UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
(Mark One)
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 33-90998-01
CNL INCOME FUND XVIII, LTD.
(Exact name of registrant as specified in its charter)
Florida 59-3295394
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
400 East South Street, Suite 500
Orlando, Florida 32801
(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code: (407) 422-1574
Securities registered pursuant to Section 12(b) of the Act:
Title of each class: Name of exchange on which registered:
None Not Applicable
Securities registered pursuant to Section 12(g) of the Act:
None
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days: Yes X No
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Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
Aggregate market value of the voting stock held by nonaffiliates of the
registrant: The registrant registered an offering of units of limited
partnership interest (the "Units") on Form S-11 under the Securities Act of
1933, as amended. Since no established market for such Units exists, there is
no market value for such Units. Each Unit was originally sold at $10 per
Unit.
DOCUMENTS INCORPORATED BY REFERENCE:
None
PART I
ITEM 1. BUSINESS
CNL Income Fund XVIII, Ltd. (the "Registrant" or the "Partnership") is a
limited partnership which was organized pursuant to the laws of the State of
Florida on February 10, 1995. The general partners of the Partnership are
Robert A. Bourne, James M. Seneff, Jr. and CNL Realty Corporation, a Florida
corporation (the "General Partners"). Beginning on September 20, 1996, the
Partnership offered for sale up to $35,000,000 of limited partnership
interests (the "Units") (3,500,000 Units at $10 per Unit) pursuant to a
registration statement on Form S-11 under the Securities Act of 1933, as
amended, effective August 11, 1995. As of December 31, 1996, the Partnership
had sold 842,182 Units, representing $8,421,815 of capital contributions
received from investors who were admitted to the Partnership as limited
partners (the "Limited Partners"). Based on the General Partners' experience
with 17 prior CNL Income Fund offerings (each of which sold the entire amount
offered for purchase), the Partnership anticipates significant additional
sales of Units prior to the termination of the offering. The offering of
Units will terminate no later than August 11, 1997.
The Partnership was organized to acquire both newly constructed and
existing restaurant properties, as well as properties upon which restaurants
are to be constructed (the "Properties"), to be leased primarily to operators
of national and regional fast-food, family-style and casual dining restaurant
chains (the "Restaurant Chains"). As of December 31, 1996, net proceeds to
the Partnership from its offering of Units, after deduction of organizational
and offering expenses, totalled $7,016,149. As of December 31, 1996, the
Partnership had invested or committed for investment approximately $2,960,800
of such proceeds in two Properties (one of which was under construction) and
to pay acquisition fees and certain acquisitions expenses, leaving
approximately $4,055,400 of offering proceeds available for investment in
Properties. The Partnership will use the remaining net offering proceeds,
together with proceeds from the sale of Units subsequent to December 31, 1996,
to acquire additional Properties, to pay acquisition fees and acquisition
expenses and to pay expenses relating to the sale of Units. The Properties
are expected to be leased on a triple-net basis with the lessee responsible
for all repairs and maintenance, property taxes, insurance and utilities.
The Partnership's primary investment objectives are to preserve, protect
and enhance Partnership capital, while providing (i) cash distributions
commencing in the initial year of Partnership operations in amounts which
exceed current taxable income (due to the fact that depreciation deductions
attributable to the Properties reduce taxable income even though depreciation
is not a cash expenditure); (ii) an anticipated minimum level of income
through the long-term rental of Properties to selected operators of certain
national and regional fast-food, family-style and casual dining restaurant
chains; (iii) additional income and protection against inflation by
participation in certain restaurant gross sales through the receipt of
percentage rent payments and, typically, automatic increases in the minimum
annual rent; and (iv) capital appreciation through the potential increase in
value of the Properties.
Description of Leases
The leases of the two Properties owned by the Partnership as of December
31, 1996, provide for initial terms ranging from 15 to 20 years and are on a
triple-net basis, with the lessees responsible for all repairs and
maintenance, property taxes, insurance and utilities. The lease agreement
entered into for the Property that was operational as of December 31, 1996,
provides for minimum base annual rental payments (payable in equal monthly
installments) of approximately $89,700 and provides for percentage rent equal
to the amount by which six percent of annual gross sales of the restaurant
exceeds the minimum annual rent for such lease year. The lease agreement
entered into for the Property under construction, provides for estimated
minimum base annual rental payments (payable in equal monthly installments) of
approximately $170,300 and provides for percentage rent equal to the amount by
which five percent of annual gross sales of the restaurant exceeds a specified
amount. In addition, the lease relating to the existing Property provides
that, commencing in the sixth lease year, the annual base rent required under
the terms of the lease will increase by five percent and commencing in the
eleventh lease year and every five years thereafter, the annual base rent
required will increase by ten percent. In accordance with the lease
agreement,
1
rent relating to the Property under construction, will commence the earlier of
(i) the date a certificate of occupancy for the premises is received, (ii) the
date the restaurant opens for business, or (iii) June 25, 1997.
Both leases provide for four five-year renewal options subject to the
same terms and conditions as the initial lease. The lessees also have been
granted an option to purchase the Properties after a specified portion of the
lease term has elapsed. The option purchase price is equal to the
Partnership's original cost of the Property (including acquisition costs),
plus a specified percentage or the Property's fair market value at the time
the purchase option is exercised, whichever is greater.
The leases also provide that, in the event the Partnership wishes to
sell the Properties, the Partnership first must offer the lessees the right to
purchase the Properties on the same terms and conditions, and for the same
price, as any offer which the Partnership has received for the sale of the
Properties.
Major Tenants
Due to the facts that (i) the Partnership did not commence operations
until October 12, 1996, the date following when the minimum offering proceeds
of $1,500,000 were received and released from escrow, (ii) the Partnership had
only acquired two Properties (one of which was under construction) as of
December 31, 1996, and (iii) the Partnership is continuing to acquire
Properties, it is not possible to determine which lessees or Restaurant Chains
will contribute more than ten percent of the Partnership's rental income in
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
future years, any failure of such lessees or Restaurant Chains could
materially affect the Partnership's income. As of December 31, 1996, no
single tenant or group of affiliated tenants lease Properties with an
aggregate carrying value, excluding acquisition fees and certain acquisition
expenses, in excess of 20 percent of the anticipated total assets of the
Partnership upon completion of the offering of Units.
Management Services
CNL Fund Advisors, Inc., an affiliate of the General Partners, provides
certain services relating to the management of the Partnership and its
Properties pursuant to a management agreement with the Partnership. Under
this agreement, CNL Fund Advisors, Inc. is responsible for collecting rental
payments, inspecting the Properties and the tenants' books and records,
assisting the Partnership in responding to tenant inquiries and notices and
providing information to the Partnership about the status of the leases and
the Properties. CNL Fund Advisors, Inc. also assists the General Partners in
negotiating the leases. For these services, the Partnership has agreed to pay
CNL Fund Advisors, Inc. an annual fee of one percent of the sum of gross
rental revenues from Properties wholly owned by the Partnership, plus the
Partnership's allocable share of gross revenues of joint ventures in which the
Partnership is a co-venturer, but not in excess of competitive fees for
comparable services.
The management agreement continues until the Partnership no longer owns
an interest in any Properties unless terminated at an earlier date upon 60
days' prior notice by either party.
Competition
The fast-food, family-style, and casual dining restaurant business is
characterized by intense competition. The restaurants on the Partnership's
Properties will compete with independently owned restaurants, restaurants
which are part of local or regional chains, and restaurants in other well-
known national chains, including those offering different types of food and
service.
The Partnership also will be in competition with other persons and
entities both to locate suitable Properties to acquire and to locate
purchasers for its Properties. The Partnership also will compete with other
financing sources such as banks, mortgage lenders, and sale/leaseback
companies for suitable Properties and tenants.
Employees
The Partnership has no employees. The officers of CNL Realty
Corporation and the officers and employees of CNL Fund Advisors, Inc. perform
certain services for the Partnership. In addition, the General Partners have
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available to them the resources and expertise of the officers and employees of
CNL Group, Inc., a diversified real estate company, and its affiliates, who
may also perform certain services for the Partnership.
ITEM 2. PROPERTIES
As of December 31, 1996, the Partnership owned two Properties, one
located in North Carolina and one located in Texas. Reference is made to the
Schedule of Real Estate and Accumulated Depreciation filed with this report
for a listing of the Properties and their costs, including acquisition fees
and certain acquisition expenses.
During the period January 1, 1997 through March 6, 1997, the Partnership
acquired five additional Properties (four of which are under construction) for
cash, at a total cost of approximately $4,735,600, excluding certain closing
and development costs. In connection with the four Properties under
construction, the Partnership has agreed to pay costs (including the purchase
prices of the land and closing costs) of approximately $4,565,200, of which
approximately $3,509,900 in land and other costs had been paid by the
Partnership as of March 6, 1997. The buildings are expected to be operational
by July 1997. In connection with the acquisition of each of these Properties,
the Partnership entered into a long-term, triple-net lease. The leases range
from 15 to 18 years and provide for renewal options of four to five five-year
periods. In addition, the leases provide for the payment of minimum annual
rent (payable monthly) ranging from approximately $77,900 to $148,400 and the
payment of percentage rent based on sales in excess of a specified amount.
The Partnership is negotiating to acquire additional Properties, but as
of March 6, 1997, had not acquired any such Properties.
Description of Properties
Land. As of December 31, 1996, the Partnership's two Property sites
were approximately 24,400 and 50,000 square feet. Sites purchased or to be
purchased by the Partnership are or will be in locations zoned for commercial
use which have been reviewed for traffic patterns and volume.
Buildings. The Properties owned by the Partnership as of December 31,
1996, currently include or will include a building that is one of a Restaurant
Chain's approved designs. The buildings to be acquired or constructed
generally will be rectangular and constructed from various combinations of
stucco, steel, wood, brick and tile. As of December 31, 1996, the size of the
existing Property is approximately 2,300 square feet and the size of the
building under construction owned by the Partnership will be approximately
9,500 square feet. All buildings on Properties acquired or to be acquired by
the Partnership will be freestanding and surrounded by paved parking areas.
Buildings will be suitable for conversion to various uses, although
modifications may be required prior to use for other than restaurant
operations.
