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): December 27, 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 December 12, 1996 through February 5, 1997, CNL XVII acquired
four Properties, including two Properties as tenants-in-common with affiliates
of the General Partners which each consist of land and building, one Property
acquired pursuant to a joint venture agreement between CNL XVII and an
unaffiliated entity which consists of land and building, and one Property
acquired pursuant to a joint venture agreement between CNL XVII and an
affiliated entity which consists of land and building. The Properties are a
Golden Corral Property (in El Cajon, California), a Black-eyed Pea Property
(in Corpus Christi, Texas), a Burger King Property (in Akron, Ohio), and a
Jack in the Box Property (in Mansfield, Texas).
The Black-eyed Pea Property in Corpus Christi, Texas, and the Burger
King Property in Akron, Ohio, 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. Both
Properties were acquired as tenants-in-common with affiliates of the general
partners of CNL XVII (the "General Partners"). The purchase prices paid by
CNL XVII and affiliates 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.
The Golden Corral Property in El Cajon, California, was acquired
pursuant to a joint venture agreement between CNL XVII and an unaffiliated
entity. The Jack in the Box Property in Mansfield, Texas, was acquired
pursuant to a joint venture agreement between CNL XVII and an affiliated
entity.
In connection with the purchase of each of these four Properties, CNL
XVII indirectly through the joint venture or tenancy-in-common arrangements,
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, CNL XVII has entered
into development and indemnification and put agreements with the lessees.
- 1 -
The following table sets forth the location of the four Properties
acquired by CNL XVII between December 12, 1996 and February 5, 1997, a
description of the competition, and a summary of the principal terms of the
acquisition and lease of each Property.
- 2 -
<TABLE>
PROPERTY ACQUISITIONS
From December 12, 1996 through February 5, 1997
<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>
GOLDEN CORRAL (5) $758,292 12/27/96 12/2016; two 11.75% of Total for each lease at any time
(the "El Cajon (excluding five-year Cost (4); year, (i) 7% of after the
Property") closing and renewal options increases by annual gross seventh
Restaurant to be development 15% after the sales minus lease year
constructed costs) (3) fifth lease (ii) the
year and after minimum annual
The El Cajon Property every five rent payable in
is located at the years that lease year
northeast quadrant of thereafter
the intersection of during the
Second Street and Main lease term
Street in El Cajon, San
Diego County,
California, in an area
of primarily retail,
commercial, and
residential
development. Other
fast-food and family-
style restaurants
located in proximity to
the El Cajon Property
include a McDonald's,
an Arby's, a Burger
King, a Wendy's, a
Pizza Hut, a KFC, a
Taco Bell, an Outback
Steakhouse, a Jack in
the Box, a Subway
Sandwich Shop, a Dairy
Queen, and several
local restaurants.
- 3 -
</TABLE>
<TABLE>
<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>
BLACK-EYED PEA (6) $1,428,670 01/28/97 12/2016; two $153,775 (6); for each lease during the
(the "Corpus Christi (excluding five-year increases by year, (i) 5% of eighth,
Property") closing costs) renewal options 11% after the annual gross tenth and
Existing restaurant (6) fifth lease sales minus twelfth
year and after (ii) the lease years
The Corpus Christi every five minimum annual only
Property is located at years rent payable in
the southeast corner of thereafter that lease year
South Padre Island during the
Drive and Everhart Road lease term
in Corpus Christi,
Nueces County, Texas,
in an area of primarily
retail, commercial, and
residential
development. Other
fast-food and family-
style restaurants
located in proximity to
the Corpus Christi
Property include a Tony
Roma's, a Red Lobster,
a Denny's, a Chick-Fil-
A, a Burger King, a
Chili's, a Kenny
Roger's Roasters, a
McDonald's, an Olive
Garden, a Pizza Hut, a
Popeye's, a Subway
Sandwich Shop, a
Wendy's, and several
local restaurants.
