FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT of 1934
For the quarterly period ended March 31, 1999
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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
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CNL Income Fund XVII, Ltd.
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(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
<S> <C>
Florida 59-3295393
- - ------------------------------------------------------ ------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
400 East South Street
Orlando, Florida 32801
- - ------------------------------------------------------ ------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number
(including area code) (407) 650-1000
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</TABLE>
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for 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 _________
<PAGE>
CONTENTS
Part I Page
Item 1. Financial Statements:
Condensed Balance Sheets
Condensed Statements of Income
Condensed Statements of Partners' Capital
Condensed Statements of Cash Flows
Notes to Condensed Financial Statements
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About
Market Risk
Part II
Other Information
<PAGE>
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
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<S> <C>
ASSETS
Land and buildings on operating leases, less
accumulated depreciation of $968,854 and
$875,817 $ 20,555,091 $ 20,648,128
Net investment in direct financing leases 2,971,297 2,980,811
Investment in joint ventures 1,964,822 1,443,064
Cash and cash equivalents 945,293 1,492,343
Receivables, less allowance for doubtful accounts
of $7,290 and $1,283 57,645 33,963
Prepaid expenses 8,519 530
Organization costs, less accumulated
amortization of $10,000 and $6,309 -- 3,691
Accrued rental income 655,814 644,643
Other assets 117,298 118,532
------------------ -------------------
$ 27,275,779 $ 27,365,705
================== ===================
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 33,206 $ 3,598
Distributions payable 600,000 600,000
Due to related parties 7,099 14,448
Rents paid in advance 28,028 20,578
Deferred rental income 63,048 63,918
------------------ -------------------
Total liabilities 731,381 702,542
Minority interest 436,132 432,802
Partners' capital 26,108,266 26,230,361
------------------ -------------------
$ 27,275,779 $ 27,365,705
================== ===================
</TABLE>
See accompanying notes to condensed financial statements.
<PAGE>
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Quarter Ended
March 31,
1999 1998
--------------- --------------
<S> <C>
Revenues:
Rental income from operating leases $ 596,824 $ 620,816
Adjustments to accrued rental income (59,643 ) --
Earned income from direct financing leases 92,314 94,335
Interest and other income 12,353 10,675
--------------- --------------
641,848 725,826
--------------- --------------
Expenses:
General operating and administrative 32,467 26,647
Professional services 5,882 4,196
Management fees to related party 6,580 6,760
State and other taxes 12,734 11,804
Depreciation and amortization 99,014 98,833
Transaction costs 32,528 --
--------------- --------------
189,205 148,240
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Income Before Minority Interest in Income of
Consolidated Joint Venture and Equity in
Earnings of Unconsolidated Joint Ventures 452,643 577,586
Minority Interest in Income of Consolidated
Joint Venture (15,628 ) (15,731 )
Equity in Earnings of Unconsolidated Joint Ventures 40,890 34,746
--------------- --------------
Net Income $ 477,905 $ 596,601
=============== ==============
Allocation of Net Income:
General partners $ (990 ) $ (34 )
Limited partners 478,895 596,635
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$ 477,905 $ 596,601
=============== ==============
Net Income Per Limited Partner Unit $ 0.16 $ 0.20
=============== ==============
Weighted Average Number of Limited Partner
Units Outstanding 3,000,000 3,000,000
=============== ==============
</TABLE>
See accompanying notes to condensed financial statements.
<PAGE>
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF PARTNERS' CAPITAL
<TABLE>
<CAPTION>
Quarter Ended Year Ended
March 31, December 31,
1999 1998
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<S> <C>
General partners:
Beginning balance $ (610 ) $ (551 )
Net income (1,221 ) (59 )
------------------- ------------------
(1,831 ) (610 )
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Limited partners:
Beginning balance 26,230,971 26,236,754
Net income 479,126 2,394,217
Distributions ($0.20 and $0.80 per
limited partner unit, respectively) (600,000 ) (2,400,000 )
------------------- ------------------
26,110,097 26,230,971
------------------- ------------------
Total partners' capital $ 26,108,266 $ 26,230,361
=================== ==================
</TABLE>
See accompanying notes to condensed financial statements.
