CNL INCOME FUND XVII, LTD.
AND
CNL INCOME FUND XVIII, LTD.
Supplement No. 1, dated August 6, 1997
to Prospectus, dated May 9, 1997
This Supplement is part of, and should be read in conjunction with, the
Prospectus dated May 9, 1997. This Supplement replaces all prior Supplements to
the Prospectus. Capitalized terms used in this Supplement have the same meaning
as in the Prospectus unless otherwise stated herein.
All subscriptions referred to in this Supplement are for the purchase
of Units of CNL Income Fund XVIII, Ltd. ("CNL XVIII"). Offers are no longer
being made nor are the General Partners accepting subscriptions for CNL Income
Fund XVII, Ltd. ("CNL XVII"). THE ACQUISITION OF UNITS OF ONE PARTNERSHIP WILL
NOT ENTITLE THE INVESTOR TO ANY OWNERSHIP INTEREST IN THE OTHER PARTNERSHIP OR
ITS PROPERTIES.
Information as to the number and types of Properties acquired by CNL
XVIII is presented as of July 18, 1997, and all references to Property
acquisitions should be read in that context. Proposed properties for which CNL
XVIII receives initial commitments, as well as property acquisitions that occur
after July 18, 1997, will be reported in a subsequent Supplement.
THE OFFERING
GENERAL
The General Partners have elected to extend this Offering until August
11, 1998.
SUBSCRIPTION PROCEDURES
As of July 18, 1997, CNL XVIII had received total subscription proceeds
of $23,290,947 (2,329,095 Units) from 1,127 Limited Partners. As of July 18,
1997, the proceeds had been invested or committed for investment in 19
Properties and to pay Acquisition Fees and miscellaneous Acquisition Expenses.
As of July 18, 1997, CNL XVIII had incurred $1,048,093 in Acquisition Fees to an
Affiliate of the General Partners.
BUSINESS
PROPERTY ACQUISITIONS
Between May 1, 1997 and July 18, 1997, CNL XVIII acquired six
Properties consisting of land and building. The Properties are a Boston Market
Property (in Timonium, Maryland), a Jack in the Box Property (in Houston,
Texas), a Golden Corral Property (in Elizabethtown, Kentucky), two IHOP
Properties (one in each of Santa Rosa, California, and Bridgeview, Illinois) and
an Arby's Property (in Lexington, North Carolina). For information regarding the
13 Properties acquired by CNL XVIII prior to May 1, 1997, see the Prospectus
dated May 9, 1997.
<PAGE>
In connection with the purchase of each of these six Properties, CNL
XVIII, as lessor, entered into a long-term lease agreement with an unaffiliated
lessee. The general terms of the lease agreements are described in the section
of the Prospectus entitled "Business - Description of Leases." For the
Properties that are to be constructed, CNL XVIII has entered into development
and indemnification and put agreements with the lessee. The general terms of
these agreements are described in the section of the Prospectus entitled
"Business - Site Selection and Acquisition of Properties - Construction and
Renovation."
The following table sets forth the location of the six Properties
consisting of land and building acquired by CNL XVIII from May 1, 1997 through
July 18, 1997, a description of the competition, and a summary of the principal
terms of the acquisition and lease of each Property.
3
<PAGE>
PROPERTY ACQUISITIONS
From May 1, 1997 through July 18, 1997
<TABLE>
<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>
BOSTON MARKET $749,978 05/08/97 05/2012; five 10.38% of CNL for each lease at any
(the "Timonium Property") (excluding five-year XVIII's total year after the time after
Restaurant to be renovated development renewal cost to fifth lease the fifth
costs) options purchase the year, (i) 4% of lease year
The Timonium Property is (3) property; annual gross
located on the northeast corner increases by sales minus
of the intersection of York 10% after the (ii) the
Road and Belfast Road, in fifth lease minimum annual
Timonium, Baltimore County, year and after rent for such
Maryland, in an area of mixed every five lease year
retail, commercial, and years
residential development. Other thereafter
fast-food and family-style during the
restaurants located in lease term
proximity to the Timonium
Property include a McDonald's,
a Burger King, a KFC, and
several local restaurants.
JACK IN THE BOX $1,290,000 05/09/97 05/2015; four $132,225 (6); for each lease at any
(the "Houston Property") (3)(6) five-year increases by 8% year, (i) 5% of time after
Restaurant to be constructed renewal after the fifth annual gross the
options lease year and sales minus seventh
The Houston Property is located after every (ii) the lease year
on the north side of Louetta five years minimum annual
Road, west of State Highway thereafter rent for such
249, in Houston, Harris County, during the lease year (5)
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 Houston
Property include a McDonald's
and a Subway Sandwich Shop.
<PAGE>
<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>
GOLDEN CORRAL $446,180 05/21/97 05/2012; four 10.75% of Total for each lease during the
(the "Elizabethtown Property") (excluding five-year Cost (4) year, 5% of the first
Restaurant to be constructed closing renewal amount by which through
and options annual gross seventh
The Elizabethtown Property is development sales exceed lease
located on the east side of costs) $2,697,649 (5) years and
North Dixie Avenue, in (3) the tenth
Elizabethtown, Hardin County, through
Kentucky, in an area of mixed fifteenth
retail, commercial, and lease
residential development. Other years only
fast-food and family-style
restaurants located in
proximity to the Elizabethtown
Property include a Steak N
Shake, a Dairy Queen, an
Arby's, a Bob Evans, a Captain
D's, a Fazoli's, a Hardee's, a
McDonald's, a Taco Bell, and a
Lee's Famous Recipe Country
Chicken.
IHOP (7) $1,286,364 05/21/97 05/2017; $130,244; for each lease during the
(the "Santa Rosa Property") three five- increases by year, (i) 4% of eleventh
Existing restaurant year renewal 10% after the annual gross lease year
options fifth lease sales minus and at the
The Santa Rosa Property is year and after (ii) the end of the
located on the northwest every five minimum annual initial
quadrant of Fulton Road and years rent for such lease term
Guerneville Road, in Santa thereafter lease year
Rosa, Sonoma County, during the
California, in an area of mixed lease term
retail, commercial, and
residential development. Other
fast-food and family-style
restaurants located in
proximity to the Santa Rosa
Property include a Taco Bell, a
McDonald's, and several local
restaurants.
