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): October 4, 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)
were for CNL XVII, and the remaining Units are for CNL XVIII. The offering of
Units of CNL XVII terminated on September 19, 1996, at which time
subscriptions for an aggregate 3,000,000 Units ($30,000,000), including Units
sold pursuant to the Reinvestment Plan, had been received and 1,602
subscribers had been admitted as Limited Partners in accordance with the
Partnership Agreement of CNL XVII.
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 August 8, 1996 through December 11, 1996, CNL XVII acquired four
Properties, including one Property as tenants-in-common with an Affiliate of
the General Partners which consists of land and building and three Properties
which consist of land and building. The Properties are two Boston Market
Properties (one in each of Fayetteville, North Carolina, and Long Beach,
California), an Arby's Property (in Plainfield, Indiana), and a Burger King
Property (in Lyons, Illinois).
The Boston Market Properties in Fayetteville, North Carolina, and
Long Beach, California, were acquired from an Affiliate of CNL XVII. The
Affiliate had purchased and temporarily held title to these Properties in
order to facilitate the acquisition of the Properties by CNL XVII. The
Property in Fayetteville, North Carolina, was acquired as tenants-in-common
with an Affiliate of the General Partners. The Property in Long Beach,
California, was acquired as a wholly owned Property by CNL XVII. The purchase
prices paid by CNL XVII, and in the case of the tenancy-in-common, CNL XVII
and an Affiliate of the General Partners, represented actual costs incurred by
the Affiliate who originally had purchased and temporarily held title to these
Properties, to acquire the Properties, including closing costs.
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 Property that is to be constructed, 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 August 8, 1996 and December 11, 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 August 8, 1996 through December 11, 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 (5) $963,657 10/04/96 06/2011; five $96,403 (7); for each lease at any time
(the "Fayetteville (excluding five-year increases to year after the after the
Property") closing renewal options 10.81% of total fifth lease fifth lease
Existing restaurant costs) (6) cost during the year, (i) 5% of year
third through annual gross
The Fayetteville Property fifth lease sales minus (ii)
is located on a pad site in years, 11.55% of the minimum
the Cross Pointe Centre total cost annual rent for
Shopping Center, which is during the sixth such lease year
located on the east side of through tenth
Skibo Road in Fayetteville, lease years, and
Cumberland County, North 12.71% of total
Carolina, in an area of cost during the
primarily retail and eleventh through
commercial development. fifteenth lease
Other fast-food and family- years
style restaurants located
in proximity to the
Fayetteville Property
include two McDonald's, a
Burger King, a Taco Bell,
an Arby's, a Hardee's, a
KFC, a Subway Sandwich
Shop, a Chick-Fil-A, a
Golden Corral, a Ruby
Tuesday's, a Shoney's, a
Lone Star Steakhouse, a
Chili's, and several local
restaurants.
ARBY'S $807,719 10/25/96 10/2016; two $82,791; for each lease during the
(the "Plainfield Property") (excluding five-year increases by year, (i) 4% of seventh and
Existing restaurant closing renewal options 4.14% after the annual gross tenth lease
costs) third lease year sales minus (ii) years only
The Plainfield Property is and after every the minimum
located on the east side of three years annual rent for
Gateway Drive and the west thereafter such lease year
side of State Road 267 in during the lease (8)
Plainfield, Hendricks term
County, Indiana, in an area
of primarily agricultural
and residential
development. Other fast-
food and family-style
restaurants located in
proximity to the Plainfield
Property include a Wendy's,
a McDonald's, a Frisch's
Big Boy, a Steak and Shake,
a Cracker Barrel, a Subway
Sandwich Shop, and several
local restaurants.
BURGER KING $849,605 11/13/96 11/2016; two 11% of Total for each lease None
(the "Lyons Property") (excluding five-year Cost (4) year, (i) 8.5%
Restaurant to be closing and renewal options of annual gross
constructed development sales minus (ii)
costs (3) the minimum
The Lyons Property is annual rent for
located at the northwest such lease year
corner of Ogden Avenue and
First Avenue in Lyons, Cook
County, Illinois, in an
area of primarily retail,
commercial, and residential
development. Other fast-
food and family-style
restaurants located in
proximity to the Lyons
Property include a
McDonald's and several
local restaurants.
BOSTON MARKET $619,813 12/05/96 06/2011; five $90,262; for each lease at any time
(the "Long Beach Property") (excluding five-year increases to year after the after the
Existing restaurant closing renewal options 10.81% of total fifth lease fifth lease
costs) (9) cost during the year, (i) 4% of year
The Long Beach Property is third through annual gross
located on the southeast fifth lease sales minus (ii)
corner of Atlantic Avenue years, 11.55% of the minimum
and Roosevelt Boulevard, in total cost annual rent for
Long Beach, Los Angeles during the sixth such lease year
County, California, in an through tenth
area of primarily retail, lease years, and
commercial, and residential 12.71% of total
development. Other fast- cost during the
food and family-style eleventh through
restaurants located in fifteenth lease
proximity to the Long Beach years
Property include two KFC's,
two Taco Bell's, a Jack in
the Box, an Arby's, a
Denny's, a McDonald's, and
several local restaurants.
