FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT of 1934
For the quarterly period ended March 31, 1999
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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
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CNL Income Fund VIII, Ltd.
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(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
<S> <C>
Florida 59-2963338
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
400 East South Street
Orlando, Florida 32801
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number
(including area code) (407) 650-1000
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</TABLE>
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No _________
<PAGE>
CONTENTS
Page
Part I.
Item 1. Financial Statements:
Condensed Balance Sheets
Condensed Statements of Income
Condensed Statements of Partners' Capital
Condensed Statements of Cash Flows
Notes to Condensed Financial Statements
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About
Market Risk
Part II.
Other Information
<PAGE>
CNL INCOME FUND VIII, LTD.
(A Florida Limited Partnership)
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
------------------- -------------------
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ASSETS
Land and buildings on operating leases, less
accumulated depreciation of $1,760,557 and
$1,685,510 $ 15,694,231 $ 15,769,278
Net investment in direct financing leases 7,762,940 7,802,785
Investment in joint ventures 2,785,272 2,809,759
Mortgage notes receivable 1,526,082 1,811,726
Cash and cash equivalents 1,876,769 1,809,258
Receivables, less allowance for doubtful accounts
of $28,474 and $24,636 1,079 84,265
Prepaid expenses 11,337 3,959
Accrued rental income, less allowance for doubtful
accounts of $4,501 in 1999 and 1998 1,950,689 1,927,418
Other assets 52,671 52,671
------------------- -------------------
$ 31,661,070 $ 32,071,119
=================== ===================
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 48,505 $ 4,258
Escrowed real estate taxes payable 24,133 27,838
Distributions payable 787,501 1,137,501
Due to related party 58,095 75,266
Rents paid in advance 91,562 62,349
------------------- -------------------
Total liabilities 1,009,796 1,307,212
Minority interest 108,625 108,600
Partners' capital 30,542,649 30,655,307
------------------- -------------------
$ 31,661,070 $ 32,071,119
=================== ===================
</TABLE>
See accompanying notes to condensed financial statements.
<PAGE>
CNL INCOME FUND VIII, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Quarter Ended
March 31,
1999 1998
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<S> <C>
Revenues:
Rental income from operating leases $ 492,989 $ 455,556
Earned income from direct financing leases 236,859 299,442
Contingent rental income 3,279 18,486
Interest and other income 54,365 65,084
-------------- ---------------
787,492 838,568
-------------- ---------------
Expenses:
General operating and administrative 37,649 32,443
Professional services 5,732 5,506
State and other taxes 17,534 5,269
Depreciation 75,047 52,242
Transaction costs 33,563 --
-------------- ---------------
169,525 95,460
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Income Before Minority Interest in Income of
Consolidated Joint Venture and Equity in
Earnings of Unconsolidated Joint Ventures 617,967 743,108
Minority Interest in Income of Consolidated
Joint Venture (3,355 ) (3,404 )
Equity in Earnings of Unconsolidated Joint Ventures 60,231 68,104
-------------- ---------------
Net Income $ 674,843 $ 807,808
============== ===============
Allocation of Net Income:
General partners $ 6,748 $ 8,078
Limited partners 668,095 799,730
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$ 674,843 $ 807,808
============== ===============
Net Income Per Limited Partner Unit $ 0.019 $ 0.023
============== ===============
Weighted Average Number of Limited Partner
Units Outstanding 35,000,000 35,000,000
============== ===============
</TABLE>
See accompanying notes to condensed financial statements.
<PAGE>
CNL INCOME FUND VIII, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF PARTNERS' CAPITAL
<TABLE>
<CAPTION>
Quarter Ended Year Ended
March 31, December 31,
1999 1998
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<S> <C>
General partners:
Beginning balance $ 258,248 $ 226,441
Net income 6,748 31,807
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264,996 258,248
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Limited partners:
Beginning balance 30,397,059 30,989,957
Net income 668,095 3,257,105
Distributions ($0.023 and $0.110 per
limited partner unit, respectively (787,501 ) (3,850,003 )
------------------- -----------------
30,277,653 30,397,059
------------------- -----------------
Total partners' capital $ 30,542,649 $ 30,655,307
=================== =================
</TABLE>
See accompanying notes to condensed financial statements.
