<PAGE>
424(b)(3)
No. 33-90998-01
CNL INCOME FUND XVIII, LTD.
This Supplement is part of, and should be read in conjunction with, the
Prospectus dated May 9, 1997. This Supplement replaces the Supplements dated
May 15, 1997 and May 29, 1997. Capitalized terms used in this Supplement have
the same meaning as in the Prospectus unless otherwise stated herein.
All subscriptions are for the purchase of Units of CNL Income Fund
XVIII, Ltd. ("CNL XVIII"). Offers are no longer being made nor are the
General Partners accepting subscriptions for CNL XVII. THE ACQUISITION OF
UNITS OF ONE PARTNERSHIP WILL NOT ENTITLE THE INVESTOR TO ANY OWNERSHIP
INTEREST IN THE OTHER PARTNERSHIP OR ITS PROPERTIES.
Information as to proposed properties for which CNL XVIII has received
initial commitments and as to the number and types of Properties acquired by
CNL XVIII is presented as of July 1, 1997, and all references to commitments
or Property acquisitions should be read in that context. Proposed properties
for which CNL XVIII receives initial commitments, as well as property
acquisitions that occur after July 1, 1997, will be reported in a subsequent
Supplement.
THE OFFERING
GENERAL
The General Partners have elected to extend this Offering until August
11, 1998.
SUBSCRIPTION PROCEDURES
As of July 1, 1997, CNL XVIII had received total subscription proceeds
of $22,332,412 (2,233,241 Units) from 1,077 Limited Partners. As of July 1,
1997, the proceeds had been invested or committed for investment in 17
Properties and to pay Acquisition Fees and miscellaneous Acquisition Expenses.
As of July 1, 1997, CNL XVIII had incurred $1,004,959 in Acquisition Fees to
an Affiliate of the General Partners.
BUSINESS
PROPERTY ACQUISITIONS
Between May 1, 1997 and July 1, 1997, CNL XVIII acquired four Properties
consisting of land and building. The Properties are a Boston Market Property
(in Timonium, Maryland), a Jack in the Box Property (in Houston, Texas), a
Golden Corral Property (in Elizabethtown, Kentucky) and an IHOP Property (in
Santa Rosa, California). For information regarding the 13 Properties acquired
by CNL XVIII prior to May 1, 1997, see the Prospectus dated May 9, 1997.
In connection with the purchase of each of these four Properties, CNL
XVIII, as lessor, entered into a long-term lease agreement with an
unaffiliated lessee. The general terms of the lease agreements are described
in the section of the Prospectus entitled "Business - Description of Leases."
For the Properties that are to be constructed, CNL XVIII has entered into
development and indemnification and put agreements with the lessee. The
general terms of these agreements are described in the section of the
Prospectus entitled "Business - Site Selection and Acquisition of Properties -
Construction and Renovation."
The following table sets forth the location of the four Properties
consisting of land and building acquired by CNL XVIII from May 1, 1997 through
July 1, 1997, a description of the competition, and a summary of the principal
terms of the acquisition and lease of each Property.
July 7, 1997 Prospectus Dated May 9, 1997
<PAGE>
<TABLE>
PROPERTY ACQUISITIONS
From May 1, 1997 through July 1, 1997
<CAPTION>
Lease Expira-
Property Location and Purchase Date tion and Minimum Option
Competition Price (1) Acquired Renewal Options Annual Rent (2) Percentage Rent To Purchase
- --------------------- ------------ -------- --------------- --------------- --------------- -----------
<S> <C> <C> <C> <C> <C> <C>
BOSTON MARKET $749,978 05/08/97 05/2012; five 10.38% of CNL for each lease at any time
(the "Timonium Property") (excluding five-year XVIII's total year after the after the
Restaurant to be renovated development renewal options cost to fifth lease fifth lease
costs) (3) purchase the year, (i) 4% of year
The Timonium Property is property; annual gross
located on the northeast increases by sales minus
corner of the intersection of 10% after the (ii) the
York Road and Belfast Road, in fifth lease minimum annual
Timonium, Baltimore County, year and after rent for such
Maryland, in an area of mixed every five lease year
retail, commercial, and years
residential development. thereafter
Other fast-food and family- during the
style restaurants located in lease term
proximity to the Timonium
Property include a McDonald's,
a Burger King, a KFC, and
several local restaurants.
