FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(X) QUARTERLY REPORT PURSUANT TO SECTION
13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT of 1934
For the quarterly period ended September 30, 2004
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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
0-19139
---------------------------------------
CNL Income Fund VIII, Ltd.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Florida 59-2963338
- --------------------------------- --------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
450 South Orange Avenue
Orlando, Florida 32801
- ----------------------------------------- --------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number
(including area code) (407) 540-2000
--------------------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for 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 whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act): Yes___ No X
CONTENTS
Page
Part I.
Item 1. Financial Statements:
Condensed Balance Sheets 1
Condensed Statements of Income 2
Condensed Statements of Partners' Capital 3
Condensed Statements of Cash Flows 4
Notes to Condensed Financial Statements 5-7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8-10
Item 3. Quantitative and Qualitative Disclosures About
Market Risk 11
Item 4. Controls and Procedures 11
Part II.
Other Information 12-13
CNL INCOME FUND VIII, LTD.
(A Florida Limited Partnership)
CONDENSED BALANCE SHEETS
September 30, December 31,
2004 2003
------------------ -------------------
ASSETS
Real estate properties with operating leases, net $ 17,416,629 $ 17,717,697
Net investment in direct financing leases 3,812,817 3,970,939
Real estate held for sale -- 1,259,314
Investment in joint ventures 3,874,936 3,912,953
Cash and cash equivalents 3,516,884 1,709,779
Certificate of deposit 388,009 385,718
Receivables, less allowance for doubtful accounts of $15,814
and $15,033 in 2004 and 2003, respectively 148,074 44,739
Accrued rental income 1,121,371 1,149,139
Other assets 90,079 90,929
------------------ -------------------
$ 30,368,799 $ 30,241,207
================== ===================
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable and accrued expenses $ 58,929 $ 9,203
Real estate taxes payable 22,989 10,743
Distributions payable 787,501 787,501
Due to related parties 78,898 67,705
Rents paid in advance and deposits 144,125 160,072
------------------ -------------------
Total liabilities 1,092,442 1,035,224
Minority interests 208,036 212,137
Partners' capital 29,068,321 28,993,846
------------------ -------------------
$ 30,368,799 $ 30,241,207
================== ===================
See accompanying notes to condensed financial statements.
1
CNL INCOME FUND VIII, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF INCOME
Quarter Ended Nine Months Ended
September 30, September 30,
2004 2003 2004 2003
-------------- -------------- --------------- ---------------
Revenues:
Rental income from operating leases $ 564,905 $ 561,916 $ 1,688,725 $ 1,674,724
Earned income from direct financing leases 117,485 123,851 357,408 375,916
Contingent rental income 9,759 9,381 32,242 23,152
Interest and other income 2,614 2,679 7,333 7,974
-------------- -------------- --------------- ---------------
694,763 697,827 2,085,708 2,081,766
-------------- -------------- --------------- ---------------
Expenses:
General operating and administrative 90,520 55,300 268,402 195,569
Property related 7,649 4,660 17,556 13,493
State and other taxes -- -- 50,039 45,737
Depreciation and amortization 102,283 100,356 306,803 303,905
-------------- -------------- --------------- ---------------
200,452 160,316 642,800 558,704
-------------- -------------- --------------- ---------------
Income before minority interests and equity in
earnings of unconsolidated joint ventures 494,311 537,511 1,442,908 1,523,062
Minority interests (5,538) (5,528) (16,441) (16,603)
Equity in earnings of unconsolidated joint
ventures 96,287 95,961 286,234 287,488
-------------- -------------- --------------- ---------------
Income from continuing operations 585,060 627,944 1,712,701 1,793,947
-------------- -------------- --------------- ---------------
Discontinued operations:
Income from discontinued operations 37,692 46,743 123,383 127,170
Gain on disposal of discontinued operations 209,778 -- 600,894 --
-------------- -------------- --------------- ---------------
247,470 46,743 724,277 127,170
-------------- -------------- --------------- ---------------
Net income $ 832,530 $ 674,687 $ 2,436,978 $ 1,921,117
============== ============== =============== ===============
Income per limited partner unit:
Continuing operations $ 0.017 $ 0.018 $ 0.049 $ 0.051
Discontinued operations 0.007 0.001 0.021 0.004
-------------- -------------- --------------- ---------------
$ 0.024 $ 0.019 $ 0.070 $ 0.055
============== ============== =============== ===============
Weighted average number of limited partner
units outstanding 35,000,000 35,000,000 35,000,000 35,000,000
============== ============== =============== ===============
See accompanying notes to condensed financial statements.
