FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
------------------------
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number
0-26216
CNL Income Fund XV, Ltd.
(Exact name of registrant as specified in its charter)
Florida 59-3198888
(State or other jurisdiction (I.R.S. Employer
of incorporation or organiza- Identification No.)
tion)
400 E. South Street, #500
Orlando, Florida 32801
- ---------------------------- -----------------
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number
(including area code) (407) 422-1574
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Sections 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
<PAGE>
CONTENTS
Part I Page
Item 1. Financial Statements:
Condensed Balance Sheets 1
Condensed Statements of Income 2
Condensed Statements of Partners' Capital 3
Condensed Statements of Cash Flows 4-5
Notes to Condensed Financial Statements 6-7
Item 2. Management's Discussion and Analysis
of Financial Condition and
Results of Operations 8-11
Part II
Other Information 12
<PAGE>
CNL INCOME FUND XV, LTD.
(A Florida Limited Partnership)
CONDENSED BALANCE SHEETS
June 30, December 31,
ASSETS 1996 1995
----------- --------
Land and buildings on operating
leases, less accumulated
depreciation of $433,256 and
$310,475 $22,513,483 $22,636,264
Net investment in direct
financing leases 9,391,870 9,429,649
Investment in joint ventures 2,520,311 2,347,635
Cash and cash equivalents 1,373,821 1,431,420
Receivables 2,501 88,189
Prepaid expenses 13,144 2,815
Organization costs, less
accumulated amortization
of $4,548 and $3,548 5,452 6,452
Accrued rental income 775,994 560,048
Other assets - 14,260
----------- -----------
$36,596,576 $36,516,732
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 2,396 $ 3,475
Escrowed real estate taxes
payable 5,997 6,187
Distributions payable 800,000 800,000
Due to related parties 2,253 8,235
Rents paid in advance - 15,396
----------- -----------
Total liabilities 810,646 833,293
Partners' capital 35,785,930 35,683,439
----------- -----------
$36,596,576 $36,516,732
=========== ===========
See accompanying notes to condensed financial statements.
1
<PAGE>
CNL INCOME FUND XV, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
---------- ---------- ---------- -------
<S> <C>
Revenues:
Rental income from
operating leases $ 631,815 $ 622,801 $1,257,548 $1,234,698
Earned income from
direct financing
leases 267,594 234,705 535,740 434,245
Interest and other
income 13,503 33,418 27,476 61,561
---------- ---------- ---------- ----------
912,912 890,924 1,820,764 1,730,504
---------- ---------- ---------- ----------
Expenses:
General operating
and administrative 40,960 41,178 80,608 70,538
Professional services 4,536 7,096 9,713 15,923
Management fees to
related parties 8,772 8,212 17,474 16,015
State and other taxes 11,877 3,451 30,924 12,481
Depreciation and
amortization 62,068 61,070 124,093 121,228
---------- ---------- ---------- ----------
128,213 121,007 262,812 236,185
---------- ---------- ---------- ----------
Income Before Equity
in Earnings of Joint
Venture and Loss on
Sale of Land 784,699 769,917 1,557,952 1,494,319
Equity in Earnings of
Joint Venture 73,165 69,622 144,539 140,824
Loss on Sale of Land - - - (71,023)
---------- ---------- ---------- ----------
Net Income $ 857,864 $ 839,539 $1,702,491 $1,564,120
========== ========== ========== ==========
Allocation of Net Income:
General partners $ 8,579 $ 8,395 $ 17,025 $ 15,641
Limited partners 849,285 831,144 1,685,466 1,548,479
---------- ---------- ---------- ----------
$ 857,864 $ 839,539 $1,702,491 $1,564,120
========== ========== ========== ==========
Net Income Per Limited
Partner Unit $ 0.21 $ 0.21 $ 0.42 $ 0.39
========== ========== ========== ==========
Weighted Average Number
of Limited Partner Units
Outstanding 4,000,000 4,000,000 4,000,000 4,000,000
========== ========== ========== ==========
</TABLE>
See accompanying notes to condensed financial statements
2
<PAGE>
CNL INCOME FUND XV, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF PARTNERS' CAPITAL
Six Months Ended Year Ended
June 30, December 31,
1996 1995
General partners:
Beginning balance $ 47,211 $ 12,859
Net income 17,025 34,352
----------- -----------
64,236 47,211
----------- -----------
Limited partners:
Beginning balance 35,636,228 35,198,113
Net income 1,685,466 3,338,116
Distributions ($0.40 and $0.73
per limited partner unit,
respectively) (1,600,000) (2,900,001)
----------- -----------
35,721,694 35,636,228
----------- -----------
Total partners' capital $35,785,930 $35,683,439
=========== ===========
See accompanying notes to condensed financial statements.
