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, 1997
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 of (I.R.S. Employer Identification No.)
incorporation or organization)
400 East South Street
Orlando, Florida 32801
(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code: (407) 422-1574
Securities registered pursuant to Section 12(b) of
the Act:
Title of each class: Name of exchange on which registered:
None Not Applicable
Securities registered pursuant to Section 12(g) of
the Act:
Units of limited partnership interest ($10 per Unit)
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days: Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [x]
Aggregate market value of the voting stock held by nonaffiliates of the
registrant: The registrant registered an offering of units of limited
partnership interest (the "Units") on Form S-11 under the Securities Act of
1933, as amended. Since no established market for such Units exists, there is no
market value for such Units. Each Unit was originally sold at $10 per Unit.
DOCUMENTS INCORPORATED BY REFERENCE:
None
<PAGE>
PART I
Item 1. Business
CNL Income Fund XV, Ltd. (the "Registrant" or the "Partnership") is a
limited partnership which was organized pursuant to the laws of the State of
Florida on September 2, 1993. 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 February 23, 1994, the
Partnership offered for sale up to $40,000,000 of limited partnership interests
(the "Units") (4,000,000 Units at $10 per Unit) pursuant to a registration
statement on Form S-11 under the Securities Act of 1933, as amended, effective
February 23, 1994. The offering terminated on September 1, 1994, at which date
the maximum offering proceeds of $40,000,000 had been received from investors
who were admitted to the Partnership as limited partners (the "Limited
Partners").
The Partnership was organized to acquire both newly constructed and
existing restaurant properties, as well as properties upon which restaurants
were to be constructed (the "Properties"), which are leased primarily to
operators of national and regional fast-food and family-style restaurant chains
(the "Restaurant Chains"). Net proceeds to the Partnership from its offering of
Units, after deduction of organizational and offering expenses, totalled
$35,200,000 and were used to acquire 45 Properties, including 15 Properties
consisting of only land and two Properties owned by a joint venture in which the
Partnership is a co-venturer, to pay acquisition fees totalling $2,200,000 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 two
Checkers Properties in Knoxville, Tennessee, and one Checkers Property in
Leavenworth, Kansas, which consisted of land only, exercised its option in
accordance with the lease agreements to substitute other Properties for these
three Properties. The Partnership sold the two Properties in Knoxville,
Tennessee, and the Property in Leavenworth, Kansas, and used the net sales
proceeds to acquire two Checkers Properties, consisting of land only, located in
Orlando and Bradenton, Florida. During the year ended December 31, 1996, the
Partnership acquired a Property in Clinton, North Carolina, with affiliates of
the General Partners as tenants-in-common. In addition, during the year ended
December 31, 1996, Wood-Ridge Real Estate Joint Venture, a joint venture in
which the Partnership is a co-venturer with an affiliate of the General
Partners, sold its two Properties to the tenant. The joint venture reinvested
the majority of the net sales proceeds in four Boston Market Properties (one of
which consisted of only land) and one Golden Corral Property. The building
portion of the Property in Murfreesboro, Tennessee is owned by the tenant.
During the year ended December 31, 1997, Wood-Ridge Real Estate Joint Venture
reinvested the remaining proceeds from the sales of the two Properties in 1996,
in a Taco Bell Property in Anniston, Alabama. As a result of the above
transactions, as of December 31, 1997, the Partnership owned 49 Properties,
including 14 wholly owned Properties consisting of only land, six Properties
owned by a joint venture in which the Partnership is a co-venturer and one
Property owned with an affiliate as tenants-in-common. The lessee of the 14
wholly owned Properties consisting of only land 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 terms. The Properties are 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. In general, the General Partners plan to seek the sale of some of
the Properties commencing seven to 12 years after their acquisition. The
Partnership has no obligation to sell all or any portion of a Property at any
particular time, except as may be required under property purchase options
granted to certain lessees.
Leases
Although there are variations in the specific terms of the leases, the
following is a summarized description of the general structure of the
Partnership's leases. The leases of the Properties owned by the Partnership and
the
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joint venture in which the Partnership is a co-venturer provide for initial
terms ranging from 15 to 20 years (the average being 19 years) and expire
between 2009 and 2015. All leases are 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 $22,500 to
$190,600. All of the leases provide for percentage rent, based on sales in
excess of a specified amount. In addition, the majority of the leases provide
that, commencing in specified lease years (generally the sixth or ninth lease
year), the annual base rent required under the terms of the lease will increase.
Generally, the leases of the Properties provide for two to five
five-year renewal options subject to the same terms and conditions as the
initial lease. Certain lessees also have been granted options to purchase
Properties at the Property's then fair market value after a specified portion of
the lease term has elapsed. Under the terms of certain leases, the option
purchase price may equal the Partnership's original cost to purchase the
Property (including acquisition costs), plus a specified percentage from the
date of the lease or a specified percentage of the Partnership's purchase price,
if that amount is greater than the Property's fair market value at the time the
purchase option is exercised.
In January 1997, Wood-Ridge Real Estate Joint Venture reinvested the
majority of the remaining net sales proceeds from the 1996 sale of its two
Properties in a Taco Bell Property located in Anniston, Alabama. The lease terms
for this Property are substantially the same as the Partnership's other leases
as described above in the first two paragraphs of this section.
Major Tenants
During 1997, five lessees (or group of affiliated lessees) of the
Partnership, (i) Flagstar Enterprises, Inc. and Quincy's Restaurants, Inc.
(which are affiliated entities under common control of Flagstar Corporation)
(hereinafter referred to as Flagstar Corporation), (ii) Checkers Drive-In
Restaurants, Inc., (iii) Long John Silver's, Inc., (iv) Foodmaker, Inc. and (v)
Golden Corral Corporation, each contributed more than ten percent of the
Partnership's total rental income (including the Partnership's share of rental
income from six Properties owned by a joint venture and one Property owned with
affiliates as tenants-in-common). As of December 31, 1997, Flagstar Corporation
was the lessee under leases relating to eight restaurants, Checkers Drive-In
Restaurants, Inc. was the lessee under leases relating to 14 restaurants, Long
John Silver's, Inc. was the lessee under leases relating to eight restaurants,
Foodmaker, Inc. was the lessee under leases relating to four restaurants and
Golden Corral Corporation was the lessee under leases relating to five
restaurants. It is anticipated that based on the minimum rental payments
required by the leases, these five lessees (or group of affiliated lessees) each
will continue to contribute more than ten percent of the Partnership's total
rental income in 1998 and subsequent years. In addition, five Restaurant Chains,
Hardee's, Checkers Drive-In Restaurants, Long John Silver's, Golden Corral
Family Steakhouse Restaurants ("Golden Corral") and Jack in the Box, each
accounted for more than ten percent of the Partnership's total rental income
during 1997 (including the Partnership's share of rental income from six
Properties owned by a joint venture and one Property owned with affiliates as
tenants-in-common). In subsequent years, it is anticipated that these five
Restaurant Chains each will continue to account for more than ten percent of the
total rental income to which the Partnership is entitled under the terms of the
leases. Any failure of these lessees or Restaurant Chains could materially
affect the Partnership's income. No single tenant or group of affiliated tenants
lease Properties with an aggregate carrying value, excluding acquisition fees
and certain acquisition expenses, in excess of 20 percent of the total assets of
the Partnership.
Joint Venture Arrangement
In August 1994, the Partnership entered into a joint venture
arrangement, Wood-Ridge Real Estate Joint Venture, with an affiliate of the
General Partners to purchase and hold two Properties. In September 1996,
Wood-Ridge Real Estate Joint Venture sold its two Properties to the tenant and
as of December 31, 1997, had reinvested the majority of the net sales proceeds
in six replacement Properties. The joint venture distributed the remaining net
sales proceeds to the Partnership and its co-venture partner on a pro-rata basis
during 1997. The joint venture arrangement provides for the Partnership and its
joint venture partner to share in all costs and benefits associated with the
joint venture in accordance with their respective percentage interests in the
joint venture. The Partnership and its joint venture partner are also jointly
and severally liable for all debts, obligations and other liabilities of the
joint venture.
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Wood-Ridge Real Estate Joint Venture has an initial term of 30 years
and, after the expiration of the initial term, continues in existence from year
to year unless terminated at the option of either of the joint venturers or by
an event of dissolution. Events of dissolution include the bankruptcy,
insolvency or termination of any joint venturer, sale of the Property owned by
the joint venture, unless agreed to by mutual agreement of the Partnership and
its joint venture partner to reinvest the sales proceeds in replacement
Properties, and by mutual agreement of the Partnership and its joint venture
partner to dissolve the joint venture.
The Partnership shares management control equally with an affiliate of
the General Partners for Wood-Ridge Real Estate Joint Venture. The joint venture
agreement restricts 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 Wood-Ridge Real Estate Joint Venture
is distributed 50 percent to each joint venture partner. 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 agreement, in January 1996, the
Partnership entered into an agreement to hold a Golden Corral Property as
tenants-in-common with affiliates of the General Partners. The agreement
provides for the Partnership and the affiliates to share in the profits and
losses of the Property in proportion to each co-venturer's percentage interest.
The Partnership owns a 15.02% interest in this Property.
Certain Management Services
CNL Income Fund Advisors, Inc., an affiliate of the General Partners,
provided certain services relating to management of the Partnership and its
Properties pursuant to a management agreement with the Partnership through
September 30, 1995. Under this agreement, CNL Income Fund Advisors, Inc. was
responsible for collecting rental payments, inspecting the Properties and the
tenants' books and records, assisting the Partnership in responding to tenant
inquiries and notices and providing information to the Partnership about the
status of the leases and the Properties. CNL Income Fund Advisors, Inc. also
assisted the General Partners in negotiating the leases. For these services, the
Partnership had agreed to pay CNL Income 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.
Effective October 1, 1995, CNL Income Fund Advisors, Inc. assigned its
rights in, and its obligations under, the management agreement with the
Partnership to CNL Fund Advisors, Inc. All of the terms and conditions of the
management agreement, including the payment of fees, as described above, remain
unchanged.
The management agreement continues until the Partnership no longer owns
an interest in any Properties unless terminated at an earlier date upon 60 days'
prior notice by either party.
Competition
The fast-food and family-style restaurant business is characterized by
intense competition. The restaurants on the Partnership's Properties compete
with independently owned restaurants, restaurants which are part of local or
regional chains and restaurants in other well-known national chains, including
those offering different types of food and service.
At the time the Partnership elects to dispose of its Properties, other
than as a result of the exercise of tenant options to purchase Properties, the
Partnership will be in competition with other persons and entities to locate
purchasers for its Properties.
3
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Employees
The Partnership has no employees. The officers of CNL Realty
Corporation and the officers and employees of CNL Fund Advisors, Inc. perform
certain services for the Partnership. In addition, the General Partners have
available to them the resources and expertise of the officers and employees of
CNL Group, Inc., a diversified real estate company, and its affiliates, who may
also perform certain services for the Partnership.
Item 2. Properties
As of December 31, 1997, the Partnership owned, either directly or
through joint venture arrangements, 49 Properties, located in 18 states.
Reference is made to the Schedule of Real Estate and Accumulated Depreciation
filed with this report for a listing of the Properties and their respective
costs, including acquisition fees and certain acquisition expenses.
Description of Properties
Land. The Partnership's Property sites range from approximately 15,600
to 137,700 square feet depending upon building size and local demographic
factors. Sites purchased by the Partnership are in locations zoned for
commercial use which have been reviewed for traffic patterns and volume.