<PAGE>
<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>
ARBY'S $632,418 07/15/97 07/2017; two $63,242; for each lease during the
(the "Lexington Property") five-year increases by year, (i) 4% of seventh
Existing restaurant renewal 4.14% after the annual gross and tenth
options third lease sales minus lease
The Lexington Property is year and after (ii) the years only
located on the northeast corner every three minimum annual
of North Main Street and East years rent for such
Fourth Street, in Lexington, thereafter lease year
Davidson County, North during the
Carolina, in an area of mixed lease term
retail, commercial, and
residential development. Other
fast-food and family-style
restaurants located in
proximity to the Lexington
Property include a local
restaurant.
IHOP (7) $1,423,008 07/16/97 07/2017; $144,080; for each lease during the
(the "Bridgeview Property") three five- increases by year, (i) 4% of eleventh
Existing restaurant year renewal 10% after the annual gross lease year
options fifth lease sales minus and at the
The Bridgeview Property is year and after (ii) the end of the
located at the northeast every five minimum annual initial
quadrant of the intersection of years rent for such lease term
West 79th Street and Harlem thereafter lease year
Avenue, in Bridgeview, Cook during the
County, Illinois, in an area of lease term
mixed retail, commercial, and
residential development. Other
fast-food and family-style
restaurants located in
proximity to the Bridgeview
Property include a Pizza Hut, a
McDonald's, a White Castle, and
a Burger King.
</TABLE>
<PAGE>
FOOTNOTES:
(1) The estimated federal income tax basis of the depreciable portion (the
building portion) of each of the Properties acquired, and for
construction Properties, once the buildings are constructed, is set
forth below:
Property Federal Tax Basis
------- -------------------
Timonium Property $ 454,000
Houston Property 622,000
Elizabethtown Property 1,077,000
Santa Rosa Property 854,000
Lexington Property 456,000
Bridgeview Property 1,144,000
(2) Minimum annual rent for each of the Properties became payable on the
effective date of the lease, except as indicated below. For the
Timonium Property, minimum annual rent will become due and payable on
the date the tenant receives from the landlord its final funding of the
construction costs. For the Elizabethtown 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, or (iii) the date the restaurant opens for
business to the public. During the period commencing with the effective
date of the lease to the date minimum annual rent becomes payable for
the Timonium and Elizabethtown Properties, as described above, interim
rent equal to a specified rate per annum (ranging from 10% to 10.38%)
of the amount funded by CNL XVIII in connection with the purchase and
construction of the Properties shall accrue and be payable in a single
lump sum at the time of final funding of the construction costs.
(3) The development agreements for the Properties which are to be
constructed or renovated provide that construction or renovation 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:
Property Estimated Maximum Cost Estimated Final Completion Date
<TABLE>
<S> <C>
Timonium Property $1,140,100 November 4, 1997
Houston Property 1,290,000 November 5, 1997
Elizabethtown Property 1,572,176 November 17, 1997
</TABLE>
(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) Percentage rent shall be calculated on a calendar year basis (January 1
to December 31).
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<PAGE>
(6) CNL XVIII paid for all construction costs in advance at closing;
therefore, minimum annual rent was determined on the date acquired and
is not expected to change.
(7) The lessee of the Santa Rosa and Bridgeview Properties is the same
unaffiliated lessee.
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<PAGE>
MANAGEMENT COMPENSATION
FEES AND EXPENSES PAID TO THE
GENERAL PARTNERS AND THEIR AFFILIATES
Selling Commissions and Due Diligence Expense Reimbursement Fee. The
Placement Agent, CNL Securities Corp., is entitled to receive Selling
Commissions amounting to 8.5% of the Limited Partners' Capital Contributions for
services in connection with selling the Units, a substantial portion of which
will be paid as Selling Commissions to other broker-dealers. As of July 18,
1997, the Partnership had incurred $1,979,730 for Selling Commissions due to the
Placement Agent, a substantial portion of which was reallowed to other
broker-dealers. CNL Securities Corp. also is entitled to receive a due diligence
expense reimbursement fee equal to 0.5% of the Limited Partners' Capital
Contributions. As of July 18, 1997, the Partnership had incurred $116,455 in due
diligence expense reimbursement fees due to the Placement Agent. The majority of
these fees has since been reallowed to other broker-dealers for payment of bona
fide due diligence expenses.
Acquisition Fees. CNL Fund Advisors, Inc. is entitled to receive
Acquisition Fees for services in finding, negotiating and acquiring Properties
equal to 4.5% of the Limited Partners' Capital Contributions. As of July 18,
1997, the Partnership had incurred $1,048,093 in Acquisition Fees payable to CNL
Fund Advisors, Inc.
Management Fees. The Partnership has entered into a management
agreement pursuant to which CNL Fund Advisors, Inc. will receive annual
management fees of one percent of the sum of gross revenues from Properties
wholly owned by the Partnership and one percent of the Partnership's allocable
share of gross operating revenues from Joint Ventures. During the quarter ended
March 31, 1997, the Partnership had incurred $1,212 in management fees.
Administrative and Other Expenses. CNL Fund Advisors, Inc. provides
accounting and administrative services (including accounting and administrative
services in connection with the Offering of Units) to the Partnership on a
day-to-day basis. During the quarter ended March 31, 1997, the Partnership had
incurred $95,927 in administrative and other expenses, which includes $82,682
incurred in connection with the Offering and is included with syndication costs.
Real Estate Disposition Fee. CNL Fund Advisors, Inc. is also entitled
to receive a deferred, subordinated real estate disposition fee, payable upon
the sale of one or more Properties based on the lesser of one-half of a
Competitive Real Estate Commission or three percent of the sales price if CNL
Fund Advisors, Inc. provides a substantial amount of services in connection with
the sale. The real estate disposition fee is payable only after the Limited
Partners receive their cumulative Limited Partners' 8% Return, plus their
Invested Capital Contributions. No real estate disposition fees had been
incurred by the Partnership as of March 31, 1997.
Reimbursement of Out-of-Pocket Expenses. CNL Fund Advisors, Inc. and
its Affiliates are entitled to receive reimbursement, at cost, for expenses they
incur for Organizational and Offering Expenses, Acquisition Expenses and
Operating Expenses. During the quarter ended March 31, 1997, the Advisor and its
Affiliates incurred $158,599, $81,738, and $9,302 on behalf of the Partnership
for Organizational and Offering Expenses, Acquisition Expenses, and Operating
Expenses, respectively.
