UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
(Mark One)
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-19139
CNL INCOME FUND VIII, LTD.
(Exact name of registrant as specified in its charter)
Florida 59-2963338
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
400 East South Street
Orlando, Florida 32801
(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code: (407) 422-1574
Securities registered pursuant to Section 12(b) of
the Act:
Title of each class: Name of exchange on which registered:
None Not Applicable
Securities registered pursuant to Section 12(g) of
the Act:
Units of limited partnership interest ($1 per Unit)
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days: Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [x]
Aggregate market value of the voting stock held by nonaffiliates of the
registrant: The registrant registered an offering of units of limited
partnership interest (the "Units") on Form S-11 under the Securities Act of
1933, as amended. Since no established market for such Units exists, there is no
market value for such Units. Each Unit was originally sold at $1 per Unit.
DOCUMENTS INCORPORATED BY REFERENCE:
None
<PAGE>
PART I
Item 1. Business
CNL Income Fund VIII, Ltd. (the "Registrant" or the "Partnership") is a
limited partnership which was organized pursuant to the laws of the State of
Florida on August 18, 1989. The general partners of the Partnership are Robert
A. Bourne, James M. Seneff, Jr. and CNL Realty Corporation, a Florida
corporation (the "General Partners"). Beginning on August 2, 1990, the
Partnership offered for sale up to $35,000,000 of limited partnership interests
(the "Units") (35,000,000 Units at $1 per Unit) pursuant to a registration
statement on Form S-11 under the Securities Act of 1933, as amended, effective
January 30, 1990. The offering terminated on March 7, 1991, at which date the
maximum offering proceeds of $35,000,000 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
$30,975,000, and were used to acquire 38 Properties, including interests in
eight Properties owned by joint ventures in which the Partnership is a
co-venturer, and to establish a working capital reserve for Partnership
purposes. During the year ended December 31, 1995, the Partnership sold its
Property in Ocoee, Florida and reinvested the majority of the net sales proceeds
in a Shoney's in North Fort Myers, Florida. Also, during the year ended December
31, 1995, the Partnership sold two Properties in Jacksonville, Florida. During
the year ended December 31, 1996, the Partnership reinvested the remaining net
sales proceeds from the 1995 sale of the Property in Ocoee, Florida, to acquire
one additional Property indirectly through a joint venture in which the
Partnership is a co-venturer. Also, during the year ended December 31, 1996, the
Partnership sold its Property in Orlando, Florida. As a result of the above
transactions the Partnership currently owns 36 Properties, including interests
in nine Properties owned by joint ventures in which the Partnership is a
co-venturer. The Properties are leased on a triple-net basis with the lessees
responsible for all repairs and maintenance, property taxes, insurance and
utilities.
The Partnership will hold its Properties until the General Partners
determine that the sale or other disposition of the Properties is advantageous
in view of the Partnership's investment objectives. In deciding whether to sell
Properties, the General Partners will consider factors such as potential capital
appreciation, net cash flow and federal income tax considerations. Certain
lessees also have been granted options to purchase Properties, generally at the
Property's then fair market value after a specified portion of the lease term
has elapsed. In general, the General Partners plan to seek the sale of some of
the Properties commencing seven to 12 years after their acquisition. The
Partnership has no obligation to sell all or any portion of a Property at any
particular time, except as may be required under property purchase options
granted to certain lessees.
Leases
Although there are variations in the specific terms of the leases, the
following is a summarized description of the general structure of the
Partnership's leases. The leases of the Properties owned by the Partnership and
the joint ventures in which the Partnership is a co-venturer provide for initial
terms, ranging from 14 to 20 years (the average being 18 years), and expire
between 2005 and 2016. All leases are on a triple-net basis, with the lessees
responsible for all repairs and maintenance, property taxes, insurance and
utilities. The leases of the Properties provide for minimum base annual rental
payments (payable in monthly installments) ranging from approximately $41,300 to
$213,800. All of the leases provide for percentage rent, based on sales in
excess of a specified amount. In addition, a majority of the leases provide
that, commencing in specified lease years (ranging from the third to the sixth
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 four
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
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certain leases, the option purchase price may equal the Partnership's original
cost to purchase the Property (including acquisition costs), plus a specified
percentage from the date of the lease or a specified percentage of the
Partnership's purchase price, if that amount is greater than the Property's fair
market value at the time the purchase option is exercised.
The leases also generally provide that, in the event the Partnership
wishes to sell the Property subject to that lease, the Partnership first must
offer the lessee the right to purchase the Property on the same terms and
conditions, and for the same price, as any offer which the Partnership has
received for the sale of the Property.
Major Tenants
During 1997, three lessees of the Partnership and its consolidated
joint venture, Golden Corral Corporation, Carrols Corporation and Restaurant
Management Services, Inc., each contributed more than ten percent of the
Partnership's total rental income (including rental income from the
Partnership's consolidated joint venture and the Partnership's share of rental
income from eight Properties owned by unconsolidated joint ventures). As of
December 31, 1997, Golden Corral Corporation was the lessee under leases
relating to four restaurants, Carrols Corporation was the lessee under leases
relating to five restaurants and Restaurant Management Services, Inc. was the
lessee under leases relating to five restaurants. It is anticipated that, based
on the minimum rental payments required by the leases, these three lessees each
will continue to contribute more than ten percent of the Partnership's total
rental income in 1998 and subsequent years. In addition, three Restaurant
Chains, Golden Corral Family Steakhouse Restaurants, Burger King and Shoney's,
each accounted for more than ten percent of the Partnership's total rental
income in 1997 (including rental income from the Partnership's consolidated
joint venture and the Partnership's share of rental income from eight Properties
owned by unconsolidated joint ventures). In subsequent years, it is anticipated
that these three Restaurant Chains each will continue to account for more than
ten percent of the Partnership's total rental income to which the Partnership is
entitled under the terms of the leases. Any failure of these lessees or
Restaurant Chains could materially affect the Partnership's income. No single
tenant or group of affiliated tenants lease Properties with an aggregate
carrying value, excluding acquisition fees and certain acquisition expenses, in
excess of 20 percent of the total assets of the Partnership.
Joint Venture Arrangements
The Partnership has entered into a joint venture arrangement, Woodway
Joint Venture, with an unaffiliated entity to purchase and hold one Property. In
addition, the Partnership has entered into three separate joint venture
arrangements, Asheville Joint Venture, CNL Restaurant Investments II, and
Middleburg Joint Venture with affiliates of the General Partners, to purchase
and hold eight Properties.
The joint venture arrangements provide for the Partnership and its
joint venture partners to share in all costs and benefits associated with the
joint ventures in accordance with their respective percentage interests in the
joint ventures. The Partnership and its joint venture partners are also jointly
and severally liable for all debts, obligations and other liabilities of the
joint ventures.
Woodway Joint Venture, Asheville Joint Venture and Middleburg Joint
Venture each have an initial term of 20 years and, after the expiration of the
initial term, continue in existence from year to year unless terminated at the
option of either joint venturer 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 and mutual agreement
of the Partnership and each joint venture partner to dissolve the joint venture.
CNL Restaurant Investments II's joint venture agreement does not provide for a
fixed term, but continues in existence until terminated by any of the joint
venturers.
The Partnership has management control of Woodway Joint Venture and
shares management control equally with affiliates of the General Partners for
Asheville Joint Venture, CNL Restaurant Investments II and Middleburg Joint
Venture. The joint venture agreements restrict each venturer's ability to sell,
transfer or assign its joint venture interest without first offering it for sale
to its joint venture partner, either upon such terms and conditions as to which
the venturers may agree or, in the event the venturers cannot agree, on the same
terms and conditions as any offer from a third party to purchase such joint
venture interest.
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Net cash flow from operations of Woodway Joint Venture, Asheville Joint
Venture, CNL Restaurant Investments II and Middleburg Joint Venture is
distributed 88 percent, 86 percent, 37 percent and 12 percent, respectively, to
the Partnership and the balance is distributed to each of the other joint
venture partners in accordance with their respective percentage interest in the
joint venture. Any liquidation proceeds, after paying joint venture debts and
liabilities and funding reserves for contingent liabilities, will be distributed
first to the joint venture partners with positive capital account balances in
proportion to such balances until such balances equal zero, and thereafter in
proportion to each joint venture partner's percentage interest in the joint
venture.
Certain Management Services
CNL Income Fund Advisors, Inc., an affiliate of the General Partners,
provided certain services relating to management of the Partnership and its
Properties pursuant to a management agreement with the Partnership through
September 30, 1995. Under this agreement, CNL Income Fund Advisors, Inc. was
responsible for collecting rental payments, inspecting the Properties and the
tenants' books and records, assisting the Partnership in responding to tenant
inquiries and notices and providing information to the Partnership about the
status of the leases and the Properties. CNL Income Fund Advisors, Inc. also
assisted the General Partners in negotiating the leases. For these services, the
Partnership had agreed to pay CNL Income Fund Advisors, Inc. an annual fee of
one percent of the sum of gross operating 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. Under the management agreement, the
management fee is subordinated to receipt by the Limited Partners of an
aggregate, ten percent, cumulative, noncompounded annual return on their
adjusted capital contributions (the "10% Preferred Return"), calculated in
accordance with the Partnership's limited partnership agreement (the
"Partnership Agreement").
Effective October 1, 1995, CNL Income Fund Advisors, Inc. assigned its
rights in, and its obligations under, the management agreement with the
Partnership to CNL Fund Advisors, Inc. All of the terms and conditions of the
management agreement, including the payment of fees, as described above, remain
unchanged.
The management agreement continues until the Partnership no longer owns
an interest in any Properties unless terminated at an earlier date upon 60 days'
prior notice by either party.
Competition
The fast-food and family-style restaurant business is characterized by
intense competition. The restaurants on the Partnership's Properties compete
with independently owned restaurants, restaurants which are part of local or
regional chains and restaurants in other well-known national chains, including
those offering different types of food and service.
At the time the Partnership elects to dispose of its Properties, other
than as a result of the exercise of tenant options to purchase Properties, the
Partnership will be in competition with other persons and entities to locate
purchasers for its Properties.
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.
3
<PAGE>
Item 2. Properties
As of December 31, 1997, the Partnership owned, either directly or
through joint venture arrangements, 36 Properties located in 12 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 17,400
to 467,400 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. The buildings
generally are rectangular and are constructed from various combinations of
stucco, steel, wood, brick and tile. Building sizes range from approximately
1,300 to 10,900 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 the leases with the
Partnership's major tenants as of December 31, 1997 (see Item 1. Business -
Major Tenants), are substantially the same as those described in Item 1.
Business - Leases.
Golden Corral Corporation leases four Golden Corral restaurants. The
initial term of each lease is 15 years (expiring in 2005) and the average
minimum base annual rent is approximately $163,500 (ranging from approximately
$145,500 to $189,700).
Restaurant Management Services leases four Shoney's restaurants and one
Popeyes restaurant. The initial term of each lease is 20 years (expiring between
2010 and 2015) and the average minimum base annual rent is approximately
$104,500 (ranging from approximately $41,300 to $139,400).
Carrols Corporation leases five Burger King restaurants. The initial
term of each lease is 20 years (expiring in 2011) and the average minimum base
annual rent is approximately $113,600 (ranging from approximately $108,800 to
$122,800).
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.
4
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PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
As of February 28, 1998, there were 3,441 holders of record of the
Units. There is no public trading market for the Units, and it is not
anticipated that a public market for the Units will develop. Limited Partners
who wish to sell their Units may offer the Units for sale pursuant to the
Partnership's distribution reinvestment plan (the "Plan"), and Limited Partners
who wish to have their distributions used to acquire additional Units (to the
extent Units are available for purchase), may do so pursuant to such Plan. The
General Partners have the right to prohibit transfers of Units. Since inception,
the price paid for any Unit transferred pursuant to the Plan has been $.95 per
Unit. The price to be paid for any Unit transferred other than pursuant to the
Plan is subject to negotiation by the purchaser and the selling Limited Partner.
The Partnership will not redeem or repurchase Units.
The following table reflects, for each calendar quarter, the high, low
and average sales prices for transfers of Units during 1997 and 1996 other than
pursuant to the Plan, net of commissions.