</TABLE>
FOOTNOTES:
(1) The estimated federal income tax basis of the depreciable portion (the
building portion) of each of the Properties acquired, and for the
construction Property, once the building is constructed, is set forth
below:
Property Federal Tax Basis
-------- -----------------
Fayetteville Property (5) $537,000
Plainfield Property 492,000
Lyons Property 641,000
Long Beach Property 311,000
(2) Minimum annual rent for each of the Properties became payable on the
effective date of the lease, except as indicated below. For the Lyons
Property, minimum annual rent will become due and payable on the
Possession Date, which is March 1, 1997. For this Property, "interim
rent" equal to 11 percent per annum of the amount funded by CNL XVII in
connection with the purchase and construction of the Property shall
accrue prior to the Possession Date and shall be payable in a single
lump sum at the time of final funding of the construction costs.
(3) The development agreement for the Property which is to be constructed,
provides that construction must be completed no later than the date set
forth below. The maximum cost to CNL XVII (including the purchase price
of the land, development costs (if applicable), and closing and
acquisition costs) is not expected to, but may, exceed the amount set
forth below:
Estimated Estimated Final
Property Maximum Cost Completion Date
-------- ------------ ---------------
Lyons Property $1,409,091 March 1, 1997
(4) The "Total Cost" is equal to the sum of (i) the purchase price of the
Property, (ii) closing costs, and (iii) actual development costs
incurred under the development agreement.
(5) CNL XVII acquired an approximate 20 percent interest in the Property in
Fayetteville, North Carolina, as tenants-in-common with an Affiliate of
the General Partners. Amount presented represents full cost of the
Property.
(6) CNL XVII purchased an approximate 20 percent interest in the Property in
Fayetteville, North Carolina, as tenants-in-common with an Affiliate of
the General Partners for $190,130.
(7) CNL XVII's minimum annual rent for the approximate 20 percent interest
in the Property in Fayetteville, North Carolina, as tenants-in-common
with an Affiliate of the General Partners is $19,020.
(8) Percentage rent shall be calculated on a calendar year basis (January 1
to December 31).
(9) CNL XVII has committed to pay $899,646, including development costs. Of
the total amount committed, $618,813 was paid at closing.
<TABLE>
PRO FORMA ESTIMATE OF TAXABLE INCOME OF
CNL INCOME FUND XVII, LTD.
GENERATED FROM THE OPERATIONS OF PROPERTIES ACQUIRED FROM AUGUST 8, 1996
THROUGH DECEMBER 11, 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 August 8, 1996 through December 11, 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 Arby's Burger King Boston Market
Fayetteville, NC (6) Plainfield, IN Lyons, IL Long Beach, CA
-------------------- -------------- ----------- --------------
<S> <C> <C> <C> <C>
Pro Forma Estimate
of Taxable Income:
Base Rent (1) $ 19,020 $ 82,791 $153,200 $ 90,262
Management Fees (2) (190) (828) (1,532) (903)
General and Administrative
Expenses (3) (951) (4,140) (7,660) (4,513)
-------- -------- -------- --------
Estimated Cash Available from
Operations 17,879 77,823 144,008 84,846
Depreciation Expense (4) (2,651) (12,300) (16,030) (7,781)
-------- -------- -------- --------
Pro Forma Estimate of Taxable
Income of CNL XVII $ 15,228 $ 65,523 $127,978 $ 77,065
======== ======== ======== ========
See Footnotes
</TABLE>
<TABLE>
<CAPTION>
Total
--------
<S> <C>
Pro Forma Estimate
of Taxable Income:
Base Rent (1) $345,273
Management Fees (2) (3,453)
General and Administrative
Expenses (3) (17,264)
--------
Estimated Cash Available from
Operations 324,556
Depreciation Expense (4) (38,762)
--------
Pro Forma Estimate of Taxable
Income of CNL XVII $285,794
========
</TABLE>
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 agreement for the Property which is to be constructed,
provides that construction must be completed no later than the date set
forth below:
Property Estimated Final Completion Date
-------- -------------------------------
Lyons Property March 1, 1997
(6) Represents CNL XVII's approximate 20 percent interest in income and
expenses relating to the Property in Fayetteville, North Carolina,
acquired as tenants-in-common with an Affiliate of the General Partners.
