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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, 2000
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 59-329393
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
450 South Orange Avenue
Orlando, Florida 32801-3336
(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code: (407) 540-2000
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. No [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 for such Units. Each Unit was originally sold at $10 per Unit.
DOCUMENTS INCORPORATED BY REFERENCE:
None
4
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
29 Properties, pay acquisition fees totalling $1,350,000 and to establish a
working capital reserve for Partnership purposes. The 29 Properties include four
Properties owned by joint ventures in which the Partnership is a co-venturer and
three Properties owned with affiliates of the General Partners as
tenants-in-common. During 1998, the Partnership received $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.
During 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. In addition, during 1999, CNL/GC El
Cajon Joint Venture, in which the Partnership owned an 80 percent interest, sold
its Property to the tenant and the Partnership received a return of capital from
the net sales proceeds. In January 2000, the Partnership reinvested the majority
of the net sales proceeds received from El Cajon Joint Venture in a Property in
Wilmette, Illinois. In addition, during 2000, the Partnership sold its
Properties in Warner Robins, Georgia and Long Beach, California.
As a result of the above transactions, as of December 31, 2000, the
Partnership owned 28 Properties. The 28 Properties include three Properties
owned by joint ventures in which the Partnership is a co-venturer and four
Properties owned with affiliates as tenants-in-common. In January 2001, the
Partnership sold its Property in Houston, Texas to an unrelated third party
resulting in a gain for financial reporting purposes. The Partnership generally
leases the Properties on a triple-net basis with the lessees responsible for all
repairs and maintenance, property taxes, insurance and utilities.
The Partnership will hold its Properties until the General Partners
determine that the sale or other disposition of the Properties is advantageous
in view of the Partnership's investment objectives. In deciding whether to sell
Properties, the General Partners will consider factors such as potential capital
appreciation, net cash flow and federal income tax considerations. Certain
lessees also have been granted options to purchase Properties, generally at the
Property's then fair market value after a specified portion of the lease term
has elapsed. The Partnership has no obligation to sell all or any portion of a
Property at any particular time, except as may be required under property
purchase options granted to certain lessees.
Leases
Although there are variations in the specific terms of the leases, the
following is a summarized description of the general structure of the
Partnership's leases. The leases of the Properties provide for initial terms
ranging from 15 to 20 years (the average being 18 years) and expire between 2011
and 2019. 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
$190,000. 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 21 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 tenants of three Boston Market Properties, Boston
Chicken, Inc., Bostonwest L.L.C. and BCBM Southwest L.P., filed for bankruptcy.
In April 1999 and July 2000, the tenant rejected two and one, respectively, of
the leases relating to these Properties. The Partnership sold one of the vacant
Properties in October 2000 and another of the vacant Properties in January 2001.
The Partnership will not recognize rental and earned income from the remaining
vacant Property until a new tenant for this Property is located or until the
Property is sold and the proceeds from such sale are reinvested in an additional
Property. The lost revenues resulting from the remaining vacant Property could
have an adverse effect on the results of operations of the Partnership if the
Partnership is not able to re-lease the Property in a timely manner. The General
Partners are currently seeking either a new tenant or a purchaser for the
Property.
In January 2000, the Partnership reinvested the majority of the net
sales proceeds received from the sale of the Property owned by CNL/GC El Cajon
Joint Venture (as described above), in a Property located in Wilmette, Illinois.
The lease terms for this Property are substantially the same as the
Partnership's other leases, as described above.
Major Tenants
During 2000, three lessees of the Partnership, Golden Corral
Corporation, National Restaurant Enterprises, Inc., and Jack in the Box Inc.,
each contributed more than ten percent of the Partnership's total rental and
earned income, the Partnership's share of rental and earned income from three
Properties owned by unconsolidated joint ventures and four Properties owned with
affiliates of the General Partners as tenants-in-common. As of December 31,
2000, Golden Corral Corporation and National Restaurant Enterprises, Inc. were
each the lessee under leases relating to three restaurants, and Jack in the Box
Inc. was the lessee under leases relating to four restaurants. It is anticipated
that based on the minimum rental payments required by the leases, these three
lessees each will continue to contribute more than ten percent of the
Partnership's total rental and earned income in 2001. In addition, four
Restaurant Chains, Golden Corral Family Steakhouse Restaurants, ("Golden
Corral"), Jack in the Box, Burger King, and Arby's, each accounted for more than
ten percent of the Partnership's total rental and earned income during 2000
(including the Partnership's share of rental and earned income from three
Properties owned by unconsolidated joint ventures and four Properties owned with
affiliates of the General Partners as tenants-in-common). In 2001, it is
anticipated that each of these four Restaurant Chains will continue to
contribute more than ten percent of the Partnership's rental and earned income
to which the Partnership is entitled under the terms of the leases. Any failure
of these lessees or Restaurant Chains could have a material adverse affect on
the Partnership's income if the Partnership is not able to re-lease the
Properties in a timely manner. As of December 31, 2000, 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 1997, the Partnership entered into two 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. In addition, during 1999, the Partnership
entered into Ocean Shores Joint Venture with CNL Income Fund X, 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 a 21 percent interest in CNL Mansfield Joint Venture, a 60.06%
interest in CNL Kingston Joint Venture, and a 30.94% interest in Ocean Shores
Joint Venture. The Partnership and its joint venture partners are also jointly
and severally liable for all debts, obligations and other liabilities of the
respective 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 venturer or by an event of
dissolution. Events of dissolution include the bankruptcy, insolvency or
termination of either of the joint venturer partner, 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 shares management control equally with affiliates of
the General Partners for each of these joint ventures. 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 Mansfield Joint Venture, CNL
Kingston Joint Venture and Ocean Shores Joint Venture is distributed 21 percent,
60.06% and 30.94% 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; 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; 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, and an
agreement to hold a Property in Zephyrhills, Florida, as tenants-in-common, with
CNL Income Fund IV, 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%,
36.91% and 24 percent interest in the Properties in Fayetteville, North
Carolina; Corpus Christi, Texas; Akron, Ohio; and Zephryhills, Florida,
respectively.
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.
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 APF, the parent company 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 Financial 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, 2000, the Partnership owned 28 Properties. Of the 28
Properties, 21 are owned by the Partnership in fee simple, three are owned
through joint venture arrangements and four are owned through tenancy in common
arrangements. See Item 1. Business - Joint Venture and Tenancy in Common
Arrangements. The Partnership is not permitted to encumber its Properties under
the terms of its partnership agreement. Reference is made to the Schedule of
Real Estate and Accumulated Depreciation for a listing of the Properties and
their respective costs, including acquisition fees and certain acquisition
expenses.
Description of Properties
Land. The Partnership's Property sites range from approximately 15,200
to 91,400 square feet depending upon building size and local demographic
factors. Sites purchased by the Partnership are in locations zoned for
commercial use which have been reviewed for traffic patterns and volume.
The following table lists the Properties owned by the Partnership as of
December 31, 2000 by state. More detailed information regarding the location of
the Properties is contained in the Schedule of Real Estate and Accumulated
Depreciation for the year ended December 31, 2000.
State Number of Properties
California 3
Florida 3
Georgia 1
Illinois 4
Indiana 2
Michigan 1
North Carolina 1
Nevada 1
Ohio 1
South Carolina 1
Tennessee 3
Texas 6
Washington 1
--------------
TOTAL PROPERTIES 28
==============
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. As of December 31, 2000, the Partnership had no plans for renovation
of the Properties. Depreciation expense is computed for buildings and
improvements using the straight line method using a depreciable life of 40 years
for federal income tax purposes.
As of December 31, 2000, the aggregate cost of the Properties owned by
the Partnership and joint ventures (including Properties owned through tenancy
in common arrangements) for federal income tax purposes was $22,690,518 and
6,217,380, respectively.
The following table lists the Properties owned by the Partnership as of
December 31, 2000 by Restaurant Chain.
Restaurant Chain Number of Properties
Arby's 4
Bakers Square 1
Black-eyed Pea 1
Boston Market 3
Burger King 5
Denny's 2
Fazoli's 1
Golden Corral 3
Jack in the Box 4
Mr. Fable's 1
Taco Bell 1
Wendy's 2
--------------
TOTAL PROPERTIES 28
==============
The General Partners consider the Properties to be well-maintained and
sufficient for the Partnership's operations.
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 unlikely event a tenant's insurance
policy lapses or is insufficient to cover a claim relating to the Property.
Leases. The Partnership leases the Properties to operators of selected
national and regional fast-food, family-style and casual dining restaurant
chains. The leases are generally on a long-term "triple net" basis, meaning that
the tenant is responsible for repairs, maintenance, property taxes, utilities
and insurance. 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. The terms of
the leases of the Properties owned by the Partnership are described in Item 1.
Business - Leases.
As of December 31, 2000, 1999, 1998, 1997, and 1996 the Properties were
92 percent, 93 percent, 100 percent, 100 percent and 100 percent occupied,
respectively. The following is a schedule of the average rent per Property for
the years ended December 31:
2000 1999 1998 1997 1996
-------------- ------------- ------------- ------------- --------------
Rental Income(1) $ 2,353,394 $ 2,667,611 $ 2,983,830 $ 2,762,605 $1,190,656
Properties(2) 26 29 28 28 24
Average Rent per Property $ 90,515 $ 91,987 $ 106,565 $ 98,664 $ 49,611
(1) Rental income includes the Partnership's share of rental income from
the Properties owned through joint venture arrangements and the
Properties owned with affiliates as tenants-in-common. Rental revenues
have been adjusted, as applicable, for any amounts for which the
Partnership has established an allowance for doubtful accounts.
(2) Excludes Properties that were vacant at December 31, and did not
generate rental revenues during the year ended December 31.
The following is a schedule of lease expirations for leases in place as
of December 31, 2000 for each year for the next ten years and
thereafter.
Percentage of
Expiration Year Number Annual Rental Gross Annual
of Leases Revenues Rental Income
----------------- ---------------- ----------------- --------------------------
2001 -- -- --
2002 -- -- --
2003 -- -- --
2004 -- -- --
2005 -- -- --
2006 -- -- --
2007 -- -- --
2008 -- -- --
2009 -- -- --
2010 -- -- --
Thereafter 26 2,608,715 100.00%
---------- ----------------- -------------
Total (1) 26 $ 2,608,715 100.00%
========== ================= =============
(1) Excludes one Property which was vacant at December 31, 2000.
Leases with Major Tenants. The terms of each of the leases with the
Partnership's major tenants as of December 31, 2000 (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 $138,163
(ranging from approximately $123,200 to $146,900).
Jack in the Box, 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).
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 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
(a) As of March 15, 2001, there were 1,601 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. During 2000, Limited Partners who
wished to sell their Units may have offered the Units for sale pursuant to the
Partnership's distribution reinvestment plan (the "Plan"), and Limited Partners
who wished to have their distributions used to acquire additional Units (to the
extent Units were available for purchase), may have done so pursuant to such
Plan. The General Partners had the right to prohibit transfers of Units. From
inception through December 31, 2000, the price paid for any Unit transferred
pursuant to the Plan ranged from $9.14 to $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 2000 and 1999, other than
pursuant to the Plan, net of commissions.
