UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
(Mark One)
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________ to ________
Commission file number 0-26216
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) 650-1000
Securities registered pursuant to Section 12(b) of the Act:
Title of each class: Name of exchange on which registered:
None Not Applicable
Securities registered pursuant to Section 12(g) of the Act:
Units of limited partnership interest ($10 per Unit)
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days: Yes X No
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [x]
Aggregate market value of the voting stock held by nonaffiliates of the
registrant: The registrant registered an offering of 4,000,000 units of limited
partnership interest (the "Units") on Form S-11 under the Securities Act of
1933, as amended. Since no established market for such Units exists, there is no
market value for such Units. Each Unit was originally sold at $10 per Unit.
DOCUMENTS INCORPORATED BY REFERENCE:
None
<PAGE>
PART I
Item 1. Business
CNL Income Fund 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. During the year
ended December 31, 1997, Wood-Ridge Real Estate Joint Venture reinvested the
remaining proceeds from the sales of the two Properties in 1996, in a Taco Bell
Property in Anniston, Alabama. In addition, during the year ended December 31,
1998, the Partnership acquired a Property in Fort Myers, Florida, with an
affiliate of the General Partners as tenants-in-common. As a result of the above
transactions, as of December 31, 1998, the Partnership owned 50 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 two
Properties owned with affiliates 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.
On March 11, 1999, the Partnership entered into an Agreement and Plan
of Merger with CNL American Properties Fund, Inc. ("APF"), pursuant to which the
Partnership would be merged with and into a subsidiary of APF (the "Merger").
APF is a real estate investment trust whose primary business is the ownership of
restaurant properties leased on a long-term, "triple-net" basis to operators of
national and regional restaurant chains. APF has agreed to issue shares of its
common stock, par value $0.01 per share (the "APF Shares"), as consideration for
the Merger. At a special meeting of the partners that is expected to be held in
the third quarter of 1999, Limited Partners holding in excess of 50% of the
Partnership's outstanding limited partnership interests must approve the Merger
prior to consummation of the transaction. If the Limited Partners at the special
meeting approve the Merger, APF will own the Properties and other assets of the
Partnership. See Item 8.
Financial Statements and Supplementary Data -- Note 10. Subsequent Events.
In the event that the Limited Partners vote against the Merger, the
Partnership will hold its Properties until the General Partners determine that
the sale or other disposition of the Properties is advantageous in view of the
Partnership's investment objectives. In deciding whether to sell Properties, the
General Partners will consider factors such as potential capital appreciation,
net cash flow and federal income tax considerations. Certain lessees also have
been granted options to purchase Properties, generally at the Property's then
fair market value after a specified portion of the lease term has elapsed. The
Partnership has no obligation to sell all or any portion of a Property at any
particular time, except as may be required under property purchase options
granted to certain lessees.
Leases
Although there are variations in the specific terms of the leases, the
following is a summarized description of the general structure of the
Partnership's leases. The leases of the Properties owned by the Partnership, the
joint venture in which the Partnership is a co-venturer and the Properties owned
with affiliates as tenants-in-common, provide for initial terms ranging from 15
to 20 years (the average being 19 years) and expire between 2009 and 2018.
Generally, the 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. The majority of the leases provide for percentage rent, based on sales
in excess of a specified amount. In addition, the majority of the leases provide
that, commencing in specified lease years (generally the sixth or ninth lease
year), the annual base rent required under the terms of the lease will increase.
Generally, the leases of the Properties provide for two to five
five-year renewal options subject to the same terms and conditions as the
initial lease. Certain lessees also have been granted options to purchase
Properties at the Property's then fair market value after a specified portion of
the lease term has elapsed. Under the terms of certain leases, the option
purchase price may equal the Partnership's original cost to purchase the
Property (including acquisition costs), plus a specified percentage from the
date of the lease or a specified percentage of the Partnership's purchase price,
if that amount is greater than the Property's fair market value at the time the
purchase option is exercised.
In June and October 1998 and January 1999, three tenants, Long John
Silvers, Inc., Finest Foodservice, LLP, and B.C. Superior, LLC, respectively,
filed for bankruptcy and rejected the leases relating to six of their ten leases
(including two Properties held by Wood-Ridge Real Estate Joint Venture) and
ceased making rental payments to the Partnership relating to those leases that
were rejected. The Partnership will not recognize rental and earned income from
these six Properties until new tenants for these Properties are located or until
the Properties are sold and the proceeds from such sales are reinvested in
additional Properties. As of March 11, 1999, the Partnership has continued
receiving rental payments on the Properties that have not been rejected. While
Long John Silver's has not rejected or affirmed their remaining four leases,
there can be no assurance that some or all of the leases will not be rejected in
the future. The lost revenues resulting from the six leases that were rejected,
as described above, and the possible rejection of the remaining four leases
could have an adverse effect on the results of operations of the Partnership if
the Partnership is unable to re-lease these Properties in a timely manner. In
February 1999, the Partnership entered into a new lease for one of the two
Boston Market Properties with a new tenant. The lease terms for this Property
are substantially the same as the Partnership's other leases as described above.
The General Partners are currently seeking either new tenants or purchasers for
the remaining five Properties.
Major Tenants
During 1998, five lessees of the Partnership, Flagstar Enterprises,
Inc., 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 two Properties
owned with affiliates as tenants-in-common). As of December 31, 1998, Flagstar
Enterprises, Inc. 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
four restaurants (excluding four restaurants for which Long John Silver's
rejected the leases as a result of filing for bankruptcy as described above),
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, Flagstar Enterprises, Inc., Checkers Drive-In
Restaurants, Inc., Foodmaker, Inc., and Golden Corral Corporation each will
continue to contribute more than ten percent of the Partnership's total rental
income in 1999. In addition, 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 1998 (including the
Partnership's share of rental income from six Properties owned by a joint
venture and two Properties owned with affiliates as tenants-in-common). In 1999,
it is anticipated that Hardee's, Checkers Drive-In Restaurants, Golden Corral,
and Jack in the Box 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 if the Partnership is not able to re-lease the
Properties in a timely manner, as described above. 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.
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 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 16 percent interest in this
Property.
In June 1998, the Partnership entered into an agreement to hold a
Bennigan's Property as tenants-in-common with an affiliate of the General
Partners. The agreement provides for the Partnership and the affiliate to share
in the profits and losses of the Property in proportion to each co-venturer's
percentage interest. The Partnership owns a 15 percent interest in this
Property.
Certain Management Services
CNL Fund Advisors, Inc., an affiliate of the General Partners, provides
certain services relating to management of the Partnership and its Properties
pursuant to a management agreement with the Partnership. Under this agreement,
CNL Fund Advisors, Inc. is responsible for collecting rental payments,
inspecting the Properties and the tenants' books and records, assisting the
Partnership in responding to tenant inquiries and notices and providing
information to the Partnership about the status of the leases and the
Properties. CNL Fund Advisors, Inc. also assists the General Partners in
negotiating the leases. For these services, the Partnership has agreed to pay
CNL Fund Advisors, Inc. an annual fee of one percent of the sum of gross rental
revenues from Properties wholly owned by the Partnership plus the Partnership's
allocable share of gross revenues of joint ventures in which the Partnership is
a co-venturer, but not in excess of competitive fees for comparable services.
The management agreement continues until the Partnership no longer owns
an interest in any Properties unless terminated at an earlier date upon 60 days'
prior notice by either party.
Competition
The fast-food and family-style restaurant business is characterized by
intense competition. The restaurants on the Partnership's Properties compete
with independently owned restaurants, restaurants which are part of local or
regional chains and restaurants in other well-known national chains, including
those offering different types of food and service.
Employees
The Partnership has no employees. The officers of CNL Realty
Corporation and the officers and employees of CNL Fund Advisors, Inc. perform
certain services for the Partnership. In addition, the General Partners have
available to them the resources and expertise of the officers and employees of
CNL Group, Inc., a diversified real estate company, and its affiliates, who may
also perform certain services for the Partnership.
Item 2. Properties
As of December 31, 1998, the Partnership owned, either directly or
through joint venture arrangements, 50 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, 1998 (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. The initial
term of each lease is 20 years (expiring between 2013 and 2014) and the average
minimum base annual rent is approximately $73,800 (ranging from approximately
$62,900 to $87,800).
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 four Long John Silver's restaurants
(excluding four other Properties which were rejected by this tenant as described
above in Item 1. Business -- Leases) with an initial term of 20 years (expiring
in 2014) and the average minimum base annual rent is approximately $74,400
(ranging from approximately $60,400 to $92,900).
Foodmaker, Inc. leases four Jack in the Box restaurants. The 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).
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 $136,900
(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 March 11, 1999, 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. From inception through
December 31, 1998, the price paid for any Unit transferred pursuant to the Plan
was $9.50 per Unit. The price paid for any Unit transferred other than pursuant
to the Plan was subject to negotiation by the purchaser and the selling Limited
Partner. The Partnership will not redeem or repurchase Units.
<PAGE>
The following table reflects, for each calendar quarter, the high, low
and average sales prices for transfers of Units during 1998 and 1997 other than
pursuant to the Plan, net of commissions.
<TABLE>
<CAPTION>
<S> <C>
1998 (1) 1997 (1)
---------------------------------- ----------------------------------------
High Low Average High Low Average
-------- -------- ---------- ---------- ---------- ------------
First Quarter $ 9.50 $ 8.01 $ 8.44 $10.00 $ 8.30 $ 9.37
Second Quarter (2) (2) (2) 9.98 8.50 8.99
Third Quarter 9.00 6.10 8.03 10.00 8.07 8.91
Fourth Quarter 9.50 7.17 8.47 9.50 8.17 9.14
</TABLE>
(1) A total of 26,755 and 26,053 Units were transferred other than pursuant
to the Plan for the years ended December 31, 1998 and 1997.
(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.
For the years ended December 31, 1998 and 1997, the Partnership
declared cash distributions of $3,400,000 and $3,200,000, respectively, to the
Limited Partners. During the quarter ended March 31, 1998, the Partnership
declared a special distribution to the Limited Partners of $200,000 which
represented cumulative excess operating reserves. No amounts distributed to
partners for the years ended December 31, 1998 and 1997, are required to be or
have been treated by the Partnership as a return of capital for purposes of
calculating the Limited Partners' return on their adjusted capital
contributions. No distributions have been made to the General Partners to date.
