<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the balance
sheet of CNL Income Fund XVII, Ltd. at March 31, 1996, and its statement of
income for the three months then ended and is qualified in its entirety by
reference to the Form 10-Q of CNL Income Fund XVII, Ltd. for the three months
ended March 31, 1996.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 3,744,261
<SECURITIES> 0
<RECEIVABLES> 2,422
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3,747,283
<PP&E> 6,969,326
<DEPRECIATION> 5,540
<TOTAL-ASSETS> 11,637,622
<CURRENT-LIABILITIES> 543,476
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 11,094,146
<TOTAL-LIABILITY-AND-EQUITY> 11,637,622
<SALES> 0
<TOTAL-REVENUES> 93,865
<CGS> 0
<TOTAL-COSTS> 23,989
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 69,876
<INCOME-TAX> 0
<INCOME-CONTINUING> 69,876
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 69,876
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
-----------------------------------
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
--------------- ----------------
Commission file number
33-90998
----------------------
CNL Income Fund XVII, Ltd.
=------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Florida 59-3295393
- - ---------------------------- -------------------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organiza- Identification No.)
tion)
400 E. South Street, #500
Orlando, Florida 32801
- - ---------------------------- -------------------------------
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number
(including area code) (407) 422-1574
--------------------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
--------- ---------
CONTENTS
--------
Part I Page
----
Item 1. Financial Statements:
Condensed Balance Sheets 1
Condensed Statements of Income 2
Condensed Statements of Partners' Capital 3
Condensed Statements of Cash Flows 4-5
Notes to Condensed Financial Statements 6-13
Item 2. Management's Discussion and Analysis
of Financial Condition and
Results of Operations 14-18
Part II
Other Information 19
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
CONDENSED BALANCE SHEETS
March 31, December 31,
ASSETS 1996 1995
----------- ------------
Land and buildings on operating
leases, less accumulated
depreciation $ 6,963,786 $ 402,244
Net investment in direct financing
lease 628,082 -
Cash and cash equivalents 3,744,261 4,198,859
Receivables 2,422 410
Prepaid expenses 600 -
Organization costs, less accumulated
amortization of $809 and $309 9,191 9,691
Accrued rental income 2,004 -
Other assets 287,276 267,217
----------- -----------
$11,637,622 $ 4,878,421
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 20,257 $ 42,609
Accrued construction costs payable 275,638 69,316
Distributions payable 115,044 27,076
Due to related parties 132,537 97,187
----------- -----------
Total liabilities 543,476 236,188
Commitments (Note 8)
Partners' capital 11,094,146 4,642,233
----------- -----------
$11,637,622 $ 4,878,421
=========== ===========
See accompanying notes to condensed financial statements.
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF INCOME
February 10,
1995 (Date of
Inception)
Quarter Ended through
March 31, March 31,
1996 1995
------------- -------------
Revenues:
Rental income from operating
leases $ 31,846 $ -
Earned income from direct
financing lease 1,968 -
Interest 53,550 -
Other income 6,501 -
-------- --------
93,865 -
-------- --------
Expenses:
General operating and admini-
strative 16,708 -
Professional services 941 -
Management fees to related party 300 -
Depreciation and amortization 6,040 -
-------- --------
23,989 -
-------- --------
Net Income $ 69,876 $ -
======== ========
Allocation of Net Income:
General partners $ (60) $ -
Limited partners 69,936 -
-------- --------
$ 69,876 $ -
======== ========
Net Income Per Limited Partner Unit $ 0.08 $ -
======== ========
Weighted Average Number of Limited
Partner Units Outstanding 922,883 -
======== ========
See accompanying notes to condensed financial statements.
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF PARTNERS' CAPITAL
February 10,
1995 (Date of
Inception)
Quarter Ended through
March 31, December 31,
1996 1995
------------- -------------
General partners:
Beginning balance $ 997 $ -
Contributions - 1,000
Net income (60) (3)
----------- -----------
937 997
----------- -----------
Limited partners:
Beginning balance 4,641,236 -
Contributions 7,401,066 5,696,921
Syndication costs (903,985) (1,035,764)
Net income 69,936 8,354
Distributions ($0.12 and $0.08
per limited partner unit,
respectively) (115,044) (28,275)
----------- -----------
11,093,209 4,641,236
----------- -----------
Total partners' capital $11,094,146 $ 4,642,233
=========== ===========
See accompanying notes to condensed financial statements.
