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 September 30, 1996
-----------------------------------
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number
33-90998-01
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CNL Income Fund XVIII, Ltd.
- ------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Florida 59-3295394
- ---------------------------- -------------------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organiza- Identification No.)
tion)
400 E. South Street, #500
Orlando, Florida 32801
- ---------------------------- -------------------------------
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number
(including area code) (407) 422-1574
-------------------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
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CONTENTS
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Part I Page
----
Item 1. Financial Statements:
Condensed Balance Sheets 1
Condensed Statements of Partners' Capital 2
Notes to Condensed Financial Statements 3-5
Item 2. Management's Discussion and Analysis
of Financial Condition and
Results of Operations 6-8
Part II
Other Information 9
CNL INCOME FUND XVIII, LTD.
(A Development Stage Florida Limited Partnership)
CONDENSED BALANCE SHEETS
September 30, December 31,
ASSETS 1996 1995
------------- ------------
Cash $ 730 $ 980
Prepaid expenses 20 20
Organization costs 10,000 10,000
Deferred syndication costs 504,079 245,890
Other assets 27,304 -
-------- --------
$542,133 $256,890
======== ========
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 8,505 $ 22,130
Due to related parties 532,628 233,760
-------- --------
Total liabilities 541,133 255,890
Partners' capital 1,000 1,000
-------- --------
$542,133 $256,890
======== ========
See accompanying notes to condensed financial statements.
CNL INCOME FUND XVIII, LTD.
(A Development Stage Florida Limited Partnership)
CONDENSED STATEMENTS OF PARTNERS' CAPITAL
Nine Months Ended September 30, 1996 and the
Period February 10, 1995 (Date of Inception)
through December 31, 1995
Number of
Units of
Limited
Partnership
Interest Limited General
Issued Partners Partners Total
----------- -------- -------- --------
Balance,
February 10, 1995
(Date of Inception) - $ - $ - $ -
Cash contributions
on February 22,
1995, for general
partners' interest - - 1,000 1,000
------- -------- ------ --------
Balance,
December 31, 1995 - - 1,000 1,000
Subscriptions received
for limited partner-
ship units through
public offering 60,676 606,756 - 606,756
Subscriptions held
in escrow at
September 30, 1996 (60,676) (606,756) - (606,756)
------- -------- ------ --------
Balance, September 30,
1996 - $ - $1,000 $ 1,000
======= ======== ====== ========
See accompanying notes to condensed financial statements.
CNL INCOME FUND XVIII, LTD.
(A Development Stage Florida Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS
Quarters Ended September 30, 1996 and 1995
and Nine Months Ended September 30, 1996, and the
Period February 10, 1995 (Date of Inception)
through September 30, 1995
1. Significant Accounting Policies:
--------------------------------
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.
Amounts as of December 31, 1995, included in the financial statements,
have been derived from audited financial statements as of that date.
These unaudited financial statements should be read in conjunction with
the financial statements and notes thereto included in Form 10-K of CNL
Income Fund XVIII, Ltd. (the "Partnership") for the year ended December
31, 1995.
Under the terms of a registration statement filed with the Securities
and Exchange Commission, the Partnership is authorized to sell a maximum
of 3,500,000 units ($35,000,000) of limited partnership interest.
Subscriptions for 60,676 units ($606,756) of limited partnership
interest had been received and were being held in escrow as of September
30, 1996.
As of September 30, 1996, the Partnership was a development stage
enterprise and operations had not begun.
2. Deferred Syndication Costs:
--------------------------
At September 30, 1996 and December 31, 1995, syndication costs
consisting of commissions, due diligence expense reimbursement fees,
legal fees, printing and other expenses which were incurred in
connection with the offering totalled $504,079 and $245,890,
respectively. These syndication costs have been treated as deferred
costs and, once the Partnership receives the minimum offering proceeds
and funds are released from escrow, will be charged to the limited
partners' capital accounts to reflect the net capital proceeds of the
offering. All organizational and offering expenses, as defined in the
Partnership's prospectus, which exceed three percent of the total gross
proceeds received from the sale of units of the Partnership will be paid
by the general partners and will not be the responsibility of the
Partnership.
3. Related Party Transactions:
--------------------------
CNL Securities Corp. is entitled to receive commissions amounting to
8.5% of limited partners' contributions for services in connection with
selling limited partnership interests, a substantial portion of which
will be paid as commissions to other broker-dealers. As of September
30, 1996, $51,574 of such fees had been incurred.
In addition, CNL Securities Corp. is entitled to receive a due diligence
expense reimbursement fee equal to 0.5% of limited partners'
contributions, a portion of which may be reallowed to other broker-
dealers. As of September 30, 1996, $3,034 of such fees had been
incurred.
CNL Fund Advisors, Inc. is entitled to receive acquisition fees for
services in finding, negotiating and acquiring properties on behalf of
the Partnership equal to 4.5% of the limited partners' contributions.