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 September 30, 1996 12
Pro Forma Statement of Income for the
nine months ended September 30, 1996 13
Pro Forma Statement of Income for the
period February 10, 1995 (Date of
Inception) through December 31, 1995 14
Notes to Pro Forma Financial Statements
for the nine months ended September 30,
1996 and the period February 10, 1995
(Date of Inception) through December 31, 1995 15
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 September 30, 1996, including the receipt of $29,903,675 in
gross offering proceeds from the sale of 2,990,368 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 19 properties, two of which
were under construction at September 30, 1996, and to pay organizational and
offering expenses, acquisition fees, and miscellaneous acquisition expenses,
(ii) the receipt of $96,325 in gross offering proceeds from the sale of 9,632
additional Units during the period October 1, 1996 through December 11, 1996,
and (iii) the application of such funds and $6,122,038 of cash and cash
equivalents at September 30, 1996, to purchase four additional properties,
including one property acquired as tenants-in-common with an affiliate of the
general partners, acquired during the period October 1, 1996 through December
11, 1996, one of which is under construction, to pay additional construction
costs for the two properties under construction at September 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 September 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 September 30, 1996.
The Pro Forma Statements of Income for the nine months ended September
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
three of the 23 properties that were wholly owned by CNL XVII or held as
tenants-in-common with an affiliate of the general partners as of December 11,
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 20 properties owned by CNL XVII as of
December 11, 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
SEPTEMBER 30, 1996
Pro Forma
ASSETS Historical Adjustments Pro Forma
----------- --------------- -----------
Land and buildings on operating
leases, less accumulated
depreciation (c) $17,291,664 $3,298,325 (a) $20,589,989
Net investment in direct
financing leases (c) 1,934,015 376,548 (a) 2,310,563
Investment in joint venture - 200,821 (b) 200,821
Cash and cash equivalents 9,407,094 (5,931,545)(a)
(190,493)(b) 3,285,056
Receivables 65,423 65,423
Prepaid expenses 8,350 8,350
Organization costs, less
accumulated amortization 8,191 8,191
Accrued rental income 69,918 69,918
Other assets 443,404 (184,658)(a)
(10,328)(b) 248,418
----------- ----------- -----------
$29,228,059 $(2,441,330) $26,786,729
=========== ============ ===========
LIABILITIES AND
PARTNERS' CAPITAL
Accounts payable $ 1,826 $ 1,826
Accrued construction costs
payable 2,488,641 $(2,488,641)(a) -
Distributions payable 349,912 349,912
Due to related parties 67,333 (40,345)(a) 26,988
Rents paid in advance 119,398 119,398
----------- ----------- -----------
Total liabilities 3,027,110 (2,528,986) 498,124
Partners' capital 26,200,949 87,656 (a) 26,288,605
----------- ----------- -----------
$29,228,059 $(2,441,330) $26,786,729
=========== ============ ===========
See accompanying notes to unaudited pro forma
financial statements.
CNL INCOME FUND XVII, LTD.
(A FLORIDA LIMITED PARTNERSHIP)
UNAUDITED PRO FORMA STATEMENT OF INCOME
NINE MONTHS ENDED SEPTEMBER 30, 1996
Pro Forma
Historical Adjustments Pro Forma
---------- ------------- ---------
Revenues:
Rental income from operating
leases $ 525,787 $ 29,055 (1) $ 554,842
Earned income from direct
financing leases (2) 80,337 80,337
Interest 175,046 (17,562)(3) 157,484
Other income 9,552 9,552
--------- --------- ---------
790,722 11,493 802,215
--------- --------- ---------
Expenses:
General operating and admini-
strative 107,897 107,897
Professional services 11,631 11,631
Management fees to related
party 6,158 348 (4) 6,506
Depreciation and amortization 90,859 4,661 (5) 95,520
--------- --------- ---------
216,545 5,009 221,554
--------- --------- ---------
Income Before Equity in Earnings
of Joint Venture 574,177 6,484 580,661
Equity in Earnings of Joint Venture - 5,757 (6) 5,757
--------- --------- ---------
Net Income $ 574,177 $ 12,241 $ 586,418
========= ========= =========
Net Income Per Limited Partner Unit $ 0.33 $ 0.34
========= =========
Weighted Average Number of Units
Outstanding 1,748,248 1,748,248
========= =========
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 (7) $ .02 $ 0.06
========= =========
Weighted Average Number of
Units Outstanding (7) 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 NINE MONTHS ENDED SEPTEMBER 30, 1996 AND
THE PERIOD FEBRUARY 10, 1995 (DATE OF INCEPTION)
THROUGH DECEMBER 31, 1995
Pro Forma Balance Sheet:
- -----------------------
(a) Represents gross proceeds of $96,325 from the sale of 9,632 Units during
the period October 1, 1996 through December 11, 1996, and $5,931,545 of
cash and cash equivalents at September 30, 1996, used (i) to acquire
three properties for $3,176,711, (ii) to fund estimated construction
costs of $2,797,810 ($2,488,641 of which was accrued as construction
costs payable at September 30, 1996) relating to the two properties
under construction at September 30, 1996, (iii) to pay acquisition fees
and other costs of $44,355 ($40,020 of which was accrued as due to
related parties at September 30, 1996) and reclassify from other assets