Buildings. Each of the Properties owned by the Partnership includes a
building that is one of a Restaurant Chain's approved designs. However, the
buildings located on the 14 Checkers Properties owned by the Partnership and one
Boston Market Property owned by Wood-Ridge Real Estate Joint Venture are owned
by the tenants. The buildings generally are rectangular and are constructed from
various combinations of stucco, steel, wood, brick and tile. The sizes of the
buildings owned by the Partnership range from approximately 1,500 to 11,000
square feet. All buildings on Properties are freestanding and surrounded by
paved parking areas. Buildings are suitable for conversion to various uses,
although modifications may be required prior to use for other than restaurant
operations.
Generally, a lessee is required, under the terms of its lease
agreement, to make such capital expenditures as may be reasonably necessary to
refurbish buildings, premises, signs and equipment so as to comply with the
lessee's obligations, if applicable, under the franchise agreement to reflect
the current commercial image of its Restaurant Chain. These capital expenditures
are required to be paid by the lessee during the term of the lease.
Leases with Major Tenants. The terms of each of the leases with the
Partnership's major tenants as of December 31, 1997 (see Item 1. Business -
Major Tenants), are substantially the same as those described in Item 1.
Business - Leases.
Flagstar Corporation leases seven Hardee's restaurants and one Quincy's
restaurant. The initial term of each lease is 20 years (expiring between 2013
and 2014) and the average minimum base annual rent is approximately $76,700
(ranging from approximately $62,900 to $97,100).
Checkers Drive-In Restaurants, Inc. leases 14 Checkers Drive-In
Restaurants ("Checkers"). The initial term of each of its leases is 20 years
(expiring between 2014 and 2015) and the average minimum base annual rent is
approximately $42,900 (ranging from approximately $22,500 to $63,100). The
leases for the 14 Checkers Properties consist of only land. The tenant 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 term.
Long John Silver's, Inc. leases eight Long John Silver's restaurants
with an initial term of 20 years (expiring in 2014) and the average minimum base
annual rent is approximately $75,600 (ranging from approximately $58,600 to
$92,900).
Foodmaker, Inc. leases four Jack in the Box restaurants. This initial
term of each lease is 18 years (expiring in 2012) and the average minimum base
annual rent is approximately $91,100 (ranging from approximately $71,000 to
$102,200).
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In addition, Golden Corral Corporation leases five Golden Corral
restaurants. The initial term of each lease is 15 years (expiring between 2009
and 2011) and the average minimum base annual rent is approximately $137,400
(ranging from approximately $88,000 to $190,600).
The General Partners consider the Properties to be well-maintained and
sufficient for the Partnership's operations.
Item 3. Legal Proceedings
Neither the Partnership, nor its General Partners or any affiliate of
the General Partners, nor any of their respective properties, is a party to, or
subject to, any material pending legal proceedings.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
As of February 28, 1998, there were 2,705 holders of record of the
Units. There is no public trading market for the Units, and it is not
anticipated that a public market for the Units will develop. Limited Partners
who wish to sell their Units may offer the Units for sale pursuant to the
Partnership's distribution reinvestment plan (the "Plan"), and Limited Partners
who wish to have their distributions used to acquire additional Units (to the
extent Units are available for purchase), may do so pursuant to such Plan. The
General Partners have the right to prohibit transfers of Units. Since inception,
the price paid for any Unit transferred pursuant to the Plan has been $9.50 per
Unit. The price to be paid for any Unit transferred other than pursuant to the
Plan is subject to negotiation by the purchaser and the selling Limited Partner.
The Partnership will not redeem or repurchase Units.
The following table reflects, for each calendar quarter, the high, low
and average sales prices for transfers of Units during 1997 and 1996 other than
pursuant to the Plan, net of commissions.
<TABLE>
<CAPTION>
1997 (1) 1996 (1)
------------------------------ -----------------
High Low Average High Low Average
<S> <C>
First Quarter $10.00 $ 8.30 $ 9.37 $9.50 $9.50 $9.50
Second Quarter 9.98 8.50 8.99 10.00 10.00 10.00
Third Quarter 10.00 8.07 8.91 9.50 8.83 9.28
Fourth Quarter 9.50 8.17 9.14 8.60 8.60 8.60
</TABLE>
(1) A total of 26,053 and 32,575 Units were transferred other than pursuant
to the Plan for the years ended December 31, 1997 and 1996.
(2) No transfer 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.
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For the years ended December 31, 1997 and 1996, the Partnership
declared cash distributions of $3,200,000 and $3,280,000, respectively, to the
Limited Partners. During the quarter ended December 31, 1996, the Partnership
declared a special distribution to the Limited Partners of $80,000 which
represented cumulative excess operating reserves. The General Partners
anticipate that the Partnership will declare a special distribution to the
Limited Partners during the quarter ending March 31, 1998, representing
cumulative excess operating reserves. No amounts distributed to partners for the
years ended December 31, 1997 and 1996, are required to be or have been treated
by the Partnership as a return of capital for purposes of calculating the
Limited Partners' return on their adjusted capital contributions. No
distributions have been made to the General Partners to date. As indicated in
the chart below, these distributions were declared at the close of each of the
Partnership's calendar quarters. These amounts include monthly distributions
made in arrears for the Limited Partners electing to receive such distributions
on this basis.
Quarter Ended 1997 1996
------------- ---------- -----------
March 31 $800,000 $800,000
June 30 800,000 800,000
September 30 800,000 800,000
December 31 (1) 800,000 880,000
(1) Includes a special distribution to Limited Partners of $80,000 for the
quarter ended December 31, 1996.
The Partnership intends to continue to make distributions of cash
available for distribution to the Limited Partners on a quarterly basis,
although some Limited Partners, in accordance with their election, receive
monthly distributions, for an annual fee.
Item 6. Selected Financial Data
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993 (1)
-------------- -------------- -------------- -------------- -------------
<S> <C>
Year Ended December 31:
Revenues (2) $ 3,908,014 $ 4,068,610 $ 3,914,985 $ 1,319,692 $ -
Net income (3) 3,434,905 3,585,059 3,372,468 1,185,918 -
Cash distributions declared 3,200,000 3,280,000 2,900,001 1,185,946 -
Net income per Unit (3) (4) 0.85 0.89 0.83 0.41 -
Cash distribution declared
per Unit (4) 0.80 0.82 0.73 0.41 -
At December 31:
Total assets $37,045,723 $36,936,678 $36,516,732 $37,058,475 $ 1,000
Partners' capital $36,223,403 $35,988,498 $35,683,439 $35,210,972 $ 1,000
</TABLE>
(1) Selected financial data for 1993 represents the period September 2,
1993 (date of inception) to December 31, 1993.
(2) Revenues include equity in earnings of the joint venture.
(3) Net income for the year ended December 31, 1995, includes $71,023 from
loss on sale of land.
(4) Based on the weighted average number of Limited Partner Units
outstanding during the years ended December 31, 1997, 1996 and 1995,
and the period March 24, 1994 through December 31, 1994.
The above selected financial data should be read in conjunction with
the financial statements and related notes contained in Item 8 hereof.
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Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The Partnership was organized on September 2, 1993, to acquire for
cash, either directly or through joint venture arrangements, both newly
constructed and existing restaurant Properties, as well as land upon which
restaurant Properties were to be constructed, which are leased primarily to
operators of selected national and regional fast-food and family-style
Restaurant Chains. The leases are triple-net leases, with the lessees generally
responsible for all repairs and maintenance, property taxes, insurance and
utilities. As of December 31, 1997, the Partnership owned 49 Properties, either
directly or through joint venture arrangements.
Liquidity and Capital Resources
Net proceeds to the Partnership from its offering of Units, after
deduction of organizational and offering expenses, totalled $35,200,000. As of
December 31, 1994, approximately $32,088,000 had been used to invest, either
directly or through joint venture arrangements, in 43 Properties (three of which
were under construction at December 31, 1994) and to pay acquisition fees to an
affiliate of the General Partners totalling $2,200,000 and to pay certain
acquisition expenses. During 1995, the Partnership completed construction of the
three Properties acquired in 1994 and acquired two additional Properties. In
addition, in January 1995, the Partnership received notice from the tenant of
two of its Properties in Knoxville, Tennessee, and one Property in Leavenworth,
Kansas, of the tenant's intention to exercise its options, in accordance with
its lease agreements, to substitute other Properties for these three Properties.
In March 1995, the Partnership sold its two Properties in Knoxville, Tennessee,
and one Property in Leavenworth, Kansas, to the tenant for their original
purchase prices, excluding acquisition fees and miscellaneous acquisition
expenses and received net sales proceeds totalling $811,706. The Partnership
used the majority of the net sales proceeds to acquire two Checkers Properties
in Orlando and Bradenton, Florida, from the tenant. As a result of these
transactions, the Partnership recognized a loss of $71,023 for financial
reporting purposes primarily due to acquisition fees and miscellaneous
acquisition expenses the Partnership had allocated to the two Properties in
Knoxville, Tennessee, and the Property in Leavenworth, Kansas, and due to the
accrued rental income relating to future scheduled rent increases for these
Properties that the Partnership had recorded and reversed at the time of the
sale. As a result of the above transactions, as of December 31, 1995,
approximately $34,781,000 had been used to invest, either directly or through
joint venture arrangements in 44 Properties and to pay acquisition fees and
certain acquisition expenses.
In January 1996, the Partnership invested $122,439 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. As of December 31, 1996, the Partnership owned a 15.02% 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 September 1996, Wood-Ridge Real Estate Joint Venture, a joint
venture in which the Partnership owns a 50 percent interest, sold its two
Properties to the tenant for $5,020,878 and received net sales proceeds of
$5,001,180, resulting in a gain to the joint venture of approximately $261,100
for financial reporting purposes. These Properties were originally acquired by
Wood-Ridge Real Estate Joint Venture in September 1994 and had a combined total
cost of approximately $4,302,500, excluding acquisition fees and miscellaneous
acquisition expenses; therefore, the joint venture sold these Properties for
approximately $698,700 in excess of their original purchase price. In October
1996, Wood-Ridge Real Estate Joint Venture reinvested $4,404,046 of the net
sales proceeds in five Properties. In January 1997, the joint venture reinvested
$502,598 of the remaining net sales proceeds in an additional Property. As of
December 31, 1997, the Partnership had received approximately $52,000,
representing its pro-rata share of the uninvested net sales proceeds.
Currently, the Partnership's primary source of capital is cash from
operations (which includes cash received from tenants, distributions from joint
ventures and interest received, less cash paid for expenses). Cash from
operations was $3,306,595, $3,434,682 and $3,239,370 for the years ended
December 31, 1997, 1996 and 1995, respectively. The decrease in cash from
operations during 1997, as compared to 1996, and the increase during 1996, as
compared to 1995, is primarily a result of changes in income and expenses as
described in "Results of Operations" below and changes in the Partnership's
working capital.
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None of the Properties owned by the Partnership or the joint ventures
in which the Partnership owns an interest is or may be encumbered. Subject to
certain restrictions on borrowing, however, the Partnership may borrow funds but
will not encumber any of the Properties in connection with any such borrowing.
The Partnership will not borrow for the purpose of returning capital to the
Limited Partners. The Partnership will not borrow under arrangements that would
make the Limited Partners liable to creditors of the Partnership. The General
Partners further have represented that they will use their reasonable efforts to
structure any borrowing so that it will not constitute "acquisition
indebtedness" for federal income tax purposes and also will limit the
Partnership's outstanding indebtedness to three percent of the aggregate
adjusted tax basis of its Properties. Affiliates of the General Partners from
time to time incur certain operating expenses on behalf of the Partnership for
which the Partnership reimburses the affiliates without interest.
Currently, cash reserves and rental income from the Partnership's
Properties are invested in money market accounts or other short-term, highly
liquid investments pending the Partnership's use of such funds to pay
Partnership expenses or make distributions to partners. At December 31, 1997,
the Partnership had $1,614,708 invested in such short-term investments as
compared to $1,536,163 at December 31, 1996. The funds remaining at December 31,
1997, after payment of distributions and other liabilities, will be used to meet
the Partnership's working capital and other needs.