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 1998 1997
-------------
------------ ------------
March 31 $1,000,000 $ 800,000
June 30 800,000 800,000
September 30 800,000 800,000
December 31 800,000 800,000
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>
<S> <C>
1998 1997 1996 1995 1994
-------------- -------------- ------------- -------------- -------------
Year ended December 31:
Revenues (1) $3,471,040 $3,908,014 $4,068,610 $3,914,985 $1,319,692
Net income (2) 2,642,497 3,434,905 3,585,059 3,372,468 1,185,918
Cash distributions declared (4) 3,400,000 3,200,000 3,280,000 2,900,001 1,185,946
Net income per Unit (2) (3) 0.65 0.85 0.89 0.83 0.41
Cash distributions declared
per Unit (3) 0.85 0.80 0.82 0.73 0.41
At December 31:
Total assets $36,359,054 $37,045,723 $36,936,678 $36,516,732 $37,058,475
Partners' capital $35,465,900 $36,223,403 $35,988,498 $35,683,439 $35,210,972
</TABLE>
(1) Revenues include equity in earnings of the joint venture and
adjustments to accrued rental income due to Long John Silver's, Inc.
filing for bankruptcy and rejecting four of the Partnership's leases.
(2) Net income for the year ended December 31, 1995, includes $71,023 from
loss on sale of land. Net income for the year ended December 31, 1998
includes $280,907 from provision for loss on land and buildings.
(3) Based on the weighted average number of Limited Partner Units
outstanding during the years ended December 31, 1998, 1997, 1996 and
1995, and the period March 24, 1994 through December 31, 1994.
(4) Distributions for the years ended December 31, 1998 and 1996, include a
special distribution to the Limited Partners of $200,000 and $80,000,
respectively, which represented cumulative excess operating reserves.
The above selected financial data should be read in conjunction with
the financial statements and related notes contained in Item 8 hereof.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The Partnership was organized on September 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 generally triple-net leases, with the lessees
responsible for all repairs and maintenance, property taxes, insurance and
utilities. As of December 31, 1998, the Partnership owned 50 Properties, either
directly or through joint venture arrangements.
Liquidity and Capital Resources
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 $3,216,728, $3,306,595 and $3,434,682 for the years ended
December 31, 1998, 1997 and 1996, respectively. The decrease in cash from
operations during 1998, as compared to 1997, and the decrease during 1997, as
compared to 1996, 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.
In January 1996, the Partnership invested 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, 1998, the Partnership owned a 16 percent interest in this
Property.
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, 1998, the Partnership had received approximately $52,000,
representing its pro-rata share of the uninvested net sales proceeds.
In June 1998, the Partnership invested in a Bennigan's Property located
in Fort Myers, Florida, with an affiliate of the General Partners as
tenants-in-common. In connection therewith, the Partnership and its affiliate
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, 1998, the Partnership owned a 15 percent interest in this
Property.
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, 1998,
the Partnership had $1,214,444 invested in such short-term investments as
compared to $1,614,708 at December 31, 1997. The decrease in cash and cash
equivalents during 1998, is primarily due to the fact that in June 1998 the
Partnership invested in a Bennigan's Property as tenants-in-common with an
affiliate of the General Partners and due to the fact that the Partnership
declared and paid a special distribution of cumulative excess operating reserves
to the Limited Partners of $200,000 during 1998. The funds remaining at December
31, 1998, after payment of distributions and other liabilities, will be used to
meet the Partnership's working capital and other needs.
During 1998, 1997 and 1996, the affiliates incurred on behalf of the
Partnership $98,978, $78,821 and $86,714, respectively, for certain operating
expenses. As of December 31, 1998 and 1997, the Partnership owed $23,337 and
$4,311, respectively, to related parties for such amounts, accounting and
administrative services and management fees. As of March 11, 1999, the
Partnership had reimbursed the affiliates all such amounts. Other liabilities,
including distributions payable, increased to $869,817 at December 31, 1998,
from $818,009 at December 31, 1997, primarily as a result of an increase in
rents paid in advance at December 31, 1998. The General Partners believe that
the Partnership has sufficient cash on hand to meet its current working capital
needs.
Based on cash from operations and for the years ended December 31, 1998
and 1996, cumulative operating reserves, the Partnership declared distributions
to the Limited Partners of $3,400,000, $3,200,000 and $3,280,000 for the years
ended December 31, 1998, 1997 and 1996, respectively. This represents
distributions of $0.85, $0.80, and $0.82 per Unit for the years ended December
31, 1998, 1997 and 1996, respectively. No amounts distributed or to be
distributed to the Limited Partners for the years ended December 31, 1998, 1997
or 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. 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.
The General Partners have the right, but not the obligation, to make
additional capital contributions if they deem it appropriate in connection with
the operations of the Partnership.
On March 11, 1999, the Partnership entered into an Agreement and Plan
of Merger with APF, pursuant to which the Partnership would be merged with and
into a subsidiary of APF. As consideration for the Merger, APF has agreed to
issue 3,733,901 APF Shares which, for the purposes of valuing the merger
consideration, have been valued by APF at $10.00 per APF Share, the price paid
by APF investors in APF's most recent public offering. In order to assist the
General Partners in evaluating the proposed merger consideration, the General
Partners retained Valuation Associates, a nationally recognized real estate
appraisal firm, to appraise the Partnership's restaurant property portfolio.
Based on Valuation Associates' appraisal, the Partnership's property portfolio
and other assets were valued on a going concern basis (meaning the Partnership
continues unchanged) at $36,726,950 as of December 31, 1998. Legg Mason Wood
Walker, Incorporated has rendered a fairness opinion that the APF Share
consideration, payable by APF, is fair to the Partnership from a financial point
of view. The APF Shares are expected to be listed for trading on the New York
Stock Exchange concurrently with the consummation of the Merger, and, therefore,
would be freely tradable at the option of the former Limited Partners. At a
special meeting of the partners that is expected to be held in the third quarter
of 1999, Limited Partners holding in excess of 50% of the Partnership's
outstanding limited partnership interests must approve the Merger prior to
consummation of the transaction. The General Partners intend to recommend that
the Limited Partners of the Partnership approve the Merger. In connection with
their recommendation, the General Partners will solicit the consent of the
Limited Partners at the special meeting.
Results of Operations
The Partnership owned and leased 42 wholly owned Properties during
1996, 1997, and 1998. In addition, 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. During 1998, the Partnership
owned and leased one additional Property with an affiliate as tenants-in-common.
As of December 31, 1998, the Partnership owned, either directly or through joint
venture arrangements, 50 Properties, which are generally 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. The majority of the leases provide for percentage rent
based on sales in excess of a specified amount. In addition, the majority of the
leases provide that, commencing in specified lease years (generally 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, 1998, 1997 and 1996, the
Partnership earned $3,130,205, $3,586,791, and $3,596,466, respectively, in
rental income from operating leases (net of adjustments to accrued rental
income) and earned income from direct financing leases from Properties wholly
owned by the Partnership. The decrease in rental and earned income during 1998,
as compared to 1997, is primarily due to a decrease in rental and earned income
of approximately $197,700 due to the fact that, in June 1998, Long John
Silver's, Inc., filed for bankruptcy and rejected the leases relating to four of
the eight Properties leased by Long John Silver's, Inc. As a result, this tenant
ceased making rental payments on the four rejected leases. The Partnership has
continued receiving rental payments relating to the leases not rejected by the
tenant. In conjunction with the four rejected leases, during the year ended
December 31, 1998, the Partnership wrote off approximately $250,600 of accrued
rental income (non-cash accounting adjustment relating to the straight-lining of
future scheduled rent increases over the lease term in accordance with generally
accepted accounting principles). The General Partners are currently seeking
either new tenants or purchasers for these Properties. The Partnership will not
recognize rental and earned income from these Properties until new tenants for
these Properties are located or until the Properties are sold and the proceeds
from such sales are reinvested in additional Properties. While Long John
Silver's, Inc. has not rejected or affirmed the remaining four leases, there can
be no assurance that some or all of the leases will not be rejected in the
future. The lost revenues resulting from the four leases that were rejected, as
described above, and the possible rejection of the remaining four leases could
have an adverse effect on the results of operations of the Partnership if the
Partnership is unable to re-lease these Properties in a timely manner.
During the years ended December 31, 1998, 1997 and 1996, the
Partnership also earned $41,463, $25,791, and $23,318, respectively, in
contingent rental income. Contingent rental income for the year ended December
31, 1998, as compared to 1997, increased primarily as a result of increased
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, 1998, 1997 and 1996, the
Partnership earned $236,553, $239,249 and $392,862, 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 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." The joint venture
reinvested the majority of the net sales proceeds in five Properties in October
1996 and one Property in January 1997, therefore, the sale of the two Properties
did not have a material adverse effect on operations.
During the year ended December 31, 1998, five lessees of the
Partnership, Flagstar Enterprises, Inc., 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 two Properties owned with affiliates as tenants-in-common).
As of December 31, 1998, Flagstar Enterprises, Inc. 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 four restaurants (excluding the four leases
rejected by the tenant as described above), 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, Flagstar Enterprises, Inc.,
Checkers Drive-In Restaurants, Foodmaker, Inc., and Golden Corral Corporation
each will continue to contribute more than ten percent of the Partnership's
total rental income in 1999. In addition, during the year ended December 31,
1998, five Restaurant Chains, Hardee's, Checkers Drive-In Restaurants, Long 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 two
Properties owned with affiliates as tenants-in-common). In 1999, it is
anticipated that Hardee's, Checker's Drive-In Restaurants, Golden Corral and
Jack in the Box 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 if the Partnership is not able to re-lease the
Properties in a timely manner.
Operating expenses, including depreciation and amortization expense,
were $547,636, $473,109, and $483,551 for the years ended December 31, 1998,
1997 and 1996, respectively. The increase in operating expenses during 1998, as
compared to 1997, is partially attributable to the fact that the Partnership
accrued insurance and real estate taxes as a result of Long John Silver's, Inc.
filing for bankruptcy and rejecting the leases relating to four Properties in
June 1998. In addition, the increase in operating expenses during the year ended
December 31, 1998, is partially attributable to an increase in depreciation
expense due to the fact that during the year ended December 31, 1998, the
Partnership reclassified these assets from net investment in direct financing
leases to land and buildings on operating leases. The Partnership will continue
to incur certain expenses, such as real estate taxes, insurance and maintenance
relating to these Properties with rejected leases until replacement tenants or
purchasers are located. The Partnership is currently seeking either replacement
tenants or purchasers for these Properties.
