- (41,408) --
Loss (gain) on sale of land and buildings 144,720 (70,798) --
Bad debt expense -- -- 10,500
Provision for loss on buildings 27,211 37,155 --
Decrease in net investment in direct 107,236 82,359 83,787
financing leases
Increase in receivables (47,175) (38,232) (6,935)
Increase in due from related parties (5,040) -- --
Decrease (increase) in prepaid expenses (9,004) (474) 328
Increase in accrued rental income (306,683) (148,845) (471,287)
Increase (decrease) in accounts payable and
accrued expenses 145,494 (9,038) 12,017
Increase in due to related parties 51,544 17,579 6,202
Increase (decrease) in rents paid in
advance and deposits (20,902) 58,442 (32,864)
----------- ----------- -----------
Total adjustments 474,349 315,457 (59,750)
----------- ----------- -----------
Net Cash Provided by Operating Activities $3,545,471 $ 3,514,544 $ 3,606,190
=========== =========== ===========
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.
24
<PAGE>
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
-----------------------------
Years Ended December 31, 1999, 1998, and 1997
1. Significant Accounting Policies:
-------------------------------
Organization and Nature of Business - CNL Income Fund 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. Borne are also 50 percent shareholders of the Corporate
General Partner. The general partners have responsibility for managing the
day-to-day operations of the Partnership.
Real Estate and Lease Accounting - The Partnership records the acquisition
--------------------------------
of land and buildings at cost, including acquisition and closing costs.
land and buildings are leased to unrelated third parties generally on a
triple-net basis, whereby the tenant is 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 periodical rate of return
on the Partnership's net investment in the leases.
Operating method - Land and building leases accounted for using the
operating method are recorded at cost, revenue is recognized as
rentals are earned and depreciation is charged to operations as
incurred. Buildings are depreciated on the straight-line method over
their estimated useful lives of 30 years. When scheduled rentals vary
during the lease term, income is recognized on a straight-line basis
so as to produce a constant periodic rent over the lease term
commencing on the date the property is placed in service.
25
<PAGE>
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
-----------------------------
Years Ended December 31, 1999, 1998, and 1997
1. Significant Accounting Policies - Continued:
-------------------------------------------
Accrued rental income represents the aggregate amount of income
recognized on a straight-line basis in excess of scheduled rental
payments to date. Whenever a tenant defaults under the terms of its
lease, or events or changes in circumstance indicate that the tenant
will not lease the property through the end of the lease term, the
Partnership either reserves or reverses the cumulative accrued rental
income balance.
When the properties are sold, the related cost and accumulated depreciation
for operating leases and the net investment for direct financing leases,
plus any accrued rental income, are removed from the accounts and gains or
losses from sales are reflected in income. The general partners of the
Partnership review properties for impairment whenever events or changes in
circumstances indicate that the carrying amount of the assets may not be
recoverable through operations. The general partners determine whether an
impairment in value has occurred by comparing the estimated future
undiscounted cash flows, including the residual value of the property, with
the carrying cost of the individual property. If an impairment is
indicated, the assets are adjusted to their fair value. Although the
general partners have made their best estimate of these factors based on
current conditions, it is reasonably possible that changes could occur in
the near term, which could adversely affect the general partners' 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, CNL Kingston Joint Venture, Bossier City
Joint Venture, and Duluth Joint Venture using the equity method since the
Partnership shares control with affiliates which have the same general
partners.
26
<PAGE>
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
-----------------------------
Years Ended December 31, 1999, 1998, and 1997
1. Significant Accounting Policies - Continued:
-------------------------------------------
Cash and Cash Equivalents - The Partnership considers all highly liquid
-------------------------
investments with a maturity of three months or less when purchased to be
cash equivalents. Cash and cash equivalents consist of demand deposits at
commercial banks and money market funds (some of which are backed by
government securities). Cash equivalents are stated at cost plus accrued
interest, which approximates market value.
Cash accounts maintained on behalf of the Partnership in demand deposits at
commercial banks and money market funds may exceed federally insured
levels; however, the Partnership has not experienced any losses in such
accounts. The Partnership limits investment of temporary cash investments
to financial institution with high credit standing; therefore, the
Partnership believes it is not exposed to any significant credit risk on
cash and cash equivalents.
Lease Costs - Lease incentive costs and brokerage and legal fees associated
-----------
with negotiating new leases are amortized over the terms of the new leases
using the straight-line method. When a property is sold or a lease is
terminated the relate lease cost, if any, net of accumulated amortization
is removed from the accounts and charged against income.
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.
27
<PAGE>
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
-----------------------------
Years Ended December 31, 1999, 1998, and 1997
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>
1999 1998
-------------- --------------
<S> <C> <C>
Land $15,289,459 $16,195,936
Buildings 11,319,706 12,024,577
-------------- --------------
26,609,165 28,220,513
Less accumulated depreciation (2,002,873) (1,674,094)
-------------- --------------
24,606,292 26,546,419
Less allowance for loss on buildings (27,211) (37,155)
-------------- --------------
$24,579,081 $26,509,264
============== ==============
</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
28
<PAGE>
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
-----------------------------
Years Ended December 31, 1999, 1998, and 1997
3. Land and Buildings on Operating Leases - Continued:
--------------------------------------------------
Partnership sold these properties for a total of approximately $213,300 in
excess of their original purchase prices.
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.
As of December 31, 1998, the Partnership recorded a provision for loss on
building of $37,155 for financial reporting purposes relating to the Long
John Silver's property in Shelby, North Carolina. The tenant of this
property filed for bankruptcy and ceased payment of rents under the terms
of its lease agreement. The allowance represented the difference between
the carrying value of the Property at December 31, 1998 and the estimated
net realizable value for the property. In November 1999, the Partnership
sold this Property to an unrelated party for $527,370 and received net
sales proceeds of $494,178, resulting in a loss of $121,207 for financial
reporting purposes. The Partnership reinvested these net sales proceeds in
Duluth Joint Venture (see Note 5).
In May 1999, the Partnership sold Property in Stockbridge in Georgia, to an
unrelated third party for $700,000 and received net sales proceeds of
$696,300, resulting in a loss of $60,882 for financial reporting purposes.
During 1999, the Partnership reinvested a portion of the net sales proceeds
in Bossier City Joint Venture and Duluth Joint Venture (see Note 5).
29
<PAGE>
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
-----------------------------
Years Ended December 31, 1999, 1998, and 1997
3. Land and Buildings on Operating Leases - Continued:
--------------------------------------------------
In December 1999, the Partnership sold its property in Kansas City,
Missouri to a related party for $270,000 and received net sales proceeds of
$268,450, resulting in a gain of $20,718 for financial reporting purposes
(see Note 9). This was originally acquired by the Partnership in 1994, at a
cost of approximately $209,300, excluding acquisition fees and
miscellaneous acquisition expenses; therefore, the Partnership sold this
property for approximately $59,200 in excess of its original purchase
price. In December 1999, the Partnership reinvested a portion of these net
sales proceeds in Duluth Joint Venture (see Note 5).
In December 1999, the Partnership sold its property in Houston, Texas to an
unrelated third party for $387,812 and received net sales proceeds of
$385,673, resulting in a gain of $16,651 for financial reporting purposes.
This property was originally acquired by the Partnership in 1994, at a cost
of approximately $311,800 excluding acquisition fees and miscellaneous
acquisition expenses; therefore, the Partnership sold this property for
approximately $73,900 in excess of its original purchase price.
At December 31, 1999, the Partnership recorded a provision for loss on
building in the amount of $27,211 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 represented the difference between the carrying
value of the property at December 31, 1999 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, 1999, 1998, and 1997, the Partnership recognized
$306,683, $148,845 (net of $6,327 in reserves and $277,319 in write-offs),
and $471,287 (net of $6,295 in reserves), respectively, of such rental
income.
