<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the balance
sheet of CNL Income Fund XVIII, Ltd. at March 31, 1997, and its statement of
income for the three months then ended and is qualified in its entirety by
reference to the Form 10-Q of CNL Income Fund XVIII, Ltd. for the three months
ended March 31, 1997.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 6,079,177
<SECURITIES> 0
<RECEIVABLES> 78,257
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 8,241,257
<DEPRECIATION> 9,629
<TOTAL-ASSETS> 15,420,779
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 14,250,188
<TOTAL-LIABILITY-AND-EQUITY> 15,420,779
<SALES> 0
<TOTAL-REVENUES> 96,214
<CGS> 0
<TOTAL-COSTS> 34,037
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 62,177
<INCOME-TAX> 0
<INCOME-CONTINUING> 62,177
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 62,177
<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>
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, 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
33-90998-01
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
CONTENTS
Part I Page
Item 1. Financial Statements:
Condensed Balance Sheets 1
Condensed Statements of Income 2
Condensed Statements of Partners' Capital 3
Condensed Statements of Cash Flows 4-5
Notes to Condensed Financial Statements 6-12
Item 2. Management's Discussion and Analysis
of Financial Condition and
Results of Operations 13-17
Part II
Other Information 18
CNL INCOME FUND XVIII, LTD.
(A Development Stage Florida Limited Partnership)
CONDENSED BALANCE SHEETS
March 31, December 31,
ASSETS 1997 1996
----------- ------------
Land and buildings on operating
leases, less accumulated
depreciation $ 8,231,628 $ 1,530,768
Net investment in direct financing
lease 651,984 -
Cash and cash equivalents 6,079,177 5,371,325
Receivables 78,257 3,711
Prepaid expenses 900 -
Organization costs, less accumulated
amortization of $911 and $411 9,089 9,589
Accrued rental income 6,504 -
Other assets 363,240 324,931
----------- -----------
$15,420,779 $ 7,240,324
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 70,480 $ 104,514
Accrued construction costs payable 686,342 -
Distributions payable 154,476 55,708
Due to related parties 141,104 83,889
Rents paid in advance 118,189 -
----------- -----------
Total liabilities 1,170,591 244,111
Commitments (Note 8)
Partners' capital 14,250,188 6,996,213
----------- -----------
$15,420,779 $ 7,240,324
=========== ===========
See accompanying notes to condensed financial statements.
1
CNL INCOME FUND XVIII, LTD.
(A Development Stage Florida Limited Partnership)
CONDENSED STATEMENTS OF INCOME
Quarters Ended
March 31,
1997 1996
--------- ---------
Revenues:
Rental income from operating leases $ 52,230 $ -
Earned income from direct financing
leases 1,113 -
Interest 42,871 -
--------- ---------
96,214 -
--------- ---------
Expenses:
General operating and administrative 16,685 -
Professional services 5,896 -
Management fees to related party 1,212 -
State and other taxes 416 -
Depreciation and amortization 9,828 -
--------- ---------
34,037 -
--------- ---------
Net Income $ 62,177 $ -
========= =========
Allocation of Net Income:
General partners $ (98) $ -
Limited partners 62,275 -
--------- ---------
$ 62,177 $ -
========= =========
Net Income Per Limited Partner Unit $ 0.05 $ -
========= =========
Weighted Average Number of Limited
Partner Units Outstanding 1,252,970 -
========= =========
See accompanying notes to condensed financial statements.
2
CNL INCOME FUND XVIII, LTD.
(A Development Stage Florida Limited Partnership)
CONDENSED STATEMENTS OF PARTNERS' CAPITAL
Quarter Ended Year Ended
March 31, December 31,
1997 1996
------------- ------------
General partners:
Beginning balance $ 993 $ 1,000
Contributions - -
Net income (98) (7)
----------- -----------
895 993
----------- -----------
Limited partners:
Beginning balance 6,995,220 -
Contributions 8,315,063 8,421,815
Syndication costs (968,789) (1,395,666)
Net income 62,275 26,917
Distributions ($0.12 and $0.11
per weighted average limited
partner unit, respectively) (154,476) (57,846)
----------- -----------
14,249,293 6,995,220
----------- -----------
Total partners' capital $14,250,188 $ 6,996,213
=========== ===========
See accompanying notes to condensed financial statements.