The increase in operating expenses for 1998, is also partially due to
the fact that the Partnership incurred $23,196 in transaction costs related to
the General Partners retaining financial and legal advisors to assist them in
evaluating and negotiating the proposed Merger with APF, as described above in
"Liquidity and Capital Resources." If the Limited Partners reject the Merger,
the Partnership will bear the portion of the transaction costs based upon the
percentage of "For" votes and the General Partners will bear the portion of such
transaction costs based upon the percentage of "Against" votes and abstentions.
The 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.
<PAGE>
During the year ended December 31, 1998, the Partnership established an
allowance for loss on land and buildings of $280,907 for financial reporting
purposes relating to two of the four Long John Silver's Properties whose leases
were rejected by the tenant, as described above. The loss represents the
difference between the carrying value of the Properties at December 31, 1998 and
the current estimated net realizable value for these Properties. No such
allowance was established during the years ended December 31, 1997 and 1996.
The Partnership's leases as of December 31, 1998, 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.
Year 2000
The Year 2000 problem is the result of information technology systems
and embedded systems (products which are made with microprocessor (computer)
chips such as HVAC systems, physical security systems and elevators) using a
two-digit format, as opposed to four digits, to indicate the year. Such
information technology and embedded systems may be unable to properly recognize
and process date-sensitive information beginning January 1, 2000.
The Partnership currently does not have any information technology
systems. Affiliates of the General Partners provide all services requiring the
use of information technology systems pursuant to a management agreement with
the Partnership. The maintenance of embedded systems, if any, at the
Partnership's Properties is the responsibility of the tenants of the Properties
in accordance with the terms of the Partnership's leases. The General Partners
and affiliates have established a team dedicated to reviewing the internal
information technology systems used in the operation of the Partnership, and the
information technology and embedded systems and the Year 2000 compliance plans
of the Partnership's tenants, significant suppliers, financial institutions and
transfer agent.
The information technology infrastructure of the affiliates of the
General Partners consists of a network of personal computers and servers that
were obtained from major suppliers. The affiliates utilize various
administrative and financial software applications on that infrastructure to
perform the business functions of the Partnership. The inability of the General
Partners and affiliates to identify and timely correct material Year 2000
deficiencies in the software and/or infrastructure could result in an
interruption in, or failure of, certain of the Partnership's business activities
or operations. Accordingly, the General Partners and affiliates have requested
and are evaluating documentation from the suppliers of the software and
infrastructure of the affiliates regarding the Year 2000 compliance of their
products that are used in the business activities or operations of the
Partnership. The General Partners and affiliates have not yet received
sufficient certifications to be assured that the suppliers have fully considered
and mitigated any potential material impact of the Year 2000 deficiencies. The
costs expected to be incurred by the General Partners and affiliates to become
Year 2000 compliant will be incurred by the General Partners and affiliates;
therefore, these costs will have no impact on the Partnership's financial
position or results of operations.
The Partnership has material third party relationships with its
tenants, financial institutions and transfer agent. The Partnership depends on
its tenants for rents and cash flows, its financial institutions for
availability of cash and its transfer agent to maintain and track investor
information. If any of these third parties are unable to meet their obligations
to the Partnership because of the Year 2000 deficiencies, such a failure may
have a material impact on the Partnership. Accordingly, the General Partners
have requested and are evaluating documentation from the Partnership's tenants,
financial institutions, and transfer agent relating to their Year 2000
compliance plans. The General Partners have not yet received sufficient
certifications to be assured that the tenants, financial institutions, and
transfer agent have fully considered and mitigated any potential material impact
of the Year 2000 deficiencies. Therefore, the General Partners do not, at this
time, know of the potential costs to the Partnership of any adverse impact or
effect of any Year 2000 deficiencies by these third parties.
The General Partners currently expect that all year 2000 compliance
testing and any necessary remedial measures on the information technology
systems used in the business activities and operations of the Partnership will
be completed prior to June 30, 1999. Based on the progress the General Partners
and affiliates have made in identifying and addressing the Partnership's Year
2000 issues and the plan and timeline to complete the compliance program, the
General Partners do not foresee significant risks associated with the
Partnership's Year 2000 compliance at this time. Because the General Partners
and affiliates are still evaluating the status of the information technology
systems used in business activities and operations of the Partnership and the
systems of the third parties with which the Partnership conducts its business,
the General Partners have not yet developed a comprehensive contingency plan and
are unable to identify "the most reasonably likely worst case scenario" at this
time. If the General Partners identify significant risks related to the
Partnership's Year 2000 compliance or if the Partnership's Year 2000 compliance
program's progress deviates substantially from the anticipated timeline, the
General Partners will develop appropriate contingency plans.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
Item 8. Financial Statements and Supplementary Data
<PAGE>
CNL INCOME FUND XV, LTD.
(A Florida Limited Partnership)
CONTENTS
Page
----
Report of Independent Accountants
Financial Statements:
Balance Sheets
Statements of Income
Statements of Partners' Capital
Statements of Cash Flows
Notes to Financial Statements
<PAGE>
Report of Independent Accountants
To the Partners
CNL Income Fund XV, Ltd.
In our opinion, the financial statements listed in the index appearing under
item 14(a)(1) present fairly, in all material respects, the financial position
of CNL Income Fund XV, Ltd. (a Florida limited partnership) at December 31, 1998
and 1997, and the results of its operations and its cash flows for each of the
three years in the period ended December 31, 1998 in conformity with generally
accepted accounting principles. In addition, in our opinion, the financial
statement schedule listed in the index appearing under item 14(a)(2) presents
fairly, in all material respects, the information set forth therein when read in
conjunction with the related financial statements. These financial statements
and the financial statement schedule are the responsibility of the Partnership's
management; our responsibility is to express an opinion on these financial
statements and the financial statement schedule based on our audits. We
conducted our audits of these statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
Orlando, Florida
January 27, 1999, except for the second paragraph of Note 10
for which the date is March 11, 1999.
<PAGE>
<TABLE>
<CAPTION>
CNL INCOME FUND XV, LTD.
(A Florida Limited Partnership)
BALANCE SHEETS
--------------
<S> <C>
December 31,
1998 1997
----------------- -----------------
ASSETS
Land and buildings on operating leases, less
accumulated depreciation and allowance
for loss on land and building $23,173,909 $22,145,138
Net investment in direct financing leases 7,589,694 9,264,307
Investment in joint ventures 2,743,450 2,561,816
Cash and cash equivalents 1,214,444 1,614,708
Receivables, less allowance for doubtful
accounts of $849 in 1998 62,465 26,888
Prepaid expenses 9,627 7,633
Organization costs, less accumulated
amortization of $9,549 and $7,548 451 2,452
Accrued rental income 1,565,014 1,422,781
----------------- -----------------
$36,359,054 $37,045,723
================= =================
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 592 $ 6,991
Accrued and escrowed real estate
taxes payable 16,019 6,158
Distributions payable 800,000 800,000
Due to related parties 23,337 4,311
Rents paid in advance 53,206 4,860
----------------- -----------------
Total liabilities 893,154 822,320
Partners' capital 35,465,900 36,223,403
----------------- -----------------
$36,359,054 $37,045,723
================= =================
See accompanying notes to financial statements.
<PAGE>
CNL INCOME FUND XV, LTD.
(A Florida Limited Partnership)
STATEMENTS OF INCOME
--------------------
Year Ended December 31,
1998 1997 1996
-------------- -------------- --------------
Revenues:
Rental income from operating leases $2,443,550 $2,527,261 $2,527,261
Adjustments to accrued rental income (250,631 ) -- --
Earned income from direct
financing leases 937,286 1,059,530 1,069,205
Contingent rental income 41,463 25,791 23,318
Interest and other income 62,819 56,183 55,964
-------------- -------------- --------------
3,234,487 3,668,765 3,675,748
-------------- -------------- --------------
Expenses:
General operating and administrative 137,794 135,714 149,388
Professional services 26,208 24,526 19,881
Management fees to related parties 33,990 35,321 35,126
Real estate taxes 16,797 -- --
State and other taxes 27,763 29,200 30,924
Depreciation and amortization 281,888 248,348 248,232
Transaction costs 23,196 -- --
-------------- -------------- --------------
547,636 473,109 483,551
-------------- -------------- --------------
Income Before Equity in Earnings
of Joint Ventures and Provision for
Loss on Land and Buildings 2,686,851 3,195,656 3,192,197
Equity in Earnings of Joint Ventures 236,553 239,249 392,862
Provision for Loss on Land and Buildings (280,907 ) -- --
-------------- -------------- --------------
Net Income $2,642,497 $3,434,905 $3,585,059
============== ============== ==============
Allocation of Net Income:
General partners $ 28,218 $ 34,349 $ 35,851
Limited partners 2,614,279 3,400,556 3,549,208
-------------- -------------- --------------
$2,642,497 $3,434,905 $3,585,059
============== ============== ==============
Net Income Per Limited Partner Unit $ 0.65 $ 0.85 $ 0.89
============== ============== ==============
Weighted Average Number of Limited
Partner Units Outstanding 4,000,000 4,000,000 4,000,000
============== ============== ==============
See accompanying notes to financial statements.
<PAGE>
CNL INCOME FUND XV, LTD.
(A Florida Limited Partnership)
STATEMENTS OF PARTNERS' CAPITAL
Years Ended December 31, 1998, 1997 and 1996
General Partners Limited Partners
-------------------------- ------------------------------------------------------------------------
Accumulated Accumulated Syndication
Contributions Earnings Contributions Distributions Earnings Costs Total
------------- ----------- ------------- --------------- ------------ ------------ --------------
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
Distributions to limited
partners ($0.85 per
limited partner unit) -- -- -- (3,400,000 ) -- -- (3,400,000 )
Net income -- 28,218 -- -- 2,614,279 -- 2,642,497
---------- ---------- ------------- ------------ ----------- ------------ ---------------
Balance, December 31, 1998 $ 1,000 $ 144,629 $ 40,000,000 $(13,965,947 ) $14,076,218 $ (4,790,000) $ 35,465,900
========== ========== ============= ============ =========== ============ ===============
See accompanying notes to financial statements.
<PAGE>
CNL INCOME FUND XV, LTD.
