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 and May 30,
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 June 6, 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 June 6, 1996, will be reported in a subsequent Supplement.
THE OFFERING
SUBSCRIPTION PROCEDURES
As of June 6, 1996, CNL XVII had received total subscription proceeds of
$18,661,761 (1,866,176 Units) from 1,122 limited partners. As of June 6,
1996, CNL XVII had invested or committed for investment approximately
$12,900,000 of such proceeds in 11 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 June 6, 1996,
CNL XVII had incurred $839,779 in Acquisition Fees to an Affiliate of the
General Partners.
BUSINESS
PROPERTY ACQUISITIONS
Between April 25, 1996 and June 6, 1996, CNL XVII acquired three
properties. The Properties are two Wendy's Properties (one in each of
Knoxville and Livingston, 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 three 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."
June 11, 1996 Prospectus Dated August 11, 1995
In addition, in connection with the purchase of each of these three
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 June 6, 1996, CNL XVII had initial commitments to acquire eight
additional properties. The initial commitments for the Boston Market property
in Houston, Texas, the Jack in the Box property in El Dorado, California, the
Arby's property in Schertz, Texas, the Fazoli's property in Warner Robbins,
Georgia, and the Popeyes property in Warner Robbins, Georgia, were entered
into on June 4, 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 eight 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
Boston Market 15 years; five five-year 10% of CNL XVII's for each lease year at any time after
Houston, TX renewal options total cost to purchase after the fifth lease the fifth lease
Existing restaurant the property; year, (i) 4% of year
increases to 10.81% of annual gross sales
total cost during the minus (ii) the
third through fifth minimum annual rent
lease years, 11.55% of for such lease year
total cost during the
sixth through tenth
lease years, and
12.71% of total cost
during the eleventh
through fifteenth
lease years
Jack in the Box 18 years; four five-year 10.75% of Total Cost for each lease year, at any time after
El Dorado, 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 10% after (ii) the minimum
every five years annual rent for such
thereafter during the lease year (5)
lease term
Arby's 20 years; two five-year 10.25% of CNL XVII's for each lease year, during the seventh
Schertz, TX renewal options total cost to purchase (i) 4% of annual and tenth lease
Existing restaurant the property; gross sales minus years only
increases by 4.14% (ii) the minimum
after the third lease annual rent for such
year and after every lease year (5)
three years thereafter
during the lease term
Fazoli's 20 years; two five-year 11.75% of Total Cost for each lease year, at any time after
Warner Robbins, GA renewal options (1); increases by 10% (i) 6% of annual the seventh lease
Restaurant to be after the fifth lease gross sales minus year
constructed year and after every (ii) the minimum
five years thereafter annual rent for such
during the lease term lease year
Popeyes 20 years; two five-year 11.75% of Total Cost for each lease year, at any time after
Warner Robbins, GA renewal options (1); increases by 10% (i) 6% of annual the seventh lease
Restaurant to be after the fifth lease gross sales minus year
constructed year and after every (ii) the minimum
five years thereafter annual rent for such
during the lease term 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, and in the case of the El
Dorado 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).
The following table sets forth the location of the three Properties
acquired by CNL XVII from April 25, 1996 through June 6, 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 June 6, 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.
WENDY'S $223,224 06/05/96 06/2016; two 10.25% of Total for each lease at any time
(the "Livingston 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 Livingston Property is costs) (3) during the the minimum
located on the south side of fourth through annual rent for
West Main Street in sixth lease such lease year
Livingston, Overton County, years, 11.95% of
Tennessee, in an area of Total Cost
primarily retail, commercial, during the
and residential uses. Other seventh through
fast-food and family-style tenth lease
restaurants located in years, 12.70% of
proximity to the Livingston Total Cost
Property include a McDonald's, during the
a Subway Sandwich Shop, a eleventh through
Hardee's, a KFC, a Dairy fifteenth lease
Queen, a Pizza Hut, and years, and
several local restaurants. 13.97% of Total
Cost during the
sixteenth
through
twentieth lease
years (4)
</TABLE>
- ---------------------------------------------------
[FN]
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
Livingston Property 480,000
(2) Minimum annual rent for the Knoxville and Livingston Properties 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 Livingston Properties, the tenants shall
pay "interim rent" equal to 10.25% times the amount funded by CNL XVII
in connection with the purchase and construction of these Properties.