<PAGE>
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Quarter Ended
March 31,
1999 1998
--------------- --------------
<S> <C>
Increase (Decrease) in Cash and Cash Equivalents
Net Cash Provided by Operating Activities
$ 593,112 $ 677,692
--------------- --------------
Cash Flows from Investing Activities:
Investment in joint ventures (527,864 ) (127,807 )
--------------- --------------
Net cash used in investing activities (527,864 ) (127,807 )
--------------- --------------
Cash Flows from Financing Activities:
Distributions to limited partners (600,000 ) (600,000 )
Distributions to holder of minority interest (12,298 ) (12,350 )
--------------- --------------
Net cash used in financing activities (612,298 ) (612,350 )
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Net Decrease in Cash and Cash Equivalents (547,050 ) (62,465 )
Cash and Cash Equivalents at Beginning of Quarter 1,492,343 1,238,799
--------------- --------------
Cash and Cash Equivalents at End of Quarter $ 945,293 $1,176,334
=============== ==============
Supplemental Schedule of Non-Cash Financing
Activities:
Distributions declared and unpaid at end of
quarter $ 600,000 $ 600,000
=============== ==============
</TABLE>
See accompanying notes to condensed financial statements.
<PAGE>
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS
Quarters Ended March 31, 1999 and 1998
1. Basis of Presentation:
The accompanying unaudited condensed financial statements have been
prepared in accordance with the instructions to Form 10-Q and do not
include all of the information and note disclosures required by
generally accepted accounting principles. The financial statements
reflect all adjustments, consisting of normal recurring adjustments,
which are, in the opinion of management, necessary to a fair statement
of the results for the interim periods presented. Operating results for
the quarter ended March 31, 1999, may not be indicative of the results
that may be expected for the year ending December 31, 1999. Amounts as
of December 31, 1998, included in the financial statements, have been
derived from audited financial statements as of that date.
These unaudited financial statements should be read in conjunction with
the financial statements and notes thereto included in Form 10-K of CNL
Income Fund XVII, Ltd. (the "Partnership") for the year ended December
31, 1998.
The Partnership accounts for its 80 percent interest in the accounts of
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.
Effective January 1, 1999, the Partnership adopted Statement of
Position 98-5 "Reporting on the Costs of Start-Up Activities." The
Statement requires that an entity expense the costs of start-up
activities and organization costs as they are incurred. Adoption of
this statement did not have a material effect on the Partnership's
financial position or results of operations.
Certain items in the prior year's financial statements have been
reclassified to conform to 1999 presentation. These reclassifications
had no effect on partners' capital or net income.
2. Investment in Joint Ventures:
In January 1999, the Partnership entered into a joint venture
arrangement, Ocean Shores Joint Venture, with CNL Income Fund X, Ltd.,
an affiliate of the general partners to hold one restaurant property.
The Partnership contributed approximately $359,500 to the joint
venture. As of March 31, 1999, the Partnership owned a 30.94% 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.
<PAGE>
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS - CONTINUED
Quarters Ended March 31, 1999 and 1998
2. Investment in Joint Ventures - Continued:
In addition, in January 1999, the Partnership invested in a property in
Zephyrhills, Florida as tenants-in-common with CNL Income Fund IV, Ltd.
an affiliate of the general partners. As of March 31, 1999, the
Partnership contributed approximately $168,400 for a 24 percent
interest in the property. 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.
The following presents the combined, condensed financial information
for all of the Partnership's investments in joint ventures and
properties held as tenants-in-common at:
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
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<S> <C>
Land and buildings on operating
leases, less accumulated
depreciation $5,440,665 $4,412,584
Net investment in direct
financing lease 809,392 --
Cash 27,460 2,352
Other assets 87 87
Accrued rental income 153,412 134,121
Liabilities 41,987 11,918
Partners' capital 6,389,029 4,537,226
Revenues 168,882 554,934
Net income 141,337 458,588
</TABLE>
The Partnership recognized income totalling $40,890 and $34,746 for the
quarters ended March 31, 1999 and 1998, respectively, from these joint
ventures.
<PAGE>
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS - CONTINUED
Quarters Ended March 31, 1999 and 1998
3. Merger Transaction:
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 share
(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 three previous public offerings, the
most recent of which was completed in December 1998. 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, if such listing is
accomplished, the APF Shares 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. If the limited partners at the special meeting approve
the Merger, APF will own the properties and other assets of the
Partnership. 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.
