SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 16, 1997
CNL INCOME FUND XVIII, LTD.
(Exact Name of Registrant as Specified in Charter)
Florida 33-90998-01 59-3295394
(State or other juris- (Commission File Number) (IRS Employer
diction of incorporation) Identification No.)
400 East South Street, Suite 500 32801
Orlando, Florida (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (407) 422-1574
ITEM 1. CHANGES IN CONTROL OF REGISTRANT.
Not applicable.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
STATUS OF THE OFFERING
Pursuant to a registration statement on Form S-11 under the
Securities Act of 1933, as amended, effective August 11, 1995 (the
"Registration Statement"), CNL Income Fund XVII, Ltd. ("CNL XVII") and CNL
Income Fund XVIII, Ltd. ("CNL XVIII"), limited partnerships with the same
general partners and investment objectives, registered for sale an aggregate
of $65,000,000 of units of limited partnership interest (the "Units")
(6,500,000 Units at $10 per Unit). The first 3,000,000 Units ($30,000,000)
were for CNL XVII, and the remaining Units are for CNL XVIII. The offering of
Units of CNL XVII terminated on September 19, 1996, at which time
subscriptions for an aggregate 3,000,000 Units ($30,000,000), including Units
sold pursuant to the Reinvestment Plan, had been received and 1,602
subscribers had been admitted as Limited Partners in accordance with the
Partnership Agreement of CNL XVII. Pursuant to the registration statement,
CNL XVIII's offering of Units could not commence until the offering of Units
of CNL XVII was terminated. CNL XVIII's offering commenced on September 20,
1996. As of April 18, 1997, CNL XVIII had received subscription proceeds of
$17,978,530 (1,797,853 Units) from 858 Limited Partners.
As stated in the Registration Statement, including the Prospectus
which constitutes a part thereof, as supplemented and amended, the proceeds of
the offering of Units are to be used to acquire restaurant properties to be
leased primarily to operators of national and regional fast-food, family-
style, and casual dining restaurant chains (the "Properties"), to pay expenses
in connection with the offering of Units and to pay partnership organizational
costs.
ACQUISITION OF PROPERTIES
From April 3, 1997 through April 18, 1997, CNL XVIII acquired two
Properties. The Properties are a Boston Market Property (in San Antonio,
Texas) and an On The Border Property (in San Antonio, Texas).
In connection with the purchase of each of these two Properties, CNL
XVIII, as lessor, entered into a long-term lease agreement with an
unaffiliated lessee. The leases are on a triple-net basis, with the lessee
responsible for all repairs and maintenance, property taxes, insurance and
utilities. The lessee also is required to pay for special assessments, sales
and use taxes, and the cost of any renovations permitted under the lease.
Upon termination of the lease, the lessee will surrender possession of the
Property to CNL XVIII, together with any improvements made to the Property
during the term of the lease. In addition, in connection with the purchase of
these Properties, which are to be constructed, CNL XVIII has entered into
development and indemnification and put agreements with the lessee.
In connection with the acquisition of the On The Border Property,
which is building only, CNL XVIII has also entered into a tri-party agreement
with the lessee and the landlord of the land in order to provide CNL XVIII
with certain rights with respect to the land on which the building is located.
The following table sets forth the location of the two Properties,
including one Property consisting of land and building and one Property
consisting of building only, acquired by CNL XVIII from April 3, 1997 through
April 18, 1997, a description of the competition, and a summary of the
principal terms of the acquisition and lease of each Property.
-1-
<TABLE>
PROPERTY ACQUISITIONS
From April 3, 1997 through April 18, 1997
<CAPTION>
Lease Expira-
Property Location and Purchase Date tion and Minimum Option
Competition Price (1) Acquired Renewal Options Annual Rent (2) Percentage Rent To Purchase
- --------------------- ------------ -------- --------------- --------------- --------------- -----------
<S> <C> <C> <C> <C> <C> <C>
BOSTON MARKET $621,595 04/16/97 04/2012; five 10.38% of Total for each lease at any time
(the "San Antonio #1 (excluding five-year Cost (4); year after the after the
Property") development renewal options increases by fifth lease fifth lease
Restaurant to be constructed costs) (3) 10% after the year, (i) 4% of year
fifth lease annual gross
The San Antonio #1 Property is year and after sales minus
located at the northwest every five (ii) the
quadrant of San Pedro Avenue years minimum annual
and West Maplewood Lane, in thereafter rent for such
San Antonio, Bexar County, during the lease year
Texas, in an area of mixed lease term
retail, commercial, and
residential development.
Other fast-food and family-
style restaurants located in
proximity to the San Antonio
#1 Property include a KFC, a
McDonald's, and several local
restaurants.
