424(b)(3)
No. 33-90998
CNL INCOME FUND XVII, LTD.
AND
CNL INCOME FUND XVIII, LTD.
This Supplement is part of, and should be read in conjunction with, the
Prospectus dated August 11, 1995 and the Prospectus Supplement dated May 3,
1996. This Supplement replaces the Supplement dated May 15, 1996.
Capitalized terms used in this Supplement have the same meaning as in the
Prospectus unless otherwise stated herein.
All subscriptions are for the purchase of Units of CNL Income Fund XVII,
Ltd. ("CNL XVII"). No offers are being made nor are the General Partners
accepting subscriptions for Units of CNL Income Fund XVIII, Ltd. THE
ACQUISITION OF UNITS OF ONE PARTNERSHIP WILL NOT ENTITLE THE INVESTOR TO ANY
OWNERSHIP INTEREST IN THE OTHER PARTNERSHIP OR ITS PROPERTIES.
Information as to proposed properties for which CNL XVII has received
initial commitments and as to the number and types of Properties acquired by
CNL XVII is presented as of May 28, 1996, and all references to commitments or
Property acquisitions should be read in that context. Proposed properties for
which CNL XVII receives initial commitments, as well as property acquisitions
that occur after May 28, 1996, will be reported in a subsequent Supplement.
THE OFFERING
SUBSCRIPTION PROCEDURES
As of May 28, 1996, CNL XVII had received total subscription proceeds of
$17,751,777 (1,775,178 Units) from 1,073 limited partners. As of May 28,
1996, CNL XVII had invested or committed for investment approximately
$12,100,000 of such proceeds in ten Properties and to pay acquisition fees and
miscellaneous acquisition expenses, leaving approximately $3,200,000 in
offering proceeds available for investment in properties. As of May 28, 1996,
CNL XVII had incurred $798,830 in Acquisition Fees to an Affiliate of the
General Partners.
BUSINESS
PROPERTY ACQUISITIONS
Between April 25, 1996 and May 28, 1996, CNL XVII acquired two
properties. The Properties are a Wendy's Property (in Knoxville, Tennessee)
and a Jack in the Box Property (in Dinuba, California). For information
regarding the eight Properties acquired by the Partnership prior to April 25,
1996, see the Prospectus Supplement dated May 3, 1996.
In connection with the purchase of the each of these two Properties, CNL
XVII, as lessor, entered into a long-term lease agreement with an unaffiliated
lessee. The general terms of the lease agreements are described in the
section of the Prospectus entitled "Business - Description of Leases."
May 30, 1996 Prospectus Dated August 11, 1995
In addition, in connection with the purchase of each of these two
Properties, which are to be constructed, CNL XVII has entered into development
and indemnification and put agreements with the lessees. The general terms of
these agreements are described in the section of the Prospectus entitled
"Business - Site Selection and Acquisition of Properties - Construction and
Renovation."
As of May 28, 1996, CNL XVII had initial commitments to acquire four
additional properties. The acquisition of each of these properties is subject
to the fulfillment of certain conditions, including, but not limited to, a
satisfactory environmental survey and property appraisal. There can be no
assurance that any or all of the conditions will be satisfied or, if
satisfied, that one or more of these properties will be acquired by CNL XVII.
If acquired, the leases of all four of these properties are expected to be
entered into on substantially the same terms described in the Prospectus in
the section entitled "Business - Description of Leases," except as described
below.
In connection with the Wendy's property in Carmel Mountain, California,
CNL XVII anticipates owning only the building and not the underlying land.
However, CNL XVII anticipates entering into a tri-party agreement with the
lessee and the landlord of the land in order to provide CNL XVII with certain
rights with respect to the land on which the building is located.
Set forth below are summarized terms expected to apply to the leases for
each of the properties. More detailed information relating to a property and
its related lease will be provided at such time, if any, as the property is
acquired.
