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, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______ to ________
Commission file number 0-24095
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
Orlando, Florida 32801
(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code: (407) 650-1000
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:
Units of limited partner interest ($10 per Unit)
(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
----- -----
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
<PAGE>
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. The offering terminated on February 6, 1998, at which date the
maximum offering proceeds of $35,000,000 had been received from investors who
were admitted to the Partnership as limited partners (the "Limited Partners").
The Partnership was organized to acquire both newly constructed and
existing restaurant properties, as well as properties upon which restaurants
were to be constructed (the "Properties"), which are leased primarily to
operators of national and regional fast-food, family-style and casual dining
restaurant chains (the "Restaurant Chains"). As of December 31, 1998, net
proceeds to the Partnership from its offering of Units, after deduction of
organizational and offering expenses, totalled $30,800,000. As of December 31,
1998, the Partnership had invested approximately $29,859,000 of the proceeds
described above to acquire 24 Properties, including one Property owned by a
joint venture in which the Partnership is a co-venturer, and to pay acquisition
fees and certain acquisition expenses, leaving approximately $941,000 of
offering proceeds available for investment in an additional Property. In
February 1999, the Partnership invested in a joint venture arrangement,
Portsmouth Joint Venture, with an affiliate of the General Partners to hold and
purchase one Property and used the remaining amounts to establish a working
capital reserve for Partnership purposes. The Properties are generally leased on
a triple-net basis with the lessees responsible for all repairs and maintenance,
property taxes, insurance and utilities.
On March 11, 1999, the Partnership entered into an Agreement and Plan
of Merger with CNL American Properties Fund, Inc. ("APF"), pursuant to which the
Partnership would be merged with and into a subsidiary of APF (the "Merger").
APF is a real estate investment trust whose primary business is the ownership of
restaurant properties leased on a long-term, "triple-net" basis to operators of
national and regional restaurant chains. APF has agreed to issue shares of its
common stock, par value $0.01 per share (the "APF Shares"), as consideration for
the Merger. At a special meeting of the partners that is expected to be held in
the third quarter of 1999, Limited Partners holding in excess of 50% of the
Partnership's outstanding limited partnership interests must approve the Merger
prior to consummation of the transaction. If the Limited Partners at the special
meeting approve the Merger, APF will own the Properties and other assets of the
Partnership. See Item 8. Financial Statements and Supplementary Data -- Note 11.
Subsequent Event.
In the event that the Limited Partners vote against the Merger, the
Partnership will hold its Properties until the General Partners determine that
the sale or other disposition of the Properties is advantageous in view of the
Partnership's investment objectives. In deciding whether to sell Properties, the
General Partners will consider factors such as potential capital appreciation,
net cash flow and federal income tax considerations. Certain lessees also have
been granted options to purchase Properties, generally at the Property's then
fair market value after a specified portion of the lease term has elapsed. The
Partnership has no obligation to sell all or any portion of a Property at any
particular time, except as may be required under property purchase options
granted to certain lessees.
Description of Leases
The leases of the Properties owned by the Partnership as of December
31, 1998, provide for initial terms ranging from 15 to 26 years (the average
being 18 years) and expire between 2012 and 2023. All leases are generally on a
triple-net basis, with the lessees responsible for all repairs and maintenance,
property taxes, insurance and utilities. The leases for the Properties that were
operational as of December 31, 1998, provide for minimum base annual rental
payments (payable in equal monthly installments) ranging from approximately
$63,200 to $243,600. The majority of
<PAGE>
the leases provide for percentage rent based on sales in excess of a specified
amount. In addition, the majority of the leases provide that, commencing in
specified lease years (generally the sixth lease year), the annual base rent
required under the terms of the lease will increase.
Generally, the leases provide for two to five five-year renewal options
subject to the same terms and conditions as the initial lease. Certain lessees
also have been granted options 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 generally 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.
In October 1998, three Boston Market tenants, Boston Chicken, Inc.,
Finest Foodservice, L.L.C., and WMJ Texas, Inc., filed for bankruptcy and
rejected the lease relating to one of their three leases and ceased making
rental payments to the Partnership. The Partnership will not recognize any
rental and earned income from this Property until a new tenant for the Property
is located, or until the Property is sold and the proceeds from such a sale are
reinvested in an additional Property. As of March 11, 1999, the Partnership has
continued receiving rental payments relating to the two non-rejected leases.
While the tenants have not rejected or affirmed the remaining two leases, there
can be no assurance that some or all of the leases will not be rejected in the
future. The lost revenues resulting from the one lease that was rejected, as
described above, and the possible rejection of the remaining two leases could
have an adverse effect on the results of operations of the Partnership if the
Partnership is unable to re-lease these Properties in a timely manner. The
General Partners are currently seeking either new tenants or purchasers for the
rejected Property.
In addition, in February 1999, the Partnership entered into a joint
venture arrangement, Portsmouth Joint Venture, with an affiliate of the General
Partners, to purchase and hold one restaurant Property. The lease terms for this
Property are substantially the same as the Partnerships other leases as
described above, in the first three paragraphs of this section.
Major Tenants
During 1998, two lessees of the Partnership, Golden Corral Corporation
and Foodmaker, Inc., each contributed more than ten percent of the Partnership's
total rental income. As of December 31, 1998, Golden Corral Corporation and
Foodmaker, Inc. were each the lessee under leases relating to four restaurants.
It is anticipated that based on the minimum rental payments required by the
leases, that each of these lessees will continue to contribute more than ten
percent of the Partnership's total rental income in 1999. In addition, three
Restaurant Chains, Boston Market, Golden Corral Family Steakhouse Restaurants
("Golden Corral"), and Jack in the Box, each accounted for more than ten percent
of the Partnership's total rental income for 1998. During 1998, three tenants of
Boston Market properties filed for bankruptcy, as described above. In 1999, it
is anticipated that these Restaurant Chains each will contribute more than ten
percent of the Partnership's rental income to which the Partnership is entitled
under the terms of the leases. Any failure of such lessees or Restaurant Chains
could materially adversely affect the Partnership's income if the Partnership is
unable to re-lease the Properties in a timely manner, as described above.
Joint Venture Arrangement
In August 1998, the Partnership entered into a joint venture
arrangement, Columbus Joint Venture, with affiliates of the General Partners, to
construct and hold one Property. The joint venture arrangement provides for the
Partnership and its joint venture partners to share in all costs and benefits
associated in the joint venture in proportion to each partner's percentage
interest in the joint venture. The Partnership and its joint venture partners
are also jointly and severally liable for all debts, obligations and other
liabilities of the joint venture.
<PAGE>
The joint venture has an initial term of 20 years and, after the
expiration of the initial term, continues in existence from year to year unless
terminated at the option of any of the joint venturers or by an event of
dissolution. Events of dissolution include the bankruptcy, insolvency or
termination of any joint venturer, sale of the Property owned by the joint
venture and mutual agreement of the Partnership and its joint venture partners
to dissolve the joint venture.
The Partnership shares management control equally with affiliates of
the General Partners for the joint venture. The joint venture agreement
restricts each venturer's ability to sell, transfer or assign its joint venture
interest without first offering it for sale to its joint venture partners,
either upon such terms and conditions as to which the venturers may agree or, in
the event the venturers cannot agree, on the same terms and conditions as any
offer from a third party to purchase such joint venture interest.
Net cash flow from operations of Columbus Joint Venture is distributed
39.93% to the Partnership and the balance is distributed to each of the joint
venture partners in accordance with its respective percentage interest in the
joint venture. Any liquidation proceeds, after paying joint venture debts and
liabilities and funding reserves for contingent liabilities, will be distributed
first to the joint venture partners with positive capital account balances in
proportion to such balances until such balances equal zero, and thereafter in
proportion to each joint venture partner's percentage interest in the joint
venture.
In addition, in February 1999, the Partnership entered into a joint
venture arrangement, Portsmouth Joint Venture, with an affiliate of the General
Partners, to purchase and hold one restaurant Property. The joint venture
agreement provides for the Partnership and its joint venture partner to share in
all costs and benefits associated with the joint venture in proportion to each
partner's percentage interest in the joint venture. The Partnership owns an
approximate 57 percent interest in the profits and losses of the joint venture.
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 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.
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
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.
<PAGE>
Item 2. Properties
As of December 31, 1998, the Partnership owned 24 Properties, located
in 14 states. 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.
Description of Properties
Land. As of December 31, 1998, the Partnership's Property sites ranged
from approximately 24,400 to 120,400 square feet depending upon building size
and local demographic factors. Sites purchased by the Partnership are 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,
1998, currently include a building that is one of a Restaurant Chain's approved
designs. The buildings generally are rectangular and constructed from various
combinations of stucco, steel, wood, brick and tile. Building sizes range from
approximately 2,200 to 9,700 square feet. All buildings on Properties acquired
by the Partnership are freestanding and surrounded by paved parking areas.
Buildings are suitable for conversion to various uses, although modifications
may be required prior to use for other than restaurant operations.
Generally, a lessee is 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 each of the leases with the
Partnership's major tenants, as of December 31, 1998 (See Item 1. Business -
Major Tenants), are substantially the same as those described in Item 1.
Business - Description of Leases.
Golden Corral Corporation leases four Golden Corral restaurants. The
initial term of each lease is 15 years (expiring in 2012 to 2013) and the
average minimum base annual rent is approximately $164,400 (ranging from
approximately $156,700 to $178,200).
Foodmaker, Inc. leases four Jack in the Box restaurants. The initial
term of each lease is 18 years (expiring in 2015) and the average minimum base
annual rent is approximately $112,100 (ranging from approximately $77,900 to
$132,200).
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.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
<PAGE>
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
As of March 11, 1999, there were 1,567 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. The price paid for any
Unit transferred pursuant to the Plan through December 31, 1998 was $9.50 per
Unit. The price paid for any Unit transferred other than pursuant to the Plan
was subject to negotiation by the purchaser and the selling Limited Partner. The
Partnership will not redeem or repurchase Units.
The following table reflects, for each calendar quarter, the high, low
and average sales prices for transfers of Units during 1998 and 1997 other than
pursuant to the Plan, net of commissions
<TABLE>
<CAPTION>
<S> <C>
1998 (1) 1997
-------------------------------------- ---------------------------------------
High Low Average High Low Average
--------- ---------- ---------- ---------- ---------- ----------
First Quarter (2) (2) (2) (2) (2) (2)
Second Quarter $7.66 $7.66 $7.66 (2) (2) (2)
Third Quarter (2) (2) (2) (2) (2) (2)
Fourth Quarter 9.50 8.25 8.87 (2) (2) (2)
</TABLE>
(1) A total of 5,232 Units were transferred other than pursuant to the
Plan for the year ended December 31, 1998.
(2) No transfer of Units took place during the quarter other than pursuant
to the Plan.
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 years ended December 31, 1998 and 1997, the Partnership
declared cash distributions of $2,657,764 and $1,310,885, respectively, to the
Limited Partners. No amounts distributed to partners for the years ended
December 31, 1998 and 1997, 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. As indicated in the chart below,
these distributions were declared following the close of each of the
Partnership's calendar quarters. These amounts include monthly distributions
made in arrears for the Limited Partners electing to receive such distributions
on this basis.
Quarter Ended 1998 1997
-------------------- ----------- -----------
March 31 $601,514 $154,476
June 30 656,250 266,507
September 30 700,000 379,266
December 31 700,000 510,636
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.
<PAGE>
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.