<TABLE>
<CAPTION>
1997 (1) 1996 (1)
---------------------------------- ---------------------------
<S> <C>
High Low Average High Low Average
First Quarter $1.00 $ .80 $ .91 $ .95 $ .95 $ .95
Second Quarter (2) (2) (2) .95 .86 .93
Third Quarter 1.00 .88 .94 .90 .61 .75
Fourth Quarter (2) (2) (2) .75 .55 .65
</TABLE>
(1) A total of 62,676 and 185,355 Units were transferred other than
pursuant to the Plan for the years ended December 31, 1997 and 1996,
respectively.
(2) No transfer of Units took place during the quarter other than pursuant to
the Plan.
The capital contribution per Unit was $1. 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, 1997 and 1996, the Partnership
declared cash distributions of $3,150,003 and $3,412,500, respectively, to the
Limited Partners. For the quarter ended December 31, 1996, the Partnership
declared a special distribution to the Limited Partners of $262,500, which
represented cumulative excess operating reserves. The General Partners
anticipate that the Partnership will declare a special distribution to the
Limited Partners during the quarter ending March 31, 1998, representing
cumulative excess operating reserves. No amounts distributed to partners for the
years ended December 31, 1997 and 1996, are required to be or have been treated
by the Partnership as a return of capital for purposes of calculating the
Limited Partners' return on their adjusted capital contributions. No
distributions have been made to the General Partners to date. As indicated in
the chart below, these distributions were declared at the close of each of the
Partnership's calendar quarters. These amounts include monthly distributions
made in arrears for the Limited Partners electing to receive distributions on
this basis.
Quarter Ended 1997 1996
------------- ---------- -------
March 31 $787,500 $787,500
June 30 787,501 787,500
September 30 787,501 787,500
December 31 (1) 787,501 1,050,000
(1) Includes special distributions to Limited Partners of $262,500, for
the quarter ended December 31, 1996.
The Partnership intends to continue to make distributions of cash
available for distribution to the Limited Partners on a quarterly basis,
although some Limited Partners, in accordance with their election, receive
monthly distributions, for an annual fee.
5
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Item 6. Selected Financial Data
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
------------- ------------- ------------- ------------- ------------
<S> <C>
Year Ended December 31:
Revenues (1) $ 3,619,489 $ 3,593,610 $ 3,667,137 $ 3,670,207 $ 3,674,304
Net income (2) 3,241,567 3,096,992 3,336,755 3,308,267 3,307,794
Cash distributions declared (3) 3,150,003 3,412,500 3,325,002 3,307,500 3,150,000
Net income per Unit (2) .092 .088 .094 .094 .094
Cash distributions declared
per Unit (3) .090 .098 .095 .095 .090
At December 31:
Total assets $32,258,296 $32,437,106 $32,575,586 $32,615,349 $32,403,393
Partners' Capital 31,216,398 31,124,834 31,440,342 31,428,589 31,427,822
</TABLE>
(1) Revenues include equity in earnings of unconsolidated joint ventures
and minority interest in income of the consolidated joint venture.
(2) Net income for the year ended December 31, 1995, includes $71,638 from
a gain on sale of land and building. In addition, net income for the
years ended December 31, 1996 and 1995, includes $99,031 and $11,712,
respectively, from a loss on sale of land and buildings.
(3) Distributions for the years ended December 31, 1996 and 1995, include a
special distribution to the Limited Partners of $262,500 and $175,000,
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 August 18, 1989, to acquire for cash,
either directly or through joint venture arrangements, both newly constructed
and existing restaurant Properties, as well as land upon which restaurant
Properties were to be constructed, which are leased primarily to operators of
selected national and regional fast-food and family-style Restaurant Chains. The
leases are triple-net leases, with the lessee generally responsible for all
repairs and maintenance, property taxes, insurance and utilities. As of December
31, 1997, the Partnership owned 36 Properties, either directly or indirectly
through joint venture arrangements.
Liquidity and Capital Resources
The Partnership's primary source of capital for the years ended
December 31, 1997, 1996 and 1995 was cash from operations (which includes cash
received from tenants, distributions from joint ventures and interest received,
less cash paid for expenses). Cash from operations was $3,543,056, $3,462,668
and $3,263,685 for the years ended December 31, 1997, 1996 and 1995,
respectively. The increase in cash from operations for 1997, as compared to
1996, was primarily a result of changes in income and expenses as discussed in
"Results of Operations" below and changes in the Partnership's working capital,
and the increase in cash from operations for 1996, as compared to 1995, was
primarily a result of changes in the Partnership's working capital during each
of the respective years.
Other sources and uses of capital included the following during the
years ended December 31, 1997, 1996 and 1995.
In July 1995, the Partnership sold its Property in Ocoee, Florida, for
$1,200,000 and received net sales proceeds of $1,184,865, resulting in a gain of
$71,638 for financial reporting purposes. This Property was originally acquired
by the Partnership in November 1990 and had a cost of approximately $927,900,
excluding acquisition fees and miscellaneous acquisition costs; therefore, the
Partnership sold the Property for approximately $257,000 in
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excess of its original purchase price. In September 1995, the Partnership
reinvested $950,663 of the net sales proceeds in land and building of a Shoney's
in North Fort Myers, Florida.
In December 1995, the Partnership sold its two Properties in
Jacksonville, Florida, to the subtenant for a total of $460,000, and in
connection therewith, accepted promissory notes in the principal sums of
$240,000 and $220,000, collateralized by mortgages on the Properties. The notes
bear interest at a rate of ten percent per annum and are being collected in 119
equal monthly installments of $2,106 and $1,931 with balloon payments of
$218,252 and $200,324, respectively, due in December 2005. As a result of the
sale of the two Properties, the Partnership recognized a loss of $11,712 for
financial reporting purposes for the year ended December 31, 1995. The mortgage
notes receivable balances at December 31, 1997 and 1996, of $458,407 and
$461,255, respectively, include accrued interest of $3,788 and $3,812,
respectively, relating to these two Properties. Proceeds received from the
collection of these mortgage notes will be distributed to the Limited Partners
or will be used for other Partnership purposes.
In May 1996, the Partnership reinvested the remaining net sales
proceeds of approximately $234,100 from the 1995 sale of the Property in Ocoee,
Florida, in Middleburg Joint Venture. The Partnership has an approximate 12
percent interest in the profits and losses of Middleburg Joint Venture and the
remaining interest in this joint venture is held by an affiliate of the
Partnership which has the same General Partners.
In October 1996, the Partnership sold its Property in Orlando, Florida,
to the tenant for $1,375,000. In connection therewith, the Partnership accepted
a promissory note in the principal sum of $1,388,568, representing the gross
sales price of $1,375,000 plus tenant closing costs of $13,568 that the
Partnership financed on behalf of the tenant. The promissory note bears interest
at a rate of 10.75% per annum and is collateralized by a mortgage on the
Property. The promissory note is being collected in 12 monthly installments of
interest only, afterwards, in 24 monthly installments of $15,413 consisting of
principal and interest, and thereafter in 144 monthly installments of $16,220
consisting of principal and interest. The mortgage note receivable balances at
December 31, 1997 and 1996 of $1,394,979 and $1,401,007, respectively, include
accrued interest of $12,386 and $12,439, respectively, relating to this
Property. Proceeds received from the collection of this mortgage note will be
distributed to the Limited Partners or will be used for other Partnership
purposes. This Property was originally acquired by the Partnership in December
1990 and had a cost of approximately $1,177,000, excluding acquisition fees and
miscellaneous acquisition expenses; therefore, the Partnership sold the Property
for approximately $198,000 in excess of its original purchase price. Due to the
fact that the Partnership had recognized accrued rental income since the
inception of the lease relating to the straight lining of future scheduled rent
increases in accordance with generally accepted accounting principles, the
Partnership wrote off the cumulative balance of such accrued rental income at
the time of the sale of this Property, resulting in a loss of $99,031 for
financial reporting purposes. Due to the fact that the straight lining of future
scheduled rent increases over the term of the lease is a non-cash accounting
adjustment, the write off of these amounts is a loss for financial statement
purposes only.
None of the Properties owned by the Partnership or the joint ventures
in which the Partnership owns an interest is or may be encumbered. Under its
Partnership Agreement, the Partnership is prohibited from borrowing for any
purpose; provided, however, that the General Partners or their affiliates are
entitled to reimbursement, at cost, for actual expenses incurred by the General
Partners or their affiliates on behalf of the Partnership. Affiliates of the
General Partners from time to time incur certain operating expenses on behalf of
the Partnership for which the Partnership reimburses the affiliates without
interest.
Currently, rental income from the Partnership's Properties is invested
in money market accounts or other short-term, highly liquid investments pending
the Partnership's use of such funds to pay Partnership expenses or to make
distributions to the partners. At December 31, 1997, the Partnership had
$1,602,236 invested in such short-term investments as compared to $1,476,274 at
December 31, 1996. The funds remaining at December 31, 1997, after the payment
of distributions and other liabilities, will be used to meet the Partnership's
working capital and other needs.
During 1997, 1996 and 1995, affiliates incurred $80,998, $100,264 and
$95,550, respectively, for certain operating expense on behalf of the
Partnership. As of December 31, 1997 and 1996 the Partnership owed $4,599 and
$1,830, respectively, to affiliates for such amounts and accounting and
administrative services. As of February 28, 1998, the Partnership had reimbursed
the affiliates all such amounts. In addition, during the years ended December
31, 1996 and 1995, the Partnership incurred $41,250 and $13,800, respectively,
in real estate disposition
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fees due to an affiliate as a result of its services in connection with the sale
of the Property in Orlando, Florida, and the two Properties in Jacksonville,
Florida. No such fees were incurred during the year ended December 31, 1997. The
payment of such fees is deferred until the Limited Partners have received the
sum of their 10% Preferred Return and their adjusted capital contributions.
Other liabilities of the Partnership, including distributions payable, decreased
to $873,875 December 31, 1997, from $1,147,333 at December 31, 1996. The
decrease in other liabilities is primarily attributable to the Partnership's
accruing a special distribution payable to the Limited Partners of $262,500 at
December 31, 1996, from cumulative excess operating reserves. No special
distribution payable was accrued at December 31, 1997. The General Partners
believe that the Partnership has sufficient cash on hand to meet its current
working capital needs.
Based on cash from operations, and for the years ended December 31,
1996 and 1995, cumulative excess operating reserves, the Partnership declared
distributions to the Limited Partners of $3,150,003, $3,412,500 and $3,325,002
for the years ended December 31, 1997, 1996 and 1995, respectively. This
represents distributions of $0.090 per Unit for the year ended December 31,
1997, $0.098 per Unit for the year ended December 31, 1996 and $0.095 per Unit
for the year ended December 31, 1995. The General Partners anticipate that the
Partnership will declare a special distribution to the Limited Partners during
the quarter ending March 31, 1998, representing cumulative excess operating
reserves. No amounts distributed to the Limited Partners for the years ended
December 31, 1997, 1996 and 1995, are required to be or have been treated by the
Partnership as a return of capital for purposes of calculating the Limited
Partners' return on their adjusted capital contributions. The Partnership
intends to continue to make distributions of cash available for distribution to
the Limited Partners on a quarterly basis.
The 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, but not the obligation, to make
additional capital contributions if they deem it appropriate in connection with
the operations of the Partnership.
Results of Operations
During 1995, the Partnership owned and leased 31 wholly-owned
Properties (including one Property in Ocoee, Florida, which was sold in July
1995, and two Properties in Jacksonville, Florida, which were sold in December
1995), during 1996, the Partnership owned and leased 28 wholly-owned Properties
(including one Property in Orlando, Florida, which was sold in October 1996) and
during 1997, the Partnership owned and leased 28 wholly-owned Properties. In
addition, during 1995, the Partnership was a co-venturer in two separate joint
ventures that each owned and leased one Property, and one joint venture that
owned and leased six Properties, and during 1996 and 1997, the Partnership was a
co-venturer in four joint ventures that owned and leased a total of nine
Properties. As of December 31, 1997, the Partnership owned, either directly or
through joint venture arrangements, 36 Properties which are subject to
long-term, triple-net leases. The leases of the Properties provide for minimum
base annual rental amounts (payable in monthly installments) ranging from
approximately $41,300 to $213,800. All of the leases provide for percentage rent
based on sales in excess of a specified amount. In addition, a majority of the
leases provide that, commencing in specified lease years (ranging from the third
to sixth 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.