Generally, a lessee is required or is expected to be required, under the
terms of its lease agreement, to make such capital expenditures as may be
reasonably necessary to refurbish buildings, premises, signs and equipment so
as to comply with the lessee's obligations, if applicable, under the
franchise agreement to reflect the current commercial image of its Restaurant
Chain. These capital expenditures are required to be paid by the lessee
during the term of the lease.
Leases with Major Tenants. The terms of the leases with the
Partnership's tenants, Carrols Corporation and Golden Corral Corporation, as
of December 31, 1996, are described in Item 1. Business - Description of
Leases.
ITEM 3. LEGAL PROCEEDINGS
Neither the Partnership, nor its General Partners or any affiliate of
the General Partners, nor any of their respective properties, is a party to,
or subject to, any material pending legal proceedings.
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
As of March 6, 1997, there were 704 holders of record of the Units.
There is no public trading market for the Units, and it is not anticipated
that a public market for the Units will develop. Limited Partners who wish to
sell their Units may offer the Units for sale pursuant to the Partnership's
distribution reinvestment plan (the "Plan"), and Limited Partners who wish to
have their distributions used to acquire additional Units (to the extent Units
are available for purchase), may do so pursuant to such Plan. The General
Partners have the right to prohibit transfers of Units. Since inception, the
price to be paid for any Unit transferred pursuant to the Plan has been $10.00
per Unit. The price to be paid for any Unit transferred other than pursuant
to the Plan is subject to negotiation by the purchaser and the selling Limited
Partner. For the year ended December 31, 1996, no Units were transferred
other than pursuant to the Plan. The Partnership will not redeem or
repurchase Units.
The capital contribution per Unit was $10. All cash available for
distribution will be distributed to the partners pursuant to the provisions of
the Partnership Agreement.
For the year ended December 31, 1996, the Partnership declared cash
distributions of $57,846 to the Limited Partners. No amounts distributed to
partners for the year ended December 31, 1996, 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. No
distributions have been made to the General Partners to date. These
distributions were declared during the quarter ended December 31, 1996, the
first quarter in which Limited Partners were admitted to the Partnership.
These amounts include monthly distributions made in arrears for the Limited
Partners electing to receive such distributions on this basis.
For the period February 10, 1995 (date of inception) through October 11,
1996, the Partnership did not make any cash distributions because operations
had not commenced.
The Partnership intends to continue to make distributions of cash
available for distribution to the Limited Partners on a quarterly basis,
although some Limited Partners, in accordance with their election, receive
monthly distributions for an annual fee.
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ITEM 6. SELECTED FINANCIAL DATA
The following selected financial data should be read in conjunction with
the financial statements and related notes in Item 8. hereof.
For the Period
February 10,
1995 (date of
inception)
Year Ended through
December 31, December 31,
1996 1995
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Revenues $ 31,614 $ -
Net income 26,910 -
Cash distributions
declared (2) 57,846 -
Net income per Unit .05 -
Cash distributions
declared per Unit (2) .11 -
Weighted average number of
Limited Partner Units
outstanding (3) 503,436 -
December 31, December 31,
1996 1995
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Total assets $7,240,324 $ 256,890
Total partners' capital 6,996,213 1,000
(1) Operations did not commence until October 12, 1996, the date
following when the Partnership received the minimum offering
proceeds of $1,500,000, and such proceeds were released from
escrow.
(2) Approximately 53% of cash distributions ($0.06 per Unit) for the
year ended December 31, 1996, represents 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. The Partnership has not
treated such amount as a return of capital for purposes of
calculating the Limited Partners' return on their invested capital
contributions.
(3) Represents the weighted average number of Units outstanding during
the period the Partnership was operational.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The Partnership was organized on February 10, 1995, to acquire for cash,
either directly or through joint venture arrangements, both newly constructed
and existing restaurant Properties, as well as land upon which restaurants are
to be constructed, to be leased primarily to operators of selected national
and regional fast-food, family-style and casual dining Restaurant Chains. The
leases will be triple-net leases, with the lessee generally responsible for
all repairs and maintenance, property taxes, insurance and utilities. The
Partnership's primary investment objectives are to preserve, protect and
enhance Partnership capital, while providing (i) cash distributions commencing
in the initial year of Partnership operations in amounts which exceed current
taxable income (due to the fact that depreciation deductions attributable to
the Properties reduce taxable income even though depreciation is not a cash
expenditure); (ii) an anticipated minimum level of income through the long-
term rental of Properties to selected operators of certain national and
regional fast-food, family-style and casual dining Restaurant Chains; (iii)
additional income and protection against inflation by participation in certain
restaurant gross sales through the receipt of percentage rent payments and,
typically, automatic increases in the minimum annual rent; and (iv) capital
appreciation through the potential increase in value of the Properties.
5
As of December 31, 1996, the Partnership owned two Properties, one of
which was under construction.
Liquidity and Capital Resources
On September 20, 1996, the Partnership commenced an offering to the
public of up to 3,500,000 Units of limited partnership interest pursuant to a
registration statement on Form S-11 under the Securities Act of 1933, as
amended, effective August 11, 1995. As of December 31, 1996, the Partnership
had sold 842,182 Units, representing $8,421,815 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 offering will terminate
not later than August 11, 1997.
As of December 31, 1996, net proceeds to the Partnership from its
offering of Units, after deduction of organizational and offering expenses,
totalled $7,016,149. Of this amount, the Partnership had invested or
committed for investment approximately $2,960,800 of such proceeds in two
Properties (one of which was under construction as of December 31, 1996), and
to pay acquisition fees and certain acquisition expenses, leaving
approximately $4,055,400 of offering proceeds available for investment in
Properties.
In connection with the Property under construction acquired by the
Partnership as of December 31, 1996, the Partnership has entered into a
development agreement with the tenant which provides terms and specifications
for the construction of a building that the tenant has agreed to lease. The
agreement provides a maximum amount of development costs (including the
purchase price of the land and closing costs) to be paid by the Partnership.
The maximum development costs the Partnership has agreed to pay is
approximately $1,684,600, of which approximately $579,700 in land and other
costs had been incurred as of December 31, 1996. The building currently under
construction is expected to be operational by June 1997. In connection with
the purchase of this Property, the Partnership, as lessor entered into a long-
term lease agreement.
As of March 6, 1997, the Partnership had sold a total of 1,503,434
Units, for an aggregate of $15,034,343 in gross offering proceeds and had
invested or committed for investment approximately $8,900,000 of such proceeds
in seven Properties and to pay acquisition fees and certain acquisition
expenses, leaving approximately $4,100,000 in net offering proceeds available
for investment in Properties. As of March 6, 1997, the Partnership had
incurred $676,545 in acquisition fees to an affiliate of the General Partners.
During the period January 1, 1997 through March 6, 1997, the Partnership
acquired five additional Properties (four of which are under construction) for
cash, at a total cost of approximately $4,735,600, excluding certain closing
and development costs. 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
$4,565,200, of which approximately $3,509,900 in land and other costs had been
paid by the Partnership as of March 6, 1997. The buildings are expected to be
operational by July 1997. In connection with the acquisition of each of these
Properties, the Partnership entered into a long-term, triple-net lease.
The Partnership presently is negotiating to acquire additional
Properties, but as of March 6, 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 March 6, 1997, to acquire
additional Properties, to pay acquisition fees and 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. The Partnership will not borrow for the
purpose of returning capital to the Limited Partners or under arrangements
that would make the Limited Partners liable to creditors of the Partnership.
The General Partners further have represented that they will use their
reasonable efforts to structure any borrowing so that it will not constitute
"acquisition indebtedness" for federal income tax purposes and also will limit
the Partnership's outstanding indebtedness to three percent of the aggregate
adjusted tax basis of its Properties.
6
Affiliates of the General Partners from time to time incur certain expenses on
behalf of the Partnership for which the Partnership reimburses the affiliates
without interest.
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 December 31, 1996, the Partnership had $5,371,325
invested in such short-term investments, as compared to $980 at December 31,
1995. The increase in the amount invested in short-term investments reflects
subscription proceeds derived from the sale of Units during the year ended
December 31, 1996. These funds will be used to pay costs relating to the
Property under construction at December 31, 1996, to purchase and develop
additional Properties, to pay syndication and acquisition costs, to pay
distributions, to meet the Partnership's working capital and other needs and,
in the General Partners' discretion, to create cash reserves.
During the year ended December 31, 1996 and the period February 10, 1995
(date of inception) through December 31, 1995, affiliates of the General
Partners incurred on behalf of the Partnership $285,858 and $196,174,
respectively, for certain organizational and offering expenses. In addition,
during 1996, affiliated incurred $18,036 for certain acquisition expenses and
$893 for certain operating expenses. As of December 31, 1996 and 1995, the
Partnership owed $83,889 and $233,760, respectively, to related parties for
such amounts, fees and other reimbursements. Amounts payable to other
parties, including distributions payable, increased to $160,222 at December
31, 1996, as compared to $22,130 at December 31, 1995, primarily as a result
of incurring additional offering expenses during 1996 and accruing
distributions payable to limited partners as of December 31, 1996. The
General Partners believe that the Partnership has sufficient cash on hand to
meet its current working capital needs.
During the year ended December 31, 1996, the Partnership generated cash
from operations (which includes interest received, less cash paid for
expenses) of $27,146. Cash from operations is expected to increase
significantly in 1997 as (i) the Partnership invests its net offering proceeds
in additional Properties, (ii) the Property that was owned, but under
construction, as of December 31, 1996, becomes operational and (iii) the
existing Property, purchased on December 27, 1996, is operational for a full
year. Based on current and anticipated future cash from operations, the
Partnership declared distributions to the Limited Partners of $57,846 for the
year ended December 31, 1996 (representing distributions of $0.11 per Unit
based on the weighted average number of Units outstanding during the period
the Partnership was operational). No amounts distributed or to be distributed
to the Limited Partners for the year ended December 31, 1996, 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,
although some Limited Partners, in accordance with their election, receive
monthly distributions, for an annual fee.
