FILED PURSUANT TO RULE 424(B)(3)
FILE 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 July 31,
1996. This Supplement replaces the Supplements dated July 31, 1996 and August
12, 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 September 17, 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 September 17, 1996, will be reported in a subsequent
Supplement.
THE OFFERING
SUBSCRIPTION PROCEDURES
As of September 17, 1996, CNL XVII had received total subscription proceeds
of $29,014,335 (2,901,434 Units) from 1,588 limited partners. As of September
17, 1996, CNL XVII had invested or committed for investment approximately
$19,900,000 of such proceeds in 19 Properties and to pay Acquisition Fees and
miscellaneous Acquisition Expenses, leaving approximately $5,600,000 in offering
proceeds available for investment in Properties. As of September 17, 1996, CNL
XVII had incurred $1,305,645 in Acquisition Fees to an Affiliate of the General
Partners.
BUSINESS
PROPERTY ACQUISITIONS
Between July 11, 1996 and September 17, 1996, CNL XVII acquired four
Properties. The Properties are a Boston Market Property (in Troy, Ohio), a
Popeyes Property (in Warner Robins, Georgia), a Fazoli's Property (in Warner
Robins, Georgia) and a Denny's Property (in Pensacola, Florida). For information
regarding the 15 Properties acquired by CNL XVII prior to July 11, 1996, see the
Prospectus Supplement dated July 31, 1996.
In connection with the purchase of each of these four 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."
September 24, 1996 Prospectus Dated August 11, 1995
<PAGE>
For the Properties that are to be constructed or renovated, 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 September 17, 1996, CNL XVII had initial commitments to acquire three
additional properties, including one property as tenants-in-common with an
Affiliate of the General Partners. The initial commitment for the Boston Market
property in Fayetteville, North Carolina, was entered into on September 17,
1996. 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
three 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.
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.
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<PAGE>
<TABLE>
<CAPTION>
Lease Term and
Property Renewal Options Minimum Annual Rent Percentage Rent Option to Purchase
<S> <C>
Burger King 20 years; two five- 10.75% of Total for each lease None
Munster, IN year renewal Cost (1) year, (i) 8.5% of
Restaurant to be options annual gross sales
constructed minus (ii) the
minimum annual rent
for such lease year
Burger King 20 years; two five- 11% of Total cost for each lease None
Lyons, IL year renewal (1) year, (i) 8.5% of
Restaurant to be options annual gross sales
constructed minus (ii) the
minimum annual rent
for such lease year
Boston Market 15 years; five 10% of CNL XVII's for each lease year at any time after
Fayetteville, NC five-year renewal total cost to after the fifth the fifth lease
Existing restaurant options purchase the lease year, (i) 5% year
property; increases of annual gross
to 10.81% of total sales minus (ii)
cost during the the minimum annual
third through fifth rent for such lease
lease years, 11.55% year
of total cost
during the sixth
through tenth lease
years, and 12.71%
of total cost
during the eleventh
through fifteenth
lease years
</TABLE>
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.
- 3 -
<PAGE>
The following table sets forth the location of the four
Properties acquired by CNL XVII from July 11, 1996 through September 17, 1996, a
description of the competition, and a summary of the principal terms of the
acquisition and lease of each Property.
- 4 -
<PAGE>
PROPERTY ACQUISITIONS
From July 11, 1996 through September 17, 1996
<TABLE>
<CAPTION>
Lease
Expiration
Purchase and Option
Property Location and Price Date Renewal Minimum To
Competition (1) Acquired Options Annual Rent (2) Percentage Rent Purchase
<S> <C>
Boston Market $857,487 07/24/96 07/2011; five $89,007; for each lease at any
(the "Troy Property") (excluding five-year increases by year after the time after
Existing restaurant closing renewal 10% after the fifth lease the fifth
costs) options fifth lease year, (i) 5% of lease year
The Troy Property is located year and after annual gross
within the Troy Towne Center, every five sales minus
accessed via an access drive years (ii) the
from West Main Street, in Troy, thereafter minimum annual
Miami County, Ohio, in an area during the rent for such
of primarily retail, commercial lease term lease year
and residential development.