JACK IN THE BOX $1,290,000 05/09/97 05/2015; four $132,225 (6); for each lease at any time
(the "Houston Property") (3)(6) five-year increases by 8% year, (i) 5% of after the
Restaurant to be constructed renewal options after the fifth annual gross seventh
lease year and sales minus lease year
The Houston Property is after every (ii) the
located on the north side of five years minimum annual
Louetta Road, west of State thereafter rent for such
Highway 249, in Houston, during the lease year (5)
Harris County, Texas, in an lease term
area of mixed retail,
commercial, and residential
development. Other fast-food
and family-style restaurants
located in proximity to the
Houston Property include a
McDonald's and a Subway
Sandwich Shop.
-2-
<PAGE>
<CAPTION>
Lease Expira-
Property Location and Purchase Date tion and Minimum Option
Competition Price (1) Acquired Renewal Options Annual Rent (2) Percentage Rent To Purchase
- --------------------- ------------ -------- --------------- --------------- --------------- -----------
<S> <C> <C> <C> <C> <C> <C>
GOLDEN CORRAL $446,180 05/21/97 05/2012; four 10.75% of Total for each lease during the
(the "Elizabethtown Property") (excluding five-year Cost (4) year, 5% of the first
Restaurant to be constructed closing and renewal options amount by which through
development annual gross seventh
The Elizabethtown Property is costs) (3) sales exceed lease years
located on the east side of $2,697,649 (5) and the
North Dixie Avenue, in tenth
Elizabethtown, Hardin County, through
Kentucky, in an area of mixed fifteenth
retail, commercial, and lease years
residential development. only
Other fast-food and family-
style restaurants located in
proximity to the Elizabethtown
Property include a Steak N
Shake, a Dairy Queen, an
Arby's, a Bob Evans, a Captain
D's, a Fazoli's, a Hardee's, a
McDonald's, a Taco Bell, and a
Lee's Famous Recipe Country
Chicken.
IHOP $1,286,364 05/21/97 05/2017; three $130,244; for each lease during the
(the "Santa Rosa Property") five-year increases by year, (i) 4% of eleventh
Existing restaurant renewal options 10% after the annual gross lease year
fifth lease sales minus and at the
The Santa Rosa Property is year and after (ii) the end of the
located on the northwest every five minimum annual initial
quadrant of Fulton Road and years rent for such lease term
Guerneville Road, in Santa thereafter lease year
Rosa, Sonoma County, during the
California, in an area of lease term
mixed retail, commercial, and
residential development.
Other fast-food and family-
style restaurants located in
proximity to the Santa Rosa
Property include a Taco Bell,
a McDonald's, and several
local restaurants.
-3-
</TABLE>
<PAGE>
FOOTNOTES:
(1) The estimated federal income tax basis of the depreciable portion (the
building portion) of each of the Properties acquired, and for
construction Properties, once the buildings are constructed, is set
forth below:
Property Federal Tax Basis
-------- -----------------
Timonium Property $ 454,000
Houston Property 622,000
Elizabethtown Property 1,077,000
Santa Rosa Property 854,000
(2) Minimum annual rent for each of the Properties became payable on the
effective date of the lease, except as indicated below. For the
Timonium Property, minimum annual rent will become due and payable on
the date the tenant receives from the landlord its final funding of the
construction costs. For the Elizabethtown Property, minimum annual rent
will become due and payable on the earlier of (i) 180 days after
execution of the lease, (ii) the date the certificate of occupancy for
the restaurant is issued, or (iii) the date the restaurant opens for
business to the public. During the period commencing with the effective
date of the lease to the date minimum annual rent becomes payable for
the Timonium and Elizabethtown Properties, as described above, interim
rent equal to a specified rate per annum (ranging from 10% to 10.38%) of
the amount funded by CNL XVIII in connection with the purchase and
construction of the Properties shall accrue and be payable in a single
lump sum at the time of final funding of the construction costs.