<TABLE>
<CAPTION>
February 10,
1995 (Date of
Year Ended Year Ended Year Ended Inception) through
December 31, December 31, December 31, December 31,
1998 1997 1996 1995
--------------- ---------------- ---------------- --------------------
<S> <C>
Revenues $3,097,757 $1,453,242 $ 31,614 $ --
Net income (4) 2,302,322 1,154,760 26,910 --
Cash distributions declared (2) 2,657,764 1,310,885 57,846 --
Net income per Unit .66 .51 .05 --
Cash distributions declared
per Unit (2) .76 .57 .11 --
Weighted average number of
Limited Partner Units
outstanding (3) 3,495,278 2,279,801 503,436 --
1998 1997 1996 1995
--------------- ---------------- ---------------- --------------------
At December 31:
Total assets $31,112,617 $31,807,255 $7,240,324 $ 256,890
Total partners' capital ` 30,268,497 29,846,580 6,996,213 1,000
</TABLE>
(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 13%, 12%, and 53% of cash distributions ($0.10, $0.07,
and $0.06 per Unit, respectively) for the years ended December 31,
1998, 1997, and 1996, respectively, 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 amounts 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.
(4) Net income for the year ended December 31, 1998, includes $197,466 from
provision for loss on land.
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 were to be constructed, which are leased primarily to operators of
selected national and regional fast-food, family-style and casual dining
Restaurant Chains. The leases are generally triple-net leases, with the lessees
generally responsible for all repairs and maintenance, property taxes, insurance
and utilities. As of December 31, 1998, the Partnership owned 24 Properties,
either directly or through a joint venture arrangement.
<PAGE>
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. The Partnership's offering of Units
terminated on February 6, 1998, at which time the maximum proceeds of
$35,000,000 (3,500,000 Units) had been received from investors. The Partnership,
therefore, will derive no additional capital resources from the offering.
As of December 31, 1998, net proceeds to the Partnership from its
offering of Units, after deduction of organizational and offering expenses,
totalled $30,800,000. During 1996, the Partnership invested or committed for
investment approximately $2,960,800 of such proceeds to acquire two Properties
and to pay acquisition fees and certain acquisition expenses. During 1997, the
Partnership completed construction of the Property under construction in 1996
and acquired 20 additional Properties (one of which was under construction as of
December 31, 1997). During 1998, the Partnership completed construction of the
Property under construction as of December 31, 1997, acquired one additional
Property and entered into one joint venture arrangement, Columbus Joint Venture.
As a result of the above transactions, as of December 31, 1998, the Partnership
had invested approximately $29,859,000 of the net proceeds in 24 Properties,
including one Property owned by a joint venture in which the Partnership is a
co-venturer, and to pay acquisition fees and miscellaneous acquisition expenses,
leaving approximately $941,000 of net offering proceeds available for investment
in Properties. As of December 31, 1998, the Partnership had paid $1,575,000 in
acquisition fees to an affiliate of the General Partners.
In February 1999, the Partnership invested in a joint venture
arrangement, Portsmouth Joint Venture, with an affiliate of the General
Partners, to purchase and hold one restaurant property and used the remaining
amounts to establish a working capital reserve for Partnership purposes.
Currently, the Partnership's primary source of capital is cash from
operations (which includes cash received from tenants, interest received and
distributions from joint venture, less cash paid for expenses). Cash from
operations was $2,831,738, $1,361,756, and $27,146 for the years ended December
31, 1998, 1997, and 1996, respectively. The increase in cash from operations for
the year ended December 31, 1998 and 1997, each as compared to the previous
year, is primarily a result of changes in income and expenses as described in
"Results of Operations" below and changes in the Partnership's working capital.
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. 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, 1998, the Partnership had $1,839,613
invested in such short-term investments, as compared to $4,143,327 at December
31, 1997. The decrease in the amount invested in short-term investments is
primarily a result of the payment during 1998, of costs relating to the Property
that was under construction at December 31, 1997, the acquisition of additional
Property during 1998 and the acquisition of an interest in a joint venture
arrangement during 1998. The funds remaining at December 31, 1998 will be used
to purchase an additional Property, to pay acquisition costs, to pay
distributions and other liabilities and to meet the Partnership's working
capital and other needs.
During the years ended December 31, 1997 and 1996, affiliates of the
General Partners incurred on behalf of the Partnership $211,216 and $285,858,
respectively, for certain organizational and offering expenses. In addition,
during 1998, 1997, and 1996, affiliates incurred $35,842, $134,138, and $18,036,
respectively, for certain acquisition expenses and $89,969, $44,166, and $893,
respectively, for certain operating expenses. As of December 31, 1998 and 1997,
the Partnership owed $32,775 and $118,231, respectively, to related parties for
such amounts, fees and other reimbursements. As of March 11, 1999, the
Partnership had reimbursed the affiliates all such amounts. Other liabilities,
including distributions payable, decreased to $811,345 at December 31, 1998, as
compared to $1,842,444 at December 31, 1997, primarily as a result of the
payment during the year ended December 31, 1998, of construction costs accrued
for certain Properties at December 31, 1997. The decrease is partially offset by
an increase in distributions payable to the Limited Partners. The General
Partners believe that the Partnership has sufficient cash on hand to meet its
current working capital needs.
Based on cash from operations, the Partnership declared distributions
to the Limited Partners of $2,657,764, $1,310,885, and $57,846, for the years
ended December 31, 1998, 1997, and 1996, respectively. This represents
distributions of $0.76, $0.57, and $0.11 per Unit, for the years ended December
31, 1998, 1997, and 1996, respectively, 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 years ended
December 31, 1998, 1997, and 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.
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.
Due to low operating expenses and ongoing cash flow, the General
Partners believe that the Partnership has sufficient working capital reserves at
this time. In addition, because all of the leases for the Partnership's
Properties are generally on a triple-net 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.
On March 11, 1999, the Partnership entered into an Agreement and Plan
of Merger with APF, pursuant to which the Partnership would be merged with and
into a subsidiary of APF. As consideration for the Merger, APF has agreed to
issue 3,299,149 APF Shares which, for the purposes of valuing the merger
consideration, have been valued by APF at $10.00 per APF Share, the price paid
by APF investors in APF's most recent public offering. In order to assist the
General Partners in evaluating the proposed merger consideration, the General
Partners retained Valuation Associates, a nationally recognized real estate
appraisal firm, to appraise the Partnership's restaurant property portfolio.
Based on Valuation Associates' appraisal, the Partnership's property portfolio
and other assets were valued on a going concern basis (meaning the Partnership
continues unchanged) at $32,493,818 as of December 31, 1998. Legg Mason Wood
Walker, Incorporated has rendered a fairness opinion that the APF Share
consideration, payable by APF, is fair to the Partnership from a financial point
of view. The APF Shares are expected to be listed for trading on the New York
Stock Exchange concurrently with the consummation of the Merger, and, therefore,
would be freely tradable at the option of the former Limited Partners. At a
special meeting of the partners that is expected to be held in the third quarter
of 1999, Limited Partners holding in excess of 50% of the Partnership's
outstanding limited partnership interests must approve the Merger prior to
consummation of the transaction. The General Partners intend to recommend that
the Limited Partners of the Partnership approve the Merger. In connection with
their recommendation, the General Partners will solicit the consent of the
Limited Partners at the special meeting.
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.
The Partnership owned and leased two wholly owned Properties in 1996
and 22 wholly owned Properties in 1997. During 1998, the Partnership acquired
one additional wholly owned Property and entered into a joint venture
arrangement to construct and hold one restaurant Property. As of December 31,
1998, the Partnership owned, either directly or through a joint venture
arrangement, 24 Properties, which are generally subject to long-term triple-net
leases. The leases of the Properties provide for minimum base annual rental
payments (payable in monthly installments) ranging from approximately $63,200 to
$243,600. The majority of the leases provide for percentage rent based on sales
in excess of a specified amount. In addition, the majority of the leases provide
that, commencing in specified lease years (generally the sixth lease year), the
annual base rent required under the terms of the lease will increase. For a
further description of the Partnership's leases and Properties, see Item 1.
Business - Leases and Item 2. Properties.
During the years ended December 31, 1998, 1997, and 1996, the
Partnership earned $2,953,285, $1,290,621, and $1,373, respectively, in rental
income from operating leases and earned income from direct financing leases. The
increase in rental and earned income during 1998 and 1997, each as compared to
the previous year, is primarily attributable to the acquisition of additional
Properties subsequent to December 31, 1997 and 1996, respectively, and the fact
that Properties acquired during the years ended December 31, 1997 and 1996 were
operational for the full year in 1997, respectively.
During the year ended December 31, 1998, two lessees of the
Partnership, Golden Corral Corporation and Foodmaker, Inc., each contributed
more than ten percent of the Partnership's total rental income. As of December
31, 1998, Golden Corral Corporation and Foodmaker, Inc. were each the lessee
under leases relating to four restaurants. It is anticipated that, based on the
minimum rental payments required by the leases, these lessees each will continue
to contribute more than ten percent of the Partnership's total rental income in
1999. In addition, during the year ended December 31, 1998, three Restaurant
Chains, Golden Corral, Jack in the Box, and Boston Market, each accounted for
more than ten percent of the Partnership's total rental income. During 1998,
three tenants of Boston Market Properties filed for bankruptcy, as described
below. In 1999, it is anticipated that these three Restaurant Chains each will
continue to account for more than ten percent of the total rental income to
which the Partnership is entitled under the terms of the leases. Any failure of
such lessees or Restaurant Chains could materially adversely affect the
Partnership's income if the Properties are not re-leased in a timely manner.
In 1998, the tenants of three Boston Market Properties, Boston Chicken,
Inc., Finest Foodservice, L.L.C., and WMJ Texas, Inc., filed for bankruptcy and
rejected the lease relating to one of their three Properties. The Partnership
will not recognize any rental and earned income from this Property until a new
tenant for the Property is located, or until the Property is sold and the
proceeds from such a sale are reinvested in an additional Property. As of March
11, 1999, the Partnership has continued receiving rental payments relating to
the two non-rejected leases. While the tenants have not rejected or affirmed the
remaining two leases, there can be no assurance that some or all of the leases
will not be rejected in the future. The lost revenues resulting from the one
lease that was rejected, as described above, and the possible rejection of the
remaining two leases could have an adverse effect on the results of operations
of the Partnership if the Partnership is unable to re-lease these Properties in
a timely manner. The General Partners are currently seeking either a new tenant
or purchaser for the rejected Property.
During the years ended December 31, 1998, 1997, and 1996, the
Partnership earned $144,472, $162,621, and $30,241 in interest and other income.
The decrease in interest and other income during 1998, as compared to 1997, is
primarily attributable to the decrease in the amount of funds invested in
short-term liquid investments due to the payment during 1998, of construction
costs relating to the Property that was under construction at December 31, 1997,
the acquisition of an additional property in 1998 and investing in a joint
venture arrangement during 1998. The increase in interest and other income
during 1997, as compared to 1996, is primarily attributable to the increase in
the amount of funds invested in short-term liquid investments as a result of
additional Limited Partner capital contributions during 1997.
<PAGE>
Operating expenses, including depreciation and amortization expense,
were $597,969, $298,482, and $4,704 for the years ended December 31, 1998, 1997,
and 1996. The increase in operating expenses during 1998 and 1997, each as
compared to the previous year, is primarily attributable to an increase in
depreciation expense as the result of the acquisition of additional Properties
during 1998 and 1997, and the fact that Properties acquired during the years
ended December 31, 1997 and 1996 were operational for the full year in 1998 and
1997, respectively. Operating expenses also increased during 1998 and 1997, each
as compared to the previous year, as a result of an increase in (i)
administrative expenses for services related to accounting; financial, tax and
regulatory compliance and reporting; lease and loan compliance; limited partner
distributions and reporting; and investor relations (ii) management fees as a
result of the increase in rental revenues and (iii) state taxes as a result of
the Partnership incurring additional taxes relating to the filing of various
state tax returns during 1997 and 1998.