For the Dinuba Property, the tenant shall pay "interim rent" equal to
10.75% times the amount funded by CNL XVII in connection with the
purchase and construction of this Property.
(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
Livingston Property 697,839 October 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 costs
incurred under the development agreement.
(5) Percentage rent shall be calculated on a calendar year basis (January 1
to December 31).
<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 JUNE 6, 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 June 6, 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 Wendy's
Knoxville, TN (5) Dinuba, CA (5) Livingston, TN (5) Total
----------------- --------------- ------------------ --------
<S> <C> <C> <C> <C>
Pro Forma Estimate of Taxable
Income:
Base Rent (1) $ 78,937 $ 85,186 $ 68,777 $232,900
Management Fees (2) (789) (852) (688) (2,329)
General and Administrative
Expenses (3) (3,947) (4,259) (3,439) (11,645)
-------- -------- -------- --------
Estimated Cash Available from
Operations 74,201 80,075 64,650 218,926
Depreciation Expense (4) (12,051) (13,565) (12,009) (37,625)
-------- -------- -------- --------
Pro Forma Estimate of Taxable
Income of CNL XVII $ 62,150 $ 66,510 $ 52,641 $181,301
======== ======== ======== ========
See Footnotes
</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 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
Livingston Property October 3, 1996
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 March 31, 1996 14
Pro Forma Statement of Income for the quarter
ended March 31, 1996 15
Pro Forma Statement of Income for the period
February 10, 1995 (Date of Inception) through
December 31, 1995 16
Notes to Pro Forma Financial Statements for the
quarter ended March 31, 1996 and the period
February 10, 1995 (Date of Inception) through
December 31, 1995 17
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 March 31, 1996, including the receipt of $13,097,987 in
gross offering proceeds from the sale of 1,309,799 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 seven properties, three of
which were under construction at March 31, 1996, and to pay organizational and
offering expenses, acquisition fees, and miscellaneous acquisition expenses,
(ii) the receipt of $4,653,790 in gross offering proceeds from the sale of
465,379 additional Units during the period April 1, 1996 through May 28, 1996,
and (iii) the application of such funds and $491,270 of cash and cash
equivalents at March 31, 1996, to purchase three additional properties
acquired during the period April 1, 1996 through May 28, 1996, all of which
are under construction, to pay additional construction costs for the three
properties under construction at March 31, 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 March 31, 1996, includes the transactions described in (i)
above, from its historical balance sheet, adjusted to give effect to the
transactions in (ii) and (iii) above, as if they had occurred on March 31,
1996.
The Pro Forma Statement of Income for the quarter ended March 31, 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 ten properties that was owned by CNL XVII as of May 28, 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 rental
property 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 nine properties owned by CNL XVII as of May 28, 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 therein
had 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.
CNL INCOME FUND XVII, LTD.
(A FLORIDA LIMITED PARTNERSHIP)
UNAUDITED PRO FORMA BALANCE SHEET
MARCH 31, 1996
Pro Forma
ASSETS Historical Adjustments Pro Forma
----------- --------------- -----------
Land and buildings on operating
leases, less accumulated
depreciation (b) $ 6,963,786 $ 3,439,311 (a) $10,403,097
Net investment in direct
financing leases (b) 628,082 902,545 (a) 1,530,627
Cash and cash equivalents 3,744,261 (491,270)(a) 3,252,991
Receivables 2,422 2,422
Prepaid expenses 600 600
Organization costs, less
accumulated amortization 9,191 9,191
Accrued rental income 2,004 2,004
Other assets 287,276 (40,182)(a) 247,094
----------- ----------- -----------
$11,637,622 $ 3,810,404 $15,448,026
=========== ============ ===========
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 20,257 $ (19,019)(a) $ 1,238
Accrued construction costs payable 275,638 (275,638)(a) -
Distributions payable 115,044 115,044
Due to related parties 132,537 (129,888)(a) 2,649
----------- ----------- -----------
Total liabilities 543,476 (424,545) 118,931
Partners' capital 11,094,146 4,234,949 (a) 15,329,095
----------- ----------- -----------
$11,637,622 $ 3,810,404 $15,448,026
=========== ============ ===========
See accompanying notes to unaudited pro forma
financial statements.