<PAGE>
CNL INCOME FUND VIII, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Quarter Ended
March 31,
1999 1998
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<S> <C>
Increase (Decrease) in Cash and Cash Equivalents
Net Cash Provided by Operating Activities $ 924,814 $ 989,892
--------------- --------------
Cash Flows from Investing Activities:
Collections on mortgage notes receivable 283,528 9,915
--------------- --------------
Net cash provided by investing activities 283,528 9,915
--------------- --------------
Cash Flows from Financing Activities:
Distributions to limited partners (1,137,501 ) (787,501 )
Distributions to holder of minority interest (3,330 ) (3,350 )
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Net cash used in financing activities (1,140,831 ) (790,851 )
--------------- --------------
Net Increase in Cash and Cash Equivalents 67,511 208,956
Cash and Cash Equivalents at Beginning of Quarter 1,809,258 1,602,236
--------------- --------------
Cash and Cash Equivalents at End of Quarter $1,876,769 $1,811,192
=============== ==============
Supplemental Schedule of Non-Cash Financing
Activities:
Distributions declared and unpaid at end of
quarter $ 787,501 $1,137,500
=============== ==============
</TABLE>
See accompanying notes to condensed financial statements.
<PAGE>
CNL INCOME FUND VIII, LTD.
(A Florida Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS
Quarters Ended March 31, 1999 and 1998
1. Basis of Presentation:
The accompanying unaudited condensed financial statements have been
prepared in accordance with the instructions to Form 10-Q and do not
include all of the information and note disclosures required by
generally accepted accounting principles. The financial statements
reflect all adjustments, consisting of normal recurring adjustments,
which are, in the opinion of management, necessary to a fair statement
of the results for the interim periods presented. Operating results for
the quarter ended March 31, 1999 may not be indicative of the results
that may be expected for the year ending December 31, 1999. Amounts as
of December 31, 1998, included in the financial statements, have been
derived from audited financial statements as of that date.
These unaudited financial statements should be read in conjunction with
the financial statements and notes thereto included in Form 10-K of CNL
Income Fund VIII, Ltd. (the "Partnership") for the year ended December
31, 1998.
The Partnership accounts for its approximate 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.
2. Mortgage Notes Receivable:
As of December 31, 1998, the Partnership had accepted three promissory
notes in connection with the sale of three of its properties. During the
quarter ended March 31, 1999, the borrower relating to the promissory
note accepted in connection with the sale of the property in Orlando,
Florida made an advance payment of principal in the amount of $272,500
which was applied to the outstanding principal balance relating to this
promissory note.
<PAGE>
CNL INCOME FUND VIII, LTD.
(A Florida Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS
Quarters Ended March 31, 1999 and 1998
3. Merger Transaction:
On March 11, 1999, the Partnership entered into an Agreement and Plan
of Merger with CNL American Properties Fund, Inc. ("APF"), pursuant to
which the Partnership would be merged with and into a subsidiary of APF
(the "Merger"). As consideration for the Merger, APF has agreed to
issue 4,042,635 shares of its common stock, par value $0.01 per share
(the "APF Shares") which, for the purposes of valuing the merger
consideration, have been valued by APF at $10.00 per APF Share, the
price paid by APF investors in three previous public offerings, the
most recent of which was completed in December 1998. In order to assist
the general partners in evaluating the proposed merger consideration,
the general partners retained Valuation Associates, a nationally
recognized real estate appraisal firm, to appraise the Partnership's
restaurant property portfolio. Based on Valuation Associates'
appraisal, the Partnership's property portfolio and other assets were
valued on a going concern basis (meaning the Partnership continues
unchanged) at $39,843,631 as of December 31, 1998. Legg Mason Wood
Walker, Incorporated has rendered a fairness opinion that the APF Share
consideration, payable by APF, is fair to the Partnership from a
financial point of view. The APF Shares are expected to be listed for
trading on the New York Stock Exchange concurrently with the
consummation of the Merger, and, therefore, would be freely tradable at
the option of the former limited partners. At a special meeting of the
partners that is expected to be held in the third quarter of 1999,
limited partners holding in excess of 50% of the Partnership's
outstanding limited partnership interests must approve the Merger prior
to consummation of the transaction. If the limited partners at the
special meeting approve the Merger, APF will own the properties and
other assets of the Partnership. The general partners intend to
recommend that the limited partners of the Partnership approve the
Merger. In connection with their recommendation, the general partners
will solicit the consent of the limited partners at the special
meeting. If the limited partners reject the Merger, the Partnership
will bear the portion of the transaction costs based upon the
percentage of "For" votes and the general partners will bear the
portion of such transaction costs based upon the percentage of
"Against" votes and abstentions.