The increase in operating expenses for 1998, as compared to 1997, is
also partially due to the fact that the Partnership incurred $15,522 in
transaction costs related to the General Partners retaining financial and legal
advisors to assist them in evaluating and negotiating the proposed Merger with
APF, as described above in "Liquidity and Capital Resources." If the Limited
Partners reject the Merger, the Partnership will bear the portion of the
transaction costs based upon the percentage of "For" votes and the General
Partners will bear the portion of such transaction costs based upon the
percentage of "Against" votes and abstentions.
During the year ended December 31, 1998, the Partnership established an
allowance for loss on land of $197,466 for financial reporting purposes relating
to the Property in Minnetonka, Minnesota. The tenant of this Boston Market
Property declared bankruptcy and rejected the lease relating to this Property.
The loss represents the difference between the Property's carrying value at
December 31, 1998 and the current estimate of net realizable value. No such
allowance was established during the years ended December 31, 1997 and 1996.
In April 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-5 "Reporting on the Costs of Start-Up
Activities." The Statement, which is effective for fiscal years beginning after
December 15, 1998, requires that an entity expense the costs of start-up
activities and organization costs as they are incurred. The Partnership will
adopt this Statement in 1999. The General Partners believe that adoption of this
Statement will not have a material effect on the Partnership's financial
position or results of operations.
The Partnership's leases as of December 31, 1998, 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 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.
Year 2000
The Year 2000 problem is the result of information technology systems
and embedded systems (products which are made with microprocessor (computer)
chips such as HVAC systems, physical security systems and elevators) using a
two-digit format, as opposed to four digits, to indicate the year. Such
information technology and embedded systems may be unable to properly recognize
and process date-sensitive information beginning January 1, 2000.
The Partnership currently does not have any information technology
systems. Affiliates of the General Partners provide all services requiring the
use of information technology systems pursuant to a management agreement with
the Partnership. The maintenance of embedded systems, if any, at the
Partnership's Properties is the responsibility of the tenants of the Properties
in accordance with the terms of the Partnership's leases. The General Partners
and affiliates have established a team dedicated to reviewing the internal
information technology systems used in the operation of the Partnership, and the
information technology and embedded systems and the Year 2000 compliance plans
of the Partnership's tenants, significant suppliers, financial institutions and
transfer agent.
<PAGE>
The information technology infrastructure of the affiliates of the
General Partners consists of a network of personal computers and servers that
were obtained from major suppliers. The affiliates utilize various
administrative and financial software applications on that infrastructure to
perform the business functions of the Partnership. The inability of the General
Partners and affiliates to identify and timely correct material Year 2000
deficiencies in the software and/or infrastructure could result in an
interruption in, or failure of, certain of the Partnership's business activities
or operations. Accordingly, the General Partners and affiliates have requested
and are evaluating documentation from the suppliers of the software and
infrastructure of the affiliates regarding the Year 2000 compliance of their
products that are used in the business activities or operations of the
Partnership. The General Partners and affiliates have not yet received
sufficient certifications to be assured that the suppliers have fully considered
and mitigated any potential material impact of the Year 2000 deficiencies. The
costs expected to be incurred by the General Partners and affiliates to become
Year 2000 compliant will be incurred by the General Partners and affiliates;
therefore, these costs will have no impact on the Partnership's financial
position or results of operations.
The Partnership has material third party relationships with its
tenants, financial institutions and transfer agent. The Partnership depends on
its tenants for rents and cash flows, its financial institutions for
availability of cash and its transfer agent to maintain and track investor
information. If any of these third parties are unable to meet their obligations
to the Partnership because of the Year 2000 deficiencies, such a failure may
have a material impact on the Partnership. Accordingly, the General Partners
have requested and are evaluating documentation from the Partnership's tenants,
financial institutions, and transfer agent relating to their Year 2000
compliance plans. The General Partners have not yet received sufficient
certifications to be assured that the tenants, financial institutions, and
transfer agent have fully considered and mitigated any potential material impact
of the Year 2000 deficiencies. Therefore, the General Partners do not, at this
time, know of the potential costs to the Partnership of any adverse impact or
effect of any Year 2000 deficiencies by these third parties.
The General Partners currently expect that all year 2000 compliance
testing and any necessary remedial measures on the information technology
systems used in the business activities and operations of the Partnership will
be completed prior to June 30, 1999. Based on the progress the General Partners
and affiliates have made in identifying and addressing the Partnership's Year
2000 issues and the plan and timeline to complete the compliance program, the
General Partners do not foresee significant risks associated with the
Partnership's Year 2000 compliance at this time. Because the General Partners
and affiliates are still evaluating the status of the information technology
systems used in business activities and operations of the Partnership and the
systems of the third parties with which the Partnership conducts its business,
the General Partners have not yet developed a comprehensive contingency plan and
are unable to identify "the most reasonably likely worst case scenario" at this
time. If the General Partners identify significant risks related to the
Partnership's Year 2000 compliance or if the Partnership's Year 2000 compliance
program's progress deviates substantially from the anticipated timeline, the
General Partners will develop appropriate contingency plans.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
Item 8. Financial Statements and Supplementary Data
<PAGE>
CNL INCOME FUND XVIII, LTD.
(A Florida Limited Partnership)
CONTENTS
Page
----
Report of Independent Accountants 13
Financial Statements:
Balance Sheets 14
Statements of Income 15
Statements of Partners' Capital 16
Statements of Cash Flows 17
Notes to Financial Statements 19
<PAGE>
Report of Independent Accountants
To the Partners
CNL Income Fund XVIII, Ltd.
In our opinion, the financial statements listed in the index appearing under
item 14(a)(1) present fairly, in all material respects, the financial position
of CNL Income Fund XVIII, Ltd. (a Florida limited partnership) at December 31,
1998 and 1997, and the results of its operations and its cash flows for each of
the three years in the period ended December 31, 1998 in conformity with
generally accepted accounting principles. In addition, in our opinion, the
financial statement schedules listed in the index appearing under item 14(a)(2)
present fairly, in all material respects, the information set forth therein when
read in conjunction with the related financial statements. These financial
statements and financial statement schedules are the responsibility of the
Partnership's management; our responsibility is to express an opinion on these
financial statements and financial statement schedules based on our audits. We
conducted our audits of these statements in accordance with generally accepted
auditing standards which 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, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
Orlando, Florida
January 21, 1999, except for Note 11 for which the date is March 11, 1999.
<PAGE>
<TABLE>
<CAPTION>
CNL INCOME FUND XVIII, LTD.
(A Florida Limited Partnership)
BALANCE SHEETS
--------------
<S> <C>
December 31,
1998 1997
----------------- ----------------
ASSETS
Land and buildings on operating leases, less
accumulated depreciation and allowance
for loss on land $22,876,012 $21,311,062
Net investment in direct financing leases 5,937,312 6,004,878
Investment in joint venture 160,395 --
Cash and cash equivalents 1,839,613 4,143,327
Receivables, less allowance for doubtful
accounts of $62,189 and $35 -- 68,000
Prepaid expenses 3,653 --
Organization costs, less accumulated
amortization of $4,411 and $2,411 5,589 7,589
Accrued rental income 230,999 111,867
Other assets 59,044 160,532
----------------- ----------------
$31,112,617 $31,807,255
================= ================
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 2,558 $ 10,456
Accrued construction costs payable -- 1,108,627
Distributions payable 700,000 510,636
Due to related parties 32,775 118,231
Rents paid in advance 7,351 28,277
Deferred rental income 101,436 184,448
----------------- ----------------
Total liabilities 844,120 1,960,675
Partners' capital 30,268,497 29,846,580
----------------- ----------------
$31,112,617 $31,807,255
================= ================
See accompanying notes to financial statements.
<PAGE>
CNL INCOME FUND XVIII, LTD.
(A Florida Limited Partnership)
STATEMENTS OF INCOME
--------------------
Year Ended December 31,
1998 1997 1996
-------------- -------------- --------------
Revenues:
Rental income from operating leases $2,396,215 $ 950,316 $ 1,373
Earned income from direct financing
leases 557,070 340,305 --
Interest and other income 144,472 162,621 30,241
-------------- -------------- --------------
3,097,757 1,453,242 31,614
-------------- -------------- --------------
Expenses:
General operating and administrative 145,661 123,708 3,980
Professional services 25,670 20,429 --
Management fees to related party 28,038 11,842 12
State and other taxes 8,605 424 --
Depreciation and amortization 374,473 142,079 712
Transaction costs 15,522 -- --
-------------- -------------- --------------
597,969 298,482 4,704
-------------- -------------- --------------
Income Before Provision for Loss
on Land 2,499,788 1,154,760 26,910
Provision for Loss on Land (197,466 ) -- --
-------------- -------------- --------------
Net Income $2,302,322 $1,154,760 $ 26,910
============== ============== ==============
Allocation of Net Income:
General partners $ (1,582 ) $ (1,421 ) $ (7 )
Limited partners 2,303,904 1,156,181 26,917
-------------- -------------- --------------
$2,302,322 $1,154,760 $ 26,910
============== ============== ==============
Net Income Per Limited Partner Unit $ 0.66 $ 0.51 $ 0.05
============== ============== ==============
Weighted Average Number of
Limited Partner Units Outstanding 3,495,278 2,279,801 503,436
============== ============== ==============
See accompanying notes to financial statements.
<PAGE>
CNL INCOME FUND XVIII, LTD.
(A Florida Limited Partnership)
STATEMENTS OF PARTNERS' CAPITAL
Years Ended December 31, 1998, 1997, and 1996
General Partners Limited Partners
-------------------------- ----------------------------------------------------------------
Accumulated Accumulated Syndication
Contributions Earnings Contributions Distributions Earnings Costs Total
------------- ------------ ------------- ------------- ------------ ----------- -----------
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
Contributions from limited partners -- -- 25,723,944 -- -- -- 25,723,944
Distributions to limited partners
($0.57 per limited partner unit) -- -- -- (1,310,885) -- -- (1,310,885)
Syndication costs -- -- -- -- -- (2,717,452) (2,717,452)
Net income -- (1,421 ) -- -- 1,156,181 -- 1,154,760
---------- ------------ ------------ ------------- ---------- --------- -----------
Balance, December 31, 1997 1,000 (1,428 ) 34,145,759 (1,368,731) 1,183,098 (4,113,118) 29,846,580
Contributions from limited partners -- -- 854,241 -- -- -- 854,241
Distributions to limited partners
($0.76 per limited partner unit) -- -- -- (2,657,764) -- -- (2,657,764)
Syndication costs -- -- -- -- -- (76,882) (76,882)
Net income -- (1,582 ) -- -- 2,303,904 -- 2,302,322
---------- ------------ ------------ ------------- --------- ---------- ------------
Balance, December 31, 1998 $ 1,000 $ (3,010 ) $35,000,000 $ (4,026,495)$3,487,002 $(4,190,000)$30,268,497
========== ============ ============ ============= ========= =========== ============
See accompanying notes to financial statements.
<PAGE>
CNL INCOME FUND XVIII, LTD.