3
CNL INCOME FUND XVIII, LTD.
(A Development Stage Florida Limited Partnership)
CONDENSED STATEMENTS OF CASH FLOWS<PAGE>
Quarter Ended
March 31,
1997 1996
----------- -----------
Increase (Decrease) in Cash and Cash
Equivalents:
Net Cash Provided by Operating
Activities $ 189,772 $ -
----------- -----------
Cash Flows From Investing
Activities:
Additions to land and
buildings on operating
leases (5,953,421) -
Investment in direct
financing leases (651,984) -
Increase in other assets (38,309) -
Other 107 -
----------- -----------
Net cash used in
investing activities (6,643,607) -
----------- -----------
Cash Flows From Financing
Activities:
Reimbursement of acquisition
and syndication costs paid
by related parties on behalf
of the Partnership (177,493) -
Contributions from limited
partners 8,258,063 -
Distributions to limited
partners (55,708) -
Payment of syndication costs (863,175) -
Other - (250)
----------- -----------
Net cash provided by
financing activities 7,161,687 (250)
----------- -----------
Net Increase (Decrease) in Cash and
Cash Equivalents 707,852 (250)
Cash and Cash Equivalents at
Beginning of Quarter 5,371,325 980
----------- -----------
Cash and Cash Equivalents at End of
Quarter $ 6,079,177 $ 730
=========== ===========
See accompanying notes to condensed financial statements.
4
CNL INCOME FUND XVIII, LTD.
(A Development Stage Florida Limited Partnership)
CONDENSED STATEMENTS OF CASH FLOWS - CONTINUED
Quarter Ended
March 31,
1997 1996
----------- -----------
Supplemental Schedule of Non-Cash
Investing and Financing Activities:
Related parties paid certain acqui-
sition and syndication costs on
behalf of the Partnership as
follows:
Acquisition costs $ 81,738 $ -
Syndication costs 158,599 33,482
----------- -----------
$ 240,337 $ 33,482
=========== ===========
Distributions declared and unpaid
at end of quarter $ 154,476 $ -
=========== ===========
See accompanying notes to condensed financial statements.
5
CNL INCOME FUND XVIII, LTD.
(A Development Stage Florida Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS
Quarters Ended March 31, 1997 and 1996
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.
Operating results for the quarter ended March 31, 1997, may not be
indicative of the results that may be expected for the year ended
December 31, 1997. Amounts as of December 31, 1996, 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, 1996.
The Partnership was a development stage enterprise from February 10,
1995 through October 11, 1996. Since operations had not begun,
activities through October 11, 1996, were devoted to the organization of
the Partnership.
Rents Paid in Advance - Rents paid in advance by lessees for future
periods are deferred upon receipt and are recognized as revenues during
the period in which the rental income is earned. Rents paid in advance
include "interim rent" payments required to be paid under the terms of
certain leases for construction properties, equal to a pre-determined
rate times the amount funded by the Partnership during the period
commencing with the effective date of the lease to the date minimum
annual rent becomes payable. Once minimum annual rent becomes payable,
the "interim rent" payments are amortized and recorded as income either
(i) over the lease term so as to produce a constant periodic rate of
return for leases accounted for using the direct financing method, or
(ii) over the lease term using the straight-line method for leases
accounted for using the operating method, whichever is applicable.
6
CNL INCOME FUND XVIII, LTD.
(A Development Stage Florida Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS - CONTINUED
Quarters Ended March 31, 1997 and 1996
2. Leases:
The Partnership leases its land and buildings 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." Seven of the
leases are classified as operating leases and one of the leases has been
classified as a direct financing lease. The leases have initial terms
of 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 the tenants to
renew the leases for four successive five-year periods subject to the
same terms and conditions as the initial lease. Most leases also allow
the tenant to purchase the property at fair market value after a
specified portion of the lease has elapsed.