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<PAGE>
SELECTED FINANCIAL DATA
The following table sets forth certain financial information for CNL
XVIII, and should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the Financial
Statements included in Exhibit B to the Prospectus and this Prospectus
Supplement.
<TABLE>
<CAPTION>
For the Period February 10,
Quarter Ended Year Ended 1995 (date of inception)
March 31, 1997 December 31, through December 31,
(Unaudited) 1996 1995
----------------- --------------- -------------------------------
<S> <C>
Revenues $ 96,214 $ 31,614 $ -
Net income 62,177 26,910 -
Cash distributions declared (2) 154,476 57,846 -
Net income per Unit .05 .05 -
Cash distributions declared per Unit (2) .12 .11 -
Weighted average number of
Limited Partner Units outstanding (3) 1,252,970 503,436 -
</TABLE>
<TABLE>
<CAPTION>
March 31,
1997 December 31, December 31,
Unaudited 1996 1995
--------- ---------------- ----------------
<S> <C>
Total assets $15,420,779 $7,240,324 $ 256,890
Total partners' capital 14,250,188 6,996,213 1,000
</TABLE>
(1) Operations did not commence until October 12, 1996, the date following
when CNL XVIII received the minimum offering proceeds of $1,500,000,
and such proceeds were released from escrow.
(2) Approximately 60% and 53% of cash distributions ($0.07 and $0.06 per
Unit, respectively) for the quarter ended March 31, 1997 and the year
ended December 31, 1996, respectively, represent a return of capital in
accordance with generally accepted accounting principles ( "GAAP ").
Cash distributions treated as a return of capital on a GAAP basis
represent the amount of cash distributions in excess of accumulated net
income on a GAAP basis. CNL XVIII has not treated such amount as a
return of capital for purposes of calculating the Limited Partners'
Invested Capital Contributions and the Limited Partners' 8% Return, as
described in the Form of Amended and Restated Agreement of Limited
Partnership included as Exhibit A to the Prospectus.
(3) Represents the weighted average number of Units outstanding during the
period CNL XVIII was operational.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION OF THE PARTNERSHIP
GENERAL
The Partnership is a Florida limited partnership that was organized on
February 10, 1995, to acquire Properties for cash, either directly or through
Joint Venture arrangements, to be leased primarily to operators of selected
Restaurant Chains. The leases will be "triple-net leases", with the lessee
generally responsible for all repairs and maintenance, property taxes, insurance
and utilities. Since leases will be entered into on a "triple-net" basis, the
Partnership does not expect, although it has the right, to maintain a reserve
for operating expenses. The Partnership's Properties will not be readily
marketable and their value may be affected by general market conditions.
Nevertheless, the General Partners believe that Partnership capital and revenues
will be sufficient to fund the Part- nership's anticipated investments, proposed
operations, and cash distributions to the Limited Partners.
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<PAGE>
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. The General Partners have elected to
extend the Offering until August 11, 1998.
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.
During the period April 1, 1997 through July 18, 1997, the Partnership
acquired 11 additional Properties for cash, at a total cost of approximately
$9,061,600. In connection with the seven Properties under construction or
renovation, the Partnership has agreed to pay development costs (including the
purchase prices of the land and closing costs) of approximately $7,565,600, of
which approximately $4,033,700 in land and other costs had been paid by the
Partnership as of July 18, 1997. The buildings under construction or renovation
are expected to be operational by November 1997. The lease agreements for the
existing Properties and the Properties to be constructed or renovated are
substantially the same as the leases relating to the Partnership's other
Properties.
As of July 18, 1997, the Partnership had sold a total of 2,329,095
Units, for an aggregate of $23,290,947 in gross Offering proceeds. As of July
18, 1997, the proceeds had been invested or committed for investment in 19
Properties and to pay Acquisition Fees and certain Acquisition Expenses. As of
July 18, 1997, the Partnership had incurred $1,048,093 in Acquisition Fees to an
Affiliate of the General Partners.
The Partnership presently is negotiating to acquire additional
properties, but as of July 18, 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 July 18, 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
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<PAGE>
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 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.
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
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<PAGE>
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 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.
MANAGEMENT
Robert A. Bourne, age 50, is President and Treasurer of CNL Group,
Inc., President, a director and a registered principal of CNL Securities Corp.
(the Managing Dealer of the Offering) and President and a director of CNL
Investment Company. Mr. Bourne currently holds the position of Vice Chairman,
director and Treasurer of CNL Fund Advisors, Inc. Mr. Bourne served as President
of CNL Fund Advisors, Inc. from the date of its inception through June 30, 1997.
Mr. Bourne is Chief Investment Officer, Vice Chairman, a director and Treasurer
of CNL Institutional Advisors, Inc., a registered investment advisor. Mr. Bourne
served as President of CNL Institutional Advisors, Inc. from the date of its
inception through June 30, 1997. Mr. Bourne also has served as a director since
1992, as President from July 1992 to February 1996, and since February 1996, as
Vice Chairman of the Board of Directors, Secretary and Treasurer of Commercial
Net Lease Realty, Inc. In addition, Mr. Bourne has served as a director since
its inception in 1991, as President from 1991 to February 1996, as Secretary
from February 1996 to July 1996, and since February 1996, as Treasurer and Vice
Chairman of CNL Realty Advisors, Inc. In addition, Mr. Bourne has served as
President and a director of CNL American Properties Fund, Inc. since 1994, and
has served as President and a director of CNL American Realty Fund, Inc. since
1996 and of CNL Real Estate Advisors, Inc since January 1997. Upon graduation
from Florida State University in 1970, where he received a B.A. in Accounting,
with honors, Mr. Bourne worked as a certified public accountant and, from
September 1971 through December 1978, was employed by Coopers & Lybrand,
Certified Public Accountants, where he held the position of tax manager
beginning in 1975. From January 1979 until June 1982, Mr. Bourne was a partner
in the accounting
- 11 -
<PAGE>
firm of Cross & Bourne and from July 1982 through January 1987, he was a partner
in the accounting firm of Bourne & Rose, P.A., Certified Public Accountants. Mr.