(A Florida Limited Partnership)
STATEMENTS OF CASH FLOWS
Year Ended December 31,
1998 1997 1996
---------------- ---------------- ----------------
Increase (Decrease) in Cash and Cash
Equivalents:
Cash Flows from Operating Activities:
Cash received from tenants $ 2,884,620 $1,353,968 $ --
Distributions from joint venture 5,630 -- --
Interest received 141,408 161,826 30,241
Cash paid for expenses (199,920 ) (154,038 ) (3,095)
---------------- ---------------- ----------------
Net cash provided by operating
activities 2,831,738 1,361,756 27,146
---------------- ---------------- ----------------
Cash Flows from Investing Activities:
Additions to land and buildings on
operating leases (3,134,046 ) (18,581,999 ) (1,533,446)
Investment in direct financing leases (12,945 ) (5,962,087 ) --
Investment in joint venture (166,025 ) -- --
Increase in other assets -- -- (276,848)
Other -- 107 (107)
---------------- ---------------- ----------------
Net cash used in investing activities (3,313,016 ) (24,543,979 ) (1,810,401)
---------------- ---------------- ----------------
Cash Flows from Financing Activities:
Reimbursement of acquisition and syndication
costs by related parties on behalf of the
Partnership (37,135 ) (396,548 ) (497,420)
Contributions from limited partners 854,241 25,723,944 8,498,815
Distributions to limited partners (2,468,400 ) (855,957 ) (2,138)
Payment of syndication costs (161,142 ) (2,450,214 ) (845,657)
Other (10,000 ) (67,000 ) --
---------------- ---------------- ----------------
Net cash provided by (used in)
financing activities (1,822,436 ) 21,954,225 7,153,600
---------------- ---------------- ----------------
Net Increase (Decrease) in Cash and Cash Equivalents (2,303,714 ) (1,227,998 ) 5,370,345
Cash and Cash Equivalents at Beginning of Year 4,143,327 5,371,325 980
---------------- ---------------- ----------------
Cash and Cash Equivalents at End of Year $ 1,839,613 $4,143,327 $ 5,371,325
================ ================ ================
See accompanying notes to financial statements.
<PAGE>
CNL INCOME FUND XVIII, LTD.
(A Florida Limited Partnership)
STATEMENTS OF CASH FLOWS - CONTINUED
Year Ended December 31,
1998 1997 1996
---------------- --------------- ----------------
Reconciliation of Net Income to Net Cash
Provided by Operating Activities:
Net income $ 2,302,322 $ 1,154,760 $ 26,910
---------------- --------------- ----------------
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation 372,473 140,079 301
Amortization 2,000 2,000 411
Distributions from joint venture 5,630 -- --
Provision for loss on land 197,466 -- --
Decrease in net investment in direct
financing leases 81,211 28,084 --
Increase (decrease) in receivables 68,000 (66,771 ) (1,227 )
Increase in prepaid expenses (3,653 ) -- --
Increase in accrued rental income (119,132 ) (128,079 ) (146 )
Increase in accounts payable 2,102 398 57
Increase in due to related parties,
excluding acquisition,
organization and syndication costs
paid on behalf of the Partnership 27,257 2,202 820
Increase (decrease) in rents paid
in advance (20,926 ) 28,277 --
Increase (decrease) in deferred
rental income (83,012 ) 200,806 --
Other -- -- 20
---------------- --------------- ----------------
Total adjustments 529,416 206,996 236
---------------- --------------- ----------------
Net Cash Provided by Operating Activities $ 2,831,738 $ 1,361,756 $ 27,146
================ =============== ================
Supplemental Schedule of Non-Cash Investing
and Financing Activities:
Related parties paid certain acquisition
and syndication costs on behalf
of the Partnership as follows:
Acquisition costs $ 35,842 $ 134,138 $ 18,036
Syndication costs -- 211,216 285,858
---------------- --------------- ----------------
$ 35,842 $ 345,354 $ 303,894
================ =============== ================
Distributions declared and unpaid at
December 31 $ 700,000 $ 510,636 $ 55,708
================ =============== ================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
CNL INCOME FUND XVIII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
Years Ended December 31, 1998, 1997, and 1996
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 were to be
constructed, which are 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 was authorized to sell a
maximum of 3,500,000 units ($35,000,000) of limited partnership
interest. A total of 3,500,000 units ($35,000,000) of limited
partnership interest had been sold as of December 31, 1998.
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 direct financing or operating methods. Such methods are
described below:
Direct financing method - The leases accounted for using the
direct financing method are recorded at their net investment
(which at the inception of the lease generally represents the
cost of the asset) (see Note 4). Unearned income is deferred
and amortized to income over the lease terms so as to produce
a constant periodic rate of return on the Partnership's net
investment in the leases.
<PAGE>
CNL INCOME FUND XVIII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
Years Ended December 31, 1998, 1997, and 1996
1. Significant Accounting Policies - Continued:
Operating method - Land and building leases accounted for
using the operating method 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 (including rental payments, if
any, required during the construction of a property) 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.
Accrued rental income represents the aggregate amount of
income recognized on a straight-line basis in excess of
scheduled rental payments to date. In contrast, deferred
rental income represents the aggregate amount of scheduled
rental payments to date (including rental payments due during
construction and prior to the property being placed in
service) in excess of income recognized on a straight-line
basis over the lease term commencing on the date the property
is placed in service. Whenever a tenant defaults under the
terms of its lease, or events or changes in circumstance
indicate that the tenant will not lease the property through
the end of the lease term, the Partnership either reserves or
writes-off the cumulative accrued rental income balance.
When the properties are sold, the related cost and accumulated
depreciation for operating leases and the net investment for direct
financing leases, 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, the
assets are adjusted to the fair value. Although the general partners
have made their best estimate of these factors based on current
conditions, it is reasonably possible that changes could occur in the
near term which could adversely affect the general partners' estimate
of net cash flows expected to be generated from its properties and the
need for asset impairment write-downs.
<PAGE>
CNL INCOME FUND XVIII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1998, 1997, and 1996
1. Significant Accounting Policies - Continued:
When the collection of amounts recorded as rental or other income is
considered to be doubtful, an adjustment is made to increase the
allowance for doubtful accounts, which is netted against receivables,
and to decrease rental or other income or increase bad debt expense for
the current period, although the Partnership continues to pursue
collection of such amounts. If amounts are subsequently determined to
be uncollectible, the corresponding receivable and allowance for
doubtful accounts are decreased accordingly.
Investment in Joint Venture - The Partnership's investment in Columbus
Joint Venture is accounted for using the equity method since the
Partnership shares control with affiliates which have the same general
partners.
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. In
April 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-5 "Reporting on the Costs of Start-Up
Activities." The Statement, which is effective for fiscal years
beginning after December 15, 1998, requires that an entity expense the
costs of start-up activities and organization costs as they are
incurred. The Partnership will adopt this Statement in 1999. The
general partners believe that adoption of this Statement will not have
a material effect on the Partnership's financial position or results 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.
<PAGE>
CNL INCOME FUND XVIII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1998, 1997, and 1996
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 6).
Rents Paid in Advance - Rents paid in advance by lessees for future
periods are deferred upon receipt and are recognized as revenues during
the period in which the rental income is earned. Rents paid in advance
include "interim rent" payments required to be paid under the terms of
certain leases for construction properties equal to a pre-determined
rate times the amount funded by the Partnership during the period
commencing with the effective date of the lease to the date minimum
annual rent becomes payable. Once minimum annual rent becomes payable,
the "interim rent" payments are amortized and recorded as income either
(i) over the lease term so as to produce a constant periodic rate of
return for leases accounted for using the direct financing method, or
(ii) over the lease term using the straight-line method for leases
accounted for using the operating method, whichever is applicable.
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.
Reclassification - Certain items in the prior years' financial
statements have been reclassified to conform to 1998 presentation.
These reclassifications had no effect on partners' capital or net
income.
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." Some of the Partnership's
leases are classified as operating leases and some of the leases have
been classified as direct financing leases. For the leases classified
as direct financing leases, the building portions of the property
leases are accounted for as direct financing leases while
<PAGE>
CNL INCOME FUND XVIII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1998, 1997, and 1996
2. Leases - Continued:
the land portions of the majority of the leases are operating leases.
The leases have initial terms of 15 to 26 years and the majority of the
leases provide for minimum and contingent rentals. 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 generally allow the tenants to renew the leases for two
to five successive five-year periods subject to the same terms and
conditions as the initial lease. Most 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:
1998 1997
-------------- ---------------
Land $ 11,982,332 $ 10,812,849
Buildings 11,603,999 9,476,977
-------------- ---------------
23,586,331 20,289,826
Less accumulated depreciation (512,853 ) (140,380 )
-------------- ---------------
23,073,478 20,149,446
Construction in progress -- 1,161,616
-------------- ---------------
23,073,478 21,311,062
Less allowance for loss on
land (197,466 ) --
-------------- ---------------
$ 22,876,012 $ 21,311,062
============== ===============
During the year ended December 31, 1998, the Partnership established an
allowance for loss on land of $197,466, relating to the property
located in Minnetonka, Minnesota. The tenant of this property declared
bankruptcy in October 1998 and rejected the lease relating to this
property. The allowance represents the difference between the carrying
value of the property at December 31, 1998, and the current estimate of
net realizable value for this property.
Generally, the leases provide for escalating guaranteed minimum rents
throughout the lease term. Income from these scheduled rent increases
is recognized on a straight-line basis over the terms of the leases.
For the years ended December 31, 1998, 1997, and 1996, the Partnership
recognized $209,725, $128,079, and $146, respectively, of such rental
income.
<PAGE>
CNL INCOME FUND XVIII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1998, 1997, and 1996
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 leases at December 31, 1998:
1999 $2,236,248
2000 2,238,166
2001 2,239,693
2002 2,314,933
2003 2,377,365
Thereafter 26,771,320
-----------------
$38,177,725
=================
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
leases based on a percentage of tenant's gross sales.
4. Net Investment in Direct Financing Leases:
The following lists the components of the net investment in direct
financing leases at December 31:
1998 1997
------------- -------------
Minimum lease payments
receivable $12,564,207 $13,241,374
Estimated residual values 1,420,667 1,773,526
Less unearned income (8,047,562 ) (9,010,022 )
------------ ------------
Net investment in direct financing
leases $ 5,937,312 $ 6,004,878
============= =============
<PAGE>
CNL INCOME FUND XVIII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1998, 1997, and 1996
4. Net Investment in Direct Financing Leases - Continued:
The following is a schedule of future minimum lease payments to be
received on direct financing leases at December 31, 1998:
1999 $ 677,167
2000 677,167
2001 677,167
2002 683,170
2003 691,575
Thereafter 9,157,961
-----------------
$12,564,207
=================
The above table does not include future minimum lease payments for
renewal periods or for contingent rental payments that may become due
in future periods (See Note 3).
5. Investment in Joint Venture:
In August 1998, the Partnership entered into a joint venture
arrangement, Columbus Joint Venture, with affiliates of the general
partners, to construct and hold one restaurant property. As of December
31, 1998, the Partnership had contributed $166,025, to purchase land
and pay construction costs relating to the Property owned by the joint
venture. The Partnership has agreed to contribute approximately
$225,811 in additional construction costs to the joint venture. As of
December 31, 1998, the Partnership had a 39.93% interest in the profits
and losses of the joint venture. The Partnership accounts for its
investment in this property using the equity method since the
Partnership shares control with affiliates, and amounts relating to its
investment are included in investment in joint ventures. The following
presents the combined, condensed financial information for the joint
venture at December 31:
1998 1997
------------ -----------
Land on operating lease and
construction work in progress $875,700 $ --
Cash 3,935 --
Liabilities 477,945 --
Partners' capital 401,690 --
<PAGE>
CNL INCOME FUND XVIII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1998, 1997, and 1996
6. 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 $76,882, $2,717,452,
and $1,395,666 for the years ended December 31, 1998, 1997, and 1996,
respectively. These offering expenses were charged to the limited
partners' capital accounts to reflect the net capital proceeds of the
offering.
