[PG NUMBER]
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, 1998
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) 650-1000
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:
Units of limited partnership interest ($10 per Unit)
(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. [X]
Aggregate market value of the voting stock held by nonaffiliates of the
registrant: The registrant registered an offering of 3,000,000 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 and were used as of December 31, 1998, to acquire
28 Properties, including interests in three Properties owned by joint ventures
in which the Partnership is a co-venturer and three Properties owned with
affiliates as tenants-in-common, to pay acquisition fees totalling $1,350,000
and to establish a working capital reserve for Partnership purposes. During
1998, the Partnership received approximately $306,100 in a reimbursement from
the developer of the Properties in Aiken, South Carolina and Weatherford, Texas,
upon final reconciliation of total construction costs. In January 1999, the
Partnership invested these amounts, along with other net offering proceeds, in a
Property in Zephyrhills, Florida, with an affiliate as tenants-in-common, and
entered into a joint venture arrangement, Ocean Shores Joint Venture, with an
affiliate of the General Partners to purchase and hold one Property in Ocean
Shores, Washington, indirectly through a joint venture in which the Partnership
is a co-venturer. The Partnership leases the Properties on a triple-net basis
with the lessees responsible for all repairs and maintenance, property taxes,
insurance and utilities.
On March 11, 1999, the Partnership entered into an Agreement and Plan
of Merger with CNL American Properties Fund, Inc. ("APF"), pursuant to which the
Partnership would be merged with and into a subsidiary of APF (the "Merger").
APF is a real estate investment trust whose primary business is the ownership of
restaurant properties leased on a long-term, "triple-net" basis to operators of
national and regional restaurant chains. APF has agreed to issue shares of its
common stock, par value $0.01 per share (the "APF Shares"), as consideration for
the Merger. At a special meeting of the partners that is expected to be held in
the third quarter of 1999, Limited Partners holding in excess of 50% of the
Partnership's outstanding limited partnership interests must approve the Merger
prior to consummation of the transaction. If the Limited Partners at the special
meeting approve the Merger, APF will own the Properties and other assets of the
Partnership. See Item 8.
Financial Statements and Supplementary Data -- Note 11. Subsequent Events.
In the event that the Limited Partners vote against the Merger, 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. 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 13 to 20 years (the average being 18 years) and expire between 2011
and 2017. The majority of the 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 $57,300 to
$248,700. The majority 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 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.
During 1998, the Partnership exchanged a Boston Market Property in
Troy, Ohio, for a Boston Market Property in Inglewood, California. The terms of
the Troy Property lease facilitated such an exchange between the Partnership and
the lessee. In conjunction therewith, the lease was amended to allow the
Inglewood Property to continue under the terms of the Troy lease; therefore, all
terms of the lease remained unchanged.
In January 1999, the Partnership invested in an Arby's Property in
Zephyrills, Florida, as tenants-in-common with an affiliate of the General
Partners and entered into a joint venture, Ocean Shores Joint Venture, with an
affiliate of the General Partners to purchase and hold one Property indirectly.
The lease terms for these Properties are substantially the same as the
Partnership's other leases as described above in the first three paragraphs of
this section.
Major Tenants
During 1998, five lessees of the Partnership and its consolidated joint
venture, Golden Corral Corporation, National Restaurant Enterprises, Inc.,
DenAmerica Corp., Foodmaker, Inc. and San Diego Food Holdings, Inc. each
contributed more than ten percent of the Partnership's total rental income
(including rental income from the Partnerships' 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, 1998, each of Golden Corral Corporation and National
Restaurant Enterprises, Inc. was the lessee under leases relating to three
restaurants, each of DenAmerica Corp. and Foodmaker, Inc. was the lessee under
leases relating to four restaurants and San Diego Food Holdings, Inc. was the
lessee under a lease relating to one restaurant. It is anticipated that based on
the minimum rental payments required by the leases, these five lessees each will
contribute more than ten percent of the Partnership's total rental income in
1999. 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 1998 (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). In 1999, it is anticipated that Golden Corral,
Jack in the Box and Burger King 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 if the Partnership is not
able to re-lease the Properties in a timely manner. During 1998, the tenants of
three Boston Market Properties, Boston Chicken, Inc., BCBM Southwest L.P. and
Boston West L.L.C. filed for bankruptcy. While the tenants have not rejected or
affirmed these three leases, there can be no assurance that some or all of the
leases will not be rejected in the future. The lost revenues resulting from the
rejection of all three leases could have an adverse effect on the results of
operations of the Partnership if the Partnership is unable to re-lease these
Properties in a timely manner. As of December 31, 1998, no single lessee or
group of affiliated lessees 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.
<PAGE>
Joint Venture Arrangements
The Partnership has entered into a joint venture arrangement, CNL/GC El
Cajon Joint Venture, with an unaffiliated entity to purchase and hold one
Property and has entered into two 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 venturer partners, 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.
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 respective 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, the Partnership
has entered into separate agreements to hold a Property in Fayetteville, North
Carolina, a Property in Corpus Christi, Texas and a Property in Akron, Ohio,
respectively, 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 Properties and net cash flow from the Properties in
proportion to each co-owner's percentage interest. The Partnership owns a
19.56%, 27.42% and 36.91% interest in the Properties in Fayetteville, North
Carolina, Corpus Christi, Texas and Akron, Ohio, respectively.
In addition, in January 1999, the Partnership entered into an agreement
to hold an Arby's Property in Zephyrhills, Florida, as tenants-in-common, with
affiliates of the General Partners. The agreement provides for the Partnership
and the affiliates 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. The Partnership owns a 24 percent interest in this Property. Also in
January 1999, the Partnership entered into a joint venture arrangement, Ocean
Shores Joint Venture, with an affiliate of the General Partners to purchase and
hold one Property. The 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 owns a 30.94% interest in the profits and
losses of the joint venture.
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 tenant's 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
<PAGE>
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.
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.
Item 2. Properties
As of December 31, 1998, 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 range from approximately 15,185
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, 1998 (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 $146,100 (ranging from approximately
$107,600 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 $144,400
(ranging from approximately $123,200 to $153,600).
DenAmerica Corp. leases two Denny's restaurants, one Mr. Fable's
restaurant 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 $120,300 (ranging from approximately $98,700 to $153,800).
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 $93,900 (ranging from approximately
$80,100 to $117,900).
San Diego Food Holdings, Inc. leases one Golden Corral restaurant. The
initial term of the lease is 20
years (expiring 2016) and the minimum base rent is approximately $248,700.
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.
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 11, 1999, there were 2,478 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. From inception through
December 31, 1998, the price paid for any Unit transferred pursuant to the Plan
was $9.50 per Unit. The price paid for any Unit transferred other than pursuant
to the Plan was 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 1998 and 1997 other than
pursuant to the Plan, net of commissions.
<TABLE>
<CAPTION>
1998 (1) 1997
-------------------------------- --------------------------------
High Low Average High Low Average
------- ------- ---------- ------- ------- ----------
<S> <C>
First Quarter (2) (2) (2) (2) (2) (2)
Second Quarter 7.73 7.73 7.73 (2) (2) (2)
Third Quarter (2) (2) (2) (2) (2) (2)
Fourth Quarter (2) (2) (2) (2) (2) (2)
</TABLE>
(1) A total of 400 Units were transferred other than pursuant to the Plan
for the year ended December 31, 1998.
(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, 1998 and 1997, the Partnership
declared cash distributions of $2,400,000 and $2,287,500, respectively, to the
Limited Partners. No amounts distributed to partners for the years ended
December 31, 1998 and 1997, 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 1998 1997
-------------------- ------------ ------------
March 31 $600,000 $525,000
June 30 600,000 562,500
September 30 600,000 600,000
December 31 600,000 600,000
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 Year Ended through
December 31, December 31, December 31, December 31,
1998 1997 1996 1995 (1)
---------------- ---------------- ----------------- -----------------
<S> <C>
Revenues (2) $ 2,946,048 $ 2,772,714 $ 1,444,503 $ 12,153
Net income 2,394,158 2,203,557 1,095,759 8,351
Cash distributions declared 2,400,000 2,287,500 1,166,689 28,275
Net income per Unit (3) 0.80 0.73 0.52 0.02
Cash distributions declared per 0.80 0.76 0.55 0.08
Unit (3)
1998 1997 1996 1995
---------------- ---------------- ----------------- -----------------
At December 31:
Total assets $ 27,365,705 $ 27,524,148 $ 28,675,007 $ 4,878,421
Partners' capital 26,230,361 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, 1998, 1997, 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.
