424(b)(3)
No. 33-90998-01
CNL INCOME FUND XVII, LTD.
AND
CNL INCOME FUND XVIII, LTD.
This Supplement is part of, and should be read in conjunction with, the
Prospectus dated August 11, 1995 and the Prospectus Supplement dated April 22,
1997. This Supplement replaces the Supplement dated April 23, 1997.
Capitalized terms used in this Supplement have the same meaning as in the
Prospectus unless otherwise stated herein.
All subscriptions are for the purchase of Units of CNL Income Fund
XVIII, Ltd. ("CNL XVIII"). Offers are no longer being made nor are the
General Partners accepting subscriptions for CNL XVII. THE ACQUISITION OF
UNITS OF ONE PARTNERSHIP WILL NOT ENTITLE THE INVESTOR TO ANY OWNERSHIP
INTEREST IN THE OTHER PARTNERSHIP OR ITS PROPERTIES.
Information as to proposed properties for which CNL XVIII has received
initial commitments and as to the number and types of Properties acquired by
CNL XVIII is presented as of April 30, 1997, and all references to commitments
or Property acquisitions should be read in that context. Proposed properties
for which CNL XVIII receives initial commitments, as well as property
acquisitions that occur after April 30, 1997, will be reported in a
subsequent Supplement.
THE OFFERING
SUBSCRIPTION PROCEDURES
As of April 30, 1997, CNL XVIII had received total subscription proceeds
of $18,483,022 (1,848,302 Units) from 895 Limited Partners. As of April 30,
1997, CNL XVIII had invested or committed for investment approximately
$15,100,000 of such proceeds in 13 Properties and to pay Acquisition Fees and
miscellaneous Acquisition Expenses, leaving approximately $1,100,000 in
offering proceeds available for investment in Properties. As of April 30,
1997, CNL XVIII had incurred $831,736 in Acquisition Fees to an Affiliate of
the General Partners.
BUSINESS
PROPERTY ACQUISITIONS
Between April 3, 1997 and April 30, 1997, CNL XVIII acquired four
Properties, including three Properties consisting of land and building and one
Property consisting of building only. The Properties are two Boston Market
Properties (one in each of San Antonio, Texas, and Minnetonka, Minnesota), an
On The Border Property (in San Antonio, Texas) and a Wendy's Property (in
Sparta, Tennessee). For information regarding the nine Properties acquired by
CNL XVIII prior to April 3, 1997, see the Prospectus Supplement dated April
22, 1997.
In connection with the purchase of each of these four Properties, CNL
XVIII, as lessor, entered into a long-term lease agreement with an
unaffiliated lessee. The general terms of the lease agreements are described
in the section of the Prospectus entitled "Business - Description of Leases."
In connection with the purchase of these Properties, which are to be
constructed, the Company has entered into development and indemnification and
put agreements with the lessee. The general terms of these agreements are
described in the section of the Prospectus entitled "Business - Site Selection
and Acquisition of Properties - Construction and Renovation."
May 6, 1997 Prospectus Dated August 11, 1995
In connection with the acquisition of the On The Border Property, which
is building only, CNL XVIII has also entered into a tri-party agreement with
the lessee and the landlord of the land. The tri-party agreement provides
that the ground lessee is responsible for all obligations under the ground
lease and provides certain rights to CNL XVIII relating to the maintenance of
its interest in the building in the event of a default by the lessee under the
terms of the ground lease.
The following table sets forth the location of the four Properties,
including three Properties consisting of land and building and one Property
consisting of building only, acquired by CNL XVIII, from April 3, 1997 through
April 30, 1997, a description of the competition, and a summary of the
principal terms of the acquisition and lease of each Property.
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<TABLE>
PROPERTY ACQUISITIONS
From April 3, 1997 through April 30, 1997
<CAPTION>
Lease Expira-
Property Location and Purchase Date tion and Minimum Option
Competition Price (1) Acquired Renewal Options Annual Rent (2) Percentage Rent To Purchase
- --------------------- ------------ -------- --------------- --------------- --------------- -----------
<S> <C> <C> <C> <C> <C> <C>
BOSTON MARKET $621,595 04/16/97 04/2012; five 10.38% of Total for each lease at any time
(the "San Antonio #1 (excluding five-year Cost (4); year after the after the
Property") development renewal options increases by fifth lease fifth lease
Restaurant to be constructed costs) (3) 10% after the year, (i) 4% of year
fifth lease annual gross
The San Antonio #1 Property year and after sales minus
is located at the northwest every five (ii) the
quadrant of San Pedro Avenue years minimum annual
and West Maplewood Lane, in thereafter rent for such
San Antonio, Bexar County, during the lease year
Texas, in an area of mixed lease term
retail, commercial, and
residential development.