3. Land and Buildings on Operating Leases:
Land and buildings on operating leases consisted of the following at:
March 31, December 31,
1997 1996
---------- ------------
Land $3,990,795 $ 852,578
Buildings 1,259,475 659,134
---------- ----------
5,250,270 1,511,712
Less accumulated
depreciation (9,629) (301)
---------- ----------
5,240,641 1,511,411
Construction in progress 2,990,987 19,357
---------- ----------
$8,231,628 $1,530,768
========== ==========
Some of the leases provide for scheduled rent increases throughout the
lease term and/or rental payments during the construction of a property
prior to the date it is placed in service. Such amounts are recognized
on a straight-line basis over the terms of the leases. For the quarter
ended March 31, 1997, the Partnership recognized $6,504 of such rental
income.
7
CNL INCOME FUND XVIII, LTD.
(A Development Stage Florida Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS - CONTINUED
Quarters Ended March 31, 1997 and 1996
3. Land and Buildings on Operating Leases - Continued:
The following is a schedule of the future minimum lease payments to be
received on the noncancellable operating leases for the properties that
were operational as of March 31, 1997:
1997 $ 158,052
1998 212,256
1999 221,357
2000 222,184
2001 222,184
Thereafter 3,050,633
----------
$4,086,666
==========
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 tenant's gross sales. The amounts also
do not include minimum lease payments that will become due when the
properties under development are completed (see Note 8).
4. Net Investment in Direct Financing Lease:
The following lists the components of the net investment in direct
financing lease at:
March 31, December 31,
1997 1996
----------- ------------
Minimum lease payments
receivable $ 1,893,111 $ -
Estimated residual
value 163,002 -
Less unearned income (1,404,129) -
----------- -----------
Net investment in direct
financing lease $ 651,984 $ -
=========== ===========
8
CNL INCOME FUND XVIII, LTD.
(A Development Stage Florida Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS - CONTINUED
Quarters Ended March 31, 1997 and 1996
4. Net Investment in Direct Financing Lease - Continued:
The following is a schedule of future minimum lease payments to be
received on the direct financing lease at March 31, 1997:
1997 $ 52,010
1998 69,347
1999 69,347
2000 69,347
2001 69,347
Thereafter 1,563,713
----------
$1,893,111
==========
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).
5. Syndication Costs:
Syndication costs consisting of legal fees, commissions, the due
diligence expense reimbursement fee, printing and other expenses
incurred in connection with the offering totalled $968,789 and
$1,395,666 for the quarter ended March 31, 1997 and the year ended
December 31, 1996, respectively. These offering expenses were 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 or reimbursed by the general partners and will
not be the responsibility of the Partnership.
6. Related Party Transactions:
During the quarter ended March 31, 1997, the Partnership incurred
$706,781 in syndication costs due to CNL Securities Corp. for services
in connection with selling units of limited partnership interest. A
substantial portion of these amounts ($599,493) was or will be reallowed
to other broker-dealers.
In addition, during the quarter ended March 31, 1997, the Partnership
incurred $41,575 in due diligence expense reimbursement fees due to CNL
Securities Corp. These fees equal 0.5% of the limited partner
contributions of $8,315,063 received during the quarter ended March 31,
1997. The majority of these fees was reallowed to other broker-dealers
and from which all bona fide due diligence expenses were paid.
9
CNL INCOME FUND XVIII, LTD.
(A Development Stage Florida Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS - CONTINUED
Quarters Ended March 31, 1997 and 1996
6. Related Party Transactions - Continued:
Additionally, during the quarter ended March 31, 1997, the Partnership
incurred $374,178 in acquisition fees due to CNL Fund Advisors, Inc. for
services in finding, negotiating and acquiring properties on behalf of
the Partnership. These fees represent 4.5% of the limited partner
capital contributions received during the quarter ended March 31, 1997,
and are included in land and buildings on operating leases, net
investment in direct financing lease and other assets.
In addition, during the quarter ended March 31, 1997, the Partnership
incurred management fees of $1,212 due to CNL Fund Advisors, Inc.
During the quarter ended March 31, 1997, certain affiliates of the
general partners provided accounting and administrative services to the
Partnership (including accounting and administrative services in
connection with the offering of units) on a day-to-day basis. The
expenses incurred for these services were classified as follows for the
quarters ended March 31:
1997 1996
------- -------
Syndication costs $82,682 $ 3,372
General operating and
administrative
expenses 13,245 -
------- -------
$95,927 $ 3,372
======= =======
10
CNL INCOME FUND XVIII, LTD.