The General Partners have obtained contingent liability and property
coverage for the Partnership. This insurance policy is intended to reduce the
Partnership's exposure in the unlikely event a tenant's insurance policy
lapses or is insufficient to cover a claim relating to the Property;
therefore, the General Partners believe that the Properties the Partnership
owned as of December 31, 1996, are adequately covered by insurance. The
Partnership's investment strategy of acquiring Properties for cash and leasing
them under triple-net leases to operators who generally meet specified
financial standards minimizes the Partnership's operating expenses. The
General Partners believe that the leases will generate cash flow in excess of
operating expenses. Partnership net income is expected to increase throughout
1997, as rental income increases, due to (i) the acquisition of additional
Properties, (ii) the Property under construction at December 31, 1996 becoming
operational and (iii) the existing Property, purchased on December 27, 1996,
being operational for a full year. Accordingly, the General Partners believe
that the anticipated decrease in the Partnership's liquidity in 1997, due to
its investment of net offering proceeds in additional Properties and the
payment of construction costs for the Property under construction at December
31, 1996, will not have an adverse effect on the Partnership's operations
during 1997.
Due to low operating expenses, ongoing cash flow from rental income
obtained from Properties after they are acquired and the fact that the
Partnership will not enter into a commitment to purchase a Property until
sufficient cash is available for such purchase, the General Partners do not
believe that working capital reserves are necessary at this time. In
addition, due to the fact that both of the leases for the Partnership's
Properties are on a triple-net
7
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 maintenance and repairs. The General Partners have
the right to cause the Partnership to maintain reserves if, in their
discretion, they determine such reserves are required to meet the
Partnership's working capital needs.
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 December 31, 1996, the Partnership had purchased two Properties
(one of which is under construction), and entered into lease agreements with
Carrols Corporation relating to the existing Property and Golden Corral
Corporation relating to the Property under construction at December 31, 1996.
The lease agreement entered into for the existing Property provides for
minimum base annual rental payments (payable in equal monthly installments) of
approximately $89,700 and provides for percentage rent equal to the amount by
which six percent of annual gross sales of the restaurant exceeds the minimum
annual rent for such lease year. The lease agreement entered into for the
Property under construction, provides for estimated minimum base annual rental
payments (payable in equal monthly installments) of approximately $170,300 and
provides for percentage rent equal to the amount by which five percent of
annual gross sales of the restaurant exceeds a specified amount. In addition,
the lease relating to the existing Property provides that, commencing in the
sixth lease year, the annual base rent required under the terms of the lease
will increase by five percent and commencing in the eleventh lease year and
every five years thereafter, the annual base rent required will increase by
ten percent. In accordance with the lease agreement relating to the Property
under construction, rent will commence the earlier of (i) the date a
certificate of occupancy for the premises is received, (ii) the date the
restaurant opens for business, or (iii) June 25, 1997. The Partnership earned
$1,373 in rental income during the year ended December 31, 1996, attributable
to the existing Property purchased on December 27, 1996. For further
description of the Partnership's leases and Properties owned as of December
31, 1996, see Item 1. Business - Description of Leases and Item 2.
Properties, respectively.
Due to the fact that as of December 31, 1996, the Partnership had only
acquired two Properties and the Partnership anticipates acquiring additional
Properties, it is not possible to determine which lessees or Restaurant Chains
will contribute more than ten percent of the Partnership's rental income
during 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 future years, any failure of such lessees or Restaurant Chains could
materially effect the Partnership's income.
During the year ended December 31, 1996, the Partnership earned $30,241
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, the Property under construction becomes operational,
and the existing Property acquired during 1996 becomes operational for a full
year, the percentage of total income representing interest income is expected
to decrease.
Operating expenses, including depreciation and amortization expense,
were $4,704 for the year ended December 31, 1996. 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, in 1997 as the Partnership acquires additional
Properties.
The Partnership's leases as of December 31, 1996, and the leases the
Partnership expects to enter into, are or are expected to be on a triple-net
basis and contain provisions that management believes will mitigate the
adverse effect of inflation. Such provisions include clauses requiring the
payment of percentage rent based on certain restaurant sales above a specified
level and/or automatic increases in base rent at specified times during the
term of the lease. Management expects that increases in restaurant sales
volumes due to inflation and real sales growth should result in an increase in
rental income over time. Continued inflation also may cause capital
appreciation of
8
the Partnership's Properties. Inflation and changing prices, however, also
may have an adverse impact on the sales of the restaurants and on potential
capital appreciation of the Properties.
This information contains forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. Although the Partnership believes that the expectations
reflected in such forward-looking statements are based upon reasonable
assumptions, the Partnership's actual results could differ materially from
those set forth in the forward-looking statements. Certain factors that might
cause such a difference include the following: changes in general economic
conditions, changes in local real estate conditions, continued availability of
proceeds from the Partnership's offering, the ability of the Partnership to
locate suitable tenants for its Properties and the ability of tenants to make
payments under their respective leases.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
9
CNL INCOME FUND XVIII, LTD.
(A Florida Limited Partnership)
CONTENTS
--------
Page
----
Report of Independent Accountants 11
Financial Statements:
Balance Sheets 12
Statements of Income 13
Statements of Partners' Capital 14
Statements of Cash Flows 15
Notes to Financial Statements 17
10
Report of Independent Accountants
---------------------------------
To the Partners
CNL Income Fund XVIII, Ltd.
We have audited the financial statements and the financial statement schedule
of CNL Income Fund XVIII, Ltd. (a Florida limited partnership) listed in Item
14(a) of this Form 10-K. These financial statements and financial statement
schedule are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements and
financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of CNL Income Fund XVIII, Ltd.
as of December 31, 1996 and 1995, and the results of its operations and its
cash flows for the year ended December 31, 1996 and the period February 10,
1995 (date of inception) through December 31, 1995, in conformity with
generally accepted accounting principles. In addition, in our opinion, the
financial statement schedule referred to above, when considered in relation to
the basic financial statements taken as a whole, presents fairly, in all
material respects, the information required to be included therein.
/s/COOPERS & LYBRAND L.L.P.
Orlando, Florida
February 3, 1997
11
CNL INCOME FUND XVIII, LTD.
(A Florida Limited Partnership)
BALANCE SHEETS
--------------
December 31,
ASSETS 1996 1995
------ ---------- ----------
Land and buildings on operating leases,
less accumulated depreciation $1,530,768 $ -
Cash and cash equivalents 5,371,325 980
Receivables 3,711 -
Organization costs, less accumulated
amortization of $411 in 1996 9,589 10,000
Deferred syndication costs - 245,890
Other assets 324,931 20
---------- ----------
$7,240,324 $ 256,890
========== ==========
LIABILITIES AND PARTNERS' CAPITAL
---------------------------------
Accounts payable $ 104,514 $ 22,130
Distributions payable 55,708 -
Due to related parties 83,889 233,760
---------- ----------
Total liabilities 244,111 255,890
Commitment (Note 9)
Partners' capital 6,996,213 1,000
---------- ----------
$7,240,324 $ 256,890
========== ==========
See accompanying notes to financial statements.
12
CNL INCOME FUND XVIII, LTD.
(A Florida Limited Partnership)
STATEMENTS OF INCOME
--------------------
February 10,
1995 (Date
of Inception)
Year Ended through
December 31, December 31,
1996 1995
------------ -------------
Revenues:
Rental income from operating
lease $ 1,373 $ -
Interest income 30,241 -
-------- --------
31,614 -
-------- --------
Expenses:
General operating and admini-
strative 3,980 -
Management fee to related party 12 -
Depreciation and amortization 712 -
-------- --------
4,704 -
-------- --------
Net Income $ 26,910 $ -
======== ========
Allocation of Net Income:
General partners $ (7) $ -
Limited partners 26,917 -
-------- --------
$ 26,910 $ -
======== ========
Net Income Per Limited Partner
Unit $ 0.05 $ -
======== ========
Weighted Average Number of Limited
Partner Units Outstanding 503,436 -
======== ========
See accompanying notes to financial statements.
13
<TABLE>
CNL INCOME FUND XVIII, LTD.
(A Florida Limited Partnership)
STATEMENTS OF PARTNERS' CAPITAL
-------------------------------
Year Ended December 31, 1996 and the Period
February 10, 1995 (Date of Inception)
through December 31, 1995
<CAPTION>
General Partners Limited Partners
----------------- -------------------------------------------------
Accumu- Accumu-
Contri- lated Contri- Distri- lated Syndication
butions Losses butions butions Earnings Costs Total
------- -------- ----------- ----------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, February 10, 1995
(Date of Inception) $ - $ - $ - $ - $ - $ - $ -
Contributions from
general partners 1,000 - - - - - 1,000
------ ------- ----------- ----------- ---------- ----------- -----------
Balance, December 31, 1995 1,000 - - - - - 1,000
Contributions from
limited partners - - 8,421,815 - - - 8,421,815
Distributions to limited
partners ($0.11 per
limited partner unit) - - - (57,846) - - (57,846)
Syndication costs - - - - - (1,395,666) (1,395,666)
Net income - (7) - - 26,917 - 26,910
------ ------- ----------- ----------- ---------- ----------- -----------
Balance, December 31, 1996 $1,000 $ (7) $ 8,421,815 $ (57,846) $ 26,917 $(1,395,666)$ 6,996,213
====== ======= =========== =========== ========== =========== ===========
See accompanying notes to financial statements.
14
</TABLE>
CNL INCOME FUND XVIII, LTD.
(A Florida Limited Partnership)
STATEMENTS OF CASH FLOWS
------------------------
February 10,
1995 (Date
of Inception)
Year Ended through
December 31, December 31,
1996 1995
------------ -------------
Increase (Decrease) in Cash and Cash
Equivalents:
Cash Flows From Operating Activities:
Interest received $ 30,241 $ -
Cash paid for expenses (3,095) -
----------- -----------
Net cash provided by (used in)
operating activities 27,146 -
----------- -----------
Cash Flows From Investing Activities:
Additions to land and buildings on
operating leases (1,533,446) -
Increase in other assets (276,848) -
Other (107) (20)
----------- -----------
Net cash used in investing
activities (1,810,401) (20)
----------- -----------
Cash Flows From Financing Activities:
Reimbursement of acquisition,
organization and syndication
costs paid by related parties on
behalf of the Partnership (497,420) -
Contributions from general partners - 1,000
Contributions from limited partners 8,498,815 -
Distributions to limited partners (2,138) -
Payment of syndication costs (845,657) -
----------- -----------
Net cash provided by financing
activities 7,153,600 1,000
----------- -----------
Net Increase in Cash and Cash Equivalents 5,370,345 980
Cash and Cash Equivalents at Beginning
of Period 980 -
----------- -----------
Cash and Cash Equivalents at End of Period $ 5,371,325 $ 980
=========== ===========
See accompanying notes to financial statements.