3
<PAGE>
CNL INCOME FUND XV, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF CASH FLOWS
Six Months Ended
June 30,
1996 1995
----------- --------
Increase (Decrease) in Cash and
Cash Equivalents:
Net Cash Provided by
Operating Activities $ 1,687,927 $ 1,566,951
----------- -----------
Cash Flows from Investing
Activities:
Additions to land and
buildings on operating
leases - (1,985,137)
Proceeds from sale of land - 811,706
Investment in direct
financing leases - (900,106)
Investment in joint venture (145,526) (720,572)
Other - 23,610
----------- -----------
Net cash used in
investing activities (145,526) (2,770,499)
----------- -----------
Cash Flows from Financing
Activities:
Reimbursement of acquisition,
costs paid by related parties
on behalf of the Partnership - (21,835)
Distributions to limited
partners (1,600,000) (1,150,002)
----------- -----------
Net cash used in
financing activities (1,600,000) (1,171,837)
----------- -----------
Net Decrease in Cash
and Cash Equivalents (57,599) (2,375,385)
Cash and Cash Equivalents at
Beginning of Period 1,431,420 4,787,830
----------- -----------
Cash and Cash Equivalents at
End of Period $ 1,373,821 $ 2,412,445
=========== ===========
See accompanying notes to condensed financial statements.
4
<PAGE>
CNL INCOME FUND XV, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF CASH FLOWS - CONTINUED
Six Months Ended
June 30,
1996 1995
----------- --------
Supplemental Schedule of Non-Cash
Investing and Financing
Activities:
Related parties paid
certain acquisition
costs on behalf of
the Partnership $ - $ 601
=========== ===========
Construction in progress
at December 31, 1994,
transferred to net investment
in direct financing leases $ - $ 860,990
=========== ===========
Land and building costs
incurred and unpaid at
end of period $ - $ 324,005
=========== ===========
Distributions declared and
unpaid at end of period $ 800,000 $ 700,000
=========== ===========
See accompanying notes to condensed financial statements.
5
<PAGE>
CNL INCOME FUND XV, LTD.
(A Florida Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS
Quarters and Six Months Ended June 30, 1996 and 1995
1. Basis of Presentation:
The accompanying unaudited condensed financial statements have been
prepared in accordance with the instructions to Form 10-Q and do not
include all of the information and note disclosures required by
generally accepted accounting principles. The financial statements
reflect all adjustments, consisting of normal recurring adjustments,
which are, in the opinion of management, necessary to a fair statement
of the results for the interim periods presented. Operating results for
the quarter and six months ended June 30, 1996, may not be indicative of
the results that may be expected for the year ending December 31, 1996.
Amounts as of December 31, 1995, included in the financial statements,
have been derived from audited financial statements as of that date.
These unaudited financial statements should be read in conjunction with
the financial statements and notes thereto included in Form 10-K of CNL
Income Fund XV, Ltd. (the "Partnership") for the year ended December 31,
1995.
Certain items in the prior years' financial statements have been
reclassified to conform to 1996 presentation. These reclassifications
had no effect on partners' capital or net income.
