UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
(Mark One)
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1997
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 0-22485
CNL INCOME FUND XVII, LTD.
(Exact name of registrant as specified in its charter)
Florida 59-3295393
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
400 East South Street
Orlando, Florida 32801
(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code: (407) 422-1574
Securities registered pursuant to Section 12(b) of
the Act:
Title of each class: Name of exchange on which registered:
None Not Applicable
Securities registered pursuant to Section 12(g) of
the Act:
None
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or 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
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
Aggregate market value of the voting stock held by nonaffiliates of the
registrant: The registrant registered an offering of units of limited
partnership interest (the "Units") on Form S-11 under the Securities Act of
1933, as amended. Since no established market for such Units exists, there is no
market value for such Units. Each Unit was originally sold at $10 per Unit.
DOCUMENTS INCORPORATED BY REFERENCE:
None
<PAGE>
PART I
Item 1. Business
CNL Income Fund XVII, Ltd. (the "Registrant" or the "Partnership") is a
limited partnership which was organized pursuant to the laws of the State of
Florida on February 10, 1995. The general partners of the Partnership are Robert
A. Bourne, James M. Seneff, Jr. and CNL Realty Corporation, a Florida
corporation (the "General Partners"). Beginning on September 2, 1995, the
Partnership offered for sale up to $30,000,000 of limited partnership interests
(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. The offering terminated on September 19, 1996, at which date
the maximum offering proceeds of $30,000,000 had been received from investors
who were admitted to the Partnership as limited partners (the "Limited
Partners").
The Partnership was organized to acquire both newly constructed and
existing restaurant properties, as well as properties upon which restaurants
were to be constructed (the "Properties"), which are leased primarily to
operators of national and regional fast-food, family-style and casual dining
restaurant chains (the "Restaurant Chains"). Net proceeds to the Partnership
from its offering of Units, after deduction of organizational and offering
expenses, totalled $26,400,000. The Partnership acquired its first Property on
December 20, 1995. During the year ended December 31, 1996, the Partnership
acquired 23 additional Properties, including one Property owned by a joint
venture in which the Partnership is a co-venturer and one Property owned with an
affiliate, as tenants-in-common, at an aggregate cost of approximately
$23,406,500, including acquisition fees and certain acquisition expenses. During
1997, the Partnership used the majority of its remaining net offering proceeds
to acquire two additional Properties, as tenants-in-common, with two separate
affiliates, and to establish a working capital reserve of approximately $258,000
for Partnership purposes. In addition, the Partnership entered into two
additional joint ventures, CNL Mansfield Joint Venture and CNL Kingston Joint
Venture, with affiliates of the General Partners. As a result of the above
transactions, as of December 31, 1997, the Partnership owned 28 Properties,
including interests in three Properties owned through joint ventures in which
the Partnership is a co-venturer and three Properties owned with affiliates as
tenants-in-common. The Partnership leases the Properties on a triple-net basis
with the lessees responsible for all repairs and maintenance, property taxes,
insurance and utilities.
The Partnership will hold its Properties until the General Partners
determine that the sale or other disposition of the Properties is advantageous
in view of the Partnership's investment objectives. In deciding whether to sell
Properties, the General Partners will consider factors such as potential capital
appreciation, net cash flow and federal income tax considerations. Certain
lessees also have been granted options to purchase Properties, generally at the
Property's then fair market value after a specified portion of the lease term
has elapsed. In general, the General Partners plan to seek the sale of the
Properties commencing seven to 12 years after their acquisition. The Partnership
has no obligation to sell all or any portion of a Property at any particular
time, except as may be required under property purchase options granted to
certain lessees.
Leases
Although there are variations in the specific terms of the leases, the
following is a summarized description of the general structure of the
Partnership's leases. The leases of the Properties provide for initial terms
ranging from 15 to 20 years (the average being 18 years) and expire between 2011
and 2017. All leases are on a triple-net basis, with the lessees responsible for
all repairs and maintenance, property taxes, insurance and utilities. The leases
of the Properties provide for minimum base annual rental payments (payable in
monthly installments) ranging from approximately $66,200 to $248,700. All of the
leases provide for percentage rent, based on sales in excess of a specified
amount. In addition, the majority 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.
Generally, the leases of the Properties provide for two to five
five-year renewal options subject to the same terms and conditions as the
initial lease. Certain lessees also have been granted options to purchase
Properties at the Property's then fair market value after a specified portion of
the lease term has elapsed. Under the terms of
1
<PAGE>
certain leases, the option purchase price may equal the Partnership's original
cost to purchase the Property (including acquisition costs), plus a specified
percentage from the date of the lease or a specified percentage of the
Partnership's purchase price, if that amount is greater than the Property's fair
market value at the time the purchase option is exercised.
The leases also generally provide that, in the event the Partnership
wishes to sell the Property subject to the terms of the lease, the Partnership
first must offer the lessee the right to purchase the Property on the same terms
and conditions, and for the same price, as any offer which the Partnership has
received for the sale of the Property.
Major Tenants
During 1997, four lessees, or group of affiliated lessees, of the
Partnership and its consolidated joint venture, Golden Corral Corporation,
National Restaurant Enterprises, Inc., DenAmerica Corp. and Foodmaker, Inc.,
each contributed more than ten percent of the Partnership's total rental income
(including rental income from the Partnership's consolidated joint venture, the
Partnership's share of rental income from two Properties owned by unconsolidated
joint ventures and three Properties owned with affiliates as tenants-in-common).
As of December 31, 1997, Golden Corral Corporation and National Restaurant
Enterprises, Inc. were each the lessee under leases relating to three
restaurants and DenAmerica Corp. and Foodmaker, Inc. were each the lessee under
leases relating to four restaurants. It is anticipated that based on the minimum
rental payments required by the leases, these four lessees each will contribute
more than ten percent of the Partnership's total rental income in 1998 and
subsequent years. In addition, four Restaurant Chains, Golden Corral Family
Steakhouse Restaurants, ("Golden Corral"), Jack in the Box, Boston Market and
Burger King, each accounted for more than ten percent of the Partnership's total
rental income during 1997 (including rental income from the Partnership
consolidated joint venture, the Partnership's share of rental income from two
Properties owned by unconsolidated joint ventures and three Properties owned
with affiliates as tenants-in-common). In subsequent years, it is anticipated
that these four Restaurant Chains each will contribute more than ten percent of
the Partnership's rental income to which the Partnership is entitled under the
terms of the leases. Any failure of these lessees or Restaurant Chains could
materially adversely affect the Partnership's income. As of December 31, 1997,
no single tenant or group of affiliated tenants leased Properties with an
aggregate carrying value, excluding acquisition fees and certain acquisition
expenses, in excess of 20 percent of the total assets of the Partnership.
Joint Venture Arrangements
In December 1996, the Partnership entered into a joint venture
arrangement, CNL/GC El Cajon Joint Venture, with an unaffiliated entity to
purchase and hold one Property. In addition, during 1997, the Partnership
entered into two additional joint venture arrangements, CNL Mansfield Joint
Venture and CNL Kingston Joint Venture, with affiliates of the General Partners,
for each joint venture to purchase and hold one Property. Each joint venture
arrangement provides for the Partnership and its joint venture partners to share
in all costs and benefits associated with the joint venture in proportion to
each partner's percentage interest in the joint venture. The Partnership and its
joint venture partners are also jointly and severally liable for all debts,
obligations and other liabilities of the joint venture.
Each joint venture has an initial term of 20 years and, after the
expiration of the initial term, continues in existence from year to year unless
terminated at the option of either of the joint venturers or by an event of
dissolution. Events of dissolution include the bankruptcy, insolvency or
termination of either of the joint venturers, sale of the Property owned by the
joint venture and mutual agreement of the Partnership and its joint venture
partners to dissolve the joint venture.
The Partnership has management control of CNL/GC El Cajon Joint Venture
and shares management control equally with affiliates of the General Partners
for CNL Mansfield Joint Venture and CNL Kingston Joint Venture. The joint
venture agreements restrict any venturer's ability to sell, transfer or assign
its joint venture interest without first offering it for sale to its joint
venture partner, either upon such terms and conditions as to which the venturers
may agree or, in the event the venturers cannot agree, on the same terms and
conditions as any offer from a third party to purchase such joint venture
interest.
2
<PAGE>
Net cash flow from operations of CNL/GC El Cajon Joint Venture, CNL
Mansfield Joint Venture and CNL Kingston Joint Venture is distributed 80
percent, 21 percent and 60.06%, respectively, to the Partnership and the balance
is distributed to each other joint venture partner in accordance with its
percentage ownership in the joint venture. Any liquidation proceeds, after
paying joint venture debts and liabilities and funding reserves for contingent
liabilities, will be distributed first to the joint venture partners with
positive capital account balances in proportion to such balances until such
balances equal zero, and thereafter in proportion to each joint venture
partner's percentage interest in the joint venture.
In addition to the above joint venture arrangements, in October 1996,
the Partnership entered into an agreement to hold a Property in Fayetteville,
North Carolina, as tenants-in-common with an affiliate of the General Partners.
The agreement provides for the Partnership and the affiliate to share in the
profits and losses of the Property and net cash flow from the Property in
proportion to each co-venturer's percentage interest in the Property.
The Partnership owns a 19.73% interest in this Property.
In addition, during 1997, the Partnership entered into two agreements
to hold Properties in Corpus Christi, Texas and Akron, Ohio, each as
tenants-in-common, with affiliates of the General Partners. The agreements
provide for the Partnership and the affiliates to share in the profits and
losses of the Property in proportion to each co-venturer's percentage interest.
The Partnership owns an approximate 27 percent and 37 percent interest in the
Properties in Corpus Christi, Texas and Akron, Ohio, respectively.
Management Services
CNL Fund Advisors, Inc., an affiliate of the General Partners, provides
certain services relating to management of the Partnership and its Properties
pursuant to a management agreement with the Partnership. Under this agreement,
CNL Fund Advisors, Inc. is responsible for collecting rental payments,
inspecting the Properties and the tenants' books and records, assisting the
Partnership in responding to tenant inquiries and notices and providing
information to the Partnership about the status of the leases and the
Properties. CNL Fund Advisors, Inc. also assists the General Partners in
negotiating the leases. For these services, the Partnership has agreed to pay
CNL Fund Advisors, Inc. an annual fee of one percent of the sum of gross rental
revenues from Properties wholly owned by the Partnership plus the Partnership's
allocable share of gross revenues of joint ventures in which the Partnership is
a co-venturer, but not in excess of competitive fees for comparable services.
The management agreement continues until the Partnership no longer owns
an interest in any Properties unless terminated at an earlier date upon 60 days'
prior notice by either party.
Competition
The fast-food, family-style and casual dining restaurant business is
characterized by intense competition. The restaurants on the Partnership's
Properties compete with independently owned restaurants, restaurants which are
part of local or regional chains and restaurants in other well-known national
chains, including those offering different types of food and service.
The Partnership also will be in competition with other persons and
entities both to locate suitable Properties to acquire and to locate purchasers
for its Properties. The Partnership also will compete with other financing
sources such as banks, mortgage lenders and sale/leaseback companies for
suitable Properties and tenants.
Employees
The Partnership has no employees. The officers of CNL Realty
Corporation and the officers and employees of CNL Fund Advisors, Inc. perform
certain services for the Partnership. In addition, the General Partners have
available to them the resources and expertise of the officers and employees of
CNL Group, Inc., a diversified real estate company, and its affiliates, who may
also perform certain services for the Partnership.
3
<PAGE>
Item 2. Properties
As of December 31, 1997, the Partnership owned either directly or
through joint venture arrangements, 28 Properties, located in 12 states.
Reference is made to the Schedule of Real Estate and Accumulated Depreciation
filed with this report for a listing of the Property and its cost, including
acquisition fees and certain acquisition expenses.
Description of Properties
Land. The Partnership's Property sites ranged from approximately 18,200
to 91,400 square feet depending upon building size and local demographic
factors. Sites purchased by the Partnership are in locations zoned for
commercial use which have been reviewed for traffic patterns and volume.
Buildings. Each of the Properties owned by the Partnership includes a
building that is one of a Restaurant Chain's approved designs. The buildings
generally are rectangular and are constructed from various combinations of
stucco, steel, wood, brick and tile. The sizes of the buildings owned by the
Partnership ranged from approximately 2,100 to 11,300 square feet. All buildings
on Properties acquired by the Partnership are freestanding and surrounded by
paved parking areas. Buildings are suitable for conversion to various uses,
although modifications may be required prior to use for other than restaurant
operations.
Generally, a lessee is required, under the terms of its lease
agreement, to make such capital expenditures, as may be reasonably necessary, to
refurbish buildings, premises, signs and equipment, so as to comply with the
lessee's obligations, if applicable, under the franchise agreement to reflect
the current commercial image of its Restaurant Chain. These capital expenditures
are required to be paid by the lessee during the term of the lease.
Leases with Major Tenants. The terms of each of the leases with the
Partnership's major tenants as of December 31, 1997 (see Item 1. Business -
Major Tenants), are substantially the same as those described in Item 1.
Business - Leases.
Golden Corral Corporation leases three Golden Corral restaurants. The
initial term of each lease is 15 years (expiring in 2011) and the average
minimum base annual rent is approximately $157,100 (ranging from approximately
$127,800 to $190,000).
National Restaurant Enterprises, Inc. leases three Burger King
restaurants. The initial term of each lease is 20 years (expiring between 2016
and 2017) and the average minimum base annual rent is approximately $140,400
(ranging from approximately $123,200 to $155,000).
DenAmerica Corp. leases three Denny's restaurants and one Black-eyed
Pea restaurant. The initial term of each lease is 20 years (expiring between
2015 and 2016) and the average minimum base annual rent is approximately
$118,500 (ranging from approximately $98,700 to $142,600).