ON THE BORDER (5) $182,459 04/17/97 (6); three 13.64% of Total for each lease at any time
(the "San Antonio #2 (excluding five-year Cost (4); (7) year, (i) 4% of after the
Property") development renewal options annual gross tenth lease
Restaurant to be constructed costs) (3) sales minus year
(ii) the
The San Antonio #2 Property is minimum annual
located along the east side of rent for such
Interstate Highway 10, north lease year (8)
of Huebner Oaks Road, in San
Antonio, Bexar County, Texas,
in an area of mixed retail,
commercial, and residential
development.
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</TABLE>
FOOTNOTES:
(1) The estimated federal income tax basis of the depreciable portion (the
building portion) of each of the Properties acquired, once the buildings
are constructed, is set forth below:
Property Federal Tax Basis
-------- -----------------
San Antonio #1 Property $ 284,000
San Antonio #2 Property 1,251,000
(2) Minimum annual rent for the San Antonio #1 Property will become due and
payable on the date the tenant receives from the landlord its final
funding of the construction costs. For the San Antonio #2 Property,
minimum annual rent will become due and payable on the earlier of (i)
180 days after execution of the lease, (ii) the date the certificate of
occupancy for the restaurant is issued, (iii) the date the restaurant
opens for business to the public, or (iv) the date the tenant receives
from the landlord its final funding of the construction costs. During
the period commencing with the effective date of the lease to the date
minimum annual rent becomes payable for the San Antonio #1 Property, as
described above, interim rent equal to 10.38% per annum of the amount
funded by CNL XVIII in connection with the purchase and construction of
the Property shall accrue and be payable in a single lump sum at the
time of final funding of the construction costs. During the period
commencing with the effective date of the lease to the date minimum
annual rent becomes payable for the San Antonio #2 Property, as
described above, the tenant shall pay monthly "interim rent" equal to 11
percent per annum of the amount funded by CNL XVIII in connection with
the purchase and construction of the Property.
(3) The development agreements for the Properties which are to be
constructed, provide that construction must be completed no later than
the dates set forth below. The maximum cost to CNL XVIII (including the
purchase price of the land, (if applicable), development costs (if
applicable), and closing and acquisition costs) is not expected to, but
may, exceed the amounts set forth below:
Estimated Final
Property Estimated Maximum Cost Completion Date
-------- ---------------------- ---------------
San Antonio #1 Property $ 860,388 October 13, 1997
San Antonio #2 Property 1,213,504 October 14, 1997
(4) The "Total Cost" is equal to the sum of (i) the purchase price of the
Property, (ii) closing costs, and (iii) actual development costs
incurred under the development agreement.
(5) CNL XVIII owns the building only for this Property. CNL XVIII does not
own the underlying land; although, CNL XVIII has entered into a tri-
party agreement with the lessee and the landlord of the land in order to
provide CNL XVIII with certain rights with respect to the land on which
the building is located.
(6) The lease term shall expire upon the later of (i) the date 15 years from
the date of closing, (ii) the expiration of the original term of the
ground lease, or (iii) the earlier termination of the ground lease.
-3-
(7) Annual rent shall increase after every five years during the lease term
by the lesser of (i) 10% of the minimum annual rent during the preceding
year or (ii) 150% of the change in the Consumer Price Index.
(8) Percentage rent shall be calculated on a calendar year basis (January 1
to December 31).
-4-
<TABLE>
PRO FORMA ESTIMATE OF TAXABLE INCOME OF
CNL INCOME FUND XVIII, LTD.
GENERATED FROM THE OPERATIONS OF PROPERTIES ACQUIRED FROM
APRIL 3, 1997 THROUGH APRIL 18, 1997
FOR A 12-MONTH PERIOD (UNAUDITED)
The following schedule represents pro forma unaudited estimates of taxable income of each Property
acquired by CNL XVIII from April 3, 1997 through April 18, 1997, for the 12-month period commencing on the
date of the inception of the respective lease on such Property. The schedule should be read in light of the
accompanying footnotes.
These estimates do not purport to present actual or expected operations of CNL XVIII for any period in
the future. These estimates were prepared on the basis described in the accompanying notes which should be
read in conjunction herewith. No single lessee or group of affiliated lessees lease Properties with an
aggregate purchase price in excess of 20% of the expected total net offering proceeds of CNL XVIII.
<CAPTION>
Boston Market On The Border
San Antonio, TX (5) San Antonio, TX (5) Total
------------------- ------------------- --------
<S> <C> <C> <C>
Pro Forma Estimate of Taxable Income:
Base Rent (1) $ 89,308 $131,808 $221,116
Management Fees (2) (893) (1,318) (2,211)
General and Administrative Expenses (3) (4,465) (6,590) (11,055)
-------- -------- --------
Estimated Cash Available from Operations 83,950 123,900 207,850
Depreciation Expense (4) (7,098) (31,277) (38,375)
-------- -------- --------
Pro Forma Estimate of Taxable Income of
CNL XVIII $ 76,852 $ 92,623 $169,475
======== ======== ========
See Footnotes
-5-
</TABLE>
FOOTNOTES:
(1) Base rent does not include percentage rents which become due if
specified levels of gross receipts are achieved.