30
<PAGE>
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
-----------------------------
Years Ended December 31, 1999, 1998, and 1997
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, 1999:
2000 $ 2,615,258
2001 2,634,454
2002 2,691,812
2003 2,709,480
2004 2,886,966
Thereafter 25,614,171
-----------
$39,152,141
===========
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>
1999 1998
------------- --------------
<S> <C> <C>
Minimum lease payments receivable
$12,862,784 $14,282,003
Estimated residual values 2,156,574 2,373,313
Less unearned income (8,239,716) (9,355,214)
------------- --------------
Net investment in direct financing leases $ 6,779,642 $ 7,300,102
============= ==============
</TABLE>
31
<PAGE>
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
-----------------------------
Years Ended December 31, 1999, 1998, and 1997
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, 1999:
2000 $ 846,697
2001 849,520
2002 857,988
2003 861,651
2004 868,976
Thereafter 8,577,952
-----------
$12,862,784
===========
The above table does not include future minimum lease payments for renewal
periods of 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 1999 and 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 $20,119 and $21,873, respectively, for financial
reporting purposes. In addition, in August 1999, one of the Partnership's
remaining leases with Long John Silver's, Inc. was rejected in connection
with the tenant filing for bankruptcy in June 1998.
32
<PAGE>
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
-----------------------------
Years Ended December 31, 1999, 1998, and 1997
5. Investment in Joint Ventures:
----------------------------
The Partnership owns a 50 percent, 72.2%, 50 percent, and 39.94% interest
in the profits and losses of Attalla Joint Venture, Salem Joint Venture,
Wood-Ridge Real Estate Joint Venture, and CNL Kingston Joint Venture,
respectively. The remaining interests in these joint ventures are held by
affiliates of the Partnership which have the same general partners.
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.
As of December 31, 1999, the Partnership had contributed approximately
$539,100, of which approximately $44,100 was contributed during 1999. As of
December 31,1999, the Partnership owned a 50 percent interest in the
profits and losses of this joint venture.
In November 1999, the Partnership entered into a joint venture arrangement,
Bossier City Joint Venture, with CNL Income Fund VIII, Ltd. and CNL Income
Fund XII, Ltd., to purchase and hold one restaurant property. Each CNL
Income Fund is a Florida limited partnership and affiliate of the general
partners. As of December 31, 1999, the Partnership had contributed
approximately $145,100 to the joint venture and owned an 11 percent
interest in the profits and losses of this joint venture. In addition, in
December 1999, the Partnership entered into a joint venture arrangement,
Duluth Joint Venture, with CNL Income Fund V, Ltd., CNL Income Fund VII,
Ltd., and CNL Income Fund XV, Ltd., to construct and hold one restaurant
property. Each CNL Income Fund is a Florida limited partnership and
affiliate of the general partners. As of December 31, 1999, the Partnership
had contributed approximately $476,600 to purchase land and pay for
construction costs relating to this joint venture and owned a 44 percent
interest in the profits and losses of this joint venture.
33
<PAGE>
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
-----------------------------
Years Ended December 31, 1999, 1998, and 1997
5. Investment in Joint Ventures - Continued:
----------------------------------------
As of December 31, 1999, Attalla Joint Venture, Salem Joint Venture, CNL
Kingston Joint Venture, Melbourne Joint Venture, Bossier City Joint
Venture, and Duluth 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>
1999 1998
---------------- --------------
<S> <C> <C>
Land and buildings on operating leases, less
accumulated depreciation $8,588,997 $6,913,765
Net investment in direct financing leases 990,480 360,790
Cash 31,188 87,922
Receivables 118,630 47,545
Accrued rental income 309,013 194,526
Other assets 20,817 1,055
Liabilities 82,684 171,590
Partners' capital 9,976,441 7,434,013
Revenues 895,295 750,147
Net income 739,271 615,127
</TABLE>
The Partnership recognized income totalling $373,434, $317,654, and
$309,879 for the years ended December 31, 1999, 1998, and 1997,
respectively, from these joint ventures.
6. Restricted Cash:
---------------
As of December 31, 1999, the net sales proceeds of $385,673 from the sale
of the property in Houston, Texas, less miscellaneous escrow fees of $2,305
were being held in and interest-bearing escrow account pending the release
of funds to acquire an additional property.
34
<PAGE>
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
-----------------------------
Years Ended December 31, 1999, 1998, and 1997
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, 1999, 1998 and 1997, the
Partnership declared distributions to the limited partners of $3,712,520.
No distributions have been made to the general partners to date.
35
<PAGE>
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
-----------------------------
Years Ended December 31, 1999, 1998, and 1997
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>
1999 1998 1997
----------------- --------------- ----------------
<S> <C> <C> <C>
Net income for financial reporting purposes $3,071,122 $3,199,087 $3,665,940
Depreciation for tax reporting purposes in excess of
depreciation for financial reporting purposes (58,526) (77,202) (130,766)
Direct financing leases recorded as operating leases for
tax reporting purposes 107,236 82,359 83,787
Gain on sale of land and buildings for tax reporting
purposes in excess of gain for financial reporting
purposes 37,025 94,442 --
Gain on land and building from right of way taking
deferred for tax reporting purposes -- (41,408) --
Allowance for loss on building 27,211 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 (79,904) 35,645 3,109
Capitalization of transaction costs for tax reporting
purposes 214,611 25,231 --
Allowance for doubtful accounts 5,598 1,105 --
Accrued rental income (306,683) (148,845) (471,287)
Loss on lease termination of direct financing leases 20,119 21,873 --
Rents paid in advance (28,232) 53,442 (32,864)
Other 566 1,034 (21,988)
----------------- --------------- ----------------
Net income for federal income tax purposes $3,010,143 $3,283,918 $3,095,931
================= =============== ================
</TABLE>
36
<PAGE>
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
-----------------------------
Years Ended December 31, 1999, 1998, and 1997
9. Related Party Transactions:
--------------------------
One of the individual general partners, James M. Seneff, Jr., is one of the
principal shareholders of CNL Holdings, Inc. The other individual general
partner, Robert A. Bourne, serves as President and Treasurer of CNL
Financial Group, Inc., a wholly owned subsidiary of CNL Holdings, Inc., CNL
Fund Advisors, Inc. (the "Advisor") was a majority owned subsidiary of CNL
Financial Group, Inc. until it merged with CNL American Properties Fund,
Inc. ("APF"), effective September 1, 1999. The individual general partners
are stockholders and directors of APF.
The Advisor provides certain services relating to management of the
Partnership and its properties pursuant to a management agreement with the
Partnership. In connection therewith, the Partnership has agreed to pay
the Advisor 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 Advisor. 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 Advisors
shall determine. The Partnership incurred management fees of $39,473,
$37,430, and $38,626 for the years ended December 31, 1999, 1998, and 1997,
respectively.
The Advisor is also entitled to receive a deferred, subordinated real
estate disposition fee payable upon the sale of one or more properties
based on the lesser of one-half of a competitive real estate commission or
three percent of the sales price if the Advisor provide a substantial
amount of services in connection with the sale. However, if the net sales
proceeds are reinvested in a replacement property, no such real estate
disposition fees will be incurred until such replacement property is sold
and the net sales proceeds are distributed. The payment of the real estate
disposition fee is subordinated to the 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.
37
<PAGE>
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
-----------------------------
Years Ended December 31, 1999, 1998, and 1997
9. Related Party Transactions - Continued:
--------------------------------------
During the years ended December 31, 1999, 1998, and 1997, the Advisor and
its affiliates provided accounting and administrative services to the
Partnership on a day-to-day basis including services relating to the
proposed and terminated merger as described in Note 11. The Partnership
incurred $142,557, $110,618, and $89,910 for the years ended December 31,
1999, 1998, and 1997, respectively, for such services.
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.
During 1999, the Partnership sold its property in Kansas City, Missouri to
Commercial Net Lease Realty, Inc., an affiliate of the general partners,
for $270,000 and received net sales proceeds of $268,450, resulting in a
gain of $20,718 for financial reporting purposes.