Foodmaker, Inc. leases four Jack in the Box restaurants. The initial
term of each lease is 18 years (expiring between 2014 and 2015) and the average
minimum base annual rent is approximately $89,300 (ranging from approximately
$83,600 to $109,000).
The General Partners consider the Properties to be well-maintained and
sufficient for the Partnership's operations.
Item 3. Legal Proceedings
Neither the Partnership, nor its General Partners or any affiliate of
the General Partners, nor any of their respective properties, is a party to, or
subject to, any material pending legal proceedings.
4
<PAGE>
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
As of March 13, 1998, there were 1,614 holders of record of the Units.
There is no public trading market for the Units, and it is not anticipated that
a public market for the Units will develop. Limited Partners who wish to sell
their Units may offer the Units for sale pursuant to the Partnership's
distribution reinvestment plan (the "Plan"), and Limited Partners who wish to
have their distributions used to acquire additional Units (to the extent Units
are available for purchase), may do so pursuant to such Plan. The General
Partners have the right to prohibit transfers of Units. Since inception, the
price to be paid for any Unit transferred pursuant to the Plan has been $10.00
per Unit. The price to be paid for any Unit transferred other than pursuant to
the Plan is subject to negotiation by the purchaser and the selling Limited
Partner. The Partnership will not redeem or repurchase Units.
The following table reflects, for each calendar quarter, the high, low
and average sales prices for transfers of Units during 1997 and 1996 other than
pursuant to the Plan, net of commissions.
<TABLE>
<CAPTION>
1997 (1) 1996 (1)
------------------------------- ----------------------
<S> <C>
High Low Average High Low Average
First Quarter (2) (2) (2) (2) (2) (2)
Second Quarter (2) (2) (2) (2) (2) (2)
Third Quarter (2) (2) (2) (2) (2) (2)
Fourth Quarter (2) (2) (2) $10.00 $10.00 $10.00
</TABLE>
(1) A total of 4,000 Units were transferred other than pursuant to the Plan
for the year ended December 31, 1996.
(2) No transfer of Units took place during the quarter other than pursuant
to the Plan.
The capital contribution per Unit was $10. All cash available for
distribution will be distributed to the partners pursuant to the provisions of
the Partnership Agreement.
For the years ended December 31, 1997 and 1996, the Partnership
declared cash distributions of $2,287,500 and $1,166,689, respectively, to the
Limited Partners. No amounts distributed to partners for the years ended
December 31, 1997 and 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. No distributions have
been made to the General Partners to date. As indicated in the chart below,
these distributions were declared following the close of each of the
Partnership's calendar quarters. These amounts include monthly distributions
made in arrears for the Limited Partners electing to receive such distributions
on this basis.
Quarter Ended 1997 1996
------------- ---------- ------
March 31 $525,000 $115,044
June 30 562,500 211,692
September 30 600,000 349,869
December 31 600,000 490,084
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<PAGE>
The Partnership intends to continue to make distributions of cash
available for distribution to the Limited Partners on a quarterly basis,
although some Limited Partners, in accordance with their election, receive
monthly distributions for an annual fee.
Item 6. Selected Financial Data
<TABLE>
<CAPTION>
February 10,
1995 (date
of inception)
Year Ended Year Ended through
December 31, December 31, December 31,
1997 1996 1995 (1)
<S> <C>
Revenues (2) $2,772,714 $ 1,444,503 $ 12,153
Net income 2,203,557 1,095,759 8,351
Cash distributions declared 2,287,500 1,166,689 28,275
Net income per Unit (3) 0.73 0.52 .02
Cash distributions declared per Unit (3) 0.76 0.55 .08
1997 1996 1995
At December 31:
Total assets $27,524,148 $28,675,007 $4,878,421
Partners' capital 26,236,203 26,320,146 4,642,233
</TABLE>
(1) Operations did not commence until November 4, 1995, the date following
when the Partnership received the minimum offering proceeds of
$1,500,000, and such proceeds were released from escrow.
(2) Revenues include equity in earnings of unconsolidated joint ventures
and minority interest in income of the consolidated joint venture.
(3) Based on the weighted average number of Limited Partner Units
outstanding during the years ended December 31, 1997 and 1996 and the
period February 10, 1995 (date of inception) through December 31, 1995.
The above selected financial data should be read in conjunction with
the financial statements and related notes contained in Item 8 hereof.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The Partnership 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
restaurant Properties were to be constructed, which are leased primarily to
operators of selected national and regional fast-food, family-style and casual
dining Restaurant Chains. The leases are triple-net leases, with the lessees
generally responsible for all repairs and maintenance, property taxes, insurance
and utilities. As of December 31, 1997, the Partnership owned 28 Properties,
either directly or through joint venture arrangements.
Liquidity and Capital Resources
On September 2, 1995, the Partnership commenced an offering to the
public of up to 3,000,000 Units of limited partnership interest. The
Partnership's offering of Units terminated on September 19, 1996, at which time
the maximum proceeds of $30,000,000 (3,000,000 Units) had been received from
investors. The Partnership, therefore, will derive no additional capital
resources from the offering.
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<PAGE>
Net proceeds to the Partnership from its offering of Units, after
deduction of organizational and offering expenses, totalled $26,400,000. As of
December 31, 1995, approximately $1,539,000 had been used to invest in one
Property and to pay acquisition fees and certain acquisition expenses. During
1996, the Partnership acquired 23 additional Properties, including one Property
owned by a joint venture in which the Partnership is a co-venturer and one
Property, owned with an affiliate, as tenants-in-common, at a cost of
approximately $23,406,500, including acquisition fees and miscellaneous
acquisition expenses. During 1997, the Partnership used the majority of its
remaining net offering proceeds to acquire two additional Properties, as
tenants-in-common, with affiliates of the General Partners. In addition, the
Partnership entered into two joint ventures, CNL Mansfield Joint Venture and CNL
Kingston Joint Venture, with affiliates of the General Partners, to own an
approximate 21 percent interest and 60.06 percent interest, respectively, in two
Properties. As a result of the above transactions, as of December 31, 1997, the
Partnership had acquired 28 Properties, including three Properties owned by
joint ventures in which the Partnership is a co-venturer and three Properties
owned with affiliates as tenants-in-common, and had paid acquisition fees
totaling $1,350,000 to an affiliate of the General Partners. The remaining net
offering proceeds of approximately $258,000 from the Partnership's offering of
Units were reserved for Partnership purposes.
Until Properties were acquired by the Partnership, all Partnership
proceeds were held in short-term, highly liquid investments which the General
Partners believed to have appropriate safety of principal. This investment
strategy provided high liquidity in order to facilitate the Partnership's use of
these funds to acquire Properties at such time as Properties suitable for
acquisition were located.
Currently, the Partnership's primary source of capital is cash from
operations (which includes cash received from tenants, distributions from the
joint ventures and interest received, less cash paid for expenses). Cash from
operations was $2,495,114, $1,232,948 and $9,012 for the years ended December
31, 1997 and 1996 and the period February 10, 1995 (date of inception) through
December 31, 1995, respectively. The increase in cash from operations during
1997 and 1996, each as compared to the previous year, is primarily a result of
changes in income and expenses as described in "Results of Operations" below.
None of the Properties owned 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. The Partnership will not borrow for the
purpose of returning capital to the Limited Partners. The Partnership will not
borrow under arrangements that would make the Limited Partners liable to
creditors of the Partnership. The General Partners further have represented that
they will use their reasonable efforts to structure any borrowing so that it
will not constitute "acquisition indebtedness" for federal income tax purposes
and also will limit the Partnership's outstanding indebtedness to three percent
of the aggregate adjusted tax basis of its Properties. In addition, the
Partnership will not borrow unless it first obtains an opinion of counsel that
such borrowing will not constitute acquisition indebtedness. Affiliates of the
General Partners from time to time incur certain operating expenses on behalf of
the Partnership for which the Partnership reimburses the affiliates without
interest.
Currently, rental income from the Partnership's Properties and cash
reserves are invested in money market accounts or other short-term, highly
liquid investments pending the Partnership's use of such funds to pay
Partnership expenses or to make distributions to partners. At December 31, 1997,
the Partnership had $1,238,799 invested in such short-term investments as
compared to $4,716,719 at December 31, 1996. The decrease in the amount invested
in short-term investments during 1997, as compared to 1996, is primarily a
result of the payment of construction costs during 1997 relating to the
Properties that were under construction at December 31, 1996 and the acquisition
of additional Properties through joint ventures and with affiliates of the
General Partners as tenants-in-common during 1997. The funds remaining at
December 31, 1997, after payment of distribution and other liabilities, will be
used to meet the Partnership's working capital and other needs.
During the year ended December 31, 1996 and the period February 10,
1995 (date of inception) through December 31, 1995, affiliates of the General
Partners incurred on behalf of the Partnership $231,885 and $356,450,
respectively, for certain organizational and offering expenses. In addition,
during the years ended December 31, 1997 and 1996 and the period February 10,
1995 (date of inception) through December 31, 1995, the affiliates incurred on
behalf of the Partnership $11,262, $69,835 and $30,424, respectively, for
certain acquisition expenses and $59,451, $64,906 and $790, respectively, for
certain operating expenses. As of December 31, 1997 and 1996, the Partnership
owed $2,875 and $17,153, respectively, to related parties for such amounts,
accounting and administrative
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<PAGE>
services and management fees. As of February 28, 1998, the Partnership had
reimbursed the affiliates all such amounts. Other liabilities, including
distributions payable, decreased to $865,877 at December 31, 1997, from
$2,197,032 at December 31, 1996, as a result of the payment during 1997, of
construction costs accrued for certain Properties at December 31, 1996. The
decrease is partially offset by an increase in distributions payable to the
Limited Partners and an increase in deferred rental income at December 31, 1997.
The General Partners believe that the Partnership has sufficient cash on hand to
meet its current working capital needs.
Based on cash from operations, the Partnership declared distributions
to the Limited Partners of $2,287,500, $1,166,689 and $28,275 for the years
ended December 31, 1997 and 1996 and the period February 10, 1995 (date of
inception) through December 31, 1995, respectively. This represents
distributions of $0.76, $0.55 and $0.08 per Unit for the years ended December
31, 1997 and 1996 and the period February 10, 1995 (date of inception) through
December 31, 1995, respectively. No amounts distributed or to be distributed to
the Limited Partners for the years ended December 31, 1997 and 1996 and the
period February 10, 1995 (date of inception) through December 31, 1995, 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 Limited Partners on a quarterly basis.
The General Partners believe that the Properties are adequately covered
by insurance. In addition, the General Partners have obtained contingent
liability and property coverage for the Partnership. This insurance is intended
to reduce the Partnership's exposure in the 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 generally meet
specified financial standards minimizes the Partnership's operating expenses.
The General Partners believe that the leases will generate cash flow in excess
of operating expenses.
Due to low operating expenses and ongoing cash flow, the General
Partners do not believe that working capital reserves are necessary at this
time. In addition, because all 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 maintenance and repairs. The General Partners have the
right to cause the Partnership to maintain reserves if, in their discretion,
they determine such reserves are required 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.
The Partnership owned and leased one wholly owned Property during 1995
and 22 wholly owned Properties during 1996 and 1997. During 1996, the
Partnership owned and leased one Property through a joint venture arrangement in
which the Partnership is a co-venturer, and owned and leased one Property with
an affiliate of the General Partners, as tenants-in-common. During 1997 the
Partnership was a co-venturer in three joint ventures that each owned and leased
one Property and also owned and leased three Properties with affiliates of the
General Partners, as tenants-in-common. As of December 31, 1997, the Partnership
owned, either directly or through joint venture arrangements, 28 Properties
which are subject to long-term, triple-net leases. The leases of the Properties
provide for minimum base annual rental payments (payable in monthly
installments) ranging from approximately $66,200 to $248,700. All of the leases
provide for percentage rent based on sales in excess of a specified amount. In
addition, the majority 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. For further description of the Partnership's
leases and Properties, see Item 1. Business - Leases and Item 2. Properties,
respectively.
8
<PAGE>
During the years ended December 31, 1997 and 1996, the Partnership and
its consolidated joint venture, CNL/GC El Cajon Joint Venture, earned $2,642,743
and $1,185,279, respectively, in rental income from operating leases and earned
income from direct financing leases. The increase in rental and earned income
during 1997, as compared to 1996, is primarily attributable to the fact that the
majority of the Properties were operational for a full year in 1997, as compared
to a partial year in 1996. In addition, for the years ended December 31, 1997
and 1996, the Partnership earned $100,918 and $4,834, respectively, attributable
to net income earned by unconsolidated joint ventures in which the Partnership
is a co-venturer. The increase in net income earned by unconsolidated joint
ventures during 1997, as compared to 1996, is primarily attributable to the
Partnership investing in two Properties with affiliates of the General Partners
as tenants-in-common and in two joint ventures in which the Partnership is a
co-venturer, during 1997, as described above in "Liquidity and Capital
Resources." Net income earned by joint ventures is expected to increase in 1998
as the Properties owned by the joint ventures or with affiliates as
tenants-in-common will be operational for a full year during 1998 as compared to
a partial year during 1997.
During at least one of the years ended December 31, 1997 and 1996 and
the period February 10, 1995 (date of inception) through December 31, 1995, five
lessees, or group of affiliated lessees, of the Partnership, (i) Golden Corral
Corporation, (ii) National Restaurant Enterprises, Inc., (iii) DenAmerica Corp.
