SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 24, 1996
CNL INCOME FUND XVII, LTD.
(Exact Name of Registrant as Specified in Charter)
Florida 33-90998 59-3295393
(State or other juris- (Commission File Number) (IRS Employer
diction of incorporation) Identification No.)
400 East South Street, Suite 500 32801
Orlando, Florida (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (407) 422-1574
ITEM 1. CHANGES IN CONTROL OF REGISTRANT.
- ------
Not applicable.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
- ------
STATUS OF THE OFFERING
Pursuant to a registration statement on Form S-11 under the
Securities Act of 1933, as amended, effective August 11, 1995 (the
"Registration Statement"), CNL Income Fund XVII, Ltd. ("CNL XVII") and CNL
Income Fund XVIII, Ltd. ("CNL XVIII"), limited partnerships with the same
general partners and investment objectives, registered for sale an aggregate
of $65,000,000 of units of limited partnership interest (the "Units")
(6,500,000 Units at $10 per Unit). The first 3,000,000 Units ($30,000,000)
are for CNL XVII, and the remaining Units are for CNL XVIII. As of August 7,
1996, CNL XVII had received subscription proceeds of $24,169,794 (2,416,979
Units) from 1,390 limited partners.
As stated in the Registration Statement, including the Prospectus
which constitutes a part thereof, as supplemented and amended, the proceeds of
the offering of Units are to be used to acquire restaurant properties to be
leased primarily to operators of national and regional fast-food, family-
style, and casual dining restaurant chains (the "Properties"), to pay expenses
in connection with the offering of Units and to pay partnership organizational
costs.
ACQUISITION OF PROPERTIES
From July 11, 1996 through 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).
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 leases are on a triple-net basis, with the lessee responsible for
all repairs and maintenance, property taxes, insurance and utilities. The
lessee also is required to pay for special assessments, sales and use taxes,
and the cost of any renovations permitted under the lease. Upon termination
of the lease, the lessee will surrender possession of the Property to CNL
XVII, together with any improvements made to the Property during the term of
the lease.
For the Properties that are to be constructed or renovated, CNL XVII
has entered into development and indemnification and put agreements with the
lessee.
The following table sets forth the location of the four Properties
acquired by CNL XVII between July 11, 1996 and 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 year after the after the
Existing restaurant closing renewal options 10% after the fifth lease fifth lease
costs) fifth lease year, (i) 5% of year
The Troy Property is located year and after annual gross
within the Troy Towne every five sales minus
Center, accessed via an years (ii) the
access drive from West Main thereafter minimum annual
Street, in Troy, Miami during the rent for such
County, Ohio, in an area of lease term lease year
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 annual gross seventh lease
Restaurant to be constructed development 10% after the sales minus year
costs) (3) fifth lease (ii) the
The Warner Robins #1 year and after minimum annual
Property is located within every five rent for such
the northeast quadrant of years lease year
the intersection of Russell thereafter
Parkway and Kimberly Road in during the
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 #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 annual gross seventh lease
Restaurant to be constructed development 10% after the sales minus year
costs (3) fifth lease (ii) the
The Warner Robins #2 year and after minimum annual
Property is located within every five rent for such
the northeast quadrant of years lease year
the intersection of Russell thereafter
Parkway and Kimberly Road in during the
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, tenth
Restaurant to be renovated closing renewal options 11% after the annual gross and twelfth
(6) costs) (5) fifth lease sales minus lease years
year and after (ii) the only
The Pensacola Property is every five minimum annual
located on the west side of years rent for such
Mobile Highway, south of thereafter lease year
Wabash Road in Pensacola, during the
Escambia County, Florida, in lease term
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
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 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
(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) 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>
<CAPTION>
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.
(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.
ITEM 3. BANKRUPTCY OR RECEIVERSHIP.
- -------
Not applicable.
ITEM 4. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT.
- -------
Not applicable.
ITEM 5. OTHER EVENTS.
- -------
Not applicable.
ITEM 6. RESIGNATION OF REGISTRANT'S GENERAL PARTNERS.
- -------
Not applicable.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND
- ------- EXHIBITS.
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 11
Pro Forma Statement of Income for the six months
ended June 30, 1996 12
Pro Forma Statement of Income for the period
February 10, 1995 (Date of Inception) through
December 31, 1995 13
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 14
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) the
receipt 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, from
its 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 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 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 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
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.
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.
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 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 of
cash 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 related
parties 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:
Estimated
purchase price
(including con-
struction and Acquisition
closing costs) fees
and additional allocated
construction costs to property Total
------------------- ------------ ----------
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
==========
(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.
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 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 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 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.
(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 the
weighted average number of limited partner units outstanding during the
period CNL XVII was operational, November 4, 1995 through December 31,
1995.
ITEM 8. CHANGE IN FISCAL YEAR.
- ------ Not applicable.
EXHIBITS
None.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be filed on its behalf
by the undersigned thereunto duly authorized.
CNL INCOME FUND XVII, LTD.
Dated: August 19, 1996 By: /s/ Robert A. Bourne
------------------------------
ROBERT A. BOURNE, General Partner