<PAGE>
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 generally triple-net leases, with the
lessees generally responsible for all repairs and maintenance, property taxes,
insurance and utilities. As of December 31, 1998, the Partnership owned 28
Properties, either directly or through joint venture arrangements.
Liquidity and Capital Resources
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.
Net proceeds to the Partnership from its offering of Units, after
deduction of organizational and offering expenses, totalled $26,400,000. 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, during
1997, 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. During 1998, the Partnership contributed
$124,500 to Kingston Joint Venture to pay for additional construction costs. As
a result of the above transactions, as of December 31, 1998, 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. During 1998, the Partnership
received approximately $306,100 in reimbursements from the developer upon final
reconciliation of total construction costs relating to the Properties in Aiken,
South Carolina and Weatherford, Texas, in accordance with the related
development agreements. During January 1999, the Partnership invested these
amounts, along with other net offering proceeds, in a Property in Zephyrhills,
Florida, with an affiliate as tenants-in-common, and entered into a joint
venture arrangement, Ocean Shores Joint Venture, with affiliates of the General
Partners to own a 30.94% interest in the profits and losses of the joint
venture. The remaining net offering proceeds 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 $2,520,919, $2,495,114, and $1,232,948 for the years ended
December 31, 1998, 1997, and 1996, respectively. The increase in cash from
operations during 1998 and 1997, each as compared to the previous year, is
primarily a result of changes in the Partnership's working capital and 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,
<PAGE>
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, 1998,
the Partnership had $1,492,343 invested in such short-term investments as
compared to $1,238,799 at December 31, 1997. The increase in the amount invested
in short-term investments during 1998, as compared to 1997, is primarily
attributable to the Partnership receiving construction reimbursements during
1998, as described above. The funds remaining at December 31, 1998, 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, affiliates of the General
Partners incurred on behalf of the Partnership $231,885 for certain
organizational and offering expenses. In addition, during the years ended
December 31, 1997, and 1996, the affiliates incurred on behalf of the
Partnership $11,262, and $69,835, respectively, for certain acquisition expenses
and during the years ended December 31, 1998, 1997 and 1996, the affiliates
incurred on behalf of the Partnership $64,521, $59,451, and $64,906,
respectively, for certain operating expenses. As of December 31, 1998 and 1997,
the Partnership owed $14,448 and $2,875, respectively, to related parties for
such amounts, accounting and administrative services and management fees. As of
March 11, 1999, the Partnership had reimbursed the affiliates all such amounts.
Other liabilities, including distributions payable, decreased to $688,094 at
December 31, 1998, from $865,877 at December 31, 1997, partially as a result of
a decrease in deferred rental income and at December 31, 1998. 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 $2,400,000, $2,287,500, and $1,166,689 for the years
ended December 31, 1998, 1997, and 1996, respectively. This represents
distributions of $0.80, $0.76, and $0.55 per Unit for the years ended December
31, 1998, 1997, and 1996, respectively. No amounts distributed or to be
distributed to the Limited Partners for the years ended December 31, 1998, 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. 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.
On March 11, 1999, the Partnership entered into an Agreement and Plan
of Merger with APF, pursuant to which the Partnership would be merged with and
into a subsidiary of APF. As consideration for the Merger, APF has agreed to
issue 3,014,377 APF Shares which, for the purposes of valuing the merger
consideration, have been valued by APF at $10.00 per APF Share, the price paid
by APF investors in APF's most recent public offering. In order to assist the
General Partners in evaluating the proposed merger consideration, the General
Partners retained Valuation Associates, a nationally recognized real estate
appraisal firm, to appraise the Partnership's restaurant property portfolio.
Based on Valuation Associates' appraisal, the Partnership's property portfolio
and other assets were valued on a going concern basis (meaning the Partnership
continues unchanged) at $29,681,344 as of December 31, 1998. Legg Mason Wood
Walker, Incorporated has rendered a fairness opinion that the APF Share
consideration, payable by APF, is fair to the Partnership from a financial point
of view. The APF Shares are expected to be listed for trading on the New York
Stock Exchange concurrently with the consummation of the Merger, and, therefore,
would be freely tradable at the option of the former Limited Partners. At a
special meeting of the partners that is expected to be held in the third quarter
of 1999, Limited Partners holding in excess of 50% of the Partnership's
outstanding limited partnership interests must approve the Merger prior to
consummation of the transaction. The General Partners intend to recommend that
the Limited Partners of the Partnership approve the Merger. In connection with
their recommendation, the General Partners will solicit the consent of the
Limited Partners at the special meeting.
Results of Operations
The Partnership owned and leased 22 wholly owned Properties during
1998, 1997 and 1996. In addition, 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 and 1998, 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, 1998, the Partnership owned, either
directly or through joint venture arrangements, 28 Properties (including one
Property in Troy, Ohio exchanged for one Property in Inglewood, California),
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 $63,000 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.
During the years ended December 31, 1998, 1997, and 1996, the
Partnership and its consolidated joint venture, CNL/GC El Cajon Joint Venture,
earned $2,813,442, $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 1998, as compared to 1997, is
primarily attributable to the fact that two Properties were operational for only
a partial year during 1997, as compared to a full year during 1998, due to
acquisitions by the Partnership during 1997. The increase during 1997, as
compared to 1996, is partially attributable to the fact that Properties acquired
during 1996 were operational for a full year during 1997, as compared to a
partial year during 1996. The increase is partially offset by a decrease in
rental income due from the tenants of the Properties in Aiken, South Carolina
and Weatherford, Texas, as a result of receiving reimbursements of construction
costs from the developer, as described above in "Liquidity and Capital
Resources", which reduced the depreciable base of the Property. In addition, for
the years ended December 31, 1998, 1997, and 1996, the Partnership earned
$140,595, $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 1998 and
1997, each as compared to the previous year, 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," and the fact the Properties were operational for the full year
during 1998, as compared to a partial year during 1997.
During the year ended December 31, 1998, five lessees of the
Partnership and its consolidated joint venture, Golden Corral Corporation,
National Restaurant Enterprises, Inc., DenAmerica Corp., Foodmaker, Corp. and
San Diego Food Holdings, Inc., 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, 1998, Golden Corral Corporation and National Restaurant Enterprises, Inc.,
were each lessee under leases relating to three restaurants, DenAmerica Corp.
and Foodmaker, Inc., were each the lessee under leases relating to four
restaurants and San Diego Food Holdings, Inc. was the lessee under a lease
relating to one restaurant. It is anticipated that based on the minimum rental
payments required by the leases, Golden Corral Corporation, National Restaurant
Enterprises, Inc., DenAmerica Corp., Foodmaker, Inc., and San Diego Food
Holdings, Inc. each will contribute more than ten percent of the Partnership's
total rental income in 1999. In addition, four Restaurant Chains, Golden Corral,
Burger King, Jack in the Box and Boston Market each accounted for more than ten
percent of the Partnership's total rental income during the year ended December
31, 1998, (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 1999,
it is anticipated that Golden Corral, Jack in the Box, and Burger King, 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 if the Partnership is not able to re-lease the Properties
in a timely manner. During 1998, the tenants of three Boston Market Properties
filed for bankruptcy. While the tenant has not rejected or affirmed these three
leases, there can be no assurance that some or all of the leases will not be
rejected in the future. The lost revenues resulting from the rejection of all
three leases could have an adverse effect of the results of operations of the
Partnership if the Partnership is unable to re-lease these Properties in a
timely manner.
During the years ended December 31, 1998, 1997, and 1996, the
Partnership also earned $51,240, $69,779 and $244,406, respectively, in interest
income from investments in money market accounts or other short-term, highly
liquid investments. The decrease in interest income during 1998 and 1997, each
as compared to the previous year, 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 Properties as tenants-in-common with affiliates, and as a result
of acquiring interests in joint ventures as described above in "Liquidity and
Capital Resources."