2
CNL INCOME FUND VIII, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF PARTNERS' CAPITAL
Nine Months Ended Year Ended
September 30, December 31,
2004 2003
--------------------- -----------------
General partners:
Beginning balance $ 286,349 $ 286,349
Net income -- --
--------------------- -----------------
286,349 286,349
--------------------- -----------------
Limited partners:
Beginning balance 28,707,497 29,424,875
Net income 2,436,978 2,432,626
Distributions ($0.068 and $0.090 per
limited partner unit, respectively (2,362,503) (3,150,004)
--------------------- -----------------
28,781,972 28,707,497
--------------------- -----------------
Total partners' capital $ 29,068,321 $ 28,993,846
===================== =================
See accompanying notes to condensed financial statements.
3
CNL INCOME FUND VIII, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF CASH FLOWS
Nine Months Ended
September 30,
2004 2003
--------------- --------------
Net cash provided by operating activities $ 2,342,160 $ 2,617,457
--------------- --------------
Cash flows from investing activities:
Proceeds from sale of assets 1,847,990 --
Investments in certificates of deposit -- (386,215)
Redemption of certificates of deposit -- 376,202
--------------- --------------
Net cash provided by (used in) investing activities 1,847,990 (10,013)
--------------- --------------
Cash flows from financing activities:
Distributions to limited partners (2,362,503) (2,537,503)
Distributions to holders of minority interests (20,542) (20,602)
--------------- --------------
Net cash used in financing activities (2,383,045) (2,558,105)
--------------- --------------
Net increase in cash and cash equivalents 1,807,105 49,339
Cash and cash equivalents at beginning of period 1,709,779 1,573,584
--------------- --------------
Cash and cash equivalents at end of period $ 3,516,884 $ 1,622,923
=============== ==============
Supplemental schedule of non-cash financing activities:
Distributions declared and unpaid at end of
period $ 787,501 $ 787,501
=============== ==============
See accompanying notes to condensed financial statements.
4
CNL INCOME FUND VIII, LTD.
(A Florida Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS
Quarters and Nine Months Ended September 30, 2004 and 2003
1. Basis of Presentation
The accompanying unaudited condensed financial statements have been
prepared in accordance with the instructions to Form 10-Q and do not
include all of the information and note disclosures required by
generally accepted accounting principles. The financial statements
reflect all adjustments, consisting of normal recurring adjustments,
which are, in the opinion of the general partners, necessary for a fair
statement of the results for the interim periods presented. Operating
results for the nine months ended September 30, 2004, may not be
indicative of the results that may be expected for the year ending
December 31, 2004. Amounts as of December 31, 2003, included in the
financial statements, have been derived from audited financial
statements as of that date.
These unaudited financial statements should be read in conjunction with
the financial statements and notes thereto included in Form 10-K of CNL
Income Fund VIII, Ltd. (the "Partnership") for the year ended December
31, 2003.
The Partnership accounts for its approximate 87.68% interest in Woodway
Joint Venture and its 85.54% interest in Asheville Joint Venture using
the consolidation method. Minority interests represent the minority
joint venture partners' proportionate share of the equity in the joint
ventures. All significant intercompany accounts and transactions have
been eliminated.