(iv) RTM Indianapolis, Inc. and RTM Southwest Texas, Inc., (hereinafter referred
to as RTM, Inc.) and (v) Foodmaker, Corp., each contributed more than ten
percent of the Partnership's total rental income (including rental and earned
income from the Partnership's consolidated joint venture and the Partnership's
share of rental income from two Properties owned by unconsolidated joint venture
and three Properties owned with separate affiliates as tenants-in-common). As of
December 31, 1997, RTM, Inc., Golden Corral Corporation and National Restaurant
Enterprises, Inc., were each lessee under leases relating to three restaurants
and DenAmerica Corp. and Foodmaker, Inc., were each the lessee under leases
relating to four restaurants. It is anticipated that based on the minimum rental
payments required by the leases, Golden Corral Corporation, National Restaurant
Enterprises, Inc., DenAmerica Corp. and Foodmaker, Inc. each will contribute
more than ten percent of the Partnership's total rental income in 1998 and
subsequent years. In addition, six Restaurant Chains, Golden Corral, Arby's,
Denny's, Burger King, Jack in the Box and Boston Market each accounted for more
than ten percent of the Partnership's total rental income during at least one of
the years ended December 31, 1997 and 1996 and the period February 10, 1995
(date of inception) through December 31, 1995 (including rental and earned
income from the Partnership's consolidated joint venture, the Partnership's
share of rental income from two Properties owned by unconsolidated joint
ventures and three Properties owned with separate affiliates of the General
Partners as tenants-in-common). In subsequent years, it is anticipated that
Golden Corral, Jack in the Box, Burger King and Boston Market, each will
contribute more than ten percent of the Partnership's rental income to which the
Partnership is entitled under the terms of the leases. Any failure of these
lessees or Restaurant Chains could materially adversely affect the Partnership's
income.
During the years ended December 31, 1997 and 1996 and the period
February 10, 1995 (date of inception) through December 31, 1995, the Partnership
also earned $69,779, $244,406 and $12,153, respectively, in interest income from
investments in money market accounts or other short-term, highly liquid
investments. The decrease in interest income during 1997, as compared to 1996,
is primarily attributable to the decrease in the amount of funds invested in
short-term, liquid investments due to the payment during 1997, of construction
costs accrued at December 31, 1996, the acquisition of two Properties as
tenants-in-common with affiliates, and as a result of acquiring interests in two
joint ventures as described above in "Liquidity and Capital Resources." The
increase in interest income during 1996, as compared to 1995, was primarily
attributable to an increase in the amount of funds invested in short-term liquid
investments as a result of additional Limited Partner contributions during 1996.
Operating expenses, including depreciation and amortization expense,
were $569,157, $348,744 and $3,802 for the years ended December 31, 1997 and
1996 and the period February 10, 1995 (date of inception) through December 31,
1995, respectively. The increase in operating expenses during 1996, as compared
to 1995, is primarily attributable to an increase in depreciation expense as the
result of the acquisition of additional Properties during 1996. The increase
during 1997, as compared to 1996, is primarily attributable to the fact that the
Properties acquired during 1996 were operational for a full year in 1997, as
compared to a partial year during 1996. In addition, operating expenses
increased during 1997 and 1996, each as compared to the previous year, as a
result of an increase in management fees derived from the increased rental
revenues, as described above. Operating expenses also increased during 1997, as
compared to 1996, as a result of the Partnership incurring taxes relating to the
filing of various state tax returns during 1997. Operating expenses also
increased during 1996, as compared to 1995, as a result of an increase in
administrative expenses associated with operating the Partnership and its
Properties.
9
<PAGE>
The General Partners of the Partnership are in the process of assessing
and addressing the impact of the year 2000 on their computer package software.
The hardware and built-in software are believed to be year 2000 compliant.
Accordingly, the General Partners do not expect this matter to materially impact
how the Partnership conducts business nor its current or future results of
operations or financial position.
The Partnership's leases as of December 31, 1997, are triple-net leases
and contain provisions that the General Partners believe mitigate the adverse
effect of inflation. Such provisions include clauses requiring the payment of
percentage rent based on certain restaurant sales above a specified level and/or
automatic increases in base rent at specified times during the term of the
lease. Management expects that increases in restaurant sales volume due to
inflation and real sales growth should result in an increase in rental income
over time. Continued inflation also may cause capital appreciation of the
Partnership's Properties. Inflation and changing prices, however, also may have
an adverse impact on the sales of the restaurants and on potential capital
appreciation of the Properties.
Item 8. Financial Statements and Supplementary Data
10
<PAGE>
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
CONTENTS
Page
Report of Independent Accountants 12
Financial Statements:
Balance Sheets 13
Statements of Income 14
Statements of Partners' Capital 15
Statements of Cash Flows 16
Notes to Financial Statements 20
11
<PAGE>
Report of Independent Accountants
To the Partners
CNL Income Fund XVII, Ltd.
We have audited the financial statements and the financial statement schedule of
CNL Income Fund XVII, Ltd. (a Florida limited partnership) listed in Item 14(a)
of this Form 10-K. These financial statements and financial statement schedule
are the responsibility of the Partnership's management. Our responsibility is to
express an opinion on these financial statements and financial statement
schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of CNL Income Fund XVII, Ltd. as
of December 31, 1997 and 1996, and the results of its operations and its cash
flows for each of the years ended December 31, 1997 and 1996 and the period
February 10, 1995 (date of inception) through December 31, 1995 in conformity
with generally accepted accounting principles. In addition, in our opinion, the
financial statement schedule referred to above, when considered in relation to
the basic financial statements taken as a whole, presents fairly, in all
material respects, the information required to be included therein.
/s/ Coopers & Lybrand, L.L.P.
- -----------------------------
Orlando, Florida
February 4, 1998
12
<PAGE>
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
BALANCE SHEETS
December 31,
ASSETS 1997 1996
------ ----------- --------
Land and buildings on operating
leases, less accumulated
depreciation $21,328,869 $21,364,032
Net investment in direct financing
leases 3,056,783 1,982,164
Investment in joint ventures 1,328,067 201,171
Cash and cash equivalents 1,238,799 4,716,719
Receivables, less allowance for
doubtful accounts of $14,333
and $4,469 613 63,253
Organization costs, less accumulated
amortization of $4,309 and $2,309 5,691 7,691
Accrued rental income 460,915 167,216
Other assets 104,411 172,761
----------- -----------
$27,524,148 $28,675,007
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 2,922 $ 2,985
Accrued construction costs payable 38,834 1,560,712
Distributions payable 600,000 490,084
Due to related parties 2,875 17,153
Rents paid in advance 55,762 52,769
Deferred rental income 168,359 90,482
----------- -----------
Total liabilities 868,752 2,214,185
Minority interest 419,193 140,676
Partners' capital 26,236,203 26,320,146
----------- -----------
$27,524,148 $28,675,007
=========== ===========
See accompanying notes to financial statements.
13
<PAGE>
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
February 10,
1995 (Date
of Inception)
Year Ended through
December 31, December 31,
1997 1996 1995
<S> <C>
Revenues:
Rental income from
operating leases $2,323,256 $1,054,534 $ -
Earned income from direct
financing leases 319,487 130,745 -
Interest 69,779 244,406 12,153
Other income 1,128 9,984 -
---------- ---------- ---------
2,713,650 1,439,669 12,153
---------- ---------- ----------
Expenses:
General operating and
administrative 128,168 144,728 3,360
Professional services 21,877 14,326 133
Management fee to related party 25,377 10,482 -
State and other taxes 6,443 - -
Depreciation and amortization 387,292 179,208 309
---------- ---------- ----------
569,157 348,744 3,802
---------- ---------- ----------
Income Before Minority Interest
in Income of Consolidated
Joint Venture and Equity in
Earnings of Unconsolidated
Joint Ventures 2,144,493 1,090,925 8,351
Minority Interest in Income of
Consolidated Joint Venture (41,854) - -
Equity in Earnings of
Unconsolidated Joint Ventures 100,918 4,834 -
---------- ---------- ---------
Net Income $2,203,557 $1,095,759 $ 8,351
========== ========== ==========
Allocation of Net Income:
General partners $ (839) $ (709) $ (3)
Limited partners 2,204,396 1,096,468 8,354
---------- ---------- ----------
$2,203,557 $1,095,759 $ 8,351
========== ========== ==========
Net Income per Limited Partner
Unit $ 0.73 $ 0.52 $ 0.02
========== ========== ==========
Weighted Average Number of Limited
Partner Units Outstanding 3,000,000 2,121,253 340,780
========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
14
<PAGE>
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
STATEMENTS OF PARTNERS' CAPITAL
Years Ended December 31, 1997 and 1996 and the Period
February 10, 1995 (Date of Inception)
through December 31, 1995
<TABLE>
<CAPTION>
General Partners Limited Partners
Accumu- Accumu-
Contri- lated Contri- Distri- lated Syndication
butions Losses butions butions Earnings Costs Total
------- -------- ----------- ----------- ---------- ----------- --------
<S> <C>
Balance at Inception,
(February 10, 1995) $ - $ - $ - $ - $ - $ - $ -
Contributions from
general partners 1,000 - - - - - 1,000
Contributions from
limited partners - - 5,696,921 - - - 5,696,921
Distributions to limited
partners ($.08 per
limited partner unit) - - - (28,275) - - (28,275)
Syndication costs - - - - - (1,035,764) (1,035,764)
Net income - (3) - - 8,354 - 8,351
------- -------- ----------- ----------- ---------- ----------- -----------
Balance, December 31, 1995 1,000 (3) 5,696,921 (28,275) 8,354 (1,035,764) 4,642,233
Contributions from
limited partners - - 24,303,079 - - - 24,303,079
Distributions to limited
partners ($0.55 per
limited partner unit) - - - (1,166,689) - - (1,166,689)
Syndication costs - - - - - (2,554,236) (2,554,236)
Net income - (709) - - 1,096,468 - 1,095,759
------- -------- ----------- ----------- ---------- ----------- -----------
Balance, December 31, 1996 1,000 (712) 30,000,000 (1,194,964) 1,104,822 (3,590,000) 26,320,146
Distributions to limited
partners ($0.76 per
limited partner unit) - - - (2,287,500) - - (2,287,500)
Net income - (839) - - 2,204,396 - 2,203,557
------- -------- ----------- ----------- ---------- ----------- -----------
Balance, December 31, 1997 $ 1,000 $ (1,551) $30,000,000 $(3,482,464) $3,309,218 $(3,590,000) $26,236,203
======= ======== =========== =========== ========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
15
<PAGE>
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
February 10,
1995 (Date
of Inception)
Year Ended through
December 31, December 31,
1997 1996 1995
------------ ------------ ---------
<S> <C>
Increase (Decrease) in Cash
and Cash Equivalents:
Cash Flows From Operating
Activities:
Cash received from
tenants $ 2,502,057 $ 1,149,196 $ -
Distributions from
unconsolidated joint
ventures 106,346 4,985 -
Cash paid for expenses (183,068) (165,639) (3,141)
Interest received 69,779 244,406 12,153
------------ ------------ -------------
Net cash provided
by operating
activities 2,495,114 1,232,948 9,012
------------ ------------ -------------
Cash Flows From Investing
Activities:
Additions to land and
buildings on
operating leases (1,740,491) (19,735,346) (332,928)
Investment in direct
financing leases (1,130,497) (1,784,925) -
Investment in joint
ventures (1,135,681) (201,501) -
Increase in other
assets - - (221,282)
Other - 410 (410)
------------ ------------ -------------
Net cash used in
investing
activities (4,006,669) (21,721,362) (554,620)
------------ ------------ -------------
</TABLE>
See accompanying notes to financial statements.
16
<PAGE>
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
STATEMENTS OF CASH FLOWS - CONTINUED
<TABLE>
<CAPTION>
February 10,
1995 (Date
of Inception)
Year Ended through
December 31, December 31,
1997 1996 1995
------------ ------------ ---------
<S> <C>
Cash Flows From Financing
Activities:
Reimbursement of
acquisition,
organization and
syndication costs
paid by related
parties on behalf of
the Partnership (25,444) (326,483) (347,907)
Contributions from
general partners - - 1,000
Contributions from
limited partners - 24,303,079 5,696,921
Contributions from
holder of minority
interest 278,170 140,676 -
Distributions to
limited partners (2,177,584) (703,681) (1,199)
Distributions to holder
of minority interest (41,507) - -
Payment of syndication
costs - (2,407,317) (604,348)
----------- ----------- ------------
Net cash provided
by (used in) fin-
ancing activities (1,966,365) 21,006,274 4,744,467
----------- ----------- ------------
Net Increase (Decrease) in Cash
and Cash Equivalents (3,477,920) 517,860 4,198,859
Cash and Cash Equivalents at
Beginning of Period 4,716,719 4,198,859 -
----------- ----------- -----------
Cash and Cash Equivalents at
End of Period $ 1,238,799 $ 4,716,719 $ 4,198,859
=========== =========== ============
</TABLE>
See accompanying notes to financial statements.