$184,658 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 $8,994 ($325 of which was
accrued as due to related parties at September 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
------------------ ----------- ----------
Arby's in
Plainfield, IN $ 806,719 $ 43,738 $ 850,457
Burger King in
Lyons, IL 1,468,236 79,603 1,547,839
Boston Market in
Long Beach, CA 901,756 48,890 950,646
Two properties under
construction at
September 30, 1996 309,169 16,762 325,931
---------- ---------- ----------
$3,485,880 $ 188,993 $3,674,873
========== ========== ==========
Pro forma adjustment
classified as
follows:
Land and buildings
on operating
leases $3,298,325
Net investment in
direct financing
leases 376,548
----------
$3,674,873
==========
(b) Represents the use of $190,493 of CNL XVII's net offering proceeds to
acquire an approximate 20 percent interest in the Boston Market property
in Fayetteville, NC, as tenants-in-common with an affiliate of the
general partners. CNL XVII accounts for its investment in this property
using the equity method since the partnership shares control with an
affiliate, and amounts relating to this investment are classified as an
investment in joint venture.
The pro forma adjustments to investment in joint venture and other
assets as a result of the above transaction were as follows:
Investment in joint venture:
Acquisition of approximate
20 percent interest in the
Boston Market property in
Fayetteville, NC $190,493
Reclassification from other
assets for the allocation
of acquisition fees and
other costs previously
incurred relating to the
acquired property 10,328
--------
$200,821
========
(c) 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 two wholly owned
properties acquired during the period November 4, 1995 (the date CNL
XVII began operations) through December 11, 1996, which had a previous
rental history prior to the acquisition of the property by CNL XVII (the
"Pro Forma Properties"), for the period commencing (A) the later of (i)
the date the Pro Forma Properties became operational as rental
properties 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 Properties were acquired by CNL XVII or (ii) the end of the pro
forma period presented. The Pro Forma Properties were acquired from
affiliates who had purchased and temporarily held title to the
properties in order to facilitate their acquisition by CNL XVII. The
noncancellable leases for the Pro Forma Properties in place during the
period the affiliates owned the Pro Forma Properties were assigned to
CNL XVII at the time CNL XVII acquired the properties. The following
presents the actual dates the Pro Forma Properties were acquired by CNL
XVII, as compared to the dates the Pro Forma Properties were 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
Boston Market in Long
Beach, CA December 5, 1996 June 14, 1996
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 leases relating to the Pro Forma Properties provide 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 leases for the Pro
Forma Properties during the portion of 1996 and 1995 that the previous
owners held the properties, no pro forma adjustments were made for
percentage rental income.
(2) See Note (c) 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 nine months ended September 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 Properties 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 Properties accounted for as operating leases
using the straight-line method over an estimated useful life of 30
years.
(6) Represents CNL XVII's approximate 20 percent interest in rental income
from an operating lease, net of depreciation expense, for the one
property acquired as tenants-in-common with an affiliate of the general
partners, during the period November 4, 1995 (the date CNL XVII began
operations) through December 11, 1996, which had a previous rental
history prior to the acquisition of the property by CNL XVII and an
affiliate of the general partners as tenants-in-common (the "Pro Forma
TIC Property"), for the period commencing (A) the later of (i) the date
the Pro Forma TIC 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 TIC
Property was acquired by CNL XVII and an affiliate of the general
partners as tenants-in-common or (ii) the end of the pro forma period
presented. The Pro Forma TIC 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 and an affiliate of the general
partners as tenants-in-common. The noncancellable lease for the Pro
Forma TIC Property in place during the period the affiliate owned the
Pro Forma TIC Property was assigned to CNL XVII and an affiliate of the
general partners as tenants-in-common at the time CNL XVII and the
affiliate of the general partners acquired the property as tenants-in-
common. The following presents the actual date the Pro Forma TIC
Property was acquired by CNL XVII and the affiliate of the general
partners, as compared to the date the Pro Forma TIC 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
----------- ------------
Boston Market in
Fayetteville, NC October 4, 1996 June 7, 1996
(7) Historical net income per limited partner unit was calculated based upon
the weighted average number of limited partner units outstanding during
the nine months ended September 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 one of the Pro Forma Properties 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: December 19, 1996 By: /s/ Robert A. Bourne
---------------------------------
ROBERT A. BOURNE, General Partner