15
CNL INCOME FUND XVIII, LTD.
(A Florida Limited Partnership)
STATEMENTS OF CASH FLOWS - CONTINUED
------------------------------------
February 10,
1995 (Date
of Inception)
Year Ended through
December 31, December 31,
1996 1995
------------ -------------
Reconciliation of Net Income to Net Cash
Provided by Operating Activities:
Net income $ 26,910 $ -
----------- -----------
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation 301 -
Amortization 411 -
Increase in receivables (1,227) -
Increase in accounts payable 57 -
Increase in due to related
parties, excluding reimbursement
of acquisition, organization
and syndication costs paid on
behalf of the Partnership 820 -
Other (126) -
----------- -----------
Total adjustments 236 -
----------- -----------
Net Cash Provided by Operating Activities $ 27,146 $ -
=========== ===========
Supplemental Schedule of Non-Cash
Investing and Financing Activities:
Related parties paid certain
acquisition, organization and
syndication costs on behalf of
the Partnership as follows:
Acquisition costs $ 18,036 $ -
Organization costs - 10,000
Syndication costs 285,858 186,174
----------- -----------
$ 303,894 $ 196,174
=========== ===========
Distributions declared and unpaid at
December 31 $ 55,708 $ -
=========== ===========
See accompanying notes to financial statements.
16
CNL INCOME FUND XVIII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
-----------------------------
Year Ended December 31, 1996 and the Period
February 10, 1995 (Date of Inception)
through December 31, 1995
1. Significant Accounting Policies:
-------------------------------
Organization and Nature of Business - CNL Income Fund XVIII, Ltd. (the
"Partnership") is a Florida limited partnership that was organized for
the purpose of acquiring both newly constructed and existing restaurant
properties, as well as properties upon which restaurants are to be
constructed, to be leased primarily to operators of national and
regional fast-food, family-style and casual dining restaurant chains.
Under the terms of a registration statement filed with the Securities
and Exchange Commission, the Partnership is authorized to sell a maximum
of 3,500,000 units ($35,000,000) of limited partnership interest. A
total of 842,182 units ($8,421,815) of limited partnership interest had
been sold as of 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 organization of the
Partnership.
The general partners of the Partnership are CNL Realty Corporation (the
"Corporate General Partner"), James M. Seneff, Jr. and Robert A. Bourne.
Mr. Seneff and Mr. Bourne are also 50 percent shareholders of the
Corporate General Partner. The general partners have responsibility for
managing the day-to-day operations of the Partnership.
Real Estate and Lease Accounting - The Partnership records the
acquisition of land and buildings at cost, including acquisition and
closing costs. Land and buildings are leased to unrelated third parties
on a triple-net basis, whereby the tenant is generally responsible for
all operating expenses relating to the property, including property
taxes, insurance, maintenance and repairs. The leases are accounted for
using the operating method. Under the operating method, land and
building are recorded at cost, revenue is recognized as rentals are
earned and depreciation is charged to operations as incurred. Buildings
are depreciated on the straight-line method over their estimated useful
lives of 30 years. When scheduled rentals vary during the lease term,
income is recognized on a straight-line basis so as to produce a
constant periodic rent over the lease term commencing on the date the
property is placed in service.
17
CNL INCOME FUND XVIII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
-----------------------------------------
Year Ended December 31, 1996 and the Period
February 10, 1995 (Date of Inception)
through December 31, 1995
1. Significant Accounting Policies - Continued:
-------------------------------------------
When the properties are sold, the related cost and accumulated
depreciation, plus any accrued rental income, will be removed from the
accounts and gains or losses from sales will be reflected in income.
The general partners of the Partnership review properties for impairment
whenever events or changes in circumstances indicate that the carrying
amount of the assets may not be recoverable through operations. The
general partners determine whether an impairment in value has occurred
by comparing the estimated future undiscounted cash flows, including the
residual value of the property, with the carrying cost of the individual
property. If an impairment is indicated, a loss will be recorded for
the amount by which the carrying value of the asset exceeds its fair
market value.
Cash and Cash Equivalents - The Partnership considers all highly liquid
investments with a maturity of three months or less when purchased to be
cash equivalents. Cash and cash equivalents consist of demand deposits
at commercial banks and money market funds (some of which are backed by
government securities). Cash equivalents are stated at cost plus
accrued interest, which approximates market value.
Cash accounts maintained on behalf of the Partnership in demand deposits
at commercial banks and money market funds may exceed federally insured
levels; however, the Partnership has not experienced any losses in such
accounts. The Partnership limits investment of temporary cash
investments to financial institutions with high credit standing;
therefore, the Partnership believes it is not exposed to any significant
credit risk on cash and cash equivalents.
Organization Costs - Organization costs are amortized over five years
using the straight-line method upon commencement of operations.
Income Taxes - Under Section 701 of the Internal Revenue Code, all
income, expenses and tax credit items flow through to the partners for
tax purposes. Therefore, no provision for federal income taxes is
provided in the accompanying financial statements. The Partnership is
subject to certain state taxes on its income and property.
18
CNL INCOME FUND XVIII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
-----------------------------------------
Year Ended December 31, 1996 and the Period
February 10, 1995 (Date of Inception)
through December 31, 1995
1. Significant Accounting Policies - Continued:
-------------------------------------------
Additionally, for tax purposes, syndication costs are included in
Partnership equity and in the basis of each partner's investment. For
financial reporting purposes, syndication costs are netted against
partners' capital and represent a reduction of Partnership equity and a
reduction in the basis of each partner's investment (Note 4).
Weighted Average Number of Limited Partner Units Outstanding -Net income
and distributions per limited partner unit are calculated based upon the
weighted average number of units of limited partnership interest
outstanding during the period the Partnership was operational.
Use of Estimates - The general partners of the Partnership have 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.
New Accounting Standard - Effective January 1, 1996, the Partnership
adopted Statement of Financial Accounting Standards No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be
Disposed Of." The statement requires that an entity review long-lived
assets and certain identifiable intangibles, to be held and used, for
impairment whenever events or changes in circumstances indicate that the
carrying amount of the asset may not be recoverable. Adoption of this
standard had no material effect on the Partnership's financial position.
19
CNL INCOME FUND XVIII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
-----------------------------------------
Year Ended December 31, 1996 and the Period
February 10, 1995 (Date of Inception)
through December 31, 1995
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." As of December
31, 1996, the Partnership's leases were classified as operating leases.
The leases have initial terms of 15 to 20 years and provide for minimum
and contingent rentals. One of the leases provides for scheduled rent
increases over the term of the lease. 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 allow the tenants to renew the leases for four successive five-
year periods subject to the same terms and conditions as the initial
lease. The 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
December 31:
1996 1995
---------- ----------
Land $ 852,578 $ -
Building 659,134 -
---------- ----------
1,511,712 -
Less accumulated
depreciation (301) -
---------- ----------
1,511,411 -
Construction in progress 19,357 -
---------- ----------
$1,530,768 $ -
========== ==========
20
CNL INCOME FUND XVIII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
-----------------------------------------
Year Ended December 31, 1996 and the Period
February 10, 1995 (Date of Inception)
through December 31, 1995
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 lease for the property that was
operational as of December 31, 1996:
1997 $ 89,688
1998 89,688
1999 89,688
2000 89,688
2001 89,688
Thereafter 1,556,851
----------
$2,005,291
==========
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 term. In addition, this table does not include any
amounts for future contingent rentals which may be received on the lease
based on a percentage of tenant's gross sales. The amounts also do not
include minimum lease payments that will become due when the property
under development is completed (see Note 9).
4. 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 $1,395,666 for the
year ended December 31, 1996. 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.
21
CNL INCOME FUND XVIII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
-----------------------------------------
Year Ended December 31, 1996 and the Period
February 10, 1995 (Date of Inception)
through December 31, 1995
5. Allocations and Distributions:
-----------------------------
Generally, distributions of net cash flow, as defined in the limited
partnership agreement of the Partnership, are made 95 percent to the
limited partners and five percent to the general partners; provided,
however, that for any particular year, the five percent of net cash flow
to be distributed to the general partners will be subordinated to
receipt by the limited partners in that year of an eight percent
noncumulative, noncompounded return on their aggregate invested capital
contributions (the "Limited Partners' 8% Return"). During the year
ended December 31, 1996, the Partnership declared distributions to the
limited partners of $57,846. No distributions have been made to the
general partners to date.
Generally, net income (determined without regard to any depreciation and
amortization deductions and gains and losses from the sale of
properties) is allocated between the limited partners and the general
partners first, in an amount not to exceed the net cash flow distributed
to the partners attributable to such year in the same proportions as
such net cash flow is distributed; and thereafter, 99 percent to the
limited partners and one percent to the general partners. All
deductions for depreciation and amortization are allocated 99 percent to
the limited partners and one percent to the general partners.
Net sales proceeds from the sale of a property generally will be
distributed first to the limited partners in an amount sufficient to
provide them with the return of their invested capital contributions,
plus their cumulative Limited Partners' 8% Return. The general partners
will then receive a return of their capital contributions and, to the
extent previously subordinated and unpaid, a five percent interest in
all net cash flow distributions. Any remaining net sales proceeds will
be distributed 95 percent to the limited partners and five percent to
the general partners.
Any gain from the sale of a property will be, in general, allocated in
the same manner as net sales proceeds are distributable. Any loss will
be allocated first, on a pro rata basis to the partners with positive
balances in their capital accounts; and thereafter, 95 percent to the
limited partners and five percent to the general partners.