(A Development Stage Florida Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS - CONTINUED
Quarters Ended March 31, 1997 and 1996
6. Related Party Transactions - Continued:
The amounts due to related parties consisted of the following at:
March 31, December 31,
1997 1996
--------- ------------
Due to CNL Securities Corp.:
Commissions $ 17,044 $ 44,186
Due diligence expense
reimbursement fee 1,003 2,599
-------- --------
18,047 46,785
-------- --------
Due to CNL Fund Advisors,
Inc.:
Expenditures incurred on
on behalf of the
Partnership 69,876 2,788
Acquisition fees 43,331 23,392
Accounting and admini-
strative services 8,638 10,912
Management fees 1,212 12
-------- --------
123,057 37,104
-------- --------
$141,104 $ 83,889
======== ========
7. Concentration of Credit Risk:
The following schedule presents total rental and earned income from
individual lessees and the respective restaurant chains, each
representing more than ten percent of the Partnership's total rental and
earned income for the quarters ended March 31:
1997 1996
------- --------
Platinum Rotisserie,
L.L.C. (operating
a Boston Market
restaurant) $27,153 $ -
Carrols Corporation
(operating a Burger
King restaurant) 25,078 -
It is expected that the percentage of total rental and earned income
contributed by these lessees and restaurant chains will decrease as
additional properties are acquired and leased during the remainder of
1997 and in subsequent years.
11
CNL INCOME FUND XVIII, LTD.
(A Development Stage Florida Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS - CONTINUED
Quarters Ended March 31, 1997 and 1996
8. Commitments:
The Partnership has entered into five development agreements with
tenants which provide terms and specifications for the construction of
buildings that the tenants have agreed to lease once construction is
completed. The agreements provide a maximum amount of development costs
(including the purchase price of the land and closing costs) to be paid
by the Partnership. The aggregate maximum development costs the
Partnership has agreed to pay is approximately $6,225,100, of which
approximately $5,690,900 in land and other costs had been incurred as of
March 31, 1997. The buildings under construction are expected to be
operational by May 1997. The lease agreements for these properties are
substantially the same as the leases relating to the Partnership's other
properties as described in Note 2.
9. Subsequent Event:
During the period April 1, 1997 through April 30, 1997, the Partnership
received capital contributions for an additional 174,614 units
($1,746,144) of limited partnership interest.
In addition, during the period April 1, 1997 through April 30, 1997, the
Partnership acquired five additional properties for cash, at a total
cost of approximately $2,933,700. In connection with the four
properties under construction, the Partnership has agreed to pay
development costs (including the purchase prices of the land and closing
costs) of approximately $3,563,300 of which approximately $1,547,500 in
land and other costs had been paid by the Partnership as of April 30,
1997. The buildings under construction are expected to be operational
by October 1997. The lease agreements for the existing property and the
properties to be constructed are substantially the same as the leases
relating to the Partnership's other properties, as described in Note 2.
12
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. As of March 31, 1997, the Partnership owned eight
Properties, five of which were under construction.
Liquidity and Capital Resources
On September 20, 1996, the Partnership commenced an offering to the
public of up to 3,500,000 Units of limited partnership interest pursuant to a
registration statement on Form S-11 under the Securities Act of 1933, as
amended, effective August 11, 1995. As of March 31, 1997, the Partnership had
sold 1,673,688 Units, representing $16,736,878 of capital contributed by the
limited partners. 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.
As of March 31, 1997, net proceeds to the Partnership from its offering
of Units, after deduction of organizational and offering expenses, totalled
$14,362,423. Of this amount, the Partnership had invested or committed for
investment approximately $9,762,400 of such proceeds in eight Properties (five
of which were under construction at March 31, 1997), and to pay acquisition
fees and certain acquisition expenses, leaving approximately $4,603,300 of
offering proceeds available for investment in Properties. As of March 31,
1997, the Partnership had incurred $753,160 in acquisition fees to an
affiliate of the general partners.
As of March 31, 1997, the Partnership had entered into five development
agreements with tenants which provide terms and specifications for the
construction of buildings. The agreements provide a maximum amount of
development costs (including the purchase price of the land and closing costs)
to be paid by the Partnership. The aggregate maximum development costs the
Partnership has agreed to pay is approximately $6,225,100, of which
approximately $5,690,900 in land and other costs had been incurred as of March
31, 1997. The buildings under construction are expected to be operational by
May 1997. In connection with the acquisition of each of these Properties, the
Partnership entered into a long-term, triple-net lease.