7. 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").
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 not in liquidation of
the Partnership 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 not in liquidation of the
Partnership 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.
<PAGE>
CNL INCOME FUND XVIII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1998, 1997, and 1996
7. Allocations and Distributions - Continued:
Generally, net sales proceeds from a liquidating sale of properties,
will be used in the following order i) first to pay and discharge all
of the Partnership's liabilities to creditors, ii) second, to establish
reserves that may be deemed necessary for any anticipated or unforeseen
liabilities or obligations of the Partnership, iii) third, to pay all
of the Partnership's liabilities, if any, to the general and limited
partners, iv) fourth, after allocations of net income, gains and/or
losses, to the partners with positive capital account balances, in
proportion to such balances, up to amounts sufficient to reduce such
positive balances to zero, and v) thereafter, any funds remaining shall
then be distributed 95 percent to the limited partners and five percent
to the general partners.
During the years ended December 31, 1998, 1997, and 1996, the
Partnership declared distributions to the limited partners of
$2,657,764, $1,310,885, and $57,846. No distributions have been made to
the general partners to date.
<PAGE>
CNL INCOME FUND XVIII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1998, 1997, and 1996
8. Income Taxes:
The following is a reconciliation of net income for financial reporting
purposes to net income for federal income tax purposes for the years
ended December 31:
<TABLE>
<CAPTION>
1998 1997 1996
------------ ------------ -----------
<S> <C>
Net income for financial
reporting purposes $2,302,322 $1,154,760 $ 26,910
Depreciation for tax reporting
purposes in excess of depreciation
for financial reporting purposes (33,436 ) (45,009 ) (386 )
Allowance for loss on land 197,466 -- --
Direct financing leases recorded as
operating leases for tax reporting
purposes 81,211 28,084 --
Capitalization of transaction costs
for tax reporting purposes 15,522 -- --
Capitalization of administrative
expenses for tax reporting purposes -- -- 3,662
Equity in earnings of joint venture
for tax reporting purposes in excess
of equity in earnings of joint
venture for financial reporting purposes 7,168 -- --
Accrued rental income (209,725 ) (128,079 ) (146 )
Deferred rental income (73,028 ) 281,415 --
Rents paid in advance (20,926 ) 28,277 --
Allowance for doubtful accounts 62,155 34 --
Amortization for financial reporting
purposes (less than) in excess of
amortization for tax reporting
purposes (3,984 ) (732 ) 183
------------ ------------ -----------
Net income for federal income tax
purposes $2,324,745 $1,318,750 $ 30,223
============ ============ ===========
</TABLE>
<PAGE>
CNL INCOME FUND XVIII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1998, 1997, and 1996
9. 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 majority stockholder of CNL Fund Advisors,
Inc. James M. Seneff, Jr. is director and chief executive officer of
CNL Securities Corp. and is director, chairman of the board of
directors and chief executive officer of CNL Fund Advisors, Inc. The
other individual general partner, Robert A. Bourne, is director and
president of CNL Securities Corp., is treasurer, director, and vice
chairman of the board of directors of CNL Fund Advisors, Inc.
CNL Securities Corp. was 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 was paid as commissions to other broker-dealers. For
the years ended December 31, 1998, 1997, and 1996, the Partnership
incurred $72,611, $2,186,535, and $715,854, respectively, of which
$67,539, $2,050,986, and $673,534, respectively, was reallowed to other
broker-dealers.
In addition, CNL Securities Corp. was 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 was reallowed to other broker-dealers and from which
all due diligence expenses were paid. For the years ended December 31,
1998, 1997, and 1996, the Partnership incurred $4,271, $128,620, and
$42,109, respectively, of such fees. The majority of these fees were
reallowed to other broker-dealers for payment of bona fide due
diligence expenses.
CNL Fund Advisors, Inc. was 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. For the years ended December
31, 1998, 1997, and 1996, the Partnership incurred $38,441, $1,157,577,
and $378,982, respectively, of such fees. Such fees are included in
land and buildings, net investment in direct financing leases,
investment in joint venture and other assets.
<PAGE>
CNL INCOME FUND XVIII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1998, 1997, and 1996
9. Related Party Transactions - Continued:
The Partnership and CNL Fund Advisors, Inc. have entered into a
management agreement pursuant to which CNL Fund Advisors, Inc. receives
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 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. For the
years ended December 31, 1998, 1997, and 1996, the Partnership incurred
$28,038, $11,842, and $12, respectively, for such management fees.
During the years ended December 31, 1998, 1997, and 1996, CNL Fund
Advisors, Inc. and its affiliates provided various administrative
services to the Partnership, including services related to accounting;
financial, tax and regulatory compliance and reporting; lease and loan
compliance; limited partners distributions and reporting; due diligence
and marketing; and investor relations (including administrative
services in connection with selling units of limited partnership
interest), on a day-to-day basis. The expenses incurred for these
services were classified as follows for the years ended December 31:
1998 1997 1996
----------- ------------ -----------
Syndication costs $ -- $ 212,279 $106,887
General operating and
administrative expenses 104,709 98,207 2,980
----------- ------------ -----------
$ 104,709 $ 310,486 $109,867
=========== ============ ===========
<PAGE>
CNL INCOME FUND XVIII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1998, 1997, and 1996
9. Related Party Transactions - Continued:
The due to related parties consisted of the following at December 31:
<TABLE>
<CAPTION>
1998 1997
-------------- -------------
<S> <C>
Due to CNL Fund Advisors, Inc.
and its affiliates:
Expenditures incurred on
behalf of the Partnership $ 13,698 $ 1,737
Acquisition fees -- 29,757
Accounting and
administrative services 9,608 1,921
Management fees 2,379 556
Other 7,090 --
-------------- -------------
32,775 33,971
-------------- -------------
Due to CNL Securities Corp.:
Commissions $ -- $ 79,069
Marketing support and due
diligence expense
reimbursement fee -- 5,191
-------------- -------------
-- 84,260
-------------- -------------
$ 32,775 $ 118,231
============== =============
</TABLE>
<PAGE>
CNL INCOME FUND XVIII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1998, 1997, and 1996
10. Concentration of Credit Risk:
The following schedule presents total rental and earned income from
individual lessees, each representing more than ten percent of the
Partnership's total rental and earned income for each of the years
ended December 31:
<TABLE>
<CAPTION>
1998 1997 1996
-------------- -------------- ---------------
<S> <C>
Golden Corral Corp. $626,564 $241,395 $ --
Foodmaker, Inc. 509,456 240,261 --
IHOP Properties, Inc. N/A 152,343 --
Tiffany, L.L.C. N/A 154,153 --
Platinum Rotisserie, L.L.C. N/A 133,591 --
Carrols Corporation N/A N/A 1,373
In addition, the following schedule presents total rental and earned
income from individual restaurant chains, each representing more than
ten percent of the Partnership's total rental and earned income for
each of the years ended December 31:
1998 1997 1996
-------------- -------------- --------------
Golden Corral $784,292 $395,548 $ --
Jack in the Box 509,456 240,261 --
Boston Market 455,118 231,489 --
IHOP N/A 152,343 --
Burger King N/A N/A 1,373
</TABLE>
The information denoted by N/A indicates that for each period
presented, the tenant or group of affiliated tenants and the chains did
not represent more than ten percent of the Company's total rental,
earned income and interest income.
Although the Partnership's properties are geographically diverse
throughout the United States and the Partnership's lessees operate a
variety of restaurant concepts, default by any one of these lessees or
restaurant chains could significantly impact the results of operations
of the Partnership if the Partnership is not able to re-lease the
properties in a timely manner.
In 1998, Boston Chicken, Inc., Finest Foodservice, L.L.C., and WMJ
Texas, Inc., the tenants of three of the Boston Market properties filed
for bankruptcy and rejected the lease relating to one property. The
Partnership will not recognize any rental income relating to this
property until a new tenant for the property is located, or until the
property is sold and
<PAGE>
CNL INCOME FUND XVIII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1998, 1997, and 1996
10. Concentration of Credit Risk - Continued:
the proceeds from such a sale are reinvested in an additional property.
While the tenants have not rejected or affirmed the remaining two
leases, there can be no assurance that some or all of the leases will
not be rejected in the future. The lost revenues resulting from the one
lease that was rejected, as described above, and the possible rejection
of the remaining two leases could have an adverse effect on the results
of operations of the Partnership if the Partnership is unable to
re-lease these Properties in a timely manner. The General Partners are
currently seeking either new tenant or purchaser for the one rejected
Property.
11. Subsequent Event:
On March 11, 1999, the Partnership entered into an Agreement and Plan
of Merger with CNL American Properties Fund, Inc. ("APF"), pursuant to
which the Partnership would be merged with and into a subsidiary of APF
(the "Merger"). As consideration for the Merger, APF has agreed to
issue 3,299,149 shares of its common stock, par value $0.01 per shares
(the "APF Shares") which, for the purposes of valuing the merger
consideration, have been valued by APF at $10.00 per APF Share, the
price paid by APF investors in APF's most recent public offering. In
order to assist the general partners in evaluating the proposed merger
consideration, the general partners retained Valuation Associates, a
nationally recognized real estate appraisal firm, to appraise the
Partnership's restaurant property portfolio. Based on Valuation
Associates' appraisal, the Partnership's property portfolio and other
assets were valued on a going concern basis (meaning the Partnership
continues unchanged) at $32,493,818 as of December 31, 1998. Legg Mason
Wood Walker, Incorporated has rendered a fairness opinion that the APF
Share consideration, payable by APF, is fair to the Partnership from a
financial point of view. The APF Shares are expected to be listed for
trading on the New York Stock Exchange concurrently with the
consummation of the Merger, and, therefore, would be freely tradable at
the option of the former limited partners. At a special meeting of the
partners that is expected to be held in the third quarter of 1999,
limited partners holding in excess of 50% of the Partnership's
outstanding limited partnership interests must approve the Merger prior
to consummation of the transaction. The general partners intend to
recommend that the limited partners of the Partnership approve the
Merger. In connection with their recommendation, the general partners
will solicit the consent of the limited partners at the special
meeting. If the limited partners reject the Merger, the Partnership
will bear the portion of the transaction costs based upon the
percentage of "For" votes and the general partners will bear the
portion of such transaction costs based upon the percentage of
"Against" votes and abstentions.
<PAGE>
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 52, is a principal stockholder of CNL Group,
Inc., a diversified real estate company, and has served as its Chairman of the
Board of Directors, a director and Chief Executive Officer since its formation
in 1980. Mr. Seneff has been Chairman of the Board of Directors, director, and
Chief Executive Officer of CNL Securities Corp. since its formation in 1979. Mr.