On May 5, 1999, four limited partners in several of the CNL Income
Funds filed a lawsuit against the general partners and APF in
connection with the proposed Merger (see Part II - Item 1. Legal
Proceedings). The general partners and APF believe that the lawsuit is
without merit and intend to defend vigorously against the claims.
Because the lawsuit was so recently filed, it is premature to further
comment on the lawsuit at this time.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
CNL Income Fund XVII, Ltd. (the "Partnership") is a Florida limited
partnership that 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 restaurants were to
be constructed, to be leased primarily to operators of national and regional
fast-food, family-style and casual dining restaurant chains (collectively, the
"Properties"). The leases generally are triple-net leases, with the lessee
responsible for all repairs and maintenance, property taxes, insurance and
utilities. As of March 31, 1999, the Partnership owned 30 Properties, which
included interests in four Properties owned by joint ventures in which the
Partnership is a co-venturer and four Properties owned with affiliates as
tenants-in-common.
Liquidity and Capital Resources
The Partnership's primary source of capital is cash from operations
(which includes cash received from tenants, distributions from joint ventures,
and interest and other income received, less cash paid for expenses). Cash from
operations was $593,112 and $677,692 for the quarters ended March 31, 1999 and
1998, respectively. The decrease in cash from operations for the quarter ended
March 31, 1999, as compared to the quarter ended March 31, 1998, is primarily a
result of changes in income and expenses as described in "Results of Operations"
below and changes in the Partnership's working capital.
Other sources and uses of capital included the following during the
quarter ended March 31, 1999.
In January 1999, the Partnership entered into a joint venture
arrangement, Ocean Shores Joint Venture, with CNL Income Fund X, Ltd., an
affiliate of the general partners, to hold one restaurant property. The
Partnership contributed approximately $359,500 the joint venture. As of March
31, 1999, the Partnership owned a 30.94% interest in the profits and losses of
the joint venture.
In addition, in January 1999, the Partnership invested in a property in
Zephyrhills, Florida as tenants-in-common with CNL Income Fund IV, Ltd., an
affiliate of the general partners. As of March 31, 1999, the Partnership had
contributed approximately $168,400 for a 24 percent interest in the Property.
Currently, rental income from the Partnership's Properties is 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 the partners. At March 31, 1999, the Partnership had $945,293
invested in such short-term investments, as compared to $1,492,343 at December
31, 1998. The decrease in short-term investments at March 31, 1999 is primarily
due to the fact that in January 1999 the Partnership invested in a joint venture
arrangement, Ocean Shores Joint Venture, and in a Property in Zephyrhills,
Florida as tenants-in-
<PAGE>
Liquidity and Capital Resources - Continued
common with an affiliate of the general partners, as described above. The funds
remaining at March 31, 1999, after payment of distributions and other
liabilities, will be used meet the Partnership's working capital and other
needs.
Total liabilities of the Partnership, including distributions payable,
increased to $731,381 at March 31, 1999, from $702,542 at December 31, 1998,
primarily as a result of the Partnership accruing transaction costs related to
the proposed merger with CNL American Properties Fund, Inc. ("APF"), as
described below. The general partners believe that the Partnership has
sufficient cash on hand to meet its current working capital needs.
Based on current and anticipated future cash from operations, the
Partnership declared distributions to limited partners of $600,000 for each of
the quarters ended March 31, 1999 and 1998. This represents distributions for
each applicable quarter of $0.20 per unit. No distributions were made to the
general partners for the quarters ended March 31, 1999 and 1998. No amounts
distributed to the limited partners for the quarters ended March 31, 1999 and
1998, 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 the limited partners on a
quarterly basis.
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 continue to generate cash flow
in excess of operating expenses.
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 (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. 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 three previous public offerings, the most recent of which
was completed in December 1998. 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
<PAGE>
Liquidity and Capital Resources - Continued
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, if such listing is accomplished, the
APF shares 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. If the limited partners at the special
meeting approve the Merger, APF will own the Properties and other assets of the
Partnership. 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.
