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): May 8, 1997
CNL INCOME FUND XVIII, LTD.
(Exact Name of Registrant as Specified in Charter)
Florida 33-90998-01 59-3295394
(State or other jurisdiction (Commission File Number) (IRS Employer
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 May 12, 1997, CNL XVIII had received subscription proceeds of
$19,205,754 (1,920,575 Units) from 931 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 May 1, 1997 through May 12, 1997, CNL XVIII acquired two
Properties. The Properties are a Boston Market Property (in Timonium,
Maryland) and a Jack in the Box 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. In addition, in connection with the purchase of
these Properties, which are to be constructed, CNL XVIII has entered into
development and indemnification and put agreements with the lessee.
The following table sets forth the location of the two Properties
consisting of land and building, acquired by CNL XVIII from May 1, 1997
through May 12, 1997, a description of the competition, and a summary of the
principal terms of the acquisition and lease of each Property.
-1-
<TABLE>
PROPERTY ACQUISITIONS
From May 1, 1997 through May 12, 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 10% after the (ii) the
of York Road and Belfast fifth lease minimum annual
Road, in Timonium, year and after rent for such
Baltimore County, every five lease year
Maryland, in an area of years
mixed retail, commercial, thereafter
and residential during the
development. Other fast- lease term
food and family-style
restaurants located in
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 renewal options after the fifth annual gross seventh
constructed lease year and sales minus lease year
after every (ii) the
The Houston Property is five years minimum annual
located on the north side thereafter rent for such
of Louetta Road, west of during the lease year (5)
State Highway 249, in lease term
Houston, Harris County,
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 McDonald's and a
Subway Sandwich Shop.
-2-
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
(2) Minimum annual rent for each of the Properties became payable on the
effective date of the lease, except as indicated below. Minimum annual
rent for the Timonium Property will become due and payable on the date
the tenant receives from the landlord its final funding of the
construction costs. During the period commencing with the effective
date of the lease to the date minimum annual rent becomes payable for
the Timonium Property, as described above, interim rent equal to 10.38%
per annum of the amount funded by CNL XVIII in connection with the
purchase and construction of the Property shall accrue and be payable in
a single lump sum at the time of final funding of the construction
costs.
(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
(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.
-3-
STATEMENT OF ESTIMATED TAXABLE OPERATING RESULTS
CNL INCOME FUND XVIII, LTD.
PROPERTIES ACQUIRED FROM INCEPTION
THROUGH MAY 12, 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 May 12,
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>
<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
-4-
<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
-5-
<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)
--------
Estimated Taxable Operating
Results $ 32,442 (5) (5) (5)
========
See Footnotes
-6-
<CAPTION>
Wendy's Boston Market Jack in the Box
Sparta, TN Timonium, MD Houston #2, TX (6) Total
---------- ------------- ------------------ ---------
<S> <C> <C> <C> <C>
Estimated Taxable Operating
Results:
Base Rent (1) (5) (5) (5) $104,373
Management Fees (2) (5) (5) (5) (1,044)
General and Administrative
Expenses (3) (5) (5) (5) (5,218)
--------
Estimated Cash Available from
Operations (5) (5) (5) 98,111
Depreciation Expense (4) (5) (5) (5) (16,975)
--------
Estimated Taxable Operating
Results (5) (5) (5) $ 81,136
========
</TABLE>
FOOTNOTES:
(1) Represents rental income from leases for four of the 15 Properties
acquired from inception through May 12, 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 11 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.
(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.
-7-
(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
(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 and Galveston Properties is the same
unaffiliated lessee.
-8-
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.
-9-
INDEX TO PRO FORMA FINANCIAL STATEMENTS
Page
CNL INCOME FUND XVIII, LTD.
(A FLORIDA LIMITED PARTNERSHIP)
Pro Forma Financial Information (unaudited):
Pro Forma Balance Sheet as of December 31, 1996 12
Pro Forma Statement of Income for the year ended
December 31, 1996 13
Notes to Pro Forma Financial Statements as of
December 31, 1996 14
-10-
PRO FORMA FINANCIAL INFORMATION
The following Pro Forma Balance Sheet of CNL Income Fund XVIII, Ltd.
("CNL XVIII") gives effect to (i) property acquisition transactions from
inception through December 31, 1996, including the receipt of $8,421,815 in
gross offering proceeds from the sale of 842,182 units of limited partnership
interest (the "Units") pursuant to a registration statement on Form S-11 under
the Securities Act of 1933, as amended, effective August 11, 1995, and the
application of such funds to acquire two properties, one of which was under
construction at December 31, 1996, and to pay organizational and offering
expenses, acquisition fees, and miscellaneous acquisition expenses, (ii) the
receipt of $10,783,939 in gross offering proceeds from the sale of 1,078,393
additional Units during the period January 1, 1997 through May 12, 1997, and
(iii) the application of such funds and $5,371,325 of cash and cash
equivalents at December 31, 1996, to purchase 13 additional properties during
the period January 1, 1997 through May 12, 1997, (nine of which are under
construction and consist of land and building, one property which is under
construction and consists of building only, two properties which consist of
land and building and one property which consists of building only), to pay
additional construction costs for the property under construction at December
31, 1996, and to pay offering expenses, acquisition fees, and miscellaneous
acquisition expenses, all as reflected in the pro forma adjustments described
in the related notes. The Pro Forma Balance Sheet as of December 31, 1996,
includes the transactions described in (i) above, from its historical balance
sheet, adjusted to give effect to the transactions in (ii) and (iii) above, as
if they had occurred on December 31, 1996.
