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 June 30, 2003
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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 ____
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
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 5-7
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 12-14
CNL INCOME FUND XVIII, LTD.
(A Florida Limited Partnership)
CONDENSED BALANCE SHEETS
June 30, December 31,
2003 2002
------------------ ------------------
ASSETS
Real estate properties with operating leases, net $ 17,279,474 $ 17,453,524
Net investment in direct financing leases 2,045,408 2,064,258
Real estate held for sale -- 1,420,626
Investment in joint ventures 3,174,526 3,185,337
Cash and cash equivalents 1,932,337 429,481
Receivables, less allowance for doubtful
accounts of $188,340 and $104,228, respectively 15,457 945
Accrued rental income 482,659 456,857
Other assets 13,289 10,504
------------------ ------------------
$ 24,943,150 $ 25,021,532
================== ==================
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 11,127 $ 4,178
Real estate taxes payable 13,292 12,204
Distributions payable 700,000 700,000
Due to related parties 66,080 17,762
Rents paid in advance 56,895 35,840
Deferred rental income 2,661 4,661
------------------ ------------------
Total liabilities 850,055 774,645
Partners' capital 24,093,095 24,246,887
------------------ ------------------
$ 24,943,150 $ 25,021,532
================== ==================
See accompanying notes to condensed financial statements.
CNL INCOME FUND XVIII, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF INCOME
Quarter Ended Six Months Ended
June 30, June 30,
2003 2002 2003 2002
------------ -------------- -------------- --------------
Revenues:
Rental income from operating leases $ 484,183 $ 458,130 $ 965,998 $ 924,574
Earned income from direct financing leases 43,443 58,748 83,134 138,838
Interest and other income 978 706 6,870 2,450
------------ -------------- -------------- --------------
528,604 517,584 1,056,002 1,065,862
------------ -------------- -------------- --------------
Expenses:
General operating and administrative 38,367 44,906 94,572 112,472
Property related 10,466 42,500 24,420 108,970
Management fees to related parties 7,136 6,898 12,844 13,245
State and other taxes -- 612 7,425 8,727
Depreciation and amortization 87,830 73,948 175,658 151,517
------------ -------------- -------------- --------------
143,799 168,864 314,919 394,931
------------ -------------- -------------- --------------
Income Before Loss on Sale of Assets and Equity
in Earnings of Joint Ventures 384,805 348,720 741,083 670,931
Loss on Sale of Assets -- (25,694 ) -- (25,694 )
Equity in Earnings of Joint Ventures 77,586 78,055 155,312 155,821
------------ -------------- -------------- --------------
Income from Continuing Operations 462,391 401,081 896,395 801,058
------------ -------------- -------------- --------------
Discontinued Operations:
Income (Loss) from discontinued operations 40,700 (305,518 ) 75,937 (280,038 )
Gain on disposal of discontinued operations 273,876 -- 273,876 --
------------ -------------- -------------- --------------
314,576 (305,518 ) 349,813 (280,038 )
------------ -------------- -------------- --------------
Net Income $ 776,967 $ 95,563 $ 1,246,208 $ 521,020
============ ============== ============== ==============
Income (Loss) Per Limited Partner Unit:
Continuing operations $ 0.13 $ 0.12 $ 0.26 $ 0.23
Discontinued operations 0.09 (0.09 ) 0.10 (0.08 )
------------ -------------- -------------- --------------
$ 0.22 $ 0.03 $ 0.36 $ 0.15
============ ============== ============== ==============
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
Six Months Ended Year Ended
June 30, December 31,
2003 2002
--------------------- -------------------
General partners:
Beginning balance $ (5,319 ) $ (5,319 )
Net income -- --
--------------------- -------------------
(5,319 ) (5,319 )
--------------------- -------------------
Limited partners:
Beginning balance 24,252,206 26,675,136
Net income 1,246,208 377,070
Distributions ($0.40 and $0.80 per
limited partner unit, respectively) (1,400,000 ) (2,800,000 )
--------------------- -------------------
24,098,414 24,252,206
--------------------- -------------------
Total partners' capital $ 24,093,095 $ 24,246,887
===================== ===================
See accompanying notes to condensed financial statements.
CNL INCOME FUND XVIII, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF CASH FLOWS
Six Months Ended
June 30,
2003 2002
--------------- --------------
Increase (Decrease) in Cash and Cash Equivalents
Net Cash Provided by Operating Activities $ 1,160,030 $ 1,009,994
--------------- --------------
Cash Flows from Investing Activities:
Addition to real estate properties with operating leases -- (2,090,604 )
Proceeds from sale of assets 1,742,826 951,629
Decrease in restricted cash -- 1,663,401
Investment in joint ventures -- (215,191 )
--------------- --------------
Net cash provided by investing activities 1,742,826 309,235
--------------- --------------
Cash Flows from Financing Activities:
Loans from corporate general partner 650,000 375,000
Repayment of loans from corporate general partner (650,000 ) (375,000 )
Distributions to limited partners (1,400,000 ) (1,400,000 )
--------------- --------------
Net cash used in financing activities (1,400,000 ) (1,400,000 )
--------------- --------------
Net Increase (Decrease) in Cash and Cash Equivalents 1,502,856 (80,771 )
Cash and Cash Equivalents at Beginning of Period 429,481 226,136
--------------- --------------
Cash and Cash Equivalents at End of Period $ 1,932,337 $ 145,365
=============== ==============
Supplemental Schedule of Non-Cash Investing and Financing Activities:
Deferred real estate disposition fee incurred and unpaid at
end of period $ 54,000 $ --
=============== ==============
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 Six Months Ended June 30, 2003 and 2002
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 quarter and six months ended June 30, 2003 may not be
indicative of the results that may be expected for the year ending
December 31, 2003. Amounts as of December 31, 2002, 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, 2002.
In January 2003, FASB issued FASB Interpretation No. 46 ("FIN 46"),
"Consolidation of Variable Interest Entities" to expand upon and
strengthen existing accounting guidance that addresses when a company
should include the assets, liabilities and activities of another entity
in its financial statements. To improve financial reporting by
companies involved with variable interest entities (more commonly
referred to as special-purpose entities or off-balance sheet
structures), FIN 46 requires that a variable interest entity be
consolidated by a company if that company is subject to a majority risk
of loss from the variable interest entity's activities or entitled to
receive a majority of the entity's residual returns or both. Prior to
FIN 46, a company generally included another entity in its consolidated
financial statements only if it controlled the entity through voting
interests. The consolidation requirements of FIN 46 apply immediately
to variable interest entities created after January 31, 2003, and to
older entities, in the first fiscal year or interim period beginning
after June 15, 2003. The general partners believe adoption of this
standard may result in either consolidation or additional disclosure
requirements with respect to the Partnership's unconsolidated joint
ventures, which are currently accounted for under the equity method.
However, such consolidation is not expected to significantly impact the
Partnership's results of operations.
2. Reclassification:
Certain items in the prior year's financial statements have been
reclassified to conform to 2003 presentation. These reclassifications
had no effect on total partners' capital or net income.
3. Discontinued Operations:
During 2002, the Partnership identified and sold two properties that
were classified as Discontinued Operations in the accompanying
financial statements. Both of the properties became vacant prior to
2002. In addition, in June 2003, the Partnership sold its property in
Destin, Florida and recorded a gain on disposal of assets of
approximately $273,900 during the quarter and six months ended June 30,
2003.
The operating results of the discontinued operations for the these
three properties are as follows:
CNL INCOME FUND XVIII, LTD.
(A Florida Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS
Quarter and Six Months Ended June 30, 2003 and 2002
3. Discontinued Operations - Continued:
Quarter Ended June 30, Six Months Ended June 30,
2003 2002 2003 2002
------------- -------------- --------------- --------------
Rental revenues $ 41,044 41,075 $ 82,119 $ 82,150
Expenses (344 ) (24,121 ) (6,182 ) (39,716 )
Provision for write-down of assets -- (322,472 ) -- (322,472 )
------------- -------------- --------------- --------------
Income (loss) from discontinued
operations $ 40,700 $(305,518 ) $ 75,937 $ (280,038 )
============= ============== =============== ==============
4. Related Party Transactions:
An affiliate of the Partnership is entitled to receive a deferred,
subordinated real estate disposition fee, payable upon the sale of one
or more properties, based on the lesser of one-half of a competitive
real estate commission or three percent of the sales price if the
affiliate provides a substantial amount of services in connection with
the sales. However, if the net sales proceeds are reinvested in a
replacement property, no such real estate disposition fees will be
incurred until such replacement property is sold and the net sales
proceeds are distributed. The payment of the real estate disposition
fee is subordinated to the receipt by the limited partners of their
aggregate, 8% Return, plus their invested capital contributions. During
the quarter and six months ended June 30, 2003, the Partnership
incurred a deferred, subordinated real estate disposition fee of
$54,000 as a result of the Partnership's sale of the property in
Destin, Florida.
5. 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 June
30:
2003 2002
--------------- ---------------
Golden Corral Corporation $ 327,518 $ 328,806
Metromedia Restaurant Group (S&A
Properties Corporation and Steak
and Ale of Colorado, Inc.) 225,879 222,382
Jack in the Box Inc. 192,390 190,722
Carrols Corp. and Texas Taco Cabana,
LP (under common control of
Carrols Corp.) 162,995 N/A
Chevy's, Inc. 134,393 134,393
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
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 June 30:
CNL INCOME FUND XVIII, LTD.
(A Florida Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS
Quarter and Six Months Ended June 30, 2003 and 2002
5. Concentration of Credit Risk - Continued:
2003 2002
-------------- -------------
Golden Corral Family Steakhouse
Restaurants $ 327,518 $ 328,806
Bennigan's 225,879 222,382
Jack in the Box 192,390 190,722
Chevy's Fresh Mex 134,393 134,393
The information denoted by N/A indicates that for the period presented,
the tenant did not represent more than 10% of the Partnership's total
rental revenues.
Although the Partnership's properties have some geographical diversity
in the United States and the Partnership's lessees operate a variety of
restaurant concepts, default by any one of these lessees or restaurant
chains will significantly impact the Partnership's operating results 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 June 30, 2002 and 2003, the Partnership owned 17 Properties
directly and five Properties indirectly through joint venture or tenancy in
common arrangements.
Capital Resources
Cash from operating activities was $1,160,030 and $1,009,994 for the
six months ended June 30, 2003 and 2002, respectively. The increase in cash from
operating activities during the six months ended June 30, 2003, as compared to
the same period of 2002, was the result of changes in the Partnership's working
capital and changes in the Partnership's income and expenses. Other sources and
uses of cash included the following during the six months ended June 30, 2003.
In June 2003, the Partnership sold its Property in Destin, Florida, to
a third party and received net sales proceeds of approximately $1,742,800,
resulting in a gain on disposal of assets of approximately $273,900. In
connection with the sale, the Partnership incurred a deferred, subordinated real
estate disposition fee of $54,000. Payment of the real estate disposition fee is
subordinated to the receipt by the limited partners of their aggregate 8%
Return, plus their invested capital contributions. The Partnership intends to
use the net sales proceeds to pay liabilities of the Partnership, including
distributions to the limited partners.
During the six months ended June 30, 2003, the Partnership entered into
two different promissory notes, each with the corporate general partner, for
loans in the aggregate amount of $650,000 in connection with the operations of
the Partnership. The loans were uncollateralized, non-interest bearing and due
on demand. As of June 30, 2003, the Partnership repaid the loans in full to the
corporate general partner.
At June 30, 2003, the Partnership had $1,932,337 in cash and cash
equivalents, as compared to $429,481 at December 31, 2002. At June 30, 2003,
these funds were held in demand deposit accounts at commercial banks. The
increase in cash and cash equivalents at June 30, 2003, as compared to December
31, 2002, was due to the Partnership holding the sales proceeds from the sale of
the Property in Destin, Florida. The funds remaining at June 30, 2003, after the
payment of distributions and other liabilities, will be used to meet the
Partnership's working capital needs.
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.
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 six months ended June 30, 2003, the sales
proceeds from the sale of the Property in Destin, Florida, the Partnership
declared distributions to limited partners of $1,400,000 for each of the six
months ended June 30, 2003 and 2002, ($700,000 for each of the quarters ended
June 30, 2003 and 2002). This represents distributions of $0.40 per unit for
each of the six months ended June 30, 2003 and 2002, ($0.20 per unit for each
applicable quarter). No distributions were made to the general partners for the
quarters and six months ended June 30, 2003 and 2002. No amounts distributed to
the limited partners for the six months ended June 30, 2003 and 2002 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.
If the general partners do not elect to make additional capital contributions or
loans to the Partnership, the Partnership may consider lowering the distribution
rate.
Total liabilities of the Partnership, including distributions payable,
were $850,055 at June 30, 2003, as compared to $774,645 at December 31, 2002.
The increase in liabilities at June 30, 2003, as compared to December 31, 2002,
was due to an increase in amounts payable to related parties and an increase in
rents paid in advance at June 30, 2003, as compared to December 31, 2002. The
general partners believe that the Partnership has sufficient cash on hand to
meet its current working capital needs.
Long-Term Liquidity
The Partnership has no long-term debt or other long-term liquidity
requirements.
Results of Operations
Total rental revenues were $1,049,132 during the six months ended June
30, 2003, as compared to $1,063,412 during the same period of 2002, $527,626 and
$516,878 of which were earned during the second quarters of 2003 and 2002,
respectively. Rental revenues were lower during the six months ended June 30,
2003 because the Partnership stopped recording rental revenues relating to the
Property in Stow, Ohio when the tenant experienced financial difficulties during
2002. During the quarters and six months ended June 30, 2003 and 2002, the
Partnership did not record rental revenues relating to the Property in
Minnetonka, Minnesota because the lease was rejected by the tenant in 1998 in
connection with the tenant's bankruptcy proceedings. The lost revenues resulting
from these two Properties will continue to have an adverse effect on the cash
from operations and results of operations of the Partnership until the
Partnership is able to re-lease the Property in Stow, Ohio and resolve the
outstanding issues relating to the Property in Minnetonka, Minnesota. The
decrease in rental revenues was partially offset by the rental revenues from a
Property acquired in June 2002.
The Partnership also earned $155,312 attributable to net income earned
by joint ventures during the six months ended June 30, 2003, as compared to
$155,821 during the same period of 2002, $77,586 and $78,055 of which were
earned during the quarters ended June 30, 2003 and 2002, respectively. Net
income earned by joint ventures during the six months ended June 30, 2003,
remained constant, as compared to same period in 2002, because there were no
changes in the leased Property portfolio owned by the joint ventures and the
tenancies in common.
During the six months ended June 30, 2003, five lessees of the
Partnership, Golden Corral Corporation, S&A Properties Corporation and Steak and
Ale of Colorado, Inc. (under common control of Metromedia Restaurant Group,
hereinafter referred to as Metromedia Restaurant Group), Jack in the Box Inc.,
Carrols Corporation and Texas Taco Cabana, LP (which are affiliated entities
under common control, hereinafter referred to as Carrols Corp.), and Chevy's,
Inc. each contributed more than 10% of the Partnership's total rental revenues
(including the Partnership's share of rental revenues from Properties owned by
joint ventures and Properties owned with affiliates of the general partners as
tenants-in-common). It is anticipated that, based on the minimum rental payments
required by the leases, these five tenants will continue to contribute more than
10% of the Partnership's total rental revenues. In addition, four restaurant
chains, Golden Corral Family Steakhouse Restaurants, Bennigan's, Jack in the
Box, and Chevy's Fresh Mex, each accounted for more than 10% of the
Partnership's total rental revenues, (including the Partnership's share of the
rental revenues from Properties owned by joint ventures and Properties owned
with affiliates of the general partners as tenants-in-common). It is anticipated
that these four restaurant chains, each will continue to account for more than
10% of total rental revenues to which the Partnership is entitled under the
terms of the leases. Any failure of these lessees or any of these restaurant
chains will materially affect the Partnership's operating results, if the
Partnership is not able to re-lease these Properties in a timely manner.
Operating expenses, including depreciation and amortization expense,
were $314,919 during the six months ended June 30, 2003, as compared to $394,931
during the same period of 2002, $143,799 and $168,864 of which were incurred
during the quarters ended June 30, 2003 and 2002, respectively. Operating
expenses were lower during the quarter and six months ended June 30, 2003, due
to a decrease in property expenses related to vacant Properties. During the
quarter and six months ended June 30, 2002, 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 quarter and six months ended
June 30, 2002, the Partnership incurred approximately $46,200 in rent expense
relating to the ground lease of the Property. In May 2002, the Partnership sold
this Property and did not incur additional expenses relating to this Property
once it was sold. The Partnership will continue to incur Property expenses
relating to the Properties in Minnetonka, Minnesota and Stow, Ohio until the
Partnership is able to re-lease the Property in Stow, Ohio and resolve the
outstanding issues relating to the Property in Minnetonka, Minnesota.
In addition, operating expenses were lower during the quarter and six
months ended June 30, 2003 due to a decrease in the costs incurred for
administrative expenses for servicing the Partnership and its Properties. The
decrease was partially offset by an increase in depreciation expense related to
the acquisition of a Property in June 2002.
As a result of the sale of the On the Border Property in San Antonio,
Texas, the Partnership recognized a loss of approximately $25,700, during the
quarter and six months ended June 30, 2002. This Property had been identified
for sale as of December 31, 2001 and therefore, was not subject to
classification as Discontinued Operations.
During the year ended December 31, 2002, the Partnership identified for
sale two Properties that were classified as Discontinued Operations in the
accompanying financial statements. Both Properties were vacant prior to 2002. In
addition, in March 2003, the Partnership identified for sale its Property in
Destin, Florida. The Partnership recognized net rental income (rental revenues
less Property related expenses) of $16,954 and $42,434 during the quarter and
six months ended June 30, 2002, respectively, relating to these three
Properties. The Partnership sold the Boston Market Property in San Antonio,
Texas in May 2002. Because the Partnership had recorded provisions for
write-down of assets in previous years, no gain or loss was recorded during the
six months ended June 30, 2002 relating to the sale of this Property. In
anticipation for the sale of the Property in Raleigh, North Carolina, the
Partnership recorded a provision for write-down of assets of approximately
$322,500 during the quarter and six months ended June 30, 2002. The provision
represented the difference between the Property's net carrying value and its
estimated fair value. The Partnership sold this Property subsequent to June 30,
2002. In June 2003, the Partnership sold the Property in Destin, Florida and
recorded a gain on disposal of discontinued operations of approximately
$273,900. The Partnership recognized net rental income of $40,700 and $75,937
during the quarter and six months ended June 30, 2003, relating to this
Property.
In January 2003, FASB issued FASB Interpretation No. 46 ("FIN 46"),
"Consolidation of Variable Interest Entities" to expand upon and strengthen
existing accounting guidance that addresses when a company should include the
assets, liabilities and activities of another entity in its financial
statements. To improve financial reporting by companies involved with variable
interest entities (more commonly referred to as special-purpose entities or
off-balance sheet structures), FIN 46 requires that a variable interest entity
be consolidated by a company if that company is subject to a majority risk of
loss from the variable interest entity's activities or entitled to receive a
majority of the entity's residual returns or both. Prior to FIN 46, a company
generally included another entity in its consolidated financial statements only
if it controlled the entity through voting interests. The consolidation
requirements of FIN 46 apply immediately to variable interest entities created
after January 31, 2003, and to older entities, in the first fiscal year or
interim period beginning after June 15, 2003. The general partners believe
adoption of this standard may result in either consolidation or additional
disclosure requirements with respect to the Partnership's unconsolidated joint
ventures, which are currently accounted for under the equity method. However,
such consolidation is not expected to significantly impact the Partnership's
results of operations.
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 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.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings. Inapplicable.
------------------
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.)
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.)
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended
June 30, 2003.
**Previously filed.
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 August, 2003.
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)
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.)
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.)
**Previously filed.
EXHIBIT 31.1
EXHIBIT 31.2
EXHIBIT 32.1
EXHIBIT 32.2