22
CNL INCOME FUND XVIII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
-----------------------------------------
Year Ended December 31, 1996 and the Period
February 10, 1995 (Date of Inception)
through December 31, 1995
6. Income Taxes:
------------
The following is a reconciliation of net income for financial reporting
purposes to net income for federal income tax purposes for the year
ended December 31, 1996 and the period February 10, 1995 (date of
inception) through December 31, 1995:
1996 1995
-------- --------
Net income for financial
reporting purposes $ 26,910 $ -
Depreciation for tax
reporting purposes
in excess of depreci-
ation for financial
reporting purposes (386) -
Capitalization of admini-
strative expenses for
tax reporting purposes 3,662 -
Accrued rental income (146) -
Amortization for financial
reporting purposes in
excess of amortization
for tax reporting purposes 183 -
-------- --------
Net income for federal
income tax purposes $ 30,223 $ -
======== ========
23
CNL INCOME FUND XVIII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
-----------------------------------------
Year Ended December 31, 1996 and the Period
February 10, 1995 (Date of Inception)
through December 31, 1995
7. Related Party Transactions:
--------------------------
One of the individual general partners, James M. Seneff, Jr., is one of
the principal shareholders of CNL Group, Inc., the parent company of CNL
Securities Corp. and CNL Fund Advisors, Inc. The other individual
general partner, Robert A. Bourne, is the president of CNL Securities
Corp. and CNL Fund Advisors, Inc.
CNL Securities Corp. is entitled to receive selling commissions
amounting to 8.5% of the total amount raised from the sale of units of
limited partnership interest for services in connection with the
formation of the Partnership and the offering of units, a substantial
portion of which is paid as commissions to other broker-dealers. As of
December 31, 1996, the Partnership had incurred $715,854 as syndication
costs for such fees, of which $673,534 was or will be reallowed to other
broker-dealers.
In addition, CNL Securities Corp. is entitled to receive a due diligence
expense reimbursement fee equal to 0.5% of the total amount raised from
the sale of units of limited partnership interest, a portion of which
may be reallowed to other broker-dealers and from which all due
diligence expenses will be paid. As of December 31, 1996, the
Partnership had incurred $42,109 of such fees, the majority of which was
reallowed to other broker-dealers for payment of bona fide due diligence
expenses were or will be paid.
CNL Fund Advisors, Inc. will be entitled to receive acquisition fees for
services in finding, negotiating and acquiring properties on behalf of
the Partnership equal to 4.5% of the total amount raised from the sale
of units of limited partnership interest. As of December 31, 1996, the
Partnership had incurred $378,982 of such fees. Such fees are included
in land and buildings on operating leases and other assets.
The Partnership and CNL Fund Advisors, Inc. have 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 the
Partnership's allocable share of gross revenues from joint ventures.
The management fee, which will not exceed fees which are competitive for
similar services in the same geographic area, may or may not be taken,
in whole or
24
CNL INCOME FUND XVIII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
-----------------------------------------
Year Ended December 31, 1996 and the Period
February 10, 1995 (Date of Inception)
through December 31, 1995
7. Related Party Transactions - Continued:
--------------------------------------
in part as to any year, in the sole discretion of CNL Fund Advisors,
Inc. All or any portion of the management fee not taken as to any
fiscal year shall be deferred without interest and may be taken in such
other fiscal year as CNL Fund Advisors, Inc. shall determine. As of
December 31, 1996, the Partnership had incurred $12 for such management
fees.
During the year ended December 31, 1996 and the period February 10, 1995
(date of inception) through December 31, 1995, CNL Fund Advisors, Inc.
and its affiliates 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. For the
year ended December 31, 1996 and the period February 10, 1995 (date of
inception) through December 31, 1995, the expenses incurred for these
services were classified as follows:
1996 1995
-------- --------
Syndication costs $106,887 $ 37,586
General operating and
administrative expenses 2,980 -
-------- --------
$109,867 $ 37,586
======== ========
25
CNL INCOME FUND XVIII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
-----------------------------------------
Year Ended December 31, 1996 and the Period
February 10, 1995 (Date of Inception)
through December 31, 1995
7. Related Party Transactions - Continued:
--------------------------------------
The due to related parties consisted of the following at December 31:
1996 1995
-------- --------
Due to CNL Securities Corp.:
Commissions $ 44,186 $ -
Marketing support and due
diligence expense reim-
bursement fee 2,599 -
-------- --------
46,785 -
-------- --------
Due to CNL Fund Advisors, Inc.
and its affiliates:
Expenditures incurred
on behalf of the
Partnership 2,788 196,174
Acquisition fees 23,392 -
Accounting and admini-
strative services 10,912 37,586
Management fees 12 -
-------- --------
37,104 233,760
-------- --------
$ 83,889 $233,760
======== ========
8. Concentration of Credit Risk:
----------------------------
Rental income due from Carrols Corporation, which operates a Burger King
restaurant, represented all of the Partnership's rental income for the
year ended December 31, 1996. The percentage of total rental income
contributed by this lessee and restaurant chain will decrease as
additional properties are acquired and leased in 1997 and subsequent
years and the property under construction at December 31, 1996 becomes
operational.
9. Commitment:
----------
The Partnership has entered into a development agreement with a tenant
which provides terms and specifications for the construction of the
building that the tenant has agreed to lease. The agreement provides 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
26
CNL INCOME FUND XVIII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
-----------------------------------------
Year Ended December 31, 1996 and the Period
February 10, 1995 (Date of Inception)
through December 31, 1995
9. Commitment - Continued:
----------------------
development costs the Partnership has agreed to pay is approximately
$1,684,600, of which approximately $579,700 in land and other costs had
been incurred as of December 31, 1996. The building under construction
is currently expected to be operational by June 1997. The lease
agreement for this property has substantially the same terms as those
described in Note 2.
10. Subsequent Events:
-----------------
During the period January 1, 1997 through February 3, 1997, the
Partnership received capital contributions for an additional 273,094
units ($2,730,941) of limited partnership interest.
In addition, during the period January 1, 1997 through February 3, 1997,
the Partnership acquired five additional properties for cash, at a total
cost of approximately $4,735,600 (excluding certain closing and
development costs). 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 $4,565,200, of which approximately $3,509,900 in land and
other costs had been paid by the Partnership as of February 3, 1997.
The buildings are expected to be operational by July 1997. In
connection with the acquisition of each of these properties, the
Partnership entered into a long-term, triple-net lease. The leases
range from 15 to 18 years and provide for renewal options of four to
five five-year periods. In addition, the leases provide for the payment
of minimum annual rent (payable monthly) ranging from approximately
$77,900 to $148,400 and the payment of percentage rent based on sales in
excess of a specified amount.
27
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The General Partners of the Registrant are James M. Seneff, Jr., Robert
A. Bourne and CNL Realty Corporation, a Florida corporation. The General
Partners manage and control the Partnership's affairs and have general
responsibility and the ultimate authority in all matters affecting the
Partnership's business. The Partnership has available to it the services,
personnel and experience of CNL Fund Advisors, Inc., CNL Group, Inc. and their
affiliates, all of which are affiliates of the General Partners.
James M. Seneff, Jr., age 50, is a principal stockholder of CNL Group,
Inc., a diversified real estate company, and has served as its Chairman of the
Board of Directors, director and Chief Executive Officer since its formation
in 1980. CNL Group, Inc. is the parent company of CNL Securities Corp., CNL
Investment Company, CNL Fund Advisors, Inc., and prior to its merger with CNL
Fund Advisors, Inc., effective January 1, 1996, CNL Income Fund Advisors, Inc.
Mr. Seneff is Chief Executive Officer, and has been a director and registered
principal of CNL Securities Corp., which serves as the managing dealer in the
Partnership's offering of Units, since its formation in 1979. Mr. Seneff also
has held the position of President and a director of CNL Management Company, a
registered investment advisor, since its formation in 1976, has served as
Chief Executive Officer and Chairman of the Board of CNL Investment Company,
and Chief Executive Officer and Chairman of the Board of Commercial Net Lease
Realty, Inc. since 1992, has served as the Chairman of the Board and the Chief
Executive Officer of CNL Realty Advisors, Inc. since its inception in 1991,
served as Chairman of the Board and Chief Executive Officer of CNL Income Fund
Advisors, Inc. since its inception in 1994 through December 31, 1995, has
served as Chairman of the Board and Chief Executive Officer of CNL Fund
Advisors, Inc. since its inception in 1994, and has held the position of Chief
Executive Officer and a director of CNL Institutional Advisors, Inc., a
registered investment advisor, since its inception in 1990. In addition, Mr.
Seneff has served as Chairman of the Board and Chief Executive Officer of CNL
American Properties Fund, Inc. since 1994, and has served as Chairman of the
Board and Chief Executive Officer of CNL American Realty Fund, Inc. since 1996
and of CNL Real Estate Advisors, Inc. since January 1997. Mr. Seneff
previously served on the Florida State Commission on Ethics and is a former
member and past Chairman of the State of Florida Investment Advisory Council,
which recommends to the Florida Board of Administration investments for
various Florida employee retirement funds. The Florida Board of
Administration, Florida's principal investment advisory and money management
agency, oversees the investment of more than $40 billion of retirement funds.
Since 1971, Mr. Seneff has been active in the acquisition, development and
management of real estate projects and, directly or through an affiliated
entity, has served 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 65
privately offered real estate limited partnerships in which Mr. Seneff,
directly or through an affiliated entity, serves or has served as a general
partner. Also included are 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. and CNL Income
Fund XVII, Ltd. (the ``CNL Income Fund Partnerships''), public real estate
limited partnerships with investment objectives similar to those of the
Partnership, in which Mr. Seneff serves as a general partner. Mr. Seneff
received his degree in Business Administration from Florida State University
in 1968.
Robert A. Bourne, age 49, 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), President and a director of CNL
28
Investment Company, CNL Fund Advisors, Inc., and prior to its merger with CNL
Fund Advisors, Inc., effective January 1, 1996, CNL Income Fund Advisors,
Inc., and President, Chief Investment Officer and a director of CNL
Institutional Advisors, Inc., a registered investment advisor. 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
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.
CNL Realty Corporation is a corporation organized on November 26, 1985,
under the laws of the State of Florida. Its sole directors and shareholders
are James M. Seneff, Jr. and Robert A. Bourne, the individual General
Partners. CNL Realty Corporation was organized to serve as the corporate
general partner of real estate limited partnerships, such as the Partnership,
organized by one or both of the individual General Partners. CNL Realty
Corporation currently serves as the corporate general partner of the CNL
Income Fund Partnerships.