17
<PAGE>
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
STATEMENTS OF CASH FLOWS - CONTINUED
<TABLE>
<CAPTION>
February 10,
1995 (Date
of Inception)
Year Ended through
December 31, December 31,
1997 1996 1995
------------ ------------ ---------
<S> <C>
Reconciliation of Net Income
to Net Cash Provided by
Operating Activities:
Net income $ 2,203,557 $ 1,095,759 $ 8,351
----------- ----------- -----------
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Depreciation 376,973 176,995 -
Amortization 10,319 2,213 309
Minority interest in
income of consoli-
dated joint venture 41,854 - -
Equity in earnings of
unconsolidated joint
ventures, net of
distributions 5,428 151 -
Decrease (increase) in
receivables 39,518 (40,131) -
Decrease in net invest-
ment in direct
financing leases 30,454 16,345 -
Increase in accrued
rental income (293,699) (167,216) -
Increase (decrease) in
accounts payable and
accrued expenses (63) 2,985 -
Increase (decrease) in
due to related parties,
excluding acquisition,
organization and
syndication costs paid
on behalf of the
Partnership (97) 2,596 352
Increase in rents paid
in advance 2,993 52,769 -
Increase in deferred
rental income 77,877 90,482 -
----------- ----------- ----------
Total adjustments 291,557 137,189 661
----------- ----------- -----------
Net Cash Provided by Operating
Activities $ 2,495,114 $ 1,232,948 $ 9,012
=========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
18
<PAGE>
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
STATEMENTS OF CASH FLOWS - CONTINUED
<TABLE>
<CAPTION>
February 10,
1995 (Date
of Inception)
Year Ended through
December 31, December 31,
1997 1996 1995
------------ ------------ ---------
<S> <C>
Supplemental Schedule of
Non-Cash Investing and
Financing Activities:
Related parties paid certain
acquisition, organization and
syndication costs on behalf of
the Partnership as follows:
Acquisition costs $ 11,262 $ 69,836 $ 30,424
Organization costs - - 10,000
Syndication costs - 231,885 346,450
------------ ------------ -------------
$ 11,262 $ 301,721 $ 386,874
============ ============ =============
Distributions declared
and unpaid at
December 31 $ 600,000 $ 490,084 $ 27,076
============ ============ =============
</TABLE>
See accompanying notes to financial statements.
19
<PAGE>
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
Years Ended December 31, 1997 and 1996 and the Period
February 10, 1995 (Date of Inception)
through December 31, 1995
1. Significant Accounting Policies:
Organization and Nature of Business - CNL Income Fund XVII, Ltd. (the
"Partnership") is a Florida limited partnership that was organized for
the purpose of acquiring both newly constructed and existing restaurant
properties, as well as properties upon which restaurants were to be
constructed, which are leased primarily to operators of national and
regional fast-food, family-style and casual dining restaurant chains.
Under the terms of a registration statement filed with the Securities
and Exchange Commission, the Partnership was authorized to sell a
maximum of 3,000,000 units ($30,000,000) of limited partnership
interest. A total of 3,000,000 units ($30,000,000) of limited
partnership interest were sold.
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.
The general partners of the Partnership are CNL Realty Corporation (the
"Corporate General Partner"), James M. Seneff, Jr. and Robert A.
Bourne. Mr. Seneff and Mr. Bourne are also 50 percent shareholders of
the Corporate General Partner. The general partners have responsibility
for managing the day-to-day operations of the Partnership.
Real Estate and Lease Accounting - The Partnership records the
acquisition of land and buildings at cost, including acquisition and
closing costs. Land and buildings are leased to unrelated third parties
on a triple-net 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 methods. Such
methods are described below:
Direct financing method - The leases accounted for using the
direct financing method are recorded at their net investment
(which at the inception of the lease generally represents the
cost of the asset) (see Note 4). Unearned income is deferred
and amortized to income over the lease terms so as to produce
a constant periodic rate of return on the Partnership's net
investment in the leases.
20
<PAGE>
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1997 and 1996 and the Period
February 10, 1995 (Date of Inception)
through December 31, 1995
1. Significant Accounting Policies - Continued:
Operating method - Land and building leases accounted for
using the operating method are recorded at cost, revenue is
recognized as rentals are earned and depreciation is charged
to operations as incurred. Buildings are depreciated on the
straight-line method over their estimated useful lives of 30
years. When scheduled rentals (including rental payments, if
any, required during the construction of a property) vary
during the lease term, income is recognized on a straight-line
basis so as to produce a constant periodic rent over the lease
term commencing on the date the property is placed in service.
Accrued rental income represents the aggregate amount of
income recognized on a straight-line basis in excess of
scheduled rental payments to date. In contrast, deferred
rental income represents the aggregate amount of scheduled
rental payments to date (including rental payments due during
construction and prior to the property being placed in
service) in excess of income recognized on a straight-line
basis over the lease term commencing on the date the property
is placed in service.
When the properties are sold, the related cost and accumulated
depreciation for operating leases and the net investment for direct
financing leases, plus any accrued rental income, or deferred rental
income, will be removed from the accounts and gains or losses from
sales will be reflected in income. The general partners of the
Partnership review properties for impairment whenever events or changes
in circumstances indicate that the carrying amount of the assets may
not be recoverable through operations. The general partners determine
whether an impairment in value has occurred by comparing the estimated
future undiscounted cash flows, including the residual value of the
property, with the carrying cost of the individual property. If an
impairment is indicated, the assets are adjusted to their fair value.
21
<PAGE>
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1997 and 1996 and the Period
February 10, 1995 (Date of Inception)
through December 31, 1995
1. Significant Accounting Policies - Continued:
Investment in Joint Ventures - The Partnership accounts for its 80
percent interest in CNL/GC El Cajon Joint Venture using the
consolidation method. Minority interest represents the minority joint
venture partner's proportionate share of the equity in the
Partnership's consolidated joint venture. All significant intercompany
accounts and transactions have been eliminated.
The Partnership's investments in CNL Kingston Joint Venture and CNL
Mansfield Joint Venture, and a property in Corpus Christi, Texas, a
property in Akron, Ohio, and a property in Fayetteville, North
Carolina, for which each property is held as tenants-in-common, are
accounted for using the equity method since the Partnership shares
control with affiliates which have the same general partners.
Cash and Cash Equivalents - The Partnership considers all highly liquid
investments with a maturity of three months or less when purchased to
be cash equivalents. Cash and cash equivalents consist of demand
deposits at commercial banks, certificates of deposit and money market
funds (some of which are backed by government securities). Cash
equivalents are stated at cost plus accrued interest, which
approximates market value.
Cash accounts maintained on behalf of the Partnership in demand
deposits at commercial banks, certificates of deposit and money market
funds may exceed federally insured levels; however, the Partnership has
not experienced any losses in such accounts. The Partnership limits
investment of temporary cash investments to financial institutions with
high credit standing; therefore, the Partnership believes it is not
exposed to any significant credit risk on cash and cash equivalents.
Organization Costs - Organization costs are amortized over five years
using the straight-line method upon commencement of operations.
22
<PAGE>
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1997 and 1996 and the Period
February 10, 1995 (Date of Inception)
through December 31, 1995
1. Significant Accounting Policies - Continued:
Income Taxes - Under Section 701 of the Internal Revenue Code, all
income, expenses and tax credit items flow through to the partners for
tax purposes. Therefore, no provision for federal income taxes is
provided in the accompanying financial statements. The Partnership is
subject to certain state taxes on its income and property.
Additionally, for tax purposes, syndication costs are included in
Partnership equity and in the basis of each partner's investment. For
financial reporting purposes, syndication costs are netted against
partners' capital and represent a reduction of Partnership equity and a
reduction in the basis of each partner's investment (Note 6).
Weighted Average Number of Limited Partner Units Outstanding Net income
and distributions per limited partner unit are calculated based upon
the weighted average number of units of limited partnership interest
outstanding during the period the Partnership was operational.
Use of Estimates - The general partners of the Partnership have made a
number of estimates and assumptions relating to the reporting of assets
and liabilities and the disclosure of contingent assets and liabilities
to prepare these financial statements in conformity with generally
accepted accounted principles. The more significant areas requiring the
use of management estimates relate to the allowance for doubtful
accounts and future cash flows associated with long-lived assets.
Actual results could differ from those estimates.
Reclassification - Certain items in the prior years' financial
statements have been reclassified to conform to 1997 presentation.
These reclassifications had no effect on partners' capital or net
income.
23
<PAGE>
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1997 and 1996 and the Period
February 10, 1995 (Date of Inception)
through December 31, 1995
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." Some of the leases are
classified as operating leases and some of the leases have been
classified as direct financing leases. For the leases classified as
direct financing leases, the building portions of the property leases
are accounted for as direct financing leases while the land portion of
the leases are operating leases. 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
December 31:
1997 1996
----------- -----------
Land $10,357,191 $10,148,827
Buildings 11,525,646 11,168,540
----------- -----------
21,882,837 21,317,367
Less accumulated
depreciation (553,968) (176,995)
----------- -----------
21,328,869 21,140,372
Construction in progress - 223,660
----------- -----------
$21,328,869 $21,364,032
=========== ===========
24
<PAGE>
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1997 and 1996 and the Period
February 10, 1995 (Date of Inception)
through December 31, 1995
3. Land and Buildings on Operating Leases - Continued:
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 years ended December 31, 1997 and 1996, the Partnership recognized
$293,699 and $167,216, respectively, of such rental income.
The following is a schedule of the future minimum lease payments to be
received on noncancellable operating leases at December 31, 1997:
1998 $ 2,160,765
1999 2,173,058
2000 2,185,696
2001 2,279,375
2002 2,336,127
Thereafter 30,028,040
-----------
$41,163,061
Since lease renewal periods are exercisable at the option of the
tenant, the above table only presents future minimum lease payments due
during the initial lease terms. In addition, this table does not
include any amounts for future contingent rentals which may be received
on the leases based on a percentage of the tenant's gross sales.
4. Net Investment in Direct Financing Leases:
The following lists the components of the net investment in direct
financing leases at December 31:
1997 1996
----------- -----------
Minimum lease payments
receivable $ 7,636,851 $ 4,301,029
Estimated residual
values 775,896 499,627
Less unearned income (5,355,964) (2,818,492)
----------- -----------
Net investment in
direct financing
leases $ 3,056,783 $ 1,982,164
=========== ===========
25
<PAGE>
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1997 and 1996 and the Period
February 10, 1995 (Date of Inception)
through December 31, 1995
4. Net Investment in Direct Financing Leases - Continued:
The following is a schedule of future minimum lease payments to be
received on direct financing leases at December 31, 1997:
1998 $ 411,927
1999 411,927
2000 411,927
2001 411,927
2002 411,927
Thereafter 5,577,216
----------
$7,636,851
The above table does not include future minimum lease payments for
renewal periods or for contingent rental payments that may become due
in future periods (see Note 3).
5. Investment in Joint Ventures:
In October 1996, the Partnership acquired an approximate 20 percent
interest in a property in Fayetteville, North Carolina, as
tenants-in-common, with an affiliate of the general partners. The
Partnership accounts for its investment in this property using the
equity method since the Partnership shares control with an affiliate,
and amounts relating to its investment are included in investment in
joint ventures.
In January 1997, the Partnership acquired an approximate 27 percent
interest in a property in Corpus Christi, Texas, and an approximate 37
percent interest in a property in Akron, Ohio, each as
tenants-in-common, with affiliates of the general partners. The
Partnership accounts for its investment in these properties using the
equity method since the Partnership shares control with affiliates, and
amounts relating to these investments are included in investment in
joint ventures.
In February 1997, the Partnership entered into a joint venture
arrangement, CNL Mansfield Joint Venture, with an affiliate of the
Partnership which has the same general partners, to hold one restaurant
property in Mansfield, Texas. As of December 31, 1997, the Partnership
and its co-venture partner had contributed $163,964 and $616,245,
respectively, to the joint
26
<PAGE>
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1997 and 1996 and the Period
February 10, 1995 (Date of Inception)
through December 31, 1995
5. Investment in Joint Ventures - Continued:
venture to acquire the restaurant property. As of December 31, 1997,
the Partnership and its co-venture partner owned a 21 percent and 79
percent interest, respectively, in the profits and losses of the joint
venture. The Partnership accounts for its investment in this joint
venture under the equity method since the Partnership shares control
with the affiliate.
In September 1997, the Partnership entered into a joint venture
arrangement, CNL Kingston Joint Venture, with an affiliate of the
Partnership which has the same general partners, to construct and hold
one restaurant property. As of December 31, 1997, the Partnership and
its co-venture partner had contributed $183,241 and $121,855,
respectively, to CNL Kingston Joint Venture to fund construction costs
relating to the property owned by the joint venture. The partnership
and its co-venture partner have agreed to contribute approximately
$128,700 and $85,600, respectively, in additional construction costs to
the joint venture. When construction is completed, the Partnership and
its co-venture partner expect to have a 60.06 and 39.94 percent
interest, respectively, in the profits and losses of the joint venture.
As of December 31, 1997, the Partnership owned a 60.06% interest in the
profits and losses of the joint venture. The Partnership accounts for
its investment in this joint venture under the equity method since the
Partnership shares control with an affiliate.
27
<PAGE>
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1997 and 1996 and the Period
February 10, 1995 (Date of Inception)
through December 31, 1995
5. Investment in Joint Ventures - Continued:
CNL Mansfield Joint Venture and CNL Kingston Joint Venture, and the
Partnership and affiliates, as tenants-in-common in three separate
tenancy-in-common arrangements, each own and lease one property to an
operator of national fast-food or family-style restaurants. The
following presents the combined, condensed financial information for
the joint ventures and the properties held as tenants-in-common with
affiliates at December 31:
1997 1996
---------- -----------
Land and buildings on
operating leases, less
accumulated depreciation $4,495,671 $ 960,732
Cash 8,936 100
Accrued rental income 65,395 3,929
Other assets 1,931 -
Liabilities 228,896 23
Partners' capital 4,343,037 964,738
Revenues 453,481 29,293
Net income 375,257 24,502
The Partnership recognized income totalling $100,918 and $4,834 for the
years ended December 31, 1997 and 1996 from these joint ventures and
the properties held as tenants-in-common with affiliates.
6. Syndication Costs:
Syndication costs consisting of legal fees, commissions, a due
diligence expense reimbursement fee, printing and other expenses
incurred in connection with the offering totalled $3,590,000. These
offering expenses were charged to the limited partners' capital
accounts to reflect the net capital proceeds of the offering.