(3) The development agreements for the Properties which are to be
constructed provide that construction must be completed no later than
the dates set forth below. The maximum cost to CNL XVIII (including the
purchase price of the land (if applicable), development costs (if
applicable), and closing and acquisition costs) is not expected to, but
may, exceed the amounts set forth below:
Estimated Final
Property Estimated Maximum Cost Completion Date
-------- ---------------------- ---------------
Timonium Property $1,140,100 November 4, 1997
Houston Property 1,290,000 November 5, 1997
Elizabethtown Property 1,572,176 November 17, 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).
(6) CNL XVIII paid for all construction costs in advance at closing;
therefore, minimum annual rent was determined on the date acquired and
is not expected to change.
-4-
<PAGE>
PENDING INVESTMENTS
As of July 1, 1997, CNL XVIII had initial commitments to acquire three
properties consisting of land and building. The initial commitments for the
Arby's property in Lexington, North Carolina, and the IHOP property in
Bridgeview, Illinois, were entered into on June 30, 1997. The acquisition of
each of these properties is subject to the fulfillment of certain conditions,
including, but not limited to, a satisfactory environmental survey and
property appraisal. There can be no assurance that any or all of the
conditions will be satisfied or, if satisfied, that one or more of these
properties will be acquired by CNL XVIII. If acquired, the leases of all
three of these properties are expected to be entered into on substantially the
same terms described in the Prospectus in the section entitled "Business -
Description of Leases."
Set forth below are summarized terms expected to apply to the leases for
each of the properties. More detailed information relating to a property and
its related lease will be provided at such time, if any, as the property is
acquired.
-5-
<PAGE>
<TABLE>
<CAPTION>
Lease Term and
Property Renewal Options Minimum Annual Rent Percentage Rent Option to Purchase
- -------- ------------------------ ---------------------- --------------------- -------------------
<S> <C> <C> <C> <C>
Arby's 20 years; two five-year 10.25% of CNL XVIII's for each lease year, during the seventh
Lexington, NC renewal options total cost to purchase (i) 4% of annual and tenth lease
Existing restaurant the property; gross sales minus years only
increases by 4.14% (ii) the minimum
after the third lease annual rent for such
year and after every lease year
three years thereafter
during the lease term
IHOP 20 years; three five- 10.125% of CNL XVIII's for each lease year, during the eleventh
Bridgeview, IL year renewal options total cost to purchase (i) 4% of annual lease year and at
Existing restaurant the property; gross sales minus the end of the
increases by 10% after (ii) the minimum initial lease term
the fifth lease year annual rent for such
and after every five lease year
years thereafter
during the lease term
Popeyes (2) 20 years; two five-year 11.75% of Total Cost for each lease year, at any time after
Macon, GA renewal options (1); increases by 10% (i) 6% of annual the seventh lease
Restaurant to be after the fifth lease gross sales minus year
renovated year and after every (ii) the minimum
five years thereafter annual rent for such
during the lease term lease year
</TABLE>
FOOTNOTES:
(1) 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.
(2) CNL XVIII anticipates acquiring an interest in Macon Joint Venture with
an Affiliate of the General Partners. Based upon anticipated renovation
costs for the Property, CNL XVIII expects to own an approximate 26
percent interest in the Macon Joint Venture upon completion of
renovation.
-6-
<PAGE>
STATEMENT OF ESTIMATED TAXABLE OPERATING RESULTS
CNL INCOME FUND XVIII, LTD.