In December 2003, the Financial Accounting Standards Board issued a
revision to FASB Interpretation No. 46 (originally issued in January
2003) ("FIN 46R"), "Consolidation of Variable Interest Entities"
requiring existing unconsolidated variable interest entities to be
consolidated by their primary beneficiaries. The primary beneficiary of
a variable interest entity is the party that absorbs a majority of the
entity's expected losses, receives a majority of its expected residual
returns, or both, as a result of holding variable interests, which are
the ownership, contractual, or other pecuniary interests in an entity
that change with changes in the fair value of the entity's net assets
excluding variable interests. Prior to FIN 46R, a company generally
included another entity in its financial statements only if it
controlled the entity through voting interests. Application of FIN 46R
is required in financial statements of public entities that have
interests in variable interest entities for periods ending after March
15, 2004. The Partnership adopted FIN 46R during the quarter ended
March 31, 2004, which resulted in the consolidation of a previously
unconsolidated joint venture, which was accounted for under the equity
method. FIN 46R does not require, but does permit restatement of
previously issued financial statements. The Partnership has restated
prior year's financial statements to maintain comparability between the
periods presented. Such consolidation resulted in certain assets and
minority interest, and revenues and expenses, of the entity being
reported on a gross basis in the Partnership's financial statements;
however, these restatements had no effect on partners' capital or net
income.
2. Investment in Joint Ventures
During 2003, CNL Restaurant Investments II, in which the Partnership
owns a 36.8% interest, entered into negotiations with a third party to
sell the property in San Antonio, Texas. During 2004, the contract was
terminated, and as a result, the joint venture reclassified the assets
from real estate held for sale to real estate properties with operating
leases.
CNL Restaurant Investments II owns five properties. Bossier City Joint
Venture and CNL VIII, X, XII Kokomo Joint Venture each owns one
property. In addition, the Partnership and affiliates, in four separate
tenancy in common arrangements, each own one property.
5
CNL INCOME FUND VIII, LTD.
(A Florida Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS
Quarters and Nine Months Ended September 30, 2004 and 2003
2. Investment in Joint Ventures - Continued
The following presents the combined, condensed financial information
for the joint ventures and the properties held as tenants-in-common
with affiliates at:
September 30, December 31,
2004 2003
---------------- ----------------
Real estate properties with operating $ 12,499,331 $ 12,729,434
leases, net
Net investment in direct financing leases 953,191 967,655
Cash 25,174 66,531
Accrued rental income 330,845 252,850
Liabilities 13,828 53,747
Partners' capital 13,794,713 13,962,723
Quarter Ended Nine Months Ended
September 30, September 30,
2004 2003 2004 2003
------------ ---------------- ------------- ----------------
Revenues $ 415,364 $ 414,284 $ 1,237,244 $ 1,239,884
Expenses (78,950) (80,823) (235,289) (236,804)
------------ ---------------- ------------- ----------------
Net income $ 336,414 $ 333,461 $ 1,001,955 $ 1,003,080
============ ================ ============= ================
The Partnership recognized income of $286,234 and $287,488 during the
nine months ended September 30, 2004 and 2003, respectively, $96,287
and $95,961 of which were earned during the third quarters of 2004 and
2003, respectively, from these joint ventures and tenants-in-common
arrangements.
3. Discontinued Operations
During 2004, the Partnership identified two properties for sale. During
March 2004, the Partnership sold its property in Tiffin, Ohio, to a
third party, and received net sales proceeds of approximately $791,100,
resulting in a gain on disposal of discontinued operations of
approximately $391,100. In September 2004, the Partnership sold its
property in Brandon, Florida, to a third party, and received net sales
proceeds of approximately $1,056,900, resulting in a gain on disposal
of discontinued operations of approximately $209,800.
The following presents the operating results of the discontinued
operations for these properties:
Quarter Ended Nine Months Ended
September 30, September 30,
2004 2003 2004 2003
------------- -------------- --------------- --------------
Rental revenues $ 38,256 $ 50,141 $ 126,858 $ 150,237
Expenses (564) (3,398) (3,475) (23,067)
------------- -------------- --------------- --------------
Income from discontinued
operations $ 37,692 $ 46,743 $ 123,383 $ 127,170
============= ============== =============== ==============
6
CNL INCOME FUND VIII, LTD.