Bourne, who joined CNL Securities Corp. in 1979, has participated as a general
partner or joint venturer in over 100 real estate ventures involved in the
financing, acquisition, construction and rental of office buildings, apartment
complexes, restaurants, hotels and other real estate. Included in these real
estate ventures are approximately 64 privately offered real estate limited
partnerships in which Mr. Bourne, directly or through an affiliated entity,
serves or has served as a general partner. Also included are the CNL Income Fund
Partnerships, public real estate limited partnerships with investment objectives
similar to those of the Partnership, in which Mr. Bourne serves as a general
partner. See "Conflicts of Interest."
CNL GROUP, INC.
The following person serves as an operating officer of CNL Group, Inc.
or its affiliates or subsidiaries in the discretion of the Boards of Directors
of those companies, but, except as specifically indicated, does not serve as a
member of the Boards of Directors of those entities. The Boards of Directors
have the responsibility for creating and implementing the policies of CNL Group,
Inc. and its affiliated companies. For information regarding other operating
officers, see the section of the Prospectus entitled "Management."
Curtis B. McWilliams. Mr. McWilliams joined CNL Group, Inc. in April
1997 and currently serves as President of CNL Fund Advisors, Inc. In addition,
Mr. McWilliams serves as Executive Vice President of CNL Group, Inc. and as
President of CNL Institutional Advisors, Inc. and certain other subsidiaries of
CNL Group, Inc. From January 1991 to August 1996, Mr. McWilliams was a managing
director in the corporate banking group of Merrill Lynch's investment banking
division. During this time, he was a senior relationship manager with Merrill
Lynch and as such was responsible for a number of the firm's relationships with
companies such as AT&T, AT&T Capital, AMR Corporation, J.C. Penney and the
Robert M. Bass Group. In addition, from February 1990 to February 1993, he
served as co-head of New York #1 Industrial Banking Group and had administrative
responsibility for 25 bankers overseeing 150 client relationships, including the
firm's transportation group. In addition, from September 1996 to March 1997, Mr.
McWilliams served as Chairman of Private Advisory Services, Merrill Lynch's high
net worth brokerage business. Mr. McWilliams received a B.S.E. in Chemical
Engineering from Princeton University in 1977 and a Masters of Business
Administration with a concentration in finance from the University of Chicago in
1983.
NET WORTH OF GENERAL PARTNERS
Messrs. Seneff and Bourne, the individual General Partners, have
represented that at April 30, 1995, along with their wives, they had a reviewed
aggregate net worth in excess of $14,000,000, and that their aggregate net worth
at April 23, 1996 was in excess of $14,000,000. However, a substantial portion
of their assets is represented by interests in real estate and closely held
companies which are essentially illiquid. At April 30, 1995 and April 23, 1996,
Messrs. Seneff and Bourne also had contingent liabilities in the aggregate
amount of approximately $7,900,000 and $9,700,000, respectively, as a result of
all guarantees of loans to limited partnerships in which they serve as general
partners. Should some of these contingent liabilities become actual, or should
some of the assets prove to be uncollectible, their net worth may be
significantly reduced. Messrs. Seneff and Bourne have additional contingent
liabilities as a result of their practice of maintaining lines of credit that
enable Affiliates to invest in restaurant properties or restaurant facilities on
an interim basis prior to the time that an affiliated partnership has sufficient
funds to purchase the restaurant properties or restaurant facilities. At April
30, 1995 and April 23, 1996, these lines of credit aggregated approximately
$2,000,000 and $5,900,000, respectively. In addition, Messrs. Seneff and Bourne
have certain contingent liabilities as a result of guarantees of loans to
various general partnerships in which they are partners. At April 30, 1995 and
April 23, 1996, these guarantees totalled approximately $22,400,000 and
$31,500,000, respectively. All of the loans guaranteed by Messrs. Seneff and
Bourne, as well as the lines of credit, are secured by real property or other
collateral which, in the event of a default under any such loan or line of
credit, would be subject to foreclosure and sale, with the proceeds of such sale
applied against the outstanding balance of the loan or line of credit. Messrs.
Seneff and Bourne believe that such properties or collateral are of sufficient
value to cover the outstanding balance of such loans and lines of credit. In
addition, it is highly unlikely that all such loans would be in default at any
one time, since they represent loans made to a number of different partnerships.
Messrs. Seneff and Bourne also have contingent liabilities of approximately
$1,300,000 attributable to capital notes payable to certain corporations that
serve as general partners of certain affiliated partnerships on demand in the
event that
- 12 -
<PAGE>
these corporations require additional funds. As of the date of this Prospectus,
Messrs. Seneff and Bourne have not been required to advance any amounts pursuant
to such notes and, based on operations of the related partnerships, do not
expect to be required to do so in the foreseeable future. In addition, Messrs.
Seneff and Bourne have guaranteed the obligations of two master tenants (CNL
Management Group, Inc. and CNL Group, Inc., affiliates of the General Partners)
under master leases, of which the aggregate present value of the master lease
obligations as of April 23, 1996, was $3,400,000. Messrs. Seneff and Bourne also
have contingent liabilities as a result of their agreement to fund reserves
under certain limited circumstances for the CNL Income Fund Partnerships.
Messrs. Seneff and Bourne do not anticipate that they will be required to fund
such reserves due to the structure of those public limited partnerships. See
"Conflicts of Interest" and "Risk Factors--Investment Risks--Limited Resources
of General Partners." The corporate General Partner has a nominal net worth.
ALLOCATIONS AND DISTRIBUTIONS
DISTRIBUTIONS OF NET CASH FLOW
The Partnership declared distributions of Net Cash Flow to the Limited
Partners in the amount of $154,476 and $57,846 for the quarters ended March 31,
1997 and December 31, 1996, respectively, and distributions of Net Cash Flow are
expected to be paid quarterly hereafter. For the quarters ended March 31, 1997
and December 31, 1996, approximately 60% and 53%, respectively, of the
cumulative cash distributions to the Limited Partners constituted cash
distributions that exceeded accumulated net income on a GAAP basis. Accumulated
net income includes deductions for depreciation and amortization expense and
income from certain non-cash items. CNL XVIII did not treat such amounts, which
represent a return of capital on a GAAP basis, as a return of capital for
purposes of calculating the Limited Partners Invested Capital Contributions.