The Pro Forma Statement of Income for the year ended December 31, 1996,
includes the historical operating results of the properties described in (i)
above from the dates of their acquisitions. No pro forma adjustments have
been made to the Pro Forma Statement of Income for the properties owned by CNL
XVIII as of May 12, 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.
-11-
CNL INCOME FUND XVIII, LTD.
(A FLORIDA LIMITED PARTNERSHIP)
UNAUDITED PRO FORMA BALANCE SHEET
DECEMBER 31, 1996
Pro Forma
ASSETS Historical Adjustments Pro Forma
---------- --------------- -----------
Land and building on operating
leases, less accumulated
depreciation $1,530,768 $11,853,945 (a) $13,384,713
Net investment in direct
financing leases (b) - 3,795,084 (a) 3,795,084
Cash and cash equivalents 5,371,325 (5,371,325)(a) -
Receivables 3,711 3,711
Organization costs, less
accumulated amortization 9,589 9,589
Other assets 324,931 (319,530)(a) 5,401
---------- ----------- -----------
$7,240,324 $ 9,958,174 $17,198,498
========== =========== ===========
LIABILITIES AND
PARTNERS' CAPITAL
Accounts payable $ 104,514 $ (104,514)(a) $ -
Construction costs payable - 332,373 (a) 332,373
Distributions payable 55,708 55,708
Due to related parties 83,889 (83,069)(a) 820
---------- ----------- -----------
Total liabilities 244,111 (144,790) 388,901
Partners' capital 6,996,213 9,813,384 (a) 16,809,597
---------- ----------- -----------
$7,240,324 $ 9,958,174 $17,198,498
========== =========== ===========
See accompanying notes to unaudited pro forma
financial statements.
-12-
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.
-13-
CNL INCOME FUND XVIII, LTD.
(A FLORIDA LIMITED PARTNERSHIP)
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS
DECEMBER 31, 1996
Pro Forma Balance Sheet:
(a) Represents gross proceeds of $10,783,939 from the sale of 1,078,393
Units during the period January 1, 1997 through May 12, 1997, and
$5,371,325 of cash and cash equivalents at December 31, 1996, used
(i) to acquire 13 properties for $13,858,493 ($332,373 of which was
accrued as construction costs payable as of May 12, 1997), (ii) to fund
estimated construction costs of $985,729 relating to the property under
construction at December 31, 1996, (iii) to pay acquisition fees and
other costs of $517,825 ($6,508 of which was accrued as accounts payable
at December 31, 1996 and $26,040 of which was accrued as due to related
parties at December 31, 1996) and reclassify from other assets $319,530
of acquisition fees and other costs previously incurred relating to the
acquired properties, and (iv) to pay selling commissions and offering
expenses (syndication costs) of $1,125,590 ($98,006 of which was accrued
as accounts payable at December 31, 1996 and $57,029 of which was
accrued as due to related parties at December 31, 1996), which have been
netted against partners' capital.
The pro forma adjustments to land and buildings on operating leases as a
result of the above transactions were as follows:
<TABLE>
<CAPTION>
Estimated purchase
price (including
construction and Acquisition
closing costs) and fees
additional con- allocated
struction costs to property Total
------------------ ----------- -----------
<S> <C> <C> <C>
Jack in the Box in Echo Park, CA $ 1,257,223 $ 68,163 $ 1,325,386
Jack in the Box in Hendersonville, NV 1,066,175 57,805 1,123,980
Jack in the Box in Centerville, TX 758,658 41,132 799,790
Golden Corral in Galveston, TX 1,359,566 73,711 1,433,277
Boston Market in Raleigh, NC 1,225,886 66,463 1,292,349
Black-eyed Pea in Atlanta, GA 616,110 33,404 649,514
Golden Corral in Stow, OH 1,668,863 90,480 1,759,343
Boston Market in San Antonio, TX 851,302 46,154 897,456
On The Border in San Antonio, TX 1,186,744 64,342 1,251,086
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
One property under construction at
December 31, 1996 985,729 53,444 1,039,173
----------- ----------- -----------
$14,844,222 $ 804,807 $15,649,029
=========== =========== ===========
Adjustment classified as follows:
Land and buildings on operating leases $11,853,945
Net investment in direct financing leases 3,795,084
-----------
$15,649,029
===========
</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.
-13-
ITEM 8. CHANGE IN FISCAL YEAR.
Not applicable.
EXHIBITS
None.
-14-
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be filed on its behalf
by the undersigned thereunto duly authorized.
CNL INCOME FUND XVIII, LTD.
Dated: May 26, 1997 By: /s/ Robert A. Bourne
---------------------------------
ROBERT A. BOURNE, General Partner
