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, 2002
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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
0-24095
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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
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 _________
CONTENTS
Part I Page
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 5-9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10-14
Item 3. Quantitative and Qualitative Disclosures about
Market Risk 14
Item 4. Controls and Procedures 14
Part II
Other Information 15-17
CNL INCOME FUND XVIII, LTD.
(A Florida Limited Partnership)
CONDENSED BALANCE SHEETS
September 30, December 31,
2002 2001
---------------- -----------------
ASSETS
Land and buildings on operating leases, net $ 18,817,449 $ 17,494,535
Net investment in direct financing leases 3,121,332 3,145,098
Real estate held for sale -- 1,423,054
Investment in joint ventures 3,201,008 3,011,159
Cash and cash equivalents 640,454 226,136
Restricted cash -- 1,662,201
Receivables, less allowance for doubtful accounts of
$66,734 and $75,201, respectively 945 19,767
Accrued rental income 616,809 513,016
Other assets 10,967 16,729
---------------- -----------------
$ 26,408,964 $ 27,511,695
================ =================
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 92,030 $ 92,368
Real estate taxes payable 6,310 12,817
Distributions payable 700,000 700,000
Due to related parties 18,658 20,273
Rents paid in advance 5,325 11,441
Deferred rental income 4,741 4,979
---------------- -----------------
Total liabilities 827,064 841,878
Partners' capital 25,581,900 26,669,817
---------------- -----------------
$ 26,408,964 $ 27,511,695
================ =================
See accompanying notes to condensed financial statements.
CNL INCOME FUND XVIII, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF INCOME
Quarter Ended Nine Months Ended
September 30 September 30,
2002 2001 2002 2001
-------------- --------------- --------------- --------------
Revenues:
Rental income from operating leases $ 531,989 $ 536,134 $ 1,538,713 $ 1,577,599
Earned income from direct financing leases 53,953 99,561 192,791 299,609
Interest and other income 1,769 5,375 4,219 18,007
-------------- --------------- --------------- --------------
587,711 641,070 1,735,723 1,895,215
-------------- --------------- --------------- --------------
Expenses:
General operating and administrative 42,652 34,140 155,124 240,852
Property expenses 13,574 132,611 122,544 396,236
Management fees to related party 5,158 6,293 18,403 18,605
State and other taxes -- -- 8,727 23,984
Depreciation and amortization 105,553 97,172 274,106 279,860
Provision for write-down of assets -- 112,109 -- 321,239
-------------- --------------- --------------- --------------
166,937 382,325 578,904 1,280,776
-------------- --------------- --------------- --------------
Income Before Gain (Loss) on Sale of Assets and
Equity in Earnings of Joint Ventures 420,774 258,745 1,156,819 614,439
Gain (Loss) on Sale of Assets -- 177,865 (25,694 ) 159,010
Equity in Earnings of Joint Ventures 77,652 65,191 233,473 122,772
-------------- --------------- --------------- --------------
Income from Continuing Operations 498,426 501,801 1,364,598 896,221
-------------- --------------- --------------- --------------
Discontinued Operations (Note 6):
Loss from discontinued operations, net (7,363 ) (24,180 ) (30,043 ) (48,814 )
Loss on disposal of discontinued operations, net -- -- (322,472 ) (387,138 )
-------------- --------------- --------------- --------------
(7,363 ) (24,180 ) (352,515 ) (435,952 )
-------------- --------------- --------------- --------------
Net Income (Loss) $ 491,063 $ 477,621 $ 1,012,083 $ 460,269
============== =============== =============== ==============
Net Income (Loss) Per Limited Partner Unit
Continuing operations $ 0.14 $ 0.15 $ 0.39 $ 0.25
Discontinued operations -- (0.01 ) (0.10 ) (0.12 )
-------------- --------------- --------------- --------------
Total $ 0.14 $ 0.14 $ 0.29 $ 0.13
============== =============== =============== ==============
Weighted Average Number of Limited Partner
Units Outstanding 3,500,000 3,500,000 3,500,000 3,500,000
============== =============== =============== ==============
See accompanying notes to condensed financial statements.
CNL INCOME FUND XVIII, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF PARTNERS' CAPITAL
Nine Months Ended Year Ended
September 30, December 31,
2002 2001
--------------------- -------------------
General partners:
Beginning balance $ (5,319 ) $ (5,319 )
Net income -- --
--------------------- -------------------
(5,319 ) (5,319 )
--------------------- -------------------
Limited partners:
Beginning balance 26,675,136 28,306,371
Net income 1,012,083 1,168,765
Distributions ($0.60 and $0.80 per
limited partner unit, respectively) (2,100,000 ) (2,800,000 )
--------------------- -------------------
25,587,219 26,675,136
--------------------- -------------------
Total partners' capital $ 25,581,900 $ 26,669,817
===================== ===================
See accompanying notes to condensed financial statements.