During 1997, 1996 and 1995, the affiliates incurred on behalf of the
Partnership $78,821, $86,714 and $94,991, respectively, for certain operating
expenses. In addition, during 1995, affiliates of the General Partners incurred
on behalf of the Partnership $2,274 for certain acquisition expenses. As of
December 31, 1997 and 1996, the Partnership owed $4,311 and $1,355,
respectively, to related parties for such amounts, accounting and administrative
services and management fees. As of February 28, 1998, the Partnership had
reimbursed the affiliates all such amounts. Other liabilities, including
distributions payable, decreased to $818,009 at December 31, 1997, from $946,825
at December 31, 1996, partially as a result of the Partnership accruing a
special distribution payable to the Limited Partners of $80,000 at December 31,
1996, which was paid in January 1997 from cumulative excess operating reserves.
Total liabilities also decreased as a result of a decrease in rents paid in
advance at December 31, 1997. 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 $3,200,000, $3,280,000 and $2,900,001 for the years
ended December 31, 1997, 1996 and 1995, respectively. This represents
distributions of $0.80, $0.82 and $0.73 per Unit for the years ended December
31, 1997, 1996 and 1995, respectively. The General Partners anticipate that the
Partnership will declare a special distribution to the Limited Partners during
the quarter ending March 31, 1998, representing cumulative excess operating
reserves. No amounts distributed or to be distributed to the Limited Partners
for the years ended December 31, 1997, 1996 or 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 General Partners believe that the Properties are adequately covered
by insurance. In addition, the General Partners have obtained contingent
liability and property coverage for the Partnership. This insurance is intended
to reduce the Partnership's exposure in the unlikely event a tenant's insurance
policy lapses or is insufficient to cover a claim relating to the Property.
The Partnership's investment strategy of acquiring Properties for cash
and leasing them under triple-net leases to operators who generally meet
specified financial standards minimizes the Partnership's operating expenses.
The General Partners believe that the leases will continue to generate cash flow
in excess of operating expenses.
Due to low operating expenses and ongoing cash flow, the General
Partners believe that the Partnership has sufficient working capital reserves at
this time. In addition, because all leases of the Partnership's Properties are
on a triple-net basis, it is not anticipated that a permanent reserve for
maintenance and repairs will be established at this time. To the extent,
however, that the Partnership has insufficient funds for such purposes, the
General Partners will contribute to the Partnership an aggregate amount of up to
one percent of the offering proceeds for maintenance and repairs. The General
Partners have the right to cause the Partnership to maintain additional reserves
if, in their discretion, they determine such reserves are required to meet the
Partnership's working capital needs.
8
<PAGE>
The General Partners have the right, but not the obligation, to make
additional capital contributions if they deem it appropriate in connection with
the operations of the Partnership.
Results of Operations
The Partnership owned and leased 45 wholly owned Properties during 1995
(including two Properties in Knoxville, Tennessee, and one Property in
Leavenworth, Kansas, which were sold in March 1995), and during 1996 and 1997,
owned and leased 42 wholly owned Properties. In addition, during 1995, the
Partnership was a co-venturer in one joint venture that owned two Properties,
and during 1996, the Partnership was a co-venturer in one joint venture that
owned and leased seven Properties (including two Properties in Wood-Ridge Real
Estate Joint Venture, which were sold in September 1996) and the Partnership
owned and leased one Property with affiliates, as tenants-in-common. During
1997, the Partnership was a co-venturer in one joint venture that owned and
leased six Properties and owned and leased one Property with affiliates as
tenants-in-common. As of December 31, 1997, the Partnership owned, either
directly or through joint venture arrangements 49 Properties, which are subject
to long-term, triple-net leases. The leases of the Properties provide for
minimum base annual rental payments (payable in monthly installments) ranging
from approximately $22,500 to $190,600. All of the leases provide for percentage
rent based on sales in excess of a specified amount. In addition, the majority
of the leases provide that, commencing in specified lease years (generally from
the sixth or the 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, 1997, 1996 and 1995, the
Partnership earned $3,586,791, $3,596,466 and $3,446,745 respectively, in rental
income from operating leases and earned income from direct financing leases from
Properties wholly owned by the Partnership. The increase in rental and earned
income during 1996, as compared to 1995, is primarily attributable to the
acquisition of additional Properties in 1995, and the fact that, with the
exception of the three Properties sold in March 1995, the Properties owned at
December 31, 1995, were operational for a full year in 1996, as compared to a
partial year in 1995.
During the years ended December 31, 1997, 1996 and 1995, the
Partnership also earned $25,791, $23,318 and $97,539, respectively, in
contingent rental income. Contingent rental income for the year ended December
31, 1996, as compared to 1995, decreased primarily as a result of decreased
gross sales of certain restaurant Properties that are subject to leases
requiring payment of contingent rental income.
In addition, for the years ended December 31, 1997, 1996 and 1995, the
Partnership earned $239,249, $392,862 and $280,606, respectively, attributable
to net income earned by joint ventures in which the Partnership is a
co-venturer. The decrease in net income earned by joint ventures during 1997, as
compared to 1996, is primarily attributable to, and the increase during 1996, as
compared to 1995, is primarily attributable to, the fact that in September 1996,
Wood-Ridge Real Estate Joint Venture, in which the Partnership owns a 50 percent
interest, recognized a gain of approximately $261,100 for financial reporting
purposes as a result of the sale of its Properties in September 1996, as
described above in "Liquidity and Capital Resources." Due to the fact that the
joint venture reinvested the majority of the net sales proceeds in five
Properties in October 1996 and one Property in January 1997, the Partnership
does not anticipate that the sale of the two Properties will have a material
adverse effect on operations.
During at least one of the years ended December 31, 1997, 1996 and
1995, five lessees (or group of affiliated lessees) of the Partnership, Flagstar
Corporation, Checkers Drive-In Restaurants, Inc., Long John Silver's, Inc.,
Foodmaker, Inc. and Golden Corral Corporation, each contributed more than ten
percent of the Partnership's total rental income (including the Partnership's
share of rental income from six Properties owned by a joint venture and one
Property owned with affiliates as tenants-in-common). As of December 31, 1997,
Flagstar Corporation was the lessee under leases relating to eight restaurants,
Checkers Drive-In Restaurants, Inc. was the lessee under leases relating to 14
restaurants, Long John Silver's, Inc. was the lessee under leases relating to
eight restaurants, Foodmaker, Inc. was the lessee under leases relating to four
restaurants and Golden Corral Corporation was lessee under leases relating to
five restaurants. It is anticipated that based on the minimum rental payments
required by the leases, these five lessees (or group of affiliated lessees) each
will continue to contribute more than ten percent of the Partnership's total
rental income in 1998 and subsequent years. In addition, during at least one of
the years ended December 31, 1997, 1996 and 1995, five Restaurant Chains,
Hardee's, Checkers Drive-In Restaurants, Long
9
<PAGE>
John Silver's, Golden Corral and Jack in the Box, each accounted for more than
ten percent of the Partnership's total rental income (including the
Partnership's share of rental income from six Properties owned by a joint
venture and one Property owned with affiliates as tenants-in-common). In
subsequent years, it is anticipated that these five Restaurant Chains each will
continue to account for more than ten percent of the total rental income to
which the Partnership is entitled under the terms of the leases. Any failure of
these lessees or Restaurant Chains could materially affect the Partnership's
income.
During the years ended December 31, 1997, 1996 and 1995, the
Partnership also earned $56,183, $55,964, and $90,095, respectively, in interest
and other income. The decrease in interest and other income during 1996, as
compared to 1995, is primarily attributable to a decrease in the amount of funds
invested in short-term, liquid investments due to the acquisition of Properties
during 1995.
Operating expenses, including depreciation and amortization expense,
were $473,109, $483,551 and $471,494 for the years ended December 31, 1997, 1996
and 1995, respectively. The decrease in operating expenses during 1997, as
compared to 1996, is primarily attributable to a decrease in accounting and
administrative expenses associated with operating the Partnership and its
Properties. The increase in operating expenses during 1996, as compared to 1995,
is primarily a result of the Partnership incurring additional taxes relating to
the filing of various state tax returns during 1996.
As a result of the sale of the two Properties in Knoxville, Tennessee,
and the Property in Leavenworth, Kansas, as described above in "Liquidity and
Capital Resources," the Partnership recognized a loss for financial reporting
purposes of $71,023 during the year ended December 31, 1995. The loss was
primarily due to acquisition fees and miscellaneous acquisition expenses the
Partnership had allocated to these Properties and due to accrued rental income
relating to future scheduled rent increases that the Partnership had recorded
and wrote off at the time of sale. No Properties were sold during the years
ended December 31, 1996 and 1997.
The General Partners of the Partnership are in the process of assessing
and addressing the impact of the year 2000 on their computer package software.
The hardware and built-in software are believed to be year 2000 compliant.
Accordingly, the General Partners do not expect this matter to materially impact
how the Partnership conducts business nor its current or future results of
operations or financial position.
The Partnership's leases as of December 31, 1997, are 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.
Item 8. Financial Statements and Supplementary Data
10
<PAGE>
CNL INCOME FUND XV, LTD.
(A Florida Limited Partnership)
CONTENTS
Page
Report of Independent Accountants 12
Financial Statements:
Balance Sheets 13
Statements of Income 14
Statements of Partners' Capital 15
Statements of Cash Flows 16
Notes to Financial Statements 18
11
<PAGE>
Report of Independent Accountants
To the Partners
CNL Income Fund XV, Ltd.
We have audited the financial statements and the financial statement schedule of
CNL Income Fund XV, Ltd. (a Florida limited partnership) listed in Item 14(a) of
this Form 10-K. These financial statements and financial statement schedule are
the responsibility of the Partnership's management. Our responsibility is to
express an opinion on these financial statements and financial statement
schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of CNL Income Fund XV, Ltd. as of
December 31, 1997 and 1996, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1997, in conformity
with generally accepted accounting principles. In addition, in our opinion, the
financial statement schedule referred to above, when considered in relation to
the basic financial statements taken as a whole, presents fairly, in all
material respects, the information required to be included therein.
/s/ Coopers & Lybrand L.L.P.
- --------------------------------
Orlando, Florida
January 19, 1998
12
<PAGE>
CNL INCOME FUND XV, LTD.
(A Florida Limited Partnership)
BALANCE SHEETS
December 31,
ASSETS 1997 1996
------ ----------- ----------
Land and buildings on operating
leases, less accumulated
depreciation $22,145,138 $22,390,701
Net investment in direct
financing leases 9,264,307 9,351,815
Investment in joint ventures 2,561,816 2,624,620
Cash and cash equivalents 1,614,708 1,536,163
Receivables, less allowance for
doubtful accounts of $1,458
in 1996 26,888 30,176
Prepaid expenses 7,633 7,049
Organization costs, less
accumulated amortization of
$7,548 and $5,548 2,452 4,452
Accrued rental income 1,422,781 991,702
----------- -----------
$37,045,723 $36,936,678
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 6,991 $ 3,053
Escrowed real estate taxes payable 6,158 8,581
Distributions payable 800,000 880,000
Due to related parties 4,311 1,355
Rents paid in advance 4,860 55,191
----------- -----------
Total liabilities 822,320 948,180
Partners' capital 36,223,403 35,988,498
----------- -----------
$37,045,723 $36,936,678
=========== ===========
See accompanying notes to financial statements.
13
<PAGE>
CNL INCOME FUND XV, LTD.