There can be no assurance, however, as to the amount of any future
distributions. At the time distributions are paid, each Limited Partner will
receive a distribution of available Net Cash Flow for the calendar quarter and
each Limited Partner who has elected to receive distributions monthly will
receive one-third of such amount. The remaining two-thirds of such amount will
be held in an interest-bearing monthly distribution account segregated from
other Partnership funds, and will be paid, without interest, in approximately
equal installments in each of the next two months to those Limited Partners who
have elected to receive distributions monthly.
- 13 -
<PAGE>
ADDENDUM TO
EXHIBIT B
FINANCIAL INFORMATION
THE UPDATED PRO FORMA FINANCIAL STATEMENTS AND THE UPDATED, UNAUDITED FINANCIAL
STATEMENTS OF CNL INCOME FUND XVIII, LTD. AND CNL REALTY CORPORATION CONTAINED
IN THIS ADDENDUM SHOULD BE READ IN CONJUNCTION WITH EXHIBIT B TO THE ATTACHED
PROSPECTUS, DATED MAY 9, 1997.
<PAGE>
INDEX TO UPDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
<S> <C>
CNL INCOME FUND XVIII, LTD.
(A Florida Limited Partnership)
Pro Forma Financial Information (unaudited):
Pro Forma Balance Sheet as of March 31, 1997 B-2
Pro Forma Statement of Income for the quarter ended March 31, 1997 B-3
Pro Forma Statement of Income for the year ended December 31, 1996 B-4
Notes to Pro Forma Financial Statements for the quarter ended March 31, 1997 and
the year ended December 31, 1996 B-5
Updated Condensed Financial Statements (unaudited):
Condensed Balance Sheets as of March 31, 1997 and December 31, 1996 B-6
Condensed Statements of Income for the quarters ended March 31, 1997 and 1996
B-7 Condensed Statements of Partners' Capital for the quarter ended March 31,
1997 and the year ended December 31, 1996 B-8
Condensed Statements of Cash Flows for the quarters ended March 31, 1997 and 1996 B-9
Notes to Condensed Financial Statements for the quarters ended March 31, 1997 and 1996 B-11
CNL REALTY CORPORATION
Updated Financial Statements (unaudited):
Balance Sheets as of March 31, 1997 and December 31, 1996 B-18
Notes to Balance Sheets as of March 31, 1997 and December 31, 1996 B-19
</TABLE>
<PAGE>
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 March 31, 1997, including the receipt of $16,736,878 in gross
offering proceeds from the sale of 1,673,688 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 eight properties, five of which were under
construction at March 31, 1997, and to pay organizational and offering expenses,
acquisition fees, and miscellaneous acquisition expenses, (ii) the receipt of
$6,554,069 in gross offering proceeds from the sale of 655,407 additional Units
during the period April 1, 1997 through July 18, 1997, (iii) the assumed future
sales of 202,422 Units, resulting in the receipt of $2,024,218 in gross offering
proceeds through July 18, 1997, and (iv) the application of such funds and
$6,079,177 of cash and cash equivalents at March 31, 1997, to purchase eleven
additional properties during the period April 1, 1997 through July 18, 1997 (six
of which are under construction and consist of land and building, one property
which is under construction and consists of building only and four properties
which consist of land and building), to pay additional construction costs for
the five properties under construction at March 31, 1997, 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 March 31, 1997, includes the transactions described in
(i) above, from its historical balance sheet, adjusted to give effect to the
transactions in (ii), (iii) and (iv) above, as if they had occurred on March 31,
1997.
The Pro Forma Statements of Income for the quarter ended March 31, 1997
and the year ended December 31, 1996, include 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 Statements of Income
for the properties owned by CNL XVIII as of July 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.
B-1
<PAGE>
CNL INCOME FUND XVIII, LTD.
(A Florida Limited Partnership)
UNAUDITED PRO FORMA BALANCE SHEET
MARCH 31, 1997
<TABLE>
<CAPTION>
Pro Forma
ASSETS Historical Adjustments Pro Forma
------ ---------- ----------- ---------
<S> <C>
Land and buildings on operating
leases, less accumulated
depreciation $ 8,231,628 $ 7,871,708 (a) $16,103,336
Net investment in direct
financing leases (b) 651,984 5,494,962 (a) 6,146,946
Cash and cash equivalents 6,079,177 (6,079,177)(a) -
Receivables 78,257 78,257
Prepaid expenses 900 900
Organization costs, less
accumulated amortization 9,089 9,089
Accrued rental income 6,504 6,504
Other assets 363,240 (301,406)(a) 61,834
----------- ----------- -----------
$15,420,779 $ 6,986,087 $22,406,866
=========== =========== ===========
LIABILITIES AND
PARTNERS' CAPITAL
Accounts payable $ 70,480 $ 70,480
Accrued construction costs
payable 686,342 $ (686,342)(a) -
Distributions payable 154,476 154,476
Due to related parties 141,104 (133,812)(a) 7,292
Rents paid in advance 118,189 118,189
----------- ----------- -----------
Total liabilities 1,170,591 (820,154) 350,437
Partners' capital 14,250,188 7,806,241 (a) 22,056,429
----------- ---------- -----------
$15,420,779 $ 6,986,087 $22,406,866
=========== =========== ===========
</TABLE>
See accompanying notes to unaudited pro forma financial statements.
B-2
<PAGE>
CNL INCOME FUND XVIII, LTD.
(A Florida Limited Partnership)
UNAUDITED PRO FORMA STATEMENT OF INCOME
QUARTER ENDED MARCH 31, 1997
<TABLE>
<CAPTION>
Pro Forma
Historical Adjustments Pro Forma
---------- ----------- ---------
<S> <C>
Revenues:
Rental income from operating
leases $ 52,230 $ - $ 52,230
Earned income from direct
financing leases 1,113 - 1,113
Interest income 42,871 - 42,871
--------- --------- ---------
96,214 - 96,214
--------- --------- ---------
Expenses:
General operating and
administrative 16,685 - 16,685
Professional services 5,896 - 5,896
Management fees to related party 1,212 - 1,212
State and other taxes 416 - 416
Depreciation and amortization 9,828 - 9,828
--------- --------- ---------
34,037 - 34,037
--------- --------- ---------
Net Income $ 62,177 $ - $ 62,177
========= ========= =========
Net Income Per Limited Partner
Unit $ 0.05 $ 0.05
========= =========
Weighted Average Number of Units
Outstanding 1,252,970 1,252,970
========= =========
</TABLE>
See accompanying notes to unaudited pro forma financial statements.