Operating expenses, including depreciation and amortization expense,
were $551,890, $569,157, and $348,744 for the years ended December 31, 1998,
1997, and 1996, respectively. The decrease in operating expenses during 1998 as
compared to 1997 is partially attributable to a decrease in administrative
expenses, which includes services related to accounting; financial, tax and
regulatory compliance and reporting; lease and loan compliance; limited partner
distributions and reporting; and investor relations. The decrease is also
attributable to a decrease in depreciation expense as a result of the
reimbursement from the developer of construction costs relating to the
Properties in Aiken, South Carolina and Weatherford, Texas as described above in
"Liquidity and Capital Resources", which reduced the depreciable base of the
Property. The decrease in operating expenses during 1998 as compared to 1997, is
partially off set by, and the increase during 1997 as compared to 1996, is
partially attributable to the Partnership incurring taxes relating to the filing
of various state tax returns during 1998 and 1997. 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.
The decrease during 1998 as compared to 1997, is partially offset by
the fact that the Partnership incurred $14,139 in transaction costs related to
the General Partners retaining financial and legal advisors to assist them in
evaluating and negotiating the proposed Merger with APF, as described above in
"Liquidity and Capital Resources." If the Limited Partners reject the Merger,
the Partnership will bear the portion of the transaction costs based upon the
percentage of "For" votes and the General Partners will bear the portion of such
transaction costs based upon the percentage of "Against" votes and abstentions.
In April 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-5 "Reporting on the Costs of Start-Up
Activities." The Statement, which is effective for fiscal years beginning after
December 15, 1998, requires that an entity expense the costs of start-up
activities and organization costs as they are incurred. The Partnership will
adopt this Statement in 1999. While historically these costs have been amortized
over five years, the General Partners believe that adoption of this Statement
will not have a material effect on the Partnership's financial position or
results of operations.
The Partnership's leases as of December 31, 1998, 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.
<PAGE>
Year 2000
The Year 2000 problem is the result of information technology systems
and embedded systems (products which are made with microprocessor (computer)
chips such as HVAC systems, physical security systems and elevators) using a
two-digit format, as opposed to four digits, to indicate the year. Such
information technology and embedded systems may be unable to properly recognize
and process date-sensitive information beginning January 1, 2000.
The Partnership currently does not have any information technology
systems. Affiliates of the General Partners provide all services requiring the
use of information technology systems pursuant to a management agreement with
the Partnership. The maintenance of embedded systems, if any, at the
Partnership's Properties is the responsibility of the tenants of the Properties
in accordance with the terms of the Partnership's leases. The General Partners
and affiliates have established a team dedicated to reviewing the internal
information technology systems used in the operation of the Partnership, and the
information technology and embedded systems and the Year 2000 compliance plans
of the Partnership's tenants, significant suppliers, financial institutions and
transfer agent.
The information technology infrastructure of the affiliates of the
General Partners consists of a network of personal computers and servers that
were obtained from major suppliers. The affiliates utilize various
administrative and financial software applications on that infrastructure to
perform the business functions of the Partnership. The inability of the General
Partners and affiliates to identify and timely correct material Year 2000
deficiencies in the software and/or infrastructure could result in an
interruption in, or failure of, certain of the Partnership's business activities
or operations. Accordingly, the General Partners and affiliates have requested
and are evaluating documentation from the suppliers of the software and
infrastructure of the affiliates regarding the Year 2000 compliance of their
products that are used in the business activities or operations of the
Partnership. The General Partners and affiliates have not yet received
sufficient certifications to be assured that the suppliers have fully considered
and mitigated any potential material impact of the Year 2000 deficiencies. The
costs expected to be incurred by the General Partners and affiliates to become
Year 2000 compliant will be incurred by the General Partners and affiliates;
therefore, these costs will have no impact on the Partnership's financial
position or results of operations.
The Partnership has material third party relationships with its
tenants, financial institutions and transfer agent. The Partnership depends on
its tenants for rents and cash flows, its financial institutions for
availability of cash and its transfer agent to maintain and track investor
information. If any of these third parties are unable to meet their obligations
to the Partnership because of the Year 2000 deficiencies, such a failure may
have a material impact on the Partnership. Accordingly, the General Partners
have requested and are evaluating documentation from the Partnership's tenants,
financial institutions, and transfer agent relating to their Year 2000
compliance plans. The General Partners have not yet received sufficient
certifications to be assured that the tenants, financial institutions, and
transfer agent have fully considered and mitigated any potential material impact
of the Year 2000 deficiencies. Therefore, the General Partners do not, at this
time, know of the potential costs to the Partnership of any adverse impact or
effect of any Year 2000 deficiencies by these third parties.
The General Partners currently expect that all year 2000 compliance
testing and any necessary remedial measures on the information technology
systems used in the business activities and operations of the Partnership will
be completed prior to June 30, 1999. Based on the progress the General Partners
and affiliates have made in identifying and addressing the Partnership's Year
2000 issues and the plan and timeline to complete the compliance program, the
General Partners do not foresee significant risks associated with the
Partnership's Year 2000 compliance at this time. Because the General Partners
and affiliates are still evaluating the status of the information technology
systems used in business activities and operations of the Partnership and the
systems of the third parties with which the Partnership conducts its business,
the General Partners have not yet developed a comprehensive contingency plan and
are unable to identify "the most reasonably likely worst case scenario" at this
time. If the General Partners identify significant risks related to the
Partnership's Year 2000 compliance or if the Partnership's Year 2000 compliance
program's progress deviates substantially from the anticipated timeline, the
General Partners will develop appropriate contingency plans.
<PAGE>
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
Item 8. Financial Statements and Supplementary Data
<PAGE>
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
CONTENTS
Page
Report of Independent Accountants
Financial Statements:
Balance Sheets
Statements of Income
Statements of Partners' Capital
Statements of Cash Flows
Notes to Financial Statements
<PAGE>
Report of Independent Accountants
To the Partners
CNL Income Fund XVII, Ltd.
In our opinion, the financial statements listed in the index appearing under
item 14(a)(1) present fairly, in all material respects, the financial position
of CNL Income Fund XVII, Ltd. (a Florida limited partnership) at December 31,
1998 and 1997, and the results of their operations and their cash flows for each
of the three years in the period ended December 31, 1998 in conformity with
generally accepted accounting principles. In addition, in our opinion, the
financial statement schedule listed in the index appearing under item 14(a)(2)
presents fairly, in all material respects, the information set forth therein
when read in conjunction with the related financial statements. These financial
statements and the financial statement schedule are the responsibility of the
Partnership's management; our responsibility is to express an opinion on these
financial statements and the financial statement schedule based on our audits.
We conducted our audits of these statements in accordance with generally
accepted auditing standards which 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, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
Orlando, Florida
January 23, 1999, except for the second paragraph of Note 11 for which the date
is March 11, 1999.