7. Allocations and Distributions:
Generally, distributions of net cash flow, as defined in the limited
partnership agreement of the Partnership, are made 95 percent to the
limited partners and five percent to the general partners; provided,
however, that for any particular year, the five percent of net cash
flow to be distributed to the general partners will be subordinated to
receipt by the
28
<PAGE>
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1997 and 1996 and the Period
February 10, 1995 (Date of Inception)
through December 31, 1995
7. Allocations and Distributions - Continued:
limited partners in that year of an eight percent noncumulative,
noncompounded return on their aggregate invested capital contributions
(the "Limited Partners' 8% Return").
Generally, net income (determined without regard to any depreciation
and amortization deductions and gains and losses from the sale of
properties) is allocated between the limited partners and the general
partners first, in an amount not to exceed the net cash flow
distributed to the partners attributable to such year in the same
proportions as such net cash flow is distributed; and thereafter, 99
percent to the limited partners and one percent to the general
partners. All deductions for depreciation and amortization are
allocated 99 percent to the limited partners and one percent to the
general partners.
Net sales proceeds from the sale of a property generally will be
distributed first to the limited partners in an amount sufficient to
provide them with the return of their invested capital contributions,
plus their cumulative Limited Partners' 8% Return. The general partners
will then receive a return of their capital contributions and, to the
extent previously subordinated and unpaid, a five percent interest in
all net cash flow distributions. Any remaining net sales proceeds will
be distributed 95 percent to the limited partners and five percent to
the general partners.
Any gain from the sale of a property will be, in general, allocated in
the same manner as net sales proceeds are distributable. Any loss will
be allocated first, on a pro rata basis to the partners with positive
balances in their capital accounts; and thereafter, 95 percent to the
limited partners and five percent to the general partners.
During the years ended December 31, 1997 and 1996 and during the period
February 10, 1995 (date of inception) through December 31, 1995, the
Partnership declared distributions to the limited partners of
$2,287,500, $1,166,689 and $28,275, respectively. No distributions have
been made to the general partners to date.
29
<PAGE>
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1997 and 1996 and the Period
February 10, 1995 (Date of Inception)
through December 31, 1995
8. Income Taxes:
The following is a reconciliation of net income for financial reporting
purposes to net income for federal income tax purposes for the years
ended December 31, 1997 and 1996 and the period February 10, 1995 (date
of inception) through December 31, 1995:
<TABLE>
<CAPTION>
1997 1996 1995
---------- ---------- -------
<S> <C>
Net income for financial
reporting purposes $2,203,557 $1,095,759 $ 8,351
Depreciation for
financial reporting
purposes in excess of
depreciation for tax
reporting purposes 25,005 13,226 -
Direct financing leases
recorded as operating
leases for tax
reporting purposes 30,454 16,345 -
Equity in earnings of
unconsolidated joint venture
for financial reporting
purposes in excess of
equity in earnings of
unconsolidated joint ventures
for tax reporting purposes (3,650) (479) -
Minority interest in
timing differences of
consolidated joint
venture 217 - -
Capitalization of admini-
strative expenses for
tax reporting purposes 1,557 11,940 3,493
Amortization for tax
reporting purposes (in
excess of) less than
amortization for finan-
cial reporting purposes 1,667 (2,025) 309
Accrued rental income (293,699) (167,216) -
Deferred rental income 80,635 90,482 -
Rents paid in advance 2,993 52,769 -
Other 9,865 4,163 -
---------- ---------- ---------
Net income for federal
income tax purposes $2,058,601 $1,114,964 $ 12,153
========== ========== ==========
</TABLE>
30
<PAGE>
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1997 and 1996 and the Period
February 10, 1995 (Date of Inception)
through December 31, 1995
9. Related Party Transactions:
One of the individual general partners, James M. Seneff, Jr., is one of
the principal shareholders of CNL Group, Inc., the parent company of
CNL Securities Corp. and CNL Fund Advisors, Inc. James M. Seneff, Jr.
is director and chief executive officer of CNL Securities Corp. and is
director, chairman of the board of directors and chief executive
officer of CNL Fund Advisors, Inc. The other individual general
partner, Robert A. Bourne, is director and president of CNL Securities
Corp., is director, vice chairman of the board of directors and
treasurer of CNL Fund Advisors, Inc. and served as president of CNL
Fund Advisors, Inc. through October 31, 1997.
For the year ended December 31, 1996 and the period February 10, 1995
(Date of Inception) through December 31, 1995, the Partnership incurred
$2,065,762 and $484,238, respectively, in syndication costs due to CNL
Securities Corp. for services in connection with selling limited
partnership interests. A substantial portion of these amounts
($2,359,831) was paid as commissions to other broker-dealers.
In addition, for the year ended December 31, 1996 and the period
February 10, 1995 (Date of Inception) through December 31, 1995, the
Partnership incurred $121,515 and $28,485, respectively, as a due
diligence expense reimbursement fee due to CNL Securities Corp. This
fee equals 0.5% of the limited partner contributions of $30,000,000.
The majority of this fee was reallowed to other broker-dealers for
payment of bona fide due diligence expenses.
Additionally, the Partnership incurred $1,093,639 and $256,361 for the
year ended December 31, 1996 and the period February 10, 1995 (Date of
Inception) through December 31, 1995, respectively, 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 of $30,000,000.
During the years ended December 31, 1997 and 1996, and the period
February 10, 1995 (Date of Inception) through December 31, 1995, CNL
Fund Advisors, Inc. acted as manager of the Partnership's properties
pursuant to a management agreement with the Partnership. In connection
therewith, the Partnership agreed to pay CNL Fund Advisors, Inc. an
annual,
31
<PAGE>
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1997 and 1996 and the Period
February 10, 1995 (Date of Inception)
through December 31, 1995
9. Related Party Transactions - Continued:
management fee of one percent of the sum of gross revenues from
properties wholly owned by the Partnership and the Partnership's
allocable share of gross revenues from joint ventures. The management
fee, which will not exceed fees which are competitive for similar
services in the same geographic area, may or may not be taken, in whole
or in part as to any year, in the sole discretion of CNL Fund Advisors,
Inc. All or any portion of the management fee not taken as to any
fiscal year shall be deferred without interest and may be taken in such
other fiscal year as CNL Fund Advisors, Inc. shall determine. The
Partnership incurred management fees of $25,377 and $10,482 for the
years ended December 31, 1997 and 1996. No such fees were incurred for
the period February 10, 1995 (date of inception) through December 31,
1995.
During the years ended December 31, 1997 and 1996 and for the period
February 10, 1995 (date of inception) through December 31, 1995,
Affiliates 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. The
expenses incurred for these services were classified as follows:
1997 1996 1995
-------- -------- ------
Syndication costs $ - $177,683 $133,982
General operating
and administrative
expenses 90,700 96,729 2,659
-------- -------- --------
$ 90,700 $274,412 $136,641
======== ======== ========
The due to related parties at December 31, 1997 and 1996 totalled
$2,875 and $17,153, respectively.
During 1996, the Partnership acquired from affiliates of the general
partners three properties, one of which was held with another affiliate
as tenants-in-common, for an aggregate purchase price of $1,667,140.
The affiliates of the general partners had purchased and temporarily
held title to these properties in order to facilitate the acquisition
of these properties by the Partnership. The purchase prices paid by the
Partnership represented the costs incurred by the affiliates of the
general partners to acquire the properties, including closing costs.
32
<PAGE>
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1997 and 1996 and the Period
February 10, 1995 (Date of Inception)
through December 31, 1995
9. Related Party Transactions - Continued:
During 1997, the Partnership and affiliates of the general partners
acquired two properties as tenants-in-common for an aggregate purchase
price of $718,932 from CNL BB Corp., an affiliate of the general
partners. CNL BB Corp. had purchased and temporarily held title to
these properties in order to facilitate the acquisition of the
properties by the Partnership and the affiliates. The purchase price
paid by the Partnership and the affiliates represented the costs
incurred by CNL BB Corp. to acquire and carry the property, including
closing costs.
10. Concentration of Credit Risk:
The following schedule presents total rental and earned income from
individual lessees, or affiliated groups of lessees, each representing
more than ten percent of the Partnership's total rental and earned
income (including rental and earned income from the Partnership's
consolidated joint venture, the Partnership's share of rental income
from the unconsolidated joint ventures and the three properties held as
tenants-in-common with affiliates of the general partners) for at least
one of the years ended December 31, 1997 and 1996 and the period
February 10, 1995 (date of inception) through December 31, 1995:
1997 1996 1995
-------- -------- ------
Golden Corral
Corporation $467,275 $286,307 $ -
DenAmerica Corp. 427,800 250,535 -
National Restaurant
Enterprises, Inc. 376,461 197,882 -
Foodmaker, Inc. 326,007 116,658 -
RTM Indianapolis,
Inc. and RTM
Southwest, Texas,
Inc. 269,010 133,200 -
33
<PAGE>
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1997 and 1996 and the Period
February 10, 1995 (Date of Inception)
through December 31, 1995
10. Concentration of Credit Risk - Continued:
In addition, the following schedule presents total rental and earned
income from individual restaurant chains, each representing more than
ten percent of the Partnership's total rental and earned income
(including rental and earned income from the Partnership's consolidated
joint venture, the Partnership's share of total rental income from the
unconsolidated joint ventures and the three properties held as
tenants-in-common with affiliates of the general partners) for at least
one of the years ended December 31, 1997 and 1996 and the period
February 10, 1995 (date of inception through December 31, 1995):
1997 1996 1995
-------- -------- ------
Golden Corral Family
Steakhouse Rest-
aurants $680,316 $286,307 $ -
Burger King 410,876 197,882 -
Jack in the Box 326,007 116,659 -
Boston Market 299,744 105,682 -
Arby's 269,010 133,200 -
Denny's 252,968 250,535 -
Although the Partnership's properties are geographically diverse
throughout the United States and the Partnership's lessees operate a
variety of restaurant concepts, default by 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.
34
<PAGE>
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
The General Partners of the Registrant are James M. Seneff, Jr., Robert
A. Bourne and CNL Realty Corporation, a Florida corporation. The General
Partners manage and control the Partnership's affairs and have general
responsibility and the ultimate authority in all matters affecting the
Partnership's business. The Partnership has available to it the services,
personnel and experience of CNL Fund Advisors, Inc., CNL Group, Inc. and their
affiliates, all of which are affiliates of the General Partners.
James M. Seneff, Jr., age 51, is a principal stockholder of CNL Group,
Inc., a diversified real estate company, and has served as its Chairman of the
Board of Directors, director and Chief Executive Officer since its formation in
1980. CNL Group, Inc. is the parent company of CNL Securities Corp., CNL
Investment Company, CNL Fund Advisors, Inc., CNL Real Estate Advisors, Inc. and
prior to its merger with CNL Fund Advisors, Inc., effective January 1, 1996, CNL
Income Fund Advisors, Inc. Mr. Seneff is Chief Executive Officer, and has been a
director and registered principal of CNL Securities Corp., which served as the
managing dealer in the Partnership's offering of Units, since its formation in
1979. Mr. Seneff also has held the position of President and a director of CNL
Management Company, a registered investment advisor, since its formation in
1976, has served as Chief Executive Officer and Chairman of the Board of CNL
Investment Company, and Chief Executive Officer and Chairman of the Board of
Commercial Net Lease Realty, Inc. since 1992, has served as the Chairman of the
Board and the Chief Executive Officer of CNL Realty Advisors, Inc. since its
inception in 1991 through December 31, 1997, at which time CNL Realty Advisors,
Inc. merged with Commercial Net Lease Realty, Inc., served as Chairman of the
Board and Chief Executive Officer of CNL Income Fund Advisors, Inc. since its
inception in 1994 through December 31, 1995, has served as a director, Chairman
of the Board and Chief Executive Officer of CNL Fund Advisors, Inc. since its
inception in 1994, and has held the position of Chief Executive Officer and a
director of CNL Institutional Advisors, Inc., a registered investment advisor,
since its inception in 1990. In addition, Mr. Seneff has served as a director,
Chairman of the Board and Chief Executive Officer of CNL American Properties
Fund, Inc. since 1994, and has served as a director, Chairman of the Board and
Chief Executive Officer of CNL American Realty Fund, Inc. since 1996 and of CNL
Real Estate Advisors, Inc. since January 1997. Mr. Seneff previously served on
the Florida State Commission on Ethics and is a former member and past Chairman
of the State of Florida Investment Advisory Council, which recommends to the
Florida Board of Administration investments for various Florida employee
retirement funds. The Florida Board of Administration, Florida's principal
investment advisory and money management agency, oversees the investment of more
than $60 billion of retirement funds. Since 1971, Mr. Seneff has been active in
the acquisition, development and management of real estate projects and,
directly or through an affiliated entity, has served as a general partner or
joint venturer in over 100 real estate ventures involved in the financing,
acquisition, construction and rental of office buildings, apartment complexes,
restaurants, hotels and other real estate. Included in these real estate
ventures are approximately 65 privately offered real estate limited partnerships
in which Mr. Seneff, directly or through an affiliated entity, serves or has
served as a general partner. Also included are CNL Income Fund, Ltd., CNL Income
Fund II, Ltd., CNL Income Fund III, Ltd., CNL Income Fund IV, Ltd., CNL Income
Fund V, Ltd., CNL Income Fund VI, Ltd., CNL Income Fund VII, Ltd., CNL Income
Fund VIII, Ltd., CNL Income Fund IX, Ltd., CNL Income Fund X, Ltd., CNL Income
Fund XI, Ltd., CNL Income Fund XII, Ltd., CNL Income Fund XIII, Ltd., CNL Income
Fund XIV, Ltd., CNL Income Fund XV, Ltd., CNL Income Fund XVI, Ltd. and CNL
Income Fund XVIII, Ltd. (the "CNL Income Fund Partnerships"), public real estate
limited partnerships with investment objectives similar to those of the
Partnership, in which Mr. Seneff serves as a general partner. Mr. Seneff
received his degree in Business Administration from Florida State University in
1968.