BURGER KING (7) $871,838 01/28/97 12/2016; four $89,687 (7); for each lease during the
(the "Akron Property") (excluding five-year increases by 5% year, (i) 6% of eighth
Existing restaurant closing costs) renewal options after the fifth annual gross through
(7) lease year and sales minus twelfth
The Akron Property is increases by (ii) the lease years
located on the south 10% after the minimum annual only
side of Wooster Road tenth lease rent payable in
(State Road 261) in year and after that lease year
Akron, Summit County, every five (8)
Ohio, in an area of years
primarily retail, thereafter
commercial, and during the
residential lease term
development. Other
fast-food and family-
style restaurants
located in proximity to
the Akron Property
include a Church's
Fried Chicken, a White
Castle, a Rally's, a
KFC, a Subway Sandwich
Shop, and several local
restaurants.
- 4 -
</TABLE>
<TABLE>
<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>
JACK IN THE BOX (10) $781,209 02/05/97 02/2015; four $80,074 (9); for each lease None
(the "Mansfield (excluding five-year increases by 8% year, (i) 5% of
Property") closing costs) renewal options after the fifth annual gross
Restaurant to be (3)(9) lease year and sales minus
constructed after every (ii) the
five years minimum annual
The Mansfield Property thereafter rent payable in
is located at the during the that lease year
southeast quadrant of lease term (8)
U.S. Highway 287 and
FM157 in Mansfield,
Tarrant County, Texas,
in an area of primarily
retail, commercial and
residential
development. Other
fast-food and family-
style restaurants
located in proximity to
the Mansfield Property
include a Waffle House,
a Sonics Drive-In, a
KFC, a Taco Bell, a
McDonald's, and a
Whataburger.
</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 Properties, once the buildings are constructed, is set
forth below:
Property Federal Tax Basis
-------- -----------------
El Cajon Property $1,115,000
Corpus Christi Property (6) 726,000
Akron Property (9) 517,000
Mansfield Property 483,000
(2) Minimum annual rent for each of the Properties became payable on the
effective date of the lease, except as indicated below. For the El
Cajon Property, 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) 150 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 this Property,
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
this Property.
- 5 -
(3) The development agreements for the Properties which are to be
constructed, provide that construction must be completed no later than
the dates set forth below. The maximum cost to CNL XVII and
unaffiliated entities pursuant to the joint venture agreements
(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
-------- ------------ ---------------
El Cajon Property (5) $2,048,992 May 26, 1997
Mansfield Property (14) 781,209 August 4, 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 interest in CNL/GC El Cajon Joint Venture, a
general partnership between CNL XVII and an unaffiliated entity. Based
upon anticipated development costs for the Property, CNL XVII expects to
own an 80% interest in CNL/GC El Cajon Joint Venture upon completion of
construction.
(6) CNL XVII acquired an approximate 27 percent interest in the Property in
Corpus Christi, Texas, as tenants-in-common with an affiliate of the
General Partners. Amount presented represents full cost of the
Property. The actual amount paid by CNL XVII for this Property was
$391,737. CNL XVII's minimum annual rent for the approximate 27 percent
interest in this Property is $42,163.
(7) CNL XVII acquired an approximate 37 percent interest in the Property in
Akron, Ohio, as tenants-in-common with an affiliate of the General
Partners. Amount presented represents full cost of the Property. The
actual amount paid by CNL XVII for this Property was $321,838. CNL
XVII's minimum annual rent for the approximate 37 percent interest in
this Property is $33,104.
(8) Percentage rent shall be calculated on a calendar year basis (January 1
to December 31).
(9) CNL XVII paid for all construction costs in advance at closing;
therefore, minimum annual rent was determined on the date acquired and
is not expected to change.
(10) CNL XVII acquired a 21 percent interest in CNL Mansfield Joint Venture,
a general partnership between CNL XVII and an affiliated entity.
- 6 -
PRO FORMA ESTIMATE OF TAXABLE INCOME OF
CNL INCOME FUND XVII, LTD.
GENERATED FROM THE OPERATIONS OF PROPERTIES ACQUIRED FROM DECEMBER 12, 1996
THROUGH FEBRUARY 5, 1997
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 December 12, 1996
through February 5, 1997, 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.
