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, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-22485
CNL INCOME FUND XVII, LTD.
(Exact name of registrant as specified in its charter)
Florida 59-3295393
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
450 South Orange Avenue
Orlando, Florida 32801-3336
(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 value for such Units. Each Unit was originally sold at $10 per Unit.
DOCUMENTS INCORPORATED BY REFERENCE:
None
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. During the year
ended December 31, 2001, the Partnership reinvested the net sales proceeds from
the 2000 sale of the Property in Warner Robins, Georgia, and Long Beach,
California along with a portion of the net sales proceeds received from the 2001
sale of the Property in Houston, Texas, and entered into a joint venture
arrangement, CNL VII & XVII Lincoln Joint Venture, with an affiliate of the
General Partners to purchase and hold one property in Lincoln, Nebraska,
indirectly through a joint venture in which the Partnership is a co-venturer. In
addition, during 2001, the Partnership sold its Properties in Kentwood, Missouri
and El Dorado, California, and reinvested a portion of these net sales proceeds
in a Property in Austin, Texas, and in a Property in Waldorf, Maryland, as
tenants-in-common, with affiliates of the General Partners, which are Florida
limited partnerships. In addition, during 2001, the Partnership distributed to
the limited partners, a portion of the net sales proceeds received from the sale
in Inglewood, California and a portion of the net sales proceeds received from
the sale of the Property in Houston, Texas.
As a result of the above transactions, as of December 31, 2001, the
Partnership owned 27 Properties. The 27 Properties include four Properties owned
by joint ventures in which the Partnership is a co-venturer and five Properties
owned with affiliates as tenants-in-common. 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 2020. 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
$280,900. 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 22 of the Partnership's 27 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 2001, the Partnership reinvested a portion of the net sales
proceeds it received from the sales of the Properties in Warner Robins, Georgia;
Long Beach, California; Houston, Texas; Kentwood, Missouri; and El Dorado,
California (as described above); in a Property in Austin, Texas; in a Property
in Waldorf, Maryland, as tenants-in-common with affiliates of the General
Partners and in a Property in Lincoln, Nebraska in a joint venture arrangement,
CNL VII & XVII Lincoln Joint Venture, with an affiliate of the General Partners.
The affiliates are limited partnerships organized pursuant to the laws of the
state of Florida. The lease terms for these Properties are substantially the
same as the Partnership's other leases, as described above.
In February 2002, a tenant, Sybra, Inc., filed for bankruptcy. As of
March 15, 2002, the Partnership has continued receiving rental payments relating
to the Property in Zephyrhills, Florida, held with an affiliate of the General
Partners, as tenants-in-common. While the tenant has not rejected or affirmed
the lease, there can be no assurance that it will not be rejected in the future.
The lost revenues resulting from the possible rejection of this lease could have
an adverse effect on the results of operations of the Partnership.
Major Tenants
During 2001, four lessees of the Partnership, Golden Corral
Corporation, National Restaurant Enterprises, Inc., Jack in the Box Inc. and
Jack in the Box Eastern Division, L.P. (which are affiliated entities under
common control) (hereinafter referred as "Jack in the Box Inc."), and RTM
Indianapolis, Inc. and RTM Southwest Texas, Inc. (which are affiliated entities
under common control) (hereinafter referred as "RTM, Inc."), each contributed
more than 10% of the Partnership's total rental and earned income, including the
Partnership's share of rental and earned income from Properties owned by
unconsolidated joint ventures and Properties owned with affiliates of the
General Partners as tenants-in-common. As of December 31, 2001, Golden Corral
Corporation was the lessee under leases relating to four restaurants, and Jack
in the Box Inc., National Restaurant Enterprises, Inc. and RTM, Inc. were each
the lessee under leases relating to three restaurants. It is anticipated that
based on the minimum rental payments required by the leases, these four lessees
each will continue to contribute more than ten percent of the Partnership's
total rental and earned income in 2002. 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 10% of the Partnership's
total rental and earned income during 2001 (including the Partnership's share of
rental and earned income from Properties owned by unconsolidated joint ventures
and Properties owned with affiliates of the General Partners as
tenants-in-common). In 2002, it is anticipated that each of these four
Restaurant Chains will continue to contribute more than 10% 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 or sell the Properties in a timely manner. As of December 31,
2001, Golden Corral Corporation 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
The Partnership has entered into the following separate joint venture
arrangements, each to purchase and hold one Property: CNL Mansfield Joint
Venture with CNL Income Fund VII, Ltd., and CNL Kingston Joint Venture with CNL
Income Fund XIV, Ltd., Ocean Shores Joint Venture with CNL Income Fund X, Ltd.