<TABLE>
<CAPTION>
Lease Term and
Property Renewal Options Minimum Annual Rent Percentage Rent Option to Purchase
-------- --------------- ------------------- --------------- ------------------
<S> <C> <C> <C> <C>
Burger King 20 years; two five-year 10.75% of Total Cost for each leaseyear, None
Munster, IN renewal options (1) (i) 8.5% of annual
Restaurant to be gross sales minus
constructed (ii) the minimum
annualrent for such
lease year
Burger King 20 years; two five- 10.75%of Total Cost for each lease None
Tinley Park, IL year renewal options (1) year, (i) 8.5% of
Restaurant to be annual gross sales
constructed minus (ii) the
minimum annual rent
for such lease year
Wendy's (2) 20 years; three five- 11.98% of CNL XVII's for each lease year, upon the expiration
Carmel Mountain, CA year renewal options total cost to purchase (i) 6% of annual of the initial term
Existing restaurant the building; gross sales times the of the lease and
increases by 8% after Building Overage during any renewal
the fifth lease year Multiplier (3) minus period thereafter
and after every five (ii) the minimum (4)
years thereafter annual rent for such
during the lease term lease year
Wendy's 20 years; two five-year 10.25% of Total Cost; for each lease at any time after
Livingston, TN renewal options increases to 10.76% of year, (i) 6% of the seventh lease
Restaurant to be Total Cost during the annual gross sales year
constructed fourth through sixth minus (ii) the
lease years, 11.95% of minimum annual rent
Total Cost during the for such lease year
seventh through tenth
lease years, 12.70% of
Total Cost during the
eleventh through
fifteenth lease years,
and 13.97% of Total
Cost during the
sixteenth through
twentieth lease years
(1)
- ------------------------------------------------------
FOOTNOTES:
(1) The "Total Cost" is equal to the sum of (i) the purchase price of the property, (ii) closing costs,
and (iii) actual development costs incurred under the development agreement.
(2) CNL XVII anticipates owning only the building for this property. CNL XVII will not own the underlying
land; although, CNL XVII anticipates entering into a tri-party agreement with the lessee and the
landlord of the land in order to provide CNL XVII with certain rights with respect to the land on
which the building is located.
(3) The "Building Overage Multiplier" is calculated as follows:
Building Overage Multiplier = (purchase price of the building)/[purchase price of the building +
(initial annual rent due under the land lease/10.5%)]
(4) In the event that the aggregate amount of percentage rent paid by the lessee to CNL XVII over the term
of the lease shall equal or exceed 15% of the purchase price of the building paid by CNL XVII, then
the option purchase price shall equal one dollar. In the event that the aggregate amount of
percentage rent paid by the lessee to CNL XVII over the term of the lease shall be less than 15% of
the purchase price paid by CNL XVII, then the option purchase price shall equal the difference of 15%
of the purchase price of the building paid by CNL XVII, less the aggregate amount of percentage rent
paid by the lessee to CNL XVII over the term of the lease.
</TABLE>
The following table sets forth the location of the two Properties
acquired by CNL XVII from April 25, 1996 through May 28, 1996, a description
of the competition, and a summary of the principal terms of the acquisition
and lease of each Property.
<TABLE>
PROPERTY ACQUISITIONS
From April 25, 1996 through May 28, 1996
<CAPTION>
Lease Expira-
Property Location and Purchase Date tion and Minimum Option
Competition Price (1) Acquired Renewal Options Annual Rent (2) Percentage Rent To Purchase
--------------------- --------- -------- --------------- --------------- --------------- -----------
<S> <C> <C> <C> <C> <C> <C>
WENDY'S $320,543 05/08/96 05/2016; two 10.25% of Total for each lease at any time
(the "Knoxville Property") (excluding five-year Cost; increases year, (i) 6% of after the
Restaurant to be constructed closing and renewal options to 10.76% of annual gross seventh
development Total Cost sales minus (ii) lease year
The Knoxville Property is costs) (3) during the the minimum
located on the north side of fourth through annual rent for
Emory Road at the north corner sixth lease such lease year
of Dean Rutherford Road in years, 11.95% of
Knoxville, Knox County, Total Cost
Tennessee, in an area of during the
primarily retail, commercial, seventh through
and residential development. tenth lease
Other fast-food and family- years, 12.70% of
style restaurants located in Total Cost
proximity to the Knoxville during the
Property include a McDonald's, eleventh through
a Subway Sandwich Shop, a Taco fifteenth lease
Bell, a Waffle House, a years, and
Hardee's, and several local 13.97% of Total
restaurants. Cost during the
sixteenth
through
twentieth lease
years (4)
JACK IN THE BOX $312,763 05/22/96 05/2014; four 10.75% of Total for each lease at any time
(the "Dinuba Property") (excluding five-year Cost (4); year, (i) 5% of after the
Restaurant to be constructed closing and renewal options increases by 8% annual gross seventh
development after the fifth sales minus (ii) lease year
The Dinuba Property is located costs) (3) lease year and the minimum
on the south side of El Monte by 10% after annual rent for
Way in Dinuba, Tulare County, every five years such lease year
California, in an area of thereafter (5)
primarily retail, commercial during the lease
and residential development. term
Other fast-food and family-
style restaurants in proximity
to the Dinuba Property include
a KFC, a McDonald's, a Pizza
Hut, a Burger King, and a
Subway.