(A Florida Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS
Quarters and Nine Months Ended September 30, 2004 and 2003
4. Merger Transaction
On August 9, 2004, the Partnership entered into a definitive Agreement
and Plan of Merger pursuant to which the Partnership will be merged
with a subsidiary of U.S. Restaurant Properties, Inc. (NYSE: USV). The
merger is one of multiple concurrent transactions pursuant to which 17
other affiliated limited partnerships also will be merged with a
subsidiary of U.S. Restaurant Properties, Inc. and in which CNL
Restaurant Properties, Inc., an affiliate, also will be merged with
U.S. Restaurant Properties, Inc. CNL Restaurant Properties, Inc.
currently provides property management and other services to the
Partnership. The merger of the Partnership (and each of the 17 other
affiliated mergers) is subject to certain conditions including approval
by a majority of the limited partners, consummation of a minimum number
of limited partnership mergers representing at least 75.0% in value (as
measured by the value of the merger consideration) of all limited
partnerships, consummation of the merger between U.S. Restaurant
Properties, Inc. and CNL Restaurant Properties, Inc., approval of the
shareholders of U.S. Restaurant Properties, Inc., and availability of
financing. The transaction is expected to be consummated in the first
quarter of 2005.
Under the terms of the merger agreement, if the transaction is
approved, the limited partners will receive total consideration of
approximately $35.15 million, consisting of approximately $29.39
million in cash and approximately $5.76 million in U.S. Restaurant
Properties, Inc. Series A Convertible Preferred Stock that is listed on
the New York Stock Exchange. The general partners will receive total
consideration of approximately $223,000 consisting of approximately
$186,000 in cash and approximately $37,000 in preferred stock.
7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
CNL Income Fund VIII, Ltd. (the "Partnership," which may be referred to
as "we," "us," or "our") is a Florida limited partnership that was organized on
August 18, 1989 to acquire for cash, either directly or through joint venture
arrangements, both newly constructed and existing restaurants, as well as land
upon which restaurants were to be constructed (the "Properties"), which are
leased primarily to operators of national and regional fast-food and
family-style restaurant chains. The leases are generally triple-net leases, with
the lessees responsible for all repairs and maintenance, property taxes,
insurance and utilities. We owned 24 and 26 Properties directly as of September
30, 2004 and 2003, respectively. In addition, we also owned 13 Properties
indirectly through joint venture or tenancy in common arrangements as of
September 30, 2004 and 2003.
Merger Transaction
The general partners believe their primary objective is to maintain
current operations with restaurant operators as successfully as possible, while
evaluating strategic alternatives, including alternatives that may provide
liquidity to the limited partners. Real estate markets are strong throughout
much of the nation, and the performance of restaurants has generally improved
after several challenging years. As a result, the general partners believe that
this is an attractive period for a strategic event to monetize the interests of
the limited partners.
In furtherance of this, on August 9, 2004, we entered into a definitive
Agreement and Plan of Merger pursuant to which we will be merged with a
subsidiary of U.S. Restaurant Properties, Inc. (NYSE: USV). The merger is one of
multiple concurrent transactions pursuant to which 17 other affiliated limited
partnerships also will be merged with a subsidiary of U.S. Restaurant
Properties, Inc. and in which CNL Restaurant Properties, Inc., an affiliate,
also will be merged with U.S. Restaurant Properties, Inc. Our merger (and each
of the 17 other affiliated mergers) is subject to certain conditions including
approval by a majority of the limited partners, consummation of a minimum number
of limited partnership mergers representing at least 75.0% in value (as measured
by the value of the merger consideration) of all limited partnerships,
consummation of the merger between U.S. Restaurant Properties, Inc. and CNL
Restaurant Properties, Inc., approval of the shareholders of U.S. Restaurant
Properties, Inc., and availability of financing. U.S. Restaurant Properties,
Inc. is a real estate investment trust (REIT) that focuses primarily on
acquiring, owning and leasing restaurant properties. The transaction is expected
to be consummated in the first quarter of 2005.
Under the terms of the merger agreement, if the transaction is
approved, our limited partners will receive total consideration of approximately
$35.15 million, consisting of approximately $29.39 million in cash and
approximately $5.76 million in U.S. Restaurant Properties, Inc. Series A
Convertible Preferred Stock that is listed on the New York Stock Exchange. The
general partners will receive total consideration of approximately $223,000
consisting of approximately $186,000 in cash and approximately $37,000 in
preferred stock.