CNL Fund Advisors, Inc., is a corporation organized in 1994 under the
laws of the State of Florida, and its principal office is located at 400 East
South Street, Suite 500, Orlando, Florida 32801. CNL Fund Advisors, Inc. is a
wholly owned subsidiary of CNL Group, Inc., a diversified real estate company,
and was organized to perform property acquisition, property management and
other services.
CNL Group, Inc., which is the parent company of the managing dealer, CNL
Securities Corp., and CNL Fund Advisors, Inc., is a diversified real estate
corporation organized in 1980 under the laws of the State of Florida. Other
subsidiaries and affiliates of CNL Group, Inc. include a property development
and management company, two investment advisory companies, and seven
corporations organized as strategic business units. James M. Seneff, Jr., an
individual General Partner of the Partnership, is the Chairman of the Board,
Chief Executive Officer, and a director of CNL Group, Inc. Mr. Seneff and his
wife own all of the outstanding shares of CNL Group, Inc.
The following persons serve as operating officers 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, do not serve as
members 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.
John T. Walker, age 38, joined CNL Group, Inc. in September 1994, as
Senior Vice President, responsible for Research and Development. He currently
serves as the Chief Operating Officer and Executive Vice President of CNL Fund
Advisors, Inc. and CNL American Properties Fund, Inc. and serves as Executive
Vice President of CNL American Realty Fund, Inc. and CNL Real Estate Advisors,
Inc. From May 1992 to May 1994, he was Executive Vice President for Finance
and Administration and Chief Financial Officer of Z Music, Inc., a cable
television network which was subsequently acquired by Gaylord Entertainment,
where he was responsible for overall financial and administrative management
and planning. From January 1990 through April 1992, Mr. Walker was Chief
Financial Officer of the First Baptist Church in Orlando, Florida. From
April 1984 through December 1989, he was a partner in the accounting firm of
Chastang, Ferrell & Walker, P.A., where he was the partner in charge of audit
and consulting services, and from 1981 to 1984, Mr. Walker was a Senior
Consultant/Audit Senior at Price
29
Waterhouse. Mr. Walker is a Cum Laude graduate of Wake Forest University with
a B.S. in Accountancy and is a certified public accountant.
Lynn E. Rose, age 48, a certified public accountant, has served as Chief
Financial Officer of CNL Group, Inc. since December 1993, has served as
Secretary of CNL Group, Inc. since 1987, and served as Controller of CNL
Group, Inc. from 1987 until December 1993. In addition, Ms. Rose has served
as Chief Financial Officer and Secretary of CNL Securities Corp. since July
1994. She has served as Chief Operating Officer, Vice President and Secretary
of CNL Corporate Services, Inc. since November 1994. Ms. Rose also has served
as Chief Financial Officer and Secretary of CNL Institutional Advisors, Inc.
since its inception in 1990, a director of CNL Realty Advisors, Inc. since its
inception in 1991, Secretary of CNL Realty Advisors, Inc. since its inception
in 1991 (excluding February 1996 to July 1996), Treasurer of CNL Realty
Advisors, Inc. from 1991 to February 1996, Secretary and Treasurer of
Commercial Net Lease Realty, Inc. from 1992 to February 1996, Secretary of CNL
Income Fund Advisors, Inc. since its inception in 1994 to December 1995, and a
director, Secretary and Treasurer of CNL Fund Advisors, Inc. since 1994 and
has served as a director, Secretary and Treasurer of CNL Real Estate Advisors,
Inc. since January 1997. Ms. Rose also has served as Secretary and Treasurer
of CNL American Properties Fund, Inc. since 1994, and has served as Secretary
and Treasurer of CNL American Realty Fund, Inc. since 1996. Ms. Rose also
currently serves as Secretary for approximately 50 additional corporations.
Ms. Rose oversees the management information services, administration, legal
compliance, accounting, tenant compliance, and reporting for over 250
corporations, partnerships, and joint ventures. Prior to joining CNL, Ms. Rose
was a partner with Robert A. Bourne in the accounting firm of Bourne & Rose,
P.A., Certified Public Accountants. Ms. Rose holds a B.A. in Sociology from
the University of Central Florida and is a registered financial and operations
principal of CNL Securities Corp. She was licensed as a certified public
accountant in 1979.
Jeanne A. Wall, age 38, has served as Chief Operating Officer of
CNL Investment Company and of CNL Securities Corp. since November 1994 and
previously served as Executive Vice President of CNL Investment Company since
January 1991. In 1984, Ms. Wall joined CNL Securities Corp. as its Partnership
Administrator. In 1985, Ms. Wall became Vice President of CNL Securities
Corp. and, in 1987, she became a Senior Vice President of CNL Securities Corp.
In this capacity, Ms. Wall serves as national marketing and sales director and
oversees the national marketing plan for the CNL investment programs. In
addition, Ms. Wall oversees the partnership administration and investor
services for programs offered through participating brokers. Ms. Wall also
has served as Senior Vice President of CNL Institutional Advisors, Inc., a
registered investment advisor, from 1990 to 1993, as Vice President of CNL
Realty Advisors, Inc. since its inception in 1991, as Vice President of
Commercial Net Lease Realty, Inc. since 1992, as Executive Vice President of
CNL Income Fund Advisors, Inc. from its inception in 1994 to December 1995, as
Executive Vice President of CNL Fund Advisors, Inc. since 1994, and as
Executive Vice President of CNL American Properties Fund, Inc. since 1994. In
addition, Ms. Wall has served as Executive Vice President of CNL Real Estate
Advisors, Inc. since January 1997 and as Executive Vice President of CNL
American Realty Fund, Inc. since 1996. Ms. Wall holds a B.A. in Business
Administration from Linfield College and is a registered principal of CNL
Securities Corp. Ms. Wall currently serves as a trustee on the board of the
Investment Program Association and on the Direct Participation Program
committee for the National Association of Securities Dealers (NASD).
Steven D. Shackelford, age 33, has served as Chief Financial Officer of
CNL Fund Advisors, Inc. since September 1996. Mr. Shackelford joined CNL
Group, Inc. in September 1996. He also currently serves as the Chief
Financial Officer of CNL American Properties Fund, Inc. From March 1995 to
July 1996, he was a senior manager in the national office of Price Waterhouse
where he was responsible for advising foreign clients seeking to raise capital
and a public listing in the United States. From August 1992 to March 1995, he
served as a manager in the Price Waterhouse, Paris, France office serving
several multinational clients. Mr. Shackelford was an audit staff and senior
from 1986 to 1992 in the Orlando, Florida office of Price Waterhouse. Mr
Shackelford received a B.A. in Accounting, with honors, and a Masters of
Business Administration from Florida State University and is a certified
public accountant.
30
ITEM 11. EXECUTIVE COMPENSATION
Other than as described in Item 13, the Partnership has not paid and
does not intend to pay any executive compensation to the General Partners or
any of their affiliates. There are no compensatory plans or arrangements
regarding termination of employment or change of control.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of March 6, 1997, no person was known to the Registrant to be a
beneficial owner of more than five percent of the Units.
The following table sets forth, as of March 6, 1997, the beneficial
ownership interests of the General Partners in the Registrant.
Title of Class Name of Partner Percent of Class
-------------- --------------- ----------------
General Partnership Interests James M. Seneff, Jr. 45%
Robert A. Bourne 45%
CNL Realty Corporation 10%
----
100%
====
Neither the General Partners, nor any of their affiliates, owns any
interest in the Registrant, except as noted above. There are no arrangements
which at a subsequent date may result in a change in control of the
Registrant.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The table below summarizes the types, recipients, methods of computation
and amounts of compensation, fees and distributions paid or payable by the
Partnership to the General Partners and their affiliates for the year ended
December 31, 1996, exclusive of any distributions to which the General
Partners or their affiliates may be entitled in the event they purchase Units.
Amount Incurred
Type of Compensation For the Year Ended
and Recipient Method of Computation December 31, 1996
- - ---------------------- --------------------- ---------------------
Selling commissions to Commissions of 8.5% $715,854, of which
CNL Securities Corp., per Unit on all Units $673,534 was reallowed
as managing dealer of sold, up to eight to other broker-
the Partnership's percent of which may dealers
offering of Units be reallowed to other
dealers with respect
to Units sold by such
dealers.
Due diligence expense Fee equal to 0.5% of $42,109, the majority
reimbursement fee to gross offering of which was reallowed
CNL Securities Corp. proceeds, a portion of to other broker-
which may be reallowed dealers for the
to other dealers and payment of bona fide
from which all due due diligence expenses
diligence expenses were paid.
will be paid.
31
Amount Incurred
Type of Compensation For the Year Ended
and Recipient Method of Computation December 31, 1996
- - ---------------------- --------------------- ---------------------
Reimbursement to Actual expenses $392,745
General Partners and incurred, except that
their affiliates for the General Partners
organizational and will pay all such
offering expenses expenses in excess of
incurred in connection three percent of the
with the Partnership's gross offering
offering of Units proceeds.
Acquisition fees and Fees equal to 4.5% of Acquisition fees:
expenses to CNL Fund gross offering $378,982
Advisors, Inc. proceeds to CNL Fund
Advisors, Inc., plus Acquisition expenses:
reimbursement to the $18,036
General Partners and
their affiliates for
expenses actually
incurred.
Reimbursement to CNL Operating expenses are Operating expenses
Fund Advisors, Inc. reimbursed at the incurred on behalf of
and affiliates for lower of cost or 90 the Partnership: $893
operating expenses percent of the
prevailing rate at Accounting and
which comparable administrative
services could have services: $2,980
been obtained in the
same geographic area.
Affiliates of the
General Partners from
time to time incur
certain operating
expenses on behalf of
the Partnership for
which the Partnership
reimburses the
affiliates without
interest.
Annual management fee One percent of the sum $12
to CNL Fund Advisors, of gross revenues
Inc. (excluding noncash
lease accounting
adjustments) from
Properties wholly
owned by the
Partnership plus the
Partnership's
allocable share of
gross revenues of
joint ventures in
which the Partnership
is a co-venturer. The
management fee, which
will not exceed
competitive fees for
comparable services in
the same geographic
area, may or may not
be taken, in whole or
in part as to any
year, in the sole
discretion of CNL Fund
Advisors, Inc. All or
any portion of the
management fee not
taken as to any fiscal
year shall be deferred
without interest and
may be taken in such
other fiscal year as
CNL Fund Advisors,
Inc. shall determine.