35
<PAGE>
Robert A. Bourne, age 50, is President and Treasurer of CNL Group,
Inc., President, a director and a registered principal of CNL Securities Corp.,
President and a director of CNL Investment Company, and prior to its merger with
CNL Fund Advisors, Inc., effective January 1, 1996, CNL Income Fund Advisors,
Inc., and Chief Investment Officer, Vice Chairman of the Board of Directors, a
director and Treasurer of CNL Institutional Advisors, Inc., a registered
investment advisor. Mr. Bourne served as President of CNL Institutional
Advisors, Inc. from the date of its inception through June 30, 1997 and served
as President of CNL Fund Advisors, Inc. from the date of its inception through
October 1997. Mr. Bourne currently serves as Vice Chairman of the Board of
Directors and as Treasurer of CNL Fund Advisors, Inc. Mr. Bourne also has served
as a director since 1992, as President from July 1992 to February 1996, as
Secretary and Treasurer from February 1996 through December 1997, and since
February 1996, served as Vice Chairman of the Board of Directors of Commercial
Net Lease Realty, Inc. In addition, Mr. Bourne has served as a director since
its inception in 1991, as President from 1991 to February 1996, as Secretary
from February 1996 to July 1996, and since February 1996, served as Treasurer
and Vice Chairman of CNL Realty Advisors, Inc. through December 31, 1997, at
which time CNL Realty Advisors, Inc. merged with Commercial Net Lease Realty,
Inc. In addition, Mr. Bourne has served as President and a director of CNL
American Properties Fund, Inc. since 1994, and has served as President and a
director of CNL American Realty Fund, Inc. since 1996 and of CNL Real Estate
Advisors, Inc. since January 1997. Upon graduation from Florida State University
in 1970, where he received a B.A. in Accounting, with honors, Mr. Bourne worked
as a certified public accountant and, from September 1971 through December 1978,
was employed by Coopers & Lybrand, Certified Public Accountants, where he held
the position of tax manager beginning in 1975. From January 1979 until June
1982, Mr. Bourne was a partner in the accounting firm of Cross & Bourne and from
July 1982 through January 1987, he was a partner in the accounting firm of
Bourne & Rose, P.A., Certified Public Accountants. Mr. Bourne, who joined CNL
Securities Corp. in 1979, has participated as a general partner or joint
venturer in over 100 real estate ventures involved in the financing,
acquisition, construction and rental of office buildings, apartment complexes,
restaurants, hotels and other real estate. Included in these real estate
ventures are approximately 64 privately offered real estate limited partnerships
in which Mr. Bourne, directly or through an affiliated entity, serves or has
served as a general partner. Also included are the CNL Income Fund Partnerships,
public real estate limited partnerships with investment objectives similar to
those of the Partnership, in which Mr. Bourne serves as a general partner.
CNL Realty Corporation is a corporation organized on November 26, 1985,
under the laws of the State of Florida. Its sole directors and shareholders are
James M. Seneff, Jr. and Robert A. Bourne, the individual General Partners. CNL
Realty Corporation was organized to serve as the corporate general partner of
real estate limited partnerships, such as the Partnership, organized by one or
both of the individual General Partners. CNL Realty Corporation currently serves
as the corporate general partner of the CNL Income Fund Partnerships.
CNL Fund Advisors, Inc. provides certain management services in
connection with the Partnership and its Properties. CNL Fund Advisors, Inc. is a
corporation organized in 1994 under the laws of the State of Florida, and its
principal office is located at 400 East South Street, Orlando, Florida 32801.
CNL Fund Advisors, Inc. is a wholly owned subsidiary of CNL Group, Inc., a
diversified real estate company, and was organized to perform property
acquisition, property management and other services.
CNL Group, Inc., which is the parent company of CNL Fund Advisors,
Inc., was organized in 1980 under the laws of the State of Florida. CNL Group,
Inc. is a diversified real estate company which provides a wide range of real
estate, development and financial services to companies in the United States
through the activities of its subsidiaries. These activities are primarily
focused on the franchised restaurant and hospitality industries. James M.
Seneff, Jr., an individual General Partner of the Partnership, is the Chairman
of the Board, Chief Executive Officer, and a director of CNL Group, Inc. Mr.
Seneff and his wife own all of the outstanding shares of CNL Group, Inc.
The following persons serve as operating officers of CNL Group, Inc. or
its affiliates or subsidiaries in the discretion of the Boards of Directors of
those companies, but, except as specifically indicated, do not serve as members
of the Boards of Directors of those entities. The Boards of Directors have the
responsibility for creating and implementing the policies of CNL Group, Inc. and
its affiliated companies.
36
<PAGE>
Curtis B. McWilliams, age 42, joined CNL Fund Advisors, Inc. in April
1997 and currently serves as President of CNL Fund Advisors, Inc. and as
Executive Vice President of CNL American Properties Fund, Inc. In addition, Mr.
McWilliams serves as Executive Vice President of CNL Group, Inc. and as
President of CNL Financial Services, Inc. and certain other subsidiaries of CNL
Group, Inc. From September 1983 through March 1997, Mr. McWilliams was employed
by Merrill Lynch. From January 1991 to August 1996, Mr. McWilliams was a
managing director in the corporate banking group of Merrill Lynch's investment
banking division. During this time, he was a senior relationship manager with
Merrill Lynch and as such was responsible for a number of the firm's larger
clients. From February 1990 to February 1993, he also served as co-head of one
of the Industrial Banking Groups within Merrill Lynch's investment banking
division and had administrative responsibility for a group of bankers and client
relationships, including the firm's transportation group. From September 1996 to
March 1997, Mr. McWilliams served as Chairman of Merrill Lynch's Private
Advisory Services. Mr. McWilliams received a B.S.E. in Chemical Engineering from
Princeton University in 1977 and a Masters of Business Administration with a
concentration in finance from the University of Chicago in 1983.
John T. Walker, age 39, is the Chief Operating Officer and Executive
Vice President of CNL Fund Advisors, Inc. and CNL American Properties Fund, Inc.
and serves as Executive Vice President of CNL American Realty Fund, Inc. and CNL
Real Estate Advisors, Inc. Mr. Walker joined CNL Fund Advisors, Inc. in
September 1994, as Senior Vice President, responsible for Research and
Development. From May 1992 to May 1994, he was Executive Vice President for
Finance and Administration and Chief Financial Officer of Z Music, Inc., a cable
television network which was subsequently acquired by Gaylord Entertainment,
where he was responsible for overall financial and administrative management and
planning. From January 1990 through April 1992, Mr. Walker was Chief Financial
Officer of the First Baptist Church in Orlando, Florida. From April 1984 through
December 1989, he was a partner in the accounting firm of Chastang, Ferrell &
Walker, P.A., where he was the partner in charge of audit and consulting
services, and from 1981 to 1984, Mr. Walker was a Senior Consultant/Audit Senior
at Price Waterhouse. Mr. Walker is a Cum Laude graduate of Wake Forest
University with a B.S. in Accountancy and is a certified public accountant.
Lynn E. Rose, age 49, a certified public accountant, has served as
Chief Financial Officer of CNL Group, Inc. since December 1993, has served as
Secretary of CNL Group, Inc. since 1987, and served as Controller of CNL Group,
Inc. from 1987 until December 1993. In addition, Ms. Rose has served as Chief
Financial Officer and Secretary of CNL Securities Corp. since July 1994. She has
served as Chief Operating Officer, Vice President and Secretary of CNL Corporate
Services, Inc. since November 1994. Ms. Rose also has served as Chief Financial
Officer and Secretary of CNL Institutional Advisors, Inc. since its inception in
1990, served as a director and Secretary of CNL Realty Advisors, Inc. since its
inception in 1991 through December 31, 1997, at which time CNL Realty Advisors,
Inc. merged with Commercial Net Lease Realty, Inc., Treasurer of CNL Realty
Advisors, Inc. from 1991 to February 1996, Secretary and Treasurer of Commercial
Net Lease Realty, Inc. from 1992 to February 1996, Secretary of CNL Income Fund
Advisors, Inc. since its inception in 1994 to December 1995, and a director,
Secretary and Treasurer of CNL Fund Advisors, Inc. since 1994 and has served as
a director, Secretary and Treasurer of CNL Real Estate Advisors, Inc. since
January 1997. Ms. Rose also has served as Secretary and Treasurer of CNL
American Properties Fund, Inc. since 1994, and has served as Secretary and
Treasurer of CNL American Realty Fund, Inc. since 1996. Ms. Rose also currently
serves as Secretary for approximately 50 additional corporations. Ms. Rose
oversees the management information services, administration, legal compliance,
accounting, tenant compliance, and reporting for over 300 corporations,
partnerships, and joint ventures. Prior to joining CNL, Ms. Rose was a partner
with Robert A. Bourne in the accounting firm of Bourne & Rose, P.A., Certified
Public Accountants. Ms. Rose holds a B.A. in Sociology from the University of
Central Florida. She was licensed as a certified public accountant in 1979.
37
<PAGE>
Jeanne A. Wall, age 39, has served as Chief Operating Officer of CNL
Investment Company and of CNL Securities Corp. since November 1994 and has
served as Executive Vice President of CNL Investment Company since January 1991.
In 1984, Ms. Wall joined CNL Securities Corp. In 1985, Ms. Wall became Vice
President of CNL Securities Corp., in 1987, she became Senior Vice President and
in July 1997, she became Executive Vice President of CNL Securities Corp. In
this capacity, Ms. Wall serves as national marketing and sales director and
oversees the national marketing plan for the CNL investment programs. In
addition, Ms. Wall oversees product development, partnership administration and
investor services for programs offered through participating brokers, and
corporate communications for CNL Group, Inc. and Affiliates. Ms. Wall also has
served as Senior Vice President of CNL Institutional Advisors, Inc., a
registered investment advisor, from 1990 to 1993, as Vice President of CNL
Realty Advisors, Inc. since its inception in 1991 through 1997, as Vice
President of Commercial Net Lease Realty, Inc. from 1992 through 1997, as
Executive Vice President of CNL Fund Advisors, Inc. since 1994, and as Executive
Vice President of CNL American Properties Fund, Inc. since 1994. In addition,
Ms. Wall has served as Executive Vice President of CNL Real Estate Advisors,
Inc. since January 1997 and as Executive Vice President of CNL American Realty
Fund, Inc. since 1996. Ms. Wall holds a B.A. in Business Administration from
Linfield College and is a registered principal of CNL Securities Corp. Ms. Wall
currently serves as a trustee on the board of the Investment Program Association
and on the Direct Participation Program committee for the National Association
of Securities Dealers (NASD).
Steven D. Shackelford, age 34, has served as Chief Financial Officer of
CNL Fund Advisors, Inc. since September 1996 and as Chief Financial Officer of
CNL American Properties Fund, Inc. since January 1997. Mr. Shackelford joined
CNL Fund Advisors, Inc. in September 1996. From March 1995 to July 1996, he was
a senior manager in the national office of Price Waterhouse where he was
responsible for advising foreign clients seeking to raise capital and a public
listing in the United States. From August 1992 to March 1995, he served as a
manager in the Price Waterhouse, Paris, France office serving several
multinational clients. Mr. Shackelford was an audit staff and audit senior from
1986 to 1992 in the Orlando, Florida office of Price Waterhouse. Mr. Shackelford
received a B.A. in Accounting, with honors, and a Masters of Business
Administration from Florida State University and is a certified public
accountant.
Compliance with Section 16(A) of the Exchange Act
Based upon the Partnership's review of Forms 3 and 4 furnished to the
Partnership during the year ended December 31, 1997, the following beneficial
owners of more than ten percent (prior to the reported transaction) of interests
in the Partnership reported a transaction on Form 5 which was previously
reportable on Form 4: each of James M. Seneff, Jr. and Robert A. Bourne untimely
filed a Form 5 on March 26, 1998, which reported a reportable transaction which
occurred as of October 31, 1997, for which a Form 4 was not filed.
Item 11. Executive Compensation
Other than as described in Item 13, the Partnership has not paid and
does not intend to pay any executive compensation to the General Partners or any
of their affiliates. There are no compensatory plans or arrangements regarding
termination of employment or change of control.
38
<PAGE>
Item 12. Security Ownership of Certain Beneficial Owners and Management
As of March 13, 1998, no person was known to the Registrant to be a
beneficial owner of more than five percent of the Units.
The following table sets forth, as of March 13, 1998, the beneficial
ownership interests of the General Partners in the Registrant.
Title of Class Name of Partner Percent of Class
General Partnership Interests James M. Seneff, Jr. 45%
Robert A. Bourne 45%
CNL Realty Corporation 10%
----
100%
Neither the General Partners, nor any of their affiliates, owns any
interest in the Registrant, except as noted above. There are no arrangements
which at a subsequent date may result in a change in control of the Registrant.
Item 13. Certain Relationships and Related Transactions
The table below summarizes the types, recipients, methods of
computation and amounts of compensation, fees and distributions paid or payable
by the Partnership to the General Partners and their affiliates for the year
ended December 31, 1997, exclusive of any distributions to which the General
Partners or their affiliates may be entitled by reason of their purchase and
ownership of Units.
<TABLE>
<CAPTION>
==========================================================================================================================
Amount Incurred
Type of Compensation For the Year
and Recipient Method of Computation Ended December 31, 1997
----------------------- --------------------- -----------------------
<S> <C>
Acquisition fees and expenses to Fees equal to 4.5% of gross Acquisition fees: $ - 0 -
CNL Fund Advisors, Inc. offering proceeds to CNL Fund
Advisors, Inc., plus reimburse-
ment to the General Partners and Acquisition expenses:
their affiliates for expenses $11,262
actually incurred.