<PAGE>
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
1998 1997
----------------- ----------------
<S> <C>
ASSETS
Land and buildings on operating leases, less
accumulated depreciation $20,648,128 $21,328,869
Net investment in direct financing leases 2,980,811 3,056,783
Investment in joint ventures 1,443,064 1,328,067
Cash and cash equivalents 1,492,343 1,238,799
Receivables, less allowance for doubtful
accounts of $1,283 and $14,333 33,963 613
Organization costs, less accumulated
amortization of $6,309 and $4,309 3,691 5,691
Accrued rental income 644,643 357,246
Other assets 119,062 104,411
----------------- ----------------
$27,365,705 $27,420,479
================= ================
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 3,598 $ 2,922
Accrued construction costs payable -- 38,834
Distributions payable 600,000 600,000
Due to related parties 14,448 2,875
Rents paid in advance 20,578 55,762
Deferred rental income 63,918 64,690
----------------- ----------------
Total liabilities 702,542 765,083
Minority interest 432,802 419,193
Partners' capital 26,230,361 26,236,203
----------------- ----------------
$27,365,705 $27,420,479
================= ================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Year Ended December 31,
1998 1997 1996
-------------- --------------- ---------------
<S> <C>
Revenues:
Rental income from operating leases $2,447,938 $2,323,256 $1,054,534
Earned income from direct financing
leases 365,504 319,487 130,745
Interest 51,240 69,779 244,406
Other income 3,403 1,128 9,984
-------------- --------------- ---------------
2,868,085 2,713,650 1,439,669
-------------- --------------- ---------------
Expenses:
General operating and administrative 110,537 128,168 144,728
Professional services 19,504 21,877 14,326
Management fee to related party 26,690 25,377 10,482
State and other taxes 11,811 6,443 --
Depreciation and amortization 369,209 387,292 179,208
Transaction costs 14,139 -- --
-------------- --------------- ---------------
551,890 569,157 348,744
-------------- --------------- ---------------
Income Before Minority Interest in Income
of Consolidated Joint Venture and
Equity in Earnings of Unconsolidated
Joint Ventures 2,316,195 2,144,493 1,090,925
Minority Interest in Income of Consolidated
Joint Venture (62,632 ) (41,854 ) --
Equity in Earnings of Unconsolidated Joint
Ventures 140,595 100,918 4,834
-------------- --------------- ---------------
Net Income $2,394,158 $2,203,557 $1,095,759
============== =============== ===============
Allocation of Net Income:
General partners $ (59 ) $ (839 ) $ (709)
Limited partners 2,394,217 2,204,396 1,096,468
-------------- --------------- ---------------
$2,394,158 $2,203,557 $ 1,095,759
============== =============== ===============
Net Income Per Limited Partner Unit $ 0.80 $ 0.73 $ 0.52
============== =============== ===============
Weighted Average Number of
Limited Partner Units Outstanding 3,000,000 3,000,000 2,121,253
============== =============== ===============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
STATEMENTS OF PARTNERS' CAPITAL
Years Ended December 31, 1998, 1997, and 1996
<TABLE>
<CAPTION>
General Partners Limited Partners
-------------------------- ----------------------------------------------------
Accumulated Accumulated Syndication
Contributions Earnings Contributions Distributions Earnings Costs Total
------------- ------------ ------------- ------------- ------------ ----------- -----------
<S> <C>
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
Distributions to limited partners
($0.80 per limited partner unit) -- -- -- (2,400,000) -- -- (2,400,000)
Net income -- (59) -- -- 2,394,217 -- 2,394,158
----------- ------------ ------------- ------------- ----------- ---------- -----------
Balance, December 31, 1998 $ 1,000 $ (1,610 ) $ 30,000,000 $ (5,882,464) $5,703,435 $(3,590,000) $26,230,361
=========== ============ ============= ============= ========= =========== ===========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31,
1998 1997 1996
---------------- ---------------- ----------------
<S> <C>
Increase (Decrease) in Cash and Cash Equivalents:
Cash Flows from Operating Activities:
Cash received from tenants $ 2,493,780 $2,502,057 $1,149,196
Distributions from unconsolidated joint
ventures 145,839 106,346 4,985
Cash paid for expenses (169,940 ) (183,068 ) (165,639)
Interest received 51,240 69,779 244,406
---------------- ---------------- ----------------
Net cash provided by operating activities 2,520,919 2,495,114 1,232,948
---------------- ---------------- ----------------
Cash Flows from Investing Activities:
Additions to land and buildings on operating
leases -- (1,740,491 ) (19,735,346)
Reimbursements of construction costs from
developer 306,100 -- --
Investment in direct financing leases -- (1,130,497 ) (1,784,925)
Investment in joint ventures (124,452 ) (1,135,681 ) (201,501)
Other -- -- 410
---------------- ---------------- ----------------
Net cash provided by (used in) investing
activities 181,648 (4,006,669 ) (21,721,362)
---------------- ---------------- ----------------
Cash Flows From Financing Activities:
Reimbursement of acquisition and syndication
costs paid by related parties on behalf of
the Partnership -- (25,444 ) (326,483 )
Contributions from limited partners -- -- 24,303,079
Contributions from holder of minority interest -- 278,170 140,676
Distributions to limited partners (2,400,000 ) (2,177,584 ) (703,681 )
Distributions to holder of minority interest (49,023 ) (41,507 ) --
Payment of syndication costs -- -- (2,407,317 )
---------------- ---------------- ----------------
Net cash provided by (used in) financing
activities (2,449,023 ) (1,966,365 ) 21,006,274
---------------- ---------------- ----------------
Net Increase (Decrease) in Cash and Cash Equivalents 253,544 (3,477,920 ) 517,860
Cash and Cash Equivalents at Beginning of Year 1,238,799 4,716,719 4,198,859
---------------- ---------------- ----------------
Cash and Cash Equivalents at End of Year $ 1,492,343 $1,238,799 $4,716,719
================ ================ ================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
STATEMENTS OF CASH FLOWS - CONTINUED
<TABLE>
<CAPTION>
Year Ended December 31,
1998 1997 1996
--------------- ---------------- ---------------
<S> <C>
Reconciliation of Net Income to Net Cash
Provided by Operating Activities:
Net income $2,394,158 $2,203,557 $1,095,759
--------------- ---------------- ---------------
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation 358,063 376,973 176,995
Amortization 11,146 10,319 2,213
Minority interest in income of
consolidated joint venture 62,632 41,854 --
Equity in earnings of unconsolidated
joint ventures, net of distributions 5,244 5,428 151
Decrease (increase) in receivables (33,350 ) 39,518 (40,131 )
Increase in prepaid expenses (510 ) -- --
Decrease in net investment in direct
financing leases 34,640 30,454 16,345
Increase in accrued rental income (287,397 ) (293,699 ) (167,216 )
Increase (decrease) in accounts
payable and accrued expenses 676 (63 ) 2,985
Increase (decrease) in due to related
parties, excluding acquisition
and syndication costs paid on
behalf of the Partnership 11,573 (97 ) 2,596
Decrease (increase) in rents paid in
advance (35,184 ) 2,993 52,769
Increase (decrease) in deferred
rental income (772 ) 77,877 90,482
--------------- ---------------- ---------------
Total adjustments 126,761 291,557 137,189
--------------- ---------------- ---------------
Net Cash Provided by Operating Activities $2,520,919 $2,495,114 $1,232,948
=============== ================ ===============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
STATEMENTS OF CASH FLOWS - CONTINUED
<TABLE>
<CAPTION>
Year Ended December 31,
1998 1997 1996
--------------- --------------- ----------------
<S> <C>
Supplemental Schedule of Non-Cash Investing
and Financing Activities:
Related parties paid certain
acquisition and syndication
costs on behalf
of the Partnership as follows:
Acquisition costs $ -- $ 11,262 $ 69,836
Syndication costs -- -- 231,885
--------------- ----------------
---------------
$ -- $ 11,262 $ 301,721
===============
=============== ================
Land and building under operating lease
exchanged for land and building under
operating lease $ 899,654 $ -- $ --
=============== =============== ================
Distributions declared and unpaid at
December 31 $ 600,000 $ 600,000 $ 490,084
=============== =============== ================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
Years Ended December 31, 1998, 1997, and 1996
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 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.
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.
<PAGE>
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1998, 1997, and 1996
1. Significant Accounting Policies - Continued:
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. Whenever a tenant defaults under the
terms of its lease, or events or changes in circumstance
indicate that the tenant will not lease the property through
the end of the lease term, the Partnership either reserves or
writes off the cumulative accrued rental income balance.
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. Although
the general partners have made their best estimate of the factors based
on current conditions, it is reasonably possible that change could
occur in the near term which could adversely affect the general
partners' best estimate of net cash flows expected to be generated from
its properties and the need for asset impairment write downs. If an
impairment is indicated, the assets are adjusted to their fair value.
When the collection of amounts recorded as rental or other income is
considered to be doubtful, an adjustment is made to increase the
allowance for doubtful accounts, which is netted against receivables,
and to decrease rental or other income or increase bad debt expense for
the current period, although the Partnership continues to pursue
collection of such amounts. If amounts are subsequently determined to
be uncollectible, the corresponding receivable and allowance for
doubtful accounts are decreased accordingly.
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.
<PAGE>
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1998, 1997, and 1996
1. Significant Accounting Policies - Continued:
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 being amortized over five
years using the straight-line method. In April 1998, the American
Institute of Certified Public Accountants issued Statement of Position
98-5 "Reporting on the Costs of Start-Up Activities." The Statement,
which is effective for fiscal years beginning after December 15, 1998,
requires that an entity expense the costs of start-up activities and
organization costs as they are incurred. The Partnership will adopt
this statement in 1999. The general partners believe that adoption of
this statement will not have a material effect on the Partnership's
financial position or results of operations.
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).