(A Florida Limited Partnership)
STATEMENTS OF CASH FLOWS
Year Ended December 31,
1998 1997 1996
-------------- ------------- --------------
Increase (Decrease) in Cash and Cash Equivalents:
Cash Flows from Operating Activities:
Cash received from tenants $3,143,119 $3,228,741 $3,378,973
Distributions from joint ventures 271,075 249,318 259,407
Cash paid for expenses (252,042 ) (218,106 ) (246,748 )
Interest received 54,576 46,642 43,050
-------------- ------------- --------------
Net cash provided by operating activities 3,216,728 3,306,595 3,434,682
-------------- ------------- --------------
Cash Flows from Investing Activities:
Investment in joint ventures (216,992 ) -- (129,939 )
Return of capital from joint venture -- 51,950 --
-------------- ------------- --------------
Net cash provided by (used in) investing
activities (216,992 ) 51,950 (129,939 )
-------------- ------------- --------------
Cash Flows from Financing Activities:
Distributions to limited partners (3,400,000 ) (3,280,000 ) (3,200,000 )
-------------- ------------- --------------
Net cash used in financing activities (3,400,000 ) (3,280,000 ) (3,200,000 )
-------------- ------------- --------------
Net Increase (Decrease) in Cash and Cash Equivalents (400,264 ) 78,545 104,743
Cash and Cash Equivalents at Beginning of Year 1,614,708 1,536,163 1,431,420
-------------- ------------- --------------
Cash and Cash Equivalents at End of Year $1,214,444 $1,614,708 $1,536,163
============== ============= ==============
See accompanying notes to financial statements.
<PAGE>
CNL INCOME FUND XV, LTD.
(A Florida Limited Partnership)
STATEMENTS OF CASH FLOWS - CONTINUED
Year Ended December 31,
1998 1997 1996
--------------- --------------- ----------------
Reconciliation of Net Income to Net Cash Provided by
Operating Activities:
Net income $ 2,642,497 $ 3,434,905 $ 3,585,059
--------------- --------------- ----------------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 279,051 245,563 245,563
Amortization 2,837 2,785 2,669
Equity in earnings of joint ventures, net
of distributions 34,522 10,069 (133,455 )
Provision for loss on land and buildings 280,907 -- --
Decrease (increase) in receivables (33,427 ) 3,288 58,013
Decrease in net investment in direct
financing leases 85,884 87,508 77,834
Increase in prepaid expenses (1,994 ) (584 ) (4,234 )
Increase in accrued rental income (142,233 ) (431,079 ) (431,654 )
Increase in accounts payable and accrued
expenses 3,462 1,515 1,972
Increase (decrease) in due to related
parties 16,876 2,956 (6,880 )
Increase (decrease) in rents paid in
advance 48,346 (50,331 ) 39,795
--------------- --------------- ----------------
Total adjustments 574,231 (128,310 ) (150,377 )
--------------- --------------- ----------------
Net Cash Provided by Operating Activities $ 3,216,728 $ 3,306,595 $ 3,434,682
=============== =============== ================
Supplemental Schedule of Non-Cash Financing
Activities:
Distributions declared and unpaid at December 31 $ 800,000 $ 800,000 $ 880,000
=============== =============== ================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
CNL INCOME FUND XV, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
Years Ended December 31, 1998, 1997, and 1996
1. Significant Accounting Policies:
Organization and Nature of Business - CNL Income Fund 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.
<PAGE>
CNL INCOME FUND XV, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1998, 1997, and 1996
1. Significant Accounting Policies - Continued:
Accrued rental income represents the aggregate amount of
income recognized on a straight-line basis in excess of
scheduled rental payments to date. Whenever a tenant defaults
under the terms of its lease, or events or changes in
circumstance indicate that the tenant will not lease the
property through the end of the lease term, the Partnership
either reserves or writes-off the cumulative accrued rental
income balance.
When the properties are sold, the related cost and accumulated
depreciation for operating leases and the net investment for direct
financing leases, plus any accrued rental income, are removed from the
accounts and gains or losses from sales are reflected in income. The
general partners of the Partnership review properties for impairment
whenever events or changes in circumstances indicate that the carrying
amount of the assets may not be recoverable through operations. The
general partners determine whether an impairment in value has occurred
by comparing the estimated future undiscounted cash flows, including
the residual value of the property, with the carrying cost of the
individual property. If an impairment is indicated, the assets are
adjusted to their fair value. Although the general partners have made
their best estimate of these factors based on current conditions, it is
reasonably possible that change could occur in the near term which
could adversely affect the general partners' best estimate of net cash
flows expected to be generated from its properties and the need for
asset impairment write downs.
When the collection of amounts recorded as rental or other income is
considered to be doubtful, an adjustment is made to increase the
allowance for doubtful accounts, which is netted against receivables,
and to decrease rental or other income or increase bad debt expense for
the current period, although the Partnership continues to pursue
collection of such amounts. If amounts are subsequently determined to
be uncollectible, the corresponding receivable and allowance for
doubtful accounts are decreased accordingly.
Investment in Joint Ventures - The Partnership accounts for its
interests in Wood-Ridge Real Estate Joint Venture and properties in
Clinton, North Carolina and Fort Myers, Florida, 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.
<PAGE>
CNL INCOME FUND XV, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1998, 1997, and 1996
1. Significant Accounting Policies - Continued:
Cash accounts maintained on behalf of the Partnership in demand
deposits at commercial banks and money market funds may exceed
federally insured levels; however, the Partnership has not experienced
any losses in such accounts. The Partnership limits investment of
temporary cash investments to financial 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 were amortized over five years
using the straight-line method.
Income Taxes - Under Section 701 of the Internal Revenue Code, all
income, expenses and tax credit items flow through to the partners for
tax purposes. Therefore, no provision for federal income taxes is
provided in the accompanying financial statements. The Partnership is
subject to certain state taxes on its income and property.
Additionally, for tax purposes, syndication costs are included in
Partnership equity and in the basis of each partner's investment. For
financial reporting purposes, syndication costs are netted against
partners' capital and represent a reduction of Partnership equity and a
reduction in the basis of each partner's investment.
Use of Estimates - The general partners of the Partnership have made a
number of estimates and assumptions relating to the reporting of assets
and liabilities and the disclosure of contingent assets and liabilities
to prepare these financial statements in conformity with generally
accepted accounting principles. The more significant areas requiring
the use of management estimates relate to the allowance for doubtful
accounts and future cash flows associated with long-lived assets.
Actual results could differ from those estimates.
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 are 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, generally the tenant pays all
property taxes and assessments, fully maintains the interior and
<PAGE>
CNL INCOME FUND XV, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1998, 1997, and 1996
2. Leases - Continued:
exterior of the building and carries insurance coverage for public
liability, property damage, property damage, fire and extended
coverage. The lease options generally allow tenants to renew the leases
for two to five successive five-year periods subject to the same terms
and conditions as the initial lease. Most leases also allow the tenant
to purchase the property at fair market value after a specified portion
of the lease has elapsed.
3. Land and Buildings on Operating Leases:
Land and buildings on operating leases consisted of the following at
December 31:
1998 1997
------------- -------------
Land $15,579,852 $15,579,852
Buildings 8,955,616 7,366,887
------------- -------------
24,535,468 22,946,739
Less accumulated depreciation (1,080,652 ) (801,601 )
------------- -------------
23,454,816 22,145,138
Less allowance for loss on
land and buildings (280,907 ) --
------------- -------------
$23,173,909 $22,145,138
============= =============
During the year ended December 31, 1998, the Partnership established an
allowance for loss on land and buildings of $280,907 for financial
reporting purposes relating to two of the four Long John Silver's
properties whose leases were rejected by the tenant as a result of the
tenant filing for bankruptcy. The loss represents the difference
between the carrying value of the properties at December 31, 1998 and
the current estimated net realizable value for these properties.
Generally, the leases provide for escalating guaranteed minimum rents
throughout the lease term. Income from these scheduled rent increases
is recognized on a straight-line basis over the terms of the leases.
For the years ended December 31, 1998, 1997 and 1996, the Partnership
recognized $142,233 (net of $250,631 in write-offs), $431,079, and
$431,654, respectively, of such rental income.
<PAGE>
CNL INCOME FUND XV, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1998, 1997, and 1996
3. Land and Buildings on Operating Leases - Continued:
The following is a schedule of the future minimum lease payments to be
received on noncancellable operating leases at December 31, 1998:
1999 $2,079,263
2000 2,205,272
2001 2,208,745
2002 2,239,958
2003 2,255,872
Thereafter 24,476,132
------------------
$35,465,242
==================
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:
1998 1997
--------------- -------------
Minimum lease payments receivable $15,275,632 $19,905,444
Estimated residual values 2,460,656 2,873,859
Less unearned income (10,146,594 ) (13,514,996 )
--------------- -------------
Net investment in direct financing
leases $7,589,694 $9,264,307
=============== =============
<PAGE>
CNL INCOME FUND XV, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1998, 1997, and 1996
4. Net Investment in Direct Financing Leases - Continued:
The following is a schedule of future minimum lease payments to be
received on direct financing leases at December 31, 1998:
1999 $ 922,497
2000 925,241
2001 930,728
2002 953,085
2003 958,440
Thereafter 10,585,641
------------------
$15,275,632
==================
The above table does not include future minimum lease payments for
renewal periods or for contingent rental payments that may become due
in future periods (see Note 3).
During the year ended December 31, 1998, four of the eight leases with
Long John Silver's, Inc. were rejected in connection with the tenant
filing for bankruptcy. As a result, the Partnership reclassified these
assets from net investment in direct financing leases to land and
buildings on operating leases. In accordance with the Statement of
Financial Accounting Standards #13, "Accounting for Leases," the
Partnership recorded the reclassified assets at the lower of original
cost, present fair value, or present carrying amount. No losses on the
termination of direct financing leases were recorded for financial
reporting purposes.
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. The Partnership also has a 16 percent interest
in a Property in Clinton, North Carolina, with affiliates of the
Partnership that has the same general partners, as tenants-in-common.
The Partnership accounts for its investment in this property using the
equity method since the Partnership shares control with affiliates, and
amounts relating to its investment are included in investment in joint
ventures.
<PAGE>
CNL INCOME FUND XV, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1998, 1997, and 1996
5. Investment in Joint Ventures - Continued:
In January 1997, Wood-Ridge Real Estate Joint Venture reinvested
$502,598, of the net sales proceeds from the sale of two properties
during 1996 in one property. As of December 31, 1998, the Partnership
had received approximately $52,000, representing its pro-rata share of
the uninvested net sales proceeds. As of December 31, 1998, the
Partnership owned a 50 percent interest in the profits and losses of
the joint venture.