On May 5, 1999, four limited partners in several of the CNL Income
Funds filed a lawsuit against the general partners and APF in
connection with the proposed Merger (see Part II - Item 1. Legal
Proceedings). The general partners and APF believe that the lawsuit is
without merit and intend to defend vigorously against the claims.
Because the lawsuit was so recently filed, it is premature to further
comment on the lawsuit at this time.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
CNL Income Fund VIII, Ltd. (the "Partnership") is a Florida limited
partnership that was organized on August 18, 1989 to acquire for cash, either
directly or through joint venture arrangements, both newly constructed and
existing restaurants, as well as land upon which restaurants were to be
constructed (the "Properties"), which are leased primarily to operators of
national and regional fast-food and family-style restaurant chains. The leases
are triple-net leases, with the lessees responsible for all repairs and
maintenance, property taxes, insurance and utilities. As of March 31, 1999, the
Partnership owned 36 Properties, which included interests in nine Properties
owned by joint ventures in which the Partnership is a co-venturer.
Liquidity and Capital Resources
The Partnership's primary source of capital for the quarters ended
March 31, 1999 and 1998, was cash from operations (which includes cash received
from tenants, distributions from joint ventures, and interest and other income
received, less cash paid for expenses). Cash from operations was $924,814 and
$989,892 for the quarters ended March 31, 1999 and 1998, respectively. The
decrease in cash from operations for the quarter ended March 31, 1999, is
primarily a result of changes in income and expenses as described in "Results of
Operations" below and changes in the Partnership's working capital.
Other sources and uses of capital included the following during the
quarter ended March 31, 1999.
As of December 31, 1998, the Partnership had accepted three promissory
notes in connection with the sale of three of its Properties. During the three
months ended March 31, 1999, the borrower relating to the promissory note
accepted in connection with the sale of the Property in Orlando, Florida made an
advance payment of $272,500 which was applied to the outstanding principal
balance relating to this promissory note. The Partnership intends to reinvest
the $272,500 payment in an additional Property.
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 March 31, 1999, the Partnership had $1,876,769
invested in such short-term investments, as compared to $1,809,258 at December
31, 1998. The funds remaining at March 31, 1999, after payment of distributions
for the quarter ended March 31, 1999, and other liabilities, will be used to
meet the Partnership's working capital and other needs.
<PAGE>
Liquidity and Capital Resources - Continued
Total liabilities of the Partnership, including distributions payable,
decreased to $1,009,796 at March 31, 1999, from $1,307,212 at December 31, 1998,
partially as a result of the payment of a special distribution accrued at
December 31, 1998, of accumulated, excess operating reserves to the limited
partners of $350,000 in January 1999. In addition the increase in liabilities at
March 31, 1999 is partially a result of the Partnership accruing transaction
costs relating to the proposed Merger with CNL American Properties Fund, Inc.
("APF"), as described above. 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 quarter ended March 31,
1998, accumulated excess operating reserves, the Partnership declared
distributions to limited partners of $787,501 and $1,137,500 for the quarters
ended March 31, 1999 and 1998, respectively. This represents distributions of
$0.023 and $0.033 per unit, respectively. No distributions were made to the
general partners for the quarters ended March 31, 1999 and 1998. No amounts
distributed to the limited partners for the quarters ended March 31, 1999 and
1998 are required to be or have been treated by the Partnership as a return of
capital for purposes of calculating the limited partners' return on their
adjusted capital contributions. The Partnership intends to continue to make
distributions of cash available for distribution to the limited partners on a
quarterly basis.
The Partnership's investment strategy of acquiring Properties for cash
and leasing them under triple-net leases to operators who 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.
The general partners have the right, but not the obligation, to make
additional capital contributions if they deem it appropriate in connection with
the operations of the Partnership.
On March 11, 1999, the Partnership entered into an Agreement and Plan
of Merger with CNL American Properties Fund, Inc. ("APF"), pursuant to which the
Partnership would be merged with and into a subsidiary of APF (the "Merger").
APF is a real estate investment trust whose primary business is the ownership of
restaurant properties leased on a long-term, "triple-net" basis to operators of
national and regional restaurant chains. APF has agreed to issue shares of its
common stock, par value $0.01 per share (the "APF Shares"), as consideration for
the Merger. APF has agreed to issue 4,042,635 APF Shares which, for the purposes
of valuing the merger consideration, have been valued by APF at $10.00 per APF
Share, the price paid by APF investors in three previous public offerings, the
most recent of which was completed in December 1998. In order to assist the
general partners in evaluating the proposed merger consideration, the general
partners retained Valuation Associates, a nationally recognized real estate
appraisal firm, to appraise the Partnership's restaurant property portfolio.