B-3
<PAGE>
CNL INCOME FUND XVIII, LTD.
(A Florida Limited Partnership)
UNAUDITED PRO FORMA STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
Pro Forma
Historical Adjustments Pro Forma
---------- ----------- ---------
<S> <C>
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
======= =======
</TABLE>
See accompanying notes to unaudited pro forma financial statements.
B-4
<PAGE>
CNL INCOME FUND XVIII, LTD.
(A Florida Limited Partnership)
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS
FOR THE QUARTER ENDED MARCH 31, 1997 AND THE
YEAR ENDED DECEMBER 31, 1996
Pro Forma Balance Sheet:
(a) Represents gross proceeds of $6,554,069 from the sale of 655,407 Units
during the period April 1, 1997 through July 18, 1997, the assumed
future sales of 202,422 Units, resulting in the receipt of $2,024,218
in gross offering proceeds through July 18, 1997, and $6,079,177 of
cash and cash equivalents at March 31, 1997, used (i) to acquire eleven
properties for $12,360,344, (ii) to fund estimated construction costs
of $1,005,240 ($686,342 of which was accrued as construction costs
payable at March 31, 1997) relating to the five properties under
construction at March 31, 1997, (iii) to pay acquisition fees and other
costs of $435,639 ($49,617 of which was accrued as due to related
parties at March 31, 1997) and reclassify from other assets $301,406 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 $856,241 ($84,195 of which was accrued
as due to related parties at March 31, 1997), 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>
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
Boston Market in Minnetonka, MN 815,065 44,190 859,255
Wendy's in Sparta, TN 633,967 34,372 668,339
Boston Market in Timonium, MD 1,129,934 61,261 1,191,195
Jack in the Box in Houston, TX 1,289,000 69,886 1,358,886
Golden Corral in Elizabethtown, KY 1,453,059 78,780 1,531,839
IHOP in Santa Rosa, CA 1,282,215 69,518 1,351,733
Arby's in Lexington, NC 631,418 34,233 665,651
IHOP in Bridgeview, IL 1,418,777 76,922 1,495,699
Five properties under construction at
March 31, 1997 318,898 17,290 336,188
----------- ----------- -----------
$12,679,242 $ 687,428 $13,366,670
=========== =========== ===========
Adjustment classified as follows:
Land and buildings on operating leases $ 7,871,708
Net investment in direct financing leases 5,494,962
-----------
$13,366,670
===========
</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.
B-5
<PAGE>
CNL INCOME FUND XVIII, LTD.
(A Development Stage Florida Limited Partnership)
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
ASSETS 1997 1996
------ ---- ----
<S> <C>
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
=========== ===========
</TABLE>
See accompanying notes to condensed financial statements.
B-6
<PAGE>
CNL INCOME FUND XVIII, LTD.
(A Development Stage Florida Limited Partnership)
CONDENSED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Quarters Ended
March 31,
1997 1996
--------- ------
<S> <C>
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 -
========= ========
</TABLE>
See accompanying notes to condensed financial statements.
B-7
<PAGE>
CNL INCOME FUND XVIII, LTD.
(A Development Stage Florida Limited Partnership)
CONDENSED STATEMENTS OF PARTNERS' CAPITAL
<TABLE>
<CAPTION>
Quarter Ended Year Ended
March 31, December 31,
1997 1996
------------- --------
<S> <C>
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
=========== ===========
</TABLE>
See accompanying notes to condensed financial statements.
B-8
<PAGE>
CNL INCOME FUND XVIII, LTD.
(A Development Stage Florida Limited Partnership)
CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Quarter Ended
March 31,
1997 1996
----------- --------
<S> <C>
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
=========== ===========
</TABLE>
See accompanying notes to condensed financial statements.
B-9
<PAGE>
CNL INCOME FUND XVIII, LTD.
(A Development Stage Florida Limited Partnership)
CONDENSED STATEMENTS OF CASH FLOWS - CONTINUED
<TABLE>
<CAPTION>
Quarter Ended
March 31,
1997 1996
----------- --------
<S> <C>
Supplemental Schedule of Non-Cash
Investing and Financing Activities:
Related parties paid certain acquisition 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 $ -
=========== ==========
</TABLE>
See accompanying notes to condensed financial statements.
B-10
<PAGE>
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.
B-11
<PAGE>
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:
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
---- ----
<S> <C>
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
========== ==========
</TABLE>
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.
B-12
<PAGE>
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:
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
---- ----
<S> <C>
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 $ -
=========== ==========
</TABLE>
B-13
<PAGE>
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.
B-14
<PAGE>
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
======= =======
B-15
<PAGE>
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.
B-16
<PAGE>
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.
B-17
<PAGE>
CNL REALTY CORPORATION
BALANCE SHEETS
March 31,
1997 December 31,
ASSETS (Unaudited) 1996
------ ----------- ----
Cash $ 178 $ 188
Investment in CNL Income
Fund Partnerships 1,255,853 1,244,812
---------- ----------
$1,256,031 $1,245,000
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Loan payable to CNL Group, Inc. $1,306,849 $1,275,456
Other payables to related parties 2,414 1,201
---------- ----------
Total liabilities 1,309,263 1,276,657
---------- ----------
Commitments and contingencies
(Note 5)
Stockholders' equity:
Common stock, $1 par value,
7,500 shares authorized,
1,000 shares issued and
outstanding 1,000 1,000
Accumulated deficit (54,232) (32,657)
---------- ----------
Total stockholders' equity (53,232) (31,657)
---------- ----------
$1,256,031 $1,245,000
========== ==========
See accompanying notes to balance sheet.