32
Amount Incurred
Type of Compensation For the Year Ended
and Recipient Method of Computation December 31, 1996
- - ---------------------- --------------------- ---------------------
Deferred, subordinated A deferred, $ - 0 -
real estate subordinated real
disposition fee estate disposition
payable to CNL Fund fee, payable upon sale
Advisors, Inc. of one or more
Properties, in an
amount equal to the
lesser of (i) one-half
of a competitive real
estate commission, or
(ii) three percent of
the sales price of
such Property or
Properties. Payment
of such fee shall be
made only if CNL Fund
Advisors, Inc.
provides a substantial
amount of services in
connection with the
sale of a Property or
Properties and shall
be subordinated to
certain minimum
returns to the limited
partners.
General Partners' A deferred, $ - 0 -
deferred, sub- subordinated share
ordinated share of equal to five percent
Partnership net cash of Partnership
flow distributions of net
cash flow,
subordinated to
certain minimum
returns to the limited
partners.
General Partners' A deferred, $ - 0 -
deferred, sub- subordinated share
ordinated share of equal to five percent
Partnership net sales of Partnership
proceeds from a sale distributions of such
or sales net sales proceeds,
subordinated to
certain minimum
returns to the limited
partners.
33
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report.
1. Financial Statements
Report of Independent Accountants
Balance Sheets at December 31, 1996 and 1995
Statements of Income for the year ended December 31, 1996 and the
period February 10, 1995 (date of inception) through December 31,
1995
Statements of Partners' Capital for the year ended December 31,
1996 and the period February 10, 1995 (date of inception) through
December 31, 1995
Statements of Cash Flows for the year ended December 31, 1996 and
the period February 10, 1995 (date of inception) through December
31, 1995
Notes to Financial Statements
2. Financial Statement Schedule
Schedule III - Real Estate and Accumulated Depreciation at
December 31, 1996
Notes to Schedule III - Real Estate and Accumulated Depreciation
at December 31, 1996
All other Schedules are omitted as the required information is
inapplicable or is presented in the financial statements or notes
thereto.
3. Exhibits
3.1 Affidavit and Certificate of Limited Partnership of CNL
Income Fund XVIII, Ltd. (Included as Exhibit 3.2 to
Registration Statement No. 33-90998-01 on Form S-11 and
incorporated herein by reference.)
4.1 Affidavit and Certificate of Limited Partnership of CNL
Income Fund XVIII, Ltd. (Included as Exhibit 3.2 to
Registration Statement No. 33-90998-01 on Form S-11 and
incorporated herein by reference.)
4.2 Amended and Restated Agreement of Limited Partnership of CNL
Income Fund XVIII, Ltd. (Included as Exhibit 4.2 to Form 10-
K filed with the Securities and Exchange Commission on March
21, 1996, and incorporated herein by reference.)
10.1 Management Agreement between CNL Income Fund XVIII, Ltd. and
CNL Fund Advisors, Inc. (Filed herewith.)
(b) The Registrant filed no reports on Form 8-K during the period
October 1, 1996 through December 31, 1996.
34
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized, on the 18th day
of March, 1997.
CNL INCOME FUND XVIII, LTD.
By: CNL REALTY CORPORATION
General Partner
/s/ James M. Seneff, Jr.
-------------------------
JAMES M. SENEFF, JR., President
By: ROBERT A. BOURNE
General Partner
/s/ Robert A. Bourne
------------------------
ROBERT A. BOURNE
By: JAMES M. SENEFF, JR.
General Partner
/s/ James M. Seneff, Jr.
-------------------------
JAMES M. SENEFF, JR.
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Robert A. Bourne President, Treasurer March 18, 1997
- - -------------------- and Director (Principal
Robert A. Bourne Financial and
Accounting Officer)
/s/ James M. Seneff, Jr. Chief Executive Officer, March 18, 1997
- - ------------------------ Chairman and Director
James M. Seneff, Jr. (Principal Executive
Officer)
<TABLE>
CNL INCOME FUND XVIII, LTD.
(A Florida Limited Partnership)
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
-------------------------------------------------------
December 31, 1996
<CAPTION>
Costs Capitalized
Subsequent
Initial Cost To Acquisition
------------------------ -------------------
Buildings
Encum- and Improve- Carrying
brances Land Improvements ments Costs
------- ----------- ------------ --------- --------
<S> <C> <C> <C> <C> <C>
Properties the Partnership
has Invested in Under
Operating Leases:
Burger King Restaurant:
Kinston, North Carolina - $ 260,802 $ 659,134 $ - $ -
Golden Corral Family
Steakhouse Restaurant:
Houston, Texas - 591,776 - 19,357 -
---------- ---------- ---------- --------
$ 852,578 $ 659,134 $ 19,357 $ -
========== ========== ========== ========
<CAPTION>
Life
Gross Amount at Which Carried on Which
at Close of Period Depreciation
-------------------------------------- In Latest
Buildings Date Income
and Accumulated of Con- Date Statement is
Land Improvements Total Depreciation struction Acquired Computed
----------- ------------ ----------- ------------ --------- -------- ------------
<C> <C> <C> <C> <C> <C> <C>
$ 260,802 $ 659,134 $ 919,936 $ 301 1994 12/96 (d)
591,776 19,357 611,133 - (c) 12/96 (e)
---------- ---------- ---------- -------
$ 852,578 $ 678,491 $1,531,069 $ 301
========== ========== ========== =======
F-1
</TABLE>
CNL INCOME FUND XVIII, LTD.
(A Florida Limited Partnership)
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
----------------------------------------------------------------
December 31, 1996
(a) Transactions in real estate and accumulated depreciation during 1996 are
summarized as follows:
Accumulated
Cost (b) Depreciation
------------ ------------
Properties the Partnership
has Invested in Under
Operating Leases:
Balance, December 31, 1995 $ - $ -
Acquisitions 1,531,069 -
Depreciation expense - 301
----------- -----------
Balance, December 31, 1996 $ 1,531,069 $ 301
=========== ===========
(b) Cost for federal income tax purposes is the same as cost for financial
reporting purposes. The leases are treated as operating leases for
federal income tax purposes.
(c) Scheduled for completion in 1997.
(d) Depreciation expense is computed for buildings based upon estimated
lives of 30 years.
(e) Property was not placed in service as of December 31, 1996; therefore,
no depreciation was taken.
F-2
EXHIBITS
EXHIBIT INDEX
-------------
Exhibits Page
-------- ----
3.1 Affidavit and Certificate of Limited Partnership of
CNL Income Fund XVIII, Ltd. (Included as Exhibit 3.2
to Registration Statement No. 33-90998-01 on Form S-11
and incorporated herein by reference.)
4.1 Affidavit and Certificate of Limited Partnership of
CNL Income Fund XVIII, Ltd. (Included as Exhibit 3.2
to Registration Statement No. 33-90998-01 on Form S-11
and incorporated herein by reference.)
4.2 Amended and Restated Agreement of Limited Partnership
of CNL Income Fund XVIII, Ltd. (Included as Exhibit
4.2 to Form 10-K filed with the Securities and
Exchange Commission on March 21, 1996, and
incorporated herein by reference.)
10.1 Management Agreement between CNL Income Fund XVIII,
Ltd. and CNL Fund Advisors, Inc. (Filed herewith.)
i
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the balance
sheet of CNL Income Fund XVIII, Ltd. at December 31, 1996, and its statement of
income for the year then ended and is qualified in its entirety by reference to
the Form 10-K of CNL Income Fund XVIII, Ltd. for the year ended December 31,
1996.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 5,371,325
<SECURITIES> 0
<RECEIVABLES> 3,711
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 1,531,069
<DEPRECIATION> 301
<TOTAL-ASSETS> 7,240,324
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 6,996,213
<TOTAL-LIABILITY-AND-EQUITY> 7,240,324
<SALES> 0
<TOTAL-REVENUES> 31,614
<CGS> 0
<TOTAL-COSTS> 4,704
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 26,910
<INCOME-TAX> 0
<INCOME-CONTINUING> 26,910
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 26,910
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>Due to the nature of its industry, CNL Income Fund XVIII, Ltd. has an
unclassified balance sheet; therefore, no values are shown above for current
assets and current liabilities.
</FN>
</TABLE>
EXHIBIT 10.1
MANAGEMENT AGREEMENT
between
CNL INCOME FUND XVIII, LTD.
and
CNL FUND ADVISORS, INC.
MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT (the ``Agreement'') is made and entered into
as of this 12th day of October, 1996, by and between CNL Income Fund XVIII,
Ltd., a Florida limited partnership (the ``Partnership''), and CNL Fund
Advisors, Inc., a Florida corporation (the ``Manager'').
WHEREAS, the Partnership intends to acquire, or enter into co-tenancy
arrangements, joint ventures, or partnerships which will acquire, certain real
properties upon which restaurants are to be located;
WHEREAS, the Partnership further intends to lease such properties, and
the buildings located thereon, on a ``triple net'' basis to operators or
franchisees of certain national or regional restaurants; and
WHEREAS, the Partnership desires to have the Manager perform the
management services specified in this Agreement with respect to such
properties, and the Manager desires to perform such services.
NOW, THEREFORE, for and in consideration of the premises and the mutual
covenants and agreements hereinafter set forth, the Partnership and the
Manager agree as follows.
1. DEFINITIONS. Whenever used in this Agreement, the following terms
shall have the following specified meanings. Unless the context otherwise
clearly indicates, all other terms used in this Agreement and having initial
capital letters shall have the same meanings as set forth in the Amended and
Restated Agreement of Limited Partnership of CNL Income Fund XVIII, Ltd., a
form of which is attached hereto as Exhibit A.
1.1 ``CO-TENANCY ARRANGEMENTS'' means the co-tenancy arrangements
pursuant to which the Partnership becomes a co-tenant or tenant-in-common of
properties which are acquired, in part, by the Partnership and which may
include a written agreement among the tenants.