(A Florida Limited Partnership)
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Year Ended December 31,
1997 1996 1995
---------- ---------- -------
<S> <C>
Revenues:
Rental income from operating
leases $2,527,261 $2,527,261 $2,492,250
Earned income from direct
financing leases 1,059,530 1,069,205 954,495
Contingent rental income 25,791 23,318 97,539
Interest and other income 56,183 55,964 90,095
---------- ---------- ----------
3,668,765 3,675,748 3,634,379
---------- ---------- ----------
Expenses:
General operating and
administrative 135,714 149,388 150,586
Professional services 24,526 19,881 30,960
Management fees to
related parties 35,321 35,126 34,213
State and other taxes 29,200 30,924 12,560
Depreciation and amortization 248,348 248,232 243,175
---------- ---------- ----------
473,109 483,551 471,494
---------- ---------- ----------
Income Before Equity in
Earnings of Joint Ventures
and Loss on Sale of Land 3,195,656 3,192,197 3,162,885
Equity in Earnings of Joint
Ventures 239,249 392,862 280,606
Loss on Sale of Land - - (71,023)
---------- ---------- ----------
Net Income $3,434,905 $3,585,059 $3,372,468
========== ========== ==========
Allocation of Net Income:
General partners $ 34,349 $ 35,851 $ 34,352
Limited partners 3,400,556 3,549,208 3,338,116
---------- ---------- ----------
$3,434,905 $3,585,059 $3,372,468
========== ========== ==========
Net Income Per Limited
Partner Unit $ 0.85 $ 0.89 $ 0.83
========== ========== ==========
Weighted Average Number of
Limited Partner Units
Outstanding 4,000,000 4,000,000 4,000,000
========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
14
<PAGE>
CNL INCOME FUND XV, LTD.
(A Florida Limited Partnership)
STATEMENTS OF PARTNERS' CAPITAL
Years Ended December 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
General Partners Limited Partners
Accumu- Accumu-
Contri- lated Contri- Distri- lated Syndication
butions Earnings butions butions Earnings Costs Total
------- -------- ----------- ------------- ---------- ----------- --------
<S> <C>
Balance, December 31, 1994 $ 1,000 $11,859 $40,000,000 $ (1,185,946) $1,174,059 $(4,790,000) $35,210,972
Distributions to limited
partners ($0.73 per limited
partner unit) - - - (2,900,001) - - (2,900,001)
Net income - 34,352 - - 3,338,116 - 3,372,468
------ -------- ----------- ------------ ---------- ----------- -----------
Balance, December 31, 1995 1,000 46,211 40,000,000 (4,085,947) 4,512,175 (4,790,000) 35,683,439
Distributions to limited
partners ($0.82 per limited
partner unit) - - - (3,280,000) - - (3,280,000)
Net income - 35,851 - - 3,549,208 - 3,585,059
------ -------- ----------- ------------ ---------- ----------- -----------
Balance, December 31, 1996 1,000 82,062 40,000,000 (7,365,947) 8,061,383 (4,790,000) 35,988,498
Distributions to limited
partners ($0.80 per limited
partner unit) - - - (3,200,000) - - (3,200,000)
Net income - 34,349 - - 3,400,556 - 3,434,905
------ -------- ----------- ------------ ---------- ----------- -----------
Balance, December 31, 1997 $1,000 $116,411 $40,000,000 $(10,565,947) $11,461,939 $(4,790,000) $36,223,403
====== ======== =========== ============ =========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
15
<PAGE>
CNL INCOME FUND XV, LTD.
(A Florida Limited Partnership)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31,
1997 1996 1995
------------ ------------ --------
<S> <C>
Increase (Decrease) in Cash
and Cash Equivalents:
Cash Flows From Operating
Activities:
Cash received from tenants $ 3,228,741 $ 3,378,973 $ 3,136,569
Distributions from joint
ventures 249,318 259,407 237,566
Cash paid for expenses (218,106) (246,748) (222,824)
Interest received 46,642 43,050 88,059
------------ ------------ ------------
Net cash provided by
operating activities 3,306,595 3,434,682 3,239,370
------------ ------------ ------------
Cash Flows From Investing
Activities:
Proceeds from sale of land - - 811,706
Additions to land and
buildings on operating
leases - - (1,625,601)
Investment in direct
financing leases - - (2,412,973)
Investment in joint ventures - (129,939) (720,552)
Return of capital from
joint venture 51,950 - -
Other - - 25,150
------------ ------------ ------------
Net cash provided by
(used in)investing
activities 51,950 (129,939) (3,922,270)
------------ ------------ ------------
Cash Flows From Financing
Activities:
Reimbursement of acqui-
sition costs paid by
related parties on
behalf of the
Partnership - - (23,507)
Distributions to
limited partners (3,280,000) (3,200,000) (2,650,003)
------------ ------------ ------------
Net cash used in
financing activities (3,280,000) (3,200,000) (2,673,510)
------------ ------------ ------------
Net Increase (Decrease) in
Cash and Cash Equivalents 78,545 104,743 (3,356,410)
Cash and Cash Equivalents at
Beginning of year 1,536,163 1,431,420 4,787,830
------------ ------------ ------------
Cash and Cash Equivalents at
End of Year $ 1,614,708 $ 1,536,163 $ 1,431,420
============ ============ ============
</TABLE>
See accompanying notes to financial statements.
16
<PAGE>
CNL INCOME FUND XV, LTD.
(A Florida Limited Partnership)
STATEMENTS OF CASH FLOWS - CONTINUED
<TABLE>
<CAPTION>
Year Ended December 31,
1997 1996 1995
------------ ------------ --------
<S> <C>
Reconciliation of Net Income to
Net Cash Provided by Operating
Activities:
Net income $ 3,434,905 $ 3,585,059 $ 3,372,468
------------ ------------ ------------
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation 245,563 245,563 241,175
Amortization 2,785 2,669 2,000
Equity in earnings of
joint ventures, net of
distributions 10,069 (133,455) (43,040)
Loss on sale of land - - 71,023
Decrease (increase) in
receivables 3,288 58,013 (38,005)
Decrease in net investment
in direct financing leases 87,508 77,834 65,572
Increase in prepaid expenses (584) (4,234) (2,815)
Increase in accrued
rental income (431,079) (431,654) (429,233)
Increase in accounts
payable and accrued
expenses 1,515 1,972 2,586
Increase (decrease) in
due to related parties,
excluding reimbursement
of acquisition costs
paid in behalf of the
Partnership 2,956 (6,880) 7,683
Increase (decrease) in
rents paid in advance (50,331) 39,795 (10,044)
------------ ------------ ------------
Total adjustments (128,310) (150,377) (133,098)
------------ ------------ ------------
Net Cash Provided by Operating
Activities $ 3,306,595 $ 3,434,682 $ 3,239,370
============ ============ ============
Supplemental Schedule of Non-Cash
Financing Activities:
Distributions declared and
unpaid at December 31 $ 800,000 $ 880,000 $ 800,000
============ ============ ============
</TABLE>
See accompanying notes to financial statements.
17
<PAGE>
CNL INCOME FUND XV, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
Years Ended December 31, 1997, 1996 and 1995
1. Significant Accounting Policies:
Organization and Nature of Business - CNL Income Fund XV, Ltd. (the
"Partnership") is a Florida limited partnership that was organized for
the purpose of acquiring both newly constructed and existing restaurant
properties, as well as properties upon which restaurants were to be
constructed, which are leased primarily to operators of national and
regional fast-food and family-style restaurant chains.
The general partners of the Partnership are CNL Realty Corporation (the
"Corporate General Partner"), James M. Seneff, Jr. and Robert A.
Bourne. Mr. Seneff and Mr. Bourne are also 50 percent shareholders of
the Corporate General Partner. The general partners have responsibility
for managing the day-to-day operations of the Partnership.
Real Estate and Lease Accounting - The Partnership records the
acquisition of land and buildings at cost, including acquisition and
closing costs. Land and buildings are leased to unrelated third parties
on a triple-net basis, whereby the tenant is generally responsible for
all operating expenses relating to the property, including property
taxes, insurance, maintenance and repairs. The leases are accounted for
using either the direct financing or the operating methods. Such
methods are described below:
Direct financing method - The leases accounted for using the
direct financing method are recorded at their net investment
(which at the inception of the lease generally represents the
cost of the asset) (Note 4). Unearned income is deferred and
amortized to income over the lease terms so as to produce a
constant periodic rate of return on the Partnership's net
investment in the leases.
Operating method - Land and building leases accounted for
using the operating method are recorded at cost, revenue is
recognized as rentals are earned and depreciation is charged
to operations as incurred. Buildings are depreciated on the
straight-line method over their estimated useful lives of 30
years. When scheduled rentals vary during the lease term,
income is recognized on a straight-line basis so as to produce
a constant periodic rent over the lease term commencing on the
date the property is placed in service.
18
<PAGE>
CNL INCOME FUND XV, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1997, 1996 and 1995
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.
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.
Investment in Joint Ventures - The Partnership accounts for its
interests in Wood-Ridge Real Estate Joint Venture and a property in
Clinton, North Carolina, held as tenants-in-common with affiliates,
using the equity method since the Partnership shares control with
affiliates which have the same general partners.
Cash and Cash Equivalents - The Partnership considers all highly liquid
investments with a maturity of three months or less when purchased to
be cash equivalents. Cash and cash equivalents consist of demand
deposits at commercial banks and money market funds (some of which are
backed by government securities). Cash equivalents are stated at cost
plus accrued interest, which approximates market value.
Cash accounts maintained on behalf of the Partnership in demand
deposits at commercial banks and money market funds may exceed
federally insured levels; however, the Partnership has not experienced
any losses in such accounts. The Partnership limits investment of
temporary cash investments to financial institutions with high credit
standing; therefore, the Partnership believes it is not exposed to any
significant credit risk on cash and cash equivalents.
Organization Costs - Organization costs are amortized over five years
using the straight-line method.
19
<PAGE>
CNL INCOME FUND XV, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1997, 1996 and 1995
1. Significant Accounting Policies - Continued:
Income Taxes - Under Section 701 of the Internal Revenue Code, all
income, expenses and tax credit items flow through to the partners for
tax purposes. Therefore, no provision for federal income taxes is
provided in the accompanying financial statements. The Partnership is
subject to certain state taxes on its income and property.
Additionally, for tax purposes, syndication costs are included in
Partnership equity and in the basis of each partner's investment. For
financial reporting purposes, syndication costs are netted against
partners' capital and represent a reduction of Partnership equity and a
reduction in the basis of each partner's investment.
Use of Estimates - The general partners of the Partnership have made a
number of estimates and assumptions relating to the reporting of assets
and liabilities and the disclosure of contingent assets and liabilities
to prepare these financial statements in conformity with generally
accepted accounting principles. The more significant areas requiring
the use of management estimates relate to the allowance for doubtful
accounts and future cash flows associated with long-lived assets.
Actual results could differ from those estimates.
Reclassification - Certain items in the prior years' financial
statements have been reclassified to conform to 1997 presentation.
These reclassifications had no effect on partners' capital or net
income.
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 these 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
20
<PAGE>
CNL INCOME FUND XV, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1997, 1996 and 1995
2. Leases - Continued:
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:
1997 1996
----------- -----------
Land $15,579,852 $15,579,852
Buildings 7,366,887 7,366,887
----------- -----------
22,946,739 22,946,739
Less accumulated
depreciation (801,601) (556,038)
----------- -----------
$22,145,138 $22,390,701
=========== ===========
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, 1997, 1996 and 1995, the Partnership
recognized $431,079, $431,654 and $429,233, respectively, of such
rental income.