B-18
<PAGE>
CNL REALTY CORPORATION
NOTES TO BALANCE SHEETS
March 31, 1997 and
December 31, 1996 (Information
with respect to March 31, 1997 is
unaudited)
1. Organization and Significant Accounting Policy:
Organization - CNL Realty Corporation (the "Company") was incorporated
on November 26, 1985, under the laws of the State of Florida. The
Company is a general partner in CNL Income Fund, Ltd., CNL Income Fund
II, Ltd., CNL Income Fund III, Ltd., CNL Income Fund IV, Ltd., CNL
Income Fund V, Ltd., CNL Income Fund VI, Ltd., CNL Income Fund VII,
Ltd., CNL Income Fund VIII, Ltd., CNL Income Fund IX, Ltd., CNL Income
Fund X, Ltd., CNL Income Fund XI, Ltd., CNL Income Fund XII, Ltd., CNL
Income Fund XIII, Ltd., CNL Income Fund XIV, Ltd., CNL Income Fund XV,
Ltd., CNL Income Fund XVI, Ltd., CNL Income Fund XVII, Ltd. and CNL
Income Fund XVIII, Ltd. (collectively, the "CNL Income Fund
Partnerships"), all of which were formed to acquire existing restaurant
properties, as well as properties upon which restaurants will be
constructed, to be leased primarily to operators of national and
regional fast-food, family-style and casual dining restaurant chains.
The other general partners in the CNL Income Fund Partnerships are
James M. Seneff, Jr. and Robert A. Bourne.
Use of Estimates - The Company's management has made a number of
estimates and assumptions relating to the reporting of assets and
liabilities and the disclosure of contingent assets and liabilities to
prepare these financial statements in conformity with generally
accepted accounting principles. Actual results could differ from those
estimates.
2. Investment in CNL Income Fund Partnerships:
The Company accounts for its general partner interests in the CNL
Income Fund Partnerships under the equity method. The terms of the
limited partnership agreements of each of the CNL Income Fund
Partnerships are similar. Each agreement provides that allocations and
distributions among the general partners will be in such amounts as the
general partners agree among themselves. The general partners have
agreed that ten percent of their one percent interest in the CNL Income
Fund Partnerships will be allocated to CNL Realty Corporation.
B-19
<PAGE>
CNL REALTY CORPORATION
NOTES TO BALANCE SHEET - CONTINUED
March 31, 1997 and
December 31, 1996 (Information
with respect to March 31, 1997 is
unaudited)
2. Investment in CNL Income Fund Partnerships - Continued:
The following table presents combined, summarized financial information
relating to the CNL Income Fund Partnerships at:
March 31,
1997 December 31,
(Unaudited) 1996
----------- ----
Total assets $521,172,855 $514,640,258
Total liabilities 18,817,382 18,782,159
Limited partners'
equity 498,895,027 492,508,044
General partners'
equity:
CNL Realty
Corporation 1,255,853 1,244,812
Other 2,204,593 2,105,243
The Company had made total capital contributions of $1,012,905 to the
CNL Income Fund Partnerships as of March 31, 1997 and December 31,
1996.
In January 1997, the Company entered into two promissory notes which
provide for loans to certain of the CNL Income Fund Partnerships in the
aggregate amount of $228,000 in connection with the operations of the
CNL Income Fund Partnerships. The loans were uncollateralized,
non-interest bearing and due on demand. These loans were repaid to the
Company as of March 31, 1997.
3. Income Taxes:
Effective January 1988, the Company made an election to be governed by
Subchapter S of the Internal Revenue Code. Taxable income is reported
by the stockholders on their individual income tax returns.
4. Related Parties:
In April 1996, the Company entered into a promissory note with CNL
Group, Inc., an affiliate of the Company, which provides for loans to
the Company in the aggregate amount of up to $500,000. In September
1996, the promissory note was amended to provide loans to the Company
in the aggregate amount of up to $1,500,000. The note is
uncollateralized and bears interest at a rate of prime plus one percent
per annum. Principal and interest are payable on demand or December 31,
B-20
<PAGE>
CNL REALTY CORPORATION
NOTES TO BALANCE SHEET - CONTINUED
March 31, 1997 and
December 31, 1996 (Information
with respect to March 31, 1997 is
unaudited)
4. Related Parties - Continued:
1997, whichever comes first. The loan payable to CNL Group, Inc. of
$1,306,849 and $1,275,456 at March 31, 1997 and December 31, 1996,
respectively, includes accrued interest of $14,129 and $4,817,
respectively.
Affiliates of the stockholders provide accounting and administrative
services to the Company on a day-to-day basis. Other payables to
related parties at March 31, 1997 and December 31, 1996 of $2,414 and
$1,201, respectively, represent amounts for such services and for
operating expenses that affiliates have paid on behalf of the Company.
5. Commitments and Contingencies:
As one of the general partners in the CNL Income Fund Partnerships, the
Company will share in the liability for organizational and offering
expenses which exceed three percent of the gross offering proceeds.
Further, the general partners have agreed to contribute up to one
percent of the gross offering proceeds for partnership property
maintenance and repairs to the extent that the CNL Income Fund
Partnerships have insufficient funds for such purposes.
6. Subsequent Events:
In April 1997, the promissory note described in Note 4 between the
Company and CNL Group, Inc. was amended to provide loans to the Company
in the aggregate amount of up to $2,000,000. In addition, in April
1997, the Company received additional advances under this promissory
note totalling $399,000. As of May 19, 1997, the Company had repaid
$149,000 of such amounts advanced.
In connection therewith, in April 1997, the Company made additional
capital contributions of $138,000 to one of the CNL Income Fund
Partnerships and entered into two promissory notes which provide for
loans to certain of the CNL Income Fund Partnerships in the aggregate
amount of $261,000 in connection with the operations of the CNL Income
Fund Partnerships. The loans are uncollateralized, non-interest bearing
and are due on demand. As of May 19, 1997, $149,000 of these amounts
had been repaid to the Company.
B-21
<PAGE>
CNL REALTY CORPORATION
NOTES TO BALANCE SHEET - CONTINUED
March 31, 1997 and
December 31, 1996 (Information
with respect to March 31, 1997 is
unaudited)
7. Basis of Presentation of Unaudited Financial Statements:
In the opinion of management of the Company, the unaudited balance
sheet contains all adjustments (consisting of only normal recurring
accruals) necessary to present fairly the Company's financial position
as of March 31, 1997.
B-22
<PAGE>
ADDENDUM TO
EXHIBIT F
STATEMENT OF ESTIMATED
TAXABLE OPERATING RESULTS
THE STATEMENT OF ESTIMATED
TAXABLE OPERATING RESULTS IN THIS
ADDENDUM UPDATES AND REPLACES
EXHIBIT F TO THE ATTACHED
PROSPECTUS, DATED MAY 9, 1997.