Based on Valuation Associates' appraisal, the Partnership's property portfolio
and other assets were valued on a going concern basis (meaning the Partnership
continues unchanged) at $39,843,631 as of December 31, 1998. Legg Mason Wood
Walker, Incorporated has rendered a fairness opinion that the APF Share
consideration, payable by APF, is fair to the Partnership from a financial
<PAGE>
Liquidity and Capital Resources - Continued
point of view. The APF Shares are expected to be listed for trading on the New
York Stock Exchange concurrently with the consummation of the Merger, and
therefore, would be freely tradable at the option of the former limited
partners. At a special meeting of the partners that is expected to be held in
the third quarter of 1999, limited partners holding in excess of 50% of the
Partnership's outstanding limited partnership interests must approve the Merger
prior to consummation of the transaction. If the limited partners at the special
meeting approve the Merger, APF will own the Properties and other assets of the
Partnership. The general partners intend to recommend that the limited partners
of the Partnership approve the Merger. In connection with their recommendation,
the general partners will solicit the consent of the limited partners at the
special meeting. If the limited partners reject the Merger, the Partnership will
bear the portion of the transaction costs based upon the percentage of "For"
votes and the general partners will bear the portion of such transaction costs
based upon the percentage of "Against" votes and abstentions.
On May 5, 1999, four limited partners in several of the CNL Income
Funds filed a lawsuit against the general partners and APF in connection with
the proposed Merger (see Part II - Item 1. Legal Proceedings). The general
partners and APF believe that the lawsuit is without merit and intend to defend
vigorously against the claims. Because the lawsuit was so recently filed, it is
premature to further comment on the lawsuit at this time.
Results of Operations
During the quarters ended March 31, 1999 and 1998, the Partnership and
its consolidated joint venture, Woodway Joint Venture, owned and leased 28
wholly owned Properties to operators of fast-food and family-style restaurant
chains. In connection therewith, during the quarters ended March 31, 1999 and
1998, the Partnership and Woodway Joint Venture earned $729,848 and $754,998,
respectively, in rental income from operating leases and earned income from
direct financing leases. Rental and earned income decreased during the quarter
ended March 31, 1999, due to the fact that the leases relating to the Burger
King Properties in New City and Syracuse, New York and New Philadelphia and
Mansfield, Ohio, were amended to provide for rent reductions from August 1998
through the end of the lease term.
For the quarters ended March 31, 1999 and 1998, the Partnership also
earned $3,279 and $18,486, respectively, in contingent rental income. The
decrease in contingent rental income during the quarter ended March 31, 1999, as
compared to the quarter ended March 31, 1998, is primarily attributable to the
fact that during the quarter ended March 31, 1998, the Partnership recorded
additional contingent rental amounts as a result of adjusting estimated
contingent rental amounts accrued at December 31, 1997, to actual amounts.
Contingent rental income also decreased due to decreased gross sales of certain
restaurant Properties, the leases of which require the payment of contingent
rent.
During the quarters ended March 31, 1999 and 1998, the Partnership also
earned $54,365 and $65,084, respectively, in interest and other income. The
decrease in interest and other income during the quarter ending March 31, 1999,
is primarily attributable to a reduction in the interest earned on the mortgage
note accepted in connection with the sale of the Property located
<PAGE>
Results of Operations - Continued
in Orlando, Florida due to the fact that the tenant made an advance payment of
principal in the amount of $272,500 during the quarter ended March 31, 1999, as
described above in "Liquidity and Capital Resources."
For the quarters ended March 31, 1999 and 1998, the Partnership owned
and leased eight Properties indirectly through joint venture arrangements. In
connection therewith, during the quarters ended March 31, 1999 and 1998, the
Partnership earned $60,231 and $68,104, respectively, attributable to net income
earned by these unconsolidated joint ventures. The decrease in net income earned
by joint ventures for the quarter ended March 31, 1999, is primarily due to the
fact that the lease relating to the Burger King Property in Asheville, North
Carolina, owned by Asheville Joint Venture, was amended to provide for rent
reductions from August 1998 through the end of the lease term.