2000 1999
-------------------------------------- -------------------------------------
High Low Average High Low Average
--------- --------- ---------- -------- --------- ----------
First Quarter $7.63 $ 7.63 $ 7.63 (2) (2) (2)
Second Quarter $8.50 $ 6.66 $ 8.13 (2) (2) (2)
Third Quarter $7.63 $ 7.00 $ 7.32 $10.00 $10.00 $10.00
Fourth Quarter $7.03 $ 6.50 $ 6.83 (2) (2) (2)
(1) A total of 12,000 and 5,500 Units were transferred other than pursuant
to the Plan for the years ended December 31, 2000 and 1999,
respectively.
(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 each of the years ended December 31, 2000 and 1999, the Partnership
declared cash distributions of $2,400,000 to the Limited Partners. Distributions
of $600,000 were declared at the close of each of the Partnership's calendar
quarters during 2000 and 1999 to the Limited Partners. These amounts include
monthly distributions made in arrears for the Limited Partners electing to
receive such distributions on this basis. No amounts distributed to partners for
the years ended December 31, 2000 and 1999, 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.
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.
(b) Not applicable.
Item 6. Selected Financial Data
Year Ended Year Ended Year Ended Year Ended Year Ended
December 31, December 31, December 31, December 31, December 31,
2000 1999 1998 1997 1996
---------------- ----------------- ----------------- ---------------- -----------------
Revenues (1) $ 2,282,652 $ 2,611,294 $ 2,946,048 $ 2,772,714 $ 1,444,503
Net income (2) 673,138 1,839,269 2,394,158 2,203,557 1,095,759
Cash distributions
declared 2,400,000 2,400,000 2,400,000 2,287,500 1,166,689
Net income per Unit
(2)(3) 0.22 0.61 0.80 0.73 0.52
Cash distributions
declared per Unit
(3) 0.80 0.80 0.80 0.76 0.55
2000 1999 1998 1997 1996
---------------- ----------------- ----------------- ---------------- -----------------
At December 31:
Total assets $ 24,675,610 $ 26,561,963 $ 27,365,705 $ 27,524,148 $ 28,675,007
Partners' capital 23,942,768 25,669,630 26,230,361 26,236,203 26,320,146
(1) Revenues include equity in earnings of unconsolidated joint ventures,
minority interest in income of the consolidated joint venture and
adjustments to accrued rental income as a result of tenants filing for
bankruptcy.
(2) Net income for the year ended December 31, 2000 includes $918,692 from
provision for loss on assets and $17,447 from gain on sale of assets.
Net income for the year ended December 31, 1999 includes $82,914 from
loss on dissolution of joint venture.
(3) Based on the weighted average number of Limited Partner Units
outstanding during the years ended December 31, 2000, 1999, 1998, 1997
and 1996.
The above selected financial data should be read in conjunction with
the financial statements and related notes contained in Item 8 hereof.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The Partnership was organized on February 10, 1995, to acquire for
cash, either directly or through joint venture arrangements, both newly
constructed and existing restaurant Properties, as well as land upon which
restaurant Properties were to be constructed, which are leased primarily to
operators of selected national and regional fast-food, family-style and casual
dining Restaurant Chains. The leases are generally triple-net leases, with the
lessees generally responsible for all repairs and maintenance, property taxes,
insurance and utilities. As of December 31, 2000, the Partnership owned 28
Properties, either directly or through joint venture or tenancy in common
arrangements.
Capital Resources
Net proceeds to the Partnership from its offering of Units, after
deduction of organizational and offering expenses, totalled $26,400,000. As of
December 31, 1996, the Partnership had invested $23,406,500 of its net offering
proceeds. 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 venture arrangements, 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% interest, respectively, in
the profits and losses of the joint ventures. During 1998, the Partnership
contributed $124,500 to Kingston Joint Venture to pay for additional
construction costs. In addition, during 1998, the Partnership received $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 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 for a 24 percent interest in the property, 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. As a result of the above transactions, as of December 31, 1999,
the Partnership had acquired 29 Properties, including three Properties owned by
joint ventures in which the Partnership is a co-venturer and four properties
owned with affiliates as tenants-in-common, and had paid acquisition fees
totalling $1,350,000 to an affiliate of the General Partners. 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 $1,846,222, $2,450,018, and $2,520,919 for the years ended
December 31, 2000, 1999 and 1998, respectively. The decrease in cash from
operations during 2000 as compared to 1999, and during 1999 as compared to 1998,
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.
Other sources and uses of capital included the following during the
years ended December 31, 2000, 1999 and 1998.
In December 1999, CNL/GC El Cajon Joint Venture, in which the
Partnership owned an 80 percent interest, sold its Property to its tenant for
$2,094,231. Due to the fact that the joint venture had recorded accrued rental
income (income the joint venture had recognized since the inception of the lease
relating to the straight-lining of future schedule rent increases in accordance
with generally accepted accounting principles) the joint venture wrote off
$172,496 in accrued rental income in connection with the sale. In addition, as a
result of the sale of the Property, the joint venture was dissolved in
accordance with the joint venture agreement. As a result, the Partnership
received approximately $1,675,400, representing its prorata share of the net
sales proceeds received by the joint venture and recorded a loss on dissolution
of $82,914 as of December 31, 1999, which represented the balance of unamortized
costs recorded by the joint venture. In January 2000, the Partnership reinvested
the majority of the return of capital in a Baker's Square Property in Wilmette,
Illinois. The Partnership acquired the Property from an affiliate of the General
Partners. The affiliate had purchased and temporarily held title to the Property
in order to facilitate the acquisition of the Property by the Partnership. The
purchase price paid by the Partnership represented the costs incurred by the
affiliate to acquire the Property, including closing costs. The Partnership
distributed amounts sufficient to enable the Limited Partners to pay federal and
state income taxes, if any (at a level reasonably assumed by the General
Partners), resulting from the sale.
In September 2000, the Partnership sold its Popeyes Property in Warner
Robins, Georgia to a third party for a total of $609,861 and received net sales
proceeds of approximately $607,400, resulting in a gain of $17,447 for financial
reporting purposes. This property was originally acquired by the Partnership in
October 1996 and had costs totaling approximately $563,000, excluding
acquisition fees and miscellaneous acquisition expenses; therefore the
Partnership sold this property for a total of approximately $44,400 in excess of
its original purchase price. The Partnership anticipates it will reinvest these
net sales proceeds in an additional Property. The Partnership distributed
amounts sufficient to enable the Limited Partners to pay federal and state
income taxes, if any (at a level reasonably assumed by the General Partners),
resulting from the sale.
In addition, in October 2000, the Partnership sold its Boston Market
Property in Long Beach, California, for $533,500 and received net sales proceeds
of approximately $530,000. Due to the fact that in 2000 the Partnership recorded
an allowance for loss of $353,622 for this Property, no gain or loss was
recognized for financial reporting purposes in 2000, relating to the sale. The
Partnership anticipates it will reinvest these net sales proceeds in an
additional Property. The Partnership distributed amounts sufficient to enable
the Limited Partners to pay federal and state income taxes, if any (at a level
reasonably assumed by the General Partners), resulting from the sale.
In January 2001, the Partnership sold its Boston Market Property in
Houston, Texas for $812,696 and received net sales proceeds of $782,648. The
Partnership intends to reinvest the net sales proceeds in an additional
Property.
None of the Properties owned by the Partnership, or the joint ventures
or tenancy in common arrangements in which the Partnership owns an interest, is
or may be encumbered. Subject to certain restrictions on borrowing, however, the
Partnership may borrow funds but will not encumber any of the Properties in
connection with any such borrowing. The Partnership will not borrow for the
purpose of returning capital to the Limited Partners. The Partnership will not
borrow under arrangements that would make the Limited Partners liable to
creditors of the Partnership. The General Partners further have represented that
they will use their reasonable efforts to structure any borrowing so that it
will not constitute "acquisition indebtedness" for federal income tax purposes
and also will limit the Partnership's outstanding indebtedness to three percent
of the aggregate adjusted tax basis of its Properties. In addition, the
Partnership will not borrow unless it first obtains an opinion of counsel that
such borrowing will not constitute acquisition indebtedness. Affiliates of the
General Partners from time to time incur certain operating expenses on behalf of
the Partnership for which the Partnership reimburses the affiliates without
interest.
Currently, rental income from the Partnership's Properties and cash
reserves are invested in money market accounts or other short-term, highly
liquid investments such as demand deposit accounts at commercial banks, money
market accounts and certificates of deposit with less than a 30-day maturity
date, pending the Partnership's use of such funds to pay Partnership expenses or
to make distributions to partners. At December 31, 2000, the Partnership had
$1,597,502 invested in such short-term investments as compared to $2,644,465 at
December 31, 1999. The decrease in the amount invested in short-term investments
at December 31, 2000, as compared to December 31, 1999, is primarily
attributable to the Partnership reinvesting the net sales proceeds from the 1999
return of capital from CNL/El Cajon Joint Venture in a Bakers Square Property in
Wilmette, Illinois, as described above. As of December 31, 2000, the average
interest rate earned by the Partnership on rental income deposited in demand
deposit accounts at commercial banks was approximately 5.38% annually. The funds
remaining at December 31, 2000, after payment of distribution and other
liabilities, will be used to meet the Partnership's working capital and other
needs and to invest in additional Properties.
Short-Term Liquidity
The Partnership's short-term liquidity requirements consist primarily
of the operating expenses of the Partnership.
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 generally 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.
The Partnership generally distributes cash from operations remaining
after the payment of the operating expenses of the Partnership, to the extent
that the General Partners determine that such funds are available for
distribution. Based on current cash from operations, and for the year ended
December 31, 2000, anticipated future cash from operations, the Partnership
declared distributions to the Limited Partners of $2,400,000 for each of the
years ended December 31, 2000, 1999 and 1998. This represents distributions of
$0.80 per Unit for each of the years ended December 31, 2000, 1999 and 1998. No
distributions were made to the General Partners for the years ended December 31,
2000, 1999 and 1998. No amounts distributed to the Limited Partners for the
years ended December 31, 2000, 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 Limited Partners on a quarterly basis.
During 2000, the General Partners waived their right to receive future
distributions from the Partnership, including both distributions of operating
cash flow and distributions of liquidation proceeds, to the extent that the
cumulative amount of such distributions would exceed the balance in the General
Partners' capital account as of December 31, 1999. Accordingly, the General
Partners were not allocated any net income and did not receive any distributions
during the year ended December 31, 2000.
As of December 31, 2000, 1999 and 1998, the Partnership owed $13,819,
$23,597 and $14,448, respectively, to related parties for accounting and
administrative services and management fees. As of March 15, 2001, the
Partnership had reimbursed the affiliates all such amounts. Other liabilities,
including distributions payable, decreased to $719,023 at December 31, 2000,
from $868,736 at December 31, 1999, partially due to amounts that were accrued
at December 31, 1999 relating to transaction costs for the proposed and
terminated merger with APF, as described in "Termination of Merger." The General
Partners believe that the Partnership has sufficient cash on hand to meet its
current working capital needs.
Long-Term Liquidity
The Partnership has no long-term debt or other long-term liquidity
requirements.