On May 5, 1999, four limited partners in several of the CNL Income
Funds filed a lawsuit against the general partners and APF in connection with
the proposed Merger (see Part II - Item 1. Legal Proceedings). The general
partners and APF believe that the lawsuit is without merit and intend to defend
vigorously against the claims. Because the lawsuit was so recently filed, it is
premature to further comment on the lawsuit at this time.
Results of Operations
During the quarters ended March 31, 1999 and 1998, the Partnership and
its consolidated joint venture, CNL/GC El Cajon Joint Venture, owned and leased
23 wholly owned Properties to operators of fast-food and family-style restaurant
chains. In connection therewith, during the quarters ended March 31, 1999 and
1998, the Partnership earned $629,495 and $715,151, respectively, in rental
income from operating leases (net of adjustments to accrued rental income), and
earned income from direct financing leases from these Properties. The decrease
in rental and earned income during the quarter ended March 31, 1999, as compared
to the quarter ended March 31, 1998, is primarily attributable to 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, which reduced the base of the Property on which rental
income is computed.
During 1998, the tenant of three Boston Market Properties filed for
bankruptcy and continued making rental payments on the Properties during the
quarter ended March 31, 1999. In April 1999, the tenant rejected, vacated and
ceased making rental payments on two of the three leases. In conjunction with
the two rejected leases, the Partnership wrote off approximately $60,000 of
accrued rental income (non-cash accounting adjustment relating to the
straight-lining of future scheduled rent increases over the term of the lease in
accordance with generally accepted accounting principles) at March 31, 1999. The
Partnership will not recognize rental and earned income from these two
Properties until new tenants for these Properties are located or
<PAGE>
Results of Operations - Continued
until the Properties are sold and the proceeds from the sale are reinvested in
additional Properties. While the tenant has not rejected or affirmed the
remaining lease, there can be no assurance that the lease will not be rejected
in the future. The lost revenues resulting from the rejection of the two leases
and the possible rejection of the third lease 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 quarter ended March 31, 1998, the Partnership owned and
leased three Properties with affiliates as tenants-in-common and two Properties
indirectly through joint venture arrangements, and during the quarter ended
March 31, 1999, the Partnership owned and leased four Properties with affiliates
as tenants-in-common and four Properties indirectly through joint venture
arrangements. In connection therewith, during the quarters ended March 31, 1999
and 1998, the Partnership earned $40,890 and $34,746, respectively, attributable
to net income earned by these joint ventures. The increase is primarily due to
the fact that the Partnership entered into a joint venture arrangement, Ocean
Shores Joint Venture with CNL Income Fund X, Ltd., an affiliate of the general
partners, and invested in a Property in Zephyrhills, Florida, as
tenants-in-common with CNL Income Fund IV, Ltd., an affiliate of the general
partners, in January 1999.
Operating expenses, including depreciation and amortization expense,
were $189,205 and $148,240 for the quarters ended March 31, 1999 and 1998,
respectively. The increase in operating expenses is primarily due to the fact
that the Partnership incurred $32,528 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.
Year 2000 Readiness Disclosure
The Year 2000 problem concerns the inability of information and
non-information technology systems to properly recognize and process date
sensitive information beyond January 1, 2000. The Partnership does not have any
information or non-information technology systems. The general partners and
affiliates of the general partners provide all services requiring the use of
information and non-information technology systems pursuant to a management
agreement with the Partnership. The information technology system of the
affiliates of the general partners consists of a network of personal computers
and servers built using hardware and software from mainstream suppliers. The
non-information technology systems of the affiliates of the general partners are
primarily facility related and include building security systems, elevators,
fire suppressions, HVAC, electrical systems and other utilities. The affiliates
of the general partners have no internally generated programmed software coding
to correct, because substantially all of
<PAGE>
Year 2000 Readiness Disclosure - Continued
the software utilized by the general partners and affiliates is purchased or
licensed from external providers. The maintenance of non-information technology
systems at the Partnership's Properties is the responsibility of the tenants of
the Properties in accordance with the terms of the Partnership's leases.