CNL INCOME FUND XVIII, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF CASH FLOWS
Nine Months Ended
September 30,
2002 2001
--------------- --------------
Increase (Decrease) in Cash and Cash Equivalents
Net Cash Provided by Operating Activities $ 1,591,031 $ 1,270,122
--------------- --------------
Cash Flows from Investing Activities:
Decrease in restricted cash 1,663,401 --
Addition to land and buildings on operating leases (2,090,604 ) --
Proceeds from sale of assets 1,565,681 2,626,614
Investment in joint venture (205,675 ) (1,766,420 )
Other (9,516 ) --
--------------- --------------
Net cash provided by investing activities 923,287 860,194
--------------- --------------
Cash Flows from Financing Activities:
Loan from corporate general partner 875,000 --
Repayment of loan from corporate general partner (875,000 ) --
Distributions to limited partners (2,100,000 ) (2,100,000 )
--------------- --------------
Net cash used in financing activities (2,100,000 ) (2,100,000 )
--------------- --------------
Net Increase (Decrease) in Cash and Cash Equivalents 414,318 30,316
Cash and Cash Equivalents at Beginning of Period 226,136 479,603
--------------- --------------
Cash and Cash Equivalents at End of Period $ 640,454 $ 509,919
=============== ==============
Supplemental Schedule of Non-Cash Financing Activities:
Distributions declared and unpaid at end of period $ 700,000 $ 700,000
=============== ==============
See accompanying notes to condensed financial statements.
CNL INCOME FUND XVIII, LTD.
(A Florida Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS
Quarters and Nine Months Ended September 30, 2002 and 2001
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 management, necessary to a fair statement
of the results for the interim periods presented. Operating results for
the quarter and nine months ended September 30, 2002, may not be
indicative of the results that may be expected for the year ending
December 31, 2002. Amounts as of December 31, 2001, 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 XVIII, Ltd. (the "Partnership") for the year ended December
31, 2001.
Effective January 1, 2002, the Partnership adopted Statement of
Financial Accounting Standards No. 144 "Accounting for the Impairment
or Disposal of Long-Lived Assets." This statement requires that a
long-lived asset be tested for recoverability whenever events or
changes in circumstances indicate that its carrying amount may not be
recoverable. The carrying amount of a long-lived asset is not
recoverable if it exceeds the sum of the undiscounted cash flows
expected to result from the use and eventual disposition of the asset.
The assessment is based on the carrying amount of the asset at the date
it is tested for recoverability. An impairment loss is recognized when
the carrying amount of a long-lived asset exceeds its fair value. If an
impairment is recognized, the adjusted carrying amount of a long-lived
asset is its new cost basis. The statement also requires that the
results of operations of a component of an entity that either has been
disposed of or is classified as held for sale be reported as a
discontinued operation if the disposal activity was initiated
subsequent to the adoption of the Standard.
2. Reclassification:
Certain items in the prior year's financial statements have been
reclassified to conform to 2002 presentation. These reclassifications
had no effect on total partners' capital or net income.
3. Land and Buildings on Operating Leases:
In January 2002, the Partnership reinvested a portion of the net sales
proceeds from the 2001 sale of the property in Santa Rosa, California,
in a property in Houston, Texas at an approximate cost of $1,194,100.
The Partnership acquired this property from CNL Funding 2001-A, LP, an
affiliate of the general partners (see Note 7).
In May 2002, the Partnership sold its On the Border property in San
Antonio, Texas to an unrelated third party for $500,000 and received
net sales proceeds of approximately $470,300, resulting in a loss of
approximately $25,700. As of December 31, 2001, the Partnership had
identified this property for sale. In June 2002, the Partnership
reinvested the net sales proceeds from this sale, along with the
proceeds from the sale of the Boston Market property in San Antonio,
Texas (see Note 6), in a Taco Cabana property in San Antonio, Texas, at
an approximate cost of $896,500. The Partnership acquired this property
from CNL Funding 2001-A, LP, an affiliate of the general partners (see
Note 7).
CNL INCOME FUND XVIII, LTD.
(A Florida Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS
Quarters and Nine Months Ended September 30, 2002 and 2001
4. Investment in Joint Ventures:
In January 2002, the Partnership reinvested a portion of the net sales
proceeds from the 2001 sale of the property in Santa Rosa, California,
in a property in Austin, Texas, as tenants-in-common, with CNL Income
Fund X, Ltd., an affiliate of the general partners. The Partnership
acquired this property from CNL Funding 2001-A, LP, an affiliate of the
general partners (see Note 7). The Partnership and CNL Income Fund X,
Ltd. entered into an agreement whereby each co-venturer will share in
the profits and losses of the property in proportion to its applicable
percentage interest in the property. As of September 30, 2002, the
Partnership had contributed approximately $205,700 for an 18.35%
interest in this property.