Other fast-food and family-
style restaurants located in
proximity to the San Antonio
#1 Property include a KFC, a
McDonald's, and several
local restaurants.
ON THE BORDER (5) $182,459 04/17/97 (6); three five- 13.64% of Total for each lease at any time
(the "San Antonio #2 (excluding year renewal Cost (4); (7) year, (i) 4% of after the
Property") development options annual gross tenth lease
Restaurant to be constructed costs) (3) sales minus year
(ii) the
The San Antonio #2 Property minimum annual
is located along the east rent for such
side of Interstate Highway lease year (8)
10, north of Huebner Oaks
Road, in San Antonio, Bexar
County, Texas, in an area of
mixed retail, commercial,
and residential development.
-3-
<CAPTION>
Lease Expira-
Property Location and Purchase Date tion and Minimum Option
Competition Price (1) Acquired Renewal Options Annual Rent (2) Percentage Rent To Purchase
- --------------------- ------------ -------- --------------- --------------- --------------- -----------
<S> <C> <C> <C> <C> <C> <C>
BOSTON MARKET $549,772 04/29/97 04/2012; five 10.38% of for each lease at any time
(the "Minnetonka Property") (excluding five-year Total Cost (4); year after the after the
Restaurant to be constructed development renewal options increases by fifth lease fifth lease
costs) (3) 10% after the year, (i) 5% of year
The Minnetonka Property is fifth lease annual gross
located on the northeast year and after sales minus
corner of Shady Oak Road every five (ii) the
and State Road 62, in years minimum annual
Minnetonka, Hennepin County, thereafter rent for such
Minnesota, in an area of during the lease year
mixed retail, commercial, lease term
and residential development.
Other fast-food and family-
style restaurants located in
proximity to the Minnetonka
Property include a
McDonald's, a Schlotzsky's
Deli, and several local
restaurants.
WENDY'S $193,717 04/30/97 04/2017; two 10.25% of Total for each lease at any time
(the "Sparta Property") (excluding five-year Cost (4) year, (i) 7% of after the
Restaurant to be constructed development renewal options annual gross seventh
costs) (3) sales minus lease year
The Sparta Property is (ii) the
located at the southwest minimum annual
quadrant of Mose Drive and rent for such
Roosevelt Street, in Sparta, lease year
White County, Tennessee, in
an area of mixed retail,
commercial, and residential
development. Other fast-
food and family-style
restaurants located in
proximity to the Sparta
Property include a Taco
Bell, a Pizza Hut, a
McDonald's, and a KFC.
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</TABLE>
FOOTNOTES:
(1) The estimated federal income tax basis of the depreciable portion (the
building portion) of each of the Properties acquired, and for
construction Properties, once the buildings are constructed, is set
forth below:
Property Federal Tax Basis
-------- -----------------
San Antonio #1 Property $ 284,000
San Antonio #2 Property 1,251,000
Minnetonka Property 483,000
Sparta Property 480,000
(2) Minimum annual rent for the San Antonio #1 Property will become due and
payable on the date the tenant receives from the landlord its final
funding of the construction costs. For the San Antonio #2 Property,
minimum annual rent will become due and payable on the earlier of (i)
180 days after execution of the lease, (ii) the date the certificate of
occupancy for the restaurant is issued, (iii) the date the restaurant
opens for business to the public, or (iv) the date the tenant receives
from the landlord its final funding of the construction costs. For the
Minnetonka Property, minimum annual rent will become due and payable on
the date the tenant receives from the landlord its final funding of the
construction costs. For the Sparta Property, minimum annual rent will
become due and payable on the earlier of (i) 120 days after execution of
the lease, (ii) the date the certificate of occupancy for the restaurant
is issued, (iii) the date the restaurant opens for business to the
public, or (iv) the date the tenant receives from the landlord its final
funding of the construction costs. During the period commencing with
the effective date of the lease to the date minimum annual rent becomes
payable for the San Antonio #1 and Minnetonka Properties, as described
above, interim rent equal to 10.38% per annum of the amount funded by
CNL XVIII in connection with the purchase and construction of the
Properties shall accrue and be payable in a single lump sum at the time
of final funding of the construction costs. During the period
commencing with the effective date of the lease to the date minimum
annual rent becomes payable for the San Antonio #2 and Sparta
Properties, as described above, the tenant shall pay monthly "interim
rent" equal to a specified rate per annum (ranging from 10.25% to 11%)
of the amount funded by CNL XVIII in connection with the purchase and
construction of the Properties.