<PAGE>
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1998, 1997, and 1996
1. Significant Accounting Policies - Continued:
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 1998 presentation.
These reclassifications had no effect on partners' capital or net
income.
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. Leases are generally 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
five 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.
<PAGE>
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1998, 1997, and 1996
3. Land and Buildings on Operating Leases:
Land and buildings on operating leases consisted of the following at
December 31:
<TABLE>
<CAPTION>
1998 1997
----------------- -----------------
<S> <C>
Land $ 10,359,513 $ 10,357,191
Buildings 11,164,432 11,525,646
----------------- -----------------
21,523,945 21,882,837
Less accumulated depreciation (875,817 ) (553,968 )
----------------- -----------------
$ 20,648,128 $ 21,328,869
================= =================
</TABLE>
In June 1998, the tenant of the property in Troy, Ohio, exercised its
option under the terms of its lease agreement to substitute the
existing property for a replacement property. In conjunction therewith,
the Partnership exchanged the Boston Market property in Troy, Ohio,
with a Boston Market property in Inglewood, California. The lease for
the property in Troy, Ohio, was amended to allow the property in
Inglewood, California to continue under the terms of the original
lease. All closing costs were paid by the tenant. The Partnership
accounted for this as a nonmonetary exchange of similar assets and
recorded the acquisition of the property in Inglewood, California, at
the net book value of the property in Troy, Ohio. No gain or loss was
recognized due to this being accounted for as a nonmonetary exchange of
similar assets.
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, 1998, 1997, and 1996, the Partnership
recognized $287,397, $293,699, and $167,216, respectively, of such
rental income.
<PAGE>
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1998, 1997, and 1996
3. Land and Buildings on Operating Leases - Continued:
The following is a schedule of the future minimum lease payments to be
received on noncancellable operating leases at December 31, 1998:
1999 $2,140,644
2000 2,153,281
2001 2,246,506
2002 2,303,258
2003 2,316,816
Thereafter 27,421,272
-----------------
$38,581,777
=================
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:
<TABLE>
<CAPTION>
1998 1997
-------------- ---------------
<S> <C>
Minimum lease payments
receivable $ 7,145,730 $ 7,636,851
Estimated residual values 765,563 775,896
Less unearned income (4,930,482 ) (5,355,964 )
-------------- -------------
Net investment in direct
financing leases $ 2,980,811 $ 3,056,783
============== ===============
</TABLE>
<PAGE>
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1998, 1997, and 1996
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, 1998:
1999 $ 407,310
2000 407,310
2001 407,310
2002 407,310
2003 407,310
Thereafter 5,109,180
----------------
$7,145,730
================
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
had contributed $163,964 to the joint venture to acquire the restaurant
property. As of December 31, 1998, the Partnership owned a 21 percent
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 the affiliate.
<PAGE>
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1998, 1997, and 1996
5. Investment in Joint Ventures - Continued:
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, 1998, the Partnership had
contributed $311,048 to CNL Kingston Joint Venture to fund construction
costs relating to the property owned by the joint venture. As of
December 31, 1998, 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.
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:
<TABLE>
<CAPTION>
1998 1997
--------------- ---------------
<S> <C>
Land and buildings on operating
lease, less accumulated
depreciation $4,412,584 $4,495,671
Cash 2,352 8,936
Accrued rental income 134,121 65,395
Other assets 87 1,931
Liabilities 11,918 228,896
Partners' capital 4,537,226 4,343,037
Revenues 554,934 453,481
Net income 458,588 375,257
</TABLE>
5. Investment in Joint Ventures - Continued:
The Partnership recognized income totalling $140,595, $100,918, and
$4,834 for the years ended December 31, 1998, 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.
<PAGE>
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1998, 1997, and 1996
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 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 not in liquidation of
the Partnership 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, not in liquidation of the
Partnership, is in general, allocated in the same manner as net sales
proceeds are distributable. Any loss is, in general, 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.
Generally, net sales proceeds from a liquidating sale of properties,
will be used in the following order: i) first to pay and discharge all
of the Partnership's liabilities to creditors, ii) second, to establish
reserves that may be deemed necessary for any anticipated or unforeseen
liabilities or obligations of the Partnership, iii) third, to pay all
of the Partnership's liabilities, if any, to the general and limited
partners, iv) fourth, after allocations of net income, gains and/or
losses, to distribute to the partners with positive capital accounts
balances, in proportion to such balances, up to amounts sufficient to
reduce such positive balances to zero, and v) thereafter, any funds
remaining shall then be distributed 95 percent to the limited partners
and five percent to the general partners.
<PAGE>
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1998, 1997, and 1996
7. Allocations and Distributions - Continued:
During the years ended December 31, 1998, 1997, and 1996, the
Partnership declared distributions to the limited partners of
$2,400,000, $2,287,500, and $1,166,689, respectively. No distributions
have been made to the general partners to date.
<PAGE>
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1998, 1997, and 1996
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:
<TABLE>
<CAPTION>
1998 1997 1996
-------------- -------------- --------------
<S> <C>
Net income for financial reporting purposes $2,394,158 $2,203,557 $1,095,759
Depreciation for financial reporting purposes
in excess of (less than) depreciation for
tax reporting purposes (1,069 ) 25,005 13,226
Direct financing leases recorded as operating
leases for tax reporting purposes 34,640 30,454 16,345
Equity in earnings of unconsolidated joint
ventures for financial reporting
purposes in
excess of equity in earnings of
unconsolidated joint ventures for tax (13,489 ) (3,650 ) (479 )
reporting purposes
Minority interest in timing differences of
consolidated joint venture 23,280 217 --
Capitalization of transaction costs for tax
reporting purposes 14,139 -- --
Capitalization of administrative expenses for
tax reporting purposes -- 1,557 11,940
Amortization for tax reporting purposes (in
excess of) less than amortization for
financial reporting purposes 1,539 1,667 (2,025 )
Accrued rental income (287,397 ) (293,699 ) (167,216 )
Deferred rental income (9,208 ) 80,635 90,482
Rents paid in advance (35,184 ) 2,993 52,769
Allowance for doubtful accounts (13,050 ) 9,865 4,163
Other 5,680 -- --
-------------- -------------- --------------
Net income for federal income tax purposes $2,114,039 $2,058,601 $ 1,114,964
============== ============== ==============
</TABLE>
<PAGE>
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1998, 1997, and 1996
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 majority stockholder of 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, the Partnership incurred
$2,065,762 in syndication costs due to CNL Securities Corp. for
services in connection with selling limited partnership interests. A
substantial portion of this amount ($1,913,661) was paid as commissions
to other broker-dealers.
In addition, for the year ended December 31, 1996, the Partnership
incurred $121,515 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 for the year ended
December 31, 1996 in acquisition fees due to CNL Fund Advisors, Inc.
for services in finding, negotiating and acquiring properties on behalf
of the Partnership. In total, these fees represent 4.5% of the limited
partner capital contributions of $30,000,000.
During the years ended December 31, 1998, 1997, and 1996, 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, 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 $26,690, $25,377, and $10,482
for the years ended December 31, 1998, 1997, and 1996.
<PAGE>
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1998, 1997, and 1996
9. Related Party Transactions - Continued:
During the years ended December 31, 1998, 1997, and 1996, 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:
<TABLE>
<CAPTION>
1998 1997 1996
-------------- -------------- ---------------
<S> <C>
Syndication costs $ -- $ -- $ 177,683
General operating and
administrative expenses 91,124 90,700 96,729
-------------- -------------- ---------------
$ 91,124 $ 90,700 $ 274,412
============== ============== ===============
</TABLE>
The due to related parties at December 31, 1998 and 1997 totalled
$14,448 and $2,875 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.
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.