Reimbursement to CNL Fund Operating expenses are reimbursed Operating expenses incurred
Advisors, Inc. and affiliates for at the lower of cost or 90 percent on behalf of the Partnership:
operating expenses of the prevailing rate at which $59,451
comparable services could have
been obtained in the same Accounting and administra-
geographic area. Affiliates of the tive services: $90,700
General Partners from time to time
incur certain operating expenses on
behalf of the Partnership for which the
Partnership reimburses the affiliates
without interest.
==========================================================================================================================
</TABLE>
39
<PAGE>
<TABLE>
<CAPTION>
==========================================================================================================================
Amount Incurred
Type of Compensation For the Year
and Recipient Method of Computation Ended December 31, 1997
----------------------- --------------------- -----------------------
<S> <C>
Annual management fee to CNL One percent of the sum of gross $25,377
Fund Advisors, Inc. revenues (excluding noncash lease
accounting adjustments) from Properties
wholly owned by the Partnership plus
the Partnership's allocable share of
gross revenues of joint ventures in
which the Partnership is a co-venturer.
The management fee, which will not
exceed competitive fees for comparable
services in the same geographic area,
may or may not be taken, in whole or in
part as to any year, in the sole
discretion of CNL Fund Advisors, Inc.
All or any portion of the management
fee not taken as to any fiscal year
shall be deferred without interest and
may be taken in such other fiscal year
as CNL Fund Advisors, Inc. shall
determine. $10,482
Deferred, subordinated real estate A deferred, subordinated real $ - 0 -
disposition fee payable to CNL estate disposition fee, payable
Fund Advisors, Inc upon sale of one or more
Properties, in an amount equal to the
lesser of (i) one-half of a competitive
real estate commission, or (ii) three
percent of the sales price of such
Property or Properties. Payment of such
fee shall be made only if CNL Fund
Advisors, Inc. provides a substantial
amount of services in connection with
the sale of a Property or Properties
and shall be subordinated to certain
minimum returns to the Limited
Partners. However, if the net sales
proceeds are reinvested in a
replacement Property, no such real
estate disposition fee will be incurred
until such replacement Property is sold
and the net sales proceeds are
distributed.
==========================================================================================================================
</TABLE>
40
<PAGE>
<TABLE>
<CAPTION>
==========================================================================================================================
Amount Incurred
Type of Compensation For the Year
and Recipient Method of Computation Ended December 31, 1997
----------------------- --------------------- -----------------------
<S> <C>
General Partners' deferred, sub- A deferred, subordinated share $ - 0 -
ordinated share of Partnership net equal to five percent of
cash flow Partnership distributions of net
cash flow, subordinated to certain
minimum returns to the Limited
Partners.
General Partners' deferred, sub- A deferred, subordinated share $ - 0 -
ordinated share of Partnership net equal to five percent of
sales proceeds from a sale or Partnership distributions of such
sales net sales proceeds, subordinated to
certain minimum returns to the
Limited Partners.
==========================================================================================================================
</TABLE>
41
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) The following documents are filed as part of this report.
1. Financial Statements
Report of Independent Accountants
Balance Sheets at December 31, 1997 and 1996
Statements of Income for the year ended December 31, 1997 and
1996 and the period February 10, 1995 (date of inception)
through December 31, 1995
Statements of Partners' Capital for the year ended December
31, 1997 and 1996 and the period February 10, 1995 (date of
inception) through December 31, 1995
Statements of Cash Flows for the year ended December 31, 1997
and 1996 and the period February 10, 1995 (date of inception)
through December 31, 1995
Notes to Financial Statements
2. Financial Statement Schedule
Schedule III - Real Estate and Accumulated Depreciation at
December 31, 1997
Notes to Schedule III - Real Estate and Accumulated
Depreciation at December 31, 1997
All other Schedules are omitted as the required information is
inapplicable or is presented in the financial statements or
notes thereto.
3. Exhibits
**3.1 Affidavit and Certificate of Limited Partnership of
CNL Income Fund XVIII, Ltd. (Filed as Exhibit 3.2 to
the Registrant's Registration Statement on Form S-11,
No. 33-90998, incorporated herein by reference.)
**3.2 Amended and Restated Agreement of Limited Partnership
of CNL Income Fund XVIII, Ltd. (Included as Exhibit
4.2 to Form 10-K filed with the Securities and
Exchange Commission on March 21, 1996, and
incorporated herein by reference.)
**4.1 Affidavit and Certificate of Limited Partnership of
CNL Income Fund XVIII, Ltd. (Included as Exhibit 3.2
to Registration Statement No. 33-90998-01 on Form
S-11 and incorporated herein by reference.)
**4.2 Amended and Restated Agreement of Limited Partnership
of CNL Income Fund XVIII, Ltd. (Included as Exhibit
4.2 to Form 10-K filed with the Securities and
Exchange Commission on March 21, 1996, and
incorporated herein by reference.)
**4.3 Form of Agreement between CNL Income Fund XVII, Ltd.
and MMS Escrow and Transfer Agency, Inc. and between
CNL Income Fund XVIII, Ltd. and MMS Escrow and
Transfer Agency, Inc. relating to the Distribution
Reinvestment Plans (Filed as Exhibit 4.4 to the
Registrant's Registration Statement on Form S-11, No.
33-90998, incorporated herein by reference.)
42
<PAGE>
**8.3 Opinion of Baker & Hostetler regarding certain
material issues relating to the Distribution
Reinvestment Plan of CNL Income Fund XVII, Ltd.
(Filed as Exhibit 8.3 to Amendment No. Three to the
Registrant's Registration Statement on Form S-11, No.
33-90998, incorporated herein by reference.)
**10.1 Management Agreement between CNL Income Fund XVIII,
Ltd. and CNL Fund Advisors, Inc. (Included as Exhibit
10.1 to Form 10-K filed with the Securities and
Exchange Commission on March 20, 1997, and
incorporated herein by reference.)
**10.2 Form of Joint Venture Agreement for Joint Ventures
with Unaffiliated Entities (Filed as Exhibit 10.2 to
the Registrant's Registration Statement on Form S-11,
No. 33-90998, incorporated herein by reference.)
**10.3 Form of Joint Venture Agreement for Joint Ventures
with Affiliated Programs (Filed as Exhibit 10.3 to
the Registrant's Registration Statement on Form S-11,
No. 33-90998, incorporated herein by reference.)
**10.4 Form of Development Agreement (Filed as Exhibit 10.5
to the Registrant's Registration Statement on Form
S-11, No. 33-90998, incorporated herein by
reference.)
**10.5 Form of Indemnification and Put Agreement (Filed as
Exhibit 10.6 to the Registrant's Registration
Statement on Form S-11, No. 33-90998, incorporated
herein by reference.)
**10.6 Form of Unconditional Guarantee of Payment and
Performance (Filed as Exhibit 10.7 to the
Registrant's Registration Statement on Form S-11, No.
33-90998, incorporated herein by reference.)
**10.7 Form of Lease Agreement for Existing Restaurant
(Filed as Exhibit 10.8 to the Registrant's
Registration Statement on Form S-11, No. 33-90998,
incorporated herein by reference.)
**10.8 Form of Lease Agreement for Restaurant to be
Constructed (Filed as Exhibit 10.9 to the
Registrant's Registration Statement on Form S-11, No.
33-90998, incorporated herein by reference.)
**10.9 Form of Premises Lease for Golden Corral Restaurant
(Filed as Exhibit 10.10 to the Registrant's
Registration Statement on Form S-11, No. 33-90998,
incorporated herein by reference.)
**10.10 Form of Agreement between CNL Income Fund XVII, Ltd.
and MMS Escrow and Transfer Agency, Inc. and between
CNL Income Fund XVIII, Ltd. and MMS Escrow and
Transfer Agency, Inc. relating to the Distribution
Reinvestment Plans (Filed as Exhibit 4.4 to the
Registrant's Registration Statement on Form S-11, No.
33-90998, incorporated herein by reference.)
**10.11 Form of Cotenancy Agreement with Unaffiliated Entity
(Filed as Exhibit 10.12 to Amendment No. One to the
Registrant's Registration Statement on Form S-11, No.
33- 90998, incorporated herein by reference.)
**10.12 Form of Cotenancy Agreement with Affiliated Entity
(Filed as Exhibit 10.13 to Amendment No. One to the
Registrant's Registration Statement on Form S-11, No.
33- 90998, incorporated herein by reference.)
43
<PAGE>
**10.13 Form of Registered Investor Advisor Agreement (Filed
as Exhibit 10.14 to Amendment No. One to the
Registrant's Registration Statement on Form S-11, No.
33-90998, incorporated herein by reference.)
27 Financial Data Schedule (Filed herewith.)
(b) The Registrant filed no reports on Form 8-K during the period
October 1, 1997 through December 31, 1997.
**previously filed
44
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on the 26th day of
March, 1998.
CNL INCOME FUND XVII, LTD.
By: CNL REALTY CORPORATION
General Partner
/s/ Robert A. Bourne
ROBERT A. BOURNE, President
By: ROBERT A. BOURNE
General Partner
/s/ Robert A. Bourne
ROBERT A. BOURNE
By: JAMES M. SENEFF, JR.
General Partner
/s/ James M. Seneff, Jr.
JAMES M. SENEFF, JR.
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
==========================================================================================================================
Signature Title Date
<S> <C>
/s/ Robert A. Bourne President, Treasurer and Director March 26, 1998
- ---------------------------------------- (Principal Financial and Accounting
Robert A. Bourne Officer)
/s/ James M. Seneff, Jr. Chief Executive Officer, Chairman March 26, 1998
- ---------------------------------------- and Director (Principal Executive
James M. Seneff, Jr. Officer)
==========================================================================================================================
</TABLE>
<PAGE>
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1997
<TABLE>
<CAPTION>
Costs Capitalized
Subsequent
Initial Cost To Acquisition
Buildings
Encum- and Improve- Carrying
brances Land Improvements ments Costs
<S> <C>
Property the Partnership
has Invested in Under
Operating Leases:
Arby's Restaurants:
Muncie, Indiana - $ 242,759 $ - $ - $ -
Schertz, Texas - 348,245 470,577 - -
Plainfield, Indiana - 296,025 557,809 - -
Boston Market Restaurants:
Houston, Texas - 373,112 477,383 - -
Troy, Ohio - 327,924 571,730 - -
Long Beach, California - 661,696 - 217,883 -
Burger King Restaurants:
Harvey, Illinois - 489,340 734,010 - -
Chicago Ridge, Illinois - 771,965 - 699,556 -
Lyons, Illinois - 887,767 - 597,381 -
Denny's Restaurants:
Kentwood, Michigan - 287,732 626,865 - -
Mesquite, Nevada - 372,858 - - -
Pensacola, Florida - 305,509 670,990 - -
Fazoli's Restaurant:
Warner Robins, Georgia - 300,481 - 421,898 -
Golden Corral Family
Steakhouse Restaurants:
Orange Park, Florida - 711,838 1,162,406 - -
Aiken, South Carolina - 508,003 - 987,046 -
Weatherford, Texas - 344,610 - 891,747 -
El Cajon, California - 974,793 - - -
Jack in the Box Restaurants:
Dinuba, California - 324,970 - 509,982 -
LaPorte, Texas - 355,929 - 560,485 -
El Dorado, California - 617,416 - 548,188 -
Popeye's Famous Fried
Chicken Restaurant:
Warner Robins, Georgia - 260,513 - 330,100 -
Wendy's Old Fashioned
Hamburgers Restaurants:
Knoxville, Tennessee - 332,003 - 489,610 -
Livingston, Tennessee - 261,703 - - -
----------- ---------- ---------- -------
- $10,357,191 $5,271,770 $6,253,876 $ -
=========== ========== ========== =======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Life
on Which
Gross Amount at Which Carried Depreciation
at Close of Period (b) in Latest
Buildings Date Income
and Accumulated of Con- Date Statement is
Land Improvements Total Depreciation struction Acquired Computed
----------- ------------ ----------- ------------ --------- -------- ----------
<S> <C>
$ 242,759 (d) $ 242,759 (e) 1995 03/96 (e)
348,245 $ 470,577 818,822 24,045 1996 06/96 (c)
296,025 557,809 853,834 22,058 1996 10/96 (c)
373,112 477,383 850,495 24,392 1996 06/96 (c)
327,924 571,730 899,654 27,425 1996 07/96 (c)
661,696 217,883 879,579 7,800 1996 12/96 (c)
489,340 734,010 1,223,350 44,560 1996 03/96 (c)
771,965 699,556 1,471,521 38,204 1996 03/96 (c)
887,767 597,381 1,485,148 12,925 1997 11/96 (c)
287,732 626,865 914,597 37,311 1980 03/96 (c)
372,858 (d) 372,858 (e) 1996 12/95 (e)
305,509 670,990 976,499 31,390 1996 08/96 (c)
300,481 421,898 722,379 16,298 1996 08/96 (c)
711,838 1,162,406 1,874,244 70,673 1996 03/96 (c)
508,003 987,046 1,495,049 51,155 1996 04/96 (c)
344,610 891,747 1,236,357 39,518 1996 03/96 (c)
974,793 (d) 974,793 (e) 1997 12/96 (e)
324,970 509,982 834,952 22,926 1996 05/96 (c)
355,929 560,485 916,414 23,816 1996 07/96 (c)
617,416 548,188 1,165,604 23,092 1996 07/96 (c)
260,513 330,100 590,613 13,174 1996 08/96 (c)