The following is a schedule of the future minimum lease payments to be
received on noncancellable operating leases at December 31, 1997:
1998 $ 2,096,763
1999 2,171,812
2000 2,329,693
2001 2,333,165
2002 2,364,378
Thereafter 28,891,694
-----------
$40,187,505
21
<PAGE>
CNL INCOME FUND XV, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1997, 1996 and 1995
3. Land and Buildings on Operating Leases - Continued:
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:
1997 1996
------------ ------------
Minimum lease payments
receivable $ 19,905,444 $ 21,052,482
Estimated residual
values 2,873,859 2,873,859
Less unearned income (13,514,996) (14,574,526)
------------ ------------
Net investment in
direct financing
leases $ 9,264,307 $ 9,351,815
============ ============
The following is a schedule of future minimum lease payments to be
received on direct financing leases at December 31, 1997:
1998 $ 1,147,038
1999 1,147,038
2000 1,149,782
2001 1,155,269
2002 1,177,626
Thereafter 14,128,691
-----------
$19,905,444
The above table does not include future minimum lease payments for
renewal periods or for contingent rental payments that may become due
in future periods (see Note 3).
22
<PAGE>
CNL INCOME FUND XV, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1997, 1996 and 1995
5. Investment in Joint Ventures:
The Partnership has a 50 percent interest in the profits and losses of
Wood-Ridge Real Estate Joint Venture. The remaining interest in this
joint venture is held by an affiliate of the Partnership which has the
same general partners.
In September 1996, Wood-Ridge Real Estate Joint Venture sold its two
properties to the tenant of these properties for $5,020,878 and
received net sales proceeds of $5,001,180, resulting in a gain to the
joint venture of approximately $261,100 for financial reporting
purposes. These properties were originally acquired by Wood-Ridge Real
Estate Joint Venture in September 1994 and had a combined, total cost
of approximately $4,302,500, excluding acquisition fees and
miscellaneous acquisition expenses; therefore, the joint venture sold
these properties for approximately $698,700 in excess of their original
purchase price.
In October 1996 and January 1997, Wood-Ridge Real Estate Joint Venture
reinvested $4,404,046 and $502,598, respectively, of the net sales
proceeds from the sale of the two properties during 1996, in five
properties and one property, respectively. As of December 31, 1997, the
Partnership had received approximately $52,000, representing its
pro-rata share of the uninvested net sales proceeds. As of December 31,
1997, the Partnership owned a 50 percent interest in the profits and
losses of the joint venture.
In January 1996, the Partnership acquired a property in Clinton, North
Carolina, with affiliates of the general partners as tenants-in-common.
In connection therewith, the Partnership contributed $122,439 for a
15.02% interest in such property. 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.
23
<PAGE>
CNL INCOME FUND XV, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1997, 1996 and 1995
5. Investment in Joint Ventures - Continued:
Wood-Ridge Real Estate Joint Venture, and the Partnership and
affiliates, as tenants-in-common, own and lease six properties and one
property, respectively, to operators of national fast-food or
family-style restaurants. The following presents the combined,
condensed financial information for all of the Partnership's
investments in joint ventures at December 31:
1997 1996
---------- ----------
Land and buildings on
operating leases,
less accumulated
depreciation $5,563,722 $5,178,396
Cash 10,890 781
Restricted cash - 595,426
Receivables 5,923 15,200
Accrued rental income 74,001 11,971
Other assets 1,078 15,263
Liabilities 18,195 33,238
Partners' capital 5,637,419 5,783,799
Revenues 650,354 643,646
Gain on sale of land
and buildings - 261,106
Net income 522,611 837,850
The Partnership recognized income totalling $239,249, $392,862 and
$280,606 for the years ended December 31, 1997, 1996 and 1995,
respectively, from these entities.
6. Allocations and Distributions:
Generally, all net income and 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 shall be subordinated to receipt by the limited partners of an
aggregate, eight percent, cumulative, noncompounded annual return on
their invested capital contributions (the "Limited Partners' 8%
Return").
24
<PAGE>
CNL INCOME FUND XV, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1997, 1996 and 1995
6. Allocations and Distributions - Continued:
Generally, net sales proceeds from the sale of properties, to the
extent distributed, will be distributed first to the limited partners
in an amount sufficient to provide them with their Limited Partners' 8%
Return, plus the return of their adjusted capital contributions. The
general partners will then receive, to the extent previously
subordinated and unpaid, a one percent interest in all prior
distributions of net cash flow and a return of their capital
contributions. Any remaining sales proceeds will be distributed 95
percent to the limited partners and five percent to the general
partners. Any gain from the sale of a property is, in general,
allocated in the same manner as net sales proceeds are distributable.
Any loss from the sale of a property is, in general, allocated first,
on a pro rata basis, to partners with positive balances in their
capital accounts, and thereafter, 95 percent to the limited partners
and five percent to the general partners.
During the years ended December 31, 1997, 1996 and 1995, the
Partnership declared distributions to the limited partners of
$3,200,000, $3,280,000 and $2,900,001, respectively. No distributions
have been made to the general partners to date.
25
<PAGE>
CNL INCOME FUND XV, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1997, 1996 and 1995
7. 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>
1997 1996 1995
---------- ---------- -------
<S> <C>
Net income for financial
reporting purposes $3,434,905 $3,585,059 $3,372,468
Depreciation for tax
reporting purposes in
excess of depreciation
for financial reporting
purposes (160,007) (160,007) (139,941)
Direct financing leases
recorded as operating
leases for tax
reporting purposes 87,508 77,834 65,572
Loss on sale of
land for financial
reporting purposes in
excess of loss for tax
reporting purposes - - 71,023
Equity in earnings of joint
ventures for financial
reporting purposes in
excess of equity in
earnings of joint ventures
for tax reporting purposes 23,823 (158,836) (67,933)
Accrued rental income (431,079) (431,654) (429,233)
Rents paid in advance (50,331) 39,795 (10,044)
Other (670) 2,127 -
---------- ---------- ---------
Net income for federal
income tax purposes $2,904,149 $2,954,318 $2,861,912
========== ========== ==========
</TABLE>
26
<PAGE>
CNL INCOME FUND XV, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1997, 1996 and 1995
8. Related Party Transactions:
One of the individual general partners, James M. Seneff, Jr., is one of
the principal shareholders of CNL Group, Inc., the parent company of
CNL Fund Advisors, Inc. The other individual general partner, Robert A.
Bourne, served as president of CNL Fund Advisors, Inc. through October
1997. CNL Income Fund Advisors, Inc. was a wholly owned subsidiary of
CNL Group, Inc. until its merger, effective January 1, 1996, with CNL
Fund Advisors, Inc. During the years ended December 31, 1997, 1996 and
1995, CNL Income Fund Advisors, Inc. and CNL Fund Advisors, Inc.
(hereinafter referred to collectively as the "Affiliates") each
performed certain services for the Partnership, as described below.
During the years ended December 31, 1997, 1996 and 1995, certain
Affiliates acted as manager of the Partnership's properties pursuant to
a management agreement with the Partnership. In connection therewith,
the Partnership agreed to pay Affiliates a management fee of one
percent of the sum of gross revenues from properties wholly owned by
the Partnership and the Partnership's allocable share of gross revenues
from joint ventures. The management fee, which will not exceed fees
which are competitive for similar services in the same geographic area,
may or may not be taken, in whole or in part as to any year, in the
sole discretion of the Affiliates. All or any portion of the management
fee not taken as to any fiscal year shall be deferred without interest
and may be taken in such other fiscal year as the Affiliates shall
determine. The Partnership incurred management fees of $35,321, $35,126
and $34,213 for the years ended December 31, 1997, 1996 and 1995,
respectively.
Certain Affiliates are also entitled to receive a deferred,
subordinated real estate disposition fee, payable upon the sale of one
or more properties based on the lesser of one-half of a competitive
real estate commission or three percent of the sales price if the
Affiliates provide a substantial amount of services in connection with
the sale. However, if the net sales proceeds are reinvested in a
replacement property, no such real estate disposition fees will be
incurred until such replacement property is sold and the net sales
proceeds are distributed. The payment of the real estate disposition
fee is subordinated to receipt by the limited partners of their
aggregate 8% Preferred Return, plus their invested capital
contributions. No deferred, subordinated real estate disposition fees
have been incurred since inception.
27
<PAGE>
CNL INCOME FUND XV, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1997, 1996 and 1995
8. Related Party Transactions - Continued:
During the years ended December 31, 1997, 1996 and 1995, Affiliates of
the general partners provided accounting and administrative services to
the Partnership on a day-to-day basis. The Partnership incurred
$78,051, $87,265 and $87,894 for the years ended December 31, 1997,
1996 and 1995, respectively, for such services.
The due to related parties at December 31, 1997 and 1996, totalled
$4,311 and $1,355, respectively.
9. Concentration of Credit Risk:
The following schedule presents total rental and earned income from
individual lessees or affiliated groups of lessees, each representing
more than ten percent of the Partnership's total rental and earned
income (including the Partnership's share of total rental and earned
income from joint ventures) for at least one of the years ended
December 31:
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- ------
<S> <C>
Checkers Drive-In
Restaurants, Inc. $716,905 $723,558 $731,967
Long John Silver's,
Inc. 710,325 714,804 721,162
Flagstar Enterprises,
Inc. and Quincy's
Restaurants, Inc. 635,413 638,042 639,981
Golden Corral
Corporation 582,600 531,775 567,697
Foodmaker, Inc. 417,426 417,426 417,426
</TABLE>
28
<PAGE>
CNL INCOME FUND XV, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1997, 1996 and 1995
9. 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 rental and earned income from
joint ventures) for at least one of the years ended December 31:
1997 1996 1995
-------- -------- ---------
Long John Silver's $773,265 $777,743 $758,408
Checkers Drive-In
Restaurants 716,905 723,558 731,967
Golden Corral Family
Steakhouse
Restaurants 582,600 531,775 567,697
Hardee's 543,889 546,037 547,539
Jack in the Box 417,426 417,426 417,426
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 one of these lessees or
restaurant chains could significantly impact the results of operations
of the Partnership. However, the general partners believe that the risk
of such a default is reduced due to the essential or important nature
of these properties for the on-going operations of the lessees.
29
<PAGE>
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
The General Partners of the Registrant are James M. Seneff, Jr., Robert
A. Bourne and CNL Realty Corporation, a Florida corporation. The General
Partners manage and control the Partnership's affairs and have general
responsibility and the ultimate authority in all matters affecting the
Partnership's business. The Partnership has available to it the services,
personnel and experience of CNL Fund Advisors, Inc., CNL Group, Inc. and their
affiliates, all of which are affiliates of the General Partners.