Operating expenses, including depreciation and amortization expense,
were $169,525 and $95,460 for the quarters ended March 31, 1999 and 1998,
respectively. The increase in operating expenses during the quarter ended March
31, 1999, as compared to the quarter ended March 31, 1998, is partially due to
an increase in depreciation expense due to the fact that in August 1998, the
Partnership reclassified the leases for its Properties in New City and Syracuse,
New York and New Philadelphia and Mansfield, Ohio from direct financing leases
to operating leases, as a result of lease amendments. In addition, the increase
is partially due to the Partnership incurring additional state taxes due to
changes in tax laws of a state in which the Partnership conducts business.
The increase in operating expenses for the quarter ended March 31,
1999, is also partially due to the fact that the Partnership incurred $33,563 in
transaction costs related to the general partners retaining financial and legal
advisors to assist them in evaluating and negotiating the proposed Merger with
APF, as described above in "Liquidity and Capital Resources." If the limited
partners reject the Merger, the Partnership will bear the portion of the
transaction costs based upon the percentage of "For" votes and the general
partners will bear the portion of such transaction costs based upon the
percentage of "Against" votes and abstentions.
Year 2000 Readiness Disclosure
The Year 2000 problem concerns the inability of information and
non-information technology systems to properly recognize and process date
sensitive information beyond January 1, 2000. The Partnership does not have any
information or non-information technology systems. The general partners and
affiliates of the general partners provide all services requiring the use of
information and non-information technology systems pursuant to a management
agreement with the Partnership. The information technology system of the
affiliates of the general partners consists of a network of personal computers
and servers built using hardware and software from mainstream suppliers. The
non-information technology systems of the affiliates of the general partners are
primarily facility related and include building security systems, elevators,
fire suppressions, HVAC, electrical systems and other utilities. The affiliates
of the general partners have no internally generated programmed software coding
to correct, because substantially all of the software utilized by the general
partners and affiliates is purchased or licensed from external
<PAGE>
Year 2000 Readiness Disclosure - Continued
providers. The maintenance of non-information technology systems at the
Partnership's Properties is the responsibility of the tenants of the Properties
in accordance with the terms of the Partnership's leases.
In early 1998, the general partners and affiliates formed a Year 2000
committee (the "Y2K Team") for the purpose of identifying, understanding and
addressing the various issues associated with the Year 2000 problem. The Y2K
Team consists of the general partners and members from the affiliates of the
general partners, including representatives from senior management, information
systems, telecommunications, legal, office management, accounting and property
management. The Y2K Team's initial step in assessing the Partnership's Year 2000
readiness consists of identifying any systems that are date-sensitive and,
accordingly, could have potential Year 2000 problems. The Y2K Team is in the
process of conducting inspections, interviews and tests to identify which of the
Partnership's systems could have a potential Year 2000 problem.
The information system of the affiliates of the general partners is
comprised of hardware and software applications from mainstream suppliers.
Accordingly, the Y2K Team is in the process of contacting the respective vendors
and manufacturers to verify the Year 2000 compliance of their products. In
addition, the Y2K Team has also requested and is evaluating documentation from
other companies with which the Partnership has a material third party
relationship, including the Partnership's tenants, vendors, financial
institutions and the Partnership's transfer agent. The Partnership depends on
its tenants for rents and cash flows, its financial institutions for
availability of cash and its transfer agent to maintain and track investor
information. The Y2K Team has also requested and is evaluating documentation
from the non-information technology systems providers of the affiliates of the
general partners. Although the general partners continue to receive positive
responses from the Companies with which the Partnership has third party
relationships regarding their Year 2000 compliance, the general partners cannot
be assured that the tenants, financial institutions, transfer agent, other
vendors and system providers have adequately considered the impact of the Year
2000. The general partners are not able to measure the effect on the operations
of the Partnership of any third party's failure to adequately address the impact
of the Year 2000.
The general partners and their affiliates have identified and have
implemented upgrades for certain hardware equipment. In addition, the general
partners and their affiliates have identified certain software applications
which will require upgrades to become Year 2000 compliant. The general partners
expect all of these upgrades, as well as any other necessary remedial measures
on the information technology systems used in the business activities and
operations of the Partnership, to be completed by September 30, 1999, although,
the general partners cannot be assured that the upgrade solutions provided by
the vendors have addressed all possible Year 2000 issues. The general partners
do not expect the aggregate cost of the Year 2000 remedial measures to be
material to the results of operations of the Partnership.