<PAGE>
STATEMENT OF ESTIMATED TAXABLE OPERATING RESULTS
CNL INCOME FUND XVIII, LTD.
PROPERTIES ACQUIRED FROM INCEPTION
THROUGH JULY 18, 1997
For the Period October 12, 1996 (the date operations commenced)
through December 31, 1996 (Unaudited)
The following statement presents unaudited estimated taxable operating
results of each Property acquired by CNL XVIII from inception through July 18,
1997. The statement presents estimated taxable operating results for each
Property that was operational as if the Property had been acquired and
operational on October 12, 1996 (the date CNL XVIII commenced operations)
through December 31, 1996. The statement 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.
<TABLE>
<CAPTION>
Burger King Golden Corral Jack in the Box Jack in the Box
Kinston, NC Houston #1, TX (7) Echo Park, CA (6) Henderson, NV (6)
----------- ------------------ ----------------- -----------------
<S> <C>
Estimated Taxable Operating Results:
Base Rent (1) $ 19,862 (5) (5) (5)
Management Fees (2) (199) (5) (5) (5)
General and Administrative
Expenses (3) (993) (5) (5) (5)
--------
Estimated Cash Available from
Operations 18,670 (5) (5) (5)
Depreciation Expense (4) (3,660) (5) (5) (5)
--------
Estimated Taxable Operating Results $ 15,010 (5) (5) (5)
========
</TABLE>
See Footnotes
F-1
<PAGE>
<TABLE>
<CAPTION>
Jack in the Box Golden Corral Boston Market Black-eyed Pea
Centerville, TX (6) Galveston, TX (7) Raleigh, NC Atlanta, GA
------------------- ----------------- ------------- ------------
<S> <C>
Estimated Taxable Operating Results:
Base Rent (1) (5) (5) $ 27,144 $ 15,358
Management Fees (2) (5) (5) (271) (154)
General and Administrative
Expenses (3) (5) (5) (1,357) (768)
-------- --------
Estimated Cash Available from
Operations (5) (5) 25,516 14,436
Depreciation Expense (4) (5) (5) (2,672) (3,596)
-------- --------
Estimated Taxable Operating Results (5) (5) $ 22,844 $ 10,840
======== ========
</TABLE>
See Footnotes
F-2
<PAGE>
<TABLE>
<CAPTION>
Golden Corral Boston Market On The Border Boston Market
Stow, OH San Antonio, TX San Antonio, TX Minnetonka, MN
-------- --------------- --------------- --------------
<S> <C>
Estimated Taxable Operating Results:
Base Rent (1) $42,009 (5) (5) (5)
Management Fees (2) (420) (5) (5) (5)
General and Administrative
Expenses (3) (2,100) (5) (5) (5)
--------
Estimated Cash Available from
Operations 39,489 (5) (5) (5)
Depreciation Expense (4) (7,047) (5) (5) (5)
--------
Estimate Taxable Operating Results $ 32,442 (5) (5) (5)
========
</TABLE>
See Footnotes
F-3
<PAGE>
<TABLE>
<CAPTION>
Wendy's Boston Market Jack in the Box Golden Corral
Sparta, TN Timonium, MD Houston #2, TX (6) Elizabethtown, KY (7)
---------- ------------- ------------------ ---------------------
<S> <C>
Estimated Taxable Operating Results:
Base Rent (1) (5) (5) (5) (5)
Management Fees (2) (5) (5) (5) (5)
General and Administrative
Expenses (3) (5) (5) (5) (5)
Estimated Cash Available from
Operations (5) (5) (5) (5)
Depreciation Expense (4) (5) (5) (5) (5)
Estimate Taxable Operating Results (5) (5) (5) (5)
</TABLE>
See Footnotes
F-4
<PAGE>
<TABLE>
<CAPTION>
IHOP Arby's IHOP
Santa Rosa, CA (8) Lexington, NC Bridgeview, IL(8) Total
------------------ ------------- ----------------- -------
<S> <C>
Estimated Taxable Operating Results:
Base Rent (1) $ 28,547 $ 13,861 $ 31,579 $178,360
Management Fees (2) (285) (139) (316) (1,784)
General and Administrative
Expenses (3) (1,427) (693) (1,579) (8,917)
-------- -------- ------- -------
Estimated Cash Available from
Operations 26,835 13,029 29,684 167,659
Depreciation Expense (4) (4,678) (2,499) (6,267) (30,419)
-------- -------- -------- --------
Estimate Taxable Operating Results $ 22,157 $ 10,530 $ 23,417 $137,240
======== ======== ======== ========
</TABLE>
FOOTNOTES:
(1) Represents rental income from leases for seven of the 19 Properties
acquired from inception through July 18, 1997, which were operational
at the time acquired by CNL XVIII, for the period commencing October
12, 1996 (the date CNL XVIII commenced operations) through December 31,
1996. The 12 Properties acquired by CNL XVIII that are under
construction are not presented due to the fact that they were not
operational for the period presented.
(2) The Properties are managed pursuant to a management agreement between
CNL XVIII and an Affiliate of the General Partners, pursuant to which
the Affiliate receives an annual management fee in an amount equal to
one percent of the gross revenues that CNL XVIII earns from its
Properties. See "Management Compensation."
(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.
F-5
<PAGE>
(5) This Property is under construction and therefore was not operational
for the period presented. The development agreements for the Properties
which are to be constructed or renovated, provide that construction or
renovation must be completed no later than the dates set forth below:
Property Estimated Final Completion Date
Houston #1 Property June 25, 1997
Echo Park Property July 6, 1997
Henderson Property July 6, 1997
Centerville Property July 7, 1997
Galveston Property July 21, 1997
San Antonio #1 Property October 13, 1997
San Antonio #2 Property October 14, 1997
Minnetonka Property October 26, 1997
Sparta Property August 28, 1997
Timonium Property November 4, 1997
Houston #2 Property November 5, 1997
Elizabethtown Property November 17, 1997
(6) The lessee of the Echo Park, Henderson, Centerville and Houston #2
Properties is the same unaffiliated lessee.
(7) The lessee of the Houston #1, Galveston and Elizabethtown Properties is
the same unaffiliated lessee.
(8) The lessee of the Santa Rosa and Bridgeview Properties is the same
unaffiliated lessee.
F-6