8
<PAGE>
During the years ended December 31, 1997, 1996 and 1995, the
Partnership and its consolidated joint venture, Woodway Joint Venture, earned
$3,015,642, $3,182,058 and $3,300,816, respectively, in rental income from
operating leases and earned income from direct financing leases. The decrease in
rental and earned income during 1997, as compared to 1996, is primarily
attributable to a decrease of approximately $141,300, as a result of the sale of
the Property in Orlando, Florida, in October 1996, as described above in
"Liquidity and Capital Resources."
Rental and earned income decreased approximately $53,600 during the
year ended December 31, 1996, as compared to the year ended December 31, 1995,
as a result of the sale of two Properties located in Jacksonville, Florida, in
December 1995. In addition, rental and earned income decreased approximately
$45,400 during 1996, as compared to 1995, as a result of the sale of the
Property in Orlando, Florida, in October 1996 as described above. However, as a
result of Partnership accepting mortgage notes for the sale of the two
Properties located in Jacksonville, Florida, and the Property located in
Orlando, Florida, interest income increased during the years ended December 31,
1997 and 1996, each as compared to the previous year, as discussed below.
For the years ended December 31, 1997, 1996 and 1995, the Partnership
also earned $85,735, $31,712 and $59,085, respectively, in contingent rental
income. The increase in contingent rental income during 1997 as compared to
1996, is primarily attributable to (i) the Partnership adjusting estimated
contingent rental amounts accrued at December 31, 1996, to actual amounts during
the year ended December 31, 1997, and (ii) increased gross sales of certain
restaurant Properties requiring the payment of contingent rental income. The
decrease in contingent rental income during 1996, as compared to 1995, is
partially attributable to decreases in gross sales relating to certain
Properties.
During the years ended December 31, 1997, 1996 and 1995, the
Partnership also earned $238,338 , $127,246 and $76,445, respectively, in
interest and other income. The increase in interest and other income during 1997
and 1996, each as compared to the previous year, is primarily attributable to
the interest earned on the mortgage notes accepted in connection with the sale
of the one Property located in Orlando, Florida, in October 1996 and the two
Properties located in Jacksonville, Florida, in December 1995.
For the years ended December 31, 1997, 1996 and 1995, the Partnership
also earned $293,480, $266,500 and $244,933, respectively, attributable to net
income earned by unconsolidated joint ventures in which the Partnership is a
co-venturer. The increase in net income earned by joint ventures during 1997 and
1996, each as compared to the previous year, is primarily attributable to the
fact that the Partnership invested in Middleburg Joint Venture in May 1996, as
described above in "Liquidity and Capital Resources."
During at least one of the years ended December 31, 1997, 1996 and
1995, four lessees of the Partnership and its consolidated joint venture, (i)
Golden Corral Corporation, (ii) Carrols Corporation (iii) Restaurant Management
Services, Inc. and (iv) Flagstar Enterprises, Inc. and Quincy's Inc. (which are
affiliated entities under common control of Flagstar Corporation) (herein after
referred to as Flagstar Corporation), each contributed more than ten percent of
the Partnership's total rental income (including rental income from the
Partnership's consolidated joint venture and the Partnership's share of rental
income from eight Properties owned by joint ventures). As of December 31, 1997,
Golden Corral Corporation was the lessee under leases relating to four
restaurants, Carrols Corporation was the lessee under leases relating to five
restaurants, Restaurant Management Services, Inc. was the lessee under leases
relating to five restaurants and Flagstar Corporation was the lessee under
leases relating to three restaurants. It is anticipated that, based on the
minimum annual rental payments required by the leases, Golden Corral
Corporation, Carrols Corporation and Restaurant Management Services, each will
continue to contribute more than ten percent of the Partnership's total rental
income during 1998 and subsequent years. In addition, during at least one of the
three years ended December 31, 1997, 1996 and 1995, three Restaurant Chains,
Golden Corral Family Steakhouse Restaurants, Burger King and Shoney's, each
accounted for more than ten percent of the Partnership's total rental income
(including rental income from the Partnership's consolidated joint venture and
the Partnership's share of rental income from eight Properties owned by
unconsolidated joint ventures). In subsequent years, it is anticipated that
these three Restaurant Chains each will continue to account for more than ten
percent of the Partnership's 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.
Operating expenses, including depreciation and amortization expense,
were $377,922, $397,587 and $390,308 for the years ended December 31, 1997, 1996
and 1995, respectively. The decrease in operating expenses
9
<PAGE>
during 1997, as compared to 1996, is primarily attributable to a decrease in
accounting and administrative expenses associated with operating the Partnership
and its Properties. The increase in operating expenses during 1996 as compared
to 1995, is primarily attributable to an increase in accounting and
administrative expenses associated with operating the Partnership and its
Properties and an increase in insurance expense as a result of the General
Partners' obtaining contingent liability and property coverage for the
Partnership beginning in 1995. The increase in operating expenses during 1996,
as compared to 1995, was partially offset by a decrease in depreciation expense
as a result of the sale of the two properties located in Jacksonville, Florida,
in December 1995, as described above in "Liquidity and Capital Resources."
As a result of the 1996 sale of the Property in Orlando, Florida, as
described above in "Liquidity and Capital Resources," the Partnership recognized
a loss of $99,031 for the year ended December 31, 1996. In addition, as a result
of the 1995 sales of the Property in Ocoee, Florida, and the two Properties in
Jacksonville, Florida, as described above in "Liquidity and Capital Resources,"
the Partnership recognized a gain of $71,638 and a loss of $11,712,
respectively, during the year ended December 31, 1995. No Properties were sold
during 1997.
The General Partners of the Partnership are in the process of assessing
and addressing the impact of the year 2000 on its computer package software. The
hardware and built-in software are believed to be year 2000 compliant.
Accordingly, the General Partners do not expect this matter to materially impact
how the Partnership conducts business nor its current or future results of
operations or financial position.
The Partnership's leases as of December 31, 1997, are triple-net leases
and contain provisions that the General Partners believe mitigate the adverse
effect of inflation. Such provisions include clauses requiring the payment of
percentage rent based on certain restaurant sales above a specified level and/or
automatic increases in base rent at specified times during the term of the
lease. Management expects that increases in restaurant sales volume due to
inflation and real sales growth should result in an increase in rental income
over time. Continued inflation also may cause capital appreciation of the
Partnership's Properties. Inflation and changing prices, however, also may have
an adverse impact on the sales of the restaurants and on potential capital
appreciation of the Properties.
Item 8. Financial Statements and Supplementary Data
10
<PAGE>
CNL INCOME FUND VIII, LTD.
(A Florida Limited Partnership)
CONTENTS
Page
Report of Independent Accountants 12
Financial Statements:
Balance Sheets 13
Statements of Income 14
Statements of Partners' Capital 15
Statements of Cash Flows 16
Notes to Financial Statements 18
11
<PAGE>
Report of Independent Accountants
To the Partners
CNL Income Fund VIII, Ltd.
We have audited the financial statements and the financial statement schedules
of CNL Income Fund VIII, Ltd. (a Florida limited partnership) listed in Item
14(a) of this Form 10-K. These financial statements and financial statement
schedules are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements and
financial statement schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of CNL Income Fund VIII, Ltd. as
of December 31, 1997 and 1996, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1997 in
conformity with generally accepted accounting principles. In addition, in our
opinion, the financial statement schedules referred to above, when considered in
relation to the basic financial statements taken as a whole, present fairly, in
all material respects, the information required to be included therein.
/s/ Coopers & Lybrand, L.L.P.
- --------------------------------
Orlando, Florida
January 12, 1998
12
<PAGE>
CNL INCOME FUND VIII, LTD.
(A Florida Limited Partnership)
BALANCE SHEETS
December 31,
ASSETS 1997 1996
------ ----------- ------------
Land and buildings on operating
leases, less accumulated
depreciation $13,960,232 $14,169,203
Net investment in direct financing
leases 10,044,975 10,223,225
Investment in joint ventures 2,877,717 2,940,826
Mortgage notes receivable 1,853,386 1,862,262
Cash and cash equivalents 1,602,236 1,476,274
Receivables, less allowance for
doubtful accounts of $19,228 and
$4,775 51,393 25,675
Prepaid expenses 4,357 4,377
Accrued rental income, less
allowance for doubtful accounts
of $4,501 in 1997 1,811,329 1,682,593
Other assets 52,671 52,671
----------- -----------
$32,258,296 $32,437,106
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 8,359 $ 7,693
Escrowed real estate taxes payable 24,459 15,138
Distributions payable 787,501 1,050,000
Due to related parties 59,649 56,880
Rents paid in advance 53,556 74,502
----------- -----------
Total liabilities 933,524 1,204,213
Minority interest 108,374 108,059
Partners' capital 31,216,398 31,124,834
----------- -----------
$32,258,296 $32,437,106
=========== ===========
See accompanying notes to financial statements.
13
<PAGE>
CNL INCOME FUND VIII, LTD.
(A Florida Limited Partnership)
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Year Ended December 31,
1997 1996 1995
---------- ---------- -------
<S> <C>
Revenues:
Rental income from operating
leases $1,804,273 $1,867,968 $1,951,189
Earned income from direct
financing leases 1,211,369 1,314,090 1,349,627
Contingent rental income 85,735 31,712 59,085
Interest and other income 238,338 127,246 76,445
---------- ---------- ----------
3,339,715 3,341,016 3,436,346
---------- ---------- ----------
Expenses:
General operating and
administrative 140,586 156,177 140,009
Professional services 23,284 27,682 25,927
State and other taxes 5,081 4,757 6,796
Depreciation and amortization 208,971 208,971 217,576
---------- ---------- ----------
377,922 397,587 390,308
---------- ---------- ----------
Income Before Minority Interest
in Income of Consolidated Joint
Venture, Equity in Earnings of
Unconsolidated Joint Ventures and
Gain (Loss) on Sale of Land and
Buildings 2,961,793 2,943,429 3,046,038
Minority Interest in Income of
Consolidated Joint Venture (13,706) (13,906) (14,142)
Equity in Earnings of
Unconsolidated Joint Ventures 293,480 266,500 244,933
Gain (Loss) on Sale of Land and
Buildings - (99,031) 59,926
---------- ---------- ----------
Net Income $3,241,567 $3,096,992 $3,336,755
========== ========== ==========
Allocation of Net Income:
General partners $ 32,416 $ 31,413 $ 32,714
Limited partners 3,209,151 3,065,579 3,304,041
---------- ---------- ----------
$3,241,567 $3,096,992 $3,336,755
========== ========== ==========
Net Income Per Limited Partner Unit $ 0.092 $ 0.088 $ 0.094
========== ========== ==========
Weighted Average Number of Limited
Partner Units Outstanding 35,000,000 35,000,000 35,000,000
========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
14
<PAGE>
CNL INCOME FUND VIII, LTD.
(A Florida Limited Partnership)
STATEMENTS OF PARTNERS' CAPITAL
Years Ended December 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
General Partners Limited Partners
Accumu- Accumu-
Contri- lated Contri- Distri- lated Syndication
butions Earnings butions butions Earnings Costs Total
------- -------- ----------- ------------ ----------- ----------- ------------
<S> <C>
Balance, December 31, 1994 $1,000 $128,898 $35,000,000 $(12,447,136) $12,760,827 $(4,015,000) $31,428,589
Distributions to limited
partners ($0.095 per
limited partner unit) - - - (3,325,002) - - (3,325,002)
Net income - 32,714 - - 3,304,041 - 3,336,755
------ -------- ----------- ------------ ----------- ----------- -----------
Balance, December 31, 1995 1,000 161,612 35,000,000 (15,772,138) 16,064,868 (4,015,000) 31,440,342
Distributions to limited
partners ($0.098 per
limited partner unit) - - - (3,412,500) - - (3,412,500)
Net income - 31,413 - - 3,065,579 - 3,096,992
------ -------- ----------- ------------ ----------- ----------- -----------
Balance, December 31, 1996 1,000 193,025 35,000,000 (19,184,638) 19,130,447 (4,015,000) 31,124,834
Distributions to limited
partners ($0.090 per
limited partner unit) - - - (3,150,003) - - (3,150,003)
Net income - 32,416 - - 3,209,151 - 3,241,567
------ -------- ----------- ------------ ----------- ----------- -----------
Balance, December 31, 1997 $1,000 $225,441 $35,000,000 $(22,334,641) $22,339,598 $(4,015,000) $31,216,398
====== ======== =========== ============ =========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
15
<PAGE>
CNL INCOME FUND VIII, LTD.