PROPERTIES ACQUIRED FROM INCEPTION
THROUGH JULY 1, 1997
FOR THE PERIOD OCTOBER 12, 1996 (THE DATE OPERATIONS COMMENCED)
THROUGH DECEMBER 31, 1996 (UNAUDITED)
The following statement presents unaudited estimated taxable operating
results of each Property acquired by CNL XVIII from inception through July 1,
1997. The statement presents estimated taxable operating results for each
Property that was operational as if the Property had been acquired and
operational on October 12, 1996 (the date CNL XVIII commenced operations)
through December 31, 1996. The statement should be read in light of the
accompanying footnotes.
These estimates do not purport to present actual or expected operations
of CNL XVIII for any period in the future. These estimates were prepared on
the basis described in the accompanying notes which should be read in
conjunction herewith. No single lessee or group of affiliated lessees lease
Properties with an aggregate purchase price in excess of 20% of the expected
total net offering proceeds of CNL XVIII.
<TABLE>
<CAPTION>
Burger King Golden Corral Jack in the Box Jack in the Box
Kinston, NC Houston #1, TX (7) Echo Park, CA (6) Henderson, NV (6)
----------- ------------------ ----------------- -----------------
<S> <C> <C> <C> <C>
Estimated Taxable Operating
Results:
Base Rent (1) $ 19,862 (5) (5) (5)
Management Fees (2) (199) (5) (5) (5)
General and Administrative
Expenses (3) (993) (5) (5) (5)
--------
Estimated Cash Available from
Operations 18,670 (5) (5) (5)
Depreciation Expense (4) (3,660) (5) (5) (5)
--------
Estimated Taxable Operating
Results $ 15,010 (5) (5) (5)
========
See Footnotes
-7-
<PAGE>
<CAPTION>
Jack in the Box Golden Corral Boston Market Black-eyed Pea
Centerville, TX (6) Galveston, TX (7) Raleigh, NC Atlanta, GA
------------------- ----------------- ------------- --------------
<S> <C> <C> <C> <C>
Estimated Taxable Operating
Results:
Base Rent (1) (5) (5) $ 27,144 $ 15,358
Management Fees (2) (5) (5) (271) (154)
General and Administrative
Expenses (3) (5) (5) (1,357) (768)
-------- --------
Estimated Cash Available from
Operations (5) (5) 25,516 14,436
Depreciation Expense (4) (5) (5) (2,672) (3,596)
-------- --------
Estimated Taxable Operating
Results (5) (5) $ 22,844 $ 10,840
======== ========
See Footnotes
-8-
<PAGE>
<CAPTION>
Golden Corral Boston Market On The Border Boston Market
Stow, OH San Antonio, TX San Antonio, TX Minnetonka, MN
------------- --------------- --------------- --------------
<S> <C> <C> <C> <C>
Estimated Taxable Operating
Results:
Base Rent (1) $42,009 (5) (5) (5)
Management Fees (2) (420) (5) (5) (5)
General and Administrative
Expenses (3) (2,100) (5) (5) (5)
--------
Estimated Cash Available from
Operations 39,489 (5) (5) (5)
Depreciation Expense (4) (7,047) (5) (5) (5)
--------
Estimate Taxable Operating
Results $ 32,442 (5) (5) (5)
========
See Footnotes
-9-
<PAGE>
<CAPTION>
Wendy's Boston Market Jack in the Box Golden Corral
Sparta, TN Timonium, MD Houston #2, TX (6) Elizabethtown, KY (7)
---------- ------------- ------------------ ---------------------
<S> <C> <C> <C> <C>
Estimated Taxable Operating
Results:
Base Rent (1) (5) (5) (5) (5)
Management Fees (2) (5) (5) (5) (5)
General and Administrative
Expenses (3) (5) (5) (5) (5)
Estimated Cash Available from
Operations (5) (5) (5) (5)
Depreciation Expense (4) (5) (5) (5) (5)
Estimate Taxable Operating
Results (5) (5) (5) (5)
See Footnotes
-10-
</TABLE>
<PAGE>
IHOP
Santa Rosa, CA Total
-------------- ---------
Estimated Taxable Operating
Results:
Base Rent (1) $ 28,547 $132,920
Management Fees (2) (285) (1,329)
General and Administrative
Expenses (3) (1,427) (6,645)
-------- --------
Estimated Cash Available from
Operations 26,835 124,946
Depreciation Expense (4) (4,678) (21,653)
-------- --------
Estimate Taxable Operating
Results $ 22,157 $103,293
======== ========
FOOTNOTES:
(1) Represents rental income from leases for five of the 17 Properties
acquired from inception through July 1, 1997, which were operational at
the time acquired by CNL XVIII, for the period commencing October 12,
1996 (the date CNL XVIII commenced operations) through December 31,
1996. The 12 Properties acquired by CNL XVIII that are under
construction are not presented due to the fact that they were not
operational for the period presented.