CNL INCOME FUND XVII, LTD.
(A FLORIDA LIMITED PARTNERSHIP)
UNAUDITED PRO FORMA STATEMENT OF INCOME
QUARTER ENDED MARCH 31, 1996
Pro Forma
Historical Adjustments Pro Forma
---------- ------------ ---------
Revenues:
Rental income from operating
leases $ 31,846 $ 27,414 (1) $ 59,260
Earned income from direct financing
lease (2) 1,968 1,968
Interest 53,550 (7,763)(3) 45,787
Other income 6,501 6,501
-------- -------- --------
93,865 19,651 113,516
-------- -------- --------
Expenses:
General operating and administrative 16,708 16,708
Professional services 941 941
Management fees to related party 300 274 (4) 574
Depreciation and amortization 6,040 4,434 (5) 10,474
-------- -------- --------
23,989 4,708 28,697
-------- -------- --------
Net Income $ 69,876 $ 14,943 $ 84,819
======== ======== ========
Net Income Per Limited Partner Unit $ 0.08 $ 0.09
======== ========
Weighted Average Number of Units
Outstanding 922,883 922,883
======== ========
See accompanying notes to unaudited pro forma
financial statements.
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.
CNL INCOME FUND XVII, LTD.
(A FLORIDA LIMITED PARTNERSHIP)
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS
FOR THE QUARTER ENDED MARCH 31, 1996 AND
THE PERIOD FEBRUARY 10, 1995 (DATE OF INCEPTION)
THROUGH DECEMBER 31, 1995
Pro Forma Balance Sheet:
- -----------------------
(a) Represents gross proceeds of $4,653,790 from the sale of 465,379 Units
during the period April 1, 1996 through May 28, 1996, and $491,270 of
cash and cash equivalents at March 31, 1996, used (i) to acquire three
properties for $2,963,564, (ii) to fund estimated construction costs of
$1,404,327 ($275,638 of which was accrued as construction costs payable
at March 31, 1996) relating to the three properties under construction
at March 31, 1996, (iii) to pay acquisition fees and other costs of
$268,635 ($59,214 of which was accrued as due to related parties at
March 31, 1996) and reclassify from other assets $40,182 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 $508,534 ($19,019 of which was accrued as
accounts payable and $70,674 of which was accrued as due to related
parties at March 31, 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 lease as a result of the above
transactions were as follows:
Estimated
purchase price
(including con-
struction and
closing costs) Acquisition
and additional fees
construction allocated
costs to property Total
--------------- ----------- ----------
Golden Corral in Aiken, SC $1,407,407 $ 76,306 $1,483,713
Wendy's in Knoxville, TN 762,389 41,334 803,723
Jack in the Box in
Dinuba, CA 793,768 43,036 836,804
Three properties under
construction at
March 31, 1996 1,156,422 61,194 1,217,616
---------- ---------- ----------
$4,119,986 $ 221,870 $4,341,856
========== ========== ==========
Pro forma adjustment
classified as follows:
Land and buildings on
operating leases $3,439,311
Net investment in
direct financing
lease 902,545
----------
$4,341,856
==========
(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 two properties has been classified as
direct financing leases.
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 began
operations) through May 28, 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 for
the 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 estimated
residual 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 owner
held 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 was
acquired 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 four percent per annum by CNL XVII during the
quarter ended March 31, 1996 and the period February 10, 1995 (date of
inception) through December 31, 1995.
(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 quarter ended March 31, 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 the
weighted average number of limited partner units outstanding during the
period CNL XVII was operational, November 4, 1995 through December 31,
1995.