In June 1998, the Partnership acquired a property in Fort Myers,
Florida, with an affiliate of the general partners as
tenants-in-common. In connection therewith, the Partnership contributed
an amount to acquire a 15 percent 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.
Wood-Ridge Real Estate Joint Venture owns and leases six properties to
operators of national fast-food or family-style restaurants. The
Partnership and affiliates, as tenants-in-common in two separate
tenancy-in-common arrangements, each own and lease one property to an
operator 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:
1998 1997
------------ ------------
Land and buildings on operating leases,
less accumulated depreciation $6,063,237 $5,563,722
Net investment in direct financing lease 826,780 --
Cash 87,245 10,890
Receivables 1,677 5,923
Accrued rental income 96,768 74,001
Other assets 857 1,078
Liabilities 69,285 18,195
Partners' capital 7,007,279 5,637,419
Revenues 705,002 650,354
Net income 579,480 522,611
The Partnership recognized income totalling $236,553, $239,249 and
$392,862 for the years ended December 31, 1998, 1997 and 1996,
respectively, from these entities.
<PAGE>
CNL INCOME FUND XV, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1998, 1997, and 1996
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").
Generally, net sales proceeds from the sales of properties not in
liquidation of the Partnership, to the extent distributed, will be
distributed first to the limited partners in an amount sufficient to
provide them with their Limited Partners' 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 a sale of a property not in
liquidation of the Partnership is, in general, allocated in the same
manner as net sales proceeds are distributable. Any loss from the sale
of a property is, in general, allocated first, on a pro rata basis, to
partners with positive balances in their capital accounts, and
thereafter, 95 percent to the limited partners and five percent to the
general partners.
Generally, net sales proceeds from a liquidating sale of properties,
will be used in the following order: i) first to pay and discharge all
of the Partnership's liabilities to creditors, ii) second, to establish
reserves that may be deemed necessary for any anticipated or unforeseen
liabilities or obligations of the Partnership, iii) third, to pay all
of the Partnership's liabilities, if any, to the general and limited
partners, iv) fourth, after allocations of net income, gains and/or
losses, to distribute to the partners with positive capital accounts
balances, in proportion to such balances, up to amounts sufficient to
reduce such positive balances to zero, and v) thereafter, any funds
remaining shall then be distributed 95 percent to the limited partners
and five percent to the general partners.
During the years ended December 31, 1998, 1997 and 1996, the
Partnership declared distributions to the limited partners of
$3,400,000, $3,200,000 and $3,280,000, respectively. No distributions
have been made to the general partners to date.
<PAGE>
CNL INCOME FUND XV, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1998, 1997 and 1996
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>
1998 1997 1996
------------ ------------ ------------
<S> <C>
Net income for financial reporting
purposes $2,642,497 $3,434,905 $3,585,059
Depreciation for tax reporting
purposes in excess of depreciation
for financial reporting purposes (126,518 ) (160,007 ) (160,007 )
Direct financing leases recorded as
operating leases for tax reporting
purposes 85,884 87,508 77,834
Allowance for loss on land and
buildings 280,907 -- --
Equity in earnings of joint ventures for
tax reporting purposes in excess of
(less than) equity in earnings of joint
ventures for financial reporting purposes 33,872 23,823 (158,836 )
Accrued rental income (142,233 ) (431,079 ) (431,654 )
Rents paid in advance 48,346 (50,331 ) 39,795
Capitalization of transaction costs
for tax reporting purposes 23,196 -- --
Other 1,686 (670 ) 2,127
------------ ------------ ------------
Net income for federal income tax
purposes $2,847,637 $2,904,149 $2,954,318
============ ============ ============
</TABLE>
<PAGE>
CNL INCOME FUND XV, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1998, 1997, and 1996
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 majority stockholder
of CNL Fund Advisors, Inc. The other individual general partner, Robert
A. Bourne, serves as treasurer, director and vice chairman of the board
of CNL Fund Advisors, Inc. During the years ended December 31, 1998,
1997, and 1996, CNL Fund Advisors, Inc. (hereinafter referred to as the
"Affiliate") performed certain services for the Partnership, as
described below.
During the years ended December 31, 1998, 1997, and 1996, the Affiliate
acted as manager of the Partnership's properties pursuant to a
management agreement with the Partnership. In connection therewith, the
Partnership agreed to pay the Affiliate a management fee of one percent
of the sum of gross revenues from properties wholly owned by the
Partnership and the Partnership's allocable share of gross revenues
from joint ventures. The management fee, which will not exceed fees
which are competitive for similar services in the same geographic area,
may or may not be taken, in whole or in part as to any year, in the
sole discretion of the Affiliate. All or any portion of the management
fee not taken as to any fiscal year shall be deferred without interest
and may be taken in such other fiscal year as the Affiliate shall
determine. The Partnership incurred management fees of $33,990, $35,321
and $35,126 for the years ended December 31, 1998, 1997 and 1996,
respectively.
The Affiliate is also entitled to receive a deferred, subordinated real
estate disposition fee, payable upon the sale of one or more properties
based on the lesser of one-half of a competitive real estate commission
or three percent of the sales price if the Affiliate provides a
substantial amount of services in connection with the sale. However, if
the net sales proceeds are reinvested in a replacement property, no
such real estate disposition fees will be incurred until such
replacement property is sold and the net sales proceeds are
distributed. The payment of the real estate disposition fee is
subordinated to receipt by the limited partners of their aggregate 8%
Preferred Return, plus their invested capital contributions. No
deferred, subordinated real estate disposition fees have been incurred
since inception.
During the years ended December 31, 1998, 1997 and 1996, the Affiliate
of the general partners provided accounting and administrative services
to the Partnership on a day-to-day basis. The Partnership incurred
$92,573, $78,051 and $87,265 for the years ended December 31, 1998,
1997 and 1996, respectively, for such services.
The due to related parties at December 31, 1998 and 1997, totalled
$23,337 and $4,311, respectively.
<PAGE>
CNL INCOME FUND XV, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1998, 1997 and 1996
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 each of the years ended December 31:
<TABLE>
<CAPTION>
1998 1997 1996
------------- ------------- --------------
<S> <C>
Checkers Drive-In Restaurants, Inc. $719,308 $716,905 $723,558
Golden Corral Corporation 595,343 582,600 531,775
Flagstar Enterprises, Inc. (and
Quincy's Restaurants, Inc. for the
years ended December 31, 1997 541,527 635,413 638,042
and 1996)
Long John Silver's, Inc. 510,187 710,325 714,804
Foodmaker, Inc. 417,426 417,426 417,426
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 each of the years ended December 31:
1998 1997 1996
------------- ------------- -------------
Checkers Drive-In Restaurants $719,308 $716,905 $723,558
Golden Corral Family Steakhouse
Restaurants 595,343 582,600 531,775
Long John Silver's 573,104 773,265 777,743
Hardee's 541,527 543,889 546,037
Jack in the Box 417,426 417,426 417,426
</TABLE>
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 if the Partnership is not able to re-lease the
properties in a timely manner.
<PAGE>
CNL INCOME FUND XV, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1998, 1997 and 1996
9. Concentration of Credit Risk - Continued:
In June 1998, the tenant of eight of the Long John Silver's Properties
filed for bankruptcy and rejected the leases relating to four
Properties. The rental income relating to these Properties will
terminate until new tenants or buyers for the Properties are located.
While Long John Silver's, Inc. has not rejected or affirmed the
remaining four leases, there can be no assurance that some of all of
the leases will not be rejected in the future. The lost revenues
resulting from the four leases that were rejected, as described above,
and the possible rejection of the remaining four leases could have an
adverse effect on the results of operations of the Partnership if the
Partnership is unable to re-lease these Properties in a timely manner.
10. Subsequent Events:
In January 1999, a Boston Market tenant rejected its lease and ceased
making rental payments related to this lease.
On March 11, 1999, the Partnership entered into an Agreement and Plan
of Merger with CNL American Properties Fund, Inc. ("APF"), pursuant to
which the Partnership would be merged with and into a subsidiary of APF
(the "Merger"). As consideration for the Merger, APF has agreed to
issue 3,733,901 shares of its common stock, par value $0.01 per share
(the "APF Shares") which, for the purposes of valuing the merger
consideration, have been valued by APF at $10.00 per APF Share, the
price paid by APF investors in APF's most recent public offering. In
order to assist the general partners in evaluating the proposed merger
consideration, the general partners retained Valuation Associates, a
nationally recognized real estate appraisal firm, to appraise the
Partnership's restaurant property portfolio. Based on Valuation
Associates' appraisal, the Partnership's property portfolio and other
assets were valued on a going concern basis (meaning the Partnership
continues unchanged) at $36,726,950 as of December 31, 1998. Legg Mason
Wood Walker, Incorporated has rendered a fairness opinion that the APF
Share consideration, payable by APF, is fair to the Partnership from a
financial point of view. The APF Shares are expected to be listed for
trading on the New York Stock Exchange concurrently with the
consummation of the Merger, and, therefore, would be freely tradable at
the option of the former limited partners. At a special meeting of the
partners that is expected to be held in the third quarter of 1999,
limited partners holding in excess of 50% of the Partnership's
outstanding limited partnership interests must approve the
<PAGE>
CNL INCOME FUND XV, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1998, 1997 and 1996
10. Subsequent Events - Continued:
Merger prior to consummation of the transaction. The general partners
intend to recommend that the limited partners of the Partnership
approve the Merger. In connection with their recommendation, the
general partners will solicit the consent of the limited partners at
the special meeting. If the limited partners reject the Merger, the
Partnership will bear the portion of the transaction costs based upon
the percentage of "For" votes and the general partners will bear the
portion of such transaction costs based upon the percentage of
"Against" votes and abstentions.
<PAGE>
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
The General Partners of the Registrant are James M. Seneff, Jr., Robert
A. Bourne and CNL Realty Corporation, a Florida corporation. The General
Partners manage and control the Partnership's affairs and have general
responsibility and the ultimate authority in all matters affecting the
Partnership's business. The Partnership has available to it the services,
personnel and experience of CNL Fund Advisors, Inc., CNL Group, Inc. and their
affiliates, all of which are affiliates of the General Partners.