Effective January 1, 1996, the Partnership adopted Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." The
Statement requires that an entity review long-lived assets and certain
identifiable intangibles, to be held and used, for impairment whenever
events or changes in circumstances indicate that the carrying amount of
the asset may not be recoverable. Adoption of this standard had no
material effect on the Partnership's financial position or results of
operations.
2. Investment in Joint Ventures:
In January 1996, the Partnership acquired an approximate 15 percent
interest in a Golden Corral property in Clinton, North Carolina, with
affiliates of the general partners as tenants-in-common. The Partnership
accounts for its investment in this property using the equity method
since the Partnership shares control with affiliates and amounts
relating to its investment are included in investment in joint ventures.
6
<PAGE>
CNL INCOME FUND XV, LTD.
(A Florida Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS - CONTINUED
Quarters and Six Months Ended June 30, 1996 and 1995
2. Investment in Joint Ventures - Continued:
In June 1996, Wood-Ridge Real Estate Joint Venture, in which the
Partnership owns a 50% interest, entered into a purchase and sale
agreement to sell the two Properties it owns to the tenant of the
properties. The sale of the properties is contingent on the tenant
securing mortgage financing on the properties. The closing is scheduled
to take place no later than November 1996. Wood-Ridge Real Estate Joint
Venture anticipates that proceeds received from the sale of these
properties will be in excess of the carrying value of the properties and
will be reinvested in an additional property or properties. The sale of
these properties had not occurred as of July 18, 1996.
The following presents the combined, condensed financial information for
all of the Partnership's investments in joint ventures at:
June 30, December 31,
1996 1995
Land and buildings on
operating leases, less
accumulated depreciation $3,942,718 $3,149,552
Net investment in direct
financing lease 1,415,764 1,421,802
Cash 153,451 302
Accrued rental income 171,877 123,000
Receivables - 1,526
Prepaid expenses 163 -
Liabilities 427 270
Partners' capital 5,683,546 4,695,912
Revenues 338,994 590,537
Net income 313,318 561,212
The Partnership recognized income totalling $144,539 and $140,824 for
the six months ended June 30, 1996 and 1995, respectively, from these
joint ventures, $73,165 and $69,622 of which was earned during the
quarters ended June 30, 1996 and 1995, respectively.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
CNL Income Fund XV, Ltd. (the "Partnership") is a Florida limited
partnership that was organized on September 2, 1993, to acquire for cash, either
directly or through joint venture arrangements, both newly constructed and
existing restaurants, 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 leases
are triple-net leases with the lessee responsible for all repairs and
maintenance, property taxes, insurance and utilities. As of June 30, 1996, the
Partnership owned 45 Properties, including interests in two Properties owned by
a joint venture in which the Partnership is a co-venturer and one Property owned
with affiliates as tenants-in-common.
Liquidity and Capital Resources
The Partnership's primary source of capital for the six months ended
June 30, 1996 and 1995, was cash from operations (which includes cash received
from tenants, distributions from joint ventures, and interest and other income
received, less cash paid for expenses). Cash from operations was $1,687,927 and
$1,566,951 for the six months ended June 30, 1996 and 1995, respectively. The
increase in cash from operations for the six months ended June 30, 1996, as
compared to the six months ended June 30, 1995, is primarily a result of changes
in income and expenses as discussed in "Results of Operations" below and changes
in the Partnership's working capital.
Other sources and uses of capital included the following during the six
months ended June 30, 1996.
In January 1996, the Partnership invested approximately $145,500 in a
Golden Corral Property located in Clinton, North Carolina, with affiliates of
the general partners as tenants-in-common. In connection therewith, the
Partnership and its affiliates entered into an agreement whereby each
co-venturer will share in the profits and losses of the Property in proportion
to its applicable percentage interest. The Partnership owns approximately a 15
percent interest in this Property. Upon completion of the Partnership's
acquisitions in January 1996, the remaining net offering proceeds of
approximately $220,000 were reserved for Partnership purposes.