As of September 30, 1996, $27,304 of such fees had been incurred. This
amount is included in other assets at September 30, 1996.
During the quarter and nine months ended September 30, 1996, CNL Fund
Advisors, Inc. and its affiliates provided accounting and administrative
services to the Partnership, primarily in connection with the
registration of the offering, totalling $23,375 and $29,980,
respectively, which are included in deferred syndication costs.
The amounts due to related parties consisted of the following at:
September 30, December 31,
1996 1995
------------- ------------
Due to CNL Securities Corp.:
Commissions $ 51,574 $ -
Due diligence expense
reimbursement fee 3,034 -
-------- --------
54,608 -
-------- --------
Due to CNL Fund Advisors, Inc.:
Expenditures incurred for
organizational and offering
expenses on behalf of the
Partnership 383,150 233,760
Accounting and administrative
services 67,566 -
Acquisition fees 27,304 -
-------- --------
478,020 233,760
-------- --------
$532,628 $233,760
======== ========
In the event the minimum offering proceeds are not received by the
Partnership, the Partnership will have no obligation to repay such
amounts.
4. Subsequent Event:
----------------
As of October 11, 1996, the Partnership had received aggregate
subscription proceeds of $1,733,131, which exceeded the minimum offering
amount of $1,500,000, and $1,517,431 of the funds (which excluded all
funds received from New York and Pennsylvania investors) were released
from escrow. As of October 31, 1996, the Partnership had sold 368,665
units, representing $3,686,653 of capital contributed by limited
partners and all funds received from New York and Pennsylvania investors
had been released from escrow.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
CNL Income Fund XVIII, Ltd. (the "Partnership") is a Florida limited
partnership that was organized on February 10, 1995, to acquire for cash,
either directly or through joint venture arrangements, both newly constructed
and existing restaurant properties, as well as land upon which restaurants are
to be constructed (the "Properties"), to be leased primarily to operators of
selected national and regional fast-food, family-style and casual dining
restaurant chains. The leases will be triple-net leases, with the lessee
generally responsible for all repairs and maintenance, property taxes,
insurance and utilities. The Partnership's primary investment objectives are
to preserve, protect and enhance Partnership capital, while providing (i) cash
distributions commencing in the initial year of Partnership operations in
amounts which exceed current taxable income (due to the fact that depreciation
deductions attributable to the Properties reduce taxable income even though
depreciation is not a cash expenditure); (ii) an anticipated minimum level of
income through the long-term rental of Properties to selected operators of
certain national and regional fast-food, family-style and casual dining
restaurant chains; (iii) additional income and protection against inflation by
participation in certain restaurant gross sales through the receipt of
percentage rent payments and, typically, automatic increases in the minimum
annual rent; and (iv) capital appreciation through the potential increase in
value of the Properties. At September 30, 1996, the Partnership was in the
process of offering units for sale and therefore was in its organizational
stage.
As of September 30, 1996, the Partnership did not own any Properties.
Liquidity and Capital Resources
- -------------------------------
The Partnership's sources of liquidity are (i) capital contributions
from general and limited partners, (ii) interest earned on short-term
investments prior to the purchase of Properties and distributions of net cash
flow to partners, and (iii) rental payments under leases once Properties are
acquired.
Pursuant to a registration statement on Form S-11 under the Securities
Act of 1933, as amended, effective August 11, 1995, the Partnership and CNL
Income Fund XVII, Ltd. ("CNL XVII") registered for sale an aggregate of
$65,000,000 of limited partnership interest (the "Units") (3,000,000 Units for
CNL XVII and 3,500,000 Units for the Partnership at $10 per Unit). The
offering of Units of CNL XVII commenced September 2, 1995 and terminated on
September 19, 1996. Pursuant to the registration statement, the Partner-
ship's offering of Units could not commence until the offering of Units of CNL
XVII was terminated. The Partnership's offering commenced on September 20,
1996. As of September 30, 1996, the Partnership had received subscriptions
for 60,676 Units, representing $606,756 in subscription proceeds from limited
partners which were being held in escrow until the Partnership received
aggregate subscription proceeds of at least $1,500,000 from the offering. As
of October 11, 1996, the Partnership had received aggregate subscriptions for
173,313 Units, representing $1,733,131 in aggregate subscription proceeds from
limited partners and $1,517,431 of the funds were released from escrow (which
excluded all funds received from New York and Pennsylvania investors). As of
October 31, 1996, the Partnership had sold 368,665 Units, representing
$3,686,653 of capital contributed by limited partners and all funds received
from New York and Pennsylvania investors had been released from escrow. Based
on the general partners' experience with 17 prior CNL Income Fund offerings
(each of which sold the entire amount of units offered for purchase), the
Partnership anticipates significant additional sales of Units prior to the
termination of the offering. In accordance with the Partnership's prospectus,
the general partners have elected to extend the offering of Units of the
Partnership until a date no later than August 11, 1997.