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF CASH FLOWS
February 10,
1995 (Date of
Inception)
Quarter Ended through
March 31, March 31,
1996 1995
------------- -------------
Increase (Decrease) in Cash and
Cash Equivalents:
Net Cash Provided by Operating
Activities $ 75,084 $ -
----------- -----------
Cash Flows From Investing Activities:
Additions to land and buildings
on operating leases (6,300,677) -
Investment in direct financing
lease (625,291) -
Increase in other assets (20,059) -
Other - (20)
----------- -----------
Net cash used in investing
activities (6,946,027) (20)
----------- -----------
Cash Flows From Financing Activities:
Reimbursement of acquisition and
syndication costs paid by related
parties on behalf of the
Partnership (209,577) -
Contributions from general partners - 1,000
Contributions from limited partners 7,401,066 -
Distributions to limited partners (27,076) -
Payment of syndication costs (748,068) -
----------- -----------
Net cash provided by
financing activities 6,416,345 1,000
----------- -----------
Net Increase (Decrease) in Cash and
Cash Equivalents (454,598) 980
Cash and Cash Equivalents at Beginning
of Quarter 4,198,859 -
----------- -----------
Cash and Cash Equivalents at End of
Quarter $ 3,744,261 $ 980
=========== ===========
Supplemental Schedule of Non-Cash
Investing and Financing Activities:
Related parties paid certain acqui-
sition and syndication costs on
behalf of the Partnership as
follows:
Acquisition costs $ 35,570 $ -
Syndication costs 173,678 -
----------- -----------
$ 209,248 $ -
=========== ===========
Land, building and other costs
incurred and unpaid at end of
quarter $ 318,701 $ -
=========== ===========
Commissions, marketing support
and due diligence expense
reimbursement fee and other
syndication costs incurred
and unpaid at end of quarter $ 67,206 $ -
=========== ===========
Distributions declared and unpaid
at end of quarter $ 115,044 $ -
=========== ===========
See accompanying notes to condensed financial statements.
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS
Quarter Ended March 31, 1996 and the Period
February 10, 1995 (Date of Inception) through March 31, 1995
1. Significant Accounting Policies:
-------------------------------
Basis of Presentation - The accompanying unaudited condensed financial
statements have been prepared in accordance with the instructions to
Form 10-Q and do not include all of the information and note disclosures
required by generally accepted accounting principles. The financial
statements reflect all adjustments, consisting of normal recurring
adjustments, which are, in the opinion of management, necessary to a
fair statement of the results for the interim periods presented.
Operating results for the quarter ended March 31, 1996, may not be
indicative of the results that may be expected for the year ending
December 31, 1996. Amounts as of December 31, 1995, included in the
financial statements, have been derived from audited financial
statements as of that date.
These unaudited financial statements should be read in conjunction with
the financial statements and notes thereto included in Form 10-K of CNL
Income Fund XVII, Ltd. (the "Partnership") for the year ended December
31, 1995.
The Partnership was a development stage enterprise from February 10,
1995 through November 3, 1995. Since operations had not begun,
activities through November 3, 1995, were devoted to organization of the
Partnership.
Land and Buildings on Operating Leases - Land and buildings on operating
leases are stated at cost. Buildings are depreciated using the
straight-line method over their estimated useful lives of 30 years.
When properties are sold, the related cost and accumulated depreciation
are removed from the accounts and gains or losses from sales are
reflected in income in accordance with Statement of Financial Accounting
Standards No. 66, "Accounting for Sales of Real Estate."
Effective January 1, 1996, the Partnership adopted Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." The
Statement requires that an entity review long-lived assets and certain
identifiable intangibles, to be held and used, for impairment whenever
events or changes in circumstances indicate that the carrying amount of
the asset may not be recoverable. The general partners determine
whether an impairment in value has occurred by comparing the estimated
undiscounted future cash flows with the carrying cost of the individual
properties. Adoption of this standard had no material effect on the
Partnership's financial position or results of operations.
Acquisition Fees and Miscellaneous Acquisition Expenses - Acquisition
fees and miscellaneous acquisition expenses attributable to the
Partnership's investment in properties are capitalized and allocated to
land and buildings, net investment in direct financing leases and other
assets.
