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 31, 1997
CNL INCOME FUND XVIII, LTD.
(Exact Name of Registrant as Specified in Charter)
Florida 0-24095 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
<PAGE>
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. The offering of Units of CNL XVIII terminated on February
6, 1998, at which time the maximum offering proceeds of 3,500,000 Units
($35,000,000), including Units sold pursuant to the Reinvestment Plan, had been
received and 1,570 investors had been admitted as Limited Partners in accordance
with the Partnership Agreement of CNL XVIII.
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 October 23, 1997 through June 16, 1998, CNL XVIII acquired
two Properties. The Properties are a Chevy's Fresh Mex Property in Mesa,
Arizona, and a Bennigan's Property in Sunrise, Florida.
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, the Bennigan's Property will be accounted for as
a capital lease for federal tax purposes; therefore, CNL XVIII will not be
entitled to depreciation expense on such Property.
The following table sets forth the location of the two Properties
consisting of land and building, acquired by CNL XVIII from October 23, 1997
through June 16, 1998, a description of the competition, and a summary of the
principal terms of the acquisition and lease of each Property.
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<PAGE>
<TABLE>
<CAPTION>
PROPERTY ACQUISITIONS
From October 23, 1997 through June 16, 1998
Lease Expira-
Property Location and Purchase Date tion and Minimum Percentage Option
Competition Price (1) Acquired Renewal Options Annual Rent (2) Rent To Purchase
- --------------------- --------- -------- --------------- --------------- ------------ -----------
<S> <C>
Chevy's Fresh Mex $2,476,374 12/31/97 12/2012; two $243,643; increases for each lease at any time
(the "Mesa Property") five-year by 10% after the year, 5% of during the
Existing restaurant renewal options fifth lease year and the amount by lease term
after every five which annual
The Mesa Property is years thereafter gross sales
located on the east side during the lease exceed
of South Alma School term $3,491,500
Road, in Mesa,
Maricopa County,
Arizona, in an area of
mixed retail, commercial,
and residential development.
Other fast-food, family-
style, and casual dining
restaurants located in
proximity to the Mesa
Property include a Black-
eyed Pea, a McDonald's, a
Denny's, an Applebee's, an
Olive Garden, a Bennigan's,
a Red Lobster, and several
local restaurants.
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<PAGE>
Bennigan's (3) $1,953,488 06/16/98 06/2018; two $200,233; increases None (4)
(the "Sunrise ten-year renewal by 10% after the
Property") options fifth lease year and
Existing restaurant after every five
years thereafter
The Sunrise Property is during the lease
located on the west term
side of North
University Drive, north
of Oakland Park
Boulevard, in Sunrise,
Broward County, Florida,
in an area of mixed
retail, commercial, and
residential development.
Other fast-food, family-
style, and casual dining
restaurants located in
proximity to the Sunrise
Property include an IHOP,
and several local
restaurants.
</TABLE>
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<PAGE>
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FOOTNOTES:
(1) The estimated federal income tax basis of the depreciable portion (the
building portion) of the Property acquired, which is recorded as an
operating lease, is set forth below:
Property Federal Tax Basis
-------- -----------------
Mesa Property $1,588,000
(2) Minimum annual rent for each Property became payable on the effective
date of the lease.
(3) CNL XVIII and the lessee of the Sunrise Property have agreed that they
will treat the lease of this Property as a financing transaction for
federal income tax purposes, unless otherwise required by law. As such,
CNL XVIII will not be entitled to the depreciation relating to the
building for federal income tax purposes.
(4) The lessee shall have the option to purchase the Property at any time
during the 61st, 121st or 181st month of the lease, the 20th year of
the lease and the last 30 days of any renewal term of the lease for
prices equal to the purchase price of the Property to CNL XVIII plus a
specified percentage (ranging from 10 to 30 percent depending on the
time the option is exercised). If at the end of the initial lease term,
or any subsequent renewal period, the lessee does not elect to purchase
the Property or renew the lease, CNL XVIII may require the lessee to
purchase the Property at a cost equal to the purchase price of the
Property to CNL XVIII.
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<PAGE>
STATEMENT OF ESTIMATED TAXABLE OPERATING RESULTS
CNL INCOME FUND XVIII, LTD.