(2) The Properties will be managed pursuant to a management agreement
between CNL XVIII and an Affiliate of the General Partners, pursuant to
which the Affiliate will receive an annual management fee in an amount
equal to one percent of the gross revenues that CNL XVIII earns from its
Properties.
(3) Estimated at five percent of gross rental income based on the previous
experience of Affiliates of the General Partners with 17 public limited
partnerships which own properties similar to that owned by CNL XVIII.
(4) The estimated federal tax basis of the depreciable portion (the building
portion) of the Properties has been depreciated on the straight-line
method over 40 years.
(5) The development agreements for the Properties which are to be
constructed, provide that construction must be completed no later than
the dates set forth below:
Property Estimated Final Completion Date
-------- -------------------------------
San Antonio #1 Property October 13, 1997
San Antonio #2 Property October 14, 1997
-6-
ITEM 3. BANKRUPTCY OR RECEIVERSHIP.
Not applicable.
ITEM 4. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT.
Not applicable.
ITEM 5. OTHER EVENTS.
Not applicable.
ITEM 6. RESIGNATION OF REGISTRANT'S GENERAL PARTNERS.
Not applicable.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND
EXHIBITS.
-6-
INDEX TO PRO FORMA FINANCIAL STATEMENTS
Page
CNL INCOME FUND XVIII, LTD.
(A FLORIDA LIMITED PARTNERSHIP)
Pro Forma Financial Information (unaudited):
Pro Forma Balance Sheet as of December 31, 1996 10
Pro Forma Statement of Income for the year ended
December 31, 1996 11
Notes to Pro Forma Financial Statements as of
December 31, 1996 12
-8-
PRO FORMA FINANCIAL INFORMATION
The following Pro Forma Balance Sheet of CNL Income Fund XVIII, Ltd.
("CNL XVIII") gives effect to (i) property acquisition transactions from
inception through December 31, 1996, including the receipt of $8,421,815 in
gross offering proceeds from the sale of 842,182 units of limited partnership
interest (the "Units") pursuant to a registration statement on Form S-11 under
the Securities Act of 1933, as amended, effective August 11, 1995, and the
application of such funds to acquire two properties, one of which was under
construction at December 31, 1996, and to pay organizational and offering
expenses, acquisition fees, and miscellaneous acquisition expenses, (ii) the
receipt of $9,556,715 in gross offering proceeds from the sale of 955,671
additional Units during the period January 1, 1997 through April 18, 1997, and
(iii) the application of such funds and $2,897,280 of cash and cash
equivalents at December 31, 1996, to purchase nine additional properties
during the period January 1, 1997 through April 18, 1997, (five of which are
under construction and consist of land and building, one property which is
under construction and consists of building only, two properties which consist
of land and building and one property which consists of building only), to pay
additional construction costs for the property under construction at December
31, 1996, and to pay offering expenses, acquisition fees, and miscellaneous
acquisition expenses, all as reflected in the pro forma adjustments described
in the related notes. The Pro Forma Balance Sheet as of December 31, 1996,
includes the transactions described in (i) above, from its historical balance
sheet, adjusted to give effect to the transactions in (ii) and (iii) above, as
if they had occurred on December 31, 1996.
The Pro Forma Statement of Income for the year ended December 31, 1996,
includes the historical operating results of the properties described in (i)
above from the dates of their acquisitions. No pro forma adjustments have
been made to the Pro Forma Statement of Income for the properties owned by CNL
XVIII as of April 18, 1997, due to the fact that these properties did not have
a previous rental history.
This pro forma financial information is presented for informational
purposes only and does not purport to be indicative of CNL XVIII's financial
results or condition if the various events and transactions reflected therein
had occurred on the dates, or been in effect during the periods, indicated.
This pro forma financial information should not be viewed as predictive of CNL
XVIII's financial results or conditions in the future.
-9-
CNL INCOME FUND XVIII, LTD.