We received an opinion from Wachovia Capital Markets, LLC that as of
August 9, 2004 the merger consideration to be received by the holders of our
general and limited partnership interests is fair, from a financial point of
view, to such holders.
As reflected above, the contemplated transactions are complex, and
contingent upon certain conditions. The restaurant marketplace, the real estate
industry, and the equities markets, all individually or taken as a whole, could
impact the economics of this transaction. As a result, there is no assurance
that we will be successful in completing the contemplated transaction.
Capital Resources
Net cash provided by operating activities was $2,342,160 and $2,617,457
for the nine months ended September 30, 2004 and 2003, respectively. The
decrease in net cash provided by operating activities during the nine months
ended September 30, 2004, was a result of changes in our working capital, such
as the timing of transactions relating to the collection of receivables and the
payment of expenses, and changes in income and expenses, such as changes in
rental revenues and changes in operating and property related expenses.
8
In March 2004, we sold our Property in Tiffin, Ohio to a third party
and received net sales proceeds of approximately $791,100, resulting in a gain
on disposal of discontinued operations of approximately $391,100. The general
partners intend to reinvest the net sales proceeds in additional Properties or
to pay liabilities.
In September 2004, we sold our Property in Brandon, Florida, to a third
party and received net sales proceeds of approximately $1,056,900, resulting in
a gain on disposal of discontinued operations of approximately $209,800. The
general partners intend to reinvest the net sales proceeds in additional
Properties or to pay liabilities.
Cash and cash equivalents increased to $3,516,884 at September 30,
2004, from $1,709,779 at December 31, 2003. At September 30, 2004, these funds
were held in demand deposit accounts at a commercial bank and a certificate of
deposit with a 90-day or less maturity date. The increase in cash and cash
equivalents at September 30, 2004, was primarily a result of holding sales
proceeds from current year sales. The funds remaining at September 30, 2004,
after the payment of distributions and other liabilities, may be used to invest
in additional Properties and to meet our working capital needs.
Short-Term Liquidity
Our investment strategy of acquiring Properties for cash and leasing
them under triple-net leases to operators who meet specified financial standards
minimizes our operating expenses. The general partners believe that the leases
will generate net cash flow in excess of operating expenses.
Our short-term liquidity requirements consist primarily of our
operating expenses.
The general partners have the right, but not the obligation, to make
additional capital contributions if they deem it appropriate in connection with
our operations.
We generally distribute cash from operations remaining after the
payment of the operating expenses, to the extent that the general partners
determine that such funds are available for distribution. Based on current and
anticipated future cash from operations, we declared distributions to limited
partners of $2,362,503 for each of the nine months ended September 30, 2004 and
2003 ($787,501 for each of the quarters ended September 30, 2004 and 2003). This
represents distributions of $0.068 per unit for each of the nine months ended
September 30, 2004 and 2003 ($0.023 per unit for each applicable quarter). No
distributions were made to the general partners for the quarters and nine months
ended September 30, 2004 and 2003. No amounts distributed to the limited
partners for the nine months ended September 30, 2004 and 2003 are required to
be or have been treated as a return of capital for purposes of calculating the
limited partners' return on their adjusted capital contributions. We intend to
continue to make distributions of cash to the limited partners on a quarterly
basis.
Total liabilities, including distributions payable, were $1,092,442 and
$1,035,224 at September 30, 2004 and December 31, 2003, respectively. The
increase in total liabilities was due to increases in accounts payable and
accrued expenses, real estate taxes payable and amounts due to related parties,
partially offset by a decrease in rents paid in advance and deposits. The
general partners believe that we have sufficient cash on hand to meet our
current working capital needs.
Long-Term Liquidity
We have no long-term debt or other long-term liquidity requirements.
Results of Operations
Rental revenues from continuing operations were $2,046,133 for the nine
months ended September 30, 2004, as compared to $2,050,640 in the same period in
2003, of which $682,390 and $685,767 were earned during the third quarters of
2004 and 2003, respectively. Rental revenues from continuing operations remained
relatively constant because all of the changes in the leased Property portfolio
related to the two Properties accounted for as discontinued operations.