James M. Seneff, Jr., age 52, is a principal stockholder of CNL Group,
Inc., a diversified real estate company, and has served as its Chairman of the
Board of Directors, a director and Chief Executive Officer since its formation
in 1980. Mr. Seneff has been Chairman of the Board of Directors, director, and
Chief Executive Officer of CNL Securities Corp. since its formation in 1979. Mr.
Seneff also has held the position of Chairman of the Board of Directors, Chief
Executive Officer, President and director of CNL Management Company, a
registered investment advisor, since its formation in 1976, has served as Chief
Executive Officer, Chairman of the Board and a director of CNL Investment
Company, has served as Chief Executive Officer, a director and Chairman of the
Board of Directors of Commercial Net Lease Realty, Inc., a publicly-traded REIT,
listed on the NYSE, since 1992, served as Chief Executive Officer, a director
and Chairman of the Board of Directors of CNL Realty Advisors, Inc. from its
inception in May 1992 through December 1997, at which time such company merged
with Commercial Net Lease Realty, Inc., and has held the position of Chief
Executive Officer, Chairman of the Board and a director of CNL Institutional
Advisors, Inc., a registered investment advisor, since its inception in December
1990. Mr. Seneff has served as Chairman of the Board of Directors of CNL
American Properties Fund, Inc. since December 1994 and as a director and Chief
Executive Officer since May 1994. Mr. Seneff has served as Chairman of the
Board, Chief Executive Officer and a director of CNL Fund Advisors, Inc. since
March 1994. Mr. Seneff has served as Chairman of the Board, Chief Executive
Officer and a director of CNL Hospitality Properties, Inc. since June 1996 and
of CNL Hospitality Advisors, Inc. since January 1997. Mr. Seneff has also served
as Chairman of the Board, Chief Executive Officer and a director of CNL Health
Care Properties, Inc. since December 1997 and CNL Health Care Advisors, Inc.
since July 1997. Mr. Seneff previously served on the Florida State Commission on
Ethics and is a former member and past Chairman of the State of Florida
Investment Advisory Council, which advises the Florida Board of Administration
investments for various Florida employee retirement funds. The Florida Board of
Administration, Florida's principal investment advisory and money management
agency, oversees the investment of more then $60 billion of retirement funds.
Mr. Seneff has served as a member of the board of directors of First Union
National Bank of Florida since May 1998 and has served as a member of the
Orlando Advisory Board of First Union National Bank of Florida since March 1994.
Since 1971, Mr. Seneff has been active in the acquisition, development, and
management of real estate projects and, directly or through an affiliated
entity, has served as a general partner or joint venturer in over 100 real
estate ventures involved in the financing, acquisition, construction, and rental
of restaurants, office buildings, apartment complexes, hotels, and other real
estate. Included in these real estate ventures are approximately 65 privately
offered real estate limited partnerships in which Mr. Seneff, directly or
through an affiliated entity, serves or has served as a general partner. Also
included are CNL Income Fund, Ltd., CNL Income Fund II, Ltd., CNL Income Fund
III, Ltd., CNL Income Fund IV, Ltd., CNL Income Fund V, Ltd., CNL Income Fund
VI, Ltd., CNL Income Fund VII, Ltd., CNL Income Fund VIII, Ltd., CNL Income Fund
IX, Ltd., CNL Income Fund X, Ltd., CNL Income Fund XI, Ltd., CNL Income Fund
XII, Ltd., CNL Income Fund XIII, Ltd., CNL Income Fund 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.
Robert A. Bourne, age 51, is President and Treasurer of CNL Group,
Inc., President, Treasurer, a director, and a registered principal of CNL
Securities Corp., President, Treasurer, and a director of CNL Investment
Company, and Chief Investment Officer, a director and Treasurer of CNL
Institutional Advisors, Inc., a registered investment advisor. Mr. Bourne served
as President of CNL Institutional Advisor, Inc. from the date of its inception
through July 1997. Mr. Bourne served as President of Commercial Net Lease
Realty, Inc. from July 1992 through February 1996, served as Secretary and
Treasurer from February 1996 through December 1997, and has served as a director
since July 1992 and as Vice Chairman of the Board of Directors since February
1996. In addition, Mr. Bourne served as President of CNL Realty Advisors, Inc.
from May 1992 through February 1996, served as Treasurer from February 1996
through December 1997, served as a director from May 1992 through December 31,
1997 and served as Vice Chairman from February 1996 through December 1997, at
which time such company merged with Commercial Net Lease Realty, Inc. Mr. Bourne
has served as a Vice Chairman of the Board of Directors and Treasurer of CNL
American Properties Fund, Inc. since February 1999, has served as a director
since May 1994 and previously served as President from May 1994 through February
1999. Mr. Bourne has served as a director of CNL Fund Advisors, Inc. since March
1994, has served as Treasurer and Vice Chairman of the Board of Directors since
September 1997, and previously served as President from March 1994 through
September 1997. Mr. Bourne has served as President and a director of CNL
Hospitality Properties, Inc. since June 1996 and of CNL Hospitality Advisors,
Inc. since January 1997. Mr. Bourne has served as President and director of CNL
Health Care Properties, Inc. since December 1997 and CNL Health Care Advisors,
Inc. since July 1997. Mr. Bourne, who joined CNL Securities Corp. in 1979, has
participated as a general partner or joint venturer in over 100 real estate
ventures involved in the financing, acquisition, construction, and rental of
restaurants, office buildings, apartment complexes, hotels, and other real
estate. Included in these real estate ventures are approximately 64 privately
offered real estate limited partnerships in which Mr. Bourne, directly or
through an affiliated entity, serves or has served as a general partner. Also
included are the CNL Income Fund Partnerships, public real estate limited
partnerships with investment objectives similar to those of the Partnership, in
which Mr. Bourne serves as a general partner. Mr. Bourne formerly was a
certified public accountant with Coopers & Lybrand and a partner in the firm of
Bourne & Rose, P.A. Mr. Bourne received a B.A. in Accounting, with honors, from
Florida State University in 1970.
CNL Realty Corporation is a corporation organized on November 26, 1985,
under the laws of the State of Florida. Its sole directors and shareholders are
James M. Seneff, Jr. and Robert A. Bourne, the individual General Partners. CNL
Realty Corporation was organized to serve as the corporate general partner of
real estate limited partnerships, such as the Partnership, organized by one or
both of the individual General Partners. CNL Realty Corporation currently serves
as the corporate general partner of the CNL Income Fund Partnerships.
CNL Fund Advisors, Inc. provides certain management services in
connection with the Partnership and its Properties. CNL Fund Advisors, Inc. is a
corporation organized in 1994 under the laws of the State of Florida, and its
principal office is located at 400 East South Street, Orlando, Florida 32801.
CNL Fund Advisors, Inc. is a majority owned subsidiary of CNL Group, Inc., a
diversified real estate company, and was organized to perform property
acquisition, property management and other services.
CNL Group, Inc., which is the parent company of CNL Fund Advisors,
Inc., was organized in 1980 under the laws of the State of Florida. CNL Group,
Inc. is a diversified real estate company which provides a wide range of real
estate, development and financial services to companies in the United States
through the activities of its subsidiaries. These activities are primarily
focused on the franchised restaurant and hospitality industries. James M.
Seneff, Jr., an individual General Partner of the Partnership, is the Chairman
of the Board, Chief Executive Officer, and a director of CNL Group, Inc. Mr.
Seneff and his wife own all of the outstanding shares of CNL Group, Inc.
The following persons serve as operating officers of CNL Group, Inc. or
its affiliates or subsidiaries in the discretion of the Boards of Directors of
those companies, but, except as specifically indicated, do not serve as members
of the Boards of Directors of those entities. The Boards of Directors have the
responsibility for creating and implementing the policies of CNL Group, Inc. and
its affiliated companies.
Curtis B. McWilliams, age 43, joined CNL Group, Inc. in April 1997 and
currently serves as an Executive Vice President. In addition, Mr. McWilliams has
served as President of CNL Fund Advisors, Inc. and as President of the
Restaurant and Financial Services Groups within CNL Group, Inc. since April
1997. Mr. McWilliams has served as President of CNL American Properties Fund,
Inc. since February 1999 and previously served as Executive Vice President from
February 1998 through February 1999. From September 1983 through March 1997, Mr.
McWilliams was employed by Merrill Lynch & Co., most recently as Chairman of
Merrill Lynch's Private Advisory Services until March 1997. Mr. McWilliams
received a B.S.E. in Chemical Engineering from Princeton University in 1977 and
a Masters of Business Administration with a concentration in finance from the
University of Chicago in 1983.
John T. Walker, age 40, has served as Executive Vice President of CNL
American Properties Fund, Inc. since January 1996, as Chief Operating Officer
since March 1995, and previously served as Senior Vice President since December
1994. In addition, Mr. Walker has served as Executive Vice President of CNL Fund
Advisors, Inc. since January 1996, Chief Operating Officer since April 1995, and
previously served as Senior Vice President from November 1994 through January
1996. In addition, Mr. Walker previously served as Executive Vice President of
CNL Hospitality Properties, Inc. and CNL Hospitality Advisors, Inc. From May
1992 to May 1994, Mr. Walker, a certified public accountant, was Executive Vice
President for Finance and Administration and Chief Financial Officer of Z Music,
Inc., a cable television network (subsequently acquired by Gaylord
Entertainment), where he was responsible for overall financial and
administrative management and planning. From January 1990 through April 1992,
Mr. Walker was Chief Financial Officer of the First Baptist Church in Orlando,
Florida. From April 1984 through December 1989, he was a partner in the
accounting firm of Chastang, Ferrell & Walker, P.A., where he was the partner in
charge of audit and consulting services, and from 1981 to 1984, Mr. Walker was a
Senior Consultant/Audit Senior at Price Waterhouse. Mr. Walker is a Cum Laude
graduate of Wake Forest University with a B.S. in Accountancy and is a certified
public accountant.