(A Florida Limited Partnership)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31,
1997 1996 1995
----------- ----------- -----------
<S> <C>
Increase (Decrease) in Cash and
Cash Equivalents:
Cash Flows from Operating
Activities:
Cash received from tenants $ 3,114,439 $ 3,222,903 $ 3,074,333
Distributions from uncon-
solidated joint ventures 356,589 323,531 295,114
Cash paid for expenses (163,215) (194,218) (170,074)
Interest received 235,243 110,452 64,312
----------- ----------- -----------
Net cash provided by
operating activities 3,543,056 3,462,668 3,263,685
----------- ----------- -----------
Cash Flows from Investing
Activities:
Proceeds from sale of land
and buildings - - 1,184,865
Additions to land and
buildings on operating
leases - (1,135) (397,291)
Investment in direct
financing leases - (1,326) (550,911)
Investment in joint
venture - (234,059) -
Collections on mortgage
notes receivable 8,799 2,557 -
Other - (34,793) -
----------- ----------- ----------
Net cash provided by
(used in) investing
activities 8,799 (268,756) 236,663
----------- ----------- -----------
Cash Flows from Financing
Activities:
Distributions to limited
partners (3,412,502) (3,325,000) (3,307,502)
Distributions to holder of
minority interest (13,391) (13,503) (11,526)
----------- ----------- -----------
Net cash used in
financing activities (3,425,893) (3,338,503) (3,319,028)
----------- ----------- -----------
Net Increase (Decrease) in Cash
and Cash Equivalents 125,962 (144,591) 181,320
Cash and Cash Equivalents at
Beginning of Year 1,476,274 1,620,865 1,439,545
----------- ----------- -----------
Cash and Cash Equivalents at
End of Year $ 1,602,236 $ 1,476,274 $ 1,620,865
=========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
16
<PAGE>
CNL INCOME FUND VIII, LTD.
(A Florida Limited Partnership)
STATEMENTS OF CASH FLOWS - CONTINUED
<TABLE>
<CAPTION>
Year Ended December 31,
1997 1996 1995
----------- ----------- --------
<S> <C>
Reconciliation of Net Income to
Net Cash Provided by Operating
Activities:
Net income $ 3,241,567 $ 3,096,992 $ 3,336,755
----------- ----------- -----------
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation 208,971 208,971 216,295
Amortization - - 1,281
Minority interest in
income of consolidated
joint venture 13,706 13,906 14,142
Equity in earnings of
unconsolidated joint
ventures, net of
distributions 63,109 57,031 50,181
Loss (gain) on sale of land
and buildings - 99,031 (59,926)
Decrease (increase) in
receivables (25,641) 429 16,572
Decrease (increase) in
prepaid expenses 20 (1,465) (2,912)
Decrease in net investment
in direct financing leases 178,250 157,194 122,052
Increase in accrued rental
income (128,736) (219,757) (342,862)
Increase (decrease) in
accounts payable and
accrued expenses 9,987 12,203 (15,650)
Increase (decrease) in due
to related parties 2,769 (4,505) 6,335
Increase (decrease) in
rents paid in advance (20,946) 42,638 (78,578)
----------- ----------- -----------
Total adjustments 301,489 365,676 (73,070)
----------- ----------- -----------
Net Cash Provided by Operating
Activities $ 3,543,056 $ 3,462,668 $ 3,263,685
=========== =========== ===========
Supplemental Schedule of Non-Cash
Investing and Financing
Activities:
Mortgage notes accepted in
exchange for sale of land
and buildings $ - $ 1,375,000 $ 460,000
=========== =========== ===========
Distributions declared and
unpaid at December 31 $ 787,501 $ 1,050,000 $ 962,500
=========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
17
<PAGE>
CNL INCOME FUND VIII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
Years Ended December 31, 1997, 1996 and 1995
1. Significant Accounting Policies:
Organization and Nature of Business - CNL Income Fund VIII, 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 method. 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
investment in the leases.
Operating method - Land and building leases accounted for
using the operating method are recorded at cost, revenue is
recognized as rentals are earned and depreciation is charged
to operations as incurred. Buildings are depreciated on the
straight-line method over their estimated useful lives of 30
years. When scheduled rentals vary during the lease term,
income is recognized on a straight-line basis so as to produce
a constant periodic rent over the lease term commencing on the
date the property is placed in service.
18
<PAGE>
CNL INCOME FUND VIII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1997, 1996 and 1995
1. Significant Accounting Policies - Continued:
Accrued rental income represents the aggregate amount of
income recognized on a straight-line basis in excess of
scheduled rental payments to date.
When the properties are sold, the related cost and accumulated
depreciation for operating leases and the net investment for direct
financing leases, plus any accrued rental income, are removed from the
accounts and gains or losses from sales are reflected in income. The
general partners of the Partnership review the 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.
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 the allowance for
doubtful accounts are decreased accordingly.
Investment in Joint Ventures - The Partnership accounts for its 88
percent interest in Woodway Joint Venture using the consolidation
method. Minority interest represents the minority joint venture
partner's proportionate share of the equity in the Partnership's
consolidated joint venture. All significant intercompany accounts and
transactions have been eliminated.
The Partnership's investments in Asheville Joint Venture, CNL
Restaurant Investments II and Middleburg Joint Venture are accounted
for using the equity method since the Partnership shares control with
affiliates which have the same general partners.
19
<PAGE>
CNL INCOME FUND VIII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1997, 1996 and 1995
1. Significant Accounting Policies - Continued:
Cash and Cash Equivalents - The Partnership considers all highly liquid
investments with a maturity of three months or less when purchased to
be cash equivalents. Cash and cash equivalents consist of demand
deposits at commercial banks and money market funds (some of which are
backed by government securities). Cash equivalents are stated at cost
plus accrued interest, which approximates market value.
Cash accounts maintained on behalf of the Partnership in demand
deposits at commercial banks and money market funds may exceed
federally insured levels; however, the Partnership has not experienced
any losses in such accounts. The Partnership limits investment of
temporary cash investments to financial institutions with high credit
standing; therefore, the Partnership believes it is not exposed to any
significant credit risk on cash and cash equivalents.
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.
20
<PAGE>
CNL INCOME FUND VIII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1997, 1996 and 1995
2. Leases:
The Partnership leases its 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 have been classified as operating leases and some of the leases
have been classified as direct financing leases. For property leases
classified as direct financing leases, the building portions of the
majority of property leases are accounted for as direct financing
leases while the land portions of these leases are accounted for as
operating leases. Substantially all leases are for 15 to 20 years and
provide for minimum and contingent rentals. In addition, the tenant
pays all property taxes and assessments, fully maintains the interior
and exterior of the building and carries insurance coverage for public
liability, property damage, fire and extended coverage. The lease
options generally allow tenants to renew the leases for two to four
successive five-year periods subject to the same terms and conditions
of the initial lease. Most leases also allow the tenant to purchase the
property at fair market value after a specified portion of the lease
has elapsed.
3. Land and Buildings on Operating Leases:
Land and buildings on operating leases consisted of the following at
December 31:
1997 1996
----------- -----------
Land $ 9,167,336 $ 9,167,336
Buildings 6,231,430 6,231,430
----------- -----------
15,398,766 15,398,766
Less accumulated
depreciation (1,438,534) (1,229,563)
----------- -----------
$13,960,232 $14,169,203
=========== ===========
21
<PAGE>
CNL INCOME FUND VIII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1997, 1996 and 1995
3. Land and Buildings on Operating Leases - Continued:
In October 1996, the Partnership sold its property in Orlando, Florida,
to the tenant for $1,375,000 and accepted the sales proceeds in the
form of a promissory note (Note 6). This property was originally
acquired by the Partnership in December 1990 and had a cost of
approximately $1,177,000, excluding acquisition fees and miscellaneous
acquisition expenses; therefore, the Partnership sold the property for
approximately $198,000 in excess of its original purchase price. Due to
the fact that the Partnership had recognized accrued rental income
since the inception of the lease relating to the straight lining of
future scheduled rent increases in accordance with generally accepted
accounting principles, the Partnership wrote off the cumulative balance
of such accrued rental income at the time of the sale of this property,
resulting in a loss of $99,031 for financial reporting purposes. Due to
the fact that the straight lining of future rent increases over the
term of the lease is a non-cash accounting adjustment, the write off of
these amounts is a loss for financial statement purposes only.
Some leases provide for escalating guaranteed minimum rents throughout
the lease terms. Income from these scheduled rent increases is
recognized on a straight-line basis over the terms of the leases. For
the years ended December 31, 1997, 1996 and 1995, the Partnership
recognized $128,736, $219,757 and $342,862, respectively, of such
rental income.
The following is a schedule of the future minimum lease payments to be
received on noncancellable operating leases at December 31, 1997:
1998 $ 1,704,859
1999 1,704,859
2000 1,735,498
2001 1,825,526
2002 1,871,537
Thereafter 12,996,507
-----------
$21,838,786
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.
22
<PAGE>
CNL INCOME FUND VIII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1997, 1996 and 1995
4. Net Investment in Direct Financing Leases:
The following lists the components of the net investment in direct
financing leases at December 31:
1997 1996
------------ ------------
Minimum lease payments
receivable $ 18,939,788 $ 20,329,407
Estimated residual
values 3,040,615 3,040,615
Less unearned income (11,935,428) (13,146,797)
------------ ------------
Net investment in
direct financing
leases $ 10,044,975 $ 10,223,225
============ ============
In October 1996, the Partnership sold its property in Orlando, Florida,
for which the building portion had been classified as a direct
financing lease. In connection therewith, the gross investment (minimum
lease payments receivable and estimated residual values) and unearned
income relating to this property was removed from the accounts and the
loss from the sale relating to the land portion of the property was
reflected in income (Note 3).
The following is a schedule of future minimum lease payments to be
received on direct financing leases at December 31, 1997:
1998 $ 1,389,622
1999 1,389,622
2000 1,389,622
2001 1,413,128
2002 1,424,842
Thereafter 11,932,952
-----------
$18,939,788
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).
23
<PAGE>
CNL INCOME FUND VIII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1997, 1996 and 1995
5. Investment in Joint Ventures:
The Partnership has an 86 percent and a 37 percent interest in the
profits and losses of Asheville Joint Venture and CNL Restaurant
Investments II, respectively. The remaining interests in these joint
ventures are held by affiliates of the Partnership which have the same
general partners.
In May 1996, the Partnership entered into a joint venture arrangement,
Middleburg Joint Venture, with an affiliate of the Partnership which
has the same general partners to hold one restaurant property. In
connection therewith, the Partnership contributed $234,059 to the joint
venture and has a 12 percent interest in the profits and losses of the
joint venture.
Asheville Joint Venture and Middleburg Joint Venture each own and lease
one property, and CNL Restaurant Investments II owns and leases six
properties to an operator of national fast-food or family-style
restaurants. The following presents the joint ventures' combined,
condensed financial information at December 31:
1997 1996
---------- ----------
Land and buildings on
operating leases,
less accumulated
depreciation $6,487,210 $6,654,361
Net investment in direct
financing lease 1,335,223 1,349,611
Cash 596 9,859
Receivables 14,169 13,840
Prepaid expenses 1,017 888
Accrued rental income 128,993 91,074
Liabilities 864 9,992
Partners' capital 7,966,344 8,109,641
Revenues 1,001,284 862,821
Net income 824,576 688,253
The Partnership recognized income totalling $293,480, $266,500 and
$244,933 for the years ended December 31, 1997, 1996 and 1995,
respectively, from these joint ventures.