Other fast-food and family-
style restaurants located in
proximity to the Troy Property
include a Bob Evans Restaurant,
a Steak N Shake, a KFC, an
Applebee's, a Burger King, a
Golden Corral Family Steakhouse
Restaurant, a McDonald's, a
Taco Bell, a Friendly's, an
Arby's, and a Wendy's
Popeyes (7) $249,765 08/05/96 08/2016; two 11.75% of Total for each lease at any
(the "Warner Robins #1 (excluding five-year Cost (4); year, (i) 6% of time after
Property") closing renewal increases by annual gross the
Restaurant to be constructed and options 10% after the sales minus seventh
development fifth lease (ii) the lease year
The Warner Robins #1 Property costs) (3) year and after minimum annual
is located within the northeast every five rent for such
quadrant of the intersection of years lease year
Russell Parkway and Kimberly thereafter
Road in Warner Robins, Houston during the
County, Georgia, in an area of lease term
primarily retail, commercial,
and residential development.
Other fast-food and family-style
restaurants located in proximity
to the Warner Robins #1 Property
include a Burger King, an Arby's,
an Applebee's, a Sonic Drive-In,
a Pizza Hut, a Mario's Pizza, and
a Sonny's Real Pit Bar-B-Que.
</TABLE>
- 5 -
<PAGE>
<TABLE> Lease
<CAPTION> Expiration
and Option
Property Location and Purchase Date Renewal Minimum To
Competition Price (1) Acquired Options Annual Rent (2) Percentage Rent Purchase
<S> <C>
Fazoli's (7) $286,748 08/05/96 08/2016; two 11.75% of Total for each lease at any
(the "Warner Robins #2 (excluding five-year Cost (4); year, (i) 6% of time after
Property") closing renewal increases by annual gross the
Restaurant to be constructed and options 10% after the sales minus seventh
development fifth lease (ii) the lease year
costs year and after minimum annual
The Warner Robins #2 Property (3) every five rent for such
is located within the northeast years lease year
quadrant of the intersection of thereafter
Russell Parkway and Kimberly during the
Road in Warner Robins, Houston lease term
County, Georgia, in an area of
primarily retail, commercial,
and residential development.
Other fast-food and family-
style restaurants located in
proximity to the Warner Robins
#2 Property include a Burger
King, an Arby's, an Applebee's,
a Sonic Drive-In, a Pizza Hut,
a Mario's Pizza, and a Sonny's
Real Pit Bar-B-Que.
Denny's $928,215 08/06/96 08/2016; two $98,669; for each lease during the
(the "Pensacola Property") (excluding five-year increases by year, (i) 5% of eighth,
Restaurant to be renovated (6) closing renewal 11% after the annual gross tenth and
costs) (5) options fifth lease sales minus twelfth
The Pensacola Property is year and after (ii) the lease
located on the west side of every five minimum annual years only
Mobile Highway, south of Wabash years rent for such
Road in Pensacola, Escambia thereafter lease year
County, Florida, in an area of during the
primarily retail, commercial, lease term
and residential development.
Other fast-food and family-
style restaurants located in
proximity to the Pensacola
Property include an Arby's, a
Burger King, a Church's Fried
Chicken, a Godfather's Pizza, a
Hardee's, a McDonald's, a PizzaHut,
a Quincy's, a Shoney's, a Subway
Sandwich Shop, a Waffle House, and
several local restaurants.
</TABLE>
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<PAGE>
FOOTNOTES:
(1) The estimated federal income tax basis of the depreciable portion
(the building portion) of each of the Properties acquired, and for
construction Properties, once the buildings are constructed, is set
forth below:
Property Federal Tax Basis
Troy Property $604,000
Warner Robins #1 Property 387,000
Warner Robins #2 Property 476,000
Pensacola Property 671,000
(2) Minimum annual rent for each of the Properties became payable on the
effective date of the lease, except as indicated below. For the
Warner Robins #1 and Warner Robin's #2 Properties, minimum annual rent
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 lessee receives from the
landlord its final funding of the construction costs. During the period
commencing with the effective date of the lease to the date minimum
annual rent becomes payable for the Warner Robins #1 and Warner Robins #2
Properties, the lessee shall pay "interim rent" equal to 11.75% times
the amount funded by CNL XVII in connection with the purchase and
construction of these Properties.
(3) The development agreements for Properties which are to be
constructed provide that construction must be completed no later
than the due 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
Warner Robins #1 Property $632,246 December 3, 1996
Warner Robins #2 Property 757,194 December 3, 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 or
renovation costs incurred under the development agreement.
(5) In accordance with the lease agreement, the Pensacola Property is
being converted from a Kettles restaurant to a Denny's restaurant.