Lynn E. Rose, age 50, a certified public accountant, has served as
Secretary of CNL American Properties Fund, Inc. since December 1994 and served
as Treasurer from December 1994 through February 1999. Ms. Rose has served as a
director and Secretary of CNL Fund Advisors, Inc. since March 1994, and as
Treasurer from the date of its inception through June 30, 1997. Ms. Rose has
served as Secretary of CNL Group, Inc. since 1987, as Chief Financial Officer of
CNL Group, Inc. since December 1993, and served as Controller of CNL Group, Inc.
from 1987 until December 1993. In addition, Ms. Rose has served as Chief
Financial Officer and Secretary of CNL Securities Corp. since July 1994. She has
served as Chief Operating Officer, Vice President and Secretary of CNL Corporate
Services, Inc. since November 1994. Ms. Rose also has served as Chief Financial
Officer and Secretary of CNL Institutional Advisors, Inc. since its inception in
1990, as Treasurer of CNL Realty Advisors, Inc. from 1991 to February 1996, and
as Secretary and a director of CNL Realty Advisors, Inc. since its inception in
1991 until December 31, 1997, at which time CNL Realty Advisors, Inc. merged
with Commercial Net Lease Realty, Inc. In addition, Ms. Rose served as Secretary
and Treasurer of Commercial Net Lease Realty, Inc. from 1992 to February 1996.
Ms. Rose also serves as Secretary and Treasurer of CNL Hospitality Properties,
Inc. and CNL Health Care Properties, Inc. and as Secretary, Treasurer and a
director of CNL Hospitality Advisors, Inc. and CNL Health Care Advisors, Inc.
Ms. Rose also currently serves as Secretary for approximately 50 additional
corporations. Ms. Rose oversees the legal compliance, accounting, tenant
compliance, and reporting for over 250 corporations, partnerships and joint
ventures. Prior to joining CNL, Ms. Rose was a partner with Robert A. Bourne in
the accounting firm of Bourne & Rose, P.A., Certified Public Accountants. Ms.
Rose holds a B.A. in Sociology from the University of Central Florida.
Jeanne A. Wall, age 40, has served as Executive Vice President of CNL
American Properties Fund, Inc. since December 1994. Ms. Wall has served as
Executive Vice President of CNL Fund Advisors, Inc. since November 1994, and
previously served as Vice President from March 1994 through November 1994. Ms.
Wall has served as Chief Operating Officer of CNL Investment Company and of CNL
Securities Corp. since November 1994 and has served as Executive Vice President
of CNL Investment Company since January 1991. Ms. Wall joined CNL Securities
Corp. in 1984. In 1985, Ms. Wall became Vice President of CNL Securities Corp.
In 1987, she became Senior Vice President and in July 1997 she became Executive
Vice President of CNL Securities Corp. In this capacity, Ms. Wall serves as
national marketing and sales director and oversees the national marketing plan
for the CNL investment programs. In addition, Ms. Wall oversees product
development, partnership administration and investor services for programs
offered through participating brokers and corporate communications for CNL
Group, Inc. and its affiliates. Ms. Wall also has served as Senior Vice
President of CNL Institutional Advisors, Inc., a registered investment advisor,
from 1990 to 1993, as Vice President of CNL Realty Advisors, Inc. since its
inception in 1991 until December 31, 1997, at which time CNL Realty Advisors,
Inc. merged with Commercial Net Lease Realty, Inc., and served as Vice President
of Commercial Net Lease Realty, Inc. from 1992 through December 31, 1997. In
addition, Ms. Wall serves as Executive Vice President of CNL Hospitality
Properties, Inc., CNL Hospitality Advisors, Inc., CNL Health Care Properties,
Inc. and CNL Health Care Advisors, Inc. Ms. Wall holds a B.A. in Business
Administration from Linfield College and is a registered principal of CNL
Securities Corp. Ms. Wall currently serves as a trustee on the board of the
Investment Program Association and on the Direct Participation Program committee
for the National Association of Securities Dealers (NASD).
<PAGE>
Steven D. Shackelford, age 35, a certified public accountant, has
served as Chief Financial Officer of CNL American Properties Fund, Inc. since
January 1997 and as Chief Financial Officer of CNL Fund Advisors, Inc. since
September 1996. From March 1995 to July 1996, Mr. Shackelford was a senior
manager in the national office of Price Waterhouse where he was responsible for
advising foreign clients seeking to raise capital and a public listing in the
United States. From August 1992 to March 1995, he served as a manager in the
Price Waterhouse, Paris, France office serving several multinational clients.
Mr. Shackelford was an audit staff and audit senior from 1986 to 1992 in the
Orlando, Florida office of Price Waterhouse. Mr. Shackelford received a B.A. in
Accounting, with honors, and a Masters of Business Administration from Florida
State University.
Item 11. Executive Compensation
Other than as described in Item 13, the Partnership has not paid and
does not intend to pay any executive compensation to the General Partners or any
of their affiliates. There are no compensatory plans or arrangements regarding
termination of employment or change of control.
Item 12. Security Ownership of Certain Beneficial Owners and Management
As of March 11, 1999, no person was known to the Registrant to be a
beneficial owner of more than five percent of the Units.
The following table sets forth, as of March 11, 1999, the beneficial
ownership interests of the General Partners in the Registrant.
Title of Class Name of Partner Percent of Class
-------------- --------------- ----------------
General Partnership Interests James M. Seneff, Jr. 45%
Robert A. Bourne 45%
CNL Realty Corporation 10%
-----
100%
=====
Neither the General Partners, nor any of their affiliates, owns any
interest in the Registrant, except as noted above. On March 11, 1999, the
Registrant entered into an Agreement and Plan of Merger with CNL American
Properties Fund, Inc. ("APF") pursuant to which the Registrant would be merged
with and into a subsidiary of APF (the "Merger"). For further discussion, see
Item 8. Financial Statements and Supplementary Data -- Note 10.
Subsequent Event.
<PAGE>
Item 13. Certain Relationships and Related Transactions
The table below summarizes the types, recipients, methods of
computation and amounts of compensation, fees and distributions paid or payable
by the Partnership to the General Partners and their affiliates for the year
ended December 31, 1998, exclusive of any distributions to which the General
Partners or their affiliates may be entitled by reason of their purchase and
ownership of Units.
<TABLE>
<CAPTION>
Amount Incurred
Type of Compensation For the Year
and Recipient Method of Computation Ended December 31, 1998
----------------------- --------------------- -----------------------
<S> <C>
Reimbursement to affiliates for Operating expenses are reimbursed Operating expenses
operating expenses at the lower of cost or 90 percent incurred on behalf of the
of the prevailing rate at which Partnership: $98,978
comparable services could have been
obtained in the same geographic Accounting and
area. Affiliates of the General administrative services:
Partners from time to time incur $92,573
certain operating expenses on
behalf of the Partnership for which
the Partnership reimburses the
affiliates without interest.
Annual management fee to affiliates One percent of the sum of gross $33,990
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.
<PAGE>
Amount Incurred
Type of Compensation For the Year
and Recipient Method of Computation Ended December 31, 1998
----------------------- --------------------- -----------------------
Deferred, subordinated real estate A deferred, subordinated real $ - 0 -
disposition fee payable to affiliates estate disposition fee, payable
upon sale of one or more
Properties, in an amount equal to
the lesser of (i) one-half of a
competitive real estate
commission, or (ii) three percent
of the sales price of such
Property or Properties. Payment of
such fee shall be made only if
affiliates of the General Partners
provide a substantial amount of
services in connection with the
sale of a Property or Properties
and shall be subordinated to
certain minimum returns to the
Limited Partners. However, if the
net sales proceeds are reinvested
in a replacement Property, no such
real estate disposition fee will
be incurred until such replacement
Property is sold and the net sales
proceeds are distributed.
General Partners' deferred, A deferred, subordinated share $ - 0 -
sub-ordinated share of Partnership net equal to one percent of Partnership
cash flow distributions of net cash flow,
subordinated to certain minimum
returns to the Limited Partners.
General Partners' deferred, A deferred, subordinated share $ - 0 -
sub-ordinated share of Partnership net equal to five percent of
sales proceeds from a sale or sales not Partnership distributions of such
in liquidation of the Partnership net sales proceeds, subordinated to
certain minimum returns to the
Limited Partners.
<PAGE>
Amount Incurred
Type of Compensation For the Year
and Recipient Method of Computation Ended December 31, 1998
----------------------- --------------------- -----------------------
General Partners' share of Partnership Distributions of net sales proceeds $ - 0 -
net sales proceeds from a sale or sales from a sale or sales of
in liquidation of the Partnership substantially all of the
Partnership's assets will be
distributed in the following order
or priority: (i) first, to pay all
debts and liabilities of the
Partnership and to establish
reserves; (ii) second, to Partners
with positive capital account
balances, determined after the
allocation of net income, net
loss, gain and loss, in proportion
to such balances, up to amounts
sufficient to reduce such balances
to zero; and (iii) thereafter, 95%
to the Limited Partners and 5% to
the General Partners.
</TABLE>
As discussed above in Item 8. Financial Statements and Supplementary
Data -- Note 10. Subsequent Event, the Registrant has entered into an Agreement
and Plan of Merger, dated March 11, 1999, with APF pursuant to which the
Registrant would be merged with and into a subsidiary of APF in exchange for the
issuance of APF Shares. The APF Shares are expected to be listed for trading on
the New York Stock Exchange concurrently with the consummation of the Merger. If
the Merger is approved by Limited Partners holding units greater than 50% of the
outstanding units of the Registrant, the General Partners of the Registrant
would receive certain benefits. For instance, following the Merger, James M.
Seneff, Jr. and Robert A. Bourne, the individual General Partners, will continue
to serve as directors of APF, with Mr. Seneff serving as Chairman and Mr. Bourne
serving as Vice Chairman. As APF directors, they may also be entitled to receive
stock options under any stock option plan adopted by APF.
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) The following documents are filed as part of this report.
1. Financial Statements
Report of Independent Accountants
Balance Sheets at December 31, 1998 and 1997
Statements of Income for the years ended December 31, 1998,
1997, and 1996
Statements of Partners' Capital for the years ended December
31, 1998, 1997, and 1996
Statements of Cash Flows for the years ended December 31,
1998, 1997, and 1996
Notes to Financial Statements
2. Financial Statement Schedule
Schedule III - Real Estate and Accumulated Depreciation at
December 31, 1998
Notes to Schedule III - Real Estate and Accumulated
Depreciation at December 31, 1998
All other Schedules are omitted as the required information is
inapplicable or is presented in the financial statements or
notes thereto.
3. Exhibits
3.1 Affidavit and Certificate of Limited Partnership of
CNL Income Fund 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.)
<PAGE>
10.3 Assignment of Management Agreement from CNL Income
Fund Advisors, Inc. to CNL Fund Advisors, Inc.