13
Liquidity and Capital Resources - Continued
During the period April 1, 1997 through April 30, 1997, the Partnership
acquired five additional Properties for cash, at a total cost of approximately
$2,933,700. In connection with the four Properties under construction, the
Partnership has agreed to pay development costs (including the purchase prices
of the land and closing costs) of approximately $3,563,300, of which
approximately $1,547,500 in land and other costs had been paid by the
Partnership as of April 30, 1997. The buildings under construction are
expected to be operational by October 1997. The lease agreements for the
existing Property and the Properties to be constructed are substantially the
same as the leases relating to the Partnership's other Properties.
As of April 30, 1997, the Partnership had sold a total of 1,848,302
Units, for an aggregate of $18,483,022 in gross offering proceeds, and had
invested or committed for investment approximately $15,100,000 of such
proceeds in 13 Properties and to pay acquisition fees and certain acquisition
expenses, leaving approximately $1,100,000 in net offering proceeds available
for investment in Properties. As of April 30, 1997, the Partnership had
incurred $831,736 in acquisition fees to an affiliate of the general partners.
The Partnership presently is negotiating to acquire additional
properties, but as of April 30, 1997, had not acquired any such properties.
The Partnership will use the remaining net offering proceeds, together with
proceeds from the sale of Units subsequent to April 30, 1997, to acquire
additional Properties, to pay acquisition fees and certain acquisition
expenses and to pay expenses relating to the sale of Units. 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.
None of the Properties owned or to be acquired by the Partnership is or
may be encumbered. Subject to certain restrictions on borrowing, however,
the Partnership may borrow funds, but will not encumber any of the Properties
in connection with any such borrowing.
Until Properties are acquired by the Partnership, all Partnership
proceeds are held in short-term, highly liquid investments which the general
partners believe to have appropriate safety of principal. This investment
strategy provides high liquidity in order to facilitate the Partnership's use
of these funds to acquire Properties at such time as Properties suitable for
acquisition are located. At March 31, 1997, the Partnership had $6,079,177
invested in such short-term investments, as compared to $5,371,325 at December
31, 1996. The increase in the amount invested in short-term investments is a
result of the receipt of capital contributions from the sale of Units during
the quarter ended March 31, 1997. These funds will be used to purchase and
develop Properties (directly or indirectly through joint venture
14
Liquidity and Capital Resources - Continued
arrangements), to pay syndication and acquisition costs, to pay limited
partner distributions, to meet Partnership expenses and, in the general
partners' discretion, to create cash reserves.
During the quarter ended March 31, 1997, affiliates of the general
partners incurred on behalf of the Partnership $158,599 for certain
organizational and offering expenses. In addition, during the quarter ended
March 31, 1997, affiliates of general partners incurred on behalf of the
Partnership $81,738 for certain acquisition expenses and $9,302 for certain
operating expenses. As of March 31, 1997, the Partnership owed $141,104 to
related parties for such amounts, fees and other reimbursements. As of April
30, 1997, the Partnership had reimbursed the affiliates all such amounts.
Amounts payable to other parties, including distributions payable, increased
to $911,298 at March 31, 1997, from $160,222 at December 31, 1996, as a result
of an increase in distributions payable to limited partners and costs incurred
with respect to the Properties under construction and unpaid at March 31,
1997.
During the quarter ended March 31, 1997, the Partnership generated cash
from operations (which includes cash received from tenants, interest and other
income received, less cash paid for expenses) of $189,772. Based on cash from
operations, the Partnership declared distributions to the limited partners of
$154,476 for the quarter ended March 31, 1997. This represents distributions
of $0.12 per weighted average limited partner unit for the quarter ended March
31, 1997. No distributions were made to the general partners for the quarter
ended March 31, 1997. No amounts distributed or to be distributed to the
limited partners for the quarter ended March 31, 1997, are required to be or
have been treated by the Partnership as a return of capital for purposes of
calculating the limited partners' return on their adjusted capital
contributions. 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 meet specified
financial standards is expected to minimize the Partnership's operating
expenses. Partnership net income is expected to increase throughout 1997, as
rental income increases, due to the acquisition of additional Properties and
due to the fact that the Properties that were under construction at March 31,
1997, will be operational. Accordingly, the general partners believe that any
anticipated decrease in the Partnership's liquidity in 1997, due to its
investment of available net offering proceeds in Properties and the payment of
additional costs relating to the Properties under construction at March 31,
1997, will not have an adverse effect on the Partnership's operations.
