SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): December 27, 1996
CNL INCOME FUND XVIII, LTD.
(Exact Name of Registrant as Specified in Charter)
Florida 33-90998-01 59-3295394
(State or other juris- (Commission File Number) (IRS Employer
diction of incorporation) Identification No.)
400 East South Street, Suite 500 32801
Orlando, Florida (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (407) 422-1574
ITEM 1. CHANGES IN CONTROL OF REGISTRANT.
Not applicable.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
STATUS OF THE OFFERING
Pursuant to a registration statement on Form S-11 under the
Securities Act of 1933, as amended, effective August 11, 1995 (the
"Registration Statement"), CNL Income Fund XVII, Ltd. ("CNL XVII") and CNL
Income Fund XVIII, Ltd. ("CNL XVIII"), limited partnerships with the same
general partners and investment objectives, registered for sale an aggregate
of $65,000,000 of units of limited partnership interest (the "Units")
(6,500,000 Units at $10 per Unit). The first 3,000,000 Units ($30,000,000)
were for CNL XVII, and the remaining Units are for CNL XVIII. The offering of
Units of CNL XVII terminated on September 19, 1996, at which time
subscriptions for an aggregate 3,000,000 Units ($30,000,000), including Units
sold pursuant to the Reinvestment Plan, had been received and 1,602
subscribers had been admitted as Limited Partners in accordance with the
Partnership Agreement of CNL XVII. Pursuant to the registration statement,
CNL XVIII's offering of Units could not commence until the offering of Units
of CNL XVII was terminated. CNL XVIII's offering commenced on September 20,
1996. As of December 30, 1996, CNL XVIII had received subscription proceeds
of $8,383,815 (838,382 Units) from 396 Limited Partners.
As stated in the Registration Statement, including the Prospectus
which constitutes a part thereof, as supplemented and amended, the proceeds of
the offering of Units are to be used to acquire restaurant properties to be
leased primarily to operators of national and regional fast-food, family-
style, and casual dining restaurant chains (the "Properties"), to pay expenses
in connection with the offering of Units and to pay partnership organizational
costs.
ACQUISITION OF PROPERTIES
From inception through December 30, 1996, CNL XVIII acquired two
Properties. The Properties are a Burger King Property (in Kinston, North
Carolina) and a Golden Corral Property (in Houston, Texas).
In connection with the purchase of each of these two Properties, CNL
XVIII, as lessor, entered into a long-term lease agreement with an
unaffiliated lessee. The leases are on a triple-net basis, with the lessee
responsible for all repairs and maintenance, property taxes, insurance and
utilities. The lessee also is required to pay for special assessments, sales
and use taxes, and the cost of any renovations permitted under the lease.
Upon termination of the lease, the lessee will surrender possession of the
Property to CNL XVIII, together with any improvements made to the Property
during the term of the lease.
For the Property that is to be constructed, CNL XVIII has entered
into development and indemnification and put agreements with the lessee.
--------------------------
The following table sets forth the location of the two Properties
acquired by CNL XVIII from inception through December 30, 1996, a description
of the competition, and a summary of the principal terms of the acquisition
and lease of each Property.
<TABLE>
PROPERTY ACQUISITIONS
From Inception through December 30, 1996
<CAPTION>
Lease Expira-
Property Location and Purchase Date tion and Minimum Option
Competition Price (1) Acquired Renewal Options Annual Rent (2) Percentage Rent To Purchase
- --------------------- ------------ -------- --------------- --------------- --------------- -----------
<S> <C> <C> <C> <C> <C> <C>
BURGER KING $875,000 12/27/96 12/2016; four $89,688; for each lease during the
(the "Kinston Property") five-year increases by 5% year, (i) 6% of eighth,
Existing restaurant renewal options after the fifth annual gross ninth,
lease year and sales minus tenth,
The Kinston Property is by 10% after the (ii) the eleventh and
located at the northwest tenth lease year minimum annual twelfth
quadrant of the and after every rent for such lease years
intersection of North five years lease year only
Heritage Street and thereafter
Phillips Street, in during the lease
Kinston, Lenoir County, term
North Carolina, in an area
of mixed retail,
commercial, and residential
development. Other fast-
food and family-style
restaurants located in
proximity to the Kinston
Property include a
Hardee's, a Golden Corral,
a KFC, two Pizza Huts, and
a local restaurant.
GOLDEN CORRAL $579,704 12/27/96 12/2011; four 10.75% of Total for each lease during the
(the "Houston Property") (excluding five-year Cost (4) year, 5% of the first
Restaurant to be closing and renewal options amount by which through
constructed development annual gross seventh
costs) (3) sales exceed lease years
The Houston Property is $2,899,152 (5) and the
located at the southeast tenth
quadrant of the through
intersection of Highway 290 fifteenth
and Hollister Road, in lease years
Houston, Harris County, only
Texas, in an area of mixed
retail, commercial, and
residential development.