James M. Seneff, Jr., age 51, is a principal stockholder of CNL Group,
Inc., a diversified real estate company, and has served as its Chairman of the
Board of Directors, director and Chief Executive Officer since its formation in
1980. CNL Group, Inc. is the parent company of CNL Securities Corp., CNL
Investment Company, CNL Fund Advisors, Inc., CNL Real Estate Advisors, Inc. and
prior to its merger with CNL Fund Advisors, Inc., effective January 1, 1996, CNL
Income Fund Advisors, Inc. Mr. Seneff is Chief Executive Officer, and has been a
director and registered principal of CNL Securities Corp., which served as the
managing dealer in the Partnership's offering of Units, since its formation in
1979. Mr. Seneff also has held the position of President and a director of CNL
Management Company, a registered investment advisor, since its formation in
1976, has served as Chief Executive Officer and Chairman of the Board of CNL
Investment Company, and Chief Executive Officer and Chairman of the Board of
Commercial Net Lease Realty, Inc. since 1992, has served as the Chairman of the
Board and the Chief Executive Officer of CNL Realty Advisors, Inc. since its
inception in 1991 through December 31, 1997, at which time CNL Realty Advisors,
Inc. merged with Commercial Net Lease Realty, Inc., served as Chairman of the
Board and Chief Executive Officer of CNL Income Fund Advisors, Inc. since its
inception in 1994 through December 31, 1995, has served as a director, Chairman
of the Board and Chief Executive Officer of CNL Fund Advisors, Inc. since its
inception in 1994, and has held the position of Chief Executive Officer and a
director of CNL Institutional Advisors, Inc., a registered investment advisor,
since its inception in 1990. In addition, Mr. Seneff has served as a director,
Chairman of the Board and Chief Executive Officer of CNL American Properties
Fund, Inc. since 1994, and has served as a director, Chairman of the Board and
Chief Executive Officer of CNL American Realty Fund, Inc. since 1996 and of CNL
Real Estate Advisors, Inc. since January 1997. Mr. Seneff previously served on
the Florida State Commission on Ethics and is a former member and past Chairman
of the State of Florida Investment Advisory Council, which recommends to the
Florida Board of Administration investments for various Florida employee
retirement funds. The Florida Board of Administration, Florida's principal
investment advisory and money management agency, oversees the investment of more
than $60 billion of retirement funds. Since 1971, Mr. Seneff has been active in
the acquisition, development and management of real estate projects and,
directly or through an affiliated entity, has served as a general partner or
joint venturer in over 100 real estate ventures involved in the financing,
acquisition, construction and rental of office buildings, apartment complexes,
restaurants, hotels and other real estate. Included in these real estate
ventures are approximately 65 privately offered real estate limited partnerships
in which Mr. Seneff, directly or through an affiliated entity, serves or has
served as a general partner. Also included are CNL Income Fund, Ltd., CNL Income
Fund II, Ltd., CNL Income Fund III, Ltd., CNL Income Fund IV, Ltd., CNL Income
Fund V, Ltd., CNL Income Fund VI, Ltd., CNL Income Fund VII, Ltd., CNL Income
Fund VIII, Ltd., CNL Income Fund IX, Ltd., CNL Income Fund X, Ltd., CNL Income
Fund XI, Ltd., CNL Income Fund XII, Ltd., CNL Income Fund XIII, Ltd., CNL Income
Fund XIV, Ltd., CNL Income Fund XVI, Ltd., CNL Income Fund XVII, Ltd. and CNL
Income Fund XVIII, Ltd. (the "CNL Income Fund Partnerships"), public real estate
limited partnerships with investment objectives similar to those of the
Partnership, in which Mr. Seneff serves as a general partner. Mr. Seneff
received his degree in Business Administration from Florida State University in
1968.
30
<PAGE>
Robert A. Bourne, age 50, is President and Treasurer of CNL Group,
Inc., President, a director and a registered principal of CNL Securities Corp.,
President and a director of CNL Investment Company, and prior to its merger with
CNL Fund Advisors, Inc., effective January 1, 1996, CNL Income Fund Advisors,
Inc., and Chief Investment Officer, Vice Chairman of the Board of Directors, a
director and Treasurer of CNL Institutional Advisors, Inc., a registered
investment advisor. Mr. Bourne served as President of CNL Institutional
Advisors, Inc. from the date of its inception through June 30, 1997 and served
as President of CNL Fund Advisors, Inc. from the date of its inception through
October 1997. Mr. Bourne also has served as a director since 1992, as President
from July 1992 to February 1996, as Secretary and Treasurer from February 1996
through December 1997, and since February 1996, served as Vice Chairman of the
Board of Directors of Commercial Net Lease Realty, Inc. In addition, Mr. Bourne
has served as a director since its inception in 1991, as President from 1991 to
February 1996, as Secretary from February 1996 to July 1996, and since February
1996, served as Treasurer and Vice Chairman of CNL Realty Advisors, Inc. through
December 31, 1997, at which time CNL Realty Advisors, Inc. merged with
Commercial Net Lease Realty, Inc. In addition, Mr. Bourne has served as
President and a director of CNL American Properties Fund, Inc. since 1994, and
has served as President and a director of CNL American Realty Fund, Inc. since
1996 and of CNL Real Estate Advisors, Inc. since January 1997. Upon graduation
from Florida State University in 1970, where he received a B.A. in Accounting,
with honors, Mr. Bourne worked as a certified public accountant and, from
September 1971 through December 1978, was employed by Coopers & Lybrand,
Certified Public Accountants, where he held the position of tax manager
beginning in 1975. From January 1979 until June 1982, Mr. Bourne was a partner
in the accounting firm of Cross & Bourne and from July 1982 through January
1987, he was a partner in the accounting firm of Bourne & Rose, P.A., Certified
Public Accountants. Mr. Bourne, who joined CNL Securities Corp. in 1979, has
participated as a general partner or joint venturer in over 100 real estate
ventures involved in the financing, acquisition, construction and rental of
office buildings, apartment complexes, restaurants, hotels and other real
estate. Included in these real estate ventures are approximately 64 privately
offered real estate limited partnerships in which Mr. Bourne, directly or
through an affiliated entity, serves or has served as a general partner. Also
included are the CNL Income Fund Partnerships, public real estate limited
partnerships with investment objectives similar to those of the Partnership, in
which Mr. Bourne serves as a general partner.
CNL Realty Corporation is a corporation organized on November 26, 1985,
under the laws of the State of Florida. Its sole directors and shareholders are
James M. Seneff, Jr. and Robert A. Bourne, the individual General Partners. CNL
Realty Corporation was organized to serve as the corporate general partner of
real estate limited partnerships, such as the Partnership, organized by one or
both of the individual General Partners. CNL Realty Corporation currently serves
as the corporate general partner of the CNL Income Fund Partnerships.
CNL Fund Advisors, Inc. provides certain management services in
connection with the Partnership and its Properties. CNL Fund Advisors, Inc. is a
corporation organized in 1994 under the laws of the State of Florida, and its
principal office is located at 400 East South Street, Orlando, Florida 32801.
CNL Fund Advisors, Inc. is a wholly owned subsidiary of CNL Group, Inc., a
diversified real estate company, and was organized to perform property
acquisition, property management and other services.
CNL Group, Inc., which is the parent company of CNL Fund Advisors,
Inc., was organized in 1980 under the laws of the State of Florida. CNL Group,
Inc. is a diversified real estate company which provides a wide range of real
estate, development and financial services to companies in the United States
through the activities of its subsidiaries. These activities are primarily
focused on the franchised restaurant and hospitality industries. James M.
Seneff, Jr., an individual General Partner of the Partnership, is the Chairman
of the Board, Chief Executive Officer, and a director of CNL Group, Inc. Mr.
Seneff and his wife own all of the outstanding shares of CNL Group, Inc.
The following persons serve as operating officers of CNL Group, Inc. or
its affiliates or subsidiaries in the discretion of the Boards of Directors of
those companies, but, except as specifically indicated, do not serve as members
of the Boards of Directors of those entities. The Boards of Directors have the
responsibility for creating and implementing the policies of CNL Group, Inc. and
its affiliated companies.
31
<PAGE>
Curtis B. McWilliams, age 42, joined CNL Fund Advisors, Inc. in April
1997 and currently serves as President of CNL Fund Advisors, Inc. and as
Executive Vice President of CNL American Properties Fund, Inc. In addition, Mr.
McWilliams serves as Executive Vice President of CNL Group, Inc. and as
President of CNL Financial Services, Inc. and certain other subsidiaries of CNL
Group, Inc. From September 1983 through March 1997, Mr. McWilliams was employed
by Merrill Lynch. From January 1991 to August 1996, Mr. McWilliams was a
managing director in the corporate banking group of Merrill Lynch's investment
banking division. During this time, he was a senior relationship manager with
Merrill Lynch and as such was responsible for a number of the firm's larger
clients. From February 1990 to February 1993, he also served as co-head of one
of the Industrial Banking Groups within Merrill Lynch's investment banking
division and had administrative responsibility for a group of bankers and client
relationships, including the firm's transportation group. From September 1996 to
March 1997, Mr. McWilliams served as Chairman of Merrill Lynch's Private
Advisory Services. 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 39, is the Chief Operating Officer and Executive
Vice President of CNL Fund Advisors, Inc. and CNL American Properties Fund, Inc.
and serves as Executive Vice President of CNL American Realty Fund, Inc. and CNL
Real Estate Advisors, Inc. From May 1992 to May 1994, he was Executive Vice
President for Finance and Administration and Chief Financial Officer of Z Music,
Inc., a cable television network which was subsequently acquired by Gaylord
Entertainment, where he was responsible for overall financial and administrative
management and planning. From January 1990 through April 1992, Mr. Walker was
Chief Financial Officer of the First Baptist Church in Orlando, Florida. From
April 1984 through December 1989, he was a partner in the accounting firm of
Chastang, Ferrell & Walker, P.A., where he was the partner in charge of audit
and consulting services, and from 1981 to 1984, Mr. Walker was a Senior
Consultant/Audit Senior at Price Waterhouse. Mr. Walker is a Cum Laude graduate
of Wake Forest University with a B.S. in Accountancy and is a certified public
accountant.
Lynn E. Rose, age 49, a certified public accountant, has served as
Chief Financial Officer of CNL Group, Inc. since December 1993, has served as
Secretary of CNL Group, Inc. since 1987, and served as Controller of CNL Group,
Inc. from 1987 until December 1993. In addition, Ms. Rose has served as Chief
Financial Officer and Secretary of CNL Securities Corp. since July 1994. She has
served as Chief Operating Officer, Vice President and Secretary of CNL Corporate
Services, Inc. since November 1994. Ms. Rose also has served as Chief Financial
Officer and Secretary of CNL Institutional Advisors, Inc. since its inception in
1990, served as a director and Secretary of CNL Realty Advisors, Inc. since its
inception in 1991 through December 31, 1997, at which time CNL Realty Advisors,
Inc. merged with Commercial Net Lease Realty, Inc., Treasurer of CNL Realty
Advisors, Inc. from 1991 to February 1996, Secretary and Treasurer of Commercial
Net Lease Realty, Inc. from 1992 to February 1996, Secretary of CNL Income Fund
Advisors, Inc. since its inception in 1994 to December 1995, and a director,
Secretary and Treasurer of CNL Fund Advisors, Inc. since 1994 and has served as
a director, Secretary and Treasurer of CNL Real Estate Advisors, Inc. since
January 1997. Ms. Rose also has served as Secretary and Treasurer of CNL
American Properties Fund, Inc. since 1994, and has served as Secretary and
Treasurer of CNL American Realty Fund, Inc. since 1996. Ms. Rose also currently
serves as Secretary for approximately 50 additional corporations. Ms. Rose
oversees the management information services, administration, legal compliance,
accounting, tenant compliance, and reporting for over 300 corporations,
partnerships, and joint ventures. Prior to joining CNL, Ms. Rose was a partner
with Robert A. Bourne in the accounting firm of Bourne & Rose, P.A., Certified
Public Accountants. Ms. Rose holds a B.A. in Sociology from the University of
Central Florida. She was licensed as a certified public accountant in 1979.
32
<PAGE>
Jeanne A. Wall, age 39, has served as Chief Operating Officer of CNL
Investment Company and of CNL Securities Corp. since November 1994 and has
served as Executive Vice President of CNL Investment Company since January 1991.
In 1984, Ms. Wall joined CNL Securities Corp. In 1985, Ms. Wall became Vice
President of CNL Securities Corp., in 1987, she became Senior Vice President and
in July 1997, she became Executive Vice President of CNL Securities Corp. In
this capacity, Ms. Wall serves as national marketing and sales director and
oversees the national marketing plan for the CNL investment programs. In
addition, Ms. Wall oversees product development, partnership administration and
investor services for programs offered through participating brokers, and
corporate communications for CNL Group, Inc. and Affiliates. Ms. Wall also has
served as Senior Vice President of CNL Institutional Advisors, Inc., a
registered investment advisor, from 1990 to 1993, as Vice President of CNL
Realty Advisors, Inc. since its inception in 1991 through 1997, as Vice
President of Commercial Net Lease Realty, Inc. from 1992 through 1997, as
Executive Vice President of CNL Fund Advisors, Inc. since 1994, and as Executive
Vice President of CNL American Properties Fund, Inc. since 1994. In addition,
Ms. Wall has served as Executive Vice President of CNL Real Estate Advisors,
Inc. since January 1997 and as Executive Vice President of CNL American Realty
Fund, Inc. since 1996. Ms. Wall holds a B.A. in Business Administration from
Linfield College and is a registered principal of CNL Securities Corp. Ms. Wall
currently serves as a trustee on the board of the Investment Program Association
and on the Direct Participation Program committee for the National Association
of Securities Dealers (NASD).