Renovation of the Property is expected to be completed within 150
days of the effective date of the lease (February 2, 1997). In
connection therewith, CNL XVII paid to the lessee renovation costs
of $250,000 for the Property. The Pensacola Property is expected to
remain operational during renovations.
- 7 -
<PAGE>
(6) The results of Phase I and Phase II environmental testing prepared for the
lessee have indicated the existence of measurable concentrations of
petroleum contamination/hazardous materials on the Pensacola
Property. The contamination migrated from leaking underground petroleum
product lines first identified in 1992 and located on an adjacent property
owned by a third party. In connection with such contamination and
as a condition of the purchase of the Pensacola Property, CNL XVII
and the lessee of the Pensacola Property entered into an
environmental indemnification and put agreement (the "Agreement") dated
August 6, 1996. Under the Agreement, the lessee has agreed to (i)
undertake and pursue to completion, at the seller's sole cost and
expense, the full and complete remediation of the contamination on the
Pensacola Property within three years from the date of this Agreement,
or such later date as may be permitted by CNL XVII and (ii) indemnify CNL
XVII from and against any and all damages, penalties, fines, claims,
liens, suits, liabilities, costs (including clean-up costs), judgements
and expenses (including attorneys', consultants' or experts' fees and
expenses) of every kind and nature suffered by or asserted against CNL
XVII as a direct or indirect result of any clean-up or remediation of the
contamination. In the event that the remediation required by the
Agreement is not completed within three years from the date of the
Agreement (or such later date as may be permitted by CNL XVII), then CNL
XVII, at its option, may demand that the seller elect to either purchase
the Pensacola Property from CNL XVII or substitute the Pensacola Property
for another property having a greater or equal value to the
uncontaminated value (as defined in the Agreement) of the Pensacola
Property.
(7) The lessee of the Warner Robins #1 and Warner Robins #2 Properties is the
same unaffiliated lessee.
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<PAGE>
PRO FORMA ESTIMATE OF TAXABLE INCOME OF
CNL INCOME FUND XVII, LTD.
GENERATED FROM THE OPERATIONS OF PROPERTIES ACQUIRED FROM JULY 11, 1996
THROUGH SEPTEMBER 17, 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 July 11, 1996
through September 17, 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.
<TABLE>
<CAPTION>
Boston Market Popeyes Fazoli's Denny's
Troy, OH Warner Robins, GA (5)(6) Warner Robins, GA (5)(6) Pensacola, FL (5)
<S> <C>
Pro Forma Estimate
of Taxable Income:
Base Rent (1) $ 89,007 $ 71,432 $ 85,548 $ 98,669
Management Fees (2) (890) (714) (855) (987)
General and Administrative
Expenses (3) (4,450) (3,572) (4,277) (4,933)
Estimated Cash Available from
Operations 83,667 67,146 80,416 92,749
Depreciation Expense (4) (15,084) (9,674) (11,891) (16,782)
Pro Forma Estimate of Taxable
Income of CNL XVII $ 68,583 $ 57,472 $ 68,525 $ 75,967
</TABLE>
See Footnotes
- 9 -
<PAGE>
Total
Pro Forma Estimate
of Taxable Income:
Base Rent (1) $344,656
Management Fees (2) (3,446)
General and Administrative
Expenses (3) (17,232)
Estimated Cash Available from
Operations 323,978
Depreciation Expense (4) (53,431)
Pro Forma Estimate of Taxable
Income of CNL XVII $270,547
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 GeneralPartners 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
Warner Robins #1 Property December 3, 1996
Warner Robins #2 Property December 3, 1996
(6) The lessee of the Warner Robins #1 and Warner Robins #2 Properties is the
same unaffiliated lessee.