At September 30, 1996, and December 31, 1995, the Partnership's total
assets were $542,133 and $256,890, respectively. The increase in total assets
reflects organizational and offering expenses incurred and recorded as
deferred syndication costs and acquisition fees recorded as other assets
during the nine months ended September 30, 1996.
The Partnership and any joint venture in which the Partnership may
become a partner or co-venturer will acquire the Properties without borrowing.
Properties will be leased on a triple-net basis, meaning that tenants are
generally required to pay all repairs and maintenance, property taxes,
insurance and utilities. Rental payments under the leases are expected to
exceed Partnership operating expenses. For these reasons, no short-term or
long-term liquidity problems currently are anticipated by the general
partners.
The Partnership's investment strategy of acquiring Properties for cash
and leasing them under triple-net leases to operators who meet specified
financial standards is expected to minimize the Partnership's operating
expenses. During the operational stage, the general partners believe that the
leases will generate cash flow in excess of operating expenses. Since the
leases are expected generally to have an initial term of 15 to 20 years, with
two or more five-year renewal options, and provide for specified percentage
rent in addition to the annual base rent and, in certain cases, increases in
the base rent or the percentage rent at specified times during the terms of
the leases, it is anticipated that Partnership rental income will increase
over time. Accordingly the general partners believe that any anticipated
decrease in the Partnership's liquidity in 1996, due to its investment of
available net offering proceeds in Properties, will not have an adverse effect
on the Partnership's operations in 1996.
During the nine months ended September 30, 1996, affiliates of the
general partners incurred on behalf of the Partnership $186,976 for certain
organizational and offering expenses. As of September 30, 1996, the
Partnership owed CNL Fund Advisors, Inc., $478,020 for such amounts, for
accounting and administrative services and for acquisition fees. In addition,
the Partnership accrued $54,608 due to CNL Securities Corp. as of September
30, 1996, for commissions and due diligence expense reimbursement fees. As of
October 31, 1996, the Partnership had reimbursed the affiliates all such
amounts. The general partners have agreed to pay all organizational and
offering expenses in excess of three percent of the gross offering proceeds.
The Partnership will utilize its net proceeds from its offering to
purchase Properties. The Partnership expects to acquire Properties entirely
for cash. As of October 31, 1996, the Partnership had not entered into any
arrangements creating a reasonable probability that a Property would be
acquired by the Partnership. The number of Properties to be acquired will
depend upon the amount of net offering proceeds (gross proceeds less fees and
expenses of the offering) available to the Partnership.
The general partners expect that the cash to be generated from
operations of all Properties, once they are acquired, will be adequate to pay
operating expenses and provide distributions to partners. Distributions to
the limited partners of the Partnership are expected to commence in the fourth
quarter of 1996 and will be paid quarterly thereafter.
Due to anticipated low operating expenses, rental income expected to be
obtained from Properties after they are acquired and the fact that the
Partnership will not enter into a commitment to purchase a Property until
sufficient cash is available for such purchase, the general partners do not
believe that working capital reserves will be necessary at this time. The
general partners have the right to cause the Partnership to maintain reserves
if, in their discretion, they determine such reserves are required to meet the
Partnership's working capital needs.
Results of Operations
- ---------------------
No significant operations had commenced as of September 30, 1996,
because the Partnership was in its development stage.
As of October 11, 1996, the Partnership had received aggregate
subscription proceeds in excess of the minimum offering amount of $1,500,000
and funds were released from escrow, as described above in "Liquidity and
Capital Resources". As of October 31, 1996, the Partnership had sold 368,665
Units, representing $3,686,653 of capital contributed by limited partners, and
as of that date, had acquired no Properties and no commitments had been issued
by the Partnership to acquire any Properties.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings. Inapplicable.
-----------------
Item 2. Changes in Securities. Inapplicable.
---------------------
Item 3. Defaults upon Senior Securities. Inapplicable.
-------------------------------
Item 4. Submission of Matters to a Vote of Security Holders.
---------------------------------------------------
Inapplicable.
Item 5. Other Information. Inapplicable.
-----------------
Item 6. Exhibits and Reports on Form 8-K.
--------------------------------
(a) Exhibits - None.
(b) No reports on Form 8-K were filed during the quarter ended
September 30, 1996.
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 8th day of November, 1996.
CNL INCOME FUND XVIII, 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 XVIII, Ltd. at September 30, 1996, and its statement of
income for the nine months then ended and is qualified in its entirety by
reference to the Form 10-Q of CNL Income Fund XVIII, Ltd. for the nine months
ended September 30, 1996.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 730
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 542,133
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 1,000
<TOTAL-LIABILITY-AND-EQUITY> 542,133
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>Due to the nature of its industry, CNL Income Fund XVIII, Ltd. has an
unclassified balance sheet; therefore, no values are shown above for current
assets and current liabilities.
</FN>
</TABLE>