(3) The development agreements for the Properties which are to be
constructed, provide that construction must be completed no later than
the dates set forth below. The maximum cost to CNL XVIII (including the
purchase price of the land, (if applicable), development costs (if
applicable), and closing and acquisition costs) is not expected to, but
may, exceed the amounts set forth below:
Estimated Final
Property Estimated Maximum Cost Completion Date
-------- ---------------------- ---------------
San Antonio #1 Property $ 860,388 October 13, 1997
San Antonio #2 Property 1,213,504 October 14, 1997
Minnetonka Property 823,052 October 26, 1997
Sparta Property 666,346 August 28, 1997
(4) The "Total Cost" is equal to the sum of (i) the purchase price of the
Property, (ii) closing costs, and (iii) actual development costs
incurred under the development agreement.
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(5) CNL XVIII owns the building only for this Property. CNL XVIII does not
own the underlying land; although, CNL XVIII has entered into a tri-
party agreement with the lessee and the landlord of the land in order to
provide CNL XVIII with certain rights with respect to the land on which
the building is located.
(6) The lease term shall expire upon the later of (i) the date 15 years from
the date of closing, (ii) the expiration of the original term of the
ground lease, or (iii) the earlier termination of the ground lease.
(7) Annual rent shall increase after every five years during the lease term
by the lesser of (i) 10% of the minimum annual rent during the preceding
year or (ii) 150% of the change in the Consumer Price Index.
(8) Percentage rent shall be calculated on a calendar year basis (January 1
to December 31).
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PENDING INVESTMENTS
As of April 30, 1997, CNL XVIII had initial commitments to acquire five
properties, consisting of land and building. The acquisition of each of these
properties is subject to the fulfillment of certain conditions, including, but
not limited to, a satisfactory environmental survey and property appraisal.
There can be no assurance that any or all of the conditions will be satisfied
or, if satisfied, that one or more of these properties will be acquired by CNL
XVIII. If acquired, the leases of all five of these properties are expected
to be entered into on substantially the same terms described in the Prospectus
in the section entitled "Business - Description of Leases."
Set forth below are summarized terms expected to apply to the leases for
each of the properties. More detailed information relating to a property and
its related lease will be provided at such time, if any, as the property is
acquired.
-7-
<TABLE>
<CAPTION>
Lease Term and
Property Renewal Options Minimum Annual Rent Percentage Rent Option to Purchase
- -------- --------------- ------------------- --------------- ------------------
<S> <C> <C> <C> <C>
Boston Market 15 years; five five-year 10.38% of CNL XVIII's for each lease year at any time after
Charlotte, NC renewal options total cost to purchase after the fifth lease the fifth lease
Existing restaurant the property; year, (i) 5% of year
increases by 10% after annual gross sales
the fifth lease year minus (ii) the
and after every five minimum annual rent
years thereafter for such lease year
during the lease term
Boston Market 15 years; five five-year 10.38% of Total Cost for each lease year at any time after
Reno, NV renewal options (1); increases by 10% after the fifth lease the fifth lease
Restaurant to be after the fifth lease year, (i) 4% of year
constructed year and after every annual gross sales
five years thereafter minus (ii) the
during the lease term minimum annual rent
for such lease year
Boston Market 15 years; five five-year 10.38% of CNL XVIII's for each lease year at any time after
Timonium, MD renewal options total cost to purchase after the fifth lease the fifth lease
Restaurant to be the property; year, (i) 5% of year
renovated increases by 10% after annual gross sales
the fifth lease year minus (ii) the
and after every five minimum annual rent
years thereafter for such lease year
during the lease term
IHOP 20 years; three five- 10.125% of CNL XVIII's for each lease year, during the eleventh
Santa Rosa, CA year renewal options total cost to purchase (i) 4% of annual lease year and at
Existing restaurant the property; gross sales minus the end of the
increases by 10% after (ii) the minimum initial lease term
the fifth lease year annual rent for such
and after every five lease year
years thereafter
during the lease term
Jack in the Box 18 years; four five-year 10.25% of Total Cost for each lease year, at any time after
Houston, TX renewal options (1); increases by 8% (i) 5% of annual the seventh lease
Restaurant to be after the fifth lease gross sales minus year (2)
constructed year and after every (ii) the minimum
five years thereafter annual rent for such
during the lease term lease year<PAGE>
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</TABLE>
FOOTNOTES:
(1) The "Total Cost" is equal to the sum of (i) the purchase price of the
property, (ii) closing costs, and (iii) actual development costs
incurred under the development agreement.
(2) In the event CNL XVIII purchases the property directly from the lessee,
the lessee will have no option to purchase the property.
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<TABLE>
PRO FORMA ESTIMATE OF TAXABLE INCOME OF
CNL INCOME FUND XVIII, LTD.
GENERATED FROM THE OPERATIONS OF PROPERTIES ACQUIRED FROM
APRIL 3, 1997 THROUGH APRIL 30, 1997
FOR A 12-MONTH PERIOD (UNAUDITED)
The following schedule represents pro forma unaudited estimates of taxable income of each Property
acquired by CNL XVIII from April 3, 1997 through April 30, 1997, for the 12-month period commencing on the
date of the inception of the respective lease on such Property. The schedule should be read in light of the
accompanying footnotes.
These estimates do not purport to present actual or expected operations of CNL XVIII for any period in
the future. These estimates were prepared on the basis described in the accompanying notes which should be
read in conjunction herewith. No single lessee or group of affiliated lessees lease Properties with an
aggregate purchase price in excess of 20% of the expected total net offering proceeds of CNL XVIII.
<CAPTION>
Boston Market On The Border Boston Market Wendy's
San Antonio, TX (5) San Antonio, TX (5) Minnetonka, MN (5) Sparta, TN (5)
------------------- ------------------- ------------------ --------------
<S> <C> <C> <C> <C>
Pro Forma Estimate
of Taxable Income:
Base Rent (1) $ 89,308 $131,808 $ 85,433 $ 65,673
Management Fees (2) (893) (1,318) (854) (657)
General and Administrative
Expenses (3) (4,465) (6,590) (4,272) (3,284)
-------- -------- -------- --------
Estimated Cash Available
from Operations 83,950 123,900 80,307 61,732
Depreciation Expense (4) (7,098) (31,277) (12,063) (12,008)
-------- -------- -------- --------
Pro Forma Estimate of
Taxable Income of
CNL XVIII $ 76,852 $ 92,623 $ 68,244 $ 49,724
======== ======== ======== ========
See Footnotes
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<CAPTION>
Total
--------
<S> <C>
Pro Forma Estimate
of Taxable Income:
Base Rent (1) $372,222
Management Fees (2) (3,722)
General and Administrative
Expenses (3) (18,611)
--------
Estimated Cash Available
from Operations 349,889
Depreciation Expense (4) (62,446)
--------
Pro Forma Estimate of
Taxable Income of
CNL XVIII $287,443
========
</TABLE>
FOOTNOTES:
(1) Base rent does not include percentage rents which become due if
specified levels of gross receipts are achieved.
(2) The Properties will be managed pursuant to a management agreement
between CNL XVIII and an Affiliate of the General Partners, pursuant to
which the Affiliate will receive an annual management fee in an amount
equal to one percent of the gross revenues that CNL XVIII earns from its
Properties. See "Management Compensation."
(3) Estimated at five percent of gross rental income based on the previous
experience of Affiliates of the General Partners with 17 public limited
partnerships which own properties similar to that owned by CNL XVIII.
(4) The estimated federal tax basis of the depreciable portion (the building
portion) of the Properties has been depreciated on the straight-line
method over 40 years.
(5) The development agreements for the Properties which are to be
constructed, provide that construction must be completed no later
than the dates set forth below:
Property Estimated Final Completion Date
-------- -------------------------------
San Antonio #1 Property October 13, 1997
San Antonio #2 Property October 14, 1997
Minnetonka Property October 26, 1997
Sparta Property August 28, 1997