In early 1998, the general partners and affiliates formed a Year 2000
committee (the "Y2K Team") for the purpose of identifying, understanding and
addressing the various issues associated with the Year 2000 problem. The Y2K
Team consists of the general partners and members from the affiliates of the
general partners, including representatives from senior management, information
systems, telecommunications, legal, office management, accounting and property
management. The Y2K Team's initial step in assessing the Partnership's Year 2000
readiness consists of identifying any systems that are date-sensitive and,
accordingly, could have potential Year 2000 problems. The Y2K Team is in the
process of conducting inspections, interviews and tests to identify which of the
Partnership's systems could have a potential Year 2000 problem.
The information system of the affiliates of the general partners is
comprised of hardware and software applications from mainstream suppliers.
Accordingly, the Y2K Team is in the process of contacting the respective vendors
and manufacturers to verify the Year 2000 compliance of their products. In
addition, the Y2K Team has also requested and is evaluating documentation from
other companies with which the Partnership has a material third party
relationship, including the Partnership's tenants, vendors, financial
institutions and the Partnership's 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. The Y2K Team has also requested and is evaluating documentation
from the non-information technology systems providers of the affiliates of the
general partners. Although the general partners continue to receive positive
responses from the Companies with which the Partnership has third party
relationships regarding their Year 2000 compliance, the general partners cannot
be assured that the tenants, financial institutions, transfer agent, other
vendors and system providers have adequately considered the impact of the Year
2000. The general partners are not able to measure the effect on the operations
of the Partnership of any third party's failure to adequately address the impact
of the Year 2000.
The general partners and their affiliates have identified and have
implemented upgrades for certain hardware equipment. In addition, the general
partners and their affiliates have identified certain software applications
which will require upgrades to become Year 2000 compliant. The general partners
expect all of these upgrades, as well as any other necessary remedial measures
on the information technology systems used in the business activities and
operations of the Partnership, to be completed by September 30, 1999, although,
the general partners cannot be assured that the upgrade solutions provided by
the vendors have addressed all possible Year 2000 issues. The general partners
do not expect the aggregate cost of the Year 2000 remedial measures to be
material to the results of operations of the Partnership.
<PAGE>
Year 2000 Readiness Disclosures - Continued
The general partners and affiliates have received certification from
the Partnership's transfer agent of its Year 2000 compliance. Due to the
material relationship of the Partnership with its transfer agent, the Y2K Team
is evaluating the Year 2000 compliance of the systems of the transfer agent and
expects to have the evaluation completed by September 30, 1999. Despite the
positive response from the transfer agent and the evaluation of the transfer
agent's system by the Y2K Team, the general partners cannot be assured that the
transfer agent has addressed all possible Year 2000 issues. In the event that
the systems of the transfer agent are not Year 2000 compliant, the general
partners and their affiliates would have to allocate resources to internally
perform the functions of the transfer agent. The general partners do not
anticipate that the additional cost of these resources would have a material
impact on the Partnership.
Based upon the progress the general partners and affiliates have made
in addressing the Year 2000 issues and their plan and timeline to complete the
compliance program, the general partners do not foresee significant risks
associated with Year 2000 compliance at this time. The general partners and
their affiliates plan to address their significant Year 2000 issues prior to the
Partnership being affected by them; therefore, they have not developed a
comprehensive contingency plan. However, if the general partners and their
affiliates identify significant risks related to their Year 2000 compliance, or
if their progress deviates from the anticipated timeline, the general partners
and their affiliates will develop contingency plans as deemed necessary at that
time.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
On May 5, 1999, four limited partners in several of the CNL
Income Funds filed a lawsuit, Jon Hale, Mary J. Hewitt,
Charles A. Hewitt, and Gretchen M. Hewitt v. James M. Seneff,
Jr., Robert A. Bourne, CNL Realty Corporation, and CNL
American Properties Fund, Inc., Case No. CIO-99-0003561, in
the Circuit Court of the Ninth Judicial Circuit of Orange
County, Florida, alleging that the Messrs. Seneff and Bourne
and CNL Realty Corporation, as general partners of the CNL
Income Funds, breached their fiduciary duties and violated the
provisions of certain of the CNL Income Fund partnership
agreements in connection with the proposed acquisition of the
CNL Income Funds by APF. The plaintiffs are seeking
unspecified damages and equitable relief. The general partners
and APF believe that the lawsuit is without merit and intend
to defend vigorously against such claims. Because the lawsuit
was so recently filed, it is premature to further comment on
the lawsuit at this time.