In June 1996, Wood-Ridge Real Estate Joint Venture, in which the
Partnership owns a 50% interest, entered into a purchase and sale agreement to
sell the two Properties it owns to the tenant of the Properties. The sale of the
Properties is contingent on the tenant securing mortgage financing on the
Properties. The closing is scheduled to take place no later than November 1996.
Wood-Ridge Real Estate Joint Venture anticipates that proceeds received from the
sale of these Properties will be in excess of the carrying value of the
Properties and will be reinvested in an additional
8
<PAGE>
Liquidity and Capital Resources - Continued
property or properties. The sale of these Properties had not
occurred as of July 18,1996.
Currently, cash reserves and rental income from the Partnership's
Properties are invested in money market accounts or other short-term, highly
liquid investments pending the Partnership's use of such funds to pay
Partnership expenses or to make distributions to the partners. At June 30, 1996,
the Partnership had $1,373,821 invested in such short-term investments as
compared to $1,431,420 at December 31, 1995. The decrease in cash and cash
equivalents during the six months ended June 30, 1996, is partially the result
of the Partnership investing in a Property with affiliates of the general
partners as tenants-in-common, as described above. The funds remaining at June
30, 1996, after payment of distributions and other liabilities, will be used to
meet the Partnership's working capital and other needs.
Total liabilities of the Partnership, including distributions payable,
decreased to $810,646 at June 30, 1996, from $833,293 at December 31, 1995,
primarily as a result of a decrease in rents paid in advance during the six
months ended June 30, 1996. The general partners believe that the Partnership
has sufficient cash on hand to meet its current working capital needs.
Based on cash from operations, the Partnership declared distributions to
the limited partners of $1,600,000 and $1,300,000 for the six months ended June
30, 1996 and 1995, respectively, ($800,000 and $700,000 for the quarters ended
June 30, 1996 and 1995, respectively). This represents distributions of $0.40
and $0.33 per unit for the six months ended June 30, 1996 and 1995,
respectively, ($0.20 and $0.18 per unit for the quarters ended June 30, 1996 and
1995, respectively). No distributions were made to the general partners for the
quarters and six months ended June 30, 1996 and 1995. No amounts distributed or
to be distributed to the limited partners for the six months ended June 30, 1996
and 1995, are required to be or have been treated by the Partnership as a return
of capital for purposes of calculating the limited partners' return on their
adjusted capital contributions. The Partnership intends to continue to make
distributions of cash available for distribution to the limited partners on a
quarterly basis.
The Partnership's investment strategy of acquiring Properties for cash
and leasing them under triple-net leases to operators who meet specified
financial standards minimizes the Partnership's operating expenses. The general
partners believe that the leases will continue to generate cash flow in excess
of operating expenses.
The general partners have the right, but not the obligation, to make
additional capital contributions if they deem it appropriate in connection with
the operations of the Partnership.
9
<PAGE>
Results of Operations
During the six months ended June 30, 1996 and 1995, the Partnership
owned and leased 42 and 43 wholly owned Properties, respectively, (including two
Properties in Knoxville, Tennessee, and one Property in Leavenworth, Kansas,
during the six months ended June 30, 1995, which were sold in March 1995) to
operators of fast-food and family-style restaurant chains. In connection
therewith, during the six months ended June 30, 1996 and 1995, the Partnership
earned $1,793,288 and $1,668,943, respectively, in rental income from operating
leases and earned income from direct financing leases from these Properties,
$899,409 and $857,506 of which was earned during the quarters ended June 30,
1996 and 1995, respectively. The increase in rental and earned income is
primarily attributable to the acquisition of one additional Property subsequent
to June 30, 1995, and the fact that the Properties acquired during the quarter
and six months ended June 30, 1995, were operational for the full quarter and
six months ended June 30, 1996, as compared to a partial quarter and six months
ended June 30, 1995.