1.2 ``EXPENSES'' shall mean the actual cost of any and all goods,
materials, or services, other than overhead items, acquired by the Manager
from persons or entities not affiliated with the Manager or the General
Partners of the Partnership, which are reasonably necessary for the
performance of any of its obligations under this Agreement.
1.3 ``JOINT VENTURE'' shall mean any joint venture or partnership in
which the Partnership is a co-venturer or partner.
1.4 ``LANDLORD'' shall mean any person or entity designated as the
landlord or lessor under any Lease.
1.5 ``LEASE'' shall mean any lease entered into by the Partnership or a
Joint Venture with a Tenant for the lease of any Property.
1.6 ``PROPERTY'' shall mean any real property owned by the Partnership
or a Joint Venture and described in Exhibit B, as such exhibit may be amended
from time to time by agreement of the parties, including any buildings located
on such real property and any equipment located therein or thereon to the
extent such equipment is owned by the Partnership or a Joint Venture.
1.7 ``TENANT'' shall mean (i) any person or entity designated as a
tenant or lessee under a Lease, or (ii) any assignee or subtenant of a Tenant
pursuant to a valid assignment or subletting under a Lease.
2. SERVICES. The Manager may perform the following management services
for the Partnership with respect to the Properties:
(a) assisting the Partnership and any Joint Venture or Co-tenancy
Arrangement in negotiating Leases;
(b) visiting and inspecting each Property upon request of the
Partnership and at such other time or times as the Manager determines is
necessary or appropriate for the proper management of each such
Property;
(c) with respect to Properties wholly owned by the Partnership,
collecting all rents payable under each Lease, depositing the rents so
collected in accounts designated by the Partnership, and rendering
quarterly statements to the Partnership of the rents so collected;
(d) at the request of the Partnership, inspecting the books,
records or financial statements of a Tenant to the extent permitted
under the terms of the applicable Lease, for the purpose of determining
whether such Tenant has paid or is paying the full amount of rent
required to be paid under such Lease;
(e) notifying the Partnership of any material default by a Tenant
under a Lease;
(f) except as otherwise directed by the Partnership, enforcing
any and all rights of each Landlord under the applicable Lease, at such
times and in such manner and to such extent, other than through the
initiation of legal proceedings against a Tenant, as the Manager
reasonably determines to be appropriate under the circumstances;
(g) providing reasonable assistance to the Partnership in
connection with any legal action brought by a Landlord against a Tenant
for default under a Lease;
(h) notifying the Partnership of any request, submission, notice
or other communication from a Tenant (other than rental payments), and
advising the Partnership with respect to the appropriate response; and
(i) furnishing to the Partnership, within a reasonable time after
its request, such information with respect to any Property as the
Partnership may from time to time reasonably request.
3. COMPENSATION.
3.1 MANAGEMENT FEE. The Partnership shall, to the extent of available
Net Cash Flow, pay to CNL Fund Advisors, Inc. an annual Management Fee in an
amount equal to one percent (1%) of the sum of the gross revenues derived in
each year from Properties wholly owned by the Partnership, plus, in the case
of Properties owned by any co-tenancy arrangement, joint venture, or
partnership in which the Partnership is a co-tenant, co-venturer, or partner,
a fee in an amount equal to one percent (1%) of the Partnership's allocable
share of such gross operating revenues. The Management Fee shall be payable
monthly on the last day of such month, or the first business day following the
last day of such month. The Management Fee, which shall not exceed fees which
are competitive for similar services in the same geographic area, may be taken
or not, in whole or in part, as to any fiscal year, in the sole discretion of
CNL Fund Advisors, Inc. All or any portion of the Management Fee not taken as
to any fiscal year shall be deferred without interest and may be taken in such
other fiscal year as CNL Fund Advisors, Inc. shall determine.
3.2 EXPENSES. The Partnership shall, within 30 days after receipt of a
request by the Manager for reimbursement of Expenses, reimburse the Manager
for all such Expenses. All such requests shall state in detail the nature of
all Expenses for which reimbursement is sought and shall be supported by
appropriate documentation.
4. TERM OF AGREEMENT.
4.1 COMMENCEMENT AND EXPIRATION. This Agreement shall commence as of
the date of this Agreement and, unless sooner terminated pursuant to Paragraph
4.2 hereof, or by operation of law, or otherwise, shall expire at such time as
the Partnership no longer has an ownership interest in any Property.
4.2 TERMINATION. Either party may terminate this Agreement, without
penalty, by giving sixty (60) days' prior written notice to the other party.
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4.3 OBLIGATIONS SURVIVING EXPIRATION OR TERMINATION.
(a) In addition to any other obligations of the Partnership which
survive the expiration or termination of this Agreement, the Partnership
shall upon the expiration or termination of this Agreement (i) promptly
reimburse the Manager for all Expenses for which the Manager seeks
reimbursement, and (ii) pay to the Manager the Management Fee payable
under Paragraph 3.1 as soon after expiration or termination of this
Agreement.
(b) In addition to any other obligations of the Manager which
survive the expiration or termination of this Agreement, the Manager
shall upon the expiration or termination of this Agreement (i) promptly
cause all funds received from Tenants as payments under a Lease to be
deposited in the appropriate accounts designated by the Partnership, and
(ii) promptly deliver to the Partnership all records and documents in
its possession relating to the Properties. The Manager shall use its
best efforts to cooperate with the Partnership to accomplish an orderly
transfer of the management of the Properties to a party or parties
designated by the Partnership.
5. INDEMNIFICATION.
5.1 BY THE PARTNERSHIP. The Partnership releases and shall defend,
indemnify and hold harmless the Manager from all claims, losses, harm, costs,
liabilities, damages and expenses (including, but not limited to, attorneys'
fees) arising, whether before or after the expiration or termination of this
Agreement, out of or in connection with (a) the ``Manager's'' management of
any Property, or (b) any accident or injury (including death) to any person or
damage to any property or environment occurring in or about any Property or in
connection with the possession, use, or occupancy of any Property; provided,
however, that the Partnership shall have no obligation under this Paragraph
5.1 to release, defend, indemnify or hold harmless the Manager from any such
claim, loss, harm, cost, liability, damage or expense, if the same arises out
of (i) an act by the Manager which is not taken in good faith or in a manner
reasonably believed to be in the best interests of the Partnership, or (ii)
conduct by the Manager constituting negligence, willful misconduct or breach
of any of its obligations under this Agreement.
5.2 INDEMNIFICATION BY THE MANAGER. The Manager releases and shall
defend, indemnify and hold harmless the Partnership from all claims, losses,
harm, costs, liabilities, damages and expenses (including, but not limited to,
attorneys' fees) arising, whether before or after the expiration or
termination of this Agreement, solely out of conduct by the Manager
constituting negligence, willful misconduct or breach of any of its
obligations under this Agreement.
6. MISCELLANEOUS.
6.1 SURVIVAL. Paragraphs 4.3 and 5 and all provisions of this
Agreement which may reasonably be interpreted or construed as surviving the
expiration or termination of this Agreement shall survive the expiration or
termination of this Agreement for a period of ten years.
6.2 INDEPENDENT CONTRACTOR. The parties hereby recognize that the
Manager is serving as an independent contractor under this Agreement. Nothing
contained in this Agreement shall be interpreted or construed to create a
partnership relationship between the Manager and the Partnership.
6.3 NOTICES. Any notice, approval, request, authorization, consent,
direction or other communication required or permitted under this Agreement
shall be given in writing and shall be deemed to be delivered when delivered
in person or deposited in the United States mail, properly addressed and
stamped with the required postage, registered or certified mail, return
receipt requested, to the intended recipient as set forth below.
If to the Partnership: CNL Income Fund XVIII, Ltd.
400 East South Street, Suite 500
Orlando, Florida 32801
Attention: James M. Seneff, Jr.
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If to the Manager: CNL Fund Advisors, Inc.
400 East South Street, Suite 500
Orlando, Florida 32801
Attention: Robert A. Bourne
Either party may change its address specified above by giving the other party
notice of such change in accordance with this Paragraph 6.3.
6.4 NO THIRD PARTY BENEFICIARIES. Notwithstanding anything to the
contrary in this Agreement, the parties do not intend any person or entity not
a party to this Agreement to be a beneficiary of any provision of this
Agreement, and no provision of this Agreement shall be interpreted or
construed as being for the benefit of any third party. Further, no third
party shall by virtue of any provision of this Agreement have a right of
action or an enforceable legal remedy against either party to this Agreement.
6.5 NONWAIVER. The failure of either party to insist upon or enforce
strict performance by the other party of any provision of this Agreement or to
exercise any right under this Agreement shall not be construed as a waiver or
relinquishment to any extent of such party's right to assert or rely upon any
such provision or right in that or any other instance; rather, such provision
or right shall be and remain in full force and effect.
6.6 SUCCESSORS AND ASSIGNS. Neither party shall assign (voluntarily,
by operation of law or otherwise) this Agreement or any right, interest or
benefit under this Agreement without the prior written consent of the other
party. Subject to the foregoing, this Agreement shall be fully binding upon,
inure to the benefit of, and be enforceable by, the parties hereto and their
respective successors and assigns.
6.7 ENTIRE AGREEMENT. This Agreement sets forth the entire agreement
of the parties with regard to the subject matter hereof, and supersedes any
and all prior agreements of the parties with respect thereto.
6.8 AMENDMENT. No change, amendment or modification of any provision
of this Agreement shall be valid unless set forth in a written instrument
signed by the party to be bound thereby.
6.9 APPLICABLE LAW. This Agreement shall be interpreted, construed and
enforced in all respects in accordance with the laws of the State of Florida.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first-above written.
The Partnership: CNL INCOME FUND XVIII, LTD.
By: /s/James M. Seneff, Jr.
JAMES M. SENEFF, JR., General Partner
By: /s/Robert A. Bourne
ROBERT A. BOURNE, General Partner
By: CNL REALTY CORPORATION
General Partner
By: /s/James M. Seneff, Jr.
JAMES M. SENEFF, JR., President
The Manager: CNL FUND ADVISORS, INC.
By: /s/Robert A. Bourne
ROBERT A. BOURNE, President
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EXHIBIT A
[Copy of CNL Income Fund XVIII, Ltd. Limited Partnership Agreement.]
EXHIBIT B
[Provide name and address of each Property under management.]