In addition, in April 2001, the Partnership entered into a joint venture
arrangement, CNL VII & XVII Lincoln Joint Venture, with CNL Income Fund VII,
Ltd., an affiliate of the General Partners to purchase and hold one Property.
Each of the CNL Income Funds is an affiliate of the General Partners and is a
limited partnership organized pursuant to the laws of the state of Florida.
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% interest in CNL Mansfield Joint Venture, a
60.06% interest in CNL Kingston Joint Venture, a 30.94% interest in Ocean Shores
Joint Venture, and an 86% interest in CNL VII & XVII Lincoln 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.
CNL Mansfield Joint Venture, CNL Kingston Joint Venture and Ocean
Shores Joint Venture each have an initial term of 20 years and CNL VII & XVII
Lincoln Joint Venture has an initial term of 30 years and, after the expiration
of the initial term, the joint ventures continue 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 venture partners, sale of the Property owned
by the joint venture and mutual agreement of the Partnership and its joint
venture partners to dissolve the joint venture.
The Partnership 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, Ocean Shores Joint Venture, and CNL VII & XVII Lincoln
Joint Venture is distributed 21%, 60.06%, 30.94% and 86%, 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. In addition, in
July 2001, the Partnership entered into an agreement to hold a Property in
Waldorf, Maryland, as tenants-in-common, with CNL Income Fund VI, Ltd. and CNL
Income Fund IX, Ltd. 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%, 24% and 25% interest in the
Properties in Fayetteville, North Carolina; Corpus Christi, Texas; Akron, Ohio;
Zephryhills, Florida; and Waldorf, Maryland, 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 APF Partners, LP, 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 APF Partners, LP (the "Advisor") 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. The Advisor also assists the General Partners in negotiating the
leases. For these services, the Partnership has agreed to pay the Advisor 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.
During 2000, CNL Fund Advisors, Inc. assigned its rights in, and its
obligations under, the management agreement with the Partnership to CNL APF
Partners, LP. All of the terms and conditions of the management, including the
payment of fees, as described, remain unchanged.
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 the
Advisor, 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, 2001, the Partnership owned 27 Properties. Of the 27
Properties, 18 are owned by the Partnership in fee simple, four are owned
through joint venture arrangements and five 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 21,300
to 115,100 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 1
Florida 3
Georgia 1
Illinois 4
Indiana 2
Maryland 1
North Carolina 1
Nebraska 1
Nevada 1
Ohio 1
South Carolina 1
Tennessee 3
Texas 6
Washington 1
--------------
TOTAL PROPERTIES 27
==============
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, 2001, 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, 2001, 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 $19,984,630 and
$10,459,655, respectively.
The following table lists the Properties owned by the Partnership as of
December 31, 2001 by Restaurant Chain.
Restaurant Chain Number of Properties
Arby's 4
Bakers Square 1
Bennigan's 1
Black-eyed Pea 1
Boston Market 1
Burger King 5
Denny's 2
Fazoli's 1
Golden Corral 4
Jack in the Box 3
Taco Bell 1
Taco Cabana 1
Wendy's 2
--------------
TOTAL PROPERTIES 27
==============
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, 2001, 2000, 1999, 1998, and 1997 the Properties were
96%, 92%, 93%, 100%, and 100% occupied, respectively. The following is a
schedule of the average rent per Property for the years ended December 31:
2001 2000 1999 1998 1997
-------------- ------------- ------------- ------------- --------------
Rental Income(1)(2) $ 2,357,917 $ 2,353,394 $ 2,667,611 $ 2,983,830 $ 2,762,605
Properties(2) 26 26 29 28 28
Average Rent per Property $ 90,689 $ 90,515 $ 91,987 $ 106,565 $ 98,664
(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 a provision 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, 2001 for each year for the next ten years and thereafter.