24
<PAGE>
CNL INCOME FUND VIII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1997, 1996 and 1995
6. Mortgage Notes Receivable:
As of December 31, 1995, the Partnership had accepted two promissory
notes in the principal sum totalling $460,000, in connection with the
sale of two of its properties in Jacksonville, Florida. The promissory
notes, which are collateralized by mortgages on the properties, bear
interest at a rate of ten percent per annum, and are being collected in
119 equal monthly installments of $2,106 and $1,931, with balloon
payments of $218,252 and $200,324, respectively, due in December 2005.
In addition, in connection with the sale in 1996 of its property in
Orlando, Florida, the Partnership accepted a promissory note in the
principal sum of $1,388,568, representing the gross sales price of
$1,375,000 plus tenant closing costs of $13,568 that the Partnership
financed on behalf of the tenant. The promissory note bears interest at
a rate of 10.75% per annum, is collateralized by a mortgage on the
property and is being collected in 12 monthly installments of interest
only, in 24 monthly installments of $15,413 consisting of principal and
interest, and thereafter in 144 monthly installments of $16,220
consisting of principal and interest.
The mortgage notes receivable consisted of the following at December
31:
1997 1996
---------- ----------
Principal balance $1,837,212 $1,846,011
Accrued interest receivable 16,174 16,251
---------- ----------
$1,853,386 $1,862,262
========== ==========
The general partners believe that the estimated fair value of mortgage
notes receivable at December 31, 1997 and 1996, approximated the
outstanding principal amount based on estimated current rates at which
similar loans would be made to borrowers with similar credit and for
similar maturities.
25
<PAGE>
CNL INCOME FUND VIII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1997, 1996 and 1995
7. Allocations and Distributions:
Generally, all net income and net losses of the Partnership, excluding
gains and losses from the sale of properties, are allocated 99 percent
to the limited partners and one percent to the general partners.
Distributions of net cash flow are made 99 percent to the limited
partners and one percent to the general partners; provided, however,
that the one percent of net cash flow to be distributed to the general
partners is subordinated to receipt by the limited partners of an
aggregate, ten percent, cumulative, noncompounded annual return on
their adjusted capital contributions (the "10% Preferred Return").
Generally, net sales proceeds from the sale of properties, to the
extent distributed, will be distributed first to the limited partners
in an amount sufficient to provide them with their 10% Preferred
Return, plus the return of their adjusted capital contributions. The
general partners will then receive, to the extent previously
subordinated and unpaid, a one percent interest in all prior
distributions of net cash flow and a return of their capital
contributions. Any remaining sales proceeds will be distributed 95
percent to the limited partners and five percent to the general
partners. Any gain from the sale of a property is, in general,
allocated in the same manner as net sales proceeds are distributable.
Any loss from the sale of a property is, in general, allocated first,
on a pro rata basis, to partners with positive balances in their
capital accounts; thereafter, 95 percent to the limited partners and
five percent to the general partners.
During the years ended December 31, 1997, 1996 and 1995, the
Partnership declared distributions to the limited partners of
$3,150,003, $3,412,500 and $3,325,002, respectively. No distributions
have been made to the general partners to date.
26
<PAGE>
CNL INCOME FUND VIII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1997, 1996 and 1995
8. Income Taxes:
The following is a reconciliation of net income for financial reporting
purposes to net income for federal income tax purposes for the years
ended December 31:
<TABLE>
<CAPTION>
1997 1996 1995
---------- ---------- -------
<S> <C>
Net income for financial
reporting purposes $3,241,567 $3,096,992 $3,336,755
Depreciation for tax
reporting purposes in
in excess of depreci-
ation for financial
reporting purposes (204,419) (219,372) (219,653)
Direct financing leases
recorded as operating
leases for tax
reporting purposes 178,250 157,197 122,052
Allowance for doubtful
accounts 18,954 (23,716) 8,067
Accrued rental income (133,237) (219,757) (342,862)
Rents paid in advance (21,446) 42,637 (70,010)
Gain or loss on sale of
land and buildings for
tax reporting purposes
in excess of gain or
loss for financial
reporting purposes 670 99,031 161,548
Equity in earnings of
unconsolidated joint
ventures for tax
reporting purposes
in excess of (less than)
equity in earnings of
unconsolidated joint
ventures for financial
reporting purposes (2,987) 13,320 (4,016)
Minority interest in
timing differences of
consolidated joint
venture 1,571 1,677 2,783
---------- ---------- ----------
Net income for federal
income tax purposes $3,078,923 $2,948,009 $2,994,664
========== ========== ==========
</TABLE>
27
<PAGE>
CNL INCOME FUND VIII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1997, 1996 and 1995
9. Related Party Transactions:
One of the individual general partners, James M. Seneff, Jr., is one of
the principal shareholders of CNL Group, Inc., the parent company of
CNL Fund Advisors, Inc. The other individual general partner, Robert A.
Bourne, served as president of CNL Fund Advisors, Inc. through October
1997. CNL Income Fund Advisors, Inc. was a wholly owned subsidiary of
CNL Group, Inc. until its merger, effective January 1, 1996, with CNL
Fund Advisors, Inc. During the years ended December 31, 1997, 1996 and
1995, CNL Income Fund Advisors, Inc. and CNL Fund Advisors, Inc.
(hereinafter referred to collectively as the "Affiliates") each
performed certain services for the Partnership, as described below.
During the years ended December 31, 1997, 1996 and 1995, certain
Affiliates acted as manager of the Partnership's properties pursuant to
a management agreement with the Partnership. In connection therewith,
the Partnership agreed to pay Affiliates an annual, noncumulative,
subordinated 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, but not in
excess of competitive fees for comparable services. These fees will be
incurred and will be payable only after the limited partners receive
their 10% Preferred Return. Due to the fact that these fees are
noncumulative, if the limited partners do not receive their 10%
Preferred Return in any particular year, no management fees will be due
or payable for such year. As a result of such threshold, no management
fees were incurred during the years ended December 31, 1997, 1996 and
1995.
Certain Affiliates are also entitled to receive a deferred,
subordinated real estate disposition fee, payable upon the sale of one
or more properties based on the lesser of one-half of a competitive
real estate commission or three percent of the sales price if the
Affiliates provide a substantial amount of services in connection with
the sale. However, if the net sales proceeds are reinvested in a
replacement property, no such real estate disposition fees will be
incurred until such replacement property is sold and the net sales
proceeds are distributed. The payment of the real estate disposition
fee is subordinated to receipt by the limited partners of their
aggregate 10% Preferred Return, plus their adjusted capital
28
<PAGE>
CNL INCOME FUND VIII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1997, 1996 and 1995
9. Related Party Transactions - Continued:
contributions. During the years ended December 31, 1996 and 1995, the
Partnership incurred $41,250 and $13,800, respectively, in deferred,
subordinated real estate disposition fees as the result of the sales of
the property in Orlando, Florida, and two properties in Jacksonville,
Florida.
No deferred, subordinated real estate disposition fees were incurred
for the year ended December 1997.
During the years ended December 31, 1997, 1996 and 1995, Affiliates
provided accounting and administrative services to the Partnership on a
day-to-day basis. The Partnership incurred $80,461, $89,317 and $73,365
for the years ended December 31, 1997, 1996 and 1995, respectively, for
such services.
The due to related parties consisted of the following at December 31:
1997 1996
------- ---------
Due to Affiliates:
Accounting and administrative
services $ 4,599 $ 1,830
Deferred, subordinated real
estate disposition fee 55,050 55,050
------- -------
$59,649 $56,880
29
<PAGE>
CNL INCOME FUND VIII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1997, 1996 and 1995
10. Concentration of Credit Risk:
The following schedule presents total rental and earned income from
individual 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 the
unconsolidated joint ventures) for at least one of the years ended
December 31:
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- ------
<S> <C>
Golden Corral
Corporation $706,839 $663,889 $663,943
Restaurant Management
Services, Inc. 531,110 533,990 525,260
Carrols Corporation 523,517 526,034 532,990
Flagstar Enterprises,
Inc. and Quincy's
Restaurants, Inc. 232,876 356,720 363,335
</TABLE>
In addition, the following schedule presents total rental and earned
income from individual restaurant chains, each representing more than
ten percent of the Partnership's total rental and earned income
(including the Partnership's share of total rental and earned income
from the unconsolidated joint ventures), for at least one of the years
ended December 31:
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- ---------
<S> <C>
Burger King $1,003,419 $989,480 $987,871
Golden Corral
Family Steakhouse
Restaurants 735,949 681,042 663,943
Shoney's 607,054 609,072 526,649
</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. However, the general partners believe that the risk
of such a default is reduced due to the essential or important nature
of these Properties for the on-going operations of the lessees.
30
<PAGE>
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
The General Partners of the Registrant are James M. Seneff, Jr., Robert
A. Bourne and CNL Realty Corporation, a Florida corporation. The General
Partners manage and control the Partnership's affairs and have general
responsibility and the ultimate authority in all matters affecting the
Partnership's business. The Partnership has available to it the services,
personnel and experience of CNL Fund Advisors, Inc., CNL Group, Inc. and their
affiliates, all of which are affiliates of the General Partners.
James M. Seneff, Jr., age 51, is a principal stockholder of CNL Group,
Inc., a diversified real estate company, and has served as its Chairman of the
Board of Directors, director and Chief Executive Officer since its formation in
1980. CNL Group, Inc. is the parent company of CNL Securities Corp., CNL
Investment Company, CNL Fund Advisors, Inc., CNL Real Estate Advisors, Inc. and
prior to its merger with CNL Fund Advisors, Inc., effective January 1, 1996, CNL
Income Fund Advisors, Inc. Mr. Seneff is Chief Executive Officer, and has been a
director and registered principal of CNL Securities Corp., which served as the
managing dealer in the Partnership's offering of Units, since its formation in
1979. Mr. Seneff also has held the position of President and a director of CNL
Management Company, a registered investment advisor, since its formation in
1976, has served as Chief Executive Officer and Chairman of the Board of CNL
Investment Company, and Chief Executive Officer and Chairman of the Board of
Commercial Net Lease Realty, Inc. since 1992, has served as the Chairman of the
Board and the Chief Executive Officer of CNL Realty Advisors, Inc. since its
inception in 1991 through December 31, 1997, at which time CNL Realty Advisors,
Inc. merged with Commercial Net Lease Realty, Inc., served as Chairman of the
Board and Chief Executive Officer of CNL Income Fund Advisors, Inc. since its
inception in 1994 through December 31, 1995, has served as a director, Chairman
of the Board and Chief Executive Officer of CNL Fund Advisors, Inc. since its
inception in 1994, and has held the position of Chief Executive Officer and a
director of CNL Institutional Advisors, Inc., a registered investment advisor,
since its inception in 1990. In addition, Mr. Seneff has served as a director,
Chairman of the Board and Chief Executive Officer of CNL American Properties
Fund, Inc. since 1994, and has served as a director, Chairman of the Board and
Chief Executive Officer of CNL American Realty Fund, Inc. since 1996 and of CNL
Real Estate Advisors, Inc. since January 1997. Mr. Seneff previously served on
the Florida State Commission on Ethics and is a former member and past Chairman
of the State of Florida Investment Advisory Council, which recommends to the
Florida Board of Administration investments for various Florida employee
retirement funds. The Florida Board of Administration, Florida's principal
investment advisory and money management agency, oversees the investment of more
than $60 billion of retirement funds. Since 1971, Mr. Seneff has been active in
the acquisition, development and management of real estate projects and,
directly or through an affiliated entity, has served as a general partner or
joint venturer in over 100 real estate ventures involved in the financing,
acquisition, construction and rental of office buildings, apartment complexes,
restaurants, hotels and other real estate. Included in these real estate
ventures are approximately 65 privately offered real estate limited partnerships
in which Mr. Seneff, directly or through an affiliated entity, serves or has
served as a general partner. Also included are CNL Income Fund, Ltd., CNL Income
Fund II, Ltd., CNL Income Fund III, Ltd., CNL Income Fund IV, Ltd., CNL Income
Fund V, Ltd., CNL Income Fund VI, Ltd., CNL Income Fund VII, Ltd., CNL Income
Fund 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 XV, Ltd., CNL Income Fund XVI, Ltd., CNL Income Fund XVII, Ltd. and
CNL Income Fund XVIII, Ltd. (the "CNL Income Fund Partnerships"), public real
estate limited partnerships with investment objectives similar to those of the
Partnership, in which Mr. Seneff serves as a general partner. Mr. Seneff
received his degree in Business Administration from Florida State University in
1968.