In December 2003, Waving Leaves, Inc., the tenant of the Properties in
Jefferson, Lexington, and Grafton, Ohio filed for Chapter 11 bankruptcy
protection. In May 2004, the leases were assigned to and assumed by Hardee's
Food Systems, Inc. As of November 5, 2004, we have received all of the rental
payments relating to these leases.
9
In March 2004, we entered into an agreement, effective January 2004, to
provide temporary and partial rent deferral to a tenant who is experiencing
liquidity difficulties. The general partners anticipate that deferring the
monthly rent through December 2004, on the one lease the tenant has with us,
will provide the necessary relief to the tenant. Rental payment terms revert to
the original terms beginning in January 2005. Repayment of the deferred amounts
is secured by letters of credit and scheduled to begin in January 2005 and
continue for 60 months. The general partners do not believe that this temporary
decline in cash flows will have a material adverse effect on our operating
results.
During the nine months ended September 30, 2004 and 2003, we earned
$32,242 and $23,152, respectively, in contingent rental income, of which $9,759
and $9,381 were earned during the third quarters of 2004 and 2003, respectively.
The increase in contingent rental income during 2004 was due to an increase in
reported gross sales of certain restaurants with leases that require the payment
of contingent rental income.
During the nine months ended September 30, 2004 and 2003, we earned
$286,234 and $287,488, respectively, attributable to net income earned by
unconsolidated joint ventures, of which $96,287 and $95,961 were earned during
the third quarters of 2004 and 2003, respectively. Net income earned by
unconsolidated joint ventures remained relatively constant, as the Property
portfolio owned by the joint ventures and tenancies in common did not change.
During 2003, CNL Restaurant Investments II, in which the Partnership owns a
36.8% interest, entered into negotiations with a third party to sell the
Property in San Antonio, Texas. In 2004, the contract was terminated, and as a
result, the joint venture reclassified the assets from real estate held for sale
to real estate properties with operating leases.
Operating expenses, including depreciation and amortization expense,
were $642,800 and $558,704 for the nine months ended September 30, 2004 and
2003, respectively, of which $200,452 and $160,316 were incurred during the
third quarters of 2004 and 2003, respectively. Operating expenses were higher
during the nine months and quarter ended September 30, 2004, primarily due to an
increase in general operating and administrative expenses including, primarily,
legal fees incurred in connection with the merger transaction discussed above.
We recognized income from discontinued operations (rental revenues less
property related expenses) of $123,383 and $127,170 during the nine months ended
September 30, 2004 and 2003, respectively, of which $37,692 and $46,743 were
recognized during the third quarters of 2004 and 2003, respectively. In March
2004, we sold our Property in Tiffin, Ohio to a third party resulting in a gain
on disposal of discontinued operations of approximately $391,100. In September
2004, we sold our property in Brandon, Florida to a third party resulting in a
gain on disposal of discontinued operations of approximately $209,800.
In December 2003, the Financial Accounting Standards Board issued a
revision to FASB Interpretation No. 46 (originally issued in January 2003) ("FIN
46R"), "Consolidation of Variable Interest Entities" requiring existing
unconsolidated variable interest entities to be consolidated by their primary
beneficiaries. The primary beneficiary of a variable interest entity is the
party that absorbs a majority of the entity's expected losses, receives a
majority of its expected residual returns, or both, as a result of holding
variable interests, which are the ownership, contractual, or other pecuniary
interests in an entity that change with changes in the fair value of the
entity's net assets excluding variable interests. Prior to FIN 46R, a company
generally included another entity in its financial statements only if it
controlled the entity through voting interests. Application of FIN 46R is
required in financial statements of public entities that have interests in
variable interest entities for periods ending after March 15, 2004. We adopted
FIN 46R during the quarter ended March 31, 2004, which resulted in the
consolidation of a previously unconsolidated joint venture, Asheville Joint
Venture, which was accounted for under the equity method. FIN 46R does not
require, but does permit restatement of previously issued financial statements.