Percentage of
Expiration Year Number Annual Rental Gross Annual
of Leases Revenues Rental Income
----------------- ---------------- ----------------- --------------------------
2002 -- $ -- --
2003 -- -- --
2004 -- -- --
2005 -- -- --
2006 -- -- --
2007 -- -- --
2008 -- -- --
2009 -- -- --
2010 -- -- --
2011 4 458,331 18.57%
Thereafter 22 2,009,533 81.43%
---------- ----------------- -------------
Total (1) 26 $ 2,467,864 100.00%
========== ================= =============
(1) Excludes one Property which was vacant at December 31, 2001.
Leases with Major Tenants. The terms of each of the leases with the
Partnership's major tenants as of December 31, 2001 (see Item 1. Business -
Major Tenants), are substantially the same as those described in Item 1.
Business - Leases.
Golden Corral Corporation leases four Golden Corral restaurants. The
initial term of each lease is 15 years (three leases expiring in 2011 and one
lease in 2015) and the average minimum base annual rent is approximately
$156,000 (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 $140,400
(ranging from approximately $123,200 to $153,600).
Jack in the Box, Inc. leases three 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 $88,300 (ranging from
approximately $80,100 to $96,300).
RTM, Inc. leases three Arby's Restaurants. The initial term of each
lease is 20 years (expiring in 2016) and the average minimum base annual rent is
approximately $85,700 (ranging from approximately $82,700 to $88,200).
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, 2002, there were 1,609 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 2001,
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 have the right to prohibit
transfers of Units. From inception through December 31, 2001, 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 2001 and 2000, other than
pursuant to the Plan, net of commissions.
2001 2000
-------------------------------------- -------------------------------------
High Low Average High Low Average
--------- --------- ---------- -------- --------- ----------
First Quarter (2) (2) (2) $7.63 $7.63 $ 7.63
Second Quarter $6.70 $ 6.50 $ 6.57 $8.50 $6.66 $ 8.13
Third Quarter 6.61 6.42 6.50 $7.63 $7.00 $ 7.32
Fourth Quarter 9.57 6.10 7.84 $7.03 $6.50 $ 6.83
(1) A total of 14,880 and 12,000 Units were transferred other than pursuant
to the Plan for the years ended December 31, 2001 and 2000,
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, 2001 and 2000, 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 2001 and 2000 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, 2001 and 2000, 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,
2001 2000 1999 1998 1997
---------------- ----------------- ----------------- ---------------- -----------------
Revenues (1) $ 1,885,375 $ 2,471,879 $ 2,843,434 $ 2,946,048 $ 2,772,714
Net income (2) 969,196 673,138 1,839,269 2,394,158 2,203,557
Cash distributions
declared 2,400,000 2,400,000 2,400,000 2,400,000 2,287,500
Net income per Unit
(2)(3) 0.32 0.22 0.61 0.80 0.73
Cash distributions
declared per Unit
(3) 0.80 0.80 0.80 0.80 0.76
2001 2000 1999 1998 1997
---------------- ----------------- ----------------- ---------------- -----------------
At December 31:
Total assets $ 23,194,348 $ 24,675,610 $ 26,561,963 $ 27,365,705 $ 27,524,148
Partners' capital 22,511,964 23,942,768 25,669,630 26,230,361 26,236,203
(1) Revenues include equity in earnings (loss) of unconsolidated joint
ventures and minority interest in income of the consolidated joint
venture.
(2) Net income for the years ended December 31, 2001, 2000 and 1999
includes $534,135, $1,107,919, and $232,140 from provisions for
write-down of assets, respectively, and for the years ended December
31, 2001 and 2000, it includes $310,979 and $17,447 from gain on sale
of assets, respectively. Net income for the year ended December 31,
1999 includes $82,914 from loss on dissolution of joint venture.
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, 2001, the Partnership owned 27
Properties, either directly or through joint venture or tenancy in common
arrangements.
Capital Resources
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 $1,784,443, $1,846,222, and $2,450,018 for the years ended
December 31, 2001, 2000 and 1999, respectively. The decrease in cash from
operations during 2001 and 2000, each as compared to the previous year, is
primarily a result of changes in the Partnership's working capital and changes
in income and expenses as described in "Results of Operations" below.
Other sources and uses of capital included the following during the
years ended December 31, 2001, 2000 and 1999.