(A FLORIDA LIMITED PARTNERSHIP)
UNAUDITED PRO FORMA BALANCE SHEET
DECEMBER 31, 1996
Pro Forma
ASSETS Historical Adjustments Pro Forma
---------- --------------- -----------
Land and building on operating
leases, less accumulated
depreciation $1,530,768 $ 8,397,996 (a) $ 9,928,764
Net investment in direct
financing leases (b) - 3,173,358 3,173,358
Cash and cash equivalents 5,371,325 (2,897,280)(a) 2,474,045
Receivables 3,711 3,711
Organization costs, less
accumulated amortization 9,589 9,589
Other assets 324,931 (165,046)(a) 159,885
---------- ----------- -----------
$7,240,324 $ 8,509,028 $15,749,352
========== =========== ===========
LIABILITIES AND
PARTNERS' CAPITAL
Accounts payable $ 104,514 $ (104,514)(a) $ -
Distributions payable 55,708 55,708
Due to related parties 83,889 (83,069)(a) 820
---------- ----------- -----------
Total liabilities 244,111 (187,583) 56,528
Partners' capital 6,996,213 8,696,611 (a) 15,692,824
---------- ----------- -----------
$7,240,324 $ 8,509,028 $15,749,352
========== =========== ===========
See accompanying notes to unaudited pro forma
financial statements.
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CNL INCOME FUND XVIII, LTD.
(A FLORIDA LIMITED PARTNERSHIP)
UNAUDITED PRO FORMA STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1996
Pro Forma
Historical Adjustments Pro Forma
---------- ----------- ---------
Revenues:
Rental income from operating lease $ 1,373 $ - $ 1,373
Interest income 30,241 - 30,241
------- ------- -------
31,614 - 31,614
------- ------- -------
Expenses:
General operating and administrative 3,980 - 3,980
Management fee to related party 12 - 12
Depreciation and amortization 712 - 712
------- ------- -------
4,704 - 4,704
------- ------- -------
Net Income $26,910 $ - $26,910
======= ======= =======
Net Income Per Limited Partner Unit $ 0.05 $ 0.05
======= =======
Weighted Average Number of Units
Outstanding 503,436 503,436
======= =======
See accompanying notes to unaudited pro forma
financial statements.
-11-
CNL INCOME FUND XVIII, LTD.
(A FLORIDA LIMITED PARTNERSHIP)
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS
DECEMBER 31, 1996
Pro Forma Balance Sheet:
(a) Represents gross proceeds of $9,556,715 from the sale of 955,671 Units
during the period January 1, 1997 through April 18, 1997, and $2,897,280
of cash and cash equivalents at December 31, 1996, used (i) to acquire
nine properties for $9,990,527, (ii) to fund estimated construction
costs of $985,729 relating to the property under construction at
December 31, 1996, (iii) to pay acquisition fees and other costs of
$462,600 ($6,508 of which was accrued as accounts payable at December
31, 1996 and $26,040 of which was accrued as due to related parties at
December 31, 1996) and reclassify from other assets $165,046 of
acquisition fees and other costs previously incurred relating to the
acquired properties, and (iv) to pay selling commissions and offering
expenses (syndication costs) of $1,015,139 ($98,006 of which was accrued
as accounts payable at December 31, 1996 and $57,029 of which was
accrued as due to related parties at December 31, 1996), which have been
netted against partners' capital.
The pro forma adjustments to land and buildings on operating leases as a
result of the above transactions were as follows:
<TABLE>
<CAPTION>
Estimated purchase
price (including
construction and Acquisition
closing costs) and fees
additional con- allocated
struction costs to property Total
------------------ ----------- -----------
<S> <C> <C> <C>
Jack in the Box in Echo Park, CA $ 1,257,223 $ 68,163 $ 1,325,386
Jack in the Box in Hendersonville, NV 1,066,175 57,805 1,123,980
Jack in the Box in Centerville, TX 758,658 41,132 799,790
Golden Corral in Galveston, TX 1,359,566 73,711 1,433,277
Boston Market in Raleigh, NC 1,225,886 66,463 1,292,349
Black-eyed Pea in Atlanta, GA 616,110 33,404 649,514
Golden Corral in Stow, OH 1,668,863 90,480 1,759,343
Boston Market in San Antonio, TX 851,302 46,154 897,456
On The Border in San Antonio, TX 1,186,744 64,342 1,251,086
One property under construction at
December 31, 1996 985,729 53,444 1,039,173
----------- ----------- -----------
$10,976,256 $ 595,098 $11,571,354
=========== =========== ===========
Adjustment classified as follows:
Land and buildings on operating leases $ 8,397,996
Net investment in direct financing leases 3,173,358
-----------
$11,571,354
===========
</TABLE>
(b) In accordance with generally accepted accounting principles, leases in
which the present value of future minimum lease payments equals or
exceeds 90 percent of the value of the related properties are treated as
direct financing leases rather than as land and buildings. The
categorization of the leases has no effect on rental revenues received.
-12-
ITEM 8. CHANGE IN FISCAL YEAR.
Not applicable.
EXHIBITS
None.
-13-
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be filed on its behalf
by the undersigned thereunto duly authorized.
CNL INCOME FUND XVIII, LTD.
Dated: May 1, 1997 By: /s/ Robert A. Bourne
---------------------------------
ROBERT A. BOURNE, General Partner