<PAGE>
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1998, 1997, and 1996
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 each of
the years ended December 31:
<TABLE>
<CAPTION>
1998 1997 1996
------------- --------------- -------------
<S> <C>
Golden Corral Corporation $461,527 $467,275 $286,307
DenAmerica Corp. 432,423 427,800 250,535
National Restaurant
Enterprises, Inc. 421,988 376,461 197,882
Foodmaker, Inc. 349,514 326,007 N/A
San Diego Food Holdings, Inc. 316,038 N/A N/A
RTM Indianapolis, Inc.
and RTM Southwest,
Texas, Inc. N/A N/A 133,200
</TABLE>
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 each of
the years ended December 31:
<TABLE>
<CAPTION>
1998 1997 1996
------------- -------------- -------------
<S> <C>
Golden Corral Family
Steakhouse Restaurants $777,565 $680,316 $286,307
Burger King 459,036 410,876 197,882
Jack in the Box 349,514 326,007 N/A
Boston Market 309,576 299,744 N/A
Arby's N/A N/A 133,200
Denny's N/A N/A 250,535
</TABLE>
The information denoted by N/A indicates that for each period
presented, the tenant or group of affiliated tenants and the chains did
not represent more than ten percent of the Company's total rental,
earned income and interest income.
<PAGE>
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1998, 1997, and 1996
10. Concentration of Credit Risk - Continued:
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 if the Partnership is not able to re-lease the
properties in a timely manner.
During 1998, the tenants of three Boston Market properties filed for
bankruptcy. While the tenant has not rejected or affirmed these three
leases, there can be no assurance that some or all of the leases will
not be rejected in the future. The lost revenues resulting from the
rejection of all three leases could have an adverse effect on the
results of operations of the Partnership if the Partnership is unable
to re-lease these Properties in a timely manner.
11. Subsequent Events:
In January 1999, the Partnership invested in a property in Zephyrhills,
Florida, with an affiliate of the general partners as
tenants-in-common. The Partnership contributed approximately $169,100
for a 24 percent interest in the property. The Partnership will account
for its investment in this property using the equity method since the
Partnership will share control with affiliates. In addition, in January
1999, the Partnership used a portion of these amounts to enter into a
joint venture arrangement, Ocean Shores Joint Venture, with an
affiliate of the general partners to hold one restaurant property. The
Partnership contributed approximately $360,000 to the joint venture to
acquire the restaurant property. The Partnership owns a 30.94% interest
in the profits and losses of the joint venture and will account for its
investment in this joint venture under the equity method since the
Partnership shares control with the affiliate.
On March 11, 1999, the Partnership entered into an Agreement and Plan
of Merger with CNL American Properties Fund, Inc. ("APF"), pursuant to
which the Partnership would be merged with and into a subsidiary of APF
(the "Merger"). As consideration for the Merger, APF has agreed to
issue 3,014,377 shares of its common stock, par value $0.01 per shares
(the "APF Shares") which, for the purposes of valuing the merger
consideration, have been valued by APF at $10.00 per APF Share, the
price paid by APF investors in APF's most recent public offering. In
order to assist the general partners in evaluating the proposed merger
consideration, the general partners retained Valuation Associates, a
nationally recognized real estate appraisal firm, to appraise the
Partnership's restaurant property portfolio. Based on Valuation
Associates' appraisal, the Partnership's property portfolio and other
assets were valued on a going concern basis (meaning the Partnership
continues unchanged) at $29,681,344 as of December 31, 1998. Legg Mason
Wood Walker, Incorporated has rendered a fairness opinion that the APF
Share consideration, payable by APF, is fair to the Partnership from a
financial point of view.
<PAGE>
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 1998, 1997, and 1996
11. Subsequent Events - Continued:
The APF Shares are expected to be listed for trading on the New York
Stock Exchange concurrently with the consummation of the Merger, and,
therefore, would be freely tradable at the option of the former limited
partners. At a special meeting of the partners that is expected to be
held in the third quarter of 1999, limited partners holding in excess
of 50% of the Partnership's outstanding limited partnership interests
must approve the Merger prior to consummation of the transaction. The
general partners intend to recommend that the limited partners of the
Partnership approve the Merger. In connection with their
recommendation, the general partners will solicit the consent of the
limited partners at the special meeting. If the limited partners reject
the Merger, the Partnership will bear the portion of the transaction
costs based upon the percentage of "For" votes and the general partners
will bear the portion of such transaction costs based upon the
percentage of "Against" votes and abstentions.
<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 52, is a principal stockholder of CNL Group,
Inc., a diversified real estate company, and has served as its Chairman of the
Board of Directors, a director and Chief Executive Officer since its formation
in 1980. Mr. Seneff has been Chairman of the Board of Directors, director, and
Chief Executive Officer of CNL Securities Corp. since its formation in 1979. Mr.
Seneff also has held the position of Chairman of the Board of Directors, Chief
Executive Officer, President and director of CNL Management Company, a
registered investment advisor, since its formation in 1976, has served as Chief
Executive Officer, Chairman of the Board and a director of CNL Investment
Company, has served as Chief Executive Officer, a director and Chairman of the
Board of Directors of Commercial Net Lease Realty, Inc., a publicly-traded REIT,
listed on the NYSE, since 1992, served as Chief Executive Officer, a director
and Chairman of the Board of Directors of CNL Realty Advisors, Inc. from its
inception in May 1992 through December 1997, at which time such company merged
with Commercial Net Lease Realty, Inc., and has held the position of Chief
Executive Officer, Chairman of the Board and a director of CNL Institutional
Advisors, Inc., a registered investment advisor, since its inception in December
1990. Mr. Seneff has served as Chairman of the Board of Directors of CNL
American Properties Fund, Inc. since December 1994 and as a director and Chief
Executive Officer since May 1994. Mr. Seneff has served as Chairman of the
Board, Chief Executive Officer and a director of CNL Fund Advisors, Inc. since
March 1994. Mr. Seneff has served as Chairman of the Board, Chief Executive
Officer and a director of CNL Hospitality Properties, Inc. since June 1996 and
of CNL Hospitality Advisors, Inc. since January 1997. Mr. Seneff has also served
as Chairman of the Board, Chief Executive Officer and a director of CNL Health
Care Properties, Inc. since December 1997 and CNL Health Care Advisors, Inc.
since July 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 advises 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 then $60 billion of retirement funds.
Mr. Seneff has served as a member of the board of directors of First Union
National Bank of Florida since May 1998 and has served as a member of the
Orlando Advisory Board of First Union National Bank of Florida since March 1994.
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 restaurants, office buildings, apartment complexes, 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.
Robert A. Bourne, age 51, is President and Treasurer of CNL Group,
Inc., President, Treasurer, a director, and a registered principal of CNL
Securities Corp., President, Treasurer, and a director of CNL Investment
Company, and Chief Investment Officer, a director and Treasurer of CNL
Institutional Advisors, Inc., a registered investment advisor. Mr. Bourne served
as President of CNL Institutional Advisor, Inc. from the date of its inception
through July 1997. Mr. Bourne served as President of Commercial Net Lease
Realty, Inc. from July 1992 through February 1996, served as Secretary and
Treasurer from February 1996 through December 1997, and has served as a director
since July 1992 and as Vice Chairman of the Board of Directors since February
1996. In addition, Mr. Bourne served as President of CNL Realty Advisors, Inc.
from May 1992 through February 1996, served as Treasurer from February 1996
through December 1997, served as a director from May 1992 through December 31,
1997 and served as Vice Chairman from February 1996 through December 1997, at
which time such company merged with Commercial Net Lease Realty, Inc. Mr. Bourne
has served as a Vice Chairman of the Board of Directors and Treasurer of CNL
American Properties Fund, Inc. since February 1999, has served as a director
since May 1994 and previously served as President from May 1994 through February
1999. Mr. Bourne has served as a director of CNL Fund Advisors, Inc. since March
1994, has served as Treasurer and Vice Chairman of the Board of Directors since
September 1997, and previously served as President from March 1994 through
September 1997. Mr. Bourne has served as President and a director of CNL
Hospitality Properties, Inc. since June 1996 and of CNL Hospitality Advisors,
Inc. since January 1997. Mr. Bourne has served as President and director of CNL
Health Care Properties, Inc. since December 1997 and CNL Health Care Advisors,
Inc. since July 1997. 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
restaurants, office buildings, apartment complexes, 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. Mr. Bourne formerly was a
certified public accountant with Coopers & Lybrand and a partner in the firm of
Bourne & Rose, P.A. Mr. Bourne received a B.A. in Accounting, with honors, from
Florida State University in 1970.
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 majority 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.
Curtis B. McWilliams, age 43, joined CNL Group, Inc. in April 1997 and
currently serves as an Executive Vice President. In addition, Mr. McWilliams has
served as President of CNL Fund Advisors, Inc. and as President of the
Restaurant and Financial Services Groups within CNL Group, Inc. since April
1997. Mr. McWilliams has served as President of CNL American Properties Fund,
Inc. since February 1999 and previously served as Executive Vice President from
February 1998 through February 1999. From September 1983 through March 1997, Mr.