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, the joint venture wrote off $172,496 in accrued rental income in
connection with the sale. The accrued rental income was the accumulated amount
of non-cash accounting adjustments previously recorded in order to recognize
future scheduled rent increases as income evenly over the term of the lease. The
write-off represented the difference between the carrying value of the Property,
including the accumulated accrued rental income, and the estimated net sales
proceeds from the anticipated sale of the Property. 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. 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
a provision for write-down of assets for loss of $353,622 for this Property, no
gain or loss was recognized in 2000, relating to the sale. 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 Property in Houston, Texas to
a third party for $812,696 and received net sales proceeds of approximately
$782,700, resulting in a gain of $4,284. The Partnership used the net sales
proceeds to acquire an interest in CNL VII and XVII Lincoln Joint Venture, as
described below, and to make distributions to the limited partners. 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 April 2001, the Partnership reinvested the net sales proceeds from
the sales of the Properties in Warner Robins, Georgia; Long Beach, California,
and Houston Texas, as described above, and entered into a joint venture
arrangement, CNL VII & XVII Lincoln Joint Venture, with CNL Income Fund VII,
Ltd., a Florida limited partnership and an affiliate of the General Partners, to
hold one Property. The joint venture acquired this Property from CNL BB Corp.,
an affiliate of the General Partners, who had purchased and temporarily held
title to the Property in order to facilitate the acquisition of the Property by
the joint venture. The Partnership contributed approximately $1,496,700 to the
joint venture. As of December 31, 2001, the Partnership owned an 86% interest in
the profits and losses of the joint venture.
In June 2001, the Partnership sold the Property in Kentwood, Michigan,
received net sales proceeds of approximately $681,200 and recorded a loss of
$38,877. In July 2001, the Partnership used a portion of these net sales
proceeds to acquire an interest in a Property in Waldorf, Maryland, as
tenants-in-common with CNL Income Fund VI, Ltd. and CNL Income Fund IX, Ltd.,
each of which is a Florida limited partnership and an affiliate of the General
Partners. As of December 31, 2001, the Partnership contributed approximately
$570,100 for a 25% interest in the profits and losses of the Property. The
Partnership intends to reinvest the remainder portion of the net sales proceeds
in an additional Property.
In September 2001, the Partnership sold the Property in Inglewood,
California to a third party for $300,000 and received net sales proceeds of
approximately $298,300. Due to the fact that during second quarter, the
Partnership had recorded a provision for write-down of this Property, no
additional gain or loss was recognized in September 2001 relating to the sale of
the Property. The Partnership distributed a portion of the net sales proceeds to
the Limited Partners and intends to reinvest the remaining sales proceeds in an
additional Property.
In September 2001, the Partnership also sold its Property in El Dorado,
California to a third party for $1,553,500 and received net sales proceeds of
approximately $1,510,500, resulting in a gain of $345,572. In December 2001, the
Partnership reinvested the majority of net sales proceeds received in a Property
in Austin, Texas. 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 of approximately
$1,216,600 represented the costs incurred by the affiliate to acquire the
Property, including closing costs. The General Partners believe that the
transaction, or a portion thereof, relating to the sale of the Property and the
reinvestment of the proceeds qualified as a like-kind exchange transaction for
federal income tax purposes. The Partnership distributed the remaining net sales
proceeds to the Limited Partners. 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.
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 90-day maturity
date, pending the Partnership's use of such funds to pay Partnership expenses or
to make distributions to partners. At December 31, 2001, the Partnership had
$673,924 invested in such short-term investments as compared to $1,597,502 at
December 31, 2000. The decrease in the amount invested in short-term investments
at December 31, 2001, as compared to December 31, 2000, is primarily
attributable to the Partnership reinvesting the net sales proceeds from the 2000
sale of the Properties in Warner Robins, Georgia and Long Beach, California, in
a Property acquired in a joint venture arrangement, CNL VII & XVII Lincoln Joint
Venture, with affiliates of the General Partners, as described above. As of
December 31, 2001, the average interest rate earned by the Partnership on rental
income deposited in demand deposit accounts at commercial banks was
approximately 2.7% annually. The funds remaining at December 31, 2001, will be
used to pay distributions and other liabilities of the Partnership.