(2) The Properties are managed pursuant to a management agreement between
CNL XVIII and an Affiliate of the General Partners, pursuant to which
the Affiliate receives an annual management fee in an amount equal to
one percent of the gross revenues that CNL XVIII earns from its
Properties. See "Management Compensation."
(3) Estimated at five percent of gross rental income based on the previous
experience of Affiliates of the General Partners with 17 public limited
partnerships which own properties similar to that owned by CNL XVIII.
(4) The estimated federal tax basis of the depreciable portion (the building
portion) of the Properties has been depreciated on the straight-line
method over 40 years.
-11-
<PAGE>
(5) This Property is under construction and therefore was not operational
for the period presented. The development agreements for the Properties
which are to be constructed, provide that construction must be completed
no later than the dates set forth below:
Property Estimated Final Completion Date
-------- -------------------------------
Houston #1 Property June 25, 1997
Echo Park Property July 6, 1997
Henderson Property July 6, 1997
Centerville Property July 7, 1997
Galveston Property July 21, 1997
San Antonio #1 Property October 13, 1997
San Antonio #2 Property October 14, 1997
Minnetonka Property October 26, 1997
Sparta Property August 28, 1997
Timonium Property November 4, 1997
Houston #2 Property November 5, 1997
Elizabethtown Property November 17, 1997
(6) The lessee of the Echo Park, Henderson, Centerville and Houston #2
Properties is the same unaffiliated lessee.
(7) The lessee of the Houston #1, Galveston and Elizabethtown Properties is
the same unaffiliated lessee.
-12-
<PAGE>
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 March 31, 1997 15
Pro Forma Statement of Income for the quarter
ended March 31, 1997 16
Pro Forma Statement of Income for the year ended
December 31, 1996 17
Notes to Pro Forma Financial Statements for the
quarter ended March 31, 1997 and the year ended
December 31, 1996 18
-13-
<PAGE>
PRO FORMA FINANCIAL INFORMATION
The following Pro Forma Balance Sheet of CNL Income Fund XVIII, Ltd.
("CNL XVIII") gives effect to (i) property acquisition transactions from
inception through March 31, 1997, including the receipt of $16,736,878 in
gross offering proceeds from the sale of 1,673,688 units of limited
partnership interest (the "Units") pursuant to a registration statement on
Form S-11 under the Securities Act of 1933, as amended, effective August 11,
1995, and the application of such funds to acquire eight properties, five of
which were under construction at March 31, 1997, and to pay organizational and
offering expenses, acquisition fees, and miscellaneous acquisition expenses,
(ii) the receipt of $2,917,786 in gross offering proceeds from the sale of
291,778 additional Units during the period April 1, 1997 through May 22, 1997,
(iii) the assumed future sales of 329,033 Units, resulting in the receipt of
$3,290,334 in gross offering proceeds through May 22, 1997, and (iv) the
application of such funds and $6,079,177 of cash and cash equivalents at March
31, 1997, to purchase nine additional properties during the period April 1,
1997 through May 22, 1997 (six of which are under construction and consist of
land and building, one property which is under construction and consists of
building only and two properties which consist of land and building), to pay
additional construction costs for the five properties under construction at
March 31, 1997, and to pay offering expenses, acquisition fees, and
miscellaneous acquisition expenses, all as reflected in the pro forma
adjustments described in the related notes. The Pro Forma Balance Sheet as of
March 31, 1997, includes the transactions described in (i) above, from its
historical balance sheet, adjusted to give effect to the transactions in (ii),
(iii) and (iv) above, as if they had occurred on March 31, 1997.