<PAGE>
Year 2000 Readiness Disclosure - Continued
The general partners and affiliates have received certification from
the Partnership's transfer agent of its Year 2000 compliance. Due to the
material relationship of the Partnership with its transfer agent, the Y2K Team
is evaluating the Year 2000 compliance of the systems of the transfer agent and
expects to have the evaluation completed by September 30, 1999. Despite the
positive response from the transfer agent and the evaluation of the transfer
agent's system by the Y2K Team, the general partners cannot be assured that the
transfer agent has addressed all possible Year 2000 issues. In the event that
the systems of the transfer agent are not Year 2000 compliant, the general
partners and their affiliates would have to allocate resources to internally
perform the functions of the transfer agent. The general partners do not
anticipate that the additional cost of these resources would have a material
impact on the Partnership.
Based upon the progress the general partners and affiliates have made
in addressing the Year 2000 issues and their plan and timeline to complete the
compliance program, the general partners do not foresee significant risks
associated with Year 2000 compliance at this time. The general partners and
their affiliates plan to address their significant Year 2000 issues prior to the
Partnership being affected by them; therefore, they have not developed a
comprehensive contingency plan. However, if the general partners and their
affiliates identify significant risks related to their Year 2000 compliance, or
if their progress deviates from the anticipated timeline, the general partners
and their affiliates will develop contingency plans as deemed necessary at that
time.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK.
No material changes in the Partnership's market risk occurred from
December 31, 1998 through March 31, 1999. Information regarding the
Partnership's market risk at December 31, 1998 is included in its Annual Report
on Form 10-K for the year ended December 31, 1998.
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
On May 5, 1999, four limited partners in several of the CNL Income
Funds filed a lawsuit, Jon Hale, Mary J. Hewitt, Charles A.
Hewitt, and Gretchen M. Hewitt v. James M. Seneff, Jr., Robert A.
Bourne, CNL Realty Corporation, and CNL American Properties Fund,
Inc., Case No. CIO-99-0003561, in the Circuit Court of the Ninth
Judicial Circuit of Orange County, Florida, alleging that the
Messrs. Seneff and Bourne and CNL Realty Corporation, as general
partners of the CNL Income Funds, breached their fiduciary duties
and violated the provisions of certain of the CNL Income Fund
partnership agreements in connection with the proposed acquisition
of the CNL Income Funds by APF. The plaintiffs are seeking
unspecified damages and equitable relief. The general partners and
APF believe that the lawsuit is without merit and intend to defend
vigorously against such claims. Because the lawsuit was so
recently filed, it is premature to further comment on the lawsuit
at this time.
Item 2. Changes in Securities. Inapplicable.
Item 3. Defaults upon Senior Securities. Inapplicable.
Item 4. Submission of Matters to a Vote of Security Holders. Inapplicable.
Item 5. Other Information. Inapplicable.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
2.1 Agreement and Plan of Merger by and between the
Registrant and CNL American Properties Fund,
Inc. ("APF") dated March 11, 1999 (filed as
Appendix B to the Prospectus Supplement for the
Registrant, constituting a part of the
Registration Statement of APF on Form S-4, File
No. 74329.)
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.)
<PAGE>
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.)
(b) Reports on Form 8-K
Current Report on Form 8-K dated March 11, 1999 and filed
March 12, 1999, describing the proposed Merger of the
Partnership with and into a subsidiary of CNL American
Properties Fund, Inc.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
DATED this 14th day of May, 1999.
CNL INCOME FUND VIII, LTD.
By: CNL REALTY CORPORATION
General Partner
By: /s/ James M. Seneff, Jr.
--------------------------------------
JAMES M. SENEFF, JR.
Chief Executive Officer
(Principal Executive Officer)
By: /s/ Robert A. Bourne
--------------------------------------
ROBERT A. BOURNE
President and Treasurer
(Principal Financial and
Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the balance
sheet of CNL Income Fund VIII, Ltd. at March 31, 1999, and its statement of
income for the three months then ended and is qualified in its entirety by
reference to the Form 10Q of CNL Income Fund VIII, Ltd. for the three months
ended March 31, 1999.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 1,876,769
<SECURITIES> 0
<RECEIVABLES> 29,553
<ALLOWANCES> 28,474
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 17,454,788
<DEPRECIATION> 1,760,557
<TOTAL-ASSETS> 31,661,070
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 30,542,649
<TOTAL-LIABILITY-AND-EQUITY> 31,661,070
<SALES> 0
<TOTAL-REVENUES> 787,492
<CGS> 0
<TOTAL-COSTS> 169,525
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 674,843
<INCOME-TAX> 0
<INCOME-CONTINUING> 674,843
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 674,843
<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 above for current
assets and current liabilities.
</FN>
</TABLE>