In February 2002, a tenant, Sybra, Inc., filed for bankruptcy. As of
March 15, 2002, the Partnership has continued receiving rental payments relating
to the Property in Zephyrhills, Florida, held with an affiliate of the General
Partners, as tenants-in-common. While the tenant has not rejected or affirmed
the lease, there can be no assurance that it will not be rejected in the future.
The lost revenues resulting from the possible rejection of this lease could have
an adverse effect on the results of operations of the Partnership.
In March 2002, the Partnership entered into an agreement with an
unrelated third party to sell the Denny's Property in Mesquite, Nevada. At
December 31, 2001, the Partnership established a provision for write-down of
assets related to the anticipated sale of this Property. As of March 15, 2002,
the sale had not occurred.
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 years ended
December 31, 2001 and 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, 2001, 2000 and 1999. This represents
distributions of $0.80 per Unit for each of the years ended December 31, 2001,
2000 and 1999. No distributions were made to the General Partners for the years
ended December 31, 2001, 2000 and 1999. No amounts distributed to the Limited
Partners for the years ended December 31, 2001, 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. 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 years ended December 31, 2001 and 2000.
As of December 31, 2001 and 2000, the Partnership owed $11,582 and
$13,819, respectively, to related parties for accounting and administrative
services and management fees. As of March 15, 2002, the Partnership had
reimbursed the affiliates all such amounts. Other liabilities, including
distributions payable, decreased to $670,802 at December 31, 2001, from $719,023
at December 31, 2000, primarily due to a decrease in accrued real estate taxes
payable and rents paid in advance and deposits. Total liabilities at December
31, 2001, to the extent they exceed cash and cash equivalents, will be paid from
anticipated future cash from operations, or in the event the General Partners
elect to make additional capital contributions or loans, from the future General
Partners' contributions or loans.
Long-Term Liquidity
The Partnership has no long-term debt or other long-term liquidity
requirements.
Critical Accounting Policies
The Partnership's leases are accounted for under the provisions of
Statement of Accounting Standard No. 13, "Accounting for Leases" ("FAS 13"), and
have been accounted for using either the direct financing or the operating
method. FAS 13 requires management to estimate the economic life of the leased
property, the residual value of the leased property and the present value of
minimum lease payments to be received from the tenant. In addition, management
assumes that all payments to be received under its leases are collectible.
Changes in management's estimates or assumption regarding collectibility of
lease payments could result in a change in accounting for the lease at the
inception of the lease.
The Partnership accounts for its unconsolidated joint ventures using
the equity method of accounting. Under generally accepted accounting principles,
the equity method of accounting is appropriate for entities that are partially
owned by the Partnership, but for which operations of the investee are shared
with other partners. The Partnership's joint venture agreements require the
consent of all partners on all key decisions affecting the operations of the
underlying Property.
Management reviews its Properties and investments in unconsolidated
entities periodically (no less than once per year) for impairment whenever
events or changes in circumstances indicate that the carrying amount of the
assets may not be recoverable through operations. Management determines whether
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. If an impairment is indicated, the assets are
adjusted to their fair value.
Results of Operations
During 1999, 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). During 2001,
the Partnership owned and leased 21 wholly owned Properties (including four
Properties which were sold in 2001.) During 2001, the Partnership also owned and
leased one additional Property. In addition, during 2000 and 1999, 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). In addition, during 2001,
the Partnership was 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. As of December 31,
2001, the Partnership owned, either directly or through joint venture
arrangements, 27 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
$280,900. 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 years ended December 31, 2001 and 2000, the Partnership, and
for the year ended December 31, 1999, the Partnership and its consolidated joint
venture, CNL/GC El Cajon Joint Venture, earned $1,963,677, $2,232,836 and
$2,624,300, respectively, in rental income from operating leases and earned
income from direct financing leases. The decrease in rental and earned income
during 2001, as compared to 2000, was primarily attributable to the lost
revenues from the fact that two and one Properties were sold in 2001 and 2000,
respectively. The decrease during 2001 was partially offset by an increase in
rental and earned income of approximately $24,100 during 2001, due to the fact
that in 2001 and 2000, the Partnership reinvested in a Property in Austin, Texas
and in a Property in Wilmette, Illinois, respectively.
The decrease in rental and earned income during 2001 and 2000, each as
compared to the previous year, was partially attributable to the fact that in
2000, the Partnership stopped recording rental revenue relating to a Denny's
Property in Mesquite, Nevada and a Mr. Fable's Property in Kentwood, Michigan.