The Pro Forma Statements of Income for the quarter ended March 31, 1997
and the year ended December 31, 1996, include the historical operating results
of the properties described in (i) above from the dates of their acquisitions.
No pro forma adjustments have been made to the Pro Forma Statements of Income
for the properties owned by CNL XVIII as of May 22, 1997, due to the fact that
these properties did not have a previous rental history.
This pro forma financial information is presented for informational
purposes only and does not purport to be indicative of CNL XVIII's financial
results or condition if the various events and transactions reflected therein
had occurred on the dates, or been in effect during the periods, indicated.
This pro forma financial information should not be viewed as predictive of CNL
XVIII's financial results or conditions in the future.
-14-
<PAGE>
CNL INCOME FUND XVIII, LTD.
(A FLORIDA LIMITED PARTNERSHIP)
UNAUDITED PRO FORMA BALANCE SHEET
MARCH 31, 1997
Pro Forma
ASSETS Historical Adjustments Pro Forma
----------- --------------- -----------
Land and buildings on operating
leases, less accumulated
depreciation $ 8,231,628 $ 7,206,057 (a) $15,437,685
Net investment in direct
financing leases (b) 651,984 3,999,263 (a) 4,651,247
Cash and cash equivalents 6,079,177 (6,079,177)(a) -
Receivables 78,257 78,257
Prepaid expenses 900 900
Organization costs, less
accumulated amortization 9,089 9,089
Accrued rental income 6,504 6,504
Other assets 363,240 (296,908)(a) 66,332
----------- ----------- -----------
$15,420,779 $ 4,829,235 $20,250,014
=========== =========== ===========
LIABILITIES AND
PARTNERS' CAPITAL
Accounts payable $ 70,480 $ 70,480
Accrued construction costs
payable 686,342 $ (686,342)(a) -
Distributions payable 154,476 154,476
Due to related parties 141,104 (133,812)(a) 7,292
Rents paid in advance 118,189 118,189
----------- ----------- -----------
Total liabilities 1,170,591 (820,154) 350,437
Partners' capital 14,250,188 5,649,389 (a) 19,899,577
----------- ----------- -----------
$15,420,779 $ 4,829,235 $20,250,014
=========== =========== ===========
See accompanying notes to unaudited pro forma
financial statements.
-15-
<PAGE>
CNL INCOME FUND XVIII, LTD.
(A FLORIDA LIMITED PARTNERSHIP)
UNAUDITED PRO FORMA STATEMENT OF INCOME
QUARTER ENDED MARCH 31, 1997
Pro Forma
Historical Adjustments Pro Forma
---------- ----------- ---------
Revenues:
Rental income from operating
leases $ 52,230 $ - $ 52,230
Earned income from direct
financing leases 1,113 - 1,113
Interest income 42,871 - 42,871
--------- --------- ---------
96,214 - 96,214
--------- --------- ---------
Expenses:
General operating and
administrative 16,685 - 16,685
Professional services 5,896 - 5,896
Management fees to related party 1,212 - 1,212
State and other taxes 416 - 416
Depreciation and amortization 9,828 - 9,828
--------- --------- ---------
34,037 - 34,037
--------- --------- ---------
Net Income $ 62,177 $ - $ 62,177
========= ========= =========
Net Income Per Limited Partner
Unit $ 0.05 $ 0.05
========= =========
Weighted Average Number of Units
Outstanding 1,252,970 1,252,970
========= =========
See accompanying notes to unaudited pro forma
financial statements.