Results of Operations
During 1999 and 1998, the Partnership owned and leased 22 wholly owned
Properties, and during 2000, the Partnership owned and leased 23 wholly owned
Properties (including two Properties which were sold during 2000). In addition,
during 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. During 2000 and 1999,
the Partnership was also a co-venturer in one additional joint venture that
owned and leased one Property and also owned and leased one additional Property
with affiliates of the General Partners, as tenants-in-common (including one
Property in CNL/GC El Cajon Joint Venture, which was sold in December 1999). As
of December 31, 2000, the Partnership owned, either directly or through joint
venture arrangements, 28 Properties which are generally 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
$57,300 to $190,000. 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. For further description of the Partnership's leases and Properties,
see Item 1. Business - Leases and Item 2. Properties, respectively.
During the year ended December 31, 2000, the Partnership, and for the
years ended December 31, 1999 and 1998, the Partnership and its consolidated
joint venture, CNL/GC El Cajon Joint Venture, earned $2,043,609, $2,392,160 and
$2,813,442, respectively, in rental income from operating leases (net of
adjustments to accrued rental income) and earned income from direct financing
leases. The decrease in rental and earned income during 2000, as compared to
1999, was partially attributable to the fact that in 2000, the Partnership
established an allowance for doubtful accounts of approximately $173,700, in
accordance with its collection policy relating to two Denny's Properties and one
Mr. Fable's Property. The tenant of the Mr. Fable's Property defaulted under the
terms of its lease and ceased making rental payments. During 2000, the
Partnership also reversed approximately $154,100 of accrued rental income
relating to these Properties. The General Partners will continue to pursue
collection of the past due rental amounts relating to these Properties and will
recognize such amounts as income if collected.
The decrease in rental and earned income during 2000 and 1999, each as
compared to the previous year, was partially attributable to the fact that in
1999, the Partnership's consolidated joint venture, CNL/GC El Cajon Joint
Venture, sold its Property. As a result of the sale, the joint venture reversed
approximately $172,500 of accrued rental income that had been recognized as
income in prior periods. The decrease was partially offset by an increase of
approximately $42,000, in unamortized interim rental income. The balance was
recognized in 1999 due to the fact that the property was sold and the lease was
terminated. The decrease during 2000 was partially offset by an increase in
rental and earned income due to the fact that in January 2000, the Partnership
reinvested the return of capital from the 1999 sale of El Cajon Joint Venture in
a Property in Wilmette, Illinois.
Rental and earned income were also impacted by the fact that during
1998, the tenant of three Boston Market Properties filed for bankruptcy, but
continued making rental payments on the Properties. In April 1999, the tenant
rejected, vacated and ceased making rental payments on two of the three leases
resulting in a decrease in rental and earned income during 1999 of approximately
$135,800. In addition, during 1999, the Partnership reversed approximately
$59,700 of accrued rental income (non-cash accounting adjustment relating to the
straight-lining of future scheduled rent increases over the terms of the leases
in accordance with generally accepted accounting principles) relating to the two
rejected leases during 1999. In July 2000, the tenant rejected, vacated and
ceased making rental payments on the third lease resulting in a decrease of
rental and earned income during 2000 of approximately $59,800 relating to these
three Properties. In addition, during 2000, the Partnership reversed
approximately $35,100 of accrued rental income amounts relating to the one lease
that was rejected during 2000. In January 2001, the Partnership sold one of the
vacant Properties, as described in "Capital Resources." The Partnership will not
recognize rental and earned income from the two remaining vacant Properties
until new tenants for these Properties are located or until the Properties are
sold and the proceeds from the sale are reinvested in additional Properties. The
lost revenues resulting from the two rejected leases could have an adverse
effect on the results of operations of the Partnership if the Partnership is not
able to re-lease these Properties in a timely manner.
The decrease in rental and earned income during 1999, as compared to
1998, was also partially 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
during 1999 which reduced the cost of the Property on which rental income is
computed.
In addition, for the years ended December 31, 2000, 1999 and 1998, the
Partnership earned $176,088, $182,132 and $140,595, respectively, attributable
to net income earned by unconsolidated joint ventures in which the Partnership
is a co-venturer. The decrease in net income earned by unconsolidated joint
ventures during 2000, as compared to 1999, was partially a result of the fact
that during 2000 the tenant of the Property in Corpus Christi, Texas experienced
financial difficulties. As a result the tenants-in-common established an
allowance for doubtful accounts of approximately $42,900 relating to past due
rental amounts. The Partnership owns a 27.42% interest in this Property. The
increase in net income earned by unconsolidated joint ventures during 1999, as
compared to 1998, was primarily due to the fact that 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, and
invested in a Property in Zephyrhills, Florida, as tenants-in-common with CNL
Income Fund IV, Ltd., an affiliate of the General Partners.
During the year ended December 31, 2000, three lessees of the
Partnership, Golden Corral Corporation, National Restaurant Enterprises, Inc.
and Jack in the Box Inc., each contributed more than ten percent of the
Partnership's total rental and earned income (including rental and earned income
from the Partnership's share of rental income from three Properties owned by
unconsolidated joint ventures and four Properties owned with separate affiliates
of the General Partners as tenants-in-common). As of December 31, 2000, Golden
Corral Corporation and National Restaurant Enterprises, Inc. were each lessee
under leases relating to three restaurants,. and Jack in the Box Inc. were each
the lessee under leases relating to four restaurants. It is anticipated that
based on the minimum rental payments required by the leases, these three lessees
each will continue to contribute more than ten percent of the Partnership's
total rental and earned income in 2001. In addition, four Restaurant Chains,
Golden Corral, Burger King, Jack in the Box, and Arby's, each accounted for more
than ten percent of the Partnership's total rental and earned income during the
year ended December 31, 2000 (including rental and earned income from the
Partnership's share of rental income from three Properties owned by
unconsolidated joint ventures and four Properties owned with separate affiliates
of the General Partners as tenants-in-common). In 2001, it is anticipated that
each of these four Restaurant Chains will continue to contribute more than ten
percent of the Partnership's rental and earned income to which the Partnership
is entitled under the terms of the leases. Any failure of these lessees or
Restaurant Chains could have a material adverse affect on the Partnership's
income if the Partnership is not able to re-lease the Properties in a timely
manner.
During the years ended December 31, 2000, 1999, and 1998, the
Partnership also earned $33,149, $24,279, and $3,403, respectively, in other
income. The increase in other income during 1999, as compared to 1998, was
primarily due to the fact that the Partnership reversed $13,399 in transaction
costs during 1999. These represented amounts that had previously been expensed
related to the General Partners retaining financial and legal advisors to assist
them in evaluating and negotiating the proposed and terminated merger with APF,
as described below. The General Partners and APF agreed that it would be in the
best interest of the Partnership that it not be acquired in the acquisition due
to the Limited Partners' loss of passive income in the acquisition, as described
below.
Operating expenses, including depreciation and amortization expense,
were $708,269, $689,111 and $551,890 for the years ended December 31, 2000,
1999, and 1998, respectively. The increase in operating expenses during 2000 and
1999, each as compared to the previous year, was partially attributable to the
fact that the Partnership incurred certain expenses, such as legal fees, real
estate taxes, insurance, and maintenance relating to the three Boston Market
Properties whose leases were rejected by the tenant, the two Denny's Properties
and the one Mr. Fable's Property, as described above. In January 2001, the
Partnership sold one of the vacant Boston Market Properties, therefore, the
Partnership will not continue to incur these expenses for this Property.
However, the Partnership will continue to incur certain expenses, such as legal
fees, real estate taxes, insurance, and maintenance relating to the remaining
vacant Properties until new tenants or purchasers are located. The Partnership
is currently seeking either replacement tenants or purchasers for the vacant
Properties.
The increase in operating expenses during 2000, as compared to 1999,
was partially attributable to an increase in depreciation expense due to the
purchase of a Property during 2000, as described in "Capital Resources." The
increase in operating expenses during 2000, as compared to 1999, is partially
offset by, and the increase during 1999, as compared to 1998, is partially
attributable to, the amount of transaction costs the Partnership incurred
related to the General Partners retaining financial and legal advisors to assist
them in evaluating and negotiating the proposed and terminated Merger with APF,
as described below in "Termination of Merger."
In addition, the increase in operating expenses during 1999, as
compared to 1998, is partially attributable to the fact that depreciation
expense was lower during 1998 as a result of an adjustment to depreciation
expense relating to the reimbursement from the developer of construction costs
relating to the Properties in Aiken, South Carolina and Weatherford, Texas, as
described above, which reduced the depreciable basis of each Property.
As described above in "Capital Resources," during 2000, the Partnership
sold it Property in Warner Robins, Georgia, resulting in a gain of $17,447 for
financial reporting purposes.
During the year ended December 31, 2000, the Partnership recorded a
provision for loss on assets in the amount of $353,622, for financial reporting
purposes for its Property in Long Beach, California. The tenant of this Property
filed for bankruptcy in October 1998, and during 1999, rejected the lease
relating to the Property. The allowance represented the difference between the
carrying value of the Property and the net sales proceeds received from the sale
of this Property. In addition, during the year ended December 31, 2000, the
Partnership established a provision for loss on assets in the amount of
$477,971, for financial reporting purposes for its Property in Inglewood,
California. The tenant of this Property filed for bankruptcy in October 1998 and
during 1999, rejected the lease relating to the Property. In addition, during
the year ended December 31, 2000, the Partnership established provision for loss
on assets in the amount of $87,099 for financial reporting purposes for its
Property in Kentwood, Michigan. The tenant of this Property defaulted under the
terms of its lease and ceased restaurant operations. The allowance represented
the difference between the carrying value of the Property at December 31, 2000
and the estimated net realizable value of the Property. No such provisions were
recorded during the years ended December 31, 1999 and 1998.
As a result of the dissolution of the Partnership's consolidated joint
venture, CNL/GC El Cajon Joint Venture, the Partnership recognized a loss on
dissolution of $82,914 during the year ended December 31, 1999, for financial
reporting purposes, as described above in "Capital Resources." No such loss was
recorded during 2000 and 1998.
The Partnership's leases as of December 31, 2000, are generally
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.
In December 1999, the Securities and Exchange Commission released SAB
101, which provides the staff's view in applying generally accepted accounting
principles to selected revenue recognition issues. SAB 101 requires the
Partnership to defer recognition of certain percentage rental income until
certain defined thresholds are met. The Partnership adopted SAB 101 beginning
January 1, 2000. Implementation of SAB 101 did not have a material impact on the
Partnership's result of operations.
In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities." The Statement establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments, embedded in other contracts (collectively referred to as
derivatives), and for hedging activities. The Statement requires that an entity
recognize all derivatives as either assets or liabilities in the balance sheet
and measure those instruments at fair value. In June 1999, the Financial
Accounting Standards Board issued Statement of Financial Accounting Standards
No. 137, "Accounting for Derivative Instruments and Hedging Activities -
Deferral of the Effective Date of FASB Statement No. 133, an Amendment of FASB
Statement No. 133." FAS 137 deferred the effective date of FAS 133 for one year.
FAS 133, as amended, is now effective for all fiscal quarters of all fiscal
years beginning after June 15, 2000. The partnership has reviewed both
statements and has determined that both FAS 133 and FAS 137 do not apply to the
Partnership as of December 31, 2000.