Lease Accounting and Rental Income - Land and buildings are leased to
others on a triple-net lease basis, whereby the tenant is generally
responsible for all operating expenses relating to the property,
including property taxes, insurance, maintenance and repairs.
The leases are accounted for using either the direct financing or the
operating method. Such methods are described below:
Direct financing method - The lease accounted for using the
direct financing method is recorded at its net investment
(Note 4). Unearned income is deferred and amortized to
income over the lease term so as to produce a constant
periodic rate of return on the Partnership's net investment
in the lease.
Operating method - Land and buildings are recorded at cost,
revenue is recognized as rentals are earned and depreciation
is charged to operations as incurred. When scheduled
rentals vary during the lease term, income is recognized on
a straight-line basis over the lease term so as to produce a
constant periodic rent. Accrued rental income is the
aggregate difference between the scheduled rents which vary
during the lease term and the income recognized on a
straight-line basis.
2. Leases:
------
The Partnership leases its land and buildings to operators of national
and regional fast-food and family-style restaurants. The leases are
accounted for under the provisions of Statement of Financial Accounting
Standards No. 13, "Accounting for Leases." Six of the leases are
classified as operating leases and one of the leases has been classified
as a direct financing lease. For the lease classified as a direct
financing lease, the building portion of the property lease is accounted
for as a direct financing lease while the land portion of the lease is
an operating lease. All leases are for 15 to 20 years and provide for
minimum and contingent rentals. In addition, the tenant pays all
property taxes and assessments, fully maintains the interior and
exterior of the building and carries insurance coverage for public
liability, property damage, fire and extended coverage. The lease
options generally allow tenants to renew the leases for two to four
successive five-year periods subject to the same terms and conditions as
the initial lease. Most leases also allow the tenant to purchase the
property at fair market value after a specified portion of the lease has
elapsed.
3. Land and Buildings on Operating Leases:
--------------------------------------
Land and buildings on operating leases consisted of the following at:
March 31, December 31,
1996 1995
----------- ------------
Land $ 3,103,600 $ 311,683
Buildings 2,597,333 -
----------- -----------
5,700,933 311,683
Less accumulated
depreciation (5,540) -
----------- -----------
5,695,393 311,683
Construction in
progress 1,268,393 90,561
----------- -----------
$ 6,963,786 $ 402,244
=========== ===========
Some leases provide for escalating guaranteed minimum rents throughout
the lease term. Income from these scheduled rent increases is
recognized on a straight-line basis over the terms of the leases. For
the quarter ended March 31, 1996, the Partnership recognized $2,004 of
such rental income.
The following is a schedule of the future minimum lease payments to be
received on noncancellable operating leases at March 31, 1996:
1996 $ 329,991
1997 443,042
1998 443,042
1999 445,673
2000 450,401
Thereafter 6,373,982
-----------
$ 8,486,131
===========
These amounts do not include minimum lease payments that will become due
when properties under development are completed. (See Note 8.)
4. Net Investment in Direct Financing Lease:
----------------------------------------
The following lists the components of the net investment in direct
financing lease at:
March 31, December 31,
1996 1995
----------- ------------
Minimum lease payments
receivable $ 1,346,418 $ -
Estimated residual
value 157,083 -
Less unearned income (875,419) -
----------- -----------
Net investment in
direct financing
lease $ 628,082 $ -
=========== ===========
The following is a schedule of future minimum lease payments to be
received on direct financing leases at March 31, 1996:
1996 $ 50,567
1997 67,423
1998 67,423
1999 67,423
2000 67,423
Thereafter 1,026,159
----------
$1,346,418
==========
5. Syndication Costs:
-----------------
Syndication costs consisting of legal fees, commissions, the due
diligence expense reimbursement fee, printing and other expenses
incurred in connection with the offering totalled $1,939,749 and
$1,035,764 at March 31, 1996 and December 31, 1995, respectively. These
offering expenses were charged to the limited partners' capital accounts
to reflect the net capital proceeds of the offering. All organizational
and offering expenses, as defined in the Partnership's prospectus, which
exceed three percent of the total gross proceeds received from the sale
of units of the Partnership will be paid or reimbursed by the general
partners and will not be the responsibility of the Partnership.