The due to related parties at December 31, 1999 and 1998, totaled $76,976
and $25,432, 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 at least one of each of the years ended December 31:
<TABLE>
<CAPTION>
1999 1998 1997
--------------- --------------- ---------------
<S> <C> <C> <C>
Checkers Drive-In
Restaurants, Inc. $603,070 $628,816 $724,612
Jack in the Box Inc. (formerly
Foodmaker, Inc.) 572,503 574,481 562,725
Golden Corral Corporation 534,997 534,624 520,911
Long John Silver's, Inc. 433,701 634,121 850,159
Flagstar Enterprises, Inc. 425,409 427,801 483,606
Denny's, Inc. N/A N/A 379,767
</TABLE>
38
<PAGE>
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
-----------------------------
Years Ended December 31, 1999, 1998, and 1997
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>
1999 1998 1997
--------------- --------------- ---------------
<S> <C> <C> <C>
Denny's $615,893 $625,101 $618,154
Checkers Drive-In Restaurants 603,070 628,816 724,612
Jack in the Box 572,503 574,481 562,725
Golden Corral Family Steakhouse
Restaurants 534,997 534,624 520,191
Long John Silver's 433,701 634,121 850,159
Hardee's 425,409 427,801 483,606
</TABLE>
The information denoted by N/A indicates that for each period presented,
the tenant or group of affiliated tenants 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 1998, Long John Silver's, Inc. filed for bankruptcy and in June 1998 and
August 1999 rejected the leases relating to four and one of its nine
leases, respectively, and ceased making rental payments to the Partnership
on the rejected leases. The Partnership entered into new leases, each with
a new tenant, for two of the five properties with rejected leases. In
addition, the Partnership sold two of the five properties with rejected
leases. The Partnership will not recognize any rental and earned income
from the remaining vacant property until a new tenant for the property is
located, or until the property is sold and the proceeds from the sale are
reinvested in additional property. In August 1999, Long John Silver's,
Inc. assumed and affirmed its four remaining leases, and the Partnership
has continued to receive rental payments relating to these four leases.
The lost revenues resulting from the one that was rejected and remains
vacant, as described above, could have an adverse effect on the results of
operations of the Partnership if the Partnership is not able to re-lease
the property in a timely manner.
39
<PAGE>
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
-----------------------------
Years Ended December 31, 1999, 1998, and 1997
11. Termination of Merger:
---------------------
On March 11, 1999, the Partnership entered into an Agreement and Plan of
Merger with CNL American Properties Fund, inc. (APF"), pursuant to which
the Partnership would be merged with and into a subsidiary of APF (the
"Merger"). Under the Agreement and Plan of Merger, APF was to issue shares
of its common stock as consideration for the Merger. On March 1, 2000, the
General Partners and APF announced that they had mutually agreed to
terminate the Agreement and Plan of Merger. The agreement to terminate the
Agreement and Plan of Merger was based, in large part, on the General
Partners' concern that, in light of market conditions relating to publicly
traded real estate investment trusts, the value of the transaction had
diminished. As a result of such diminishment, the General Partners'
ability to unequivocally recommend voting for the transaction, in the
exercise of their fiduciary duties, had become questionable.
12. Subsequent Event:
----------------
In January 2000, the Partnership reinvested the majority of the net sales
proceeds it received from the sale of the property in Houston, Texas, to
acquire a 26 percent interest in a property in Niles, Illinois, as tenants-
in-common with CNL Income Fund VI, Ltd., a Florida limited Partnership and
affiliate of the general partners. This property was acquired from CNL BB
Corp., an affiliate of the general partners, who 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 represents the costs incurred by CNL BB Corp. to acquire
and carry the property, including closing costs. In connection therewith,
the Partnership entered into a long term, triple-net lease with terms
substantially the same as its other leases.
40
<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 Financial Group, Inc. and their affiliates, all of
which are affiliates of the General Partners.
James M. Seneff, Jr., age 53, Since 1971, Mr. Seneff has been active in
the acquisition, development, and management of real estate projects and,
directly or through an affiliated entity, has served as a general partner or co-
venturer in over 100 real estate ventures. These ventures have involved the
financing, acquisition, construction, and leasing of restaurants, office
buildings, apartment complexes, hotels, and other real estate. Mr. Seneff is a
principal stockholder of CNL Holdings, Inc., the parent company of CNL Financial
Group, Inc. (formerly CNL Group, Inc.), a diversified real estate company, and
has served as a director, Chairman of the Board and Chief Executive Officer of
CNL Financial Group, Inc. since its formation in 1980. Mr. Seneff has served as
a director and Chairman of the Board since inception in 1994, and served as
Chief Executive Officer from 1994 through August 1999, of CNL American
Properties Fund, Inc., a public, unlisted real estate investment trust. He also
served as a director, Chairman of the Board and Chief Executive Officer of CNL
Fund Advisors, Inc., the advisor to CNL American Properties Fund, Inc. until it
merged with the company in September 1999. In addition, he serves as a
director, Chairman of the Board and Chief Executive Officer of CNL Health Care
Properties, Inc., as well as CNL Health Care Corp., the advisor to the company.
He also serves as director, Chairman of the Board and Chief Executive Officer of
CNL Hospitality Properties, Inc., a public, unlisted real estate investment
trust, as well as CNL Hospitality Corp., its advisor. Since 1992, Mr. Seneff
has served as Chairman of the Board and Chief Executive Officer of Commercial
Net Lease Realty, Inc., a public real estate investment trust that is listed on
the New York Stock Exchange. Mr. Seneff has also served as a director, Chairman
of the Board and Chief Executive Officer of the following affiliated companies
since formation: CNL Securities Corp., since 1979; CNL Investment Company, since
1990; and CNL Institutional Advisors, a registered investment advisor for
pension plans, since 1990. Mr. Seneff formerly served as a director of First
Union National Bank of Florida, N.A., and currently serves as the Chairman of
the Board of CNLBank. Mr. Seneff served on the Florida State Commission on
Ethics and is a former member and past Chairman of the State of Florida
Investment Advisory Council, which recommends to the Florida Board of
Administration investments for various Florida employee retirement funds. The
Florida Board of Administration is Florida's principal investment advisory and
money management agency and oversees the investment of more than $60 billion of
retirement funds. Mr. Seneff received his degree in Business Administration
from Florida State University in 1968.
Robert A. Bourne, age 52, Since joining CNL Securities Corp. in 1979, Mr.
Bourne has participated as a general partner or co-venturer in over 100 real
estate ventures involved in the financing, acquisition, construction, and
leasing of restaurants, office buildings, apartment complexes, hotels, and other
real estate. Mr. Bourne is the President and Treasurer of CNL Financial Group,
Inc. (formerly CNL Group, Inc.). Mr. Bourne has served as a director since
inception in 1994, President from 1994 through February 1999, Treasurer from
February 1999 through August 1999, and Vice Chairman of the Board since February
1999 of CNL American Properties Fund, Inc., a public, unlisted real estate
investment trust. He also served in the following positions for CNL Fund
Advisors, Inc., the advisor to CNL American Properties Fund, Inc. prior to its
merger with CNL American Properties Fund, Inc.: director from 1994 through
August 1999, Treasurer from July 1998 through August 1999, President from 1994
through September 1997, and Vice Chairman of the Board from September 1997
through August 1999. Mr. Bourne is a director and President of CNL Health Care
Properties, Inc., as well as a director and President of CNL Health Care Corp.,
the advisor to the company. He is also a director, Vice Chairman of the Board
and President of CNL Hospitality Properties, Inc., a public, unlisted real
estate investment trust, as well as CNL Hospitality Corp., its advisor. Mr.
Bourne also serves as a director of CNLBank. He has served as a director since
1992, Vice Chairman
41
<PAGE>
of the Board since February 1996, Secretary and Treasurer from February 1996
through 1997, and President from July 1992 through February 1996, of Commercial
Net Lease Realty Inc., a public real estate investment trust listed on the New
York Stock Exchange. Mr. Bourne holds the following positions for these
affiliates of CNL Financial Group, Inc.: director, President and Treasurer of
CNL Investment Company; director, President, Treasurer, and Registered Principal
of CNL Securities Corp., a subsidiary of CNL Investment Company and director,
President, Treasurer, and Chief Investment Officer of CNL Institutional
Advisors, Inc., a registered investment advisor for pension plans. Mr. Bourne
began his career as a certified public accountant employed by Coopers & Lybrand,
Certified Public Accountants, from 1971 through 1978, where he attained the
position of tax manager in 1975. Mr. Bourne graduated from Florida State
University in 1970 where he received a B.A. in Accounting, with honors.