We restated prior year's financial statements to maintain comparability between
the periods presented. Such consolidation resulted in certain assets and
minority interest, and revenues and expenses, of the entity being reported on a
gross basis in our financial statements; however, these restatements had no
effect on partners' capital or net income.
10
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 4. CONTROLS AND PROCEDURES
The general partners maintain a set of disclosure controls and
procedures designed to ensure that information required to be disclosed in our
filings under the Securities Exchange Act of 1934 is recorded, processed,
summarized and reported within the time periods specified in the Securities and
Exchange Commission's rules and forms. The principal executive and financial
officers of the corporate general partner have evaluated our disclosure controls
and procedures as of the end of the period covered by this Quarterly Report on
Form 10-Q and have determined that such disclosure controls and procedures are
effective.
There was no change in internal control over financial reporting that
occurred during the most recent fiscal quarter that has materially affected, or
is reasonably likely to materially affect, internal control over financial
reporting.
11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings. Inapplicable.
-----------------
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
-----------------------------------------------------------
Inapplicable.
Item 3. Defaults upon Senior Securities. Inapplicable.
-------------------------------
Item 4. Submission of Matters to a Vote of Security Holders. Inapplicable.
---------------------------------------------------
Item 5. Other Information. Inapplicable.
-----------------
Item 6. Exhibits and Reports on Form 8-K.
---------------------------------
(a) Exhibits
2.1 Agreement and Plan of Merger among U.S. Restaurant
Properties, Inc., Ivanhoe Acquisition VIII, LLC, and CNL
Income Fund VIII, Ltd., dated as of August 9, 2004.
(Included as Exhibit 99.2 to Form 8-K filed with the
Securities and Exchange Commission on August 9, 2004,
and incorporated herein by reference.)
3.1 Affidavit and Certificate of Limited Partnership of CNL
Income Fund VIII, Ltd. (Included as Exhibit 3.2 to
Registration Statement No. 33-31482 on Form S-11 and
incorporated herein by reference.)
4.1 Affidavit and Certificate of Limited Partnership of CNL
Income Fund VIII, Ltd. (Included as Exhibit 3.2 to
Registration Statement No. 33-31482 on Form S-11 and
incorporated herein by reference.)
4.2 Amended and Restated Agreement of Limited Partnership of
CNL Income Fund VIII, Ltd. (Included as Exhibit 4.2 to
Form 10-K filed with the Securities and Exchange
Commission on April 1, 1996, and incorporated herein by
reference.)
10.1 Management Agreement between CNL Income Fund VIII, Ltd.
and CNL Investment Company. (Included as Exhibit 10.1 to
Form 10-K filed with the Securities and Exchange
Commission on April 1, 1996, and incorporated herein by
reference.)
10.2 Assignment of Management Agreement from CNL Investment
Company to CNL Income Fund Advisors, Inc. (Included as
Exhibit 10.2 to Form 10-K filed with the Securities and
Exchange Commission on March 30, 1995, and incorporated
herein by reference.)
10.3 Assignment of Management Agreement from CNL Income Fund
Advisors, Inc. to CNL Fund Advisors, Inc. (Included as
Exhibit 10.3 to Form 10-K filed with the Securities and
Exchange Commission on April 1, 1996, and incorporated
herein by reference.)
10.4 Assignment of Management Agreement from CNL Fund
Advisors, Inc. to CNL APF Partners, LP. (Included as
Exhibit 10.4 to Form 10-Q filed with the Securities and
Exchange Commission on August 9, 2001, and incorporated
herein by reference.)
10.5 Assignment of Management Agreement from CNL APF
Partners, LP to CNL Restaurants XVIII, Inc. (Included as
Exhibit 10.5 to Form 10-Q filed with the Securities and
Exchange Commission on August 14, 2002, and incorporated
herein by reference.)
12
31.1 Certification of Chief Executive Officer of Corporate
General Partner Pursuant to Rule 13a-14 as Adopted
Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002. (Filed herewith.)