6. Related Party Transactions:
--------------------------
During the quarter ended March 31, 1996, the Partnership incurred
$629,091 in syndication costs due to CNL Securities Corp. for services
in connection with selling units of limited partnership interest. A
substantial portion of these amounts ($593,902) was or will be paid as
commissions to other broker-dealers.
In addition, during the quarter ended March 31, 1996, the Partnership
incurred $37,005 in due diligence expense reimbursement fees due to CNL
Securities Corp. These fees equal 0.5% of the limited partner
contributions of $7,401,066 received during the quarter ended March 31,
1996. A portion of these fees has been or may be reallowed to other
broker-dealers and all due diligence expenses will be paid from such
fees.
Additionally, during the quarter ended March 31, 1996, the Partnership
incurred $333,048 in acquisition fees due to CNL Fund Advisors, Inc. for
services in finding, negotiating and acquiring properties on behalf of
the Partnership. These fees represent 4.5% of the limited partner
capital contributions received during the quarter ended March 31, 1996,
and are included in land and buildings on operating leases, net
investment in direct financing lease and other assets.
In addition, during the quarter ended March 31, 1996, the Partnership
incurred management fees of $300 due to CNL Fund Advisors, Inc.
During the quarter ended March 31, 1996, certain affiliates of the
general partners provided accounting and administrative services to the
Partnership (including accounting and administrative services in
connection with the offering of units) on a day-to-day basis. For the
quarter ended March 31, 1996, the expenses incurred for these services
were classified as follows:
Syndication costs $ 87,800
General operating
and administrative
expenses 14,285
--------
$102,085
========
The due to related parties consisted of the following at:
March 31, December 31,
1996 1995
--------- ------------
Due to CNL Securities Corp.:
Commissions $ 32,394 $ 29,298
Due diligence expense
reimbursement fee 1,906 1,723
-------- --------
34,300 31,021
-------- --------
Due to CNL Fund Advisors,
Inc. and its affiliates:
Expenditures incurred
on behalf of the
Partnership 38,354 38,070
Acquisition fees 43,063 15,511
Accounting and admini-
strative services 16,520 12,585
Management fees 300 -
-------- --------
98,237 66,166
-------- --------
$132,537 $ 97,187
======== ========
During the quarter ended March 31, 1996, the Partnership acquired one
property for a purchase price of $853,881 from an affiliate of the
general partners. The affiliate had purchased and temporarily held
title to the property in order to facilitate the acquisition of the
property by the Partnership. The purchase price paid by the Partnership
represented the costs incurred by the affiliate to acquire the property,
including closing costs.
7. Concentration of Credit Risk:
----------------------------
The following schedule presents total rental and earned income from
individual lessees and the respective restaurant chains, each
representing more than ten percent of the Partnership's total rental and
earned income for the quarter ended March 31, 1996:
Golden Corral Corporation (operating
Golden Corral Family Steakhouse
Restaurants) $ 14,784
National Restaurant Enterprises, Inc.
(operating Burger King restaurants) 10,901
Great Midwestern Restaurants, Inc.
(operating Denny's restaurants) 5,242
Although the Partnership's properties are geographically diverse and the
Partnership's lessees operate a variety of restaurant concepts, failure
of any of these lessees or restaurant chains could significantly impact
the results of operations of the Partnership. However, the general
partners believe that the risk of such a default is reduced due to the
essential or important nature of these properties for the on-going
operations of the lessees.
8. Commitments:
-----------
The Partnership has entered into three development agreements with
tenants which provide terms and specifications for the construction of
buildings that the tenants have agreed to lease once construction is
completed. The agreements provide a maximum amount of development costs
(including the purchase price of the land and closing costs) to be paid
by the Partnership. The aggregate maximum development costs the
Partnership has agreed to pay is approximately $3,844,000, of which
approximately $2,523,500 in land and other costs had been incurred as of
March 31, 1996. The buildings under construction are expected to be
operational by September 1996. The lease agreements for these
properties are substantially the same as the leases relating to the
Partnership's other properties.
9. Subsequent Events:
-----------------
During the period April 1, 1996 through April 30, 1996, the Partnership
received capital contributions for an additional 256,535 units
($2,565,350) of limited partnership interest.
In addition, during the period April 1, 1996 through April 30, 1996, the
Partnership acquired one property for cash, at a total cost of $445,000.