Other fast-food and family-
style restaurants located
in proximity to the Houston
Property include a Burger
King, a Taco Bell, a
Fuddrucker's, an Outback
Steakhouse, a Shoney's, a
Red Lobster, a Whataburger,
and several local
restaurants.
</TABLE>
FOOTNOTES:
(1) The estimated federal income tax basis of the depreciable portion (the
building portion) of each of the Properties acquired, and for the
construction Property, once the building is constructed, is set forth
below:
Property Federal Tax Basis
---------------- -----------------
Kinston Property $ 661,000
Houston Property 1,058,000
(2) Minimum annual rent for each of the Properties became payable on the
effective date of the lease, except as indicated below. For the Houston
Property, minimum annual rent will become due and payable on the earlier
of (i) the date the certificate of occupancy for the restaurant is
issued, (ii) the date the restaurant opens for business to the public or
(iii) 180 days after execution of the lease. During the period
commencing with the effective date of the lease to the date minimum
annual rent becomes payable for the Houston Property, "interim rent"
equal to ten percent per annum of the amount funded by CNL XVIII in
connection with the purchase and construction of the Property shall
accrue and shall be payable in a single lump sum on the date minimum
annual rent becomes payable for this Property.
(3) The development agreement for the Property which is to be constructed,
provides that construction must be completed no later than the date set
forth below. The maximum cost to CNL XVIII (including the purchase
price of the land, (if applicable), development costs (if applicable),
and closing and acquisition costs) is not expected to, but may, exceed
the amount set forth below:
Estimated Final
Property Estimated Maximum Cost Completion Date
---------------- ---------------------- ---------------
Houston Property $1,684,643 June 25, 1997
(4) The "Total Cost" is equal to the sum of (i) the purchase price of the
Property, (ii) closing costs, and (iii) actual development costs
incurred under the development agreement.
(5) Percentage rent shall be calculated on a calendar year basis (January 1
to December 31).
<TABLE>
PRO FORMA ESTIMATE OF TAXABLE INCOME OF
CNL INCOME FUND XVIII, LTD.
GENERATED FROM THE OPERATIONS OF PROPERTIES ACQUIRED FROM INCEPTION
THROUGH DECEMBER 30, 1996
FOR A 12-MONTH PERIOD (UNAUDITED)
The following schedule represents pro forma unaudited estimates of taxable income of each Property
acquired by CNL XVIII from inception through December 30, 1996, for the 12-month period commencing on the
date of the inception of the respective lease on such Property. The schedule should be read in light of the
accompanying footnotes.
These estimates do not purport to present actual or expected operations of CNL XVIII for any period in
the future. These estimates were prepared on the basis described in the accompanying notes which should be
read in conjunction herewith. No single lessee or group of affiliated lessees lease Properties with an
aggregate purchase price in excess of 20% of the expected total net offering proceeds of CNL XVIII.
<CAPTION>
Burger King Golden Corral
Kinston, NC Houston, TX (5) Total
----------- --------------- --------
<S> <C> <C> <C>
Pro Forma Estimate
of Taxable Income:
Base Rent (1) $ 89,688 $170,349 $260,037
Management Fees (2) (897) (1,703) (2,600)
General and Administrative
Expenses (3) (4,484) (8,517) (13,001)
-------- -------- --------
Estimated Cash Available from
Operations 84,307 160,129 244,436
Depreciation Expense (4) (16,525) (26,460) (42,985)
-------- -------- --------
Pro Forma Estimate of Taxable
Income of CNL XVIII $ 67,782 $133,669 $201,451
======== ======== ========
See Footnotes
</TABLE>
FOOTNOTES:
(1) Base rent does not include percentage rents which become due if
specified levels of gross receipts are achieved.
(2) The Properties will be managed pursuant to a management agreement
between CNL XVIII and an Affiliate of the General Partners, pursuant to
which the Affiliate will receive an annual management fee in an amount
equal to one percent of the gross revenues that CNL XVIII earns from its
Properties.
(3) Estimated at five percent of gross rental income based on the previous
experience of Affiliates of the General Partners with 17 public limited
partnerships which own properties similar to that owned by CNL XVIII.
(4) The estimated federal tax basis of the depreciable portion (the building
portion) of the Properties has been depreciated on the straight-line
method over 40 years.
(5) The development agreement for the Property which is to be constructed,
provides that construction must be completed no later than the date set
forth below:
Property Estimated Final Completion Date
---------------- -------------------------------
Houston Property June 25, 1997
ITEM 3. BANKRUPTCY OR RECEIVERSHIP.
Not applicable.
ITEM 4. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT.
Not applicable.
ITEM 5. OTHER EVENTS.
Not applicable.
ITEM 6. RESIGNATION OF REGISTRANT'S GENERAL PARTNERS.
Not applicable.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND
EXHIBITS.
INDEX TO PRO FORMA FINANCIAL STATEMENTS
Page
CNL INCOME FUND XVIII, LTD.