<TABLE>
<CAPTION>
Golden Corral Black-eyed Pea Burger King Jack in the Box
El Cajon, CA (5)(6) Corpus Christi, TX (7) Akron, OH (8) Mansfield, TX (5)(9)
------------------- ---------------------- ------------- --------------------
<S> <C> <C> <C> <C>
Pro Forma Estimate
of Taxable Income:
Base Rent (1) $240,757 $ 42,163 $ 33,104 $ 80,074
Management Fees (2) (2,408) (422) (331) (801)
General and Administra-
tive Expenses (3) (12,038) (2,108) (1,655) (4,004)
-------- -------- -------- --------
Estimated Cash Available
from Operations 226,311 39,633 31,118 75,269
Depreciation Expense (4) (27,877) (4,989) (4,771) (12,073)
-------- -------- -------- --------
Pro Forma Estimate of
Taxable Income of
CNL XVII $198,434 $ 34,644 $ 26,347 $ 63,196
======== ======== ======== ========
See Footnotes
- 7 -
</TABLE>
Total
--------
Pro Forma Estimate
of Taxable Income:
Base Rent (1) $396,098
Management Fees (2) (3,962)
General and Administra-
tive Expenses (3) (19,805)
--------
Estimated Cash Available
from Operations 372,331
Depreciation Expense (4) (49,710)
--------
Pro Forma Estimate of
Taxable Income of
CNL XVII $322,621
========
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, provide that construction must be completed no later than
the dates set forth below:
Property Estimated Final Completion Date
-------- -------------------------------
El Cajon Property May 26, 1997
Mansfield Property August 4, 1997
(6) Amounts presented represent 100 percent of the proforma estimate of
taxable income for the Property owned by CNL/GC El Cajon Joint Venture.
CNL XVII owns an approximate 80 percent interest in the profits and
losses of this joint venture, a general partnership between CNL XVII and
an unaffiliated entity.
(7) Represents CNL XVII's approximate 27 percent interest in income and
expenses relating to the Property in Corpus Christi, Texas, acquired as
tenants-in-common with an affiliate of the General Partners.
- 8 -
(8) Represents CNL XVII's approximate 37 percent interest in income and
expenses relating to the Property in Akron, Ohio, acquired as tenants-
in-common with an affiliate of the General Partners.
(9) Amounts presented represent 100 percent of the proforma estimate of
taxable income for the Property owned by CNL Mansfield Joint Venture.
CNL XVII owns an approximate 21 percent interest in the profits and
losses of this joint venture, a general partnership between CNL XVII and
an affiliated entity.
- 9 -
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.
- 10 -
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 13
Pro Forma Statement of Income for the nine months
ended September 30, 1996 14
Pro Forma Statement of Income for the period
February 10, 1995 (Date of Inception) through
December 31, 1995 15
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 16
- 11 -
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 February 5, 1997,
and (iii) the application of such funds and $8,625,998 of cash and cash
equivalents at September 30, 1996, to purchase eight additional properties
(including three properties acquired as tenants-in-common with affiliates of
the general partners and two properties acquired pursuant to two separate
joint venture agreements between CNL XVII and unaffiliated entities), acquired
during the period October 1, 1996 through February 5, 1997, three of which are
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 27 properties that were wholly owned by CNL XVII, held as
tenants-in-common with affiliates of the general partners or owned pursuant to
joint venture agreements as of February 5, 1997, 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 24
properties owned by CNL XVII as of February 5, 1997, 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.
- 12 -
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 (d) $17,291,664 $3,298,325 (a)
911,403 (c) $21,501,392
Net investment in direct
financing leases (d) 1,934,015 376,548 (a)
1,115,079 (c) 3,425,642
Investments in joint ventures - 1,131,457 (b) 1,131,457
Cash and cash equivalents 9,407,094 (5,931,545)(a)
(1,073,267)(b)
(1,621,186)(c) 781,096
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)
(58,190)(b) 200,556
----------- ----------- -----------
$29,228,059 $(2,036,034) $27,192,025
=========== =========== ===========
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
Minority interest - 405,296 (c) 405,296
Partners' capital 26,200,949 87,656 (a) 26,288,605
----------- ----------- -----------
$29,228,059 $(2,036,034) $27,192,025
=========== =========== ===========
See accompanying notes to unaudited pro forma
financial statements.