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<PAGE>
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
INDEX TO FINANCIAL STATEMENTS
Page
Pro Forma Financial Information (unaudited):
Pro Forma Balance Sheet as of June 30, 1996 13
Pro Forma Statement of Income for the six months ended
June 30, 1996 14
Pro Forma Statement of Income for the period February 10, 1995
(Date of Inception) through December 31, 1995 15
Notes to Pro Forma Financial Statements for the six months ended
June 30, 1996 and the period February 10, 1995
(Date of Inception) through December 31, 1995 16
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<PAGE>
PRO FORMA FINANCIAL INFORMATION
The following Pro Forma Balance Sheet of CNL Income Fund XVII, Ltd. ("CNL
XVII") gives effect to (i) property acquisition transactions from inception
through June 30, 1996, including the receipt of $21,132,863 in gross offering
proceeds from the sale of 2,113,286 units of limited partnership interest (the
"Units") pursuant to a registration statement on Form S-11 under the Securities
Act of 1933, as amended, effective August 11, 1995, and the application of such
funds to acquire 13 properties, four of which were under construction at June
30, 1996, and to pay organizational and offering expenses, acquisition fees, and
miscellaneous acquisition expenses, (ii) thereceipt of $3,036,931 in gross
offering proceeds from the sale of 303,693 additional Units during the period
July 1, 1996 through August 7, 1996, and (iii) the application of such funds and
$4,927,197 of cash and cash equivalents at June 30, 1996, to purchase six
additional properties acquired during the period July 1, 1996 through August 7,
1996, four of which are under construction, to pay additional construction costs
for the four properties under construction at June 30, 1996, and to pay offering
expenses, acquisition fees, and miscellaneous acquisition expenses, all as
reflected in the pro forma adjustments described in the related notes. The Pro
Forma Balance Sheet as of June 30, 1996, includes the transactions described in
(i) above, fromits historical balance sheet, adjusted to give effect to the
transactions in (ii) and (iii) above, as if they had occurred on June 30, 1996.
The Pro Forma Statements of Income for the six months ended June 30, 1996
and the period February 10, 1995 (date of inception) through December 31, 1995,
include the historical operating results of the properties described in (i)
above from the dates of their acquisitions, plus operating results for one of
the 19 properties that was owned by CNL XVII as of August 7, 1996, and had a
previous rental history prior to CNL XVII's acquisition of such property, from
(A) the later of (1) the date the property became operational as a
rentalproperty by the previous owner or (2) November 4, 1995 (the date CNL
XVII became operational), to (B) the earlier of (1) the date the property
was acquired by CNL XVII or (2) the end of the pro forma period presented. No
pro forma adjustments have been made to the Pro Forma Statements of Income for
the remaining 18 properties owned by CNL XVII as of August 7, 1996, due to
the fact that these properties did not have a previous rental history.
This pro forma financial information is presented for informational
purposes only and does not purport to be indicative of CNL XVII's financial
results or condition if the various events and transactions reflected thereinhad
occurred on the dates, or been in effect during the periods, indicated. This pro
forma financial information should not be viewed as predictive of CNL XVII's
financial results or conditions in the future.
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<PAGE>
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
UNAUDITED PRO FORMA BALANCE SHEET
JUNE 30, 1996
Pro Forma
ASSETS Historical Adjustments Pro Forma
Land and buildings on operating
leases, less accumulated
depreciation (b) $11,098,698 $ 6,055,343 (a) $17,154,041
Net investment in direct
financing leases (b) 1,474,108 865,944 (a) 2,340,052
Cash and cash equivalents 6,454,397 (4,927,197)(a) 1,527,200
Receivables 39,453 39,453
Organization costs, less
accumulated amortization 8,691 8,691
Accrued rental income 22,413 22,413
Other assets 385,951 (225,801)(a) 160,150
$19,483,711 $ 1,768,289 $21,252,000
LIABILITIES AND
PARTNERS' CAPITAL
Accounts payable $ 2,543 $ 2,543
Accrued construction costs
payable 930,121 $ (930,121)(a) -
Distributions payable 211,692 211,692
Due to related parties 71,245 (65,197)(a) 6,048
Rents paid in advance 7,061 7,061
Total liabilities 1,222,662 (995,318) 227,344
Partners' capital 18,261,049 2,763,607 (a) 21,024,656
$19,483,711 $ 1,768,289 $21,252,000
See accompanying notes to unaudited pro
forma financial statements.
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<PAGE>
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
UNAUDITED PRO FORMA STATEMENT OF INCOME
SIX MONTHS ENDED JUNE 30, 1996
Pro Forma
Historical Adjustments Pro Forma
Revenues:
Rental income from operating
leases $ 221,811 $ 27,414 (1) $ 249,225
Earned income from direct
financing leases (2) 35,763 35,763
Interest 102,696 (7,763)(3) 94,933
Other income 7,062 7,062
367,332 19,651 386,983
Expenses:
General operating and admini-
strative 58,734 58,734
Professional services 7,467 7,467
Management fees to related
party 2,396 274 (4) 2,670
Depreciation and amortization 32,931 4,434 (5) 37,365
101,528 4,708 106,236
Net Income $ 265,804 $ 14,943 $ 280,747
Net Income Per Limited Partner Unit $ 0.20 $ 0.21
Weighted Average Number of Units
Outstanding 1,314,128 1,314,128
See accompanying notes to unaudited pro
forma financial statements.