Steven D. Shackelford, age 34, has served as Chief Financial Officer of
CNL Fund Advisors, Inc. since September 1996 and as Chief Financial Officer of
CNL American Properties Fund, Inc. since January 1997. From March 1995 to July
1996, he was a senior manager in the national office of Price Waterhouse where
he was responsible for advising foreign clients seeking to raise capital and a
public listing in the United States. From August 1992 to March 1995, he served
as a manager in the Price Waterhouse, Paris, France office serving several
multinational clients. Mr. Shackelford was an audit staff and audit senior from
1986 to 1992 in the Orlando, Florida office of Price Waterhouse. Mr. Shackelford
received a B.A. in Accounting, with honors, and a Masters of Business
Administration from Florida State University and is a certified public
accountant.
Item 11. Executive Compensation
Other than as described in Item 13, the Partnership has not paid and
does not intend to pay any executive compensation to the General Partners or any
of their affiliates. There are no compensatory plans or arrangements regarding
termination of employment or change of control.
Item 12. Security Ownership of Certain Beneficial Owners and Management
As of February 28, 1998, no person was known to the Registrant to be a
beneficial owner of more than five percent of the Units.
The following table sets forth, as of February 28, 1998, the beneficial
ownership interests of the General Partners in the Registrant.
<TABLE>
<CAPTION>
Title of Class Name of Partner Percent of Class
<S> <C>
General Partnership Interests James M. Seneff, Jr. 45%
Robert A. Bourne 45%
CNL Realty Corporation 10%
----
100%
</TABLE>
Neither the General Partners, nor any of their affiliates, owns any
interest in the Registrant, except as noted above. There are no arrangements
which at a subsequent date may result in a change in control of the Registrant.
33
<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, 1997, 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, 1997
----------------------- --------------------- -----------------------
<S> <C>
Reimbursement to affiliates for Operating expenses are reimbursed Operating expenses incurred
operating expenses at the lower of cost or 90 percent on behalf of the Partnership:
of the prevailing rate at which $78,821
comparable services could have
been obtained in the same Accounting and administra-
geographic area. Affiliates of the tive services: $78,051
General Partners from time to
time incur certain operating
expenses on behalf of the
Partnership for which the
Partnership reimburses the
affiliates without interest.
Annual management fee to One percent of the sum of gross $35,321
affiliates revenues from Properties wholly
owned by the Partnership plus the
Partnership's allocable share of gross
revenues of joint ventures in which the
Partnership is a co-venturer. The
management fee, which will not exceed
competitive fees for comparable
services in the same geographic area,
may or may not be taken, in whole or in
part as to any year, in the sole
discretion of the affiliates of the
General Partners. All or any portion of
the management fee not taken as to any
fiscal year shall be deferred without
interest and may be taken in such other
fiscal year as the affiliates shall
determine.
==========================================================================================================================
</TABLE>
34
<PAGE>
<TABLE>
<CAPTION>
==========================================================================================================================
Amount Incurred
Type of Compensation For the Year
and Recipient Method of Computation Ended December 31, 1997
----------------------- --------------------- -----------------------
<S> <C>
Deferred, subordinated real estate A deferred, subordinated real $ - 0 -
disposition fee payable to estate disposition fee, payable
affiliates upon sale of one or more
Properties, in an amount equal to the
lesser of (i) one-half of a competitive
real estate commission, or (ii) three
percent of the sales price of such
Property or Properties. Payment of such
fee shall be made only if affiliates of
the General Partners provide a
substantial amount of services in
connection with the sale of a Property
or Properties and shall be subordinated
to certain minimum returns to the
Limited Partners. However, if the net
sales proceeds are reinvested in a
replacement Property, no such real
estate disposition fee will be incurred
until such replacement Property is sold
and the net sales proceeds are
distributed.
General Partners' deferred, sub- A deferred, subordinated share $ - 0 -
ordinated share of Partnership net equal to one percent of
cash flow Partnership distributions of net
cash flow, subordinated to certain
minimum returns to the Limited
Partners.
General Partners' deferred, sub- A deferred, subordinated share $ - 0 -
ordinated share of Partnership net equal to five percent of
sales proceeds from a sale or Partnership distributions of such
sales net sales proceeds, subordinated to
certain minimum returns to the
Limited Partners.
==========================================================================================================================
</TABLE>
35
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) The following documents are filed as part of this report.
1. Financial Statements
Report of Independent Accountants
Balance Sheets at December 31, 1997 and 1996
Statements of Income for the years ended December 31, 1997,
1996 and 1995
Statements of Partners' Capital for the years ended December
31, 1997, 1996 and 1995
Statements of Cash Flows for the years ended December 31,
1997, 1996 and 1995
Notes to Financial Statements
2. Financial Statement Schedule
Schedule III - Real Estate and Accumulated Depreciation at
December 31, 1997
Notes to Schedule III - Real Estate and Accumulated
Depreciation at December 31, 1997
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 XV, Ltd. (Included as Exhibit 3.1 to
Registration Statement No. 33-69968 on Form S-11 and
incorporated herein by reference.)
4.1 Affidavit and Certificate of Limited Partnership of
CNL Income Fund XV, Ltd. (Included as Exhibit 3.1 to
Registration Statement No. 33-69968 on Form S-11 and
incorporated herein by reference.)
4.2 Amended and Restated Agreement of Limited Partnership
of CNL Income Fund XV, Ltd. (Included as Exhibit 4.2
to Form 10-K filed with the Securities and Exchange
Commission on March 30, 1995, and incorporated herein
by reference.)
10.1 Management Agreement between CNL Income Fund XV, Ltd.
and CNL Investment Company (Included as Exhibit 10.1
to Form 10-K filed with the Securities and Exchange
Commission on March 30, 1996, and incorporated herein
by reference.)
10.2 Assignment of Management Agreement from CNL
Investment Company to CNL Income Fund Advisors, Inc.
(Included as Exhibit 10.2 to Form 10-K filed with the
Securities and Exchange Commission on March 30, 1995,
and incorporated herein by reference.)
36
<PAGE>
10.3 Assignment of Management Agreement from CNL Income
Fund Advisors, Inc. to CNL Fund Advisors, Inc.
(Included as exhibit 10.3 to Form 10-K filed with the
Securities and Exchange Commission on April 1, 1996,
and incorporated herein by reference.)
27 Financial Data Schedule (Filed herewith.)
(b) The Registrant filed no reports on Form 8-K during the period
October 1, 1997 through December 31, 1997.
37
<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 20th day of
March, 1998.
CNL INCOME FUND XV, LTD.
By: CNL REALTY CORPORATION
General Partner
/s/ Robert A. Bourne
----------------------------
ROBERT A. BOURNE, President
By: ROBERT A. BOURNE
General Partner
/s/ Robert A. Bourne
---------------------------
ROBERT A. BOURNE
By: JAMES M. SENEFF, JR.
General Partner
/s/ James M. Seneff, Jr.
----------------------------
JAMES M. SENEFF, JR.
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
==========================================================================================================================
Signature Title Date
<S> <C>
/s/ Robert A. Bourne President, Treasurer and Director March 20, 1998
- --------------------------------------- (Principal Financial and
Robert A. Bourne Accounting Officer)
/s/ James M. Seneff, Jr. Chief Executive Officer and March 20, 1998
- --------------------------------------- Director (Principal Executive
James M. Seneff, Jr. Officer)
==========================================================================================================================
</TABLE>
<PAGE>
CNL INCOME FUND XV, LTD.
(A Florida Limited Partnership)
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1997
<TABLE>
<CAPTION>
Costs Capitalized
Subsequent
Initial Cost To Acquisition
Buildings
Encum- and Improve- Carrying
brances Land Improvements ments Costs
<S> <C>
Properties the Partnership
has Invested in Under
Operating Leases:
Checkers Drive-In Restaurants:
Englewood, Florida - $ 339,499 $ - $ - $ -
Marietta, Georgia - 432,547 - - -
Norcross, Georgia - 405,256 - - -
Philadelphia, Pennsylvania - 417,014 - - -
St. Petersburg, Florida - 557,206 - - -
Stratford, New Jersey - 309,370 - - -
Lake Mary, Florida - 614,471 - - -
Philadelphia, Pennsylvania - 599,586 - - -
Winter Garden, Florida - 353,799 - - -
Chamblee, Georgia - 427,829 - - -
Largo, Florida - 407,211 - - -
Seminole, Florida - 423,116 - - -
Orlando, Florida - 604,920 - - -
Bradenton, Florida - 215,478 - - -
Denny's Restaurant:
Huntsville, Texas - 349,266 - - -
East Side Mario's Restaurant:
Mentor, Ohio - 520,557 - - -
Golden Corral Family
Steakhouse Restaurants:
Aberdeen, North Carolina - 406,989 - 849,648 -
Norman, Oklahoma - 763,892 - 939,205 -
Augusta, Georgia - 766,891 - 1,124,687 -
Hardee's Restaurants:
Olive Branch, Mississippi - 209,243 - - -
Columbia, South Carolina - 230,268 497,047 - -
Pawleys Island, South Carolina - 307,911 593,997 - -
Cookeville, Tennessee - 216,335 - - -
Niceville, Florida - 310,511 480,398 - -
Jack in the Box Restaurants:
Woodland Hills, California - 617,887 406,122 - -
Redlands, California - 494,336 566,016 - -
Altadena, California - 501,099 272,441 - -
Port Arthur, Texas - 426,378 646,811 - -
Long John Silver's Restaurants:
Medina, Ohio - 445,614 - - -
Lexington, Kentucky - 346,854 - - -
Jackson, Tennessee - 254,023 - - -
Lancaster, South Carolina - 221,251 - - -
Albuquerque, New Mexico - 210,008 311,622 - -
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Life
on Which
Gross Amount at Which Carried Depreciation
at Close of Period (c) in Latest
Buildings Date Income
and Accumulated of Con- Date Statement is
Land Improvements Total Depreciation struction Acquired Computed
----------- ------------ ----------- ------------ --------- -------- ----------
<S> <C>
$ 339,499 $ - $ 339,499 (d) - 05/94 (d)
432,547 - 432,547 (d) - 05/94 (d)
405,256 - 405,256 (d) - 05/94 (d)
417,014 - 417,014 (d) - 05/94 (d)
557,206 - 557,206 (d) - 05/94 (d)
309,370 - 309,370 (d) - 05/94 (d)
614,471 - 614,471 (d) - 07/94 (d)
599,586 - 599,586 (d) - 08/94 (d)
353,799 - 353,799 (d) - 08/94 (d)
427,829 - 427,829 (d) - 12/94 (d)
407,211 - 407,211 (d) - 12/94 (d)
423,116 - 423,116 (d) - 12/94 (d)
604,920 - 604,920 (d) - 03/95 (d)
215,478 - 215,478 (d) - 03/95 (d)
349,266 (e) 349,266 (f) 1994 05/94 (f)
520,557 (e) 520,557 (f) 1995 10/94 (f)
406,989 849,648 1,256,637 $ 92,123 1994 06/94 (b)
763,892 939,205 1,703,097 95,379 1994 08/94 (b)
766,891 1,124,687 1,891,578 112,777 1994 09/94 (b)
209,243 (e) 209,243 (f) 1994 04/94 (f)
230,268 497,047 727,315 61,756 1993 04/94 (b)
307,911 593,997 901,908 72,717 1992 04/94 (b)
216,335 (e) 216,335 (f) 1992 04/94 (f)
310,511 480,398 790,909 58,854 1993 04/94 (b)
617,887 406,122 1,024,009 46,370 1988 07/94 (b)
494,336 566,016 1,060,352 64,627 1988 07/94 (b)
501,099 272,441 773,540 31,107 1976 07/94 (b)
426,378 646,811 1,073,189 70,130 1994 09/94 (b)
445,614 (e) 445,614 (f) 1994 06/94 (f)
346,854 (e) 346,854 (f) 1994 06/94 (f)
254,023 (e) 254,023 (f) 1994 06/94 (f)
221,251 (e) 221,251 (f) 1994 07/94 (f)
210,008 311,622 521,630 26,879 1976 05/95 (b)
</TABLE>
F-1
<PAGE>
CNL INCOME FUND XV, LTD.