CNL Realty Corporation is a corporation organized on November 26, 1985,
under the laws of the State of Florida. Its sole directors and shareholders are
James M. Seneff, Jr. and Robert A. Bourne, the individual General Partners. CNL
Realty Corporation was organized to serve as the corporate general partner of
real estate limited partnerships, such as the Partnership, organized by one or
both of the individual General Partners. CNL Realty Corporation currently
serves as the corporate general partner of the CNL Income Fund Partnerships.
CNL Fund Advisors, Inc. provides certain management services in connection
with the Partnership and its Properties. CNL Fund Advisors, Inc. is a
corporation organized in 1994 under the laws of the State of Florida, and its
principal office is located at 450 South Orange Avenue, Orlando, Florida 32801.
CNL Fund Advisors, Inc. was a majority owned subsidiary of CNL Financial Group,
Inc., until its merger effective September 1, 1999. On September 1, 1999, CNL
American Properties Fund, Inc. acquired CNL Fund Advisors, Inc. and was
organized to perform property acquisition, property management and other
services.
CNL Financial Group, Inc., which was the parent company of CNL Fund
Advisors, Inc. through August 1999, was organized in 1980 under the laws of the
State of Florida. CNL Financial Group, Inc. is a diversified real estate
company which provides a wide range of real estate, development and financial
services to companies in the United States through the activities of its
subsidiaries. These activities are primarily focused on the franchised
restaurant and hospitality industries. James M. Seneff, Jr., an individual
General Partner of the Partnership, is the Chairman of the Board, Chief
Executive Officer, and a director of CNL Financial Group, Inc. Mr. Seneff and
his wife own all of the outstanding shares of CNL Holdings, Inc., the Parent
company of CNL Financial Group, Inc.
The following persons serve as operating officers of CNL Financial Group,
Inc. or its affiliates or subsidiaries in the discretion of the Boards of
Directors of those companies, but, except as specifically indicated, do not
serve as members of the Boards of Directors of those entities. The Boards of
Directors have the responsibility for creating and implementing the policies of
CNL Financial Group, Inc. and its affiliated companies.
Curtis B. McWilliams, age 44, joined CNL Financial Group, Inc. in April
1997 and served as an Executive Vice President through August 1999. He serves
as Chief Executive Officer of CNL American Properties Fund, Inc. and CNL Fund
Advisors, Inc. In addition, Mr. McWilliams served as President of CNL Fund
Advisors, Inc. and as President of the Restaurant and Financial Services Groups
within CNL Financial Group, Inc. through August 1999. Mr. McWilliams served as
President of CNL American Properties Fund, Inc. from February 1999 through
August 1999 and previously served as Executive Vice President from February 1998
through February 1999. From September 1983 through March 1997, Mr. McWilliams
was employed by Merrill Lynch & Co., most recently as Chairman of Merrill
Lynch's Private Advisory Services until March 1997. Mr. McWilliams received a
B.S.E. in Chemical Engineering from Princeton University in 1977 and a Masters
of Business Administration with a concentration in finance from the University
of Chicago in 1983.
John T. Walker, age 41, serves as President and Chief Operating Officer of
CNL American Properties Fund, Inc. and CNL Fund Advisors, Inc. He served as
Executive Vice President of CNL American Properties Fund, Inc. from January 1996
through August 1999, as Chief Operating Officer since March 1995 through August
1999, and previously served as Senior Vice President from December 1994 through
August 1999. In addition, Mr. Walker has served as Executive Vice President of
CNL Fund Advisors, Inc. since January 1996 through August 1999, Chief Operating
Officer from April 1995 through August 1999, and previously served as Senior
Vice President from November 1994 through January 1996. In addition, Mr. Walker
previously served as Executive Vice President of CNL Hospitality Properties,
Inc. and CNL Hospitality Advisors, Inc. As of September 1, 1999, Mr. Walker
serves as President for CNL American Properties Fund, Inc. From May 1992 to May
1994, Mr. Walker, a certified public accountant, was Executive Vice President
for Finance and Administration and Chief Financial Officer of Z Music, Inc., a
cable television network (subsequently acquired by Gaylord Entertainment), where
he was responsible for overall financial and administrative management and
planning. From January 1990 through April 1992, Mr. Walker was Chief Financial
Officer of the First Baptist Church in Orlando, Florida. From April 1984
through December
42
<PAGE>
1989, he was a partner in the accounting firm of Chastang, Ferrell & Walker,
P.A., where he was the partner in charge of audit and consulting services, and
from 1981 to 1984, Mr. Walker was a Senior Consultant/Audit Senior at Price
Waterhouse. Mr. Walker is a Cum Laude graduate of Wake Forest University with a
B.S. in Accountancy and is a certified public accountant.
Lynn E. Rose, age 51, Ms. Rose served as Secretary of CNL American
Properties Fund, Inc., a public, unlisted real estate investment trust, from
1994 through August 1999, and served as Treasurer from 1994 through February
1999. She also served as Treasurer of CNL Fund Advisors, Inc., from 1994
through July 1998, and served as Secretary and a director from 1994 through
August 1999, at which point it merged with CNL American Properties Fund, Inc.
In addition, she is Secretary and Treasurer of CNL Health Care Properties, Inc.,
and serves as Secretary of its subsidiaries. In addition, she serves as
Secretary, Treasurer and a director of CNL Health Care Corp., the advisor. to
the company. Ms. Rose also serves as Secretary and Treasurer of CNL Hospitality
Properties, Inc., a public, unlisted real estate investment trust, as Secretary,
Treasurer and a director of CNL Hospitality Corp., its Advisor, and as Secretary
of the subsidiaries of the company. Ms. Rose served as Secretary and Treasurer
of Commercial Net Lease Realty, Inc., a public real estate investment trust
listed on the New York Stock Exchange, from 1992 to February 1996, and as
Secretary and a director of CNL Realty Advisors, Inc., its advisor, from its
inception in 1991 through 1997. She also served as Treasurer of CNL Realty
Advisors, Inc. from 1991 through February 1996. Ms. Rose, a certified public
accountant, has served as Secretary of CNL Financial Group, Inc. (formerly CNL
Group, Inc.) since 1987, served as Controller from 1987 to 1993 and has served
as Chief Financial Officer since 1993. She also serves as Secretary of the
subsidiaries of CNL Financial Group, Inc. and holds various other offices in the
subsidiaries. In addition, she serves as Secretary for approximately 50
additional corporations affiliated with CNL Financial Group, Inc. and its
subsidiaries. Ms. Rose oversees the tax and legal compliance for over 375
corporations, partnerships and joint ventures, and the accounting and financial
reporting for over 200 entities. Prior to joining CNL, Ms. Rose was a partner
with Robert A. Bourne in the accounting firm of Bourne & Rose, P.A., Certified
Public Accountants. Ms. Rose holds a B.A. in Sociology from the University of
Central Florida. She was licensed as a certified public accountant in 1979.
Jeanne A. Wall, age 41, Ms. Wall served as Executive Vice President of CNL
American Properties Fund, Inc., a public, unlisted real estate investment trust,
from 1994 through August 1999, and as Executive Vice President of CNL Fund
Advisors, Inc., its advisor, from 1994 through August 1999, at which point it
merged with CNL American Properties Fund, Inc. Ms. Wall also serves as
Executive Vice President of CNL Health Care Properties, Inc. and CNL Health Care
Corp., the Advisor to the Company. Ms. Wall also serves as Executive Vice
President of CNL Hospitality Properties, Inc., a public, unlisted real estate
investment trust, and serves as Executive Vice President and a director of CNL
Hospitality Corp., its advisor. She also serves as a director for CNLBank. Ms.