Item 2. Changes in Securities. Inapplicable.
Item 3. Default upon Senior Securities. Inapplicable.
Item 4. Submission of Matters to a Vote of Security Holders. Inapplicable.
Item 5. Other Information. Inapplicable.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
2.1 Agreement and Plan of Merger by and between the
Registrant and CNL American Properties Fund,
Inc. ("APF") dated March 11, 1999 (filed as
Appendix B to the Prospectus Supplement for the
Registrant, constituting a part of the
Registration Statement of APF on Form S-4, File
No. 74329.)
**3.1 Affidavit and Certificate of Limited Partnership
of CNL Income Fund XVII, Ltd. (Filed as Exhibit
3.1 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 XVII, 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.)
<PAGE>
**4.1 Affidavit and Certificate of Limited Partnership
of CNL Income Fund XVII, Ltd. (Filed as Exhibit
3.1 to Registration Statement No. 33-90998 on
Form S-11 and incorporated herein by reference.)
**4.2 Amended and Restated Agreement of Limited
Partnership of CNL Income Fund XVII, 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.)
**8.1 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
XVII, Ltd. and CNL Fund Advisors, Inc. (Included
as Exhibit 10.1 to Form 10-K filed with the
Securities and Exchange Commission on March 21,
1996, and incorporated herein by reference.)
**10.2 Form of Joint Venture Agreement for Joint
Ventures with Unaffiliated Entities (Filed as
Exhibit 10.2 to the Registrant's Registration
Statement on Form S-11, No. 33-90998,
incorporated herein by reference.)
**10.3 Form of Joint Venture Agreement for Joint
Ventures with Affiliated Programs (Filed as
Exhibit 10.3 to the Registrant's Registration
Statement on Form S-11, No. 33-90998,
incorporated herein by reference.)
**10.4 Form of Development Agreement (Filed as Exhibit
10.5 to the Registrant's Registration Statement
on Form S-11, No. 33-90998, incorporated herein
by reference.)
**10.5 Form of Indemnification and Put Agreement (Filed
as Exhibit 10.6 to the Registrant's Registration
Statement on Form S-11, No. 33-90998,
incorporated herein by reference.)
**10.6 Form of Unconditional Guarantee of Payment and
Performance (Filed as Exhibit 10.7 to the
Registrant's Registration Statement on Form
S-11, No. 33-90998, incorporated herein by
reference.)
**10.7 Form of Lease Agreement for Existing Restaurant
(Filed as Exhibit 10.8 to the Registrant's
Registration Statement on Form S-11, No.
33-90998, incorporated herein by reference.)
<PAGE>
**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
(b) Reports on Form 8-K
Current Report on Form 8-K dated March 11, 1999 and
filed March 12, 1999, describing the proposed Merger
of the Partnership with and into a subsidiary of CNL
American Properties Fund, Inc.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
DATED this 14th day of May, 1999
CNL INCOME FUND XVII, LTD.
By: CNL REALTY CORPORATION
General Partner
By: /s/ James M. Seneff, Jr.
-----------------------------------------
JAMES M. SENEFF, JR.
Chief Executive Officer
(Principal Executive Officer)
By: /s/ Robert A. Bourne
-----------------------------------------
ROBERT A. BOURNE
President and Treasurer
(Principal Financial and
Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the balance
sheet of CNL Income Fund XVII, Ltd. at March 31, 1999, and its statement of
income for the three months then ended and is qualified in its entirety by
reference to the Form 10Q of CNL Income Fund XVII, Ltd. for the three months
ended March 31, 1999.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 945,293
<SECURITIES> 0
<RECEIVABLES> 64,935
<ALLOWANCES> 7,290
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 21,523,945
<DEPRECIATION> 968,854
<TOTAL-ASSETS> 27,275,779
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 26,108,266
<TOTAL-LIABILITY-AND-EQUITY> 27,275,779
<SALES> 0
<TOTAL-REVENUES> 641,848
<CGS> 0
<TOTAL-COSTS> 189,205
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 477,905
<INCOME-TAX> 0
<INCOME-CONTINUING> 477,905
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 477,905
<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>