- 13 -
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.
- 14 -
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.
- 15 -
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 February 5, 1997, 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 con-
struction 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
==========
- 16 -
CNL INCOME FUND XVII, LTD.
(A FLORIDA LIMITED PARTNERSHIP)
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS - CONTINUED
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 - Continued:
- -----------------------------------
(b) Represents the use of $909,424 of CNL XVII's net offering proceeds to
acquire interests in three properties, as tenants-in-common with
affiliates of the general partners, and the use of $163,843 of net
offering proceeds to acquire one property pursuant to the CNL/Mansfield
Joint Venture agreement between CNL XVII and an unaffiliated entity.
CNL XVII accounts for its investments in these properties using the
equity method since the partnership shares control with affiliates, and
amounts relating to these investments are classified as investments in
joint ventures.
Acquisition
fees allo-
cated to
Use of net investment Approximate
offering in joint percent
proceeds ventures Total interest
---------- ---------- ---------- -----------
Boston Market in
Fayetteville, NC $ 190,493 $10,328 $ 200,821 20 percent
Black-eyed Pea in
Corpus Christi, TX 396,306 21,487 417,793 27 percent
Burger King in
Akron, OH 322,625 17,492 340,117 37 percent
Jack in the Box in
Mansfield, TX 163,843 8,883 172,726 21 percent
---------- ------- ----------
$1,073,267 $58,190 $1,131,457
========== ======= ==========
The pro forma adjustments to investment in joint ventures and other
assets as a result of the above transaction were as follows:
Investments in joint ventures:
Acquisition of interests in three
properties acquired as tenants-
in-common and one property
acquired pursuant to the
CNL/Mansfield Joint Venture
agreement $1,073,267
Reclassification from other assets
for the allocation of acquisition
fees and other costs previously
incurred relating to the acquired
properties 58,190
----------
$1,131,457
==========
(c) Represents the use of $1,621,186 of CNL XVII's net offering proceeds,
the assumed receipt of $405,296 in capital contributions from CNL XVII's
co-venture partner in accordance with the joint venture agreement of
CNL/GC El Cajon Joint Venture to fund the purchase price of the land and
estimated construction costs of $2,026,482 relating to the one property
of the joint venture. CNL XVII accounts for its 80 percent interest in
the accounts of CNL/GC El Cajon Joint Venture under the full
consolidation method. All significant accounts and transactions have
been eliminated.
- 17 -
CNL INCOME FUND XVII, LTD.
(A FLORIDA LIMITED PARTNERSHIP)
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS - CONTINUED
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND
THE PERIOD FEBRUARY 10, 1995 (DATE OF INCEPTION)
THROUGH DECEMBER 31, 1995<PAGE>
Pro Forma Balance Sheet - Continued:
- -----------------------------------
The pro forma adjustments to land and buildings on operating leases and
net investment in direct financing leases as a result of the above
transaction relating to the consolidated joint venture were as follows:
Adjustment classified as follows:
Land and building on operating leases $ 911,403
Net investment in direct financing leases 1,115,079
----------
$2,026,482
==========
(d) 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 five 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 February 5, 1997, 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.
- 18 -
CNL INCOME FUND XVII, LTD.
(A FLORIDA LIMITED PARTNERSHIP)
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS - CONTINUED
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND
THE PERIOD FEBRUARY 10, 1995 (DATE OF INCEPTION)
THROUGH DECEMBER 31, 1995
Pro Forma Statements of Income - Continued:
- ------------------------------------------
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 (d) 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 February 5, 1997, 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
- 19 -
CNL INCOME FUND XVII, LTD.
(A FLORIDA LIMITED PARTNERSHIP)
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS - CONTINUED
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND
THE PERIOD FEBRUARY 10, 1995 (DATE OF INCEPTION)
THROUGH DECEMBER 31, 1995
Pro Forma Statements of Income - Continued:
- ------------------------------------------
(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.
- 20 -
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: February 19, 1997 By: /s/ Robert A. Bourne
---------------------------------
ROBERT A. BOURNE, General Partner