Termination of Merger
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. Subsequent to entering into the Merger agreement, the
General Partners received a number of comments from brokers who sold the
Partnership's units concerning the loss of passive income treatment in the event
the Partnership merged with APF. On June 3, 1999, the General Partners, on
behalf of the Partnership, and APF agreed that it would be in the best interests
of the Partnership and APF that APF not attempt to acquire the Partnership in
the acquisition. Therefore in June 1999, APF entered into a termination
agreement with the General Partners of the Partnership.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
Item 8. Financial Statements and Supplementary Data
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
CONTENTS
Page
Report of Independent Certified Public Accountants 16
Financial Statements:
Balance Sheets 17
Statements of Income 18
Statements of Partners' Capital 19
Statements of Cash Flows 20-21
Notes to Financial Statements 22-37
Report of Independent Certified Public 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,
2000 and 1999, and the results of its operations and its cash flows for each of
the three years in the period ended December 31, 2000 in conformity with
accounting principles generally accepted in the United States of America. In
addition, in our opinion, the financial statement schedules listed in the index
appearing under item 14(a)(2) present 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
schedules are the responsibility of the Partnership's management; our
responsibility is to express an opinion on these financial statements and the
financial statement schedules based on our audits. We conducted our audits of
these statements in accordance with auditing standards generally accepted in the
United States of America, 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 our opinion.
/s/ PricewaterhouseCoopers LLP
Orlando, Florida
February 2, 2001
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
BALANCE SHEETS
December 31,
2000 1999
----------------- ------------------
ASSETS
Land and buildings on operating leases, less
accumulated depreciation and allowance
for loss on assets $ 18,604,190 $ 19,301,187
Net investment in direct financing leases 1,805,572 1,840,583
Investment in joint ventures 1,978,787 1,967,017
Cash and cash equivalents 1,597,502 2,644,465
Receivables, less allowance for doubtful
accounts of $254,586 and $48,138, respectively
33,711 77,686
Due from related parties 4,893 3,939
Prepaid expenses 13,868 3,652
Accrued rental income, less allowance for
doubtful accounts of $47,435 in 2000 633,062 693,671
Other assets 4,025 29,763
----------------- ------------------
$ 24,675,610 $ 26,561,963
================= ==================
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 4,385 $ 87,143
Accrued real estate taxes payable 22,277 2,041
Distributions payable 600,000 600,000
Due to related parties 13,819 23,597
Rents paid in advance and deposits 35,403 119,113
Deferred rental income 56,958 60,439
----------------- ------------------
Total liabilities 732,842 892,333
Partners' capital 23,942,768 25,669,630
----------------- ------------------
$ 24,675,610 $ 26,561,963
================= ==================
See accompanying notes to financial statements.
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
STATEMENTS OF INCOME
Year Ended December 31,
2000 1999 1998
---------------- --------------- ----------------
Revenues:
Rental income from operating leases $ 2,088,220 $ 2,271,450 $ 2,447,938
Adjustments to accrued rental income (189,227 ) (232,140 ) --
Earned income from direct financing leases 144,616 352,850 365,504
Interest 29,806 44,184 51,240
Other income 33,149 24,279 3,403
---------------- --------------- ----------------
2,106,564 2,460,623 2,868,085
---------------- --------------- ----------------
Expenses:
General operating and administrative 146,978 130,270 110,537
Professional services 50,721 30,086 19,504
Management fee to related party 22,591 25,246 26,690
Real estate taxes 61,764 20,254 --
State and other taxes 12,064 13,505 11,811
Depreciation and amortization 395,456 384,985 369,209
Transaction costs 18,695 84,765 14,139
---------------- --------------- ----------------
708,269 689,111 551,890
---------------- --------------- ----------------
Income Before Loss on Dissolution of Consolidated Joint
Venture, Minority Interest in Income of Consolidated
Joint Venture, Equity in Earnings of Unconsolidated
Joint Ventures, Gain on Sale of Assets, and Provision
for Losses on Assets 1,398,295 1,771,512 2,316,195
Loss on Dissolution of Consolidated Joint Venture -- (82,914 ) --
Minority Interest in Income of Consolidated
Joint Venture -- (31,461 ) (62,632 )
Equity in Earnings of Unconsolidated Joint Ventures 176,088 182,132 140,595
Gain on Sale of Assets 17,447 -- --
Provision for Loss on Assets (918,692 ) -- --
---------------- --------------- ----------------
Net Income 673,138 $ 1,839,269 $2,394,158
================ =============== ================
Allocation of Net Income
General partners $ -- $ (3,850) $ (59 )
Limited partners 673,138 1,843,119 2,394,217
---------------- --------------- ----------------
$ 673,138 $ 1,839,269 $ 2,394,158
================ =============== ================
Net Income Per Limited Partner Unit $ 0.22 $ 0.61 $ 0.80
================ =============== ================
Weighted Average Number of Limited Partner Units
Outstanding 3,000,000 3,000,000 3,000,000
================ =============== ================
See accompanying notes to condensed financial statements.
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
STATEMENTS OF PARTNERS' CAPITAL
Years Ended December 31, 2000, 1999, and 1998
General Partners
-------------------------------------
Accumulated
Contributions Earnings
----------------- ---------------- -
Balance, December 31, 1997 $ 1,000 $ (1,551 )
Distributions to limited partners
($0.80 per limited partner unit) -- --
Net income -- (59 )
----------------- ---------------- -
Balance, December 31, 1998 1,000 (1,610 )
Distributions to limited partners
($0.80 per limited partner unit) -- --
Net income -- (3,850 )
----------------- ---------------- -
Balance, December 31, 1999 1,000 (5,460 )
Distributions to limited partners
($0.80 per limited partner unit) -- --
Net income -- --
----------------- ---------------- -
Balance, December 31, 2000 $ 1,000 $ (5,460 )
================= ================ =
Limited Partners
- ------------------------------------------------------------------------
Accumulated Syndication
Contributions Distributions Earnings Costs Total
- ---------------- ---------------- ----------------- -------------- --------------
$ 30,000,000 $ (3,482,464 ) $ 3,309,218 $ (3,590,000 ) $26,236,203
-- (2,400,000 ) -- -- (2,400,000 )
-- -- 2,394,217 -- 2,394,158
- ---------------- ---------------- ----------------- -------------- --------------
30,000,000 (5,882,464 ) 5,703,435 (3,590,000 ) 26,230,361
-- (2,400,000 ) -- -- (2,400,000 )
-- -- 1,843,119 -- 1,839,269
- ---------------- ---------------- ----------------- -------------- --------------
30,000,000 (8,282,464 ) 7,546,554 (3,590,000 ) 25,669,630
-- (2,400,000 ) -- -- (2,400,000 )
-- -- 673,138 -- 673,138
- ---------------- ---------------- ----------------- -------------- --------------
$ 30,000,000 $ (10,682,464 ) $8,219,692 $ (3,590,000 ) $23,942,768
================ ================ ================= ============== ==============
See accompanying notes to financial statements.
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
STATEMENTS OF CASH FLOWS
Year Ended December 31,
2000 1999 1998
--------------- ---------------- ----------------
Increase (Decrease) in Cash and Cash Equivalents:
Cash Flows from Operating Activities:
Cash received from tenants $ 2,046,220 $ 2,436,836 $ 2,493,780
Distributions from unconsolidated joint
ventures 158,725 182,752 145,839
Cash paid for expenses (388,529 ) (213,754 ) (169,940 )
Interest received 29,806 44,184 51,240
--------------- ---------------- ----------------
Net cash provided by operating activities 1,846,222 2,450,018 2,520,919
--------------- ---------------- ----------------
Cash Flows from Investing Activities:
Additions to land and buildings on
operating leases (1,630,164 ) -- --
Proceeds from sale of assets 1,136,991 -- --
Reimbursement of construction costs from
developer -- -- 306,100
Investment in joint ventures (12 ) (527,864 ) (124,452 )
Proceeds from dissolution of consolidated joint
venture -- 2,094,231 --
--------------- ---------------- ----------------
Net cash provided by (used in) investing
activities (493,185 ) 1,566,367 181,648
--------------- ---------------- ----------------
Cash Flows from Financing Activities:
Distributions to limited partners (2,400,000 ) (2,400,000 ) (2,400,000 )
Distributions to holder of minority interest -- (46,567 ) (49,023 )
Distribution to holder of minority interest on
dissolution of consolidated joint venture -- (417,696 ) --
--------------- ---------------- ----------------
--------------- ---------------- ----------------
Net cash used in financing activities (2,400,000 ) (2,864,263 ) (2,449,023 )
--------------- ---------------- ----------------
Net Increase (Decrease) in Cash and Cash Equivalents (1,046,963 ) 1,152,122 253,544
Cash and Cash Equivalents at Beginning of Year 2,644,465 1,492,343 1,238,799
--------------- ---------------- ----------------
Cash and Cash Equivalents at End of Year $ 1,597,502 $ 2,644,465 $ 1,492,343
=============== ================ ================
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
STATEMENTS OF CASH FLOWS - CONTINUED
Year Ended December 31,
2000 1999 1998
--------------- ---------------- ----------------
Reconciliation of Net Income to Net Cash
Provided by Operating Activities:
Net income $ 673,138 $ 1,839,269 $ 2,394,158
--------------- ---------------- ----------------
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation 391,244 372,148 358,063
Amortization 4,212 12,837 11,146
Loss on dissolution of joint venture -- 82,914 --
Minority interest in income of consolidated
joint venture -- 31,461 62,632
Equity in earnings of unconsolidated joint
ventures, net of distributions (15,970 ) 620 5,244
Gain on sale of assets (17,447 ) -- --
Provision for loss on assets 918,692 -- --
Increase in receivables 13,632 (47,223 ) (29,850 )
Increase in due from related parties (954 ) (439 ) (3,500 )
Increase in prepaid expenses (10,216 ) (3,122 ) (510 )
Decrease in net investment in direct financing
leases 35,011 38,950 34,640
Decrease (increase) in accrued rental income 18,396 (67,188 ) (287,397 )
Increase in other assets (4,025 ) -- --
Increase (decrease) in accounts payable (62,522 ) 85,586 676
Increase (decrease) in due to related parties (9,778 ) 9,149 11,573
Increase (decrease) in rents paid in advance
and deposits (83,710 ) 98,535 (35,184 )
Decrease in deferred rental income (3,481 ) (3,479 ) (772 )
--------------- ---------------- ----------------
--------------- ---------------- ----------------
Total adjustments 1,173,084 610,749 126,761
--------------- ---------------- ----------------
Net Cash Provided by Operating Activities $ 1,846,222 $ 2,450,018 $ 2,520,919
=============== ================ ================
Supplemental Schedule of Non-Cash Investing and
Financing Activities:
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 $ 600,000
=============== ================ ================
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
Years Ended December 31, 2000, 1999, and 1998
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
generally 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.
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2000, 1999, and 1998
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
reverses 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, are removed from the accounts and gains or losses from sales
are 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.
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2000, 1999, and 1998
1. Significant Accounting Policies - Continued:
-------------------------------------------
Investment in Joint Ventures - Prior to the liquidation of
CNL/GC El Cajon Joint Venture in December 1999, the Partnership
accounted for its 80 percent interest in such 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.
The Partnership's investments in CNL Kingston Joint Venture; CNL
Mansfield Joint Venture; and Ocean Shores Joint Venture; and a property
in Corpus Christi, Texas; a property in Akron, Ohio; a property in
Fayetteville, North Carolina; and a property in Zephyrhills, Florida
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.