-16-
<PAGE>
CNL INCOME FUND XVIII, LTD.
(A FLORIDA LIMITED PARTNERSHIP)
UNAUDITED PRO FORMA STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1996
Pro Forma
Historical Adjustments Pro Forma
---------- ----------- ---------
Revenues:
Rental income from operating lease $ 1,373 $ - $ 1,373
Interest income 30,241 - 30,241
------- ------- -------
31,614 - 31,614
------- ------- -------
Expenses:
General operating and administrative 3,980 - 3,980
Management fee to related party 12 - 12
Depreciation and amortization 712 - 712
------- ------- -------
4,704 - 4,704
------- ------- -------
Net Income $26,910 $ - $26,910
======= ======= =======
Net Income Per Limited Partner
Unit $ 0.05 $ 0.05
======= =======
Weighted Average Number of Units
Outstanding 503,436 503,436
======= =======
See accompanying notes to unaudited pro forma
financial statements.
-17-
<PAGE>
CNL INCOME FUND XVIII, LTD.
(A FLORIDA LIMITED PARTNERSHIP)
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS
FOR THE QUARTER ENDED MARCH 31, 1997 AND THE
YEAR ENDED DECEMBER 31, 1996
Pro Forma Balance Sheet:
(a) Represents gross proceeds of $2,917,786 from the sale of 291,778 Units
during the period April 1, 1997 through May 22, 1997, the assumed future
sales of 329,033 Units, resulting in the receipt of $3,290,334 in gross
offering proceeds through May 22, 1997, and $6,079,177 of cash and cash
equivalents at March 31, 1997, used (i) to acquire nine properties for
$10,310,149, (ii) to fund estimated construction costs of $1,005,240
($686,342 of which was accrued as construction costs payable at March
31, 1997) relating to the five properties under construction at March
31, 1997, (iii) to pay acquisition fees and other costs of $328,982
($49,617 of which was accrued as due to related parties at March 31,
1997) and reclassify from other assets $296,908 of acquisition fees and
other costs previously incurred relating to the acquired properties, and
(iv) to pay selling commissions and offering expenses (syndication
costs) of $642,926 ($84,195 of which was accrued as due to related
parties at March 31, 1997), which have been netted against partners'
capital.
The pro forma adjustments to land and buildings on operating leases as a
result of the above transactions were as follows:
<TABLE>
<CAPTION>
Estimated purchase
price (including
construction and Acquisition
closing costs) and fees
additional con- allocated
struction costs to property Total
------------------ ----------- -----------
<S> <C> <C> <C>
Golden Corral in Stow, OH $ 1,668,863 $ 90,480 $ 1,759,343
Boston Market in San Antonio, TX 851,302 46,154 897,456
On The Border in San Antonio, TX 1,186,744 64,342 1,251,086
Boston Market in Minnetonka, MN 815,065 44,190 859,255
Wendy's in Sparta, TN 633,967 34,372 668,339
Boston Market in Timonium, MD 1,129,934 61,261 1,191,195
Jack in the Box in Houston, TX 1,289,000 69,886 1,358,886
Golden Corral in Elizabethtown, KY 1,453,059 78,780 1,531,839
IHOP in Santa Rosa, CA 1,282,215 69,518 1,351,733
Five properties under construction at
March 31, 1997 318,898 17,290 336,188
----------- ----------- -----------
$10,629,047 $ 576,273 $11,205,320
=========== =========== ===========
Adjustment classified as follows:
Land and buildings on operating leases $ 7,206,057
Net investment in direct financing leases 3,999,263
-----------
$11,205,320
===========
</TABLE>
(b) In accordance with generally accepted accounting principles, leases in
which the present value of future minimum lease payments equals or
exceeds 90 percent of the value of the related properties are treated as
direct financing leases rather than as land and buildings. The
categorization of the leases has no effect on rental revenues received.
-18-