(Included as exhibit 10.3 to Form 10-K filed with the
Securities and Exchange Commission on April 1, 1996,
and incorporated herein by reference.)
27 Financial Data Schedule (Filed herewith.)
(b) The Registrant filed no reports on Form 8-K during the period
October 1, 1998 through December 31, 1998.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on the 26th day of
March, 1999.
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 26, 1999
- ---------------------------
Robert A. Bourne (Principal Financial and Accounting
Officer)
/s/ James M. Seneff, Jr. Chief Executive Officer and Director March 26, 1999
- ---------------------------
James M. Seneff, Jr. (Principal Executive Officer)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CNL INCOME FUND XV, LTD.
(A Florida Limited Partnership)
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1998
<S> <C>
Costs Capitalized
Subsequent To
Initial Cost Acquisition
---------------------------- -----------------------
Encum- Buildings and Improve- Carrying
brances Land Improvements ments Costs
----------- ------------- ------------- ------------- --------
Properties the Partnership
has Invested in Under
Operating Leases:
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 (h) - 445,614 - 399,974 -
Lexington, Kentucky - 346,854 - - -
Jackson, Tennessee - 254,023 - - -
Lancaster, South Carolina (i) - 221,251 - 349,162 -
Albuquerque, New Mexico - 210,008 311,622 - -
Gastonia, North Carolina (h) - 379,499 439,209 - -
Irving, Texas - 454,448 - - -
Lexington, North Carolina (h) - 274,513 - 400,384 -
Neosho, Missouri - 171,859 - - -
Wendy's Old Fashioned
Hamburgers Restaurants:
Arlington, Virginia - 592,918 678,893 - -
------------- ------------ ------------- ------- -
$15,579,852 $4,892,556 $4,063,060 -
============= ============ ============= ======= =
Properties of Joint Venture in Which
the Partnership has a 50% Interest
and has Invested in Under an Operating
Lease:
Boston Market Restaurants:
Murfeesboro, Tennessee - $398,313 - - -
Matthews, North Carolina - 409,942 737,391 - -
Raleigh, North Carolina - 518,507 542,919 - -
Blaine, Minnesota - 253,934 531,509 - -
Golden Corral Family
Steakhouse Restaurant:
Paris, Texas - 303,608 685,064 - -
Taco Bell:
Anniston, Alabama - 173,396 329,201 - -
------------- ------------ ------------- ------- -
$2,057,700 $2,826,084 - -
============= ============ ============= ======= =
Property in Which the Partnership
has a 16% 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 - -
============= ============ ============= ======= =
Property in Which the Partnership
has a 15% Interest as Tenants-in-
Common and has Invested in Under an
Operating Lease:
Bennigan's Restaurant:
Ft. Myers, Florida - $638,026 - - -
============= =========== ============= ======= =
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 - -
Branch, Mississippi - - 510,712 - -
Piney Flats, Tennessee - 141,724 504,827 - -
Long John Silver's Restaurants:
Jackson, Tennessee - - 459,725 - -
Lexington, Kentucky - - - 316,937 -
Neosho, Missouri - - - 403,331 -
Irving, Texas - - - 414,009 -
Quincy's Restaurant:
Greer, South Carolina - 178,404 849,860 - -
------------- ------------ ------------- -------
$659,891 $4,276,942 $2,926,120 -
============= ============ ============= =======
Property of Joint Venture in
Which the Partnership has a
15% Interest and has Invested
in Under Direct Financing Lease:
Bennigan's Restaurant:
Ft. Myers, Florida - - $831,741 - -
============= ============ ============= =======
Gross Amount at Which Life on Which
Carried at Close of Period (c) Depreciation in
----------------------------------------- Date Latest Income
Buildings and Accumulated of Con- Date Statement is
Land Improvements Total Depreciation struction Acquired Computed
------------- ------------ ------------ ------------ --------- -------- ----------------
$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 1,256,637 120,444 1994 06/94 (b)
763,892 939,205 1,703,097 126,685 1994 08/94 (b)
766,891 1,124,687 1,891,578 150,266 1994 09/94 (b)
209,243 (e) 209,243 (f) 1994 04/94 (f)
230,268 497,047 727,315 78,325 1993 04/94 (b)
307,911 593,997 901,908 92,517 1992 04/94 (b)
216,335 (e) 216,335 (f) 1992 04/94 (f)
310,511 480,398 790,909 74,868 1993 04/94 (b)
617,887 406,122 1,024,009 59,908 1988 07/94 (b)
494,336 566,016 1,060,352 83,494 1988 07/94 (b)
501,099 272,441 773,540 40,188 1976 07/94 (b)
426,378 646,811 1,073,189 91,691 1994 09/94 (b)
445,614 399,974 845,588 8,448 1994 06/94 (h)
346,854 (e) 346,854 (f) 1994 06/94 (f)
254,023 (e) 254,023 (f) 1994 06/94 (f)
221,251 349,162 570,413 7,265 1994 07/94 (i)
210,008 311,622 521,630 37,267 1976 05/95 (b)
379,499 439,209 818,708 9,349 1994 07/94 (h)
454,448 (e) 454,448 (f) 1995 07/94 (f)
274,513 400,384 674,897 8,426 1994 07/94 (h)
171,859 (e) 171,859 (f) 1994 07/94 (f)
592,918 678,893 1,271,811 91,511 1994 12/94 (b)
- ------------ ------------ ------------ -----------
$15,579,852 $8,955,616 $24,535,468 $1,080,652
============ ============ ============ ===========
$398,313 - $398,313 (d) - 10/96 (d)
409,942 737,391 1,147,333 54,805 1994 10/96 (b)
518,507 542,919 1,061,426 40,351 1994 10/96 (b)
253,934 531,509 785,443 39,503 1996 10/96 (b)
303,608 685,064 988,672 50,916 1996 10/96 (b)
173,396 329,201 502,597 21,694 1993 01/97 (b)
- ------------ ------------ ------------ -----------
$2,057,700 $2,826,084 $4,883,784 $207,269
============ ============ ============ ===========
$138,382 $676,588 $814,970 $66,274 1996 01/96 (b)
============ ============ ============ ===========
$638,026 (e) $638,026 (f) 1982 06/98 (f)
============ ============ ============
- (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 07/94 (f)
- (e) (e) (f) 1995 07/94 (f)
(e) (e) (e) (g) 1988 06/94 (g)
- (e) (e) (f) 1982 06/98 (f)
</TABLE>
CNL INCOME FUND XV, LTD.
(A Florida Limited Partnership)
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1998
(a) Transactions in real estate and accumulated depreciation during 1998,
1997 and 1996 are summarized as follows:
<TABLE>
<CAPTION>
Accumulated
Cost Depreciation
------------ -------------
<S> <C>
Properties the Partnership has Invested
in Under Operating Leases:
Balance, December 31, 1995 $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
Reclassified from net investment in
direct financing lease 1,588,729 --
Depreciation expense -- 279,051
------------ -------------
Balance, December 31, 1998 $24,535,468 $ 1,080,652
============ =============
Properties of Joint Venture in Which the
Partnership has a 50% Interest and has
Invested
in Under Operating Leases:
Balance, December 31, 1995 $ 3,175,594 $ 26,042
Dispositions (3,175,594 ) (43,711 )
Acquisitions 4,404,047 --
Depreciation expense -- 37,122
------------ -------------
Balance, December 31, 1996 4,404,047 19,453
Acquisitions 502,597 --
Depreciation expense -- 94,718
------------ -------------
Balance, December 31, 1997 4,906,644 114,171
Dispositions (22,860 ) --
Depreciation expense -- 93,098
------------ -------------
Balance, December 31, 1998 $ 4,883,784 $ 207,269
============ =============
<PAGE>
CNL INCOME FUND XV, LTD.
(A Florida Limited Partnership)
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED
DEPRECIATION - CONTINUED
December 31, 1998
Accumulated
Cost Depreciation
------------ -------------
Property Which the Partnership has a 16% 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
Depreciation expense -- 22,553
------------ -------------
Balance, December 31, 1998 $ 814,970 $ 66,274
============ =============
Property Which the Partnership has a 15% Interest as
Tenants-in-Common and has Invested in Under an
Operating Lease:
Balance, December 31, 1997 $ -- $ --
Acquisition 638,026 --
Depreciation expense (f) -- --
------------ -------------
Balance, December 31, 1998 $ 638,026 $ --
============ =============
</TABLE>
(b) Depreciation expense is computed for buildings and improvements based
upon estimated lives of 30 years.
(c) As of December 31, 1998, the aggregate cost of the Properties owned
by the Partnership and joint ventures for federal income tax purposes
was $32,521,622 and $6,778,303, 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.
<PAGE>
CNL INCOME FUND XV, LTD.
(A Florida Limited Partnership)
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED
DEPRECIATION - CONTINUED
December 31, 1998
(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.
(h) Effective June 11, 1998, the lease for this Property was terminated,
resulting in the reclassification of the building portion of the
lease to an operating lease. The building was recorded at net book
value as of June 11,1998 and depreciated over its remaining estimated
life of approximately 26 years.
(i) Effective June 14, 1998, the lease for this Property was terminated,
resulting in the reclassification of the building portion of the
lease to an operating lease. The building was recorded at net book
value as of June 14, 1998 and depreciated over its remaining
estimated life of approximately 26 years.
<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.)
<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, 1998, and its statement of
income for the year then ended and is qualified in its entirety by reference to
the Form 10-K of CNL Income Fund XV, Ltd. for the year ended December 31, 1998.
</LEGEND>
<S> <C>
<PERIOD-TYPE> year
<FISCAL-YEAR-END> Dec-31-1998
<PERIOD-START> Jan-01-1998
<PERIOD-END> Dec-31-1998
<CASH> 1,214,444
<SECURITIES> 0
<RECEIVABLES> 63,314
<ALLOWANCES> 849
<INVENTORY> 0
<CURRENT-ASSETS> 0 <F1>
<PP&E> 24,254,561
<DEPRECIATION> 1,080,652
<TOTAL-ASSETS> 36,359,054
<CURRENT-LIABILITIES> 0 <F1>
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 35,465,900
<TOTAL-LIABILITY-AND-EQUITY> 36,359,054
<SALES> 0
<TOTAL-REVENUES> 3,234,487
<CGS> 0
<TOTAL-COSTS> 547,636
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,642,497
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,642,497
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,642,497
<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>