Seneff also has held the position of Chairman of the Board of Directors, Chief
Executive Officer, President and director of CNL Management Company, a
registered investment advisor, since its formation in 1976, has served as Chief
Executive Officer, Chairman of the Board and a director of CNL Investment
Company, has served as Chief Executive Officer, a director and Chairman of the
Board of Directors of Commercial Net Lease Realty, Inc., a publicly-traded REIT,
listed on the NYSE, since 1992, served as Chief Executive Officer, a director
and Chairman of the Board of Directors of CNL Realty Advisors, Inc. from its
inception in May 1992 through December 1997, at which time such company merged
with Commercial Net Lease Realty, Inc., and has held the position of Chief
Executive Officer, Chairman of the Board and a director of CNL Institutional
Advisors, Inc., a registered investment advisor, since its inception in December
1990. Mr. Seneff has served as Chairman of the Board of Directors of CNL
American Properties Fund, Inc. since December 1994 and as a director and Chief
Executive Officer since May 1994. Mr. Seneff has served as Chairman of the
Board, Chief Executive Officer and a director of CNL Fund Advisors, Inc. since
March 1994. Mr. Seneff has served as Chairman of the Board, Chief Executive
Officer and a director of CNL Hospitality Properties, Inc. since June 1996 and
of CNL Hospitality Advisors, Inc. since January 1997. Mr. Seneff has also served
as Chairman of the Board, Chief Executive Officer and a director of CNL Health
Care Properties, Inc. since December 1997 and CNL Health Care Advisors, Inc.
since July 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 advises 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 then $60 billion of retirement funds.
Mr. Seneff has served as a member of the board of directors of First Union
National Bank of Florida since May 1998 and has served as a member of the
Orlando Advisory Board of First Union National Bank of Florida since March 1994.
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 restaurants, office buildings, apartment complexes, 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 51, is President and Treasurer of CNL Group,
Inc., President, Treasurer, a director, and a registered principal of CNL
Securities Corp., President, Treasurer, and a director of CNL Investment
Company, and Chief Investment Officer, a director and Treasurer of CNL
Institutional Advisors, Inc., a registered investment advisor. Mr. Bourne served
as President of CNL Institutional Advisor, Inc. from the date of its inception
through July 1997. Mr. Bourne served as President of Commercial Net Lease
Realty, Inc. from July 1992 through February 1996, served as Secretary and
Treasurer from February 1996 through December 1997, and has served as a director
since July 1992 and as Vice Chairman of the Board of Directors since February
1996. In addition, Mr. Bourne served as President of CNL Realty Advisors, Inc.
from May 1992 through February 1996, served as Treasurer from February 1996
through December 1997, served as a director from May 1992 through December 31,
1997 and served as Vice Chairman from February 1996 through December 1997, at
which time such company merged with Commercial Net Lease Realty, Inc. Mr. Bourne
has served as a Vice Chairman of the Board of Directors and Treasurer of CNL
American Properties Fund, Inc. since February 1999, has served as a director
since May 1994 and previously served as President from May 1994 through February
1999. Mr. Bourne has served as a director of CNL Fund Advisors, Inc. since March
1994, has served as Treasurer and Vice Chairman of the Board of Directors since
September 1997, and previously served as President from March 1994 through
September 1997. Mr. Bourne has served as President and a director of CNL
Hospitality Properties, Inc. since June 1996 and of CNL Hospitality Advisors,
Inc. since January 1997. Mr. Bourne has served as President and director of CNL
Health Care Properties, Inc. since December 1997 and CNL Health Care Advisors,
Inc. since July 1997. 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
restaurants, office buildings, apartment complexes, 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. Mr. Bourne formerly was a
certified public accountant with Coopers & Lybrand and a partner in the firm of
Bourne & Rose, P.A. Mr. Bourne received a B.A. in Accounting, with honors, from
Florida State University in 1970.
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. provides certain management services in
connection with the Partnership and its Properties. 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, Orlando, Florida 32801.
CNL Fund Advisors, Inc. is a majority 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 CNL Fund Advisors,
Inc., was organized in 1980 under the laws of the State of Florida. CNL Group,
Inc. is a diversified real estate company which provides a wide range of real
estate, development and financial services to companies in the United States
through the activities of its subsidiaries. These activities are primarily
focused on the franchised restaurant and hospitality industries. 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.
Curtis B. McWilliams, age 43, joined CNL Group, Inc. in April 1997 and
currently serves as an Executive Vice President. In addition, Mr. McWilliams has
served as President of CNL Fund Advisors, Inc. and as President of the
Restaurant and Financial Services Groups within CNL Group, Inc. since April
1997. Mr. McWilliams has served as President of CNL American Properties Fund,
Inc. since February 1999 and previously served as Executive Vice President from
February 1998 through February 1999. From September 1983 through March 1997, Mr.
McWilliams was employed by Merrill Lynch & Co., most recently as Chairman of
Merrill Lynch's Private Advisory Services until March 1997. Mr. McWilliams
received a B.S.E. in Chemical Engineering from Princeton University in 1977 and
a Masters of Business Administration with a concentration in finance from the
University of Chicago in 1983.
John T. Walker, age 40, has served as Executive Vice President of CNL
American Properties Fund, Inc. since January 1996, as Chief Operating Officer
since March 1995, and previously served as Senior Vice President since December
1994. In addition, Mr. Walker has served as Executive Vice President of CNL Fund
Advisors, Inc. since January 1996, Chief Operating Officer since April 1995, and
previously served as Senior Vice President from November 1994 through January
1996. In addition, Mr. Walker previously served as Executive Vice President of
CNL Hospitality Properties, Inc. and CNL Hospitality Advisors, Inc. From May
1992 to May 1994, Mr. Walker, a certified public accountant, was Executive Vice
President for Finance and Administration and Chief Financial Officer of Z Music,
Inc., a cable television network (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 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 50, a certified public accountant, has served as
Secretary of CNL American Properties Fund, Inc. since December 1994 and served
as Treasurer from December 1994 through February 1999. Ms. Rose has served as a
director and Secretary of CNL Fund Advisors, Inc. since March 1994, and as
Treasurer from the date of its inception through June 30, 1997. Ms. Rose has
served as Secretary of CNL Group, Inc. since 1987, as Chief Financial Officer of
CNL Group, Inc. since December 1993, 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, as Treasurer of CNL Realty Advisors, Inc. from 1991 to February 1996, and
as Secretary and a director of CNL Realty Advisors, Inc. since its inception in
1991 until December 31, 1997, at which time CNL Realty Advisors, Inc. merged
with Commercial Net Lease Realty, Inc. In addition, Ms. Rose served as Secretary
and Treasurer of Commercial Net Lease Realty, Inc. from 1992 to February 1996.
Ms. Rose also serves as Secretary and Treasurer of CNL Hospitality Properties,
Inc. and CNL Health Care Properties, Inc. and as Secretary, Treasurer and a
director of CNL Hospitality Advisors, Inc. and CNL Health Care Advisors, Inc.
Ms. Rose also currently serves as Secretary for approximately 50 additional
corporations. Ms. Rose oversees the 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.
Jeanne A. Wall, age 40, has served as Executive Vice President of CNL
American Properties Fund, Inc. since December 1994. Ms. Wall has served as
Executive Vice President of CNL Fund Advisors, Inc. since November 1994, and
previously served as Vice President from March 1994 through November 1994. Ms.
Wall has served as Chief Operating Officer of CNL Investment Company and of CNL
Securities Corp. since November 1994 and has served as Executive Vice President
of CNL Investment Company since January 1991. Ms. Wall joined CNL Securities
Corp. in 1984. In 1985, Ms. Wall became Vice President of CNL Securities Corp.
In 1987, she became Senior Vice President and in July 1997 she became Executive
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 product
development, partnership administration and investor services for programs
offered through participating brokers and corporate communications for CNL
Group, Inc. and its affiliates. 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 until December 31, 1997, at which time CNL Realty Advisors,
Inc. merged with Commercial Net Lease Realty, Inc., and served as Vice President
of Commercial Net Lease Realty, Inc. from 1992 through December 31, 1997. In
addition, Ms. Wall serves as Executive Vice President of CNL Hospitality
Properties, Inc., CNL Hospitality Advisors, Inc., CNL Health Care Properties,
Inc. and CNL Health Care Advisors, Inc. 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 35, a certified public accountant, has
served as Chief Financial Officer of CNL American Properties Fund, Inc. since
January 1997 and as Chief Financial Officer of CNL Fund Advisors, Inc. since
September 1996. From March 1995 to July 1996, Mr. Shackelford 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 audit 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.
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 11, 1999, 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 11, 1999, the beneficial
ownership interests of the General Partners in the Registrant.
<TABLE>
<CAPTION>
<S> <C>
Title of Class Name of Partner Amount and Nature of Percent of
Beneficial Ownership Class
-------------------------------- ---------------------- ------------------------- ------------
General Partnership Interests James M. Seneff, Jr. 45%
Robert A. Bourne 45%
CNL Realty Corporation 10%
============
100%
============
Limited Partnership Interests James M. Seneff, Jr. 2,500 Units 0.07%
Robert A. Bourne 2,500 Units 0.07%
============
0.14%
============
</TABLE>
Neither the General Partners, nor any of their affiliates, owns any
interest in the Registrant, except as noted above. On March 11, 1999, the
Registrant entered into an Agreement and Plan of Merger with CNL American
Properties Fund, Inc. ("APF") pursuant to which the Registrant would be merged
with and into a subsidiary of APF (the "Merger"). For further discussion, see
Item 8. Financial Statements and Supplementary Data -- Note 11.
Subsequent Event.
<PAGE>
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, 1998, exclusive of any distributions to which the General
Partners or their affiliates may be entitled in the event they purchase Units.
<TABLE>
<CAPTION>
Amount Incurred
Type of Compensation For the Year Ended
and Recipient Method of Computation December 31, 1998
----------------------- --------------------- -------------------
<S> <C>
Selling commissions to CNL Securities Commissions of 8.5% per Unit on all $72,611, of which $67,539 was
Corp., as managing dealer of the Units sold, up to eight percent of reallowed to other broker-dealers
Partnership's offering of Units which may be reallowed to other
dealers with respect to Units sold
by such dealers.
Due diligence expense reim-bursement fee Fee equal to 0.5% of gross offering $4,271, the majority of which was
to CNL Securities Corp. proceeds, a portion of which may be reallowed to other broker-dealers
reallowed to other dealers and from for the payment of bona fide due
which all due diligence expenses diligence expenses.
will be paid.
Acquisition fees and expenses to CNL Fees equal to 4.5% of gross Acquisition fees: $38,441
Fund Advisors, Inc. offering proceeds to CNL Fund
Advisors, Inc., plus reimburse-ment Acquisition expenses:
to the General Partners and their $35,842
affiliates for expenses actually
incurred.
Reimbursement to CNL Fund Advisors, Inc. Operating expenses are reimbursed Operating expenses incurred on
and affiliates for operating expenses at the lower of cost or 90 percent behalf of the Partnership:
of the prevailing rate at which $89,969
comparable services could have been
obtained in the same geographic Accounting and administra-
area. Affiliates of the General tive services: $104,709
Partners from time to time incur
certain operating expenses on
behalf of the Partnership for which
the Partnership reimburses the
affiliates without interest.
<PAGE>
Amount Incurred
Type of Compensation For the Year Ended
and Recipient Method of Computation December 31, 1998
----------------------- --------------------- -------------------
Annual management fee to CNL Fund One percent of the sum of gross $28,038
Advisors, Inc. revenues (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 competi-tive 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.
Deferred, subordinated real estate A deferred, subordinated real $ - 0 -
disposition fee payable to CNL Fund estate disposition fee, payable
Advisors, Inc. upon sale 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' deferred, A deferred, subordinated share $ - 0 -
sub-ordinated share of Partnership net equal to five percent of
cash flow Partnership distributions of net
cash flow, subordinated to certain
minimum returns to the limited
partners.
<PAGE>
Amount Incurred
Type of Compensation For the Year Ended
and Recipient Method of Computation December 31, 1998
----------------------- --------------------- -------------------
General Partners' deferred, A deferred, subordinated share $ - 0 -
sub-ordinated share of Partnership net equal to five percent of
sales proceeds from a sale or sales not Partnership distributions of such
in liquidation of the Partnership net sales proceeds, subordinated to
certain minimum returns to the
limited partners.
General Partners' share of Distributions of net sales $ - 0 -
Partnership net sales proceeds proceeds from a sale or sales of
from a sale or sales in substantially all of the
liquidation of the Partnership Partnership's assets will be
distributed in the following
order or priority: (i) first, to
pay all debts and liabilities of
the Partnership and to establish
reserves; (ii) second, to
Partners with positive capital
account balances, determined
after the allocation of net
income, net loss, gain and loss,
in proportion to such balances,
up to amounts sufficient to
reduce such balances to zero; and
(iii) thereafter, 95% to the
Limited Partners and 5% to the
General Partners.
</TABLE>
As discussed above in Item 8. Financial Statements and Supplementary
Data -- Note 11. Subsequent Event, the Registrant has entered into an Agreement
and Plan of Merger, dated March 11, 1999, with APF pursuant to which the
Registrant would be merged with and into a subsidiary of APF in exchange for the
issuance of APF Shares. The APF Shares are expected to be listed for trading on
the New York Stock Exchange concurrently with the consummation of the Merger. If
the Merger is approved by Limited Partners holding units greater than 50% of the
outstanding units of the Registrant, the General Partners of the Registrant
would receive certain benefits. For instance, following the Merger, James M.
Seneff, Jr. and Robert A. Bourne, the individual General Partners, will continue
to serve as directors of APF, with Mr. Seneff serving as Chairman and Mr. Bourne
serving as Vice Chairman. As APF directors, they may also be entitled to receive
stock options under any stock option plan adopted by APF.
<PAGE>
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, 1998 and 1997
Statements of Income for the years ended December 31, 1998,
1997, and 1996
Statements of Partners' Capital for the years ended December
31, 1998, 1997, and 1996
Statements of Cash Flows for the years ended December 31,
1998, 1997, and 1996
Notes to Financial Statements
2. Financial Statement Schedule
Schedule II - Valuation and Qualifying Accounts for the years
ended December 31, 1998, 1997, and 1996
Schedule III - Real Estate and Accumulated Depreciation at
December 31, 1998
Notes to Schedule III - Real Estate and Accumulated
Depreciation at December 31, 1998
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. (Filed as Exhibit 3.2 to
the Registrant's Registration Statement on Form S-11,
No. 33-90998-01, incorporated herein by reference.)
**3.2 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.)
**4.1 Affidavit and Certificate of Limited Partnership of
CNL Income Fund XVIII, Ltd. (Filed as Exhibit 3.2 to
Registrant's Registration Statement on Form S-11, No.
33-90998-01 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.)
**4.3 Form of Agreement between CNL Income Fund XVII, Ltd.
and MMS Escrow and Transfer Agency, Inc. and between
CNL Income Fund XVIII, Ltd. and MMS Escrow and
Transfer Agency, Inc. relating to the Distribution
Reinvestment Plans (Filed as Exhibit 4.4 to the
Registrant's Registration Statement on Form S-11, No.
33-90998, incorporated herein by reference.)
**5.1 Opinion of Baker & Hostetler as to the legality of
the securities being registered by CNL Income Fund
XVIII, Ltd. (Filed as Exhibit 5.2 to Amendment No.
Three to the Registrant's Registration Statements on
Form S-11, No. 33-90998, incorporated herein by
reference.)
**8.1 Opinion of Baker & Hostetler regarding certain
material tax issues relating to CNL Income Fund
XVIII, Ltd. (Filed as Exhibit 8.1 to Amendment No.
Three to the Registrant's Registration Statement on
Form S-11, No. 33-90998, incorporated herein by
reference.)
**8.2 Opinion of Baker & Hostetler regarding certain
material issues relating to the Distribution
Reinvestment Plan of CNL Income Fund XVIII, Ltd.
(Filed as Exhibit 8.4 to Amendment No. Three to the
Registrant's Registration Statement on Form S-11, No.
33-90998, incorporated herein by reference.)
**8.3 Amended Opinion of Baker & Hostetler regarding
certain material issues relating to CNL Income Fund
XVIII, Ltd. (Filed as Exhibit 8.5 to Post-Effective
Amendment No. Four to the Registrant's Registration
Statement on Form S-11, No. 33-90998, incorporated
herein by reference.)
**10.1 Management Agreement between CNL Income Fund XVIII,
Ltd. and CNL Fund Advisors, Inc. (Included as Exhibit
10.1 to Form 10-K filed with the Securities and
Exchange Commission on March 20, 1997, and
incorporated herein by reference.)
**10.2 Form of Joint Venture Agreement for Joint Ventures
with Unaffiliated Entities (Filed as Exhibit 10.2 to
the Registrant's Registration Statement on Form S-11,
No. 33-90998, incorporated herein by reference.)
**10.3 Form of Joint Venture Agreement for Joint Ventures
with Affiliated Programs (Filed as Exhibit 10.3 to
the Registrant's Registration Statement on Form S-11,
No. 33-90998, incorporated herein by reference.)
**10.4 Form of Development Agreement (Filed as Exhibit 10.5
to the Registrant's Registration Statement on Form
S-11, No. 33-90998, incorporated herein by
reference.)
**10.5 Form of Indemnification and Put Agreement (Filed as
Exhibit 10.6 to the Registrant's Registration
Statement on Form S-11, No. 33-90998, incorporated
herein by reference.)
**10.6 Form of Unconditional Guarantee of Payment and
Performance (Filed as Exhibit 10.7 to the
Registrant's Registration Statement on Form S-11, No.
33-90998, incorporated herein by reference.)
**10.7 Form of Lease Agreement for Existing Restaurant
(Filed as Exhibit 10.8 to the Registrant's
Registration Statement on Form S-11, No. 33-90998,
incorporated herein by reference.)
**10.8 Form of Lease Agreement for Restaurant to be
Constructed (Filed as Exhibit 10.9 to the
Registrant's Registration Statement on Form S-11, No.
33-90998, incorporated herein by reference.)
**10.9 Form of Premises Lease for Golden Corral Restaurant
(Filed as Exhibit 10.10 to the Registrant's
Registration Statement on Form S-11, No. 33-90998,
incorporated herein by reference.)
**10.10 Form of Agreement between CNL Income Fund XVII, Ltd.
and MMS Escrow and Transfer Agency, Inc. and between
CNL Income Fund XVIII, Ltd. and MMS Escrow and
Transfer Agency, Inc. relating to the Distribution
Reinvestment Plans (Filed as Exhibit 4.4 to the
Registrant's Registration Statement on Form S-11, No.
33-90998, incorporated herein by reference.)
**10.11 Form of Cotenancy Agreement with Unaffiliated Entity
(Filed as Exhibit 10.12 to Amendment No. One to the
Registrant's Registration Statement on Form S-11, No.
33-90998, incorporated herein by reference.)
**10.12 Form of Cotenancy Agreement with Affiliated Entity
(Filed as Exhibit 10.13 to Amendment No. One to the
Registrant's Registration Statement on Form S-11, No.
33-90998, incorporated herein by reference.)
<PAGE>
**10.13 Form of Registered Investor Advisor Agreement (Filed
as Exhibit 10.14 to Amendment No. One to the
Registrant's Registration Statement on Form S-11, No.
33-90998, incorporated herein by reference.)
27 Financial Data Schedule (Filed herewith.)
(b) The Registrant filed no reports on Form 8-K during the period
October 1, 1998 through December 31, 1998.
**previously filed
<PAGE>
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 27th day of
March, 1999.
CNL INCOME FUND XVIII, LTD.
By: CNL REALTY CORPORATION
General Partner
/s/ Robert A. Bourne
ROBERT A. BOURNE, 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.
<PAGE>
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.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C>
/s/ Robert A. Bourne President, Treasurer and Director March 27, 1999
- ------------------------------------
Robert A. Bourne (Principal Financial and
Accounting Officer)
/s/ James M. Seneff, Jr. Chief Executive Officer, Chairman March 27, 1999
- ------------------------------------
James M. Seneff, Jr. and Director (Principal Executive
Officer)
</TABLE>
<PAGE>
CNL INCOME FUND XVIII, LTD.
(A Florida Limited Partnership)
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
Years Ended December 31, 1998, 1997, and 1996
<TABLE>
<CAPTION>
Additions Deductions
------------------------------- ----------------------------
Collected
or Deter-
Balance at Charged to Charged to Deemed mined to Balance
Beginning Costs and Other Uncollec- be Col- at End
Year Description of Year Expenses Accounts tible lectible of Year
-------- ----------------- -------------- -------------- --------------- ------------- ------------- ------------
<S> <C>
1996 Allowance for
doubtful
accounts (a) $ -- $ -- $ -- (b) $ -- $ -- $ --
============== ============== =============== ============= ============= ============
1997 Allowance for
doubtful
accounts (a) $ -- $ -- $ 35 (b) $ -- $ -- $ 35
============== ============== =============== ============= ============= ============
1998 Allowance for
doubtful
accounts (a) $ 35 $ -- $ 70,921 (b) $ -- $ 8,767 $ 62,189
============== ============== =============== ============= ============= ============
</TABLE>
(a) Deducted from receivables on the balance sheet.
(b) Reduction of rental and other income.
<PAGE>
<TABLE>
<CAPTION>
CNL INCOME FUND XVIII, LTD.
(A Florida Limited Partnership)
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1998
<S> <C>
Costs Capitalized
Subsequent To
Initial Cost Acquisition
---------------------------- ----------------------
Encum- Buildings and Improve- Carrying
brances Land Improvements ments Costs
------------ ------------ -------------- ----------- ---------
Properties the Partnership
has Invested in Under
Operating Leases:
Arby's Restaurant:
Lexington, North Carolina - $210,977 - - -
Bennigan's Restaurant:
Sunrise, Florida - 1,147,705 925,087 - -
Boston Market Restaurants:
Raleigh, North Carolina - 702,215 599,388 - -
Timonium, Maryland - 769,653 - 429,774 -
San Antonio, Texas - 677,584 - 223,333 -
Minnetonka, Minnesota (i) - 574,766 - - -
Burger King Restaurant:
Kinston, North Carolina - 262,498 663,421 - -
Chevy's Fresh Mex Restaurant:
Mesa, Arizona - 1,029,236 1,598,376 - -
Golden Corral Family
Steakhouse Restaurants:
Houston, Texas - 889,003 - 844,282 -
Stow, Ohio - 489,799 - - -
Galveston, Texas - 687,946 - 836,386 -
Elizabethtown, Kentucky - 488,945 - 1,045,207 -
Destin, Florida - 565,354 - 1,022,196 -
Ground Round Restaurant:
Rochester, New York - 525,891 582,882 - -
IHOP Restaurant:
Santa Rosa, California - 501,216 - - -
Jack in the Box Restaurants:
Centerville, Texas - 261,913 - 543,079 -
Echo Park, California - 674,647 - 659,358 -
Henderson, Nevada - 522,741 - 608,548 -
Houston, Texas - 778,706 - 589,840 -
Wendy's Restaurant:
Sparta, Tennessee - 221,537 - 432,842 -
------------ ------------- ----------- --------
$11,982,332 $4,369,154 $7,234,845 $ -
============ ============= =========== ========
Properties the Partnership
Invested in Under Direct
Financing Leases:
Arby's Restaurant:
Lexington, North Carolina - - $459,004 - -
Black-eyed Pea Restaurant:
Atlanta, Georgia - - - 653,737 -
Golden Corral Family
Steakhouse Restaurant:
Stow, Ohio - - 1,280,986 - -
IHOP Restaurants:
Bridgeview, Illinois - 354,227 1,151,199 - -
Santa Rosa, California - - 859,306 - -
On the Border Restaurant:
San Antonio, Texas - - - 1,288,148 -
------------ ------------- ----------- --------
- $354,227 $3,750,495 $1,941,885 -
============ ============= =========== ========
Property of Joint Venture
in Which the Partnership
has a 39.93% Interest
in Under an Operating Lease:
Arby's Restaurant:
Columbus, Ohio - $406,975 - $468,725 -
============ ============= =========== ========
Gross Amount at Which Life on Which
Carried at Close of Period (c) Depreciation in
----------------------------------------- Date Latest Income
Buildings and Accumulated of Con- Date Statement is
Land Improvements Total Depreciation struction Acquired Computed
------------ ------------ ------------- ----------- ---------- -------- -------------
$210,977 (f) $210,977 - 1997 07/97 (d)
1,147,705 925,087 2,072,792 16,677 1982 06/98 (b)
702,215 599,388 1,301,603 38,690 1994 01/97 (b)
769,653 429,774 1,199,427 20,976 1997 05/97 (b)
677,584 223,333 900,917 10,159 1997 04/97 (b)
574,766 (f) 574,766 - 1997 04/97 (d)
262,498 663,421 925,919 44,420 1994 12/96 (b)
1,029,236 1,598,376 2,627,612 53,378 1994 12/97 (b)
889,003 844,282 1,733,285 49,223 1997 12/96 (b)
489,799 (f) 489,799 - 1997 04/97 (d)
687,946 836,386 1,524,332 45,107 1997 01/97 (b)
488,945 1,045,207 1,534,152 41,645 1997 05/97 (b)
565,354 1,022,196 1,587,550 30,623 1998 09/97 (b)
525,891 582,882 1,108,773 23,267 1981 10/97 (b)
501,216 (f) 501,216 - 1997 05/97 (d)
261,913 543,079 804,992 30,737 1997 01/97 (b)
674,647 659,358 1,334,005 33,187 1997 01/97 (b)
522,741 608,548 1,131,289 30,407 1997 01/97 (b)
778,706 589,840 1,368,546 24,994 1997 05/97 (b)
221,537 432,842 654,379 19,363 1997 04/97 (b)
- ----------- ------------ ------------- -----------
$11,982,332 $11,603,999 $23,586,331 $512,853
=========== ============ ============= ===========
- (f) (f) (d) 1997 07/97 (d)
- (f) (f) (d) 1991 03/97 (d)
- (f) (f) (d) 1997 04/97 (d)
(f) (f) (f) (d) 1972 07/97 (e)
- (f) (f) (d) 1994 05/97 (d)
- (f) (f) (d) 1997 04/97 (d)
$406,975 $468,725 $875,700 (h) (g) 08/98 (h)
========== ============ =============
</TABLE>
CNL INCOME FUND XVIII, LTD.
(A Florida Limited Partnership)
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1998
(a) Transactions in real estate and accumulated depreciation during 1998,
1997, and 1996 are summarized as follows:
<TABLE>
<CAPTION>
<S> <C>
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
Acquisitions 19,920,373 --
Depreciation expense -- 140,079
---------------- -----------------
Balance, December 31, 1997 21,451,442 140,380
Acquisitions 2,134,889 --
Depreciation expense (i) -- 372,473
---------------- -----------------
Balance, December 31, 1998 $ 23,586,331 $ 512,853
================ =================
Property of Joint Venture in Which the
Partnership has a 39.93% Interest and
has Invested in Under an Operating Lease:
Balance, December 31, 1997 $ -- $ --
Acquisitions 875,700 --
Depreciation expense (h) -- --
---------------- -----------------
Balance, December 31, 1998 $ 875,700 $ --
================ =================
</TABLE>
(b) Depreciation expense is computed for buildings and improvements based
upon estimated lives of 30 years.
(c) As of December 31, 1998, the aggregate cost of the Properties owned by
the Partnership and the joint venture for federal income tax purposes
was $27,560,145 and $874,700, respectively. All of the leases are
treated as operating leases for federal income tax purposes.
(d) For financial reporting purposes, the portion of the lease relating to
the building has been recorded as a direct financing leases. The cost
of the building has been included in net investment in direct financing
leases; therefore, depreciation is not applicable.
<PAGE>
CNL INCOME FUND XVIII, LTD.
(A Florida Limited Partnership)
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION - CONTINUED
December 31, 1998
(e) For financial reporting purposes, the lease for the land and building
has been recorded as a direct financing lease. The cost of the land and
building has been included in net investment in direct financing
leases; therefore, depreciation is not applicable.
(f) For financial reporting purposes, certain components of the lease
relating to land and building have been recorded as a direct financing
lease. Accordingly, costs relating to these components of this lease
are not shown.
(g) Scheduled for completion in 1999.
(h) Property was not placed in service as of December 31, 1998; therefore,
no depreciation was taken.
(i) For financial reporting purposes, the undepreciated cost of the
Property in Minnetonka, Minnesota, was written down to net realizable
value due to an anticipated impairment in value. The Partnership
recognized the impairment by recording an allowance for loss on land in
the amount of $197,466 at December 31, 1998. The tenant of this
Property declared bankruptcy and rejected the lease relating to this
Property. The impairment at December 31, 1998, represents the
difference between the Property's carrying value at December 31, 1998,
and the estimated net realizable value of the Property. The cost of the
Property presented on this schedule is the gross amount at which the
Property was carried at December 31, 1998, excluding the allowance for
loss on land.
<PAGE>
EXHIBITS
<PAGE>
EXHIBIT INDEX
Exhibit Number
**3.1 Affidavit and Certificate of Limited Partnership of CNL Income
Fund XVIII, Ltd. (Filed as Exhibit 3.2 to Registrant's
Registration Statement on Form S-11, No. 33-90998-01,
incorporated herein by reference.)
**3.2 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.)
**4.1 Affidavit and Certificate of Limited Partnership of CNL Income
Fund XVIII, Ltd. (Filded as Exhibit 3.2 to Registrant's
Registration Statement on Form S-11 No. 33-90998-01,
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.)
**4.3 Form of Agreement between CNL Income Fund XVII, Ltd. and MMS
Escrow and Transfer Agency, Inc. and between CNL Income Fund
XVIII, Ltd. and MMS Escrow and Transfer Agency, Inc. relating
to the Distribution Reinvestment Plans (Filed as Exhibit 4.4
to the Registrant's Registration Statement on Form S-11, No.
33-90998, incorporated herein by reference.)
**5.1 Opinion of Baker & Hostetler as to the legality of the
securities being registered by CNL Income Fund XVIII, Ltd.
(Filed as Exhibit 5.2 to Amendment No. Three to the
Registrant's Registration Statements on Form S-11, No.
33-90998, incorporated herein by reference.)
**8.1 Opinion of Baker & Hostetler regarding certain material tax
issues relating to CNL Income Fund XVIII, Ltd. (Filed as
Exhibit 8.1 to Amendment No. Three to the Registrant's
Registration Statement on Form S-11, No. 33-90998,
incorporated herein by reference.)
**8.2 Opinion of Baker & Hostetler regarding certain material issues
relating to the Distribution Reinvestment Plan of CNL Income
Fund XVIII, Ltd. (Filed as Exhibit 8.4 to Amendment No. Three
to the Registrant's Registration Statement on Form S-11, No.
33-90998, incorporated herein by reference.)
**8.3 Amended Opinion of Baker & Hostetler regarding certain
material issues relating to CNL Income Fund XVIII, Ltd. (Filed
as Exhibit 8.5 to Post-Effective Amendment No. Four to the
Registrant's Registration Statement on Form S-11, No.33-90998,
incorporated herein by reference.)
**10.1 Management Agreement between CNL Income Fund XVIII, Ltd. and
CNL Fund Advisors, Inc. (Included as Exhibit 10.1 to Form 10-K
filed with the Securities and Exchange Commission on March 20,
1997, and incorporated herein by reference.)
**10.2 Form of Joint Venture Agreement for Joint Ventures with
Unaffiliated Entities (Filed as Exhibit 10.2 to the
Registrant's Registration Statement on Form S-11, No.
33-90998, incorporated herein by reference.)
**10.3 Form of Joint Venture Agreement for Joint Ventures with
Affiliated Programs (Filed as Exhibit 10.3 to the Registrant's
Registration Statement on Form S-11, No. 33-90998,
incorporated herein by reference.)
**10.4 Form of Development Agreement (Filed as Exhibit 10.5 to the
Registrant's Registration Statement on Form S-11, No.
33-90998, incorporated herein by reference.)
**10.5 Form of Indemnification and Put Agreement (Filed as Exhibit
10.6 to the Registrant's Registration Statement on Form S-11,
No. 33-90998, incorporated herein by reference.)
**10.6 Form of Unconditional Guarantee of Payment and Performance
(Filed as Exhibit 10.7 to the Registrant's Registration
Statement on Form S-11, No. 33-90998, incorporated herein by
reference.)
**10.7 Form of Lease Agreement for Existing Restaurant (Filed as
Exhibit 10.8 to the Registrant's Registration Statement on
Form S-11, No. 33-90998, incorporated herein by reference.)
**10.8 Form of Lease Agreement for Restaurant to be Constructed
(Filed as Exhibit 10.9 to the Registrant's Registration
Statement on Form S-11, No. 33-90998, incorporated herein by
reference.)
**10.9 Form of Premises Lease for Golden Corral Restaurant (Filed as
Exhibit 10.10 to the Registrant's Registration Statement on
Form S-11, No. 33-90998, incorporated herein by reference.)
**10.10 Form of Agreement between CNL Income Fund XVII, Ltd. and MMS
Escrow and Transfer Agency, Inc. and between CNL Income Fund
XVIII, Ltd. and MMS Escrow and Transfer Agency, Inc. relating
to the Distribution Reinvestment Plans (Filed as Exhibit 4.4
to the Registrant's Registration Statement on Form S-11, No.
33-90998, incorporated herein by reference.)
**10.11 Form of Cotenancy Agreement with Unaffiliated Entity (Filed as
Exhibit 10.12 to Amendment No. One to the Registrant's
Registration Statement on Form S-11, No. 33-90998,
incorporated herein by reference.)
**10.12 Form of Cotenancy Agreement with Affiliated Entity (Filed as
Exhibit 10.13 to Amendment No. One to the Registrant's
Registration Statement on Form S-11, No. 33-90998,
incorporated herein by reference.)
**10.13 Form of Registered Investor Advisor Agreement (Filed as
Exhibit 10.14 to Amendment No. One to the Registrant's
Registration Statement on Form S-11, No. 33-90998,
incorporated herein by reference.)
27 Financial Data Schedule (Filed herewith.)
**previously filed
<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, 1998, 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,
1998.
</LEGEND>
<S> <C>
<PERIOD-TYPE> year
<FISCAL-YEAR-END> Dec-31-1998
<PERIOD-START> Jan-01-1998
<PERIOD-END> Dec-31-1998
<CASH> 1,839,613
<SECURITIES> 0
<RECEIVABLES> 62,189
<ALLOWANCES> 62,189
<INVENTORY> 0
<CURRENT-ASSETS> 0 <F1>
<PP&E> 23,388,865
<DEPRECIATION> 512,853
<TOTAL-ASSETS> 31,112,617
<CURRENT-LIABILITIES> 0 <F1>
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 30,268,497
<TOTAL-LIABILITY-AND-EQUITY> 31,112,617
<SALES> 0
<TOTAL-REVENUES> 3,097,757
<CGS> 0
<TOTAL-COSTS> 597,969
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,302,322
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,302,322
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,302,322
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
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>