15
Liquidity and Capital Resources - Continued
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 purchase a Property until sufficient cash is available
for such purchase, the general partners do not believe that working capital
reserves are necessary at this time. In addition, due to the fact that the
leases of the Partnership's Properties are on a triple-net basis, it is not
anticipated that a permanent reserve for maintenance and repairs is necessary
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 repairs and maintenance. The general partners have the right to cause the
Partnership to maintain reserves if, in their discretion, they determine such
reserves are necessary to meet the Partnership's working capital needs.
The general partners have the right, but not the obligation, to make
additional capital contributions if they deem it appropriate in connection
with the operations of the Partnership.
Results of Operations
No significant operations commenced until the Partnership received and
released from escrow the minimum offering proceeds of $1,500,000 on October
11, 1996.
As of March 31, 1997, the Partnership had purchased eight Properties and
entered into lease agreements relating to each of these Properties. The
leases of the Properties provide for minimum base annual rental payments
(payable in monthly installments) ranging from approximately $69,300 to
$170,300. Most of the leases provide for percentage rent based on sales in
excess of a specified amount. In addition, some of the leases provide that,
commencing in specified lease years (generally the sixth lease year), the
annual base rent required under the terms of the lease will increase.
During the quarter ended March 31, 1997, the Partnership earned $53,343
in rental income from operating leases and earned income from the direct
financing lease from three Properties. Because the Partnership did not
commence significant operations until it received the minimum offering proceeds
on October 11, 1996, and has not yet acquired all of its Properties,
Partnership revenues for the quarter ended March 31, 1997, represent only a
portion of revenues which the Partnership is expected to earn during a full
quarter in which the Partnership's Properties are operational.
During the quarter ended March 31, 1997, two lessees of the Partnership
and their respective restaurant chain, Platinum Rotisserie, L.L.C. (operating
a Boston Market restaurant) and Carrols Corporation (operating a Burger King
restaurant) each contributed more than ten percent of the Partnership's total
rental income. As of March 31, 1997, Platinum Rotisserie, L.L.C. was the
lessee under the lease relating to one restaurant and Carrols Corporation was
the lessee under the lease relating to one
16
Results of Operations - Continued
restaurant. Because the Partnership did not commence operations until October
1996, and its first Property was not purchased until December 1996, the
foregoing information regarding the lessees and restaurant chains which
contributed a significant amount of the Partnership's total rental income
during the quarter ended March 31, 1997, may or may not be representative
of the lessees which will account for more than ten percent of the
Partnership's rental income during the remainder of 1997 and subsequent
years. Because the Partnership has not completed its acquisition of Properties
as yet, it is not possible to determine which lessees or restaurant chains will
contribute more than ten percent of the Partnership's rental income during the
remainder of 1997 and subsequent years. In the event that certain lessees or
restaurant chains contribute more than ten percent of the Partnership's rental
income in the current and future years, any failure of such lessees or
restaurant chains could materially affect the Partnership's income.
During the quarter ended March 31, 1997, the Partnership also earned
$42,871 in interest income from investments in money market accounts or other
short-term, highly liquid investments. As net offering proceeds are invested
in additional Properties and the Properties under construction become
operational, the percentage of total income representing interest income is
expected to decrease.
Operating expenses, including depreciation and amortization, were
$34,037 for the quarter ended March 31, 1997. The dollar amount of operating
expenses is expected to increase and the amount of general operating and
administrative expenses as a percentage of total revenues is expected to
decrease, as the Partnership acquires additional Properties and the Properties
under construction become operational.
17
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) The Partnership filed three reports on Form 8-K on January
13, 1997, January 22, 1997 and February 6, 1997, reporting
property acquisitions.
18
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, 1997.
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)