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.
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2000, 1999, and 1998
1. Significant Accounting Policies - Continued:
-------------------------------------------
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 accounting 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.
Reclassifications - Certain items in the prior years' financial
statements have been reclassified to conform to 2000 presentation.
These reclassifications had no effect on partners' capital or net
income.
Staff Accounting Bulleting No. 101 ("SAB 101") - In December 1999, the
Securities and Exchange Commission released SAB 101, which provides the
staff's view in applying generally accepted accounting principles to
selected revenue recognition issues. SAB 101 requires the Partnership
to defer recognition of certain percentage rental income until certain
defined thresholds are met. The Partnership adopted SAB 101 beginning
January 1, 2000. Implementation of SAB 101 did not have a material
impact on the Partnership's result of operations.
Statement of Financial Accounting Standards No. 133 ("FAS 133") and
Statement of Financial Accounting Standards No. 137 ("FAS 137") - In
June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities." The Statement establishes
accounting and reporting standards for derivative instruments,
including certain derivative instruments, embedded in other contracts
(collectively referred to as derivatives), and for hedging activities.
The Statement requires that an entity recognize all derivatives as
either assets or liabilities in the balance sheet and measure those
instruments at fair value. In June 1999, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards No.
137, "Accounting for Derivative Instruments and Hedging Activities -
Deferral of the Effective Date of FASB Statement No. 133, an Amendment
of FASB Statement No. 133." FAS 137 deferred the effective date of FAS
133 for one year. FAS 133, as amended, is now effective for all fiscal
quarters of all fiscal years beginning after June 15, 2000. The
partnership has reviewed both statements and has determined that both
FAS 133 and FAS 137 do not apply to the Partnership as of December 31,
2000.
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2000, 1999, and 1998
2. Leases:
------
The Partnership leases its land and buildings to operators of national
and regional fast-food and family-style and casual dining 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 some of 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, generally 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.
3. Land and Buildings on Operating Leases:
--------------------------------------
Land and buildings on operating leases consisted of the following at
December 31:
2000 1999
------------------- -------------------
Land $ 9,294,800 $ 9,384,719
Buildings 11,444,090 11,164,433
------------------- -------------------
20,738,890 20,549,152
Less accumulated depreciation (1,569,630 ) (1,247,965 )
------------------- -------------------
19,169,260 19,301,187
Less allowance for loss on
assets (565,070 ) --
------------------- -------------------
$ 18,604,190 $ 19,301,187
=================== ===================
In December 1999, CNL/GC El Cajon Joint Venture, the Partnership's
consolidated joint venture, sold its property to its tenant for
$2,094,231 (see Note 5). In January 2000, the Partnership reinvested
approximately $1,630,200 of the net sales proceeds in a Bakers Square
located in Wilmette, Illinois (see Note 8).
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2000, 1999, and 1998
3. Land and Buildings on Operating Leases:
--------------------------------------
In September 2000, the Partnership sold its property in Warner Robins,
Georgia, to a third party for $609,861 and received net sales proceeds
of approximately $607,400, resulting in a gain of $17,447 for financial
reporting purposes. This property was originally acquired by the
Partnership in 1996 at a cost totaling approximately $563,000,
excluding acquisition fees and miscellaneous acquisition expenses;
therefore, the Partnership sold this property for a total of
approximately $44,400 in excess of its original purchase price.
In 2000, the Partnership recorded a provision for loss on assets in the
amount of $353,622 for financial reporting purposes relating to the
property in Long Beach, California. The allowance represented the
difference between the carrying value of the property and the net sales
proceeds received from the sale of the property. In October 2000, the
Partnership sold this property to a third party for $533,500 and
received net sales proceeds of approximately $530,000. Due to the fact
that in 2000, the Partnership had recorded an allowance for loss for
this property, no additional gain or loss was recognized for financial
reporting purposes during 2000 relating to the sale of the property.
During 2000, the Partnership established a provision for loss on assets
of $477,971, relating to the property located in Inglewood, California.
The tenant of this property filed for bankruptcy in October 1998, and
in 1999, rejected the lease relating to the property. The allowance
represented the difference between the carrying value of the property
at December 31, 2000, and the estimated net realizable value for this
property.
During 2000, the partnership established a provision for loss on assets
of $87,099, relating to the property located in Kentwood, Michigan. The
tenant of this property defaulted under the terms of its lease and
ceased restaurant operations. The allowance represented the difference
between the carrying value of the property at December 31, 2000, and
the estimated net realizable value for this property.
Generally, 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, 2000, 1999 and 1998, the Partnership
recognized a loss of $27,155 (net of $141,492 in reversals and $47,735
in reserves), income of $19,488 (net of $232,140 in reversals), and
income of $287,397, respectively, of such rental income.
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2000, 1999, and 1998
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, 2000:
2001 $1,965,388
2002 2,005,231
2003 2,018,788
2004 2,021,433
2005 2,044,338
Thereafter 19,918,237
----------------
$29,973,415
================
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:
2000 1999
----------------- -----------------
Minimum lease payments
receivable $ 3,308,029 $ 3,526,271
Estimated residual values 485,703 485,703
Less unearned income (1,988,160 ) (2,171,391 )
-----------------
-----------------
Net investment in direct
financing leases $ 1,805,572 $ 1,840,583
================= =================
In December 1999, CNL/GC El Cajon Joint Venture, the Partnership's
consolidated joint venture, sold its property to the tenant, for which
the building portion had been classified as a direct financing lease.
In connection therewith, the gross investment (minimum lease payments
receivable and estimated residual value) and unearned income relating
to this property were removed from the accounts (see Note 5).
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2000, 1999, and 1998
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, 2000:
2001 $ 218,244
2002 218,244
2003 218,244
2004 218,244
2005 218,244
Thereafter 2,216,809
-----------------
$3,308,029
=================
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:
----------------------------
The Partnership owns properties in Fayetteville, North Carolina; Corpus
Christi, Texas; and Akron, Ohio as tenants-in-common with affiliates of
the general partners. As of December 31, 2000, the Partnership owned
interests in these properties of 19.56%, 27.42%, and 36.91%,
respectively.
The Partnership has a 21 percent and a 60.06% interest in the profits
and losses of CNL Mansfield Joint Venture and CNL Kingston Joint
Venture, respectively. The remaining interests in these joint ventures
are held by affiliates of the Partnership which have the same General
Partners.
In January 1999, the Partnership entered into a joint venture
arrangement, Ocean Shores Joint Venture, with CNL Income Fund X, Ltd.,
a Florida limited partnership and affiliate of the general partners, to
own and lease one restaurant property. The Partnership contributed
approximately $359,500 to the joint venture as of December 31, 2000.
The Partnership owns a 30.94% interest in the profits and losses of the
joint venture.
In January 1999, the Partnership invested in a property in Zephyrhills,
Florida as tenants-in-common with CNL Income Fund IV, Ltd., a Florida
limited partnership and affiliate of
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2000, 1999, and 1998
5. Investment in Joint Ventures-Continued:
--------------------------------------
the general partners. As of December 31, 2000, the Partnership
contributed approximately $168,400 for a 24 percent interest in the
property.
In addition, in December 1999, CNL/GC El Cajon Joint Venture, in which
the Partnership owned an 80 percent interest, sold its property to its
tenant for $2,094,231. Due to the fact that the joint venture had
recorded accrued rental income (income the joint venture had recognized
since the inception of the lease relating to the straight-lining of
future scheduled rent increases in accordance with generally accepted
accounting principles) the joint venture wrote-off $172,496 in accrued
rental income in connection with the sale. In addition, as a result of
the sale of the property, the joint venture was dissolved in accordance
with the joint venture agreement. As a result, the Partnership received
approximately $1,675,400 representing its prorata share of the net
sales proceeds received by the joint venture and recorded a loss on
dissolution of $82,914, during 1999, which represented the balance of
unamortized costs recorded by the joint venture.
CNL Mansfield Joint Venture, CNL Kingston Joint Venture, Ocean Shores
Joint Venture and the Partnership and affiliates, as tenants-in-common
in four 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:
2000 1999
---------------- ---------------
Land and buildings on operating leases,
less accumulated depreciation $ 5,260,304 $5,363,578
Net investment in direct financing lease 792,921 802,684
Cash 51,798 2,410
Receivables, less allowance for doubtful
accounts 66,996 27,737
Accrued rental income 297,196 215,163
Other assets 533 --
Liabilities 33,082 13,042
Partners' capital 6,436,666 6,398,530
Revenues 700,747 726,885
Net income 583,366 613,418
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2000, 1999, and 1998
5. Investment in Joint Ventures - Continued:
----------------------------------------
The Partnership recognized income totaling $176,088, $182,132 and
$140,595 during the years ended December 31, 2000, 1999, and 1998 from
these joint ventures and the properties held as tenants-in-common with
affiliates.
6. Allocations and Distributions:
-----------------------------
From inception through December 31, 1999, distributions of net cash
flow, as defined in the limited partnership agreement of the
Partnership, were 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 was 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").
From inception through December 31, 1999, generally, net income
(determined without regard to any depreciation and amortization
deductions and gains and losses from the sale of properties) was
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 were allocated 99 percent to the limited
partners and one percent to the general partners.
From inception through December 31, 1999, net sales proceeds from the
sale of a property not in liquidation of the Partnership generally were
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
then received 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 were
distributed 95 percent to the limited partners and five percent to the
general partners.
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2000, 1999, and 1998
6. Allocations and Distributions - Continued:
-----------------------------------------
Any gain from the sale of a property, not in liquidation of the
Partnership, was in general, allocated in the same manner as net sales
proceeds are distributable. Any loss was, 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.
Effective January 1, 2000, the general partners waived their right to
receive future distributions from the Partnership, including both
distributions of operating cash flow and distributions of liquidation
proceeds, to the extent that the cumulative amount of such
distributions would exceed the balance in the general partners' capital
account as of December 31, 1999. Accordingly, for years commencing
January 1, 2000 and after, the Partnership's net income will be
allocated entirely among the limited partners. However, if losses are
allocated to the general partners in a year, an amount of income equal
to the sum of such losses may be allocated to the general partners in
succeeding years. Accordingly, the general partners were not allocated
any net income and did not receive any distributions during the year
ended December 31, 2000.
During each of the years ended December 31, 2000, 1999, and 1998, the
Partnership declared distributions to the limited partners of
$2,400,000. No distributions have been made to the general partners to
date.