332,003 489,610 821,613 23,206 1996 05/96 (c)
261,703 (d) 261,703 (e) 1996 06/96 (e)
----------- ----------- ----------- --------
$10,357,191 $11,525,646 $21,882,837 $553,968
=========== =========== =========== ========
F-1
</TABLE>
<PAGE>
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1997
<TABLE>
<CAPTION>
Costs Capitalized
Subsequent
Initial Cost To Acquisition
Buildings
Encum- and Improve- Carrying
brances Land Improvements ments Costs
<S> <C>
Property in Which the Partner-
ship has a 19.73% Interest
as Tenants-in-Common and has
Invested in Under an
Operating Lease:
Boston Market Restaurant:
Fayetteville, North Carolina - $ 377,800 $ 587,700 $ - $ -
========== ========== ========== ======
Property in Which the Partnership
has a 27.5% Interest as Tenants-in-Common
and has Invested in Under an Operating Lease:
Black-eyed Pea Restaurant:
Corpus Christi, Texas - $ 715,052 $ 726,004 $ - $ -
========== ========== ========== ======
Property in Which the Partnership
has a 36.97% Interest as
Tenants-in-Common and has
Invested in Under an
Operating Lease:
Burger King Restaurant:
Akron, Ohio - $ 355,594 $ 517,030 $ - $ -
========== ========== ========== ======
Property in Which the Partnership has
a 21% Interest as Tenants-in-Common and
has Invested in Under an Operating Lease:
Jack in the Box Restaurant:
Mansfield, Texas - $ 297,295 $ 482,914 $ - $ -
========== ========== ========== ======
Property in Which the Partnership
has a 60.06% Interest as
Tenants-in-Common and has
Invested in Under an Operating
Lease:
Taco Bell Restaurant:
Kingston, Tennessee - $ 180,555 $ 332,370 $ - $ -
========== ========== ========== ======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Life
on Which
Gross Amount at Which Carried Depreciation
at Close of Period (b) in Latest
Buildings Date Income
and Accumulated of Con- Date Statement is
Land Improvements Total Depreciation struction Acquired Computed
----------- ------------ ----------- ------------ --------- -------- ----------
<S> <C>
$ 377,800 $ 587,700 $ 965,500 $ 24,358 1996 10/96 (g)
========== ========== ========== ========
$ 715,052 $ 726,004 $1,441,056 $ 22,448 1992 01/97 (c)
========== ========== ========== ========
$ 355,594 $ 517,030 $ 872,624 $ 15,988 1970 01/97 (c)
========== ========== ========== ========
$ 297,295 $ 482,914 $ 780,209 $ 12,866 1997 02/97 (c)
========== ========== ========== ========
$ 180,555 $ 332,370 $ 512,925 $ 983 1997 09/97 (c)
========== ========== ========== =========
</TABLE>
F-2
<PAGE>
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1997
<TABLE>
<CAPTION>
Costs Capitalized
Subsequent
Initial Cost To Acquisition
Buildings
Encum- and Improve- Carrying
brances Land Improvements ments Costs
<S> <C>
Properties the Partnership
has Invested in Under
Direct Financing Leases:
Arby's Restaurant:
Muncie, Indiana - - 629,847 - -
Denny's Restaurant:
Mesquite, Nevada - - - 898,723 -
Golden Corral Family
Steakhouse Restaurant:
El Cajon, California - - - 1,119,438 -
Wendy's Old Fashioned
Hamburgers Restaurant:
Livingston, Tennessee - - - 455,575 -
---------- ---------- ---------- ------
$ - $ 629,847 $2,473,736 $ -
========== ========== ========== ======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Life
on Which
Gross Amount at Which Carried Depreciation
at Close of Period (b) in Latest
Buildings Date Income
and Accumulated of Con- Date Statement is
Land Improvements Total Depreciation struction Acquired Computed
----------- ------------ ----------- ------------ --------- -------- ----------
<S> <C>
- (d) (d) (e) 1995 03/96 (e)
- (d) (d) (e) 1996 12/95 (e)
- (d) (d) (e) 1997 12/96 (e)
- (d) (d) (e) 1996 06/96 (e)
</TABLE>
F-3
<PAGE>
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1997
(a) Transactions in real estate and accumulated depreciation during 1997,
1996 and 1995 are summarized as follows:
<TABLE>
<CAPTION>
Accumulated
Cost Depreciation
<S> <C>
Properties the Partnership has
Invested in Under Operating
Leases:
Balance, December 31, 1994 $ - $ -
Acquisitions 402,244 -
Depreciation expense - -
----------- ----------
Balance, December 31, 1995 402,244 -
Acquisitions 21,138,783 -
Depreciation expense - 176,995
----------- -----------
Balance, December 31, 1996 21,541,027 176,995
Acquisitions 341,810 -
Depreciation expense - 376,973
----------- -----------
Balance, December 31, 1997 $21,882,837 $ 553,968
=========== ===========
Property in Which the Partnership
has a 19.73% Interest as Tenants-
in-Common and has Invested in
Under an Operating Lease:
Balance, December 31, 1995 $ - $ -
Acquisition 965,500 -
Depreciation expense - 4,768
----------- -----------
Balance, December 31, 1996 965,500 4,768
Acquisition -
Depreciation expense - 19,590
----------- -----------
Balance, December 31, 1997 $ 965,500 $ 24,358
=========== ===========
Property of Joint Venture in Which
the Partnership has a 27.5%
Interest and has Invested in
Under an Operating Lease:
Balance, December 31, 1996 $ - $ -
Acquisition 1,441,056 -
Depreciation expense - 22,448
----------- -----------
Balance, December 31, 1997 $ 1,441,056 $ 22,448
=========== ===========
</TABLE>
F-4
<PAGE>
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED
DEPRECIATION - CONTINUED
December 31, 1997
<TABLE>
<CAPTION>
Accumulated
Cost Depreciation
<S> <C>
Property in Which the Partnership
has a 36.97% Interest as
Tenants-in-Common and has
Invested in Under an Operating
Lease:
Balance, December 31, 1996 $ - $ -
Acquisition 872,624 -
Depreciation expense - 15,988
----------- -----------
Balance, December 31, 1997 $ 872,624 $ 15,988
=========== ===========
Property of Joint Venture in
Which the Partnership has
an 21% Interest and has
Invested in Under an Operating
Lease:
Balance, December 31, 1996 $ - $ -
Acquisition 780,209 -
Depreciation expense - 12,866
----------- -----------
Balance, December 31, 1997 $ 780,209 $ 12,866
=========== ===========
Property of Joint Venture in Which
the Partnership has a 60.06%
Interest and Invested in Under
an Operating Lease:
Balance, December 31, 1996 $ - $ -
Acquisition 512,925 -
Depreciation expense - 983
----------- -----------
Balance, December 31, 1997 $ 512,925 $ 983
=========== ===========
</TABLE>
(b) As of December 31, 1997, the aggregate cost of the Properties owned
by the Partnership and the joint venture for federal income tax
purposes was $24,986,419 and $2,205,549, respectively. All of the
leases are treated as operating leases for federal income tax
purposes.
(c) Depreciation expense is computed for buildings and improvements based
upon estimated lives of 30 years.
(d) For financial reporting purposes, certain components of the lease
relating to land and building have been recorded as a direct
financing lease. Accordingly, costs relating to these components of
this lease are not shown.
F-5
<PAGE>
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED
DEPRECIATION - CONTINUED
December 31, 1997
(e) For financial reporting purposes, the portion of the lease relating
to the building has been recorded as a direct financing lease. The
cost of the building has been included in net investment in direct
financing leases; therefore, depreciation is not applicable.
(f) During the year ended December 31, 1996, the Partnership incurred
acquisition fees totalling $1,093,639 paid to CNL Fund Advisors, Inc.
During the years ended December 31, 1997 and 1996, the Partnership
purchased land and buildings from affiliates of the Partnership for
aggregate costs of approximately $718,932 and $1,667,100,
respectively. Such amounts are included in land and buildings on
operating leases, net investment in direct financing leases,
investment in joint ventures and other assets at December 31, 1997.
F-6
<PAGE>
EXHIBITS
<PAGE>
EXHIBIT INDEX
Exhibit Number Page
**3.1 Affidavit and Certificate of Limited Partnership of CNL Income
Fund XVIII, Ltd. (Filed as Exhibit 3.2 to the Registrant's
Registration Statement on Form S-11, No. 33-90998,
incorporated herein by reference.)
**3.2 Amended and Restated Agreement of Limited Partnership of CNL
Income Fund XVIII, Ltd. (Included as Exhibit 4.2 to Form 10-K
filed with the Securities and Exchange Commission on March 21,
1996, and incorporated herein by reference.)
**4.1 Affidavit and Certificate of Limited Partnership of CNL Income
Fund XVIII, Ltd. (Included as Exhibit 3.2 to Registration
Statement No. 33-90998-01 on Form S-11 and incorporated herein
by reference.)
**4.2 Amended and Restated Agreement of Limited Partnership of CNL
Income Fund XVIII, Ltd. (Included as Exhibit 4.2 to Form 10-K
filed with the Securities and Exchange Commission on March 21,
1996, and incorporated herein by reference.)
**4.3 Form of Agreement between CNL Income Fund XVII, Ltd. and MMS
Escrow and Transfer Agency, Inc. and between CNL Income Fund
XVIII, Ltd. and MMS Escrow and Transfer Agency, Inc. relating
to the Distribution Reinvestment Plans (Filed as Exhibit 4.4
to the Registrant's Registration Statement on Form S-11, No.
33-90998, incorporated herein by reference.)
**8.3 Opinion of Baker & Hostetler regarding certain material issues
relating to the Distribution Reinvestment Plan of CNL Income
Fund XVII, Ltd. (Filed as Exhibit 8.3 to Amendment No. Three
to the Registrant's Registration Statement on Form S-11, No.
33-90998, incorporated herein by reference.)
**10.1 Management Agreement between CNL Income Fund XVIII, Ltd. and
CNL Fund Advisors, Inc. (Included as Exhibit 10.1 to Form 10-K
filed with the Securities and Exchange Commission on March 20,
1997, and incorporated herein by reference.)
**10.2 Form of Joint Venture Agreement for Joint Ventures with
Unaffiliated Entities (Filed as Exhibit 10.2 to the
Registrant's Registration Statement on Form S-11, No.
33-90998, incorporated herein by reference.)
**10.3 Form of Joint Venture Agreement for Joint Ventures with
Affiliated Programs (Filed as Exhibit 10.3 to the Registrant's
Registration Statement on Form S-11, No. 33-90998,
incorporated herein by reference.)
**10.4 Form of Development Agreement (Filed as Exhibit 10.5 to the
Registrant's Registration Statement on Form S-11, No.
33-90998, incorporated herein by reference.)
**10.5 Form of Indemnification and Put Agreement (Filed as Exhibit
10.6 to the Registrant's Registration Statement on Form S-11,
No. 33-90998, incorporated herein by reference.)
i
<PAGE>
**10.6 Form of Unconditional Guarantee of Payment and Performance
(Filed as Exhibit 10.7 to the Registrant's Registration
Statement on Form S-11, No. 33-90998, incorporated herein by
reference.)
**10.7 Form of Lease Agreement for Existing Restaurant (Filed as
Exhibit 10.8 to the Registrant's Registration Statement on
Form S-11, No. 33-90998, incorporated herein by reference.)
**10.8 Form of Lease Agreement for Restaurant to be Constructed
(Filed as Exhibit 10.9 to the Registrant's Registration
Statement on Form S-11, No. 33-90998, incorporated herein by
reference.)
**10.9 Form of Premises Lease for Golden Corral Restaurant (Filed as
Exhibit 10.10 to the Registrant's Registration Statement on
Form S-11, No. 33-90998, incorporated herein by reference.)
**10.10 Form of Agreement between CNL Income Fund XVII, Ltd. and MMS
Escrow and Transfer Agency, Inc. and between CNL Income Fund
XVIII, Ltd. and MMS Escrow and Transfer Agency, Inc. relating
to the Distribution Reinvestment Plans (Filed as Exhibit 4.4
to the Registrant's Registration Statement on Form S-11, No.
33-90998, incorporated herein by reference.)
**10.11 Form of Cotenancy Agreement with Unaffiliated Entity (Filed as
Exhibit 10.12 to Amendment No. One to the Registrant's
Registration Statement on Form S-11, No. 33-90998,
incorporated herein by reference.)
**10.12 Form of Cotenancy Agreement with Affiliated Entity (Filed as
Exhibit 10.13 to Amendment No. One to the Registrant's
Registration Statement on Form S-11, No. 33-90998,
incorporated herein by reference.)
**10.13 Form of Registered Investor Advisor Agreement (Filed as
Exhibit 10.14 to Amendment No. One to the Registrant's
Registration Statement on Form S-11, No. 33-90998,
incorporated herein by reference.)
27 Financial Data Schedule (Filed herewith.)
**previously filed
ii
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the balance
sheet of CNL Income Fund XVII, Ltd. at December 31, 1997, and its statement of
income for the year then ended and is qualified in its entirety by reference to
the Form 10K of CNL Income Fund XVII, Ltd. for the year ended December 31, 1997.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 1,238,799
<SECURITIES> 0
<RECEIVABLES> 14,946
<ALLOWANCES> 14,333
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 21,882,837
<DEPRECIATION> 553,968
<TOTAL-ASSETS> 27,524,148
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 26,236,203
<TOTAL-LIABILITY-AND-EQUITY> 27,524,148
<SALES> 0
<TOTAL-REVENUES> 2,713,650
<CGS> 0
<TOTAL-COSTS> 569,157
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,203,557
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,203,557
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,203,557
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>Due to the nature of its industry, CNL Income Fund XVII, Ltd. has an
unclassified balance sheet; therefore, no values are shown above for current
assets and current liabilities.
</FN>
</TABLE>