McWilliams was employed by Merrill Lynch & Co., most recently as Chairman of
Merrill Lynch's Private Advisory Services until March 1997. 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 40, has served as Executive Vice President of CNL
American Properties Fund, Inc. since January 1996, as Chief Operating Officer
since March 1995, and previously served as Senior Vice President since December
1994. In addition, Mr. Walker has served as Executive Vice President of CNL Fund
Advisors, Inc. since January 1996, Chief Operating Officer since April 1995, and
previously served as Senior Vice President from November 1994 through January
1996. In addition, Mr. Walker previously served as Executive Vice President of
CNL Hospitality Properties, Inc. and CNL Hospitality Advisors, Inc. From May
1992 to May 1994, Mr. Walker, a certified public accountant, was Executive Vice
President for Finance and Administration and Chief Financial Officer of Z Music,
Inc., a cable television network (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 50, a certified public accountant, has served as
Secretary of CNL American Properties Fund, Inc. since December 1994 and served
as Treasurer from December 1994 through February 1999. Ms. Rose has served as a
director and Secretary of CNL Fund Advisors, Inc. since March 1994, and as
Treasurer from the date of its inception through June 30, 1997. Ms. Rose has
served as Secretary of CNL Group, Inc. since 1987, as Chief Financial Officer of
CNL Group, Inc. since December 1993, 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, as Treasurer of CNL Realty Advisors, Inc. from 1991 to February 1996, and
as Secretary and a director of CNL Realty Advisors, Inc. since its inception in
1991 until December 31, 1997, at which time CNL Realty Advisors, Inc. merged
with Commercial Net Lease Realty, Inc. In addition, Ms. Rose served as Secretary
and Treasurer of Commercial Net Lease Realty, Inc. from 1992 to February 1996.
Ms. Rose also serves as Secretary and Treasurer of CNL Hospitality Properties,
Inc. and CNL Health Care Properties, Inc. and as Secretary, Treasurer and a
director of CNL Hospitality Advisors, Inc. and CNL Health Care Advisors, Inc.
Ms. Rose also currently serves as Secretary for approximately 50 additional
corporations. Ms. Rose oversees the legal compliance, accounting, tenant
compliance, and reporting for over 250 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.
Jeanne A. Wall, age 40, has served as Executive Vice President of CNL
American Properties Fund, Inc. since December 1994. Ms. Wall has served as
Executive Vice President of CNL Fund Advisors, Inc. since November 1994, and
previously served as Vice President from March 1994 through November 1994. Ms.
Wall 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. Ms. Wall joined CNL Securities
Corp. in 1984. 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 its 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 until December 31, 1997, at which time CNL Realty Advisors,
Inc. merged with Commercial Net Lease Realty, Inc., and served as Vice President
of Commercial Net Lease Realty, Inc. from 1992 through December 31, 1997. In
addition, Ms. Wall serves as Executive Vice President of CNL Hospitality
Properties, Inc., CNL Hospitality Advisors, Inc., CNL Health Care Properties,
Inc. and CNL Health Care Advisors, Inc. 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 35, a certified public accountant, has
served as Chief Financial Officer of CNL American Properties Fund, Inc. since
January 1997 and as Chief Financial Officer of CNL Fund Advisors, Inc. since
September 1996. From March 1995 to July 1996, Mr. Shackelford 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
<PAGE>
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.
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.
Item 12. Security Ownership of Certain Beneficial Owners and Management
As of March 11, 1999, 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 11, 1999, the beneficial
ownership interests of the General Partners in the Registrant.
<TABLE>
<CAPTION>
Title of Class Name of Partner Percent of Class
<S> <C>
General Partnership Interests James M. Seneff, Jr. 45%
Robert A. Bourne 45%
CNL Realty Corporation 10%
------
100%
======
</TABLE>
Neither the General Partners, nor any of their affiliates, owns any
interest in the Registrant, except as noted above. On March 11, 1999, the
Registrant entered into an Agreement and Plan of Merger with CNL American
Properties Fund, Inc. ("APF") pursuant to which the Registrant would be merged
with and into a subsidiary of APF (the "Merger"). For further discussion, see
Item 8. Financial Statements and Supplementary Data -- Note 11.
Subsequent Events.
<PAGE>
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, 1998, 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, 1998
<S> <C>
Reimbursement to CNL Fund Advisors, Inc. Operating expenses are reimbursed Operating expenses
and affiliates for operating expenses at the lower of cost or 90 percent incurred on behalf of the
of the prevailing rate at which Partnership: $64,521
comparable services could have been
obtained in the same geographic Accounting and
area. Affiliates of the General administrative services:
Partners from time to time incur $91,124
certain operating expenses on
behalf of the Partnership for which
the Partnership reimburses the
affiliates without interest.
Annual management fee to CNL Fund One percent of the sum of gross $26,690
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.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Amount Incurred
Type of Compensation For the Year
and Recipient Method of Computation Ended December 31, 1998
<S> <C>
Deferred, subordinated real estate A deferred, subordinated real $ - 0 -
disposition fee payable to CNL Fund estate disposition fee, payable
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.
General Partners' deferred, A deferred, subordinated share $ - 0 -
sub-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, A deferred, subordinated share $ - 0 -
sub-ordinated share of Partnership net equal to five percent of
sales proceeds from a sale or sales not Partnership distributions of such
in liquidation of the Partnership net sales proceeds, subordinated to
certain minimum returns to the
Limited Partners.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Amount Incurred
Type of Compensation For the Year
and Recipient Method of Computation Ended December 31, 1998
<S> <C>
General Partners' share of Partnership Distributions of net sales proceeds $ - 0 -
net sales proceeds from a sale or sales from a sale or sales of
in liquidation of the Partnership substantially all of the
Partnership's assets will be
distributed in the following order
or priority: (i) first, to pay all
debts and liabilities of the
Partnership and to establish
reserves; (ii) second, to Partners
with positive capital account
balances, determined after the
allocation of net income, net
loss, gain and loss, in proportion
to such balances, up to amounts
sufficient to reduce such balances
to zero; and (iii) thereafter, 95%
to the Limited Partners and 5% to
the General Partners.
As discussed above in Item 8. Financial Statements and Supplementary
Data -- Note 11. Subsequent Events, the Registrant has entered into an Agreement
and Plan of Merger, dated March 11, 1999, with APF pursuant to which the
Registrant would be merged with and into a subsidiary of APF in exchange for the
issuance of APF Shares. The APF Shares are expected to be listed for trading on
the New York Stock Exchange concurrently with the consummation of the Merger. If
the Merger is approved by Limited Partners holding units greater than 50% of the
outstanding units of the Registrant, the General Partners of the Registrant
would receive certain benefits. For instance, following the Merger, James M.
Seneff, Jr. and Robert A. Bourne, the individual General Partners, will continue
to serve as directors of APF, with Mr. Seneff serving as Chairman and Mr. Bourne
serving as Vice Chairman. As APF directors, they may also be entitled to receive
stock options under any stock option plan adopted by APF.
</TABLE>
<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, 1998 and 1997
Statements of Income for the year ended December 31, 1998,
1997, and 1996
Statements of Partners' Capital for the year ended December
31, 1998, 1997, and 1996.
Statements of Cash Flows for the year ended December 31, 1998,
1997, and 1996
Notes to Financial Statements
2. Financial Statement Schedule
Schedule III - Real Estate and Accumulated Depreciation at
December 31, 1998
Notes to Schedule III - Real Estate and Accumulated
Depreciation at December 31, 1998
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.)
<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
RegistrationStatement 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.)
<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, 1998 through December 31, 1998.
**previously filed
<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 27th day of
March, 1999.