(A FLORIDA LIMITED PARTNERSHIP)
Pro Forma Financial Information (unaudited):
Pro Forma Balance Sheet as of September 30, 1996 9
Notes to Pro Forma Balance Sheet as of September 30, 1996 10
PRO FORMA FINANCIAL INFORMATION
The following Pro Forma Balance Sheet of CNL Income Fund XVIII, Ltd.
("CNL XVIII") gives effect to (i) the subscriptions for 60,676 units
($606,760) of limited partnership interest (the "Units") pursuant to a
registration statement on Form S-11 under the Securities Act of 1933, as
amended, effective August 11, 1995, which had been received and were being
held in escrow as of September 30, 1996, (ii) the receipt of $7,777,055 in
gross offering proceeds from the sale of 777,706 additional Units during the
period October 1, 1996 through December 30, 1996, and the release of the
$606,760 previously held in escrow as of September 30, 1996, and (iii) the
application of such funds to purchase two properties, one of which is under
construction, and to pay offering expenses, acquisition fees, and
miscellaneous acquisition expenses, all as reflected in the pro forma
adjustments described in the related notes. The Pro Forma Balance Sheet as of
September 30, 1996, includes the transactions described in (i) above, from its
historical balance sheet, adjusted to give effect to the transactions in (ii)
and (iii) above, as if they had occurred on September 30, 1996.
No Pro Forma Statement of Income is presented due to the facts that (i)
CNL XVIII did not commence operations until October 12, 1996 (the date
following when CNL XVIII received its minimum offering proceeds and the funds
were released from escrow) and (ii) the properties owned by CNL XVIII as of
December 30, 1996, did not have previous rental histories.
This pro forma financial information is presented for informational
purposes only and does not purport to be indicative of CNL XVIII's financial
results or condition if the various events and transactions reflected therein
had occurred on the dates, or been in effect during the periods, indicated.
This pro forma financial information should not be viewed as predictive of the
CNL XVIII's financial results or conditions in the future.
CNL INCOME FUND XVIII, LTD.
(A FLORIDA LIMITED PARTNERSHIP)
UNAUDITED PRO FORMA BALANCE SHEET
SEPTEMBER 30, 1996
Pro Forma
ASSETS Historical Adjustments Pro Forma
---------- -------------- ----------
Land and building on
operating leases $ - $2,572,745 (a) $2,572,745
Cash and cash equivalents 730 4,352,347 (a) 4,353,077
Organization costs 10,000 10,000
Deferred syndication costs 504,079 (504,079)(b) -
Other assets 27,324 217,655 (a) 244,979
---------- ---------- ----------
$ 542,133 $6,638,668 $7,180,801
========== ========== ==========
LIABILITIES AND
PARTNERS' CAPITAL
Accounts payable $ 8,505 $ (8,505)(a) $ -
Due to related parties 532,628 (532,628)(a) -
---------- ---------- ----------
Total liabilities 541,133 (541,133) -
Partners' capital 1,000 7,683,880 (a)
(504,079)(b) 7,180,801
---------- ---------- ----------
$ 542,133 $6,638,668 $7,180,801
========== ========== ==========
See accompanying notes to unaudited pro forma balance sheet.
CNL INCOME FUND XVIII, LTD.
(A FLORIDA LIMITED PARTNERSHIP)
NOTES TO UNAUDITED PRO FORMA BALANCE SHEET
SEPTEMBER 30, 1996
Pro Forma Balance Sheet:
- -----------------------
(a) Represents gross proceeds of $7,777,055 from the sale of 777,706 Units
during the period October 1, 1996 through December 30, 1996 and the
release of $606,760 held in escrow as of September 30, 1996, used (i) to
acquire two properties for $2,440,433, (ii) to pay acquisition fees of
$377,271, ($27,304 of which was accrued as due to related parties at
September 30, 1996, $132,312 of which was allocated to the two
properties acquired and $217,655 of which was classified as other assets
and will be allocated to future properties) and (iii) to pay selling
commissions and offering expenses (syndication costs) of $1,203,764,
which have been netted against partners' capital, and organization costs
of $10,000 (a total of $513,829 of which had been incurred as of
September 30, 1996) leaving $4,352,347 in additional cash and cash
equivalents available for future investment.
The pro forma adjustments to land and buildings on operating leases as a
result of the above transactions were as follows:
Estimated Acquisition
purchase price fees
(including allocated
closing costs) to property Total
-------------- ----------- ----------
Golden Corral in
Houston, TX $1,565,433 $ 84,872 $1,650,305
Burger King in
Kinston, NC 875,000 47,440 922,440
---------- ---------- ----------
$2,440,433 $ 132,312 $2,572,745
========== ========== ==========
(b) Represents reclassification of deferred syndication costs totalling
$504,079 at September 30, 1996, to syndication costs which have been
netted against partners' capital.
ITEM 8. CHANGE IN FISCAL YEAR.
Not applicable.
EXHIBITS
None.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be filed on its behalf
by the undersigned thereunto duly authorized.
CNL INCOME FUND XVIII, LTD.
Dated: January 10, 1997 By: /s/ Robert A. Bourne
--------------------
ROBERT A. BOURNE
General Partner