Wall serves as Executive Vice President of CNL Financial Group, Inc. (formerly
CNL Group, Inc.). Ms. Wall has served as Chief Operating Officer of CNL
Investment Company and of CNL Securities Corp. since 1994 and has served as
Executive Vice President of CNL Investment Company since January 1991. In 1984,
Ms. Wall joined CNL Securities Corp. and in 1985, became Vice President. In
1987, she became a Senior Vice President and in July 1997, became Executive Vice
President of CNL Securities Corp. In this capacity, Ms. Wall serves as national
marketing and sales director and oversees the national marketing plan for the
CNL investment programs. In addition, Ms. Wall oversees product development,
communications and investor services for programs offered through participating
brokers. Ms. Wall also served as Senior Vice President of CNL Institutional
Advisors Inc., a registered investment advisor, from 1990 to 1993. Ms. Wall
served as Vice President of Commercial Net Lease Realty, Inc., a public real
estate investment trust listed on the New York Stock Exchange, from 1992 through
1997, and served as Vice President of CNL Realty Advisors, Inc. from its
inception in 1991 through 1997. Ms. Wall currently serves as a trustee on the
Board of the Investment Program Association, is a member of the Corporate
Advisory Council for the International Association for Financial Planning and is
a member of IWF, International Women's Forum. In addition, she previously
served on the Direct Participation Program committee for the National
Association of Securities Dealers, Inc. Ms. Wall holds a B.A. in Business
Administration from Linfield College and is a registered principal of CNL
Securities Corp.
Steven D. Shackelford, age 36, a certified public accountant, serves as
Senior Vice President, Chief Financial Officer, and Secretary of CNL American
Properties Fund, Inc. and CNL Fund Advisors, Inc. He served as Chief Financial
Officer of CNL American Properties Fund, Inc. from January 1997 and as Chief
Financial Officer of CNL Fund Advisors, Inc. since September 1996 through August
1999. From March 1995 to July 1996, Mr. Shackelford was a senior manager in the
national office of Price Waterhouse where he was responsible for advising
foreign clients seeking to raise capital and a public listing in the United
States. From August 1992 to March 1995, he served as a manager in the Price
Waterhouse, Paris, France office serving several multinational clients. Mr.
Shackelford was an audit staff and audit senior from 1986 to 1992 in the
Orlando, Florida office of Price
43
<PAGE>
Waterhouse. Mr. Shackelford received a B.A. in Accounting, with honors, and a
Masters of Business Administration from Florida State University.
Item 11. Executive Compensation
Other than as described in Item 13, the Partnership has not paid and does
not intend to pay any executive compensation to the General Partners or any of
their affiliates. There are no compensatory plans or arrangements regarding
termination of employment or change of control.
Item 12. Security Ownership of Certain Beneficial Owners and Management
As of March 15, 2000, no person was known to the Registrant to be a
beneficial owner of more than five percent of the Units.
The following table sets forth, as of March 15, 2000, the beneficial
ownership interests of the General Partners in the Registrant.
<TABLE>
<CAPTION>
Title of Class Name of Partner Percent of Class
-------------- --------------- ----------------
<S> <C> <C>
General Partnership Interests James M. Seneff, Jr. 45%
Robert A. Bourne 45%
CNL Realty Corporation 10%
------
100%
======
</TABLE>
Neither the General Partners, nor any of their affiliates, owns any
interest in the Registrant, except as noted above.
44
<PAGE>
Item 13. Certain Relationships and Related Transactions
The table below summarizes the types, recipients, methods of computation
and amounts of compensation, fees and distributions paid or payable by the
Partnership to the General Partners and their affiliates for the year ended
December 31, 1999, exclusive of any distributions to which the General Partners
or their affiliates may be entitled by reason of their purchase and ownership of
Units.
<TABLE>
<CAPTION>
Amount Incurred
Type of Compensation For the Year
and Recipient Method of Computation Ended December 31, 1999
- ------------------------------- ----------------------------------------------- ---------------------------------
<S> <C> <C>
Reimbursement to affiliates Operating expenses are reimbursed at the Operating expenses incurred on
for operating expenses lower of cost or 90 percent of the behalf of the Partnership:
prevailing rate at which comparable services $178,306
could have been obtained in the same
geographic area. Affiliates of the General Accounting and administrative
Partners from time to time incur certain services: $142,557
operating expenses on behalf of the
Partnership for which the Partnership
reimburses the affiliates without interest.
Annual management fee to One percent of the sum of gross revenues $39,473
affiliates from Properties wholly owned by the
Partnership plus the Partnership's allocable
share of gross revenues of joint ventures in
which the Partnership is a co-venturer. The
management fee, which will not exceed
competitive fees for comparable services in
the same geographic area, may or may not be
taken, in whole or in part as to any year,
in the sole discretion of affiliates of the
General Partners. All or any portion of the
management fee not taken as to any fiscal
year shall be deferred without interest and
may be taken in such other fiscal year as
the affiliates shall determine.
Deferred, subordinated real A deferred, subordinated real estate $ -0-
estate disposition fee disposition fee, payable upon sale of one or
payable to affiliates more Properties, in an amount equal to the
lesser of (i) one-half of a competitive real
estate commission, or (ii) three percent of
the sales price of such Property or
Properties. Payment of such fee shall be
made only if affiliates of the General
Partners provide a substantial amount of
services in connection with the sale of a
Property or Properties and shall be
subordinated to certain minimum returns to
the Limited Partners. However, if the net
sales proceeds are reinvested in a
replacement Property, no such real estate
disposition fee will be incurred until such
replacement Property is sold and the net
sales proceeds are distributed.
</TABLE>
45
<PAGE>
<TABLE>
<CAPTION>
Amount Incurred
Type of Compensation For the Year
and Recipient Method of Computation Ended December 31, 1999
- ------------------------------- ----------------------------------------------- ---------------------------------
<S> <C> <C>
General Partners' deferred, A deferred, subordinated share equal to one $-0-
subordinated share of percent of Partnership distributions of net
Partnership net cash flow cash flow, subordinated to certain minimum
returns to the Limited Partners.
General Partners' deferred, A deferred, subordinated share equal to five $-0-
subordinated share of percent of Partnership distributions of such
Partnership net sales net sales proceeds, subordinated to certain
proceeds from a sale or sales minimum returns to the Limited Partners.
not in liquidation of the
Partnership
General Partners' share of Distributions of net sales proceeds from a $-0-
Partnership net sales sale or sales of substantially all of the
proceeds from a sale or sales Partnership's assets will be distributed in
in liquidation of the the following order or priority: (i) first,
Partnership 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>
46
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) The following documents are filed as part of this report.
1. Financial Statements
Report of Independent Certified Public Accountants
Balance Sheets at December 31, 1999 and 1998
Statements of Income for the Years Ended December 31, 1999, 1998,
and 1997
Statements of Partners' Capital for the Years Ended December 31,
1999, 1998, and 1997
Statements of Cash Flows for the Years Ended December 31, 1999,
1998, and 1997
Notes to Financial Statements
2. Financial Statement Schedule
Schedule III - Real Estate and Accumulated Depreciation at
December 31, 1999
Notes to Schedule III - Real Estate and Accumulated Depreciation
at December 31, 1999
All other Schedules are omitted as the required information is
inapplicable or is presented in the financial statements or notes
thereto.
3. Exhibits
3.1 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, 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.)
(b) The Registrant filed no reports on Form 8-K during the period October 1,
1999 through December 31, 1999.
47
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on the 27th day of
March, 2000.
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.