(A Florida Limited Partnership)
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION - CONTINUED
December 31, 1997
<TABLE>
<CAPTION>
Costs Capitalized
Subsequent
Initial Cost To Acquisition
Buildings
Encum- and Improve- Carrying
brances Land Improvements ments Costs
<S> <C>
Gastonia, North Carolina - 379,499 - - -
Irving, Texas - 454,448 - - -
Lexington, North Carolina - 274,513 - - -
Neosho, Missouri - 171,859 - - -
Wendy's Old Fashioned Hamburgers
Restaurant:
Arlington, Virginia - 592,918 678,893 - -
----------- ---------- ---------- -----
$15,579,852 $4,453,347 $2,913,540 $ -
=========== ========== ========== =====
Properties of Joint Venture in
Which the Partnership has a
50% Interest and has Invested
in Under Operating Leases:
Boston Market Restaurants:
Murfreesboro, Tennessee - $ 398,313 $ - $ - $ -
Matthews, North Carolina - 409,942 737,391 - -
Raleigh, North Carolina - 518,507 542,919 - -
Blaine, Minnesota - 253,934 531,509 - -
Golden Corral Family
Steakhouse Restaurant:
Paris, Texas - 303,420 708,112 - -
Taco Bell:
Anniston, Alabama - 173,396 329,201 - -
----------- ---------- ---------- -----
$ 2,057,512 $2,849,132 $ - $ -
=========== ========== ========== =====
Property in Which the Partnership
has a 15.02% Interest as Tenants-
in-Common and has Invested in
Under an Operating Lease:
Golden Corral Family
Steakhouse Restaurant:
Clinton, North Carolina - $ 138,382 $ 676,588 $ - $ -
=========== ========== ========== =====
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Life
on Which
Gross Amount at Which Carried Depreciation
at Close of Period (c) in Latest
Buildings Date Income
and Accumulated of Con- Date Statement is
Land Improvements Total Depreciation struction Acquired Computed
----------- ------------ ----------- ------------ --------- -------- ----------
<S> <C>
379,499 (e) 379,499 (f) 1994 07/94 (f)
454,448 (e) 454,448 (f) 1995 07/94 (f)
274,513 (e) 274,513 (f) 1994 07/94 (f)
171,859 (e) 171,859 (f) 1994 07/94 (f)
592,918 678,893 1,271,811 68,882 1994 12/94 (b)
----------- ---------- ----------- --------
$15,579,852 $7,366,887 $22,946,739 $801,601
=========== ========== =========== ========
$ 398,313 $ - $ 398,313 (d) - 10/96 (d)
409,942 737,391 1,147,333 $ 30,225 1994 10/96 (b)
518,507 542,919 1,061,426 22,254 1994 10/96 (b)
253,934 531,509 785,443 21,786 1996 10/96 (b)
303,420 708,112 1,011,532 29,186 1996 10/96 (b)
173,396 329,201 502,597 10,720 1993 01/97 (b)
----------- ---------- ----------- --------
$ 2,057,512 $2,849,132 $ 4,906,644 $114,171
=========== ========== =========== ========
$ 138,382 $ 676,588 $ 814,970 $ 43,721 1996 01/96 (b)
=========== ========== =========== ========
</TABLE>
F-2
<PAGE>
CNL INCOME FUND XV, LTD.
(A Florida Limited Partnership)
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION - CONTINUED
December 31, 1997
<TABLE>
<CAPTION>
Costs Capitalized
Subsequent
Initial Cost To Acquisition
Buildings
Encum- and Improve- Carrying
brances Land Improvements ments Costs
<S> <C>
Properties the Partnership
has Invested in Under
Direct Financing Leases:
Denny's Restaurant:
Huntsville, Texas - $ - $ - $ 590,147 $ -
Bartlesville, Oklahoma - 199,747 789,589 - -
East Side Mario's Restaurant:
Mentor, Ohio - - - 1,201,696 -
Hardee's Restaurants:
Chester, South Carolina - 140,016 587,718 - -
Cookeville, Tennessee - - 574,511 - -
Olive Branch, Mississippi - - 510,712 - -
Piney Flats, Tennessee - 141,724 504,827 - -
Long John Silver's Restaurants:
Jackson, Tennessee - - 459,725 - -
Lexington, Kentucky - - - 316,937 -
Medina, Ohio - - - 414,342 -
Gastonia, North Carolina - - 458,248 - -
Lancaster, South Carolina - - - 363,078 -
Lexington, North Carolina - - - 417,145 -
Neosho, Missouri - - - 403,331 -
Irving, Texas - - - 414,009 -
Quincy's Restaurant:
Greer, South Carolina - 178,404 849,860 - -
----------- ---------- ---------- -----
$ 659,891 $4,735,190 $4,120,685 $ -
=========== ========== ========== =====
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Life
on Which
Gross Amount at Which Carried Depreciation
at Close of Period (c) in Latest
Buildings Date Income
and Accumulated of Con- Date Statement is
Land Improvements Total Depreciation struction Acquired Computed
----------- ------------ ----------- ------------ --------- -------- ----------
<S> <C>
- (e) (e) (f) 1994 05/94 (f)
(e) (e) (e) (g) 1983 08/95 (g)
- (e) (e) (f) 1995 10/94 (f)
(e) (e) (e) (g) 1994 04/94 (g)
- (e) (e) (f) 1992 04/94 (f)
- (e) (e) (f) 1994 04/94 (f)
(e) (e) (e) (g) 1993 04/94 (g)
- (e) (e) (f) 1994 06/94 (f)
- (e) (e) (f) 1994 06/94 (f)
- (e) (e) (f) 1994 06/94 (f)
- (e) (e) (f) 1994 07/94 (f)
- (e) (e) (f) 1994 07/94 (f)
- (e) (e) (f) 1994 07/94 (f)
- (e) (e) (f) 1994 07/94 (f)
- (e) (e) (f) 1995 07/94 (f)
(e) (e) (e) (g) 1988 06/94 (g)
</TABLE>
F-3
<PAGE>
CNL INCOME FUND XV, LTD.
(A Florida Limited Partnership)
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1997
(a) Transactions in real estate and accumulated depreciation during 1997,
1996 and 1995 are summarized as follows:
<TABLE>
<CAPTION>
Accumulated
Cost Depreciation
<S> <C>
Properties the Partnership
has Invested in Under
Operating Leases:
Balance, December 31, 1994 $23,358,747 $ 69,300
Acquisitions 1,319,806 -
Dispositions (870,824) -
Reclassified to net invest-
ment in direct financing
leases (860,990) -
Depreciation expense - 241,175
----------- --------
Balance, December 31, 1995 22,946,739 310,475
Depreciation expense - 245,563
----------- --------
Balance, December 31, 1996 22,946,739 556,038
Depreciation expense - 245,563
----------- --------
Balance, December 31, 1997 $22,946,739 $801,601
=========== ========
Properties of Joint Venture in
Which the Partnership has a
50% Interest and has Invested
in Under Operating Leases:
Balance, December 31, 1994 $ 3,988,577 $ 1,596
Acquisitions 295,307 -
Reclassified to net invest-
ment in direct financing
leases (1,108,290) -
Depreciation expense - 24,446
----------- --------
Balance, December 31, 1995 3,175,594 26,042
Dispositions (3,175,594) (43,711)
Acquisitions 4,404,047 -
Depreciation expense - 37,122
----------- --------
Balance, December 31, 1996 4,404,047 19,453
Acquisitions 502,597 -
Depreciation expense - 94,718
----------- --------
Balance, December 31, 1997 $ 4,906,644 $114,171
=========== ========
</TABLE>
F-4
<PAGE>
CNL INCOME FUND XV, LTD.
(A Florida Limited Partnership)
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED
DEPRECIATION - CONTINUED
December 31, 1997
<TABLE>
<CAPTION>
Accumulated
Cost Depreciation
<S> <C>
Property Which the Partnership
has a 15.02% Interest as
Tenants-in-common and has
Invested in Under an Operating
Lease:
Balance, December 31, 1995 $ - $ -
Acquisition 814,970 -
Depreciation expense - 21,168
----------- --------
Balance, December 31, 1996 814,970 21,168
Depreciation expense - 22,553
----------- --------
Balance, December 31, 1997 $ 814,970 $ 43,721
=========== ========
</TABLE>
(b) Depreciation expense is computed for buildings and improvements based
upon estimated lives of 30 years.
(c) As of December 31, 1997, the aggregate cost of the Properties owned
by the Partnership and joint ventures for federal income tax purposes
was $32,521,622 and $4,678,838, 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, 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.
(f) 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.
(g) 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 the net investment in direct
financing leases; therefore, depreciation is not applicable.
F-5
<PAGE>
EXHIBITS
<PAGE>
EXHIBIT INDEX
Exhibit Number
3.1 Affidavit and Certificate of Limited Partnership of CNL Income
Fund XV, Ltd. (Included as Exhibit 3.1 to Registration
Statement No. 33-69968 on Form S-11 and incorporated herein by
reference.)
4.1 Affidavit and Certificate of Limited Partnership of CNL Income
Fund XV, Ltd. (Included as Exhibit 3.1 to Registration
Statement No. 33-69968 on Form S-11 and incorporated herein by
reference.)
4.2 Amended and Restated Agreement of Limited Partnership of CNL
Income Fund XV, Ltd. (Included as Exhibit 4.2 to Form 10-K
filed with the Securities and Exchange Commission on March 30,
1995, and incorporated herein by reference.)
10.1 Management Agreement between CNL Income Fund XV, Ltd. and CNL
Investment Company (Included as Exhibit 10.1 to Form 10-K
filed with the Securities and Exchange Commission on March 30,
1996, and incorporated herein by reference.)
10.2 Assignment of Management Agreement from CNL Investment Company
to CNL Income Fund Advisors, Inc. (Included as Exhibit 10.2 to
Form 10-K filed with the Securities and Exchange Commission on
March 30, 1995, and incorporated herein by reference.)
10.3 Assignment of Management Agreement from CNL Income Fund
Advisors, Inc. to CNL Fund Advisors, Inc. (Included as exhibit
10.3 to Form 10-K filed with the Securities and Exchange
Commission on April 1, 1996, and incorporated herein by
reference.)
27 Financial Data Schedule (Filed herewith.)
i
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the balance
sheet of CNL Income Fund XV, Ltd. at December 31, 1997, and its statement of
income for the year then ended and is qualified in its entirety by reference to
the Form 10K of CNL Income Fund XV, Ltd. for the year ended December 31, 1997.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 1,614,708
<SECURITIES> 0
<RECEIVABLES> 26,888
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 22,946,739
<DEPRECIATION> 801,601
<TOTAL-ASSETS> 37,045,723
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 36,223,403
<TOTAL-LIABILITY-AND-EQUITY> 37,045,723
<SALES> 0
<TOTAL-REVENUES> 3,668,765
<CGS> 0
<TOTAL-COSTS> 473,109
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 3,434,905
<INCOME-TAX> 0
<INCOME-CONTINUING> 3,434,905
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,434,905
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>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>