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2000, 1999, and 1998
7. 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:
2000 1999 1998
--------------- -------------- --------------
Net income for financial reporting purposes $ 673,138 $ 1,839,269 $ 2,394,158
Depreciation for financial reporting purposes in
(excess of) less than depreciation for tax
reporting purposes 50,099 20,470 (1,069 )
Amortization for financial reporting purposes
less than (5,087 ) 2,501 1,539
(in excess of) amortization for tax
reporting
purposes
Direct financing leases recorded as operating
leases for tax reporting purposes 35,010 38,951 34,640
Equity in earnings of unconsolidated joint
ventures for
financial reporting purposes in excess of
equity in (747 ) (21,316 ) (13,489 )
earnings of unconsolidated joint ventures
for tax
reporting purposes
Minority interest in timing differences of
consolidated joint venture -- (23,193 ) 23,280
Capitalization (deduction) of transaction costs
for tax (84,765 ) 84,765 14,139
reporting purposes
Accrued rental income 27,155 (19,488 ) (287,397 )
Rents paid in advance (11,437 ) 14,014 (35,184 )
Deferred rental income (12,239 ) (51,181 ) (9,208 )
Allowance for doubtful accounts 206,448 46,855 (13,050 )
Gain on sale of assets for financial
reporting purposes less than (in excess of)
gain for tax reporting purposes (327,494 ) 74,630 --
Loss on dissolution for financial reporting
purposes in -- (14,866 ) --
excess of loss on dissolution for tax
purposes
Allowance for loss on assets 918,692 -- --
Other -- (11,318 ) 5,680
--------------- -------------- --------------
Net income for federal income tax purposes $ 1,468,773 $ 1,980,093 $ 2,114,039
=============== ============== ==============
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2000, 1999, and 1998
8. Related Party Transactions:
--------------------------
One of the individual general partners, James M. Seneff, Jr., is one of
the principal shareholders of CNL Holdings, Inc. The other individual
general partner, Robert A. Bourne, serves as President and Treasurer of
CNL Financial Group, a wholly owned subsidiary of CNL Holdings, Inc.
CNL Fund Advisors, Inc. (the "Advisor") was a majority owned subsidiary
of CNL Financial Group, Inc. until it merged with CNL American
Properties Fund, Inc. ("APF"), effective September 1, 1999. The
individual general partners are stockholders and directors of APF.
The Advisor provides certain services relating to management of the
Partnership and its properties pursuant to a management agreement with
the Partnership. In connection therewith, the Partnership has agreed to
pay the Advisor 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
the Affiliates. 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 the Affiliates shall determine. The
Partnership incurred management fees of $22,591, $25,246 and $26,690,
for the years ended December 31, 2000, 1999, and 1998, respectively.
The Advisor is also entitled to receive a deferred, subordinated real
estate disposition fee, payable upon the sale of one or more properties
based on the lesser of one-half of a competitive real estate commission
or three percent of the sales price if the Advisor provides a
substantial amount of services in connection with the sale. However, if
the sales proceeds are reinvested in a replacement property, no such
real estate disposition fees will be incurred until such replacement
property is sold and the net sales proceeds are distributed. The
payment of the real estate disposition fee is subordinated to the
receipt by the limited partners of their aggregate 18% Preferred
Return, plus their adjusted capital contributions. No deferred,
subordinated real estate disposition fees have been incurred since
inception.
During the years ended December 31, 2000, 1999, and 1998, the Advisor
and its affiliates provided accounting and administrative services to
the Partnership on a day-to-day basis including services relating to
the proposed and terminated merger. The Partnership incurred $77,769,
$81,811, and $91,124, for the years ended December 31, 2000, 1999, and
1998, respectively, for such services.
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2000, 1999, and 1998
8. Related Party Transactions - Continued:
--------------------------------------
During 2000, the Partnership acquired a property for a purchase price
of approximately $1,630,200 from CNL BB Corp., an affiliate of the
general partners. CNL BB Corp. had purchased and temporarily held title
to this property in order to facilitate the acquisition of the property
by the Partnership. The purchase price paid by the Partnership
represented the costs incurred by CNL BB Corp. to acquire and carry the
property, including closing costs. In accordance with the Statement of
Policy of Real Estate programs for the North American Securities
Administrators Association, Inc., all income, expenses, profits and
losses generated by or associated with the property, or interests
therein, purchased from an affiliate in which the affiliate has acted
as an interim owner, are treated as belonging to the Partnership. For
the year ended December 31, 2000, other income included $2,296 of such
amounts.
The amount due related parties at December 31, 2000 and 1999 totaled
$13,819 and $ 23,597, respectively.
9. 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 four properties held as
tenants-in-common with affiliates of the general partners) for each of
the years ended December 31:
2000 1999 1998
-------------- --------------- -------------
Golden Corral Corporation $438,299 $439,790 $461,527
National Restaurant Enterprises, Inc. 424,696 424,696 421,988
Jack in the Box Inc. (formerly
known as Foodmaker, Inc.) 349,491 349,491 349,514
Phoenix Restaurant Group, Inc.
(formerly known as
DenAmerica Corp.) N/A 386,065 432,423
San Diego Food Holdings, Inc. N/A N/A 316,038
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2000, 1999, and 1998
9. Concentration of Credit Risk - Continued:
----------------------------------------
In addition, the following schedule presents total rental and earned
income from individual restaurant chains, each representing more than
ten percent of the Partnership's total rental and earned income
(including rental and earned income from the Partnership's consolidated
joint venture, the Partnership's share of total rental income from the
unconsolidated joint ventures and the four properties held as
tenants-in-common with affiliates of the general partners) for each of
the years ended December 31:
2000 1999 1998
--------------- --------------- ---------------
Burger King $498,959 496,391 459,036
Golden Corral Family
Steakhouse Restaurants 438,299 $ 599,869 $ 777,565
Jack in the Box 349,491 349,491 349,514
Arby's 282,551 283,884 N/A
Boston Market N/A N/A 309,576
The information denoted by N/A indicates that for each period
presented, the tenant or group of affiliated tenants, and the chain did
not represent more than ten percent of the Partnership's total rental
and earned income.
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 and in April 1999 and July 2000, rejected the leases
relating to these properties. The lost revenues resulting from the
rejection of these 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. In October 2000, the
Partnership sold one of the vacant properties (See Note 3). In
addition, in January 2001, the Partnership sold one additional Boston
Market property (See Note 11).
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2000, 1999, and 1998
10. Selected Quarterly Financial Data:
---------------------------------
The following table presents selected unaudited quarterly financial
data for each full quarter during the years ended December 31, 2000 and
1999:
2000 Quarter First Second Third Fourth Year
---------------------- --------------- ------------- --------------- --------------- ---------------
Revenues (1) $ 607,331 $ 540,789 $ 554,011 $580,521 $2,282,652
Net Income 170,269 243,827 (9,647 ) 268,689 673,138
Net income per
limited partner
unit 0.06 0.08 0.00 0.08 0.22
1999 Quarter First Second Third Fourth Year
--------------- ------------- --------------- --------------- ---------------
Revenues (1) $ 667,110 $ 751,597 $ 551,641 $640,946 $2,611,294
Net Income 477,905 612,795 403,836 344,733 1,839,269
Net income per
limited partner
unit 0.16 0.20 0.14 0.12 0.61
(1) Revenues include equity in earnings of unconsolidated joint
ventures, minority interest in income of the consolidated
joint venture and adjustments to accrued rental income as a
result of tenants filing for bankruptcy.
11. Subsequent Events:
-----------------
In January 2001, the Partnership sold its property in Houston, Texas to
an unrelated third party for $812,696 and received net sales proceeds
of $782,648, resulting in a gain of approximately $4,300 for financial
reporting purposes.
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 Financial Group, Inc. and their affiliates, all of which are
affiliates of the General Partners.
James M. Seneff, Jr., age 54. 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 co-venturer in over 100 real estate ventures. These ventures
have involved the financing, acquisition, construction, and leasing of
restaurants, office buildings, apartment complexes, hotels, and other
real estate. Mr. Seneff has served as Director and Chairman of the
Board of CNL American Properties Fund, Inc. ("APF"), a public, unlisted
real estate investment trust, since 1994. Mr. Seneff served as Chief
Executive Officer of APF from 1994 through August 1999 and has served
as Co-Chief Executive Officer of APF since December 2000. Mr. Seneff
served as Chairman of the Board and Chief Executive Officer of CNL Fund
Advisors (the "Advisor") until it merged with APF in September 1999,
and in June 2000, was re-elected to those positions of the Advisor. Mr.
Seneff is a principal stockholder of CNL Holdings, Inc., the parent
company of CNL Financial Group, Inc. (formerly CNL Group, Inc.), a
diversified real estate company, and has served as a director, Chairman
of the Board and Chief Executive Officer of CNL Financial Group, Inc.
since its formation in 1980. CNL Financial Group, Inc. is the parent
company, either directly or indirectly through subsidiaries, of CNL
Real Estate Services, Inc., CNL Capital Markets, Inc., CNL Investment
Company and CNL Securities Corp. Mr. Seneff also serves as a Director,
Chairman of the Board and Chief Executive Officer of CNL Hospitality
Properties, Inc., a public, unlisted real estate investment trust, as
well as, CNL Hospitality Corp., its advisor. In addition, he serves as
a Director, Chairman of the Board and Chief Executive Officer of CNL
Retirement Properties, Inc., a public, unlisted real estate investment
trust and its advisor, CNL Retirement Corp. Since 1992, Mr. Seneff has
also served as a Director, Chairman of the Board and Chief Executive
Officer of Commercial Net Lease Realty, Inc., a public real estate
investment trust that is listed on the New York Stock Exchange. Mr.
Seneff has also served as a Director, Chairman of the Board and Chief
Executive Officer of CNL Securities Corp. since 1979; CNL Investment
Company since 1990; and CNL Institutional Advisors, Inc., a registered
investment advisor for pension plans, since 1990. Mr. Seneff formerly
served as a Director of First Union National Bank of Florida, N.A., and
currently serves as the Chairman of the Board of CNL Bank. Mr. Seneff
previously served on the Florida State Commission on Ethics and is a
former member and past Chairman of the State of Florida Investment
Advisory Council, which recommends to the Florida Board of
Administration investments for various Florida employee retirement
funds. The Florida Board of Administration, Florida's principal
investment advisory and money management agency, oversees the
investment of more than $60 billion of retirement funds. Mr. Seneff
received his degree in Business Administration from Florida State
University in 1968.
Robert A. Bourne, age 53. Mr. Bourne has participated as a general
partner or co-venturer in over 100 real estate ventures involved in the
financing, acquisition, construction, and leasing of restaurants,
office buildings, apartment complexes, hotels, and other real estate.
Mr. Bourne is Director and Vice Chairman of the Board of Directors of
APF. Mr. Bourne served as President of APF from 1994 through February
1999. He also served as Treasurer from February 1999 through August
1999 and from May 1994 through December 1994. He also served in various
executive positions with the Advisor prior to its merger with APF
including, President from 1994 through September 1997, and Director
from 1994 through August 1999. Mr. Bourne serves as President and
Treasurer of CNL Financial Group, Inc. (formerly CNL Group, Inc.);
Director, Vice Chairman of the Board and President of CNL Hospitality
Properties, Inc., a public, unlisted real estate investment trust; as
well as, Director and President of CNL Hospitality Corp., its advisor.
In addition, Mr. Bourne serves as Director and President of CNL
Retirement Properties, Inc., a public, unlisted real estate investment
trust; as well as, a Director and President of its advisor, CNL
Retirement Corp. Mr. Bourne also serves as a Director of CNL Bank. He
has served as a Director since 1992, Vice Chairman of the Board since
February 1996, Secretary and Treasurer from February 1996 through 1997,
and President from July 1992 through February 1996, of Commercial Net
Lease Realty, Inc., a public real estate investment trust listed on the
New York Stock Exchange. Mr. Bourne also serves as Director, President
and Treasurer for various affiliates of CNL Financial Group, Inc.
including, CNL Investment Company, CNL Securities Corp. and CNL
Institutional Advisors, Inc., a registered investment advisor for
pension plans. Mr. Bourne began his career as a certified public
accountant employed by Coopers & Lybrand, Certified Public Accountants,
from 1971 through 1978, where he attained the position of Tax Manager
in 1975. Mr. Bourne graduated from Florida State University in 1970
where he received a B.A. in Accounting, with honors.
