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 July 31,
1996. This Supplement replaces the Supplement dated July 31, 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 August 7, 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 August 7, 1996, will be reported in a subsequent
Supplement.
THE OFFERING
SUBSCRIPTION PROCEDURES
As of August 7, 1996, CNL XVII had received total subscription proceeds
of $24,169,794 (2,416,979 Units) from 1,390 limited partners. As of August 7,
1996, CNL XVII had invested or committed for investment approximately
$19,800,000 of such proceeds in 19 Properties and to pay Acquisition Fees and
miscellaneous Acquisition Expenses, leaving approximately $1,300,000 in
offering proceeds available for investment in Properties. As of August 7,
1996, CNL XVII had incurred $1,087,641 in Acquisition Fees to an Affiliate of
the General Partners.
BUSINESS
PROPERTY ACQUISITIONS
Between July 11, 1996 and August 7, 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."
August 12, 1996 Prospectus Dated August 11, 1995
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 August 7, 1996, CNL XVII had initial commitments to acquire three
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 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.
<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- 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
Wendy's (2) 20 years; three 11.98% of CNL for each lease upon the expiration
Carmel Mountain, CA five-year renewal XVII's total cost year, (i) 6% of of the initial term
Existing restaurant options to purchase the annual gross sales of the lease and
building; increases times the Building during any renewal
by 8% after the Overage Multiplier period thereafter
fifth lease year (3) minus (ii) the (4)
and after every minimum annual rent
five years for such lease year
thereafter during
the lease term
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
</TABLE>
[FN]
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/10.50%)]
(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.
The following table sets forth the location of the four Properties
acquired by CNL XVII from July 11, 1996 through August 7, 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 July 11, 1996 through August 7, 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>
BOSTON MARKET $857,487 07/24/96 07/2011; five $89,007; for each lease at any time
(the "Troy Property") (excluding five-year increases by 10% year after the after the
Existing restaurant closing renewal options after the fifth fifth lease fifth lease
costs) lease year and year, (i) 5% of year
The Troy Property is after every five annual gross
located within the Troy years thereafter sales minus (ii)
Towne Center, accessed via during the lease the minimum
an access drive from West term annual rent for
Main Street, in Troy, Miami such lease year
County, Ohio, in an area of
primarily retail,
commercial 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 time
(the "Warner Robins #1 (excluding five-year Cost (4); year, (i) 6% of after the
Property") closing and renewal options increases by 10% annual gross seventh
Restaurant to be development after the fifth sales minus (ii) lease year
constructed costs) (3) lease year and the minimum
after every five annual rent for
The Warner Robins #1 years thereafter such lease year
Property is located within during the lease
the northeast quadrant of term
the intersection of Russell
Parkway and Kimberly Road
in Warner Robins, Houston
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 #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.
FAZOLI'S (7) $286,748 08/05/96 08/2016; two 11.75% of Total for each lease at any time
(the "Warner Robins #2 (excluding five-year Cost (4); year, (i) 6% of after the
Property") closing and renewal options increases by 10% annual gross seventh
Restaurant to be development after the fifth sales minus (ii) lease year
constructed costs (3) lease year and the minimum
after every five annual rent for
The Warner Robins #2 years thereafter such lease year
Property is located within during the lease
the northeast quadrant of term
the intersection of Russell
Parkway and Kimberly Road
in Warner Robins, Houston
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 11% year, (i) 5% of eighth,
Restaurant to be renovated closing renewal options after the fifth annual gross tenth and
(6) costs) (3)(5) lease year and sales minus (ii) twelfth
after every five the minimum lease years
The Pensacola Property is years thereafter annual rent for only
located on the west side of during the lease such lease year
Mobile Highway, south of term
Wabash Road in Pensacola,
Escambia County, Florida,
in an area of primarily
retail, commercial, 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
Pizza Hut, a Quincy's, a
Shoney's, a Subway Sandwich
Shop, a Waffle House, and
several local restaurants.
</TABLE>
[FN]
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 or
renovated provide that construction or renovation 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 Estimated Final
Property Maximum Cost Completion Date
-------- ------------ ----------------
Warner Robins #1 Property $632,246 December 3, 1996
Warner Robins #2 Property 757,194 December 3, 1996
Pensacola Property 928,215 (5) February 2, 1997
(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.
(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.
<TABLE>
PRO FORMA ESTIMATE OF TAXABLE INCOME OF
CNL INCOME FUND XVII, LTD.
GENERATED FROM THE OPERATIONS OF PROPERTIES ACQUIRED FROM JULY 11, 1996
THROUGH AUGUST 7, 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 August 7, 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>
Boston Market Popeyes - Warner Fazoli's - Warner Denny's
Troy, OH Robins, GA (5)(6) Robins, GA (5)(6) Pensacola, FL (5)
------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <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
======== ======== ======== ========
See Footnotes
</TABLE>
<TABLE>
Total
--------
<S> <C>
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
========
</TABLE>
[FN]
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 or renovated provide that construction or renovation 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
Pensacola Property February 2, 1997
(6) The lessee of the Warner Robins #1 and Warner Robins #2 Properties is
the same unaffiliated lessee.