PROPERTIES ACQUIRED FROM OCTOBER 23, 1998
THROUGH JUNE 16, 1998
For the Year Ended December 31, 1997 (Unaudited)
The following statement presents unaudited estimated taxable operating
results of each Property acquired by CNL XVIII from October 23, 1998 through
June 16, 1998. The statement presents estimated taxable operating results for
each Property that was operational as if the Property had been acquired and
operational on January 1, 1997 through December 31, 1997. 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>
Chevy's Fresh Mex Bennigan's
Mesa, AZ Sunrise, FL (2) Total
----------------- --------------- -----
<S> <C>
Estimated Taxable Operating
Results:
Rental income (1) $243,643 $ - $243,643
Earned Income (2) - 200,233 200,233
Asset Management Fees (3) (2,436) (2,002) (4,438)
General and Administrative
Expenses (4) (12,182) (10,012) (22,194)
-------- -------- --------
Estimated Cash Available from
Operations 229,025 188,219 417,244
Depreciation Expense (2)(5) (39,700) - (39,700)
-------- -------- --------
Estimate Taxable Operating
Results: $189,325 $188,219 $377,544
======== ======== ========
</TABLE>
- -------------------
FOOTNOTES:
(1) Base rent does not include percentage rents which become due if
specified levels of gross receipts are achieved.
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<PAGE>
(2) CNL XVIII will account for the Sunrise Property as a capital lease for
federal tax purposes; therefore, the Company will not be entitled to
depreciation expense on such property. For leases accounted for as
capital leases, future minimum lease payments are recorded as a
receivable. The difference between the receivable and the estimated
residual values less the cost of the properties is recorded as unearned
income. The unearned income is amortized over the lease terms to
provide a constant rate of return.
(3) 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.
(4) 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.
(5) The estimated federal tax basis of the depreciable portion (the
building portion) of the Properties which are recorded as operating
leases has been depreciated on the straight-line method over 40 years.
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<PAGE>
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 Directors.
Not applicable.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
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<PAGE>
INDEX TO PRO FORMA FINANCIAL STATEMENTS
CNL INCOME FUND XVIII, LTD.
(A Florida Limited Partnership)
Pro Forma Financial Information (unaudited):
Pro Forma Balance Sheet as of March 31, 1998
Pro Forma Statement of Income for the three months ended March 31, 1998
Pro Forma Statement of Income for the year ended December 31, 1997
Notes to Pro Forma Financial Statements for the three months ended March 31,
1998 and the year ended December 31, 1997
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<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, 1998, including the receipt of $35,000,000 in gross
offering proceeds from the sale of 3,500,000 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 22 properties and to pay organizational and
offering expenses, acquisition fees, and miscellaneous acquisition expenses and
(ii) the application of $2,304,132 of cash and cash equivalents at March 31,
1998, to purchase one additional property during the period April 1, 1998
through June 16, 1998, and to fund estimated construction costs of $345,971 (all
of which was accrued as construction costs payable at March 31, 1998) 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, 1998, includes the transactions described in (i) above, from its
historical balance sheet, adjusted to give effect to the transactions in (ii)
above, as if they had occurred on March 31, 1998.
The Pro Forma Statements of Income for the three months ended March 31,
1998 and the year ended December 31, 1997, 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 June 16, 1998,
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.
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<PAGE>
CNL INCOME FUND XVIII, LTD.