Curtis B. McWilliams, age 45. Mr. McWilliams has served as Co-Chief
Executive Officer of APF since December 2000 and previously served as
Chief Executive Officer from September 1999 through December 2000.
Prior to the acquisition of the Advisor, Mr. McWilliams served as
President of APF from February 1999 until September 1999. From April
1997 to February 1999, he served as Executive Vice President of APF.
Mr. McWilliams joined CNL Financial Group, Inc. (formerly CNL Group,
Inc.) in April 1997 and served as an Executive Vice President until
September 1999. In addition, Mr. McWilliams served as President of the
Advisor and CNL Financial Services, Inc. from April 1997 until the
acquisition of such entities by APF in September 1999. From September
1983 through March 1997, Mr. McWilliams was employed by Merrill Lynch &
Co. The majority of his career at Merrill Lynch & Co. was in the
Investment Banking division where he served as a Managing Director. Mr.
McWilliams received a B.S.E. in Chemical Engineering from Princeton
University in 1977 and a Master of Business Administration degree with
a concentration in finance from the University of Chicago in 1983.
John T. Walker, age 42. Mr. Walker has served as President of APF since
September 1999 and as Chief Operating Officer since March 1995. Mr.
Walker also served as a board member of CNL Restaurant Property
Services, Inc., a subsidiary of APF from December 1999 until December
2000. Previously, he served as Executive Vice President of APF from
January 1996 to September 1999. Mr. Walker joined the Advisor in
September 1994, as Senior Vice President responsible for Research and
Development. He served as the Chief Operating Officer of the Advisor
from April 1995 until September 1999 and as Executive Vice President
from January 1996 until September 1999, at which time it merged with
APF. Mr. Walker also served as Executive Vice President of CNL
Hospitality Properties, Inc. and CNL Hospitality Corp. (formerly CNL
Hospitality Advisors, Inc.) from 1997 to October 1998. From May 1992 to
May 1994, he was Executive Vice President for Finance and
Administration and Chief Financial Officer of Z Music, Inc., a cable
television network which was subsequently acquired by Gaylord
Entertainment, where he was responsible for overall financial and
administrative management and planning. From January 1990 through April
1992, Mr. Walker was Chief Financial Officer of the First Baptist
Church in Orlando, Florida. From April 1984 through December 1989, he
was a partner in the accounting firm of Chastang, Ferrell & Walker,
P.A., where he was the partner in charge of audit and consulting
services, and from 1981 to 1984, Mr. Walker was a Senior
Consultant/Audit Senior at Price Waterhouse. Mr. Walker is a cum laude
graduate of Wake Forest University with a Bachelor of Science degree in
Accountancy and is a certified public accountant.
Steven D. Shackelford, age 37. Mr. Shackelford was promoted to
Executive Vice President and Chief Financial Officer of APF in July
2000. He served as Senior Vice President and Chief Financial Officer of
APF since January 1997. Mr. Shackelford also served as Secretary and
Treasurer of APF since September 1999. He also served as Chief
Financial Officer of the Advisor from September 1996 to September 1999.
From March 1995 to July 1996, Mr. Shackelford was a senior manager in
the national office of Price Waterhouse LLP 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 was a
manager in the Paris, France office of Price Waterhouse, serving
several multi-national clients. Mr. Shackelford was an audit staff and
senior from 1986 to 1992 in the Orlando, Florida office of Price
Waterhouse. Mr. Shackelford received a Bachelor of Arts degree in
Accounting, with honors, and a Master of Business Administration degree
from Florida State University and is a certified public accountant.
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 15, 2001, 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 15, 2001, the beneficial
ownership interests of the General Partners in the Registrant.
Title of Class Name of Partner Percent of Class
-------------- --------------- ----------------
General Partnership Interests James M. Seneff, Jr. 45%
Robert A. Bourne 45%
CNL Realty Corporation 10%
--------
100%
========
Neither the General Partners, nor any of their affiliates, owns any
interest in the Registrant, except as noted above.
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, 2000, exclusive of any distributions to which the General
Partners or their affiliates may be entitled by reason of their purchase and
ownership of Units.
Amount Incurred
Type of Compensation For the Year
and Recipient Method of Computation Ended December 31, 2000
- --------------------------------- -------------------------------------- ------------------------------
Reimbursement to affiliates for Operating expenses are reimbursed at Accounting and
operating expenses the lower of cost or 90 percent of admin-istrative services:
the prevailing rate at which $77,769
comparable services could have been
obtained in the same geographic
area. 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.
Annual management fee to One percent of the sum of gross $22,591
affiliates revenues (excluding noncash and
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 the
affiliates. All of 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 the
affiliates shall determine.
Amount Incurred
Type of Compensation For the Year
and Recipient Method of Computation Ended December 31, 2000
- --------------------------------- -------------------------------------- ------------------------------
Deferred, subordinated real A deferred, subordinated real estate $-0-
estate disposition fee payable disposition fee, payable upon sale
to affiliates. 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
affiliates of the General Partners
provide 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 equal $-0-
subordinated share of to five percent of Partnership
Part-nership net cash flow distributions of net cash flow,
subordinated to certain minimum
returns to the Limited Partners.
General Partners' deferred, A deferred, subordinated share equal $-0-
subordinated share of to five percent of Partnership
Part-nership net sales proceeds distributions of such net sales
from a sale or sales not in proceeds, subordinated to certain
liquidation of the Partnership minimum returns to the Limited
Partners
Amount Incurred
Type of Compensation For the Year
and Recipient Method of Computation Ended December 31, 2000
- --------------------------------- -------------------------------------- ------------------------------
General Partners' share of Distributions of net sales proceeds $-0-
Partnership net sales pro-ceeds from a sale or sales of
from a sale or sales in substantially all of the
liquidation of the Partnership 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.
In addition, during 2000, the Partnership acquired a Baker's Square Property
from CNL BB Corp., an affiliate of the General Partners, for an aggregate
purchase price of approximately $1,630,200. CNL BB Corp. had purchased and
temporarily held title to this Property in order to facilitate the acquisition
of the Property by the Partnership. The purchase price paid by the Partnership
represents the costs incurred by CNL BB Corp. to acquire and carry the Property,
including closing costs.
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 Certified Public Accountants
Balance Sheets at December 31, 2000 and 1999
Statements of Income for the year ended December 31, 2000,
1999, and 1998
Statements of Partners' Capital for the year ended December
31, 2000, 1999, and 1998
Statements of Cash Flows for the year ended December 31, 2000,
1999, and 1998
Notes to Financial Statements
2. Financial Statement Schedule
Schedule II - Valuation and Qualifying Accounts for the years
ended December 31, 2000, 1999, and 1998
Schedule III - Real Estate and Accumulated Depreciation at
December 31, 2000
Notes to Schedule III - Real Estate and Accumulated
Depreciation at December 31, 2000
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 XVII, 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 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.)
**4.1 Affidavit and Certificate of Limited Partnership of
CNL Income Fund XVII, 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 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.)
**8.3 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 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 20, 1997, and
incorporated herein by reference.)
**10.2 Form of Joint Venture Agreement for Joint Ventures
with Unaffiliated Entities (Filed as Exhibit 10.2 to
the Registrant's Registration Statement on Form S-11,
No. 33-90998, incorporated herein by reference.)
**10.3 Form of Joint Venture Agreement for Joint Ventures
with Affiliated Programs (Filed as Exhibit 10.3 to
the Registrant's Registration Statement on Form S-11,
No. 33-90998,
incorporated herein by reference.)
**10.4 Form of Development Agreement (Filed as Exhibit 10.5
to the Registrant's Registration Statement on Form
S-11, No. 33-90998, incorporated herein by
reference.)
**10.5 Form of Indemnification and Put Agreement (Filed as
Exhibit 10.6 to the Registrant's Registration
Statement on Form S-11, No. 33-90998, incorporated
herein by reference.)
**10.6 Form of Unconditional Guarantee of Payment and
Performance (Filed as Exhibit 10.7 to the
Registrant's Registration Statement on Form S-11, No.
33-90998, incorporated herein by reference.)
**10.7 Form of Lease Agreement for Existing Restaurant
(Filed as Exhibit 10.8 to the Registrant's
Registration Statement on Form S-11, No. 33-90998,
incorporated herein by reference.)
**10.8 Form of Lease Agreement for Restaurant to be
Constructed (Filed as Exhibit 10.9 to the
Registrant's Registration Statement on Form S-11, No.
33-90998, incorporated herein by reference.)
**10.9 Form of Premises Lease for Golden Corral Restaurant
(Filed as Exhibit 10.10 to the Registrant's
Registration Statement on Form S-11, No. 33-90998,
incorporated herein by reference.)
**10.10 Form of Agreement between CNL Income Fund XVII, Ltd.
and MMS Escrow and Transfer Agency, Inc. and between
CNL Income Fund XVIII, Ltd. and MMS Escrow and
Transfer Agency, Inc. relating to the Distribution
Reinvestment Plans (Filed as Exhibit 4.4 to the
Registrant's Registration Statement on Form S-11, No.
33-90998, incorporated herein by reference.)
**10.11 Form of Cotenancy Agreement with Unaffiliated Entity
(Filed as Exhibit 10.12 to Amendment No. One to the
Registrant's Registration Statement on Form S-11, No.
33-90998, incorporated herein by reference.)
**10.12 Form of Cotenancy Agreement with Affiliated Entity
(Filed as Exhibit 10.13 to Amendment No. One to the
Registrant's Registration Statement on Form S-11, No.
33-90998, incorporated herein by reference.)
**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.)
(b) The Registrant filed no reports on Form 8-K during
the period October 1, 2000 through December 31, 2000.
**previously filed
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 30th day of
March, 2001.
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.
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
/s/ Robert A. Bourne President, Treasurer and Director March 30, 2001
- ------------------------------------
Robert A. Bourne (Principal Financial and Accounting
Officer)
/s/ James M. Seneff, Jr. Chief Executive Officer and Director March 30, 2001
- ------------------------------------
James M. Seneff, Jr. (Principal Executive Officer)
F-1
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
Years Ended December 31, 2000, 1999, and 1998
Additions Deductions
---------------------------------- ----------------------------
Collected
or Deter-
Balance at Charged to Charged to Deemed mined to Balance
Beginning Costs and Other Uncollec- be Col- at End
Year Description of Year Expenses Accounts tible lectible of Year
- ---------- ----------------- -------------- --------------- ---------------- ------------- ------------ ------------
- ----------
1998 Allowance for
doubtful
accounts (a) $ 14,333 $ -- $ 1,896 (b) $ 4,923 (c) $ 10,023 $ 1,283
- ---------- ============== =============== ================ ============= ============ ============
- ----------
1999 Allowance for
doubtful
accounts (a) $ 1,283 $ -- $ 48,138 (b) $ -- (c) $ 1,283 $ 48,138
- ----------
============== =============== ================ ============= ============ ============
- ----------
- ----------
2000 Allowance for
doubtful
accounts (a) $ 48,138 $ 34,572 $ 250,711 (b) $ 3,966 (c) $ 27,434 $ 302,021
============== =============== ================ ============= ============ ============
(a) Deducted from receivables and accrued rental income on the balance sheet.