48
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Robert A. Bourne President, Treasurer and Director March 27, 2000
- -----------------------------
Robert A. Bourne (Principal Financial and Accounting
Officer)
/s/ James M. Seneff, Jr. Chief Executive Officer and Director March 27, 2000
- -----------------------------
James M. Seneff, Jr. (Principal Executive Officer)
</TABLE>
49
<PAGE>
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1999
<TABLE>
<CAPTION>
Costs Capitalized
Subsequent To Gross Amount at Which
Initial Cost Acquisition Carried at Close of Period (c)
------------------------- ----------------------- -------------------------------------
Encum- Buildings and Improve- Carrying Buildings and
brances Land Improvements ments Costs Land Improvements Total
--------- -------- -------------- ---------- --------- -------- -------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Properties the
Partnership
has Invested in Under
Operating Leases:
BenniGeorgian's Restaurant:
Fayetteville, North
Carolina (m) - $605,712 - - - $605,712 (g) $ 605,712
Burger King Restaurant:
Alliance, Ohio - 210,290 - - - 210,290 (g) 210,290
Checkers Drive-In
Restaurants:
Boynton Beach, Florida - 501,606 - - - 501,606 - 501,606
Chamblee, Georgia - 332,737 - - - 332,737 - 332,737
Delray Beach, Florida - 193,110 - - - 193,110 - 193,110
Foley, Alabama - 197,821 - - - 197,821 - 197,821
Huntsville, Alabama - 362,907 - - - 362,907 - 362,907
Marietta, Georgia - 332,418 - - - 332,418 - 332,418
Merriam, Kansas - 305,896 - - - 305,896 - 305,896
Norcross, Georgia - 474,262 - - - 474,262 - 474,262
Orlando, Florida - 559,646 - - - 559,646 - 559,646
Pensacola, Florida - 296,726 - - - 296,726 - 296,726
Suwannee, Georgia - 269,643 - - - 269,643 - 269,643
St. Petersburg,
Florida - 338,396 - - - 338,396 - 338,396
Coral Springs,
Florida - 421,221 - - - 421,221 - 421,221
Denny's Restaurants:
Albemarle, North
Carolina - 202,363 447,278 - - 202,363 447,278 649,641
Bullhead City, Arizona - 282,086 623,778 152,416 - 282,086 776,194 1,058,280
Topeka, Kansas - 420,446 - - - 420,446 (g) 420,446
Tempe, Arizona - 881,047 - - - 881,047 (g) 881,047
El Ranchito Restaurant:
Albemarle,
North Carolina (j) - 214,623 370,149 - - 214,623 370,149 584,772
<CAPTION>
Life on Which
Depreciation in
Date Latest Income
Accumulated of Con- Date Statement is
Depreciation struction Acquired Computed
-------------- ----------- ---------- ---------------
<S> <C> <C> <C> <C>
Properties the
Partnership
has Invested in Under
Operating Leases:
BenniGeorgian's Restaurant:
Fayetteville, North (e) 1983 10/98 (e)
Carolina (m)
Burger King Restaurant:
Alliance, Ohio (e) 1994 07/94 (e)
Checkers Drive-In Restaurants:
Boynton Beach, Florida (d) - 03/94 (d)
Chamblee, Georgia (d) - 03/94 (d)
Delray Beach, Florida (d) - 03/94 (d)
Foley, Alabama (d) - 03/94 (d)
Huntsville, Alabama (d) - 03/94 (d)
Marietta, Georgia (d) - 03/94 (d)
Merriam, Kansas (d) - 03/94 (d)
Norcross, Georgia (d) - 03/94 (d)
Orlando, Florida (d) - 03/94 (d)
Pensacola, Florida (d) - 03/94 (d)
Suwannee, Georgia (d) - 03/94 (d)
St. Petersburg, Florida (d) - 03/95 (d)
Coral Springs, Florida (d) - 03/95 (d)
Denny's Restaurants:
Albemarle, North Carolina 93,346 1992 09/93 (b)
Bullhead City, Arizona 156,865 1988 09/93 (b)
Topeka, Kansas (e) 1994 10/93 (e)
Tempe, Arizona (e) 1994 11/93 (e)
El Ranchito Restaurant:
Albemarle,
North Carolina (j) 22,154 1994 04/94 (j)
</TABLE>
F-1
<PAGE>
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1999
<TABLE>
<CAPTION>
Costs Capitalized
Subsequent To Gross Amount at Which
Initial Cost Acquisition Carried at Close of Period (c)
----------------------- -------------------- -----------------------------------
Encum- Buildings and Improve- Carrying Buildings and
brances Land Improvements ments Costs Land Improvements Total
------- -------- ------------ --------- -------- -------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
East Side Mario's Restaurant:
Columbus, Ohio - 698,046 - 1,019,581 - 698,046 1,019,581 1,717,627
Golden Corral Family
Steakhouse Restaurants:
Burlington, North Carolina - 931,962 - 975,218 - 931,962 975,218 1,907,180
Wilson, North Carolina - 415,390 - 833,156 - 415,390 833,156 1,248,546
Greeley, Colorado - 303,170 - 965,024 - 303,170 965,024 1,268,194
Hardee's Restaurants:
Franklin, Tennessee - 201,441 423,569 - - 201,441 423,569 625,010
Nashville, Tennessee - 315,087 - - - 315,087 (g) 315,087
Nashville, Tennessee - 296,341 485,974 - - 296,341 485,974 782,315
Batesville, Mississippi - 186,404 453,720 - - 186,404 453,720 640,124
Jacksonville, Florida - 385,903 409,773 - - 385,903 409,773 795,676
Jack in the Box Restaurants:
Mesquite, Texas - 449,442 528,882 - - 449,442 528,882 978,324
Plano, Texas - 423,092 467,253 - - 423,092 467,253 890,345
Farmers Branch, Texas - 465,235 525,470 - - 465,235 525,470 990,705
Fort Worth, Texas - 297,688 551,394 - - 297,688 551,394 849,082
Fort Worth, Texas - 257,393 419,245 - - 257,393 419,245 676,638
Long John Silver's Restaurants:
Apopka, Florida - 320,435 - - - 320,435 (g) 320,435
Houston, Texas - 411,403 - - - 411,403 (g) 411,403
Houston, Texas(j) - 342,971 475,749 - - 342,971 475,749 818,720
Marion, Ohio - 321,032 - - - 321,032 (g) 321,032
Laurens, South Carolina (k)(m) - 96,753 386,284 - - 96,753 386,284 483,037
Other Restaurants:
Akron, Ohio (h) - 246,431 805,793 - - 246,431 805,793 1,052,224
Las VeGeorgias, Nevada - 520,884 - - - 520,884 (g) 520,884
----------- ---------- ---------- -------- ----------- ----------- ----------
$15,289,459 $7,374,311 $3,945,395 $15,289,459 $11,319,706 $26,609,165
=========== ========== ========== ======== =========== =========== ===========
<CAPTION>
Life on Which
Depreciation in
Date Latest Income
Accumulated of Con- Date Statement is
Depreciation struction Acquired Computed
------------ --------- -------- ------------
<S> <C> <C> <C> <C>
East Side Mario's Restaurant:
Columbus, Ohio 174,717 1994 06/94 (b)
Golden Corral Family
Steakhouse Restaurants:
Burlington, North Carolina 195,132 1993 10/93 (b)
Wilson, North Carolina 172,325 1993 10/93 (b)
Greeley, Colorado 162,511 1994 08/94 (b)
Hardee's Restaurants:
Franklin, Tennessee 86,740 1993 11/93 (b)
Nashville, Tennessee (e) 1993 11/93 (e)
Nashville, Tennessee 99,519 1993 11/93 (b)
Batesville, Mississippi 91,489 1993 12/93 (b)
Jacksonville, Florida 82,627 1993 12/93 (b)
Jack in the Box Restaurants:
Mesquite, Texas 108,307 1992 11/93 (b)
Plano, Texas 94,748 1992 11/93 (b)
Farmers Branch, Texas 106,532 1988 12/93 (b)
Fort Worth, Texas 110,832 1992 12/93 (b)
Fort Worth, Texas 84,997 1983 12/93 (b)
Long John Silver's Restaurants:
Apopka, Florida (e) 1994 03/94 (e)
Houston, Texas (e) 1993 03/94 (e)
Houston, Texas(j) 4,836 1994 04/94 (j)
Marion, Ohio (e) 1994 06/94 (e)
Laurens, South Carolina (k)(m) 5,824 1994 03/94 (k)
Other Restaurants:
Akron, Ohio (h) 149,372 1993 10/93 (b)
Las VeGeorgias, Nevada (e) 1994 07/94 (e)
----------
$2,002,873
==========
</TABLE>
F-2
<PAGE>
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1999
<TABLE>
<CAPTION>
Costs Capitalized
Subsequent To Gross Amount at Which
Initial Cost Acquisition Carried at Close of Period (c)
----------------------- -------------------- --------------------------------
Encum- Buildings and Improve- Carrying Buildings and
brances Land Improvements ments Costs Land Improvements Total
------- -------- ------------ --------- -------- -------- ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
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 - - $ 196,274 $ 434,428 $ 630,702
========== ========== ====== ====== ========== ========== ==========
Properties of Joint Venture in
Which the Partnership has
a 50% Interest and has
Invested in Under
Operating Leases:
Boston Market Restaurants:
Matthews, North Carolina - 409,942 737,391 - - 409,942 737,391 1,147,333
Raleigh, North Carolina - 518,507 542,919 - - 518,507 542,919 1,061,426
Golden Corral Family
Steakhouse Restaurant:
Paris, Texas - 303,608 685,064 - - 303,608 685,064 988,672
Taco Bell Restaurant:
Anniston, Alabama - 173,395 329,202 - - 173,395 329,202 502,597
Other Restaurants:
Murfreesboro, - 398,313 - - - 398,313 - 398,313
Tennessee
Blaine, Minnesota - 253,934 531,509 - - 253,934 531,509 785,443
---------- ---------- ------ ------ ---------- ---------- ----------
$2,057,699 $2,826,085 - - $2,057,699 $2,826,085 $4,883,784
========== ========== ====== ====== ========== ========== ==========
<CAPTION>
Life on Which
Depreciation in
Date Latest Income
Accumulated of Con- Date Statement is
Depreciation struction Acquired Computed
------------ --------- -------- ------------
<S> <C> <C> <C> <C>
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 $ 87,599 1993 11/93 (b)
========
Properties of Joint Venture in
Which the Partnership has
a 50% Interest and has
Invested in Under
Operating Leases:
Boston Market Restaurants:
Matthews, North Carolina 79,385 1994 10/96 (b)
Raleigh, North Carolina 58,449 1994 10/96 (b)
Golden Corral Family
Steakhouse Restaurant:
Paris, Texas 73,751 1996 10/96 (b)
Taco Bell Restaurant:
Anniston, Alabama 32,667 1993 01/97 (b)
Other Restaurants:
Murfreesboro, (d) 1996 10/96 (d)
Tennessee
Blaine, Minnesota 57,220 1996 10/96 (b)
--------
$301,472
========
</TABLE>
F-3
<PAGE>
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1999
<TABLE>
<CAPTION>
Costs Capitalized
Subsequent To
Initial Cost Acquisition
---------------------------------------------------------
Encum- Buildings and Improve- Carrying
brances Land Improvements ments Costs
----------- ----------- ----------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Property of Joint Venture
in Which the Partnership
has a 72.2% Interest and has
Invested in Under an 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 an Operating
Lease:
Taco Bell Restaurant:
Kingston, Tennessee - $189,452 - $328,445 -
========== ================ ========== ==========
Property of Joint Venture
in Which the Partnership
has a 50% Interest and has
Invested in Under an Operating
Lease:
5 & Diner Restaurant:
Melbourne, Florida - $438,973 - - -
========== ================ ========== ==========
Property of Joint Venture
in Which the Partnership
has a 11% Interest and has
Invested in Under an Operating
Lease:
IHOP Restaurant
Bossier City, Louisiana - $453,016 $866,192 - -
========== ================ ========== ==========
<CAPTION>
Gross Amount at Which
Carried at Close of Period (c)
-------------------------------------------
Buildings and Accumulated
Land Improvements Total Depreciation
----------- ----------------- ----------- -----------------
<S> <C> <C> <C> <C>
Property of Joint Venture
in Which the Partnership
has a 72.2% Interest and has
Invested in Under an Operating
Lease:
Denny's Restaurant:
Salem, Ohio $131,762 (g) $ 131,762 (e)
========== ==========
Property of Joint Venture
in Which the Partnership
has a 39.94% Interest and has
Invested in Under an Operating
Lease:
Taco Bell Restaurant:
Kingston, Tennessee $189,452 $328,445 $ 517,897 $22,869
========== ======== ========== =======
Property of Joint Venture
in Which the Partnership
has a 50% Interest and has
Invested in Under an Operating
Lease:
5 & Diner Restaurant:
Melbourne, Florida $438,973 (g) $ 438,973 (e)
========== ==========
Property of Joint Venture
in Which the Partnership
has a 11% Interest and has
Invested in Under an Operating
Lease:
IHOP Restaurant
Bossier City, Louisiana $453,016 $866,192 $1,319,208 $ 4,542
========== ======== ========== =======
<CAPTION>
Life on Which
Depreciation in
Date Latest Income
of Con- Date Statement is
struction Acquired Computed
----------- ------------ -----------------
<S> <C> <C> <C>
Property of Joint Venture
in Which the Partnership
has a 72.2% Interest and has
Invested in Under an Operating
Lease:
Denny's Restaurant:
Salem, Ohio 1991 03/95 (e)
Property of Joint Venture
in Which the Partnership
has a 39.94% Interest and has
Invested in Under an Operating
Lease:
Taco Bell Restaurant:
Kingston, Tennessee 1997 11/97 (b)
Property of Joint Venture
in Which the Partnership
has a 50% Interest and has
Invested in Under an Operating
Lease:
5 & Diner Restaurant:
Melbourne, Florida 1998 04/98 (e)
Property of Joint Venture
in Which the Partnership
has a 11% Interest and has
Invested in Under an Operating
Lease:
IHOP Restaurant
Bossier City, Louisiana 1998 11/99 (b)
</TABLE>
F-4
<PAGE>
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1999
<TABLE>
<CAPTION>
Costs Capitalized
Subsequent To Gross Amount at Which
Initial Cost Acquisition Carried at Close of Period (c)
----------------------- -------------------- --------------------------------
Encum- Buildings and Improve- Carrying Buildings and
brances Land Improvements ments Costs Land Improvements Total
------- -------- ------------ --------- -------- -------- ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Property of Joint Venture
in Which the Partnership
has a 44% Interest and has
Invested in Under an Operating
Lease:
Roadhouse Grill Restaurant:
Duluth, Georgia - $1,083,153 - - - $1,083,153 (n) $ 1,083,153
========== ========== ========== ===== ========== ======= ===========
Properties the Partnership has
Invested in Under Direct
Financing Leases:
BenniGeorgian's Restaurant:
Fayetteville, North Carolina (m) - - $ 931,239 - - (g) (g) (g)
Burger King Restaurant:
Alliance, Ohio - - 535,949 - - - (g) (g)
Denny's Restaurants:
Winslow, Arizona - 199,767 788,202 - - (g) (g) (g)
Topeka, Kansas - - - 489,014 - - (g) (g)
Tempe, Arizona - - - 585,382 - - (g) (g)
Hardee's Restaurants:
Nashville, Tennessee - - 553,400 - - - (g) (g)
Jack in the Box Restaurant:
Shreveport, Louisiana - 240,811 848,338 - - (g) (g) (g)
Long John Silver's Restaurants:
Apopka, Florida - - 506,493 - - - (g) (g)
Houston, Texas - - 449,633 - - - (g) (g)
Marion, Ohio - - 463,504 - - - (g) (g)
Other Restaurant:
Las VeGeorgias, Nevada - - 565,680 - - - (g) (g)
---------- ---------- ---------- -----
$ 440,578 $5,642,438 $1,074,396 -
========== ========== ========== =====
<CAPTION>
Life on Which
Depreciation in
Date Latest Income
Accumulated of Con- Date Statement is
Depreciation struction Acquired Computed
------------ --------- -------- ------------
<S> <C> <C> <C> <C>
Property of Joint Venture
in Which the Partnership
has a 44% Interest and has
Invested in Under an Operating
Lease:
Roadhouse Grill Restaurant:
Duluth, Georgia (n) (o) 12/99 (o)
============
Properties the Partnership has
Invested in Under Direct
Financing Leases:
BenniGeorgian's Restaurant:
Fayetteville, North Carolina (m) (e) 1983 10/98 (e)
Burger King Restaurant:
Alliance, Ohio (e) 1994 07/94 (e)
Denny's Restaurants:
Winslow, Arizona (f) 1993 09/93 (f)
Topeka, Kansas (e) 1994 10/93 (e)
Tempe, Arizona (e) 1994 11/93 (e)
Hardee's Restaurants:
Nashville, Tennessee (e) 1993 11/93 (e)
Jack in the Box Restaurant:
Shreveport, Louisiana (f) 1993 11/93 (f)
Long John Silver's Restaurants:
Apopka, Florida (e) 1994 03/94 (e)
Houston, Texas (e) 1993 03/94 (e)
Marion, Ohio (e) 1994 06/94 (e)
Other Restaurant:
Las VeGeorgias, Nevada (e) 1994 07/94 (e)
</TABLE>
F-5
<PAGE>
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1999
<TABLE>
<CAPTION>
Costs Capitalized
Subsequent To Gross Amount at Which
Initial Cost Acquisition Carried at Close of Period (c)
----------------------- -------------------- --------------------------------
Encum- Buildings and Improve- Carrying Buildings and
brances Land Improvements ments Costs Land Improvements Total
