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. 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 9, 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 9, 1996, will be reported in a subsequent Supplement.
THE OFFERING
SUBSCRIPTION PROCEDURES
As of May 9, 1996, CNL XVII had received total subscription proceeds of
$16,488,127 (1,648,813 Units) from 980 limited partners. As of May 9, 1996,
CNL XVII had invested or committed for investment approximately $11,300,000 of
such proceeds in nine Properties and to pay acquisition fees and miscellaneous
acquisition expenses, leaving approximately $2,900,000 in offering proceeds
available for investment in properties. As of May 9, 1996, CNL XVII had
incurred $741,966 in acquisition fees to an Affiliate of the General Partners.
BUSINESS
PROPERTY ACQUISITIONS
Between April 25, 1996 and May 9, 1996, CNL XVII acquired one property.
The Property is a Wendy's Property in Knoxville, Tennessee (the "Knoxville
Property"). 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 Knoxville Property, CNL XVII, as
lessor, entered into a long-term lease agreement with an unaffiliated lessee.
The general terms of the lease agreement are described in the section of the
Prospectus entitled "Business - Description of Leases."
May 15, 1996 Prospectus Dated August 11, 1995
The Knoxville Property is to be constructed; therefore, CNL XVII has
entered into development and indemnification and put agreements with the
lessee. 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 9, 1996, CNL XVII had initial commitments to acquire four
additional properties. The initial commitment for the Jack in the Box
Property in Dibuna, California, was entered into on May 8, 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 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 lease year, None
Munster, IN renewal options (1) (i) 8.5% of annual
Restaurant to be gross sales minus
constructed (ii) the minimum
annual rent for such
lease year
Burger King 20 years; two five-year 10.75% of Total Cost for each lease year, None
Tinley Park, IL renewal options (1) (i) 8.5% of annual
Restaurant to be gross sales minus
constructed (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
Jack in the Box 18 years; four five-year 10.75% of Total Cost for each lease year, at any time after
Dibuna, CA renewal options (1); increases by 8% (i) 5% of annual the seventh lease
Restaurant to be after the fifth lease gross sales minus year
constructed year and by 10% after (ii) the minimum
every five years annual rent for such
thereafter during the lease year (5)
lease term
- ---------------------------------------------------------
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, and in the case of the
Dibuna Property, (iv) "construction financing costs" during the development period.
(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.
(5) Percentage rent shall be calculated on a calendar year basis (January 1 to December 31).
</TABLE>
The following table sets forth the location of the Knoxville Property,
which was the sole Property acquired by CNL XVII from April 25, 1996 through
May 9, 1996, a description of the competition, and a summary of the principal
terms of the acquisition and lease of the Knoxville Property.
<TABLE>
PROPERTY ACQUISITIONS
From April 25, 1996 through May 9, 1996
<CAPTION>
Lease Expira-
tion and
Property Location and Purchase Date Renewal Minimum Option To
Competition Price (1) Acquired Options Annual Rent (2) Percentage Rent 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
(the "Knoxville Property") (excluding five-year Cost (4); year, (i) 6% of time after
Restaurant to be constructed closing and renewal increases to annual gross the
development options 10.76% of Total sales minus seventh
The Knoxville Property is costs) (3) Cost during the (ii) the lease year
located on the north side of fourth through minimum annual
Emory Road at the north corner sixth lease rent for such
of Dean Rutherford Road in years, 11.95% lease year
Knoxville, Knox County, of 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%
style restaurants located in of Total Cost
proximity to the Knoxville during the
Property include a McDonald's, eleventh
a Subway Sandwich Shop, a Taco through
Bell, a Waffle House, a fifteenth lease
Hardee's, and several local years, and
restaurants. 13.97% of Total
Cost during the
sixteenth
through
twentieth lease
years
- -----------------------------------------------------
FOOTNOTES:
(1) The estimated federal income tax basis of the depreciable portion (the building portion) of the
Knoxville Property, once the building is constructed, is set forth below:
Property Federal Tax Basis
-------- -----------------
Knoxville Property $482,000
(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. During the period commencing
with the effective date of the lease to the date minimum annual rent becomes payable for the Knoxville
Property, as described above, the tenant shall pay "interim rent" equal to 10.25% times the amount
funded by CNL XVII in connection with the purchase and construction of the Knoxville Property.
(3) The development agreement for the Knoxville Property on which a restaurant is to be constructed
provides that construction must be completed no later than the date 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 amount set forth below:
Estimated
Property Maximum Cost Estimated Final Completion Date
-------- ------------ -------------------------------
Knoxville Property $800,924 September 5, 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.
</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 9, 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 9, 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
Knoxville, TN (5)
-----------------
<S> <C>
Pro Forma Estimate of Taxable
Income:
Base Rent (1) $ 78,937
Management Fees (2) (789)
General and Administrative
Expenses (3) (3,947)
--------
Estimated Cash Available from
Operations 74,201
Depreciation Expense (4) (12,051)
--------
Pro Forma Estimate of Taxable
Income of CNL XVII $ 62,150
========
See Footnotes
- --------------------------------------------------------
FOOTNOTES:
(1) Base rent does not include percentage rents which become due if specified levels of gross receipts are
achieved.
(2) The Property 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 Property. 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 agreement for the Knoxville Property which is to be constructed provides that
construction must be completed no later than the date set forth below:
Property Estimated Final Completion Date
-------- -------------------------------
Knoxville Property September 5, 1996
</TABLE>