31
<PAGE>
Robert A. Bourne, age 50, is President and Treasurer of CNL Group,
Inc., President, a director and a registered principal of CNL Securities Corp.,
President and a director of CNL Investment Company, and prior to its merger with
CNL Fund Advisors, Inc., effective January 1, 1996, CNL Income Fund Advisors,
Inc., and Chief Investment Officer, Vice Chairman of the Board of Directors, a
director and Treasurer of CNL Institutional Advisors, Inc., a registered
investment advisor. Mr. Bourne served as President of CNL Institutional
Advisors, Inc. from the date of its inception through June 30, 1997 and served
as President of CNL Fund Advisors, Inc. from the date of its inception through
October 1997. Mr. Bourne also has served as a director since 1992, as President
from July 1992 to February 1996, as Secretary and Treasurer from February 1996
through December 1997, and since February 1996, served as Vice Chairman of the
Board of Directors of Commercial Net Lease Realty, Inc. In addition, Mr. Bourne
has served as a director since its inception in 1991, as President from 1991 to
February 1996, as Secretary from February 1996 to July 1996, and since February
1996, served as Treasurer and Vice Chairman of CNL Realty Advisors, Inc. through
December 31, 1997, at which time CNL Realty Advisors, Inc. merged with
Commercial Net Lease Realty, Inc. In addition, Mr. Bourne has served as
President and a director of CNL American Properties Fund, Inc. since 1994, and
has served as President and a director of CNL American Realty Fund, Inc. since
1996 and of CNL Real Estate Advisors, Inc. since January 1997. Upon graduation
from Florida State University in 1970, where he received a B.A. in Accounting,
with honors, Mr. Bourne worked as a certified public accountant and, from
September 1971 through December 1978, was employed by Coopers & Lybrand,
Certified Public Accountants, where he held the position of tax manager
beginning in 1975. From January 1979 until June 1982, Mr. Bourne was a partner
in the accounting firm of Cross & Bourne and from July 1982 through January
1987, he was a partner in the accounting firm of Bourne & Rose, P.A., Certified
Public Accountants. Mr. Bourne, who joined CNL Securities Corp. in 1979, has
participated as a general partner or joint venturer in over 100 real estate
ventures involved in the financing, acquisition, construction and rental of
office buildings, apartment complexes, restaurants, hotels and other real
estate. Included in these real estate ventures are approximately 64 privately
offered real estate limited partnerships in which Mr. Bourne, directly or
through an affiliated entity, serves or has served as a general partner. Also
included are the CNL Income Fund Partnerships, public real estate limited
partnerships with investment objectives similar to those of the Partnership, in
which Mr. Bourne serves as a general partner.
CNL Realty Corporation is a corporation organized on November 26, 1985,
under the laws of the State of Florida. Its sole directors and shareholders are
James M. Seneff, Jr. and Robert A. Bourne, the individual General Partners. CNL
Realty Corporation was organized to serve as the corporate general partner of
real estate limited partnerships, such as the Partnership, organized by one or
both of the individual General Partners. CNL Realty Corporation currently serves
as the corporate general partner of the CNL Income Fund Partnerships.
CNL Fund Advisors, Inc. provides certain management services in
connection with the Partnership and its Properties. CNL Fund Advisors, Inc. is a
corporation organized in 1994 under the laws of the State of Florida, and its
principal office is located at 400 East South Street, Orlando, Florida 32801.
CNL Fund Advisors, Inc. is a wholly owned subsidiary of CNL Group, Inc., a
diversified real estate company, and was organized to perform property
acquisition, property management and other services.
CNL Group, Inc., which is the parent company of CNL Fund Advisors,
Inc., was organized in 1980 under the laws of the State of Florida. CNL Group,
Inc. is a diversified real estate company which provides a wide range of real
estate, development and financial services to companies in the United States
through the activities of its subsidiaries. These activities are primarily
focused on the franchised restaurant and hospitality industries. James M.
Seneff, Jr., an individual General Partner of the Partnership, is the Chairman
of the Board, Chief Executive Officer, and a director of CNL Group, Inc. Mr.
Seneff and his wife own all of the outstanding shares of CNL Group, Inc.
The following persons serve as operating officers of CNL Group, Inc. or
its affiliates or subsidiaries in the discretion of the Boards of Directors of
those companies, but, except as specifically indicated, do not serve as members
of the Boards of Directors of those entities. The Boards of Directors have the
responsibility for creating and implementing the policies of CNL Group, Inc. and
its affiliated companies.
32
<PAGE>
Curtis B. McWilliams, age 42, joined CNL Fund Advisors, Inc. in April
1997 and currently serves as President of CNL Fund Advisors, Inc. and as
Executive Vice President of CNL American Properties Fund, Inc. In addition, Mr.
McWilliams serves as Executive Vice President of CNL Group, Inc. and as
President of CNL Financial Services, Inc. and certain other subsidiaries of CNL
Group, Inc. From September 1983 through March 1997, Mr. McWilliams was employed
by Merrill Lynch. From January 1991 to August 1996, Mr. McWilliams was a
managing director in the corporate banking group of Merrill Lynch's investment
banking division. During this time, he was a senior relationship manager with
Merrill Lynch and as such was responsible for a number of the firm's larger
clients. From February 1990 to February 1993, he also served as co-head of one
of the Industrial Banking Groups within Merrill Lynch's investment banking
division and had administrative responsibility for a group of bankers and client
relationships, including the firm's transportation group. From September 1996 to
March 1997, Mr. McWilliams served as Chairman of Merrill Lynch's Private
Advisory Services. Mr. McWilliams received a B.S.E. in Chemical Engineering from
Princeton University in 1977 and a Masters of Business Administration with a
concentration in finance from the University of Chicago in 1983.
John T. Walker, age 39, is the Chief Operating Officer and Executive
Vice President of CNL Fund Advisors, Inc. and CNL American Properties Fund, Inc.
and serves as Executive Vice President of CNL American Realty Fund, Inc. and CNL
Real Estate Advisors, Inc. From May 1992 to May 1994, he was Executive Vice
President for Finance and Administration and Chief Financial Officer of Z Music,
Inc., a cable television network which was subsequently acquired by Gaylord
Entertainment, where he was responsible for overall financial and administrative
management and planning. From January 1990 through April 1992, Mr. Walker was
Chief Financial Officer of the First Baptist Church in Orlando, Florida. From
April 1984 through December 1989, he was a partner in the accounting firm of
Chastang, Ferrell & Walker, P.A., where he was the partner in charge of audit
and consulting services, and from 1981 to 1984, Mr. Walker was a Senior
Consultant/Audit Senior at Price Waterhouse. Mr. Walker is a Cum Laude graduate
of Wake Forest University with a B.S. in Accountancy and is a certified public
accountant.
Lynn E. Rose, age 49, a certified public accountant, has served as
Chief Financial Officer of CNL Group, Inc. since December 1993, has served as
Secretary of CNL Group, Inc. since 1987, and served as Controller of CNL Group,
Inc. from 1987 until December 1993. In addition, Ms. Rose has served as Chief
Financial Officer and Secretary of CNL Securities Corp. since July 1994. She has
served as Chief Operating Officer, Vice President and Secretary of CNL Corporate
Services, Inc. since November 1994. Ms. Rose also has served as Chief Financial
Officer and Secretary of CNL Institutional Advisors, Inc. since its inception in
1990, served as a director and Secretary of CNL Realty Advisors, Inc. since its
inception in 1991 through December 31, 1997, at which time CNL Realty Advisors,
Inc. merged with Commercial Net Lease Realty, Inc., Treasurer of CNL Realty
Advisors, Inc. from 1991 to February 1996, Secretary and Treasurer of Commercial
Net Lease Realty, Inc. from 1992 to February 1996, Secretary of CNL Income Fund
Advisors, Inc. since its inception in 1994 to December 1995, and a director,
Secretary and Treasurer of CNL Fund Advisors, Inc. since 1994 and has served as
a director, Secretary and Treasurer of CNL Real Estate Advisors, Inc. since
January 1997. Ms. Rose also has served as Secretary and Treasurer of CNL
American Properties Fund, Inc. since 1994, and has served as Secretary and
Treasurer of CNL American Realty Fund, Inc. since 1996. Ms. Rose also currently
serves as Secretary for approximately 50 additional corporations. Ms. Rose
oversees the management information services, administration, legal compliance,
accounting, tenant compliance, and reporting for over 300 corporations,
partnerships, and joint ventures. Prior to joining CNL, Ms. Rose was a partner
with Robert A. Bourne in the accounting firm of Bourne & Rose, P.A., Certified
Public Accountants. Ms. Rose holds a B.A. in Sociology from the University of
Central Florida. She was licensed as a certified public accountant in 1979.
33
<PAGE>
Jeanne A. Wall, age 39, has served as Chief Operating Officer of CNL
Investment Company and of CNL Securities Corp. since November 1994 and has
served as Executive Vice President of CNL Investment Company since January 1991.
In 1984, Ms. Wall joined CNL Securities Corp. In 1985, Ms. Wall became Vice
President of CNL Securities Corp., in 1987, she became Senior Vice President and
in July 1997, she became Executive Vice President of CNL Securities Corp. In
this capacity, Ms. Wall serves as national marketing and sales director and
oversees the national marketing plan for the CNL investment programs. In
addition, Ms. Wall oversees product development, partnership administration and
investor services for programs offered through participating brokers, and
corporate communications for CNL Group, Inc. and Affiliates. Ms. Wall also has
served as Senior Vice President of CNL Institutional Advisors, Inc., a
registered investment advisor, from 1990 to 1993, as Vice President of CNL
Realty Advisors, Inc. since its inception in 1991 through 1997, as Vice
President of Commercial Net Lease Realty, Inc. from 1992 through 1997, as
Executive Vice President of CNL Fund Advisors, Inc. since 1994, and as Executive
Vice President of CNL American Properties Fund, Inc. since 1994. In addition,
Ms. Wall has served as Executive Vice President of CNL Real Estate Advisors,
Inc. since January 1997 and as Executive Vice President of CNL American Realty
Fund, Inc. since 1996. Ms. Wall holds a B.A. in Business Administration from
Linfield College and is a registered principal of CNL Securities Corp. Ms. Wall
currently serves as a trustee on the board of the Investment Program Association
and on the Direct Participation Program committee for the National Association
of Securities Dealers (NASD).
Steven D. Shackelford, age 34, has served as Chief Financial Officer of
CNL Fund Advisors, Inc. since September 1996 and as Chief Financial Officer of
CNL American Properties Fund, Inc. since January 1997. From March 1995 to July
1996, he was a senior manager in the national office of Price Waterhouse where
he was responsible for advising foreign clients seeking to raise capital and a
public listing in the United States. From August 1992 to March 1995, he served
as a manager in the Price Waterhouse, Paris, France office serving several
multinational clients. Mr. Shackelford was an audit staff and audit senior from
1986 to 1992 in the Orlando, Florida office of Price Waterhouse. Mr. Shackelford
received a B.A. in Accounting, with honors, and a Masters of Business
Administration from Florida State University and is a certified public
accountant.
Item 11. Executive Compensation
Other than as described in Item 13, the Partnership has not paid and
does not intend to pay any executive compensation to the General Partners or any
of their affiliates. There are no compensatory plans or arrangements regarding
termination of employment or change of control.
Item 12. Security Ownership of Certain Beneficial Owners and Management
As of February 28, 1998, no person was known to the Registrant to be a
beneficial owner of more than five percent of the Units.
The following table sets forth, as of February 28, 1998, the beneficial
ownership interests of the General Partners in the Registrant.