(A Florida Limited Partnership)
UNAUDITED PRO FORMA BALANCE SHEET
MARCH 31, 1998
<TABLE>
<CAPTION>
Pro Forma
ASSETS Historical Adjustments Pro Forma
---------- ----------- ---------
<S> <C>
Land and buildings on operating
leases, less accumulated
depreciation $21,099,189 $ - $21,099,189
Net investment in direct
financing leases (b) 5,989,585 2,059,400 (a) 8,048,985
Cash and cash equivalents 4,406,877 (2,304,132)(a) 2,102,745
Receivables 47,721 47,721
Prepaid expenses 3,025 3,025
Organization costs, less
accumulated amortization 7,089 7,089
Accrued rental income 115,055 115,055
Other assets 196,352 (105,912)(a) 90,440
----------- ----------- -----------
$31,864,893 $ (350,644) $31,514,249
=========== =========== ===========
LIABILITIES AND
PARTNERS' CAPITAL
Accounts payable $ 837 $ - $ 837
Accrued construction costs
payable 345,971 (345,971)(a) -
Distributions payable 601,810 601,810
Due to related parties 17,594 (4,673)(a) 12,921
Rents paid in advance 65,084 65,084
Deferred rental income 224,328 224,328
----------- ----------- -----------
Total liabilities 1,255,624 (350,644) 904,980
Partners' capital 30,609,269 - 30,609,269
----------- ----------- -----------
$31,864,893 $ (350,644) $31,514,249
=========== =========== ===========
See accompanying notes to unaudited
pro forma financial statements.
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<PAGE>
CNL INCOME FUND XVIII, LTD.
(A Florida Limited Partnership)
UNAUDITED PRO FORMA STATEMENT OF INCOME
THREE MONTHS ENDED MARCH 31, 1998
Pro Forma
Historical Adjustments Pro Forma
---------- ----------- ---------
Revenues:
Rental income from operating
leases $ 526,629 $ - $ 526,629
Earned income from direct
financing leases 146,344 - 146,344
Interest and other income 52,942 - 52,942
--------- --------- ---------
725,915 - 725,915
--------- --------- ---------
Expenses:
General operating and
administrative 34,709 - 34,709
Professional services 5,007 - 5,007
Management fees to related party 6,427 - 6,427
State and other taxes 8,308 - 8,308
Depreciation and amortization 84,621 - 84,621
--------- --------- ---------
139,072 - 139,072
--------- --------- ---------
Net Income $ 586,843 $ - $ 586,843
========= ========= =========
Net Income Per Limited Partner
Unit $ 0.17 $ 0.17
========= =========
Weighted Average Number of Units
Outstanding 3,486,677 3,486,677
========= =========
See accompanying notes to unaudited
pro forma financial statements.
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<PAGE>
CNL INCOME FUND XVIII, LTD.
(A Florida Limited Partnership)
UNAUDITED PRO FORMA STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1997
Pro Forma
Historical Adjustments Pro Forma
---------- ----------- ---------
Revenues:
Rental income from operating lease $ 950,316 $ - $ 950,316
Earned income from direct financing
leases 340,305 - 340,305
Interest income 162,621 - 162,621
---------- --------- ----------
1,453,242 - 1,453,242
---------- --------- ----------
Expenses:
General operating and administrative 123,708 - 123,708
Professional services 20,429 - 20,429
Management fee to related party 11,842 - 11,842
State and other taxes 424 - 424
Depreciation and amortization 142,079 - 142,079
---------- --------- ----------
298,482 - 298,482
---------- --------- ----------
Net Income $1,154,760 $ - $1,154,760
========== ========= ==========
Net Income Per Limited Partner
Unit $ 0.51 $ 0.51
========== ==========
Weighted Average Number of Units
Outstanding 2,279,801 2,279,801
========== ==========
</TABLE>
See accompanying notes to unaudited
pro forma financial statements.
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<PAGE>
CNL INCOME FUND XVIII, LTD.
(A Florida Limited Partnership)
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND THE
YEAR ENDED DECEMBER 31, 1997
Pro Forma Balance Sheet:
(a) Represents $2,304,132 of cash and cash equivalents at March 31, 1998,
used (i) to acquire one property for $1,953,488, (ii) to fund estimated
construction costs of $345,971 (all of which was accrued as
construction costs payable at March 31, 1998), and (iii) to pay other
acquisition costs of $4,673 (all of which were accrued as due to
related parties at March 31, 1998 and reclassify from other assets
$105,912 of acquisition fees previously incurred relating to the
acquired properties).
The pro forma adjustments to net investment in direct financing 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>
Bennigan's in Sunrise, FL $ 1,953,488 $ 105,912 $ 2,059,400
=========== ========= ===========
</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.
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<PAGE>
EXHIBITS
None.
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<PAGE>
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: June 19, 1998 By: /s/ Robert A. Bourne
---------------------
ROBERT A. BOURNE, General Partner
<PAGE>