The property is undeveloped land upon which a restaurant building is
being constructed. The development costs (including the purchase of the
land and closing costs) to be paid by the Partnership relating to the
property are estimated to be approximately $1,509,400, of which
approximately $1,089,900 in land and other costs had been paid by the
Partnership as of April 30, 1996. The building under construction is
expected to be operational by September 1996. The lease agreement for
this property is substantially the same as the leases relating to the
Partnership's other properties.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
CNL Income Fund XVII, Ltd. (the "Partnership") is a Florida limited
partnership that was organized on February 10, 1995, to acquire for cash,
either directly or through joint venture arrangements, both newly constructed
and existing restaurant properties, as well as land upon which restaurants are
to be constructed, to be leased primarily to operators of national and
regional fast-food, family-style and casual dining restaurant chains
(collectively, the "Properties"). The leases will be triple-net leases, with
the lessee generally responsible for all repairs and maintenance, property
taxes, insurance and utilities. As of March 31, 1996, the Partnership owned
seven Properties, three of which were under construction.
Liquidity and Capital Resources
- - -------------------------------
Beginning September 2, 1995, the Partnership offered for sale up to
3,000,000 units of limited partnership interest (the "Units") (3,000,000 Units
at $10 per Unit) pursuant to a registration statement on Form S-11 under the
Securities Act of 1933, as amended, effective August 11, 1995. As of March
31, 1996, the Partnership had sold 1,309,799 Units, representing $13,097,987
of capital contributed by limited partners. Based on the general partners'
experience with 16 prior CNL Income Fund offerings (each of which sold the
entire amount of units offered for purchase), the Partnership anticipates
significant additional sales of Units prior to the termination of the
offering. The offering will terminate not later than August 11, 1996, unless
the general partners elect to extend the offering to a date not later than
August 11, 1997, in states that permit such an extension.
As of March 31, 1996, net proceeds to the Partnership from its offering
of Units, after deduction of organizational and offering expenses, totalled
$11,148,238. Of this amount, approximately $9,206,000 had been used to invest
or committed for investment in seven Properties, three of which were under
construction at March 31, 1996, and to pay acquisition fees and certain
acquisition expenses, leaving approximately $1,942,500 of offering proceeds
available for investment in Properties.
As of March 31, 1996, the Partnership had entered into three development
agreements with tenants which provide terms and specifications for the
construction of buildings that the tenants have agreed to lease once
construction and renovation is completed. The agreements provide a maximum
amount of development costs (including the purchase price of the land and
closing costs) to be paid by the Partnership. The aggregate maximum
development costs the Partnership has agreed to pay is approximately
$3,844,000, of which approximately $2,523,500 in land and other costs had been
incurred as of March 31, 1996. The buildings under construction are expected
to be operational by September 1996.
During the period April 1, 1996 through April 30, 1996, the Partnership
acquired one additional property for cash, at a total cost of $445,000. This
property is undeveloped land upon which a restaurant building is being
constructed. The development costs (including the purchase of the land and
closing costs) to be paid by the Partnership relating to the property are
estimated to be approximately $1,509,400, of which approximately $1,089,900 in
land and other costs had been paid by the Partnership as of April 30, 1996.
The building under construction is expected to be operational by September
1996.
The Partnership presently is negotiating to acquire additional
properties, but as of April 30, 1996, had not acquired any such properties.
As of April 30, 1996, the Partnership had sold 1,566,334 Units for an
aggregate of $15,663,337 in gross offering proceeds and had invested or
committed for investment approximately $10,748,500 thereof in Properties,
leaving approximately $2,734,000 in net offering proceeds available for
investment in Properties. As of April 30, 1996, the Partnership had incurred
$704,850 in acquisition fees to an affiliate of the general partners. The
Partnership will use the remaining net offering proceeds, together with
proceeds from the sale of Units subsequent to April 30, 1996, to acquire
additional Properties, to pay acquisition fees and acquisition expenses and to
pay expenses relating to the sale of Units. The number of Properties to be
acquired will depend upon the amount of net offering proceeds (gross proceeds
less fees and expenses of the offering) available to the Partnership.
None of the Properties owned or to be acquired by the Partnership is or
may be encumbered. Subject to certain restrictions on borrowing, however, the
Partnership may borrow funds, but will not encumber any of the Properties in
connection with any such borrowing.