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 Vice President, Secretary, March 27, 1999
Robert A. Bourne Treasurer and Director (Principal
Financial and Accounting Officer)
/s/ James M. Seneff, Jr. President and Director (Principal March 27, 1999
James M. Seneff, Jr. Executive Officer)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1998
<S> <C>
Costs Capitalized
Subsequent to
Initial Cost Acquisition
--------------------------- ---------------------
Encum- Buildings and Improve- Carrying
brances Land Improvements ments Costs
--------- ------------ ------------- ----------- --------
Properties the Partnership
has Invested in Under
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 - -
Long Beach, California - 661,696 - 217,883 -
Inglewood, California (h) - 327,924 535,518 -
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 - 373,077 - - -
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 (g) - 508,790 - 862,570 -
Weatherford, Texas (g) - 345,926 - 691,222 -
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 - 548,187 -
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 - - -
----------- ------------ ----------- --------
$10,359,513 $5,235,558 $5,928,874 -
============ ============ =========== ========
Properties the Partnership has
Invested in Under Direct
Financing Leases:
Arby's Restaurant:
Muncie, Indiana - - $629,847 - -
Denny's Restaurant:
Mesquite, Nevada - - - 857,390 -
Golden Corral Family
Steakhouse Restaurant:
El Cajon, California - - - 1,119,438 -
Wendy's Old Fashioned
Hamburgers Restaurant:
Livingston, Tennessee - - - 455,575 -
------------ ----------- ----------- --------
- $629,847 $2,432,403 -
============ =========== =========== ========
Property in Which the Partner-
ship has a 19.56% 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 Partner-
ship has a 27.42% 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 Partner-
ship has a 36.91% Interest
as Tenants-in-Common and
has Invested in Under an
Operating Lease:
Burger King Restaurant:
Akron, Ohio - $355,594 $517,030 - -
============ ============ =========== ========
Property of Joint Venture in Which
the Partnership has a 21% Interest
and has Invested in Under an
Operating Lease:
Jack in the Box Restaurant:
Mansfield, Texas - $297,295 $482,914 - -
============ ============ =========== ========
Property of Joint Venture in Which
the Partnership has a 60.06% Interest
and has Invested in Under an
Operating Lease:
Taco Bell Restaurant:
Kingston, Tennessee - $189,452 $328,444 - -
============ ============ =========== ========
Gross Amount at Which Life on Which
Carried at Close of Period (b) Depreciation in
---------------------------------------- Date Latest Income
Buildings and Accumulated of Con- Date Statement is
Land Improvements Total Depreciation struction Acquired Computed
------------ ------------ ------------ ----------- --------- -------- ------------
$242,759 (d) $242,759 (e) 1995 03/96 (e)
348,245 470,577 818,822 39,730 1996 06/96 (c)
296,025 557,809 853,834 40,651 1996 10/96 (c)
373,112 477,383 850,495 40,305 1996 06/96 (c)
661,696 217,883 879,579 15,062 1996 12/96 (c)
327,924 535,518 863,442 10,270 1996 06/98 (c)
489,340 734,010 1,223,350 69,027 1996 03/96 (c)
771,965 699,556 1,471,521 61,523 1996 03/96 (c)
887,767 597,381 1,485,148 32,838 1997 11/96 (c)
287,732 626,865 914,597 58,207 1980 03/96 (c)
373,077 (d) 373,077 (e) 1996 12/95 (e)
305,509 670,990 976,499 53,756 1996 08/96 (c)
300,481 421,898 722,379 30,361 1996 08/96 (c)
711,838 1,162,406 1,874,244 109,420 1996 03/96 (c)
508,790 862,570 1,371,360 73,478 1996 04/96 (c)
345,926 691,222 1,037,148 53,696 1996 03/96 (c)
974,793 (d) 974,793 (e) 1997 12/96 (e)
324,970 509,982 834,952 39,925 1996 05/96 (c)
355,929 560,485 916,414 42,499 1996 07/96 (c)
617,416 548,187 1,165,603 41,365 1996 07/96 (c)
260,513 330,100 590,613 24,177 1996 08/96 (c)
332,003 489,610 821,613 39,527 1996 05/96 (c)
261,703 (d) 261,703 (e) 1996 06/96 (e)
- - --------- ------------ ------------ -----------
$10,359,513 $11,164,432 $21,523,945 $875,817
=========== ============ ============ ===========
- (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)
- - ---------
-
=========
$377,800 $587,700 $965,500 $43,948 1996 10/96 (c)
========= ============ ============ ===========
$715,052 $726,004 $1,441,056 $46,648 1992 01/97 (c)
========= ============ ============ ===========
$355,594 $517,030 $872,624 $33,222 1970 01/97 (c)
========= ============ ============ ===========
$297,295 $482,914 $780,209 $28,963 1997 02/97 (c)
========= ============ ============ ===========
$189,452 $328,444 $517,896 $11,920 1997 09/97 (c)
========= ============ ============ ===========
</TABLE>
<PAGE>
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1998
(a) Transactions in real estate and accumulated depreciation during 1998,
1997 and 1996 are summarized as follows:
<TABLE>
<CAPTION>
Accumulated
Cost Depreciation
---------------- ---------------
<S> <C>
Properties the Partnership has Invested
in Under Operating Leases:
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
Acquisitions 499,431 --
Dispositions (858,323 ) (36,214 )
Depreciation expense -- 358,063
---------------- ---------------
Balance, December 31, 1998 $ 21,523,945 $ 875,817
================ ===============
Property in Which the Partnership
has a 19.56% 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
Acquisitions -- --
Depreciation expense -- 19,590
---------------- ---------------
Balance, December 31, 1997 965,500 24,358
Acquisitions -- --
Depreciation expense -- 19,590
---------------- ---------------
Balance, December 31, 1998 $ 965,500 $ 43,948
================ ===============
</TABLE>
<PAGE>
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED
DEPRECIATION - CONTINUED
December 31, 1998
<TABLE>
<CAPTION>
Accumulated
Cost Depreciation
--------------- --------------
<S> <C>
Property in Which the Partnership
has a 27.42% Interest as
Tenants-in-Common 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
Depreciation expense -- 24,200
---------------- ---------------
Balance, December 31, 1998 $ 1,441,056 $ 46,648
================ ===============
Property in Which the Partnership
has a 36.91% 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
Depreciation expense -- 17,234
--------------- --------------
Balance, December 31, 1998 $ 872,624 $ 33,222
=============== ==============
Property of Joint Venture in Which
the Partnership has a 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
Depreciation expense -- 16,097
--------------- --------------
Balance, December 31, 1998 $ 780,209 $ 28,963
=============== ==============
</TABLE>
<PAGE>
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED
DEPRECIATION - CONTINUED
December 31, 1998
<TABLE>
<CAPTION>
Accumulated
Cost Depreciation
--------------- --------------
<S> <C>
Property of Joint Venture in Which
the Partnership has a
60.06% Interest and has Invested
in Under an Operating
Lease:
Balance, December 31, 1996 $ -- $ --
Acquisition 512,925 --
Depreciation expense -- 983
--------------- --------------
Balance, December 31, 1997 512,925 983
Acquisitions 4,971 --
Depreciation expense -- 10,937
--------------- --------------
Balance, December 31, 1998 $ 517,896 $ 11,920
=============== ==============
</TABLE>
(b) As of December 31, 1998, the aggregate cost of the
Properties owned by the Partnership and the joint venture
for federal income tax purposes was $22,500,782 and
$6,671,518, 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.
(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, 1998.
(g) During the year ended December 31, 1998, the Partnership
received reimbursements from the developer of the property
upon final reconciliation of total construction costs. In
connection therewith, the land and building value was
adjusted accordingly.
(h) This property was exchanged for a Boston Market previously
owned and located in Troy, Ohio, during 1998.
<PAGE>
EXHIBITS
<PAGE>
EXHIBIT INDEX
Exhibit Number
**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.)
<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
<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, 1998, and its statement of
income for the year then ended and is qualified in its entirety by reference to
the Form 10-K of CNL Income Fund XVII, Ltd. for the year ended December 31,
1998.
</LEGEND>
<S> <C>
<PERIOD-TYPE> year
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 1,492,343
<SECURITIES> 0
<RECEIVABLES> 35,246
<ALLOWANCES> 1,283
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 21,523,945
<DEPRECIATION> (875,817)
<TOTAL-ASSETS> 27,365,705
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 26,230,361
<TOTAL-LIABILITY-AND-EQUITY> 27,365,705
<SALES> 0
<TOTAL-REVENUES> 2,868,085
<CGS> 0
<TOTAL-COSTS> 551,890
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,394,158
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,394,158
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,394,158
<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>