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<PAGE>
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
UNAUDITED PRO FORMA STATEMENT OF INCOME
FEBRUARY 10, 1995 (DATE OF INCEPTION)
THROUGH DECEMBER 31, 1995
Pro Forma
Historical Adjustments Pro Forma
Revenues:
Rental income from
operating leases $ - $ 20,367 (1) $ 20,367
Interest income 12,153 (5,491)(3) 6,662
12,153 14,876 27,029
Expenses:
General operating and
administrative 3,360 3,360
Professional services 133 133
Management fees to related party - 163 (4) 163
Depreciation and amortization 309 3,306 (5) 3,615
3,802 3,469 7,271
Net Income $ 8,351 $ 11,407 $ 19,758
Net Income Per Limited
Partner Unit (6) $ .02 $ 0.06
Weighted Average Number of
Units Outstanding (6) 340,780 340,780
See accompanying notes to unaudited pro
forma financial statements.
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<PAGE>
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND
THE PERIOD FEBRUARY 10, 1995 (DATE OF INCEPTION)
THROUGH DECEMBER 31, 1995
Pro Forma Balance Sheet:
(a) Represents gross proceeds of $3,036,931 from the sale of 303,693 Units
during the period July 1, 1996 through August 7, 1996, and $4,927,197
ofcash and cash equivalents at June 30, 1996, used (i) to acquire six
properties for $5,044,625, (ii) to fund estimated construction costs of
$2,444,321 ($930,121 of which was accrued as construction costs payable at
June 30, 1996) relating to the four properties under construction at June
30, 1996, (iii) to pay acquisition fees and other costs of $169,565
($32,904 of which was accrued as due to related parties at June 30, 1996)
and reclassify from other assets $225,801 of acquisition fees and other
costs previously incurred relating to the acquired properties, and (iv) to
pay selling commissions and offering expenses (syndication costs) of
$305,617 ($32,293 of which was accrued as due to relatedparties at June
30, 1996), which have been netted against partners' capital.
The pro forma adjustments to land and buildings on operating leases and
net investment in direct financing leases as a result of the above
transactions were as follows:
<TABLE>
<CAPTION>
Estimated
purchase price
(including con-
struction and Acquisition
closing costs) fees
and additional allocated
construction costs to property Total
<S> <C>
Jack in the Box in El Dorado, CA $1,102,761 $ 59,788 $1,162,549
Jack in the Box in La Porte, TX 840,643 45,577 886,220
Boston Market in Troy, OH 849,655 46,066 895,721
Fazoli's in Warner Robins, GA 722,088 39,149 761,237
Popeye's in Warner Robins, GA 602,762 32,679 635,441
Denny's in Pensacola, FL 926,716 50,243 976,959
Four properties under construction
at June 30, 1996 1,521,065 82,095 1,603,160
$6,565,690 $ 355,597 $6,921,287
Pro forma adjustment classified as follows:
Land and buildings on
operating leases $6,055,343
Net investment in direct
financing leases 865,944
$6,921,287
</TABLE>
(b) In accordance with generally accepted accounting principles, leases in
which the present value of future minimum lease payments equals or
exceeds 90 percent of the value of the related properties are treated
as direct financing leases rather than as land and buildings on
operating leases. The categorization of the leases has no effect on
cash flows received. The building portion of four properties has
been classified as direct financing leases.
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<PAGE>
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS - CONTINUED
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND
THE PERIOD FEBRUARY 10, 1995 (DATE OF INCEPTION)
THROUGH DECEMBER 31, 1995
Pro Forma Statements of Income:
(1) Represents rental income from operating leases for the one property
acquired during the period November 4, 1995 (the date CNL XVII
beganoperations) through August 7, 1996, which had a previous rental
history prior to the acquisition of the property by CNL XVII (the "Pro
Forma Property"), for the period commencing (A) the later of (i) the date
the Pro Forma Property became operational as a rental property by the
previous owner or (ii) November 4, 1995 (the date CNL XVII became
operational), to (B) the earlier of (i) the date the Pro Forma Property
was acquired by CNL XVII or (ii) the end of the pro forma period
presented. The Pro Forma Property was acquired from an affiliate who had
purchased and temporarily held title to the property in order to
facilitate its acquisition by CNL XVII. The noncancellable lease forthe
Pro Forma Property in place during the period the affiliate owned the Pro
Forma Property was assigned to CNL XVII at the time CNL XVII acquired the
property. The following presents the actual date the Pro Forma Property
was acquired by CNL XVII, as compared to the date the Pro Forma Property
was treated as placed in service for purposes of the Pro Forma Statements
of Income.