In June 2001, the Partnership sold the Property in Kentwood, Michigan, as
described above in "Capital Resources". On October 31, 2001, Phoenix Restaurant
Group, Inc. and its Subsidiaries (collectively referred to as "PRG"), the tenant
of the remaining lease relating to the Property in Mesquite, Nevada, filed for
Chapter 11 bankruptcy protection. As a result of the bankruptcy filing, PRG
rejected this lease. The General Partners will continue to pursue collection of
past due rental amounts relating to these Properties. The Partnership does not
anticipate it will recognize any rental income relating to the Property in
Mesquite, Nevada, until such time as the Partnership executes a new lease or
until the Property is sold and the proceeds from such sales are reinvested in an
additional Property. The lost revenues resulting from this Property could have
an adverse effect on the results of operations of the Partnership if the
Partnership is not able to re-lease or sell this Property in a timely manner.
The General Partners are currently seeking a new tenant or purchaser for this
Property.
The decrease in rental and earned income during 2000, as compared to
1999, was partially offset by an increase of approximately $42,000 in
unamortized interim rental income in 1999, resulting from the Partnership's
consolidated joint venture, CNL/GC El Cajon Joint Venture, sale of its Property.
The balance was recognized in 1999 due to the fact that the lease was terminated
as a result of the sale. 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 liquidation proceeds from the 1999 sale of El Cajon
Joint Venture in a Property in Wilmette, Illinois, as described above.
Rental and earned income were also impacted by the fact that during
1998, the tenant of three Boston Market Properties filed for bankruptcy. 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 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 2001 and 2000, the Partnership sold the
three Properties relating to these leases, as described in "Capital Resources."
In addition, for the years ended December 31, 2001, 2000 and 1999, the
Partnership recorded a loss of $136,021 and income of $176,088 and $182,132,
respectively, attributable to net income earned or losses recognized by
unconsolidated joint ventures in which the Partnership is a co-venturer. Net
income earned by joint ventures decreased during 2001 and 2000, each as compared
to the previous year, partially as a result of the Partnership and an affiliate
of the General Partners, as tenants-in-common, of the Property in Corpus
Christi, Texas, in which the Partnership owns an approximate 27% interest,
stopped recording rental revenues totaling approximately $194,100 and $42,900
during 2001 and 2000, respectively, due to the fact that PRG, the tenant of the
Property experienced financial difficulties. In October 2001, PRG filed for
bankruptcy, as described above. The Partnership and an affiliate, as
tenants-in-common, will continue to pursue collection of past due rental amounts
relating to this Property. Since future store closings may occur, the General
Partners will continue to evaluate this Property, held with an affiliate, as
tenants-in-common, that PRG is continuing to operate as of March 15, 2001. In
addition, the Partnership and the affiliate, as tenants-in-common of this
Property, recorded a provision for write-down of assets of $356,719, including
$114,329 in previously accrued rental income during 2001. The accrued rental
income was the accumulated amount of non-cash accounting adjustments previously
recorded in order to recognize future scheduled rent increases as income evenly
over the term of the lease. The provision represents the difference between the
carrying value of the Property, including the accumulated accrued rental income,
at December 31, 2001 and the General Partners' current estimate of net
realizable value for this Property. In addition, the Partnership and the
affiliate, as tenants-in-common, incurred approximately $58,400 in real estate
taxes during the 2001 relating to the Property in Corpus Christi, Texas. The
tenant is still responsible for payment of these real estate taxes under the
terms of the lease. The Partnership and an affiliate, as tenants-in-common, will
pursue collection of these amounts.
Net income earned by joint ventures also decreased during 2001, as
compared to 2000, due to the fact that Ocean Shores Joint Venture, in which the
Partnership owns an approximate 31%, stopped recording rental revenues totaling
approximately $91,200 during 2001, due to financial difficulties of the tenant.