(b) Reduction of rental, earned and other income.
(c) Amounts written off as uncollectible.
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 - -
Baker's Square:
Wilmette, Illinois - 832,288 827,640 - -
Boston Market Restaurants:
Houston, Texas - 373,112 477,383 - -
Inglewood, California (j) - 327,924 535,518 -
Burger King Restaurants:
Harvey, Illinois - 489,341 734,010 -
Chicago Ridge, Illinois - 771,965 - 699,556 -
Lyons, Illinois - 887,767 - 597,381 -
Denny's Restaurants:
Mesquite, Nevada - 373,078 - - -
Pensacola, Florida - 305,509 670,990 - -
Fazoli's Restaurant:
Warner Robins, Georgia - 300,482 - 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 -
Jack in the Box Restaurants:
Dinuba, California - 324,970 - 509,982 -
LaPorte, Texas - 355,929 - 560,485 -
El Dorado, California - 617,416 - 548,187 -
Mr. Fables's Restaurant:
Kentwood, Michigan (i) - 287,732 626,865 - -
Wendy's Old Fashioned
Hamburgers Restaurants:
Knoxville, Tennessee - 332,003 - 489,610 -
Livingston, Tennessee - 261,701 - - -
------------ ------------ ----------- --------
$9,294,800 $6,063,198 $5,380,891 -
============ ============ =========== ========
Properties the Partnership has
Invested in Under Direct
Financing Leases:
Arby's Restaurant:
Muncie, Indiana - - $629,847 - -
Denny's Restaurant:
Mesquite, Nevada - - - 857,390 -
Wendy's Old Fashioned
Hamburgers Restaurant:
Livingston, Tennessee - - - 455,575 -
------------ ------------ ----------- --------
- $629,847 $1,312,965 -
============ ============ =========== ========
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 -arolina $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, Texa- (f) $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 (f) - $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 - -
============ ============ =========== ========
Property of Joint Venture in Which the Partnership has a 30.94% Interest and has
Invested in Under an Operating Lease:
Burger KinghRestaurantaurant:
Ocean Shores, WA - $351,015 - - -
============ ============ =========== ========
Property in which the Partnership
has a 24% Interest as
Tenants-in-Common and has invested in Under an Operating Lease:
Arby's Restaurant:
Zephyrhills, FL - $260,146 $441,434 - -
============ ============ =========== ========
Property of Joint Venture in
Which the Partnership has
a 30.94% Interest and
has Invested in Under a
Direct Financing Lease:
Burger King Restaurant:
Ocean Shores, WA - - $810,902 - -
============ ============ =========== ========
Life on Which
Gross Amount at Which Depreciation in
Carried at Close of Period (b) 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 71,102 1996 06/96 (c)
296,025 557,809 853,834 77,839 1996 10/96 (c)
832,288 827,640 1,659,928 25,289 2000 01/00 (c)
373,112 477,383 850,495 72,131 1996 06/96 (c)
327,924 535,518 863,442 45,971 1996 06/98 (c)
489,341 734,010 1,223,351 117,961 1996 03/96 (c)
771,965 699,556 1,471,521 108,160 1996 03/96 (c)
887,767 597,381 1,485,148 72,663 1997 11/96 (c)
373,078 (d) 373,078 (e) 1996 12/95 (e)
305,509 670,990 976,499 98,488 1996 08/96 (c)
300,482 421,898 722,380 58,488 1996 08/96 (c)
711,838 1,162,406 1,874,244 186,914 1996 03/96 (c)
508,790 862,571 1,371,361 130,983 1996 04/96 (c)
345,926 691,222 1,037,148 99,778 1996 03/96 (c)
324,970 509,982 834,952 73,924 1996 05/96 (c)
355,929 560,485 916,414 79,864 1996 07/96 (c)
617,416 548,187 1,165,603 77,910 1996 07/96 (c)
287,732 626,865 914,597 99,998 1980 03/96 (c)
332,003 489,610 821,613 72,167 1996 05/96 (c)
261,701 (d) 261,701 (e) 1996 06/96 (e)
- -------------- ------------ ------------ ------------
$9,294,800 $11,444,090 $20,738,890 $1,569,630
============== ============ ============ ============
- (d) (d) (e) 1995 03/96 (e)
- (d) (d) (e) 1996 12/95 (e)
- (d) (d) (e) 1996 06/96 (e)
- --------------
-
==============
$377,800 $587,700 $965,500 $83,128 1996 10/96 (c)
============== ============ ============ ============
$715,052 $726,004 $1,441,056 $95,049 1992 01/97 (c)
============== ============ ============ ============
$355,594 $517,030 $872,624 $67,690 1970 01/97 (c)
============== ============ ============ ============
$297,295 $482,914 $780,209 $61,158 1997 02/97 (c)
============== ============ ============ ============
$189,452 $328,444 $517,896 $33,817 1997 09/97 (c)
============== ============ ============ ============
$351,015 (d) $351,015 (e) 1998 01/99 (e)
============== ============ ============ ============
$260,146 $441,434 $701,580 $28,733 1990 01/99 (c)
============== ============ ============ ============
- (d) (d) (e) 1998 01/99 (e)
============== ============ ============ ============
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 2000
(a) Transactions in real estate and accumulated depreciation during 2000,
1999, and 1998 are summarized as follows:
Accumulated
Cost Depreciation
---------------- -----------------
Properties the Partnership has Invested
in Under Operating Leases:
Balance, December 31, 1997 $ 21,882,839 $ 553,968
Acquisitions 499,431 -
Dispositions (858,323 ) (36,214 )
Depreciation expense -- 358,063
---------------- -----------------
Balance, December 31, 1998 21,523,947 875,817
Dispositions (974,793 ) --
Depreciation expense -- 372,148
---------------- -----------------
Balance, December 31, 1999 20,549,154 1,247,965
Acquisitions 1,659,928 --
Dispositions (1,470,192 ) (69,579 )
Depreciation expense -- 391,244
---------------- -----------------
Balance, December 31, 2000 $ 20,738,890 $ 1,569,630
================ =================
Property in Which the Partnership has an 19.56% Interest as
Tenants-in-Common and has Invested in Under an Operating Lease:
Balance, December 31, 1997 $ 965,500 $ 24,358
Depreciation expense -- 19,590
---------------- -----------------
Balance, December 31, 1998 965,500 43,948
Depreciation expense -- 19,590
---------------- -----------------
Balance, December 31, 1999 965,500 63,538
Depreciation expense -- 19,590
---------------- -----------------
Balance, December 31, 2000 $ 965,500 $ 83,128
================ =================
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED
DEPRECIATION - CONTINUED
December 31, 2000
Accumulated
Cost Depreciation
---------------- ------------------
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, 1997 $ 1,441,056 $ 22,448
Depreciation expense -- 24,200
---------------- ----------------
Balance, December 31, 1998 1,441,056 46,648
Depreciation expense -- 24,200
---------------- ----------------
Balance, December 31, 1999 1,441,056 70,848
Depreciation expense -- 24,201
---------------- ----------------
Balance, December 31, 2000 $ 1,441,056 $ 95,049
================ ================
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, 1997 $ 872,624 $ 15,988
Depreciation expense -- 17,234
---------------- ----------------
Balance, December 31, 1998 872,624 33,222
Depreciation expense -- 17,234
---------------- ----------------
Balance, December 31, 1999 872,624 50,456
Depreciation expense -- 17,234
---------------- ----------------
Balance, December 31, 2000 $ 872,624 $ 67,690
================ ================
Property of Joint Venture in Which the Partnership has a 21%
Interest and has Invested in Under an Operating Lease:
Balance, December 31, 1997 $ 780,209 $ 12,866
Depreciation expense -- 16,097
---------------- ----------------
Balance, December 31, 1998 780,209 28,963
Depreciation expense -- 16,097
---------------- ----------------
Balance, December 31, 1999 780,209 45,060
Depreciation expense -- 16,098
---------------- ----------------
Balance, December 31, 2000 $ 780,209 $ 61,158
================ ================
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED
DEPRECIATION - CONTINUED
December 31, 2000
Accumulated
Cost Depreciation
---------------- ------------------
Property of Joint Venture in which the Partnership has a 60.06%
Interest and has Invested in under an Operating Lease:
Balance, December 31, 1997 $ 512,925 $ 983
Acquisition 4,971 --
Depreciation expense -- 10,937
---------------- ----------------
Balance, December 31, 1998 517,896 11,920
Depreciation expense -- 10,948
---------------- ----------------
Balance, December 31, 1999 517,896 22,868
Depreciation expense -- 10,949
---------------- ----------------
balance, December 31, 2000 $ 517,896 $ 33,817
================ ================
Property of Joint Ventures in which the Partnership has a 30.94%
Interest and has Invested in under an Operating Lease:
Balance, December 31, 1998 $ -- $ --
Acquisitions 351,015 --
Depreciation expense (e) -- --
---------------- ----------------
Balance, December 31, 1999 351,015 --
Depreciation expense (e) -- --
---------------- ----------------
Balance, December 31, 2000 $ 351,015 $ --
================ ================
Property of Joint Ventures in which the Partnership has a 24%
Interest as Tenants-in-Common and has Invested in under an
Operating Lease:
Balance, December 31, 1998 $ -- $ --
Acquisitions 701,580 --
Depreciation expense -- 13,532
---------------- ----------------
Balance, December 31, 1999 701,580 13,532
Depreciation expense -- 15,201
---------------- ----------------
Balance, December 31, 2000 $ 701,580 $ 28,733
================ ================
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED
DEPRECIATION - CONTINUED
December 31, 2000
(b) As of December 31, 2000, the aggregate cost of the Properties owned by
the Partnership and the joint venture for federal income tax purposes
was $22,690,518 and $6,217,380, 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 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, 2000.
(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.
(i) For financial reporting purposes, the undepreciated cost of the
Property in Kentwood, Michigan, was written down to net realizable
value due to an impairment in value. The Partnership recognized the
impairment by recording an allowance for loss on the building in the
amount of $87,099 for the year ended December 31, 2000. The impairment
at December 31, 2000, represented the difference between the Property's
carrying value and the estimated of the net realizable value of the
Property. The cost of the Property presented on this schedule is the
gross amount at which the Property was carried at December 31, 2000,
excluding the allowance for loss on the building.
(j) For financial reporting purposes, the undepreciated cost of the
Property in Inglewood, California, was written down to net realizable
value due to an impairment in value. The Partnership recognized the
impairment by recording an allowance for loss on the land and building
in the amount of $477,971 for the year ended December 31, 2000. The
impairment at December 31, 2000, represented the difference between the
Property's carrying value and the estimated of the net realizable value
of the Property. The cost of the Property presented on this schedule is
the gross amount at which the Property was carried at December 31,
2000, excluding the allowance for loss on the land and building.
EXHIBITS
EXHIBIT INDEX
Exhibit Number
**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.)
**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.)
**8.3 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 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.)
**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.)
**previously filed