Date Placed Pro Forma
in Service Date Placed
by CNL XVII in Service
Denny's in Kentwood, MI March 19, 1996 November 4, 1995
In accordance with generally accepted accounting principles, lease revenue
from leases accounted for under the operating method is recognized over
the term of the lease. For operating leases providing escalating
guaranteed minimum rents, income is reported on a straight-line basis over
the terms of the leases. For leases accounted for as direct financing
leases, future minimum lease payments are recorded as a receivable. The
difference between the receivable and the estimatedresidual values less
the cost of the properties is recorded as unearned income. Accordingly,
pro forma rental income from the operating leases and earned income from
direct financing leases does not necessarily represent cash rental
payments that would have been received if the properties had been
operational for the full pro forma period.
The lease relating to the Pro Forma Property provides for the payment of
percentage rent in addition to base rental income. However, due to the
fact that no percentage rent was due under the lease for the Pro Forma
Property during the portion of 1996 and 1995 that the previous
ownerheld the property, no pro forma adjustment was made for
percentage rental income.
(2) See Note (b) under "Pro Forma Balance Sheet" above for a description of
direct financing leases.
(3) Represents adjustment to interest income due to the decrease in the amount
of cash available for investment in interest bearing accounts during the
period commencing (A) on the later of (i) the date the Pro Forma Property
became operational as a rental property by the previous owner or (ii)
November 4, 1995 (the date CNL XVII became operational), through (B) the
earlier of (i) the date the Pro Forma Property wasacquired by CNL XVII
or (ii) the end of the pro forma period presented, as described in Note
(1) above. The estimated pro forma adjustment is based upon the fact
that interest income on interest bearing accounts was earned at a rate
of approximately four percent per annum by CNL XVII during the six months
ended June 30, 1996 and the period February 10, 1995 (date of inception)
through December 31, 1995.
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CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS - CONTINUED
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND
THE PERIOD FEBRUARY 10, 1995 (DATE OF INCEPTION)
THROUGH DECEMBER 31, 1995
Pro Forma Statements of Income - Continued:
(4) Represents incremental increase in management fees relating to the Pro
Forma Property for the period commencing (A) on the later of (i) the
date the Pro Forma Property became operational as a rental property by
the previous owner or (ii) November 4, 1995 (the date CNL XVII became
operational), through (B) the earlier of (i) the date the Pro Forma
Property was acquired by CNL XVII or (ii) the end of the pro forma
period presented, as described in Note (1) above. Management fees are
equal to one percent of the gross revenues (excluding noncash lease
accounting adjustments) that CNL XVII earns from its properties.
(5) Represents incremental increase in depreciation expense of the building
portion of the Pro Forma Property accounted for as an operating lease
using the straight-line method over an estimated useful life of 30
years.
(6) Historical net income per limited partner unit was calculated based upon
the weighted average number of limited partner units outstanding during
the six months ended June 30, 1996, and during the period CNL XVII was
operational, November 4, 1995 (the date following when CNL XVII received
the minimum offering proceeds and funds were released from escrow)
through December 31, 1995.
As a result of the Pro Forma Property being treated in the Pro Forma
Statement of Income for the period February 10, 1995 (date of inception)
through December 31, 1995, as placed in service on November 4, 1995 (the
date CNL XVII became operational), CNL XVII assumed approximately 86,400
units of limited partnership interest were sold, and the net offering
proceeds were available for investment, as of such date. Due to the
fact that CNL XVII had actually sold in excess of 150,000 units as of
November 4, 1995, the weighted average number of limited partner units
outstanding for the pro forma period was not adjusted. Therefore, pro
forma net income per limited partner unit was calculated based upon
theweighted average number of limited partner units outstanding during
the period CNL XVII was operational, November 4, 1995 through December
31, 1995.
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