During the six months ended June 30, 1996 and 1995, the Partnership
owned two Properties indirectly through joint venture arrangements. In addition,
during the six months ended June 30, 1996, the Partnership owned one Property
indirectly with affiliates of the general partners as tenants-in-common. In
connection therewith, during the six months ended June 30, 1996 and 1995, the
Partnership also earned $144,539 and $140,824, respectively, attributable to net
income earned by these joint ventures, $73,165 and $69,622 of which was earned
during the quarters ended June 30, 1996 and 1995, respectively. The increase in
net income earned by joint ventures is primarily attributable to the Partnership
acquiring its interest in the Property held as tenant-in-common in January 1996,
as discussed above in "Liquidity and Capital Resources".
During the six months ended June 30, 1996 and 1995, the Partnership also
earned $27,476 and $61,561, respectively, in interest and other income, $13,503
and $33,418 of which was earned during the quarters ended June 30, 1996 and
1995, respectively. The decrease in interest and other income is primarily
attributable to the decrease in the amount of funds invested in short-term,
liquid investment due to the acquisition of additional Properties during 1995
and the six months ended June 30, 1996.
10
<PAGE>
Results of Operations - Continued
Operating expenses, including depreciation and amortization expense,
were $262,812 and $236,185 for the six months ended June 30, 1996 and 1995,
respectively, of which $128,213 and $121,007 were incurred during the quarters
ended June 30, 1996 and 1995. The increase in operating expenses during the
quarter and six months ended June 30, 1996, is primarily attributable to (i) an
increase in accounting and administrative expenses associated with operating the
Partnership and its Properties (ii) the Partnership's incurring additional taxes
relating to the filing of various state tax returns during 1996, and (iii) an
increase in insurance expense as a result of the general partners' obtaining
contingent liability and property coverage for the Partnership, effective May
1995. This insurance policy 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.
As a result of the sale of the two Properties in Knoxville, Tennessee,
and one Property in Leavenworth, Kansas, the Partnership recognized a loss for
financial reporting purposes of $71,023 during the six months ended June 30,
1995. The loss was primarily due to acquisition fees and miscellaneous
acquisition expenses the Partnership had allocated to these Properties and due
to accrued rental income relating to future scheduled rent increases that the
Partnership had recorded and reversed at the time of the sale. No Properties
were sold during the six months ended June 30, 1996.
11
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings. Inapplicable.
Item 2. Changes in Securities. Inapplicable.
Item 3. Defaults upon Senior Securities. Inapplicable.
Item 4. Submission of Matters to a Vote of Security Holders.
Inapplicable.
Item 5. Other Information. Inapplicable.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits - None.
(b) No reports on Form 8-K were filed during the quarter ended
June 30, 1996.
12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
DATED this 9th day of August, 1996.
CNL INCOME FUND XV, LTD.
By: CNL REALTY CORPORATION
General Partner
By: /s/ James M. Seneff, Jr.
-------------------------
JAMES M. SENEFF, JR.
Chief Executive Officer
(Principal Executive Officer)
By: /s/ Robert A. Bourne
-------------------------------
ROBERT A. BOURNE
President and Treasurer
(Principal Financial and
Accounting Officer)
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
balance sheet of CNL Income Fund XV, Ltd. at June 30, 1996, and its
statement of income for the six months then ended and is qualified in its
entirety by reference to the Form 10-Q of CNL Income Fund XV, Ltd. for the
six months ended June 30, 1996.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 1,373,821
<SECURITIES> 0
<RECEIVABLES> 2,501
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 22,946,739
<DEPRECIATION> 433,256
<TOTAL-ASSETS> 36,596,576
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 35,785,930
<TOTAL-LIABILITY-AND-EQUITY> 36,596,576
<SALES> 0
<TOTAL-REVENUES> 1,820,764
<CGS> 0
<TOTAL-COSTS> 262,812
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,702,491
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,702,491
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,702,491
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
Due to the nature of its industry, CNL Income Fund XV, Ltd. has
an unclassified balance sheet; therefore, no values are shown above
for current assets and current liabilities.
</FN>
</TABLE>