Until Properties are acquired by the Partnership, all Partnership
proceeds are held in short-term, highly liquid investments which the general
partners believe to have appropriate safety of principal. This investment
strategy provides high liquidity in order to facilitate the Partnership's use
of these funds to acquire Properties at such time as Properties suitable for
acquisition are located. At March 31, 1996, the Partnership had $3,744,261
invested in such short-term investments as compared to $4,198,859 at December
31, 1995. The decrease in the amount invested in short-term investments is a
result of the Partnership acquiring additional Properties during the quarter
ended March 31, 1996. The decrease in cash was partially offset by an
increase resulting from the receipt of capital contributions from the sale of
limited partnership units during the quarter ended March 31, 1996. These
funds will be used to purchase and develop Properties (directly or indirectly
through joint venture arrangements), to pay syndication and acquisition costs,
to pay limited partner distributions, to meet Partnership expenses and, in the
general partners' discretion, to create cash reserves.
During the quarter ended March 31, 1996, affiliates of the general
partners incurred on behalf of the Partnership $173,678 for certain
organizational and offering expenses, $35,570 for certain acquisition expenses
and $4,710 for certain operating expenses. As of March 31, 1996, the
Partnership owed $132,537 to related parties for such amounts, accounting and
administrative services and unpaid commissions, due diligence reimbursement
fees and acquisition fees. As of April 30, 1996, the Partnership had
reimbursed the affiliates all such amounts. Amounts payable to other parties,
including distributions payable, increased to $410,939 at March 31, 1996, from
$139,001 at December 31, 1995, as a result of an increase in distributions
payable to limited partners and costs incurred with respect to the Properties
under construction and unpaid at March 31, 1996.
During the quarter ended March 31, 1996, the Partnership generated cash
from operations (which includes cash received from tenants and interest and
other income received, less cash paid for expenses) of $75,084. Based on
current and anticipated future cash from operations, the Partnership declared
distributions to the limited partners of $115,044 for the quarter ended March
31, 1996. No distributions were made to the general partners for the quarter
ended March 31, 1996. No amounts distributed or to be distributed to the
limited partners for the quarter ended March 31, 1996, are required to be or
have been treated by the Partnership as a return of capital for purposes of
calculating the limited partners' return on their adjusted capital
contributions. The Partnership intends to continue to make distributions of
cash available for distribution to the limited partners on a quarterly basis.
The general partners believe that the Properties are adequately covered
by insurance. In addition, during 1995, the general partners obtained
contingent liability and property coverage for the Partnership. This
insurance policy is intended to reduce the Partnership's exposure in the
unlikely event a tenant's insurance policy lapses or is insufficient to cover
a claim relating to the Properties. The Partnership's investment strategy of
acquiring Properties for cash and leasing them under triple-net leases to
operators who meet specified financial standards is expected to minimize the
Partnership's operating expenses. Partnership net income is expected to
increase throughout 1996, as rental income increases, due to the acquisition
of additional Properties and due to the fact that the Properties that were
under construction at March 31, 1996, will be operational. Accordingly, the
general partners believe that any anticipated decrease in the Partnership's
liquidity in 1996, due to its investment of available net offering proceeds in
Properties and the payment of additional costs relating to the Properties
under construction at March 31, 1996, will not have an adverse effect on the
Partnership's operations.
Due to anticipated low operating expenses, rental income expected to be
obtained from Properties after they are acquired, and the fact that the
Partnership will not purchase a Property until sufficient cash is available
for such purchase, the general partners do not believe that working capital
reserves are necessary at this time. In addition, due to the fact that the
leases of the Partnership's Properties are on a triple-net basis, it is not
anticipated that a permanent reserve for maintenance and repairs is necessary
at this time. To the extent, however, that the Partnership has insufficient
funds for such purposes, the general partners will contribute to the
Partnership an aggregate amount of up to one percent of the offering proceeds
for repairs and maintenance. The general partners have the right to cause the
Partnership to maintain reserves if, in their discretion, they determine such
reserves are necessary to meet the Partnership's working capital needs.
The general partners have the right, but not the obligation, to make
additional capital contributions if they deem it appropriate in connection
with the operations of the Partnership.
Results of Operations
- - ---------------------
No significant operations commenced until the Partnership received the
minimum offering proceeds of $1,500,000 on November 3, 1995.