As of September 30, 2002, Columbus Joint Venture, CNL Portsmouth Joint
Venture, and TFIG Pittsburgh Joint Venture each owned and leased one
property to operators of fast-food or family-style restaurants. In
addition, as of September 30, 2002, the Partnership had entered into
two separate tenancy-in-common arrangements, in each case with an
affiliate of the general partners, each of which owned and leased one
property to operators of fast-food or family-style restaurants. The
following presents the combined, condensed financial information for
these joint ventures and tenancy in common arrangements at:
September 30, December 31,
2002 2001
---------------- ----------------
Land and buildings on operating
leases, net $ 6,763,043 $ 5,731,159
Net investment in direct financing
lease 310,042 313,339
Cash 13,436 22,034
Accrued rental income 204,752 125,874
Accounts receivable 26,740 8,368
Other assets -- 1,116
Liabilities 12,085 12,335
Partners' Capital 7,305,928 6,189,555
Quarter Ended September 30, Nine Months Ended September 30,
2002 2001 2002 2001
------------ --------------- ------------- ---------------
Revenues $ 210,382 $ 170,732 $ 633,692 $ 398,709
Expenses (33,838 ) (29,514 ) (104,084 ) (65,431 )
------------ --------------- ------------- ---------------
Net Income $ 176,544 $ 141,218 $ 529,608 $ 333,278
============ =============== ============= ===============
The Partnership recognized income of $233,473 and $122,772 during the
nine months ended September 30, 2002 and 2001, respectively, $77,652
and $65,191 of which was earned during the quarters ended September 30,
2002 and 2001, respectively, from these joint ventures and tenancy
in-common arrangements.
CNL INCOME FUND XVIII, LTD.
(A Florida Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS
Quarters and Nine Months Ended September 30, 2002 and 2001
5. Restricted Cash:
As of December 31, 2001, the net sales proceeds of $1,664,829 from the
2001 sale of the property in Santa Rosa, California, less miscellaneous
escrow fees of $2,628 were being held in an interest-bearing escrow
account pending the release of funds by the escrow agent to acquire an
additional property. These funds were released by the escrow agent in
January 2002 and were used to acquire a property in Houston, Texas and
an interest in a property in Austin, Texas (see Note 3 and Note 4).
6. Discontinued Operations:
In May 2002, the Partnership sold its Boston Market property in San
Antonio, Texas to an unrelated third party for approximately $515,000
and received net sales proceeds of approximately $481,325. Due to the
fact that the Partnership had recorded provisions for write-down of
assets in previous years, including $387,138 during the nine months
ended September 30, 2001, no gain or loss on disposal of discontinued
operations was recorded during the nine months ended September 30, 2002
relating to this sale. In June 2002, the Partnership reinvested these
sale proceeds in an income producing property in San Antonio, Texas
(see Note 3).
During 2002, the Partnership entered into three separate agreements,
each with an unrelated third party, to sell the Jack in the Box
property in Echo Park, California, the Boston Market property in
Raleigh, North Carolina and the Bennigan's property in Sunrise,
Florida. The contracts for the sale of the properties in Echo Park,
California and Sunrise, Florida were subsequently terminated and as a
result, the Partnership reclassified the assets from real estate held
for sale to land and building on operating leases, net investment in
direct financing leases, and accrued rental income. In August 2002, the
Partnership sold this property for $650,000 and received net sales
proceeds of approximately $614,100, resulting in a loss on disposal of
discontinued operations of $322,472, which the Partnership recorded
during the six months ended June 30, 2002. The financial results for
these properties are reflected as Discontinued Operations in the
accompanying financial statements.
The operating results of the discontinued operations for the above
properties are as follows:
Quarter Ended September 30, Nine Months Ended September 30,
2002 2001 2002 2001
------------- --------------- ------------- --------------
Rental revenues $ -- $ -- $ -- $ --
Expenses (7,363 ) (24,180 ) (30,043 ) (48,814 )
Loss on disposal of assets -- -- (322,472 ) (387,138 )
------------- --------------- ------------- --------------
Loss from discontinued operations $ (7,363 ) $ (24,180 ) $(352,515 ) $ (435,952 )
============= =============== ============= ==============
7. Related Party Transactions:
During 2002, the Partnership acquired a property in Houston, Texas, and
a property in San Antonio, Texas from CNL Funding 2001-A, LP, for a
total purchase price of approximately $2,090,600 (see Note 3). In
addition, in January 2002, the Partnership and CNL Income Fund X, Ltd,
as tenants-in-common, acquired a property in Austin, Texas, from CNL
Funding 2001-A, LP, for a purchase price of approximately $1,120,800
(see Note 4). CNL Funding 2001-A, LP is an affiliate of the general
partners. CNL Funding 2001-A, LP had purchased and temporarily held
title to the properties in order to facilitate the acquisition of the
properties by the Partnership. The purchase price paid by the
Partnership represented the costs incurred by CNL Funding 2001-A, LP to
acquire the properties.
CNL INCOME FUND XVIII, LTD.
(A Florida Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS
Quarters and Nine Months Ended September 30, 2002 and 2001
8. Litigation Matters:
In July 1998, DJD Partners VII, LLC filed a lawsuit against Finest
Foodservice, LLC and the Partnership, alleging a breach of contract
that was originally entered into by Finest Foodservice, LLC and later
assigned to the Partnership, in connection with the construction of a
Boston Market property in Minnetonka, Minnesota. In October 1998,
Finest Foodservice, LLC, the former tenant of the site in Minnetonka,
Minnesota, filed for bankruptcy and rejected its lease, causing the
obligations of the contract to become the responsibility of the
Partnership. In May 2001, the District Court awarded a judgment of
approximately $85,400 to DJD Partners VII, LLC against the Partnership,
as a result of the breach of contract by Finest Foodservice, LLC. The
Partnership accrued this amount as a general and administrative expense
as of December 31, 2001. A motion for reconsideration and a new trial
was filed and denied. The Partnership appealed the District Court's
judgment but lost.
9. Concentration of Credit Risk:
The following schedule presents total rental revenues from individual
lessees, each representing more than 10% of the Partnership's total
rental revenues (including the Partnership's share of rental revenues
from joint ventures and the properties held as tenants-in-common with
affiliates of the general partners) for each of the periods ended
September 30:
2002 2001
---------------- ----------------
Golden Corral Corporation $ 493,209 $ 374,363
Metromedia Restaurant Group 337,567 220,056
Jack in the Box Inc. 289,268 395,865
Chevy's Inc. 201,590 N/A
IHOP Properties, Inc. N/A 211,347
The information denoted by N/A indicates that for each period
presented, the specified chains did not represent more than 10% of the
Partnership's total rental revenues.
In addition, the following schedule presents total rental revenues from
individual restaurant chains, each representing more than 10% of the
Partnership's total rental revenues (including the Partnership's share
rental revenues from joint ventures and the properties held as
tenants-in-common with affiliates of the general partners) for each of
the periods ended September 30:
2002 2001
---------------- ----------------
Golden Corral Family Steakhouse
Restaurant $ 493,209 $ 642,911
Jack in the Box 289,268 395,865
Bennigan's 337,567 220,065
Chevy's Fresh Mex Resturant 201,589 N/A
IHOP N/A 211,347
The information denoted by N/A indicates that for each period
presented, the specified chains did not represent more than 10% of the
Partnership's total rental revenues.
CNL INCOME FUND XVIII, LTD.
(A Florida Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS
Quarters and Nine Months Ended September 30, 2002 and 2001
10. Concentration of Credit Risk - Continued:
Although the Partnership's properties are geographically diverse
throughout the United States and the Partnership's lessees operate a
variety of restaurant connects, default by any one of these lessees or
restaurant chains will significantly impact the results of operations
of the Partnership if the Partnership is not able to re-lease the
properties in a timely manner.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
CNL Income Fund XVIII, Ltd. (the "Partnership") is a Florida limited
partnership that was organized on February 10, 1995, 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 (collectively, the "Properties"), which are leased primarily to
operators of selected national and regional fast-food, family-style and casual
dining restaurant chains. The leases generally are triple-net leases, with the
lessees responsible for all repairs and maintenance, property taxes, insurance
and utilities. As of September 30, 2001, the Partnership owned 20 Properties
directly and three Properties indirectly through joint venture or tenancy in
common arrangements. In addition, as of September 30, 2002, the Partnership
owned 16 Properties directly and five Properties indirectly through joint
venture or tenancy in common arrangements.
Capital Resources
Cash from operating activities (which includes cash received from
tenants, distributions from joint ventures and interest and other income
received, less cash paid for expenses) was $1,591,031 and $1,270,122 for the
nine months ended September 30, 2002 and 2001, respectively. The increase in
cash from operating activities for the nine months ended September 30, 2002, as
compared to the nine months ended September 30, 2001, was primarily a result of
changes in income and expenses, as described below in "Results of Operations."
Other sources and uses of capital included the following during the
nine months ended September 30, 2002.
In January 2002, the Partnership reinvested a portion of the net sales
proceeds from the 2001 sale of the Property in Santa Rosa, California in a
Property in Houston, Texas, at an approximate cost of $1,194,100. In addition,
in January 2002, the Partnership reinvested the remaining net sales proceeds
from the 2001 sale of the Property in Santa Rosa, California in a Property in
Austin, Texas, as tenants-in-common with CNL Income Fund, X, Ltd., a Florida
limited partnership and an affiliate of the general partners. The Partnership
acquired these Properties from CNL Funding 2001-A, LP, a Delaware limited
partnership and an affiliate of the general partners. CNL Funding 2001-A, LP had
purchased and temporarily held title to the Properties in order to facilitate
the acquisition of the Properties by the Partnership. The purchase prices paid
by the Partnership represented the costs incurred by CNL Funding 2001-A, LP to
acquire the Properties. The general partners believe that the transaction, or a
portion thereof, relating to the 2001 sale of the Property in Santa Rosa,
California and the reinvestment of the net sales proceeds, described above, will
qualify as a like-kind transaction for federal income tax purposes. The
Partnership anticipates its distributions will be sufficient to enable the
limited partners to pay federal and state income taxes, if any (at a level
reasonably assumed by the general partners), resulting from the transaction.
In May 2002, the Partnership sold its On the Border Property in San
Antonio, Texas to an unrelated third party for approximately $500,000 and
received net sales proceeds of approximately $470,300, resulting in a net loss
of approximately $25,700. As of December 31, 2001, the Partnership had
identified this Property for sale. In addition, in May 2002, the Partnership
sold its Boston Market Property in San Antonio, Texas to an unrelated third
party for approximately $515,000 and received net sales proceeds of
approximately $481,325. Due to the fact that the Partnership had recorded
provisions for write-down of assets in previous years, no gain or loss on
disposal of discontinued operations was recorded during the nine months ended
September 30, 2002 relating to this sale. In June 2002, the Partnership
reinvested the net sales proceeds from these two sales in a Taco Cabana Property
in Houston, Texas at an approximate cost of $896,500. The Partnership acquired
this property from CNL Funding 2001-A, LP, a Delaware limited partnership and an
affiliate of the general partners. CNL Funding 2001-A, LP had purchased and
temporarily held title to the Property in order to facilitate the acquisition of
the Property by the Partnership. The purchase price paid by the Partnership
represented the costs incurred by CNL Funding 2001-A, LP to acquire the
Property. The Partnership anticipates that its distributions will be sufficient
to enable the limited partners to pay federal and state income taxes, if any (at
a level reasonably assumed by the general partners), resulting from the
transaction.
During 2002, the Partnership entered into an agreement with an
unrelated third party to sell the Boston Market Property in Raleigh, North
Carolina. In connection with the anticipated sale of the Property, the
Partnership recorded a loss on disposal of assets of $322,472 during the six
months ended June 30, 2002. In August 2002, the Partnership sold this Property
for $650,000 and received net sales proceeds of approximately $614,100. The
Partnership anticipates it will reinvest these proceeds in an additional
Property. The Partnership anticipates its distributions will be sufficient to
enable the limited partners to pay federal and state income taxes, if any (at a
level reasonably assumed by the general partners), resulting from this
transaction.
During the nine months ended September 30, 2002, the Partnership
entered into three promissory notes with the corporate general partner for loans
in connection with the operations of the Partnership. The loans were
uncollateralized, non-interest bearing and due on demand. As of September 30,
2002, the Partnership had repaid these loans in full to the corporate general
partner.
Currently, rental income from the Partnership's Properties and any net
sales proceeds from the sale of Properties are invested in money market accounts
or other short-term, highly liquid investments such as demand deposit accounts
at commercial banks, money market accounts and certificates of deposit with less
than a 90-day maturity date, pending the Partnership's use of such funds to
invest in an additional Property, to pay Partnership expenses or to make
distributions to partners. At September 30, 2002, the Partnership had $640,454
invested in such short-term investments, as compared to $226,136 at December 31,
2001. The funds remaining at September 30, 2002, will be used to invest in an
additional Property, and to pay distributions and other liabilities of the
Partnership.
Short-Term Liquidity
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 net cash flow in
excess of operating expenses.
The Partnership's short-term liquidity requirements consist primarily
of the operating expenses of the Partnership.
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.
Total liabilities of the Partnership, including distributions payable,
were $827,064 at September 30, 2002, as compared to $841,878 at December 31,
2001. The decrease in total liabilities was primarily due to a decrease in rents
paid in advance at September 30, 2002, as compared to December 31, 2001. Total
liabilities at September 30, 2002, to the extent they exceed cash and cash
equivalents at September 30, 2002, will be paid from future cash from
operations, loans, and in the event the general partners elect to make
additional contributions, from general partners' contributions.
The Partnership generally distributes cash from operations remaining
after the payment of operating expenses of the Partnership, to the extent that
the general partners determine that such funds are available for distribution.
Based on current and anticipated future cash from operations and loans from the
corporate general partner, and for the nine months ended September 30, 2001 the
net sales proceeds from the sale of the portion of the Partnership's interest in
TGIF Pittsburgh Joint Venture, the Partnership declared distributions to limited
partners of $2,100,000 for each of the nine months ended September 30, 2002 and
2001, ($700,000 for each of the quarters ended September 30, 2002 and 2001.)
This represents distributions of $0.60 per unit for each of the nine months
ended September 30, 2002 and 2001, ($0.20 per unit for each applicable quarter).
No distributions were made to the general partners for the quarters and nine
months ended September 30, 2002 and 2001. No amounts distributed to the limited
partners for the nine months ended September 30, 2002 and 2001 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.
Long-Term Liquidity
The Partnership has no long-term debt or other long-term liquidity
requirements.
Results of Operations
Total rental revenues were $1,731,504 for the nine months ended
September 30, 2002, as compared to $1,877,208 for the nine months ended
September 30, 2001, of which $585,942 and $635,695 were earned during the third
quarter of 2002 and 2001, respectively. The decrease in rental revenues during
the quarter and nine months ended September 30, 2002, as compared to the same
periods of 2001, was partially due to the 2001 sales of the Properties in
Henderson, Nevada, and Santa Rosa, California. In July 2001, the Partnership
reinvested the net sales proceeds from the sale of the Property in Henderson,
Nevada, in a Property in Denver, Colorado, with CNL Income Fund VIII, Ltd., a
Florida limited partnership and an affiliate of the general partners, as
tenants-in-common. In January 2002, the Partnership reinvested the net sales
proceeds from the sale of the Property in Santa Rosa, California in a Property
in Austin, Texas, as tenants-in-common, with CNL Income Fund X, Ltd., as
described above in "Capital Resources." Rental revenues are expected to remain
at reduced amounts while equity in earnings of joint ventures is expected to
increase due to the fact that the Partnership reinvested the majority of these
net sales proceeds in two Properties with affiliates of the general partners, as
tenants-in-common.
The Partnership used the remaining net sales proceeds from the 2001
sale of the Property in Santa Rosa, California, along with the net sales
proceeds from the 2002 sales of the two Properties in San Antonio, Texas to
acquire two additional Properties, as described above in "Capital Resources".
The decrease in rental revenues during the quarter and nine months ended
September 30, 2002, as compared to the same periods of 2001, was partially
offset due to the acquisition of these two Properties, one in January 2002 and
one in June 2002.
Rental revenues were lower during the quarter and nine months ended
September 30, 2002, as compared to the same periods of 2001, due to the fact
that during 2002, the Partnership stopped recording rental revenues relating to
the Partnership's Property in Stow, Ohio because the tenant was experiencing
financial difficulties. In addition, rental revenues remained at reduced amounts
during the quarters and nine months ended September 30, 2002 and 2001, due to
the fact that the Partnership stopped recording rental revenues when the lease
relating to the Boston Market Property in Minnetonka, Minnesota was rejected by
the tenant in 1998 in connection with its bankruptcy proceedings and the lease
related to the On the Border Property in San Antonio, Texas was terminated
during 2000. In May 2002, the Partnership sold the vacant Property in San
Antonio, Texas, and reinvested the net sales proceeds in a Taco Cabana Property
in San Antonio, Texas, as described above in "Capital Resources". Rental
revenues are expected to remain at reduced amounts until such time as the
Partnership executes new leases for the Properties in Stow, Ohio and Minnetonka,
Minnesota or until the Properties are sold and the proceeds from such sales are
reinvested in additional Properties. The lost revenues resulting from these
Properties will have an adverse effect on the results of operations of the
Partnership if the Partnership is not able to re-lease the Properties in a
timely manner. The Partnership is currently seeking a new tenant for the
Property in Minnetonka, Minnesota.
During the nine months ended September 30, 2002 and 2001, the
Partnership earned $233,473 and $122,772, respectively, attributable to net
income earned by joint ventures, of which $77,652 and $65,191 were earned during
the quarters ended September 30, 2002 and 2001, respectively. The increase in
net income earned by joint ventures for the quarter and nine months ended
September 30, 2002, as compared to the same periods of 2001, was primarily due
to the fact that in July 2001 and January 2002, the Partnership reinvested the
majority of the net sales proceeds from the 2001 sales of the Properties in
Henderson, Nevada and Santa Rosa, California, in a Property in Denver, Colorado
and a Property in Austin, Texas, respectively, each with an affiliate of the
general partners, as tenants-in-common.
During the nine months ended September 30, 2002, four lessees, Golden
Corral Corporation, Jack in the Box Inc., Chevy's, Inc. and Steak & Ale of
Colorado, Inc. and S&A Properties, Corp. (affiliated under common control of
Metromedia Restaurant Group) each contributed more than ten percent of the
Partnership's total rental revenues (including the Partnership's share of rental
revenues from Properties owned by joint ventures and tenants-in-common with
affiliates of the general partners.) It is anticipated that based on the minimum
rental payments required by the leases, these four lessees will continue to
contribute more than ten percent of the Partnership's total rental revenues. In
addition, during the nine months ended September 30, 2002, four restaurant
chains, Golden Corral Family Steakhouse Restaurants, Jack in the Box, Chevy's
Fresh Mex Restaurant and Bennigan's, each accounted for more than ten percent of
the Partnership's total rental revenues (including the Partnership's share of
rental revenues from Properties owned by joint ventures and tenants-in-common
with affiliates of the general partners). It is anticipated that these four
restaurant chains will each continue to account for more than ten percent of the
total rental revenues to which the Partnership is entitled under the terms of
the leases. Any failure of these lessees or restaurant chains could materially
affect the Partnership's income if the Partnership is not able to re-lease the
Properties in a timely manner.
Operating expenses, including depreciation and amortization expense and
provision for write-down of assets, were $578,904 and $1,280,776 for the nine
months ended September 30, 2002 and 2001, respectively, of which $166,937 and
$382,325 were incurred during the quarters ended September 30, 2002 and 2001,
respectively. The decrease in operating expenses during the nine months ended
September 30, 2002, as compared to the same period of 2001, was partially
attributable to a decrease in the costs incurred for administrative expenses for
servicing the Partnership and its Properties and a decrease in the amount of
state tax expenses related to certain states in which the Partnership conducts
business.
The decrease in operating expenses during the quarter and nine months
ended September 30, 2002, as compared to the same periods of 2001, was also
partially attributable to the fact that during the nine months ended September
30, 2001, the Partnership incurred approximately $85,400 pursuant to a judgment
entered against the Partnership in a lawsuit relating to the Property in
Minnetonka, Minnesota. The general partners appealed the judgment but lost and
are considering their options. No such expense was incurred during the quarter
and nine months ended September 30, 2002. In addition, the decrease in operating
expenses during the quarter and nine months ended September 30, 2002, was
partially due to the fact that the Partnership incurred certain property
expenses such as insurance, repairs and maintenance, legal fees and real estate
taxes relating to the vacant Properties owned by the Partnership in each
respective period. Between June 2001 and May 2002, the Partnership sold three of
the vacant Properties and did not incur any additional expenses relating to
these Properties after the sales occurred. However, the Partnership will
continue to incur these expenses relating to the remaining vacant Property until
the Property is sold or until the Partnership finds a new tenant.
During the quarters and six months ended June 30, 2002 and 2001, the
Partnership incurred certain operating expenses relating to the On the Border
Property in San Antonio, Texas because the Partnership owned the building and
leased the land. In 2000, the tenant of this Property vacated the Property and
ceased restaurant operations. In accordance with an agreement executed in
conjunction with the execution of the initial lease, the ground lessor, the
tenant and the Partnership agreed that the Partnership would be provided certain
rights to help protect its interest in the building in the event of a default by
the tenant under the terms of the initial lease. As a result of the default by
the tenant and in order to preserve its interest in the building, during the
nine months ended September 30, 2002 and 2001, the Partnership incurred
approximately $46,200 and $73,200, respectively, in rent expense relating to the
ground lease of the Property. In addition, during the quarter and nine months
ended September 30, 2001, the Partnership recognized a provision for write-down
of assets of $112,109 and $321,239, respectively. The provision represented the
difference between the Property's carrying value and its estimated fair value.
In May 2002, the Partnership sold this Property, and recorded an additional loss
of $25,694, as described above in "Capital Resources."
Effective January 1, 2002, the Partnership adopted Statement of
Financial Accounting Standards No. 144 "Accounting for the Impairment or
Disposal of Long-Lived Assets." This statement requires that a long-lived asset
be tested for recoverability whenever events or changes in circumstances
indicate that its carrying amount may not be recoverable. The carrying amount of
a long-lived asset is not recoverable if it exceeds the sum of the undiscounted
cash flows expected to result from the use and eventual disposition of the
asset. The assessment is based on the carrying amount of the asset at the date
it is tested for recoverability. An impairment loss is recognized when the
carrying amount of a long-lived asset exceeds its fair value. If an impairment
is recognized, the adjusted carrying amount of a long-lived asset is its new
cost basis. The statement also requires that the results of operations of a
component of an entity that either has been disposed of or is classified as held
for sale be reported as a discontinued operation if the disposal activity was
initiated subsequent to the adoption of the Standard.
During the nine months ended September 30, 2002, the Partnership
identified and sold two Properties that met the criteria of this standard and
were classified as Discontinued Operations in the accompanying financial
statements. The two Properties were vacant and the proceeds from the sales were
reinvested in income producing Properties.
As a result of the sale of the Property in San Antonio, Texas, the
Partnership recognized a loss of $25,694, during the nine months ended September
30, 2002. This Property had been identified for sale as of December 31, 2001. As
a result of the sale of the Property in Timonium, Maryland, the Partnership
recognized a loss of $18,855, during the nine months ended September 30, 2001.
As a result of the sale of the Property in Henderson, Nevada the Partnership
recognized a gain of $177,865 during the quarter and nine months ended September
30, 2001.
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 the
Partnership's 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 the
Partnership's disclosure controls and procedures within 90 days prior to the
filing of this Quarterly Report on Form 10-Q and have determined that such
disclosure controls and procedures are effective.
Subsequent to the above evaluation, there were no significant changes
in internal controls or other factors that could significantly affect these
controls, including any corrective actions with regard to significant
deficiencies and material weaknesses.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
In July 1998, DJD Partners VII, LLC filed a lawsuit against Finest
Foodservice, LLC and CNL Income Fund XVIII, Ltd., DJD Partners VII,
LLC v. Finest Foodservice, LLC, et al, Case No. CT 98-014942, in the
District Court of the Fourth Judicial District of Hennepin County,
Minnesota, alleging a breach of a contract entered into by Finest
Foodservice, LLC and assigned to CNL Income Fund XVIII, Ltd. in
connection with the construction of a Boston Market property in
Minnetonka, Minnesota. In October 1998 Finest Foodservice, LLC filed
for bankruptcy and rejected its lease, causing the obligations of the
contract to become the responsibility of CNL Income Fund XVIII, Ltd.
On May 4, 2001, the District Court awarded a judgment of approximately
$85,400 to the plaintiff. CNL Income Fund XVIII, Ltd. appealed the
District Court's judgment but lost. The general partners are
considering their options.
Item 2. Changes in Securities. Inapplicable.
Item 3. Default 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
**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 Assignment of Management Agreement from CNL Fund
Advisors, Inc. to CNL APF Partners, LP. (Filed as
Exhibit 10.2 to Form 10-Q filed with the Securities
and Exchange Commission on August 9, 2001, and
incorporated herein by reference.)
**10.3 Assignment of Management Agreement from CNL APF
Partners, LP to CNL Restaurants XVIII, Inc. (Included
as Exhibit 10.3 to Form 10-Q filed with the Securities
and Exchange Commission on August 13, 2002, and
incorporated herein by reference.)
**10.4 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.)
**10.5 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.)
**10.6 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.)
**10.7 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.)
**10.8 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.)
**10.9 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.)
**10.10 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.)
**10.11 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.)
**10.12 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.)
**10.13 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.)
**10.14 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.)
**10.15 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.)
**99.1 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.)
**99.2 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.)
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter
ended September 30, 2002.
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 6th day of November, 2002.
CNL INCOME FUND XVIII, 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)
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
I, James M. Seneff, Jr., the Chief Executive Officer of CNL Realty
Corporation, the corporate general partner of CNL Income Fund XVIII, Ltd. (the
"registrant"), certify that:
1. I have reviewed this quarterly report on Form 10-Q of the registrant;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
and we have:
a. designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b. evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "Evaluation
Date"); and
c. presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent function):
a. all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b. any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officer and I have indicated in
this quarterly report whether or not there were significant changes
in internal controls or in other factors that could significantly
affect internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
Date: November 6, 2002
/s/ James M. Seneff, Jr.
- -------------------------
James M. Seneff, Jr.
Chief Executive Officer
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
I, Robert A. Bourne, President and Treasurer of CNL Realty Corporation,
the corporate general partner of CNL Income Fund XVIII, Ltd. (the "registrant")
certify that:
1. I have reviewed this quarterly report on Form 10-Q of the registrant;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
and we have:
a. designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b. evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "Evaluation
Date"); and
c. presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent function):
a. all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b. any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officer and I have indicated in
this quarterly report whether or not there were significant changes
in internal controls or in other factors that could significantly
affect internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
Date: November 6, 2002
/s/ Robert A. Bourne
- --------------------------
Robert A. Bourne
President and Treasurer
EXHIBIT INDEX
Exhibit Number
(c) 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 Assignment of Management Agreement from CNL Fund Advisors,
Inc. to CNL APF Partners, LP. (Filed as Exhibit 10.2 to
Form 10-Q filed with the Securities and Exchange
Commission on August 9, 2001, and incorporated herein by
reference.)
**10.3 Assignment of Management Agreement from CNL APF Partners,
LP to CNL Restaurants XVIII, Inc. (Included as Exhibit
10.3 to Form 10-Q filed with the Securities and Exchange
Commission on August 13, 2002, and incorporated herein by
reference.)
**10.4 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.)
**10.5 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.)
**10.6 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.)
**10.7 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.)
**10.8 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.)
**10.9 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.)
**10.10 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.)
**10.11 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.)
**10.12 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.)
**10.13 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.)
**10.14 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.)
**10.15 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.)
**99.1 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.)
**99.2 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 99.1
EXHIBIT 99.2