<TABLE>
<CAPTION>
Title of Class Name of Partner Percent of Class
<S> <C>
General Partnership Interests James M. Seneff, Jr. 45%
Robert A. Bourne 45%
CNL Realty Corporation 10%
----
100%
</TABLE>
Neither the General Partners, nor any of their affiliates, owns any
interest in the Registrant, except as noted above. There are no arrangements
which at a subsequent date may result in change in control of the Registrant.
34
<PAGE>
Item 13. Certain Relationships and Related Transactions
The table below summarizes the types, recipients, methods of
computation and amounts of compensation, fees and distributions paid or payable
by the Partnership to the General Partners and their affiliates for the year
ended December 31, 1997, exclusive of any distributions to which the General
Partners or their affiliates may be entitled by reason of their purchase and
ownership of Units.
<TABLE>
<CAPTION>
==========================================================================================================================
Amount Incurred
Type of Compensation For the Year
and Recipient Method of Computation Ended December 31, 1997
----------------------- --------------------- -----------------------
<S> <C>
Reimbursement to affiliates for Operating expenses are reimbursed Operating expenses incurred on
operating expenses at the lower of cost or 90 percent behalf of the Partnership: $80,998
of the prevailing rate at which
comparable services could have
been obtained in the same
geographic area. Affiliates of the
General Partners from time to
time incur certain operating
expenses on behalf of the Accounting and administrative
Partnership for which the services: $80,461
Partnership reimburses the affiliates
without interest.
Annual, subordinated manage- One percent of the sum of gross $ - 0 -
ment fee to affiliates operating 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, subordinated to
certain minimum returns to the Limited
Partners. The management fee will not
exceed competitive fees for comparable
services. Due to the fact that these
are non-cumulative if the Limited
Partners do not receive their 10%
Preferred Return in any particular
years no management fees will be due or
payable for such year.
==========================================================================================================================
</TABLE>
35
<PAGE>
<TABLE>
<CAPTION>
==========================================================================================================================
Amount Incurred
Type of Compensation For the Year
and Recipient Method of Computation Ended December 31, 1997
----------------------- --------------------- -----------------------
<S> <C>
Deferred, subordinated real estate A deferred, subordinated real $ - 0 -
disposition fee payable to estate disposition fee, payable
affiliates upon sale of one or more
Properties, in an amount equal to the
lesser of (i) one-half of a competitive
real estate commission, or (ii) three
percent of the sales price of such
Property or Properties. Payment of such
fee shall be made only if affiliates of
the General Partners provide a
substantial amount of services in
connection with the sale of a Property
or Properties and shall be subordinated
to certain minimum returns to the
Limited Partners. However, if the net
sales are reinvested in a replacement
Property, no such real estate
disposition fee will be incurred until
such replacement Property is sold an
the net sales proceeds are distributed.
General Partners' deferred, sub- A deferred, subordinated share $ - 0 -
ordinated share of Partnership net equal to one percent of
cash flow Partnership distributions of net
cash flow, subordinated to certain
minimum returns to the Limited
Partners.
General Partners' deferred, sub- A deferred, subordinated share $ - 0 -
ordinated share of Partnership net equal to five percent of
sales proceeds from a sale or Partnership distributions of such
sales net sales proceeds, subordinated to
certain minimum returns to the
Limited Partners.
==========================================================================================================================
</TABLE>
36
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) The following documents are filed as part of this report.
1. Financial Statements
Report of Independent Accountants
Balance Sheets at December 31, 1997 and 1996
Statements of Income for the years ended December 31, 1997,
1996 and 1995
Statements of Partners' Capital for the years ended December
31, 1997, 1996 and 1995
Statements of Cash Flows for the years ended December 31,
1997, 1996 and 1995
Notes to Financial Statements
2. Financial Statement Schedules
Schedule III - Real Estate and Accumulated Depreciation at
December 31, 1997
Notes to Schedule III - Real Estate and Accumulated
Depreciation at December 31, 1997
Schedule IV - Mortgage Loans on Real Estate at December 31,
1997
All other Schedules are omitted as the required information is
inapplicable or is presented in the financial statements or
notes thereto.
3. Exhibits
3.1 Affidavit and Certificate of Limited Partnership of
CNL Income Fund VIII, Ltd. (Included as Exhibit 3.2
to Registration Statement No. 33-31482 on Form S-11
and incorporated herein by reference.)
4.1 Affidavit and Certificate of Limited Partnership of
CNL Income Fund VIII, Ltd. (Included as Exhibit 3.2
to Registration Statement No. 33-31482 on Form S-11
and incorporated herein by reference.)
4.2 Amended and Restated Agreement of Limited Partnership
of CNL Income Fund VIII, Ltd. (Included as Exhibit
4.2 to Form 10-K filed with the Securities and
Exchange Commission on April 1, 1996, and
incorporated herein by reference.)
10.1 Management Agreement between CNL Income Fund VIII,
Ltd. and CNL Investment Company (Included as Exhibit
10.1 to Form 10-K filed with the Securities and
Exchange Commission on April 1, 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.)
37
<PAGE>
10.3 Assignment of Management Agreement from CNL Income
Fund Advisors, Inc. to CNL Fund Advisors, Inc.
(Included as Exhibit 10.3 to Form 10-K filed with the
Securities and Exchange Commission on April 1, 1996,
and incorporated herein by reference.)
27 Financial Data Schedule (Filed herewith.)
(b) The Registrant filed no reports on Form 8-K during the period
October 1, 1997 through December 31, 1997.
38
<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 13th day of
March, 1998.
CNL INCOME FUND VIII, 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 13, 1998
- -------------------------- (Principal Financial and Accounting
Robert A. Bourne Officer)
/s/ James M. Seneff, Jr. Chief Executive Officer and Director March 13, 1998
- -------------------------- (Principal Executive Officer)
James M. Seneff, Jr.
</TABLE>
<PAGE>
CNL INCOME FUND VIII, LTD.
(A Florida Limited Partnership)
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1997
<TABLE>
<CAPTION>
Costs Capitalized
Subsequent
Initial Cost To Acquisition
Buildings
Encum- and Improve- Carrying
brances Land Improvements ments Costs
<S> <C>
Properties the Partnership
has Invested in Under
Operating Leases:
Burger King Restaurants:
Brandon, Florida - $ 478,467 $ - $ - $ -
New City, New York - 372,977 - - -
Mansfield, Ohio - 377,395 - - -
Syracuse, New York - 363,431 - - -
New Philadelphia, Ohio - 310,920 - - -
Baseball City, Florida (g) - 394,813 - - -
Denny's Restaurant:
Tiffin, Ohio - 143,592 335,971 - -
Golden Corral Family
Steakhouse Restaurants:
College Station, Texas - 517,623 - 877,505 -
Houston, Texas - 663,999 - 1,129,910 -
Beaumont, Texas - 552,646 - 893,054 -
Grand Prairie, Texas - 681,824 - 914,235 -
Hardee's Restaurant:
Jefferson, Ohio - 150,587 - - -
Jack in the Box Restaurants:
Waco, Texas - 412,942 - - -
Mesa, Arizona - 609,921 - - -
KFC Restaurant:
Norton Shores, Michigan - 177,897 - - -
Perkins Restaurant:
Memphis, Tennessee - 431,065 - - -
Popeyes Famous Fried
Chicken Restaurant:
Jacksonville, Florida - 103,063 114,507 149,978 -
Quincy's Family Steakhouse
Restaurant:
Statesville, North Carolina - 257,225 - - -
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Life
on Which
Gross Amount at Which Carried Depreciation
at Close of Period (c) in Latest
Buildings Date Income
and Accumulated of Con- Date Statement is
Land Improvements Total Depreciation struction Acquired Computed
---------- ------------ ----------- ------------ --------- -------- ----------
<S> <C>
$ 478,467 (f) $ 478,467 $ - 1991 10/90 (d)
372,977 (f) 372,977 - 1977 03/91 (d)
377,395 (f) 377,395 - 1989 03/91 (d)
363,431 (f) 363,431 - 1987 03/91 (d)
310,920 (f) 310,920 - 1989 03/91 (d)
394,813 (f) 394,813 - 1991 02/91 (d)
143,592 $ 335,971 479,563 49,371 1990 03/91 (h)
517,623 877,505 1,395,128 213,567 1990 09/90 (b)
663,999 1,129,910 1,793,909 264,058 1990 10/90 (b)
552,646 893,054 1,445,700 225,588 1990 11/90 (b)
681,824 914,235 1,596,059 221,754 1990 11/90 (b)
150,587 (f) 150,587 - 1990 11/90 (d)
412,942 (f) 412,942 - 1991 11/90 (d)
609,921 (f) 609,921 - 1991 02/92 (d)
177,897 (f) 177,897 - 1990 03/91 (d)
431,065 (f) 431,065 - 1990 11/90 (d)
103,063 264,485 367,548 61,449 1979 09/90 (b)
257,225 (f) 257,225 - 1991 10/91 (d)
</TABLE>
F-1
<PAGE>
CNL INCOME FUND VIII, LTD.
(A Florida Limited Partnership)
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION - CONTINUED
December 31, 1997
<TABLE>
<CAPTION>
Costs Capitalized
Subsequent
Initial Cost To Acquisition
Buildings
Encum- and Improve- Carrying
brances Land Improvements ments Costs
<S> <C>
Shoney's Restaurants:
Sun City, Florida - 382,883 - 736,865 -
Brooksville, Florida - 233,288 - - -
Bayonet Point, Florida - 418,464 - - -
Memphis, Tennessee - 368,290 601,660 - -
North Fort Myers, Florida - 398,423 - - -
Wendy's Old Fashioned
Hamburger Restaurant:
Midlothian, Virginia - 365,601 - 477,745 -
---------- ---------- ---------- -------
$9,167,336 $1,052,138 $5,179,292 $ -
========== ========== ========== =======
Property of Joint Venture
in Which the Partnership
has an 86% Interest and
has Invested in Under an
Operating Lease:
Burger King Restaurant:
Asheville, North Carolina - $ 438,695 $ 450,432 $ - $ -
========== ========== ========== =======
Properties of Joint Venture in Which
the Partnership has a 37% Interest and has
Invested in Under Operating Leases:
Burger King Restaurants:
Columbus, Ohio - $ 345,696 $ 651,985 $ - $ -
San Antonio, Texas - 350,479 623,615 - -
Pontiac, Michigan - 277,192 982,200 - -
Raceland, Louisiana - 174,019 986,879 - -
New Castle, Indiana - 264,239 662,265 - -
Hastings, Minnesota - 155,553 657,159 - -
---------- ---------- ---------- -------
$1,567,178 $4,564,103 $ - $ -
========== ========== ========== =======
Property of Joint Venture
in Which the Partnership
has a 12% Interest and has
Invested in Under an
Operating Lease:
Golden Corral Family
Steakhouse Restaurant:
Middleburg Heights, OH - $ 521,571 $ - $ - $ -
========== ========== ========== =======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Life
on Which
Gross Amount at Which Carried Depreciation
at Close of Period (c) in Latest
Buildings Date Income
and Accumulated of Con- Date Statement is
Land Improvements Total Depreciation struction Acquired Computed
---------- ------------ ----------- ------------ --------- -------- -------------
<S> <C>
382,883 736,865 1,119,748 167,764 1991 10/90 (b)
233,288 (f) 233,288 - 1991 12/90 (d)
418,464 (f) 418,464 - 1989 06/91 (d)
368,290 601,660 969,950 128,134 1991 08/91 (b)
398,423 (f) 398,423 - 1991 09/95 (d)
365,601 477,745 843,346 106,849 1991 03/91 (b)
---------- ---------- ----------- ----------
$9,167,336 $6,231,430 $15,398,766 $1,438,534
========== ========== =========== ==========
$ 438,695 $ 450,432 $ 889,127 $ 101,934 1986 03/91 (b)
========== ========== =========== ==========
$ 345,696 $ 651,985 $ 997,681 $ 136,114 1986 09/91 (b)
350,479 623,615 974,094 130,190 1986 09/91 (b)
277,192 982,200 1,259,392 205,051 1987 09/91 (b)
174,019 986,879 1,160,898 206,028 1988 09/91 (b)
264,239 662,265 926,504 138,259 1988 09/91 (b)
155,553 657,159 812,712 137,193 1990 09/91 (b)
---------- ---------- ----------- ----------
$1,567,178 $4,564,103 $ 6,131,281 $ 952,835
========== ========== =========== ==========
$ 521,571 (f) $ 521,571 $ - 1995 05/96 (d)
========== =========== ==========
</TABLE>
F-2
<PAGE>
CNL INCOME FUND VIII, LTD.
(A Florida Limited Partnership)
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION - CONTINUED
December 31, 1997
<TABLE>
<CAPTION>
Costs Capitalized
Subsequent
Initial Cost To Acquisition
Buildings
Encum- and Improve- Carrying
brances Land Improvements ments Costs
<S> <C>
Properties the Partnership
has Invested in Under
Direct Financing Leases:
Burger King Restaurants:
Brandon, Florida - $ - $ - $ 483,107 $ -
New City, New York - - 629,110 - -
Mansfield, Ohio - - 560,698 - -
Syracuse, New York - - 549,253 - -
New Philadelphia, Ohio - - 592,918 - -
Baseball City, Florida (g) - - - 551,446 -
Hardee's Restaurants:
Brunswick, Ohio - 116,199 457,907 - -
Grafton, Ohio - 66,092 411,798 - -
Jefferson, Ohio - - 443,444 - -
Lexington, Ohio - 124,707 433,264 - -
Jack in the Box Restaurant:
Waco, Texas - - - 406,745 -
Mesa, Arizona - - 561,477 - -
KFC Restaurants:
Grand Rapids, Michigan - 169,175 620,623 - -
Norton Shores, Michigan - - 509,228 - -
Perkins Restaurant:
Memphis, Tennessee - - - 594,154 -
Quincy's Family Steakhouse
Restaurant:
Statesville, North Carolina - - 705,444 - -
Shoney's Restaurants:
Brooksville, Florida - - - 644,369 -
Bayonet Point, Florida - - 575,985 - -
North Fort Myers, Florida - - 552,240 - -
---------- ---------- ---------- -------
$ 476,173 $7,603,389 $2,679,821 $ -
========== ========== ========== =======
Property of Joint Venture
in Which the Partnership
has a 12% Interest and has
Invested in Under a Direct
Financing Lease:
Golden Corral Family
Steakhouse Restaurant:
Middleburg Heights, Ohio - $ - $1,357,288 $ - $ -
========== ========== ========== =======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Life
on Which
Gross Amount at Which Carried Depreciation
at Close of Period (c) in Latest
Buildings Date Income
and Accumulated of Con- Date Statement is
Land Improvements Total Depreciation struction Acquired Computed
---------- ------------ ----------- ------------ --------- -------- ----------
<S> <C>
- (f) (f) (d) 1991 10/90 (d)
- (f) (f) (d) 1977 03/91 (d)
- (f) (f) (d) 1989 03/91 (d)
- (f) (f) (d) 1987 03/91 (d)
- (f) (f) (d) 1989 03/91 (d)
- (f) (f) (d) 1991 02/91 (d)
(f) (f) (f) (e) 1990 11/90 (e)
(f) (f) (f) (e) 1990 11/90 (e)
- (f) (f) (d) 1990 11/90 (d)
(f) (f) (f) (e) 1990 11/90 (e)
- (f) (f) (d) 1991 11/90 (d)
- (f) (f) (d) 1991 02/92 (d)
(f) (f) (f) (e) 1990 02/91 (e)
- (f) (f) (d) 1990 03/91 (d)
- (f) (f) (d) 1990 11/90 (d)
- (f) (f) (d) 1991 10/91 (d)
- (f) (f) (d) 1991 12/90 (d)
- (f) (f) (d) 1989 06/91 (d)
- (f) (f) (d) 1991 09/95 (d)
- (f) (f) (d) 1995 05/96 (d)
</TABLE>
F-3
<PAGE>
CNL INCOME FUND VIII, LTD.
(A Florida Limited Partnership)
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1997
(a) Transactions in real estate and accumulated depreciation during 1997,
1996 and 1995, are summarized as follows:
<TABLE>
<CAPTION>
Accumulated
Cost Depreciation
<S> <C>
Properties the Partnership
has Invested in Under
Operating Leases:
Balance, December 31, 1994 $16,437,205 $ 845,665
Acquisitions 398,423 -
Dispositions (928,665) (41,368)
Depreciation expense - 216,295
----------- ----------
Balance, December 31, 1995 15,906,963 1,020,592
Dispositions (508,197) -
Depreciation expense - 208,971
----------- ----------
Balance, December 31, 1996 15,398,766 1,229,563
Dispositions - -
Depreciation expense - 208,971
----------- ----------
Balance, December 31, 1997 $15,398,766 $1,438,534
=========== ==========
Property of Joint Venture in
Which the Partnership has an 86%
Interest and has Invested in
Under an Operating Lease:
Balance, December 31, 1994 $ 889,127 $ 56,891
Depreciation expense - 15,015
----------- ----------
Balance, December 31, 1995 889,127 71,906
Depreciation expense - 15,014
----------- ----------
Balance, December 31, 1996 889,127 86,920
Depreciation expense - 15,014
----------- ----------
Balance, December 31, 1997 $ 889,127 $ 101,934
=========== ==========
</TABLE>
F-4
<PAGE>
CNL INCOME FUND VIII, LTD.
(A Florida Limited Partnership)
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED
DEPRECIATION - CONTINUED
December 31, 1997
<TABLE>
<CAPTION>
Accumulated
Cost Depreciation
<S> <C>
Properties of Joint Venture in
Which the Partnership has a 37%
Interest and has Invested in
Under Operating Leases:
Balance, December 31, 1994 $ 6,131,281 $ 496,424
Depreciation expense - 152,137
----------- ----------
Balance, December 31, 1995 6,131,281 648,561
Depreciation expense - 152,137
----------- ----------
Balance, December 31, 1996 6,131,281 800,698
Depreciation expense - 152,137
----------- ----------
Balance, December 31, 1997 $ 6,131,281 $ 952,835
=========== ==========
Property of Joint Venture in Which
the Partnership has a 12%
Interest and has Invested in
Under an Operating Lease:
Balance, December 31, 1995 $ - $ -
Acquisitions 521,571 -
Depreciation expense (d) - -
----------- ---------
Balance, December 31, 1996 521,571 -
Depreciation expense - -
----------- ---------
Balance, December 31, 1997 $ 521,571 $ -
=========== =========
</TABLE>
(b) Depreciation expense is computed for buildings and improvements based
upon estimated lives of 30 years.
(c) As of December 31, 1997, the aggregate cost of the Properties owned by
the Partnership and its consolidated joint venture, and the
unconsolidated joint ventures for federal income tax purposes was
$26,172,699 and $8,899,267, respectively. All of the leases are treated
as operating leases for federal income tax purposes.
(d) 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 the net investment in direct
financing leases; therefore, depreciation is not applicable.
(e) For financial reporting purposes, the lease for land and building has
been recorded as a direct financing lease. The cost of the land and
building has been included in net investment in direct financing
leases; therefore, depreciation is not applicable.
F-5
<PAGE>
CNL INCOME FUND VIII, LTD.
(A Florida Limited Partnership)
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED
DEPRECIATION - CONTINUED
December 31, 1997
(f) 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.
(g) The restaurant on this Property was converted from a Popeyes Famous
Fried Chicken Restaurant to a Burger King restaurant in February 1993.
(h) Effective January 1, 1994, the lease for this Property was amended,
resulting in the reclassification of the building portion of the lease
as an operating lease. The building was recorded at net book value as
of January 1, 1994, and depreciated over its remaining estimated life
of approximately 27 years.
F-6
<PAGE>
CNL INCOME FUND VIII, LTD.
(A Florida Limited Partnership)
SCHEDULE IV - MORTGAGE LOANS ON REAL ESTATE
December 31, 1997
<TABLE>
<CAPTION>
Principal
Amount
of Loans
Carrying Subject to
Final Periodic Face Amount of Delinquent
Interest Maturity Payment Prior Amount of Mortgages Principal
Description Rate Date Terms Liens Mortgages (1) or Interest
- -------------------- -------- ------------- -------- ----- ---------- ---------- --------------
<S> <C>
Church's
Jacksonville, FL
First Mortgage 10.00% December 2005 (2) $ - $ 240,000 $ 239,169 $ -
Church's
Jacksonville, FL
First Mortgage 10.00% December 2005 (3) - 220,000 219,238 -
Ponderosa
Orlando, FL
First Mortgage 10.75% October 2011 (4) - 1,388,568 1,394,979 -
----- ---------- ---------- ----------
Total $ - $1,848,568 $1,853,386 $ -
===== ========== ========== ==========
</TABLE>
(1) The tax carrying value of the notes is $1,682,045.
(2) Monthly payments of principal and interest at an annual rate of 10%,
with a balloon payment at maturity of $218,252.
(3) Monthly payments of principal and interest at an annual rate of 10%,
with a balloon payment at maturity of $200,324.
(4) Twelve monthly payments of interest only, afterwards, in 24 monthly
installments of $15,413 consisting of principal and interest, and
thereafter in 144 monthly installments of $16,220 consisting of
principal and interest at an annual rate of 10.75%.
(5) The changes in the carrying amounts are summarized as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---------- ---------- -------
<S> <C>
Balance at beginning of
period $1,862,262 $ 463,833 $ -
New mortgage loans - 1,388,568 460,000
Interest earned 194,784 74,059 3,833
Collection of principal and
interest (203,660) (64,198) -
----------- ----------- ---------
Balance at end of period $1,853,386 $1,862,262 $ 463,833
========== ========== ==========
</TABLE>
F-7
<PAGE>
EXHIBITS
<PAGE>
EXHIBIT INDEX
Exhibit Number Page
3.1 Affidavit and Certificate of Limited Partnership of CNL Income
Fund VIII, Ltd. (Included as Exhibit 3.2 to Registration
Statement No. 33-31482 on Form S-11 and incorporated herein by
reference.)
4.1 Affidavit and Certificate of Limited Partnership of CNL Income
Fund VIII, Ltd. (Included as Exhibit 3.2 to Registration
Statement No. 33-31482 on Form S-11 and incorporated herein by
reference.)
4.2 Amended and Restated Agreement of Limited Partnership of CNL
Income Fund VIII, Ltd. (Included as Exhibit 4.2 to Form 10-K
filed with the Securities and Exchange Commission on April 1,
1996, and incorporated herein by reference.)
10.1 Management Agreement between CNL Income Fund VIII, Ltd. and
CNL Investment Company (Included as Exhibit 10.1 to Form 10-K
filed with the Securities and Exchange Commission on April 1,
1996, and incorporated herein by reference.)
10.2 Assignment of Management Agreement from CNL Investment Company
to CNL Income Fund Advisors, Inc. (Included as Exhibit 10.2 to
Form 10-K filed with the Securities and Exchange Commission on
March 30, 1995, and incorporated herein by reference.)
10.3 Assignment of Management Agreement from CNL Income Fund
Advisors, Inc. to CNL Fund Advisors, Inc. (Included as Exhibit
10.3 to Form 10-K filed with the Securities and Exchange
Commission on April 1, 1996, and incorporated herein by
reference.)
27 Financial Data Schedule (Filed herewith.)
i
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the balance
sheet of CNL Income Fund VIII, Ltd. at December 31, 1997, and its statement of
income for the year then ended and is qualified in its entirety by reference to
the Form 10-K of CNL Income Fund VIII, Ltd. for the year ended December 31,
1997.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 1,602,236
<SECURITIES> 0
<RECEIVABLES> 70,621
<ALLOWANCES> 19,228
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 15,398,766
<DEPRECIATION> 1,438,534
<TOTAL-ASSETS> 32,258,296
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 31,216,398
<TOTAL-LIABILITY-AND-EQUITY> 32,258,296
<SALES> 0
<TOTAL-REVENUES> 3,339,715
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 377,922
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 3,241,567
<INCOME-TAX> 0
<INCOME-CONTINUING> 3,241,567
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,241,567
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>Due to the nature of its industry, CNL Income Fund VIII, Ltd. has an
unclassified balance sheet; therefore, no values are shown for current assets
and current liabilities.
</FN>
</TABLE>