------- -------- ------------ --------- -------- -------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
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 - - (g) (g)
====== ======== ======== ======
Property of Joint Venture in
Which the Partnership has a
50% Interest and has Invested
in Under a Direct Financing Lease:
5 & Diner Restaurant:
Melbourne, Florida - - $639,141 - - - (g) (g)
====== ======== ======== ======
<CAPTION>
Life on Which
Depreciation in
Date Latest Income
Accumulated of Con- Date Statement is
Depreciation struction Acquired Computed
------------ --------- -------- ------------
<S> <C> <C> <C> <C>
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 (e) 1991 03/95 (e)
Property of Joint Venture in
Which the Partnership has a
50% Interest and has Invested
in Under a Direct Financing Lease:
5 & Diner Restaurant:
Melbourne, Florida (e) 1998 04/98 (e)
</TABLE>
F-6
<PAGE>
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
----------------------------------------------------------------
December 31, 1999
(a) Transactions in real estate and accumulated depreciation during 1999, 1998,
and 1997 are summarized as follows:
<TABLE>
<CAPTION>
Accumulated
Cost Depreciation
------------- --------------
<S> <C> <C>
Properties the Partnership has invested in Under
Operating leases:
Balance, December 31 ,1996 $ 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
Dispositions (1,987,957) --
Reclassified from direct financing lease 958,786 --
Reclassified to direct financing lease (582,177) --
Depreciation expense -- 328,779
------------- --------------
Balance, December 31, 1999 $ 26,609,165 $ 2,002,873
============= ==============
Property of Joint Venture in Which the Partnership
has a 50% Interest and has Invested in Under an
Operating Lease:
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
Depreciation expense -- 14,481
------------- --------------
Balance, December 31, 1999 $ 630,702 $ 87,599
============= ==============
</TABLE>
F-7
<PAGE>
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED
---------------------------------------------------
DEPRECIATION - CONTINUED
------------------------
December 31, 1999
<TABLE>
<CAPTION>
Accumulated
Cost Depreciation
------------- --------------
<S> <C> <C>
Properties of Joint Venture in Which the Partnership
has a 50% Interest and has Invested in Under
Operating Leases:
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
Depreciation expense -- 94,203
------------- --------------
Balance, December 31, 1999 $ 4,883,784 $ 301,472
============= ==============
Properties of Joint Venture in Which the Partnership
has a 72.2% Interest and has Invested in Under an
Operating Lease:
Balance, December 31, 1996 $ 131,762 $ --
Depreciation expense (e) -- --
------------- --------------
Balance, December 31, 1997 131,762 --
Depreciation expense (e) -- --
------------- --------------
Balance, December 31, 1998 131,762 --
Depreciation expense (e) -- --
------------- --------------
Balance, December 31, 1999 $ 131,762 $ --
============= ==============
</TABLE>
F-8
<PAGE>
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED
---------------------------------------------------
DEPRECIATION - CONTINUED
------------------------
December 31, 1999
<TABLE>
<CAPTION>
Accumulated
Cost Depreciation
------------- --------------
<S> <C> <C>
Property of Joint Venture in Which the Partnership
has a 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
Depreciation expense -- 10,948
------------- --------------
Balance, December 31, 1999 $ 517,897 $ 22,869
============= ==============
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
Reclassified to direct financing lease (603,892) (937)
Depreciation Expense -- --
------------- --------------
Balance, December 31, 1999 $ 438,973 $ --
============= ==============
Property of Joint Venture in Which the Partnership
has a 11% Interest and has Invested in Under an
Operating Lease:
Balance, December 31, 1998 $ -- $ --
Acquisition 1,319,208 --
Depreciation expense -- 4,542
------------- --------------
Balance, December 31, 1999 $ 1,319,208 $ 4,542
============= ==============
</TABLE>
F-9
<PAGE>
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED
---------------------------------------------------
DEPRECIATION - CONTINUED
------------------------
December 31, 1999
<TABLE>
<CAPTION>
Accumulated
Cost Depreciation
------------- --------------
<S> <C> <C>
Property of Joint Venture in Which the Partnership
has a 44% Interest and has Invested in Under an
Operating Lease:
Balance, December 31, 1998 $ -- $ --
Acquisition(n) 1,083,153 --
Depreciation expense(o) -- --
------------- --------------
Balance, December 31, 1999 $ 1,083,153 $ --
============= ==============
</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, 1999, the aggregate cost of the Properties owned by the
Partnership and joint ventures for federal income tax purposes was
$32,371,148 and $9,623,237, 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.
(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 is indicative of an impairment in the
carrying value of the Property.
(i) Effective October 1999, the lease for this property was amended, resulting
in the reclassification of the land and building portions of the lease to
an operating lease. The building was recorded at net book value and
depreciated over its remaining estimated life of approximately 24.5 years.
(j) Effective August 1999, the lease for this Property was terminated,
resulting in the reclassification of the land and building portions of the
lease to an operating lease. The land and building were recorded at net
book value and the building is being depreciated over its remaining
estimated life of approximately 25 years.
(k) 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.
F-10
<PAGE>
CNL INCOME FUND XIV, LTD.
(A Florida Limited Partnership)
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED
---------------------------------------------------
DEPRECIATION - CONTINUED
------------------------
December 31, 1999
(l) For financial reporting purposes the undepreciated cost of the Property in
Laurens, South Carolina 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 $27,211 at
December 31, 1999. 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, 1999 represents the difference between the
Property's carrying value and the estimated net realizable value of the
Property. The cost of the Property presented on this schedule is the gross
amount at which the Property was carried at December 31, 1999, excluding
the allowance for loss on building.
(m) Scheduled for completion 2000.
(n) Property was not placed in service as of December 31, 1999; therefore no
depreciation was taken.
F-11
<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, 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>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
balance sheet of CNL Income Fund XIV, Ltd. at December 31, 1999, 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, 1999.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 1,927,059<F2>
<SECURITIES> 0
<RECEIVABLES> 93,514
<ALLOWANCES> 6,703
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 26,581,954
<DEPRECIATION> 2,002,873
<TOTAL-ASSETS> 40,072,897
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 38,834,326
<TOTAL-LIABILITY-AND-EQUITY> 40,072,897
<SALES> 0
<TOTAL-REVENUES> 3,818,275
<CGS> 0
<TOTAL-COSTS> 948,656
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 3,071,122
<INCOME-TAX> 0
<INCOME-CONTINUING> 3,071,122
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,071,122
<EPS-BASIC> 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.
<F2>Includes 383,368 in restricted cash.
</FN>
</TABLE>
