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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K/A
Amendment No. 2
(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
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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)
450 South Orange Avenue
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 ______
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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
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The Form 10-K of CNL Income Fund XVII, Ltd. for the year ended December 31,
1998 is being amended to revise the disclosure under Item 1. Business.
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. The 28 Properties include 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 fourth 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.
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.
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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.
Lessees of 18 of the Partnership's 28 Properties 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. Fair market value will be
determined through an appraisal by an independent appraisal firm. 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 Partnership's consolidated joint venture, the
Partnership's share of rental income from two Properties owned by unconsolidated
joint ventures and three Properties owned with affiliates as tenants-in-common).
As of December 31, 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
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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
in excess of 20 percent of the total assets of the Partnership.
Joint Venture and Tenancy in Common Arrangements
In December 1996, the Partnership entered into a joint venture arrangement,
CNL/GC El Cajon Joint Venture, with an unaffiliated entity to purchase and hold
one Property. In addition, during 1997, the Partnership entered into two
additional joint venture arrangements: CNL Mansfield Joint Venture with CNL
Income Fund VII, Ltd., an affiliate of the General Partners to purchase and hold
one Property; and CNL Kingston Joint Venture with CNL Income Fund XIV, Ltd., an
affiliate of the General Partners, 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 owns an 80 percent interest in CNL/GC El Cajon Joint Venture, a 21
percent interest in CNL Mansfield Joint Venture and a 60.06% interest in CNL
Kingston 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 of the affiliates is a limited partnership organized
pursuant to the laws of the State of Florida.
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
entered into an agreement to hold a Property in Fayetteville, North Carolina, as
tenants-in-common with CNL Income Fund XVI, Ltd., an affiliate of the General
Partners; entered into an agreement to hold a Property in Corpus Christi, Texas,
as tenants-in-common, with CNL Income Fund XI, Ltd., an affiliate of the General
Partners; and entered into an agreement to hold a Property in Akron, Ohio, as
tenants-in-common, with CNL Income Fund XIII, Ltd., an affiliate 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-tenant'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 CNL
Income Fund IV, Ltd., an affiliate of the General Partners. The agreement
provides for the Partnership and the affiliate to share in the profits and
losses of the Property and net cash flow from the Property, in proportion to
each co-tenant'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
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Joint Venture, with CNL Income Fund X, Ltd., 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.
Each of the affiliates is a limited partnership organized pursuant to the
laws of the State of Florida. The tenancy in common agreement restricts each
co-tenant's ability to sell, transfer, or assign its interest in the tenancy in
common's Property without first offering it for sale to the remaining co-tenant.
The use of joint venture and tenancy in common arrangements allows the
Partnership to fully invest its available funds at times at which it would not
have sufficient funds to purchase an additional property, or at times when a
suitable opportunity to purchase an additional property is not available. The
use of joint venture and tenancy in common arrangements also provides the
Partnership with increased diversification of its portfolio among a greater
number of properties. In addition, tenancy in common arrangements may allow
the Partnership to defer the gain for federal income tax purposes upon the sale
of the property if the proceeds are reinvested in an additional property.
Certain 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 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.
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.
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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 17/th/ day of
December, 1999.
CNL INCOME FUND XVII, LTD.
By: CNL REALTY CORPORATION
General Partner
/s/ Robert A. Bourne
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ROBERT A. BOURNE, President
By: ROBERT A. BOURNE
General Partner
/s/ Robert A. Bourne
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ROBERT A. BOURNE
By: JAMES M. SENEFF, JR.
General Partner
/s/ James M. Seneff, Jr.
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JAMES M. SENEFF, JR.
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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.
Signature Title Date
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/s/ Robert A. Bourne Vice President, Secretary, December 17, 1999
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Robert A. Bourne Treasurer and Director
(Principal Financial and
Accounting Officer)
/s/ James M. Seneff, Jr. President and Director December 17, 1999
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James M. Seneff, Jr. (Principal Executive
Officer)