As of March 31, 1996, the Partnership had purchased seven Properties and
entered into lease agreements relating to each of these Properties. The
leases of the Properties provide for minimum base annual rental payments
(payable in monthly installments) ranging from approximately $84,700 to
$199,900. All of the leases provide for percentage rent based on sales in
excess of a specified amount. In addition, some of the leases provide that,
commencing in specified lease years (generally the sixth lease year), the
annual base rent required under the terms of the lease will increase.
During the quarter ended March 31, 1996, the Partnership earned $33,814
in rental income from operating leases and earned income from the direct
financing lease from four Properties. No rental income was earned for the
three Properties under construction as of March 31, 1996, due to the fact that
rent does not commence until the earlier of (i) the date the restaurant opens
for business to the public, (ii) the date the certificate of occupancy for the
restaurant is issued or (iii) a specified number of days after the execution
of the lease (ranging from 120 to 180 days). The Properties under
construction are expected to be operational by May, July and September 1996,
at which time rental payments are expected to commence. Because the
Partnership did not commence significant operations until it received the
minimum offering proceeds on November 3, 1995, and has not yet acquired all of
its Properties, Partnership revenues for the quarter ended March 31, 1996,
represent only a portion of revenues which the Partnership is expected to earn
during a full quarter in which the Partnership's Properties are operational.
During the quarter ended March 31, 1996, three lessees of the
Partnership and their respective restaurant chain, Golden Corral Corporation
(operating Golden Corral Family Steakhouse Restaurants), National Restaurant
Enterprises, Inc. (operating Burger King restaurants), and Great Midwestern
Restaurants, Inc. (operating Denny's restaurants) each contributed more than
ten percent of the Partnership's total rental income. As of March 31, 1996,
Golden Corral Corporation was the lessee under leases relating to two
restaurants (including one Property under construction as of March 31, 1996),
National Restaurant Enterprises, Inc., was the lessee under leases relating to
two restaurants and Great Midwestern Restaurants, Inc. was the lessee under
leases relating to one restaurant. Because the Partnership did not commence
operations until November 1995, and its first Property was not purchased until
December 1995, the foregoing information regarding the lessees and restaurant
chains which contributed a significant amount of the Partnership's total
rental income during the quarter ended March 31, 1996, may or may not be
representative of the lessees which will account for more than ten percent of
the Partnership's rental income during the remainder of 1996 and subsequent
years. Because the Partnership has not completed its acquisition of
Properties as yet, it is not possible to determine which lessees or restaurant
chains will contribute more than ten percent of the Partnership's rental
income during the remainder of 1996 and subsequent years. In the event that
certain lessees or restaurant chains contribute more than ten percent of the
Partnership's rental income in the current and future years, any failure of
such lessees or restaurant chains could materially affect the Partnership's
income.
During the quarter ended March 31, 1996, the Partnership also earned
$53,550 in interest income from investments in money market accounts or other
short-term, highly liquid investments. As net offering proceeds are invested
in additional Properties and the Properties under construction became
operational, the percentage of total income representing interest income is
expected to decrease.
Operating expenses, including depreciation and amortization, were
$23,989 for the quarter ended March 31, 1996. The dollar amount of operating
expenses is expected to increase and the amount of general operating and
administrative expenses as a percentage of total revenues is expected to
decrease, as the Partnership acquires additional Properties and the Properties
under construction become operational.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings. Inapplicable.
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Item 2. Changes in Securities. Inapplicable.
---------------------
Item 3. Defaults upon Senior Securities. Inapplicable.
-------------------------------
Item 4. Submission of Matters to a Vote of Security Holders.
---------------------------------------------------
Inapplicable.
Item 5. Other Information. Inapplicable.
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Item 6. Exhibits and Reports on Form 8-K.
--------------------------------
(a) Exhibits - None.
(b) The Partnership filed two reports on Form 8-K on January 4,
1996 and March 20, 1996, reporting property acquisitions.
SIGNATURES
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Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
DATED this 13th day of May, 1996.
CNL INCOME FUND XVII, LTD.
By: CNL REALTY CORPORATION
General Partner
By: /s/ James M. Seneff, Jr.
-----------------------------
JAMES M. SENEFF, JR.
Chief Executive Officer
(Principal Executive Officer)
By: /s/ Robert A. Bourne
-----------------------------
ROBERT A. BOURNE
President and Treasurer
(Principal Financial and
Accounting Officer)