The tenant of the Property owned by the joint venture ceased operations and
vacated the Property in April 2001. The joint venture will continue to pursue
collection of these past due rental amounts. The joint venture will not record
rental income relating to this Property until it locates a new tenant or
purchaser for this Property. In addition, during 2001, the joint venture
recorded a provision for write-down of assets of $781,741, including $43,392 in
previously accrued rental income relating to its Property in Ocean Shores,
Washington. The accrued rental income was the accumulated amount of non-cash
accounting adjustments previously recorded in order to recognize future
scheduled rent increases as income evenly over the term of the lease. The
provision represents the difference between the carrying value of the Property,
including the accumulated accrued rental income, at December 31, 2001 and the
General Partners' estimate of the realizable value for this Property. No such
amounts were recorded during 2000 and 1999.
The decrease in net income earned by joint ventures in 2001, as
compared to 2000, was partially offset by an increase of approximately $123,800
during 2001 as a result of the Partnership investing during 2001 in CNL VII and
XVII Lincoln Joint Venture, and in an additional Property, as tenants-in-common
with CNL Income Fund VI, Ltd. and CNL Income Fund IX, Ltd. as described above in
"Capital Resources".
During the year ended December 31, 2001, four lessees of the
Partnership, Golden Corral Corporation, National Restaurant Enterprises, Inc.,
Jack in the Box Inc., and RTM, Inc., each contributed more than 10% of the
Partnership's total rental and earned income (including rental and earned income
from the Partnership's share of rental income from four Properties owned by
unconsolidated joint ventures and five Properties owned with separate affiliates
of the General Partners as tenants-in-common). As of December 31, 2001, Golden
Corral Corporation was the lessee under leases relating to four restaurants, and
Jack in the Box Inc., National Restaurant Enterprises, Inc. and RTM, Inc., were
each the lessee under leases relating to three restaurants. It is anticipated
that based on the minimum rental payments required by the leases, these four
lessees each will continue to contribute more than ten percent of the
Partnership's total rental and earned income in 2002. 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, 2001 (including rental and earned
income from the Partnership's share of rental income from four Properties owned
by unconsolidated joint ventures and five Properties owned with separate
affiliates of the General Partners as tenants-in-common). In 2002, 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 or sell the
Properties in a timely manner.
Operating expenses, including depreciation and amortization expense,
and provisions for write-down of assets, were $1,227,158, $1,816,188, and
$921,251 for the years ended December 31, 2001, 2000, and 1999, respectively.
The decrease in operating expenses in 2001, as compared to 2000 was partially
due to, and the increase in 2000, as compared to 1999, was partially due to the
fact that in 2000, the Partnership recorded higher provisions for write-down of
assets.
As of December 31, 2000, the Partnership recorded a provision for
write-down of assets of $28,644 in previously accrued rental income relating to
the property in Mesquite, Nevada. The tenant of this property was experiencing
financial difficulties. The accrued rental income was the accumulated amount of
non-cash accounting adjustments previously recorded in order to recognize future
scheduled rent increases as income evenly over the term of the lease. The
provision represented the difference between the carrying value of the property,
including the accumulated accrued rental income, at December 31, 2000 and the
general partners' estimated net realizable value for the property. As a result
of the PRG bankruptcy, as of October 2001, the Partnership increased the
provision for write-down of assets by $201,002 to $229,646, including $118,604
in previously accrued rental income, relating to this property. The provision
represented the difference between the carrying value of the property, including
the accumulated accrued rental income, and the general partners' estimated net
realizable value of the Property. During December 2001, the Partnership
increased the provision for write-down of assets by $264,914 to $464,560,
including $118,604 in previously accrued rental income, relating to this
property. The provision represented the difference between the carrying value of
the property, and the estimated net sales proceeds from the anticipated sale of
the Property. As of March 15, 2002, the sale had not occurred.
In addition, during 2000, the Partnership recorded a provision for
write-down of assets of $35,127 in previously accrued rental income relating to
the Property located in Houston, Texas. In October 1998, the tenant of this
Boston Market Property filed for bankruptcy, and in July 2000, rejected, the
lease relating to this Property. As a result, the tenant discontinued making
rental payments on the rejected lease. The accrued rental income was the
accumulated amount of non-cash accounting adjustments previously recorded in
order to recognize future scheduled rent increases as income evenly over the
term of the lease. The provision represented the difference between the carrying
value of the Property, including the accumulated accrued rental income, and the
General Partners' estimated net realizable value of the Property. In January
2001, the Partnership sold this property, as described above in "Capital
Resources.".
During 2000, the Partnership recorded a