31.2 Certification of Chief Financial Officer of Corporate
General Partner Pursuant to Rule 13a-14 as Adopted
Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002. (Filed herewith.)
32.1 Certification of Chief Executive Officer of Corporate
General Partner Pursuant to 18 U.S.C. Section 1350 as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002. (Filed herewith.)
32.2 Certification of Chief Financial Officer of Corporate
General Partner Pursuant to 18 U.S.C. Section 1350 as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002. (Filed herewith.)
13
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
DATED this 11th day of November 2004.
CNL INCOME FUND VIII, LTD.
By: CNL REALTY CORPORATION
General Partner
By: /s/ James M. Seneff, Jr.
-------------------------------------
JAMES M. SENEFF, JR.
Chief Executive Officer
(Principal Executive Officer)
By: /s/ Robert A. Bourne
-------------------------------------
ROBERT A. BOURNE
President and Treasurer
(Principal Financial and
Accounting Officer)
EXHIBIT INDEX
Exhibit Number
Exhibits
2.1 Agreement and Plan of Merger among U.S. Restaurant
Properties, Inc., Ivanhoe Acquisition VIII, LLC, and CNL
Income Fund VIII, Ltd., dated as of August 9, 2004.
(Included as Exhibit 99.2 to Form 8-K filed with the
Securities and Exchange Commission on August 9, 2004,
and incorporated herein by reference.)
3.1 Affidavit and Certificate of Limited Partnership of CNL
Income Fund VIII, Ltd. (Included as Exhibit 3.2 to
Registration Statement No. 33-31482 on Form S-11 and
incorporated herein by reference.)
4.1 Affidavit and Certificate of Limited Partnership of CNL
Income Fund VIII, Ltd. (Included as Exhibit 3.2 to
Registration Statement No. 33-31482 on Form S-11 and
incorporated herein by reference.)
4.2 Amended and Restated Agreement of Limited Partnership of
CNL Income Fund VIII, Ltd. (Included as Exhibit 4.2 to
Form 10-K filed with the Securities and Exchange
Commission on April 1, 1996, and incorporated herein by
reference.)
10.1 Management Agreement between CNL Income Fund VIII, Ltd.
and CNL Investment Company. (Included as Exhibit 10.1 to
Form 10-K filed with the Securities and Exchange
Commission on April 1, 1996, and incorporated herein by
reference.)
10.2 Assignment of Management Agreement from CNL Investment
Company to CNL Income Fund Advisors, Inc. (Included as
Exhibit 10.2 to Form 10-K filed with the Securities and
Exchange Commission on March 30, 1995, and incorporated
herein by reference.)
10.3 Assignment of Management Agreement from CNL Income Fund
Advisors, Inc. to CNL Fund Advisors, Inc. (Included as
Exhibit 10.3 to Form 10-K filed with the Securities and
Exchange Commission on April 1, 1996, and incorporated
herein by reference.)
10.4 Assignment of Management Agreement from CNL Fund
Advisors, Inc. to CNL APF Partners, LP. (Included as
Exhibit 10.4 to Form 10-Q filed with the Securities and
Exchange Commission on August 9, 2001, and incorporated
herein by reference.)
10.5 Assignment of Management Agreement from CNL APF
Partners, LP to CNL Restaurants XVIII, Inc. (Included as
Exhibit 10.5 to Form 10-Q filed with the Securities and
Exchange Commission on August 14, 2002, and incorporated
herein by reference.)
31.1 Certification of Chief Executive Officer of Corporate
General Partner Pursuant to Rule 13a-14 as Adopted
Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002. (Filed herewith.)
31.2 Certification of Chief Financial Officer of Corporate
General Partner Pursuant to Rule 13a-14 as Adopted
Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002. (Filed herewith.)
32.1 Certification of Chief Executive Officer of Corporate
General Partner Pursuant to 18 U.S.C. Section 1350 as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002. (Filed herewith.)
32.2 Certification of Chief Financial Officer of Corporate
General Partner Pursuant to 18 U.S.C. Section 1350 as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002. (Filed herewith.)
EXHIBIT 31.1
EXHIBIT 31.2
EXHIBIT 32.1
EXHIBIT 32.2