- -----------------------------------------------------------
FOOTNOTES:
(1) The estimated federal income tax basis of the depreciable portion (the building portion) of each of
the construction properties, once the buildings are constructed, is set forth below:
Property Federal Tax Basis
-------- -----------------
Knoxville Property $482,000
Dinuba Property 543,000
(2) Minimum annual rent for the Knoxville Property will become due and payable on the earlier of (i) the
date the certificate of occupancy for the restaurant is issued, (ii) the date the restaurant opens for
business to the public, (iii) 120 days after execution of the lease or (iv) the date the tenant
receives from the landlord its final funding of the construction costs. For the Dinuba Property,
minimum annual rent will become due and payable on the earlier of (i) the date the restaurant opens
for business to the public or (ii) 180 days after the execution of the lease. During the period
commencing with the effective date of the lease to the date minimum annual rent becomes payable for
the Knoxville and Dinuba Properties, the tenants shall pay "interim rent" equal to 10.25% and 10.75%,
respectively, times the amount funded by CNL XVII in connection with the purchase and construction of
these Properties.
(3) The development agreements for Properties on which restaurants are to be constructed provide that
construction must be completed no later than the dates set forth below. The maximum cost to CNL XVII
(including the purchase price of the land, development costs (if applicable), and closing and
acquisition costs) is not expected to, but may, exceed the amounts set forth below:
Estimated
Property Maximum Cost Estimated Final Completion Date
-------- ------------ -------------------------------
Knoxville Property $800,924 September 5, 1996
Dinuba Property 824,128 November 18, 1996
(4) The "Total Cost" is equal to the sum of (i) the purchase price of the Property, (ii) closing costs,
and (iii) actual development costs incurred under the development agreement.
(5) Percentage rent shall be calculated on a calendar year basis (January 1 to December 31).
</TABLE>
<TABLE>
PRO FORMA ESTIMATE OF TAXABLE INCOME OF
CNL INCOME FUND XVII, LTD.
GENERATED FROM THE OPERATIONS OF PROPERTIES ACQUIRED FROM APRIL 25, 1996
THROUGH MAY 28, 1996
FOR A 12-MONTH PERIOD (UNAUDITED)
The following schedule represents pro forma unaudited estimates of taxable income of each Property
acquired by CNL XVII from April 25, 1996 through May 28, 1996, for the 12-month period commencing on the
date of the inception of the respective lease on such Property. The schedule should be read in light of the
accompanying footnotes.
These estimates do not purport to present actual or expected operations of CNL XVII for any period in
the future. These estimates were prepared on the basis described in the accompanying notes which should be
read in conjunction herewith. No single lessee or group of affiliated lessees lease Properties with an
aggregate purchase price in excess of 20% of the expected total net offering proceeds of CNL XVII.
<CAPTION>
Wendy's Jack in the Box
Knoxville, TN (5) Dinuba, CA (5) Total
----------------- --------------- --------
<S> <C> <C> <C>
Pro Forma Estimate of Taxable
Income:
Base Rent (1) $ 78,937 $ 85,186 $164,123
Management Fees (2) (789) (852) (1,641)
General and Administrative
Expenses (3) (3,947) (4,259) (8,206)
-------- -------- --------
Estimated Cash Available from
Operations 74,201 80,075 154,276
Depreciation Expense (4) (12,051) (13,565) (25,616)
-------- -------- --------
Pro Forma Estimate of Taxable
Income of CNL XVII $ 62,150 $ 66,510 $128,660
======== ======== ========
See Footnotes
- ----------------------------------------------------------------
FOOTNOTES:
(1) Base rent does not include percentage rents which become due if specified levels of gross receipts are
achieved.
(2) The Properties will be managed pursuant to a management agreement between CNL XVII and an Affiliate of
the General Partners, pursuant to which the Affiliate will receive an annual management fee in an
amount equal to one percent of the gross revenues that CNL XVII earns from its Properties. See
"Management Compensation."
(3) Estimated at five percent of gross rental income based on the previous experience of Affiliates of the
General Partners with 16 public limited partnerships which own properties similar to that owned by CNL
XVII.
(4) The estimated federal tax basis of the depreciable portion (the building portion) of the Properties
has been depreciated on the straight-line method over 40 years.
(5) The development agreements for the Properties which are to be constructed provide that construction
must be completed no later than the dates set forth below:
Property Estimated Final Completion Date
-------- -------------------------------
Knoxville Property September 5, 1996
Dinuba Property November 18, 1996
</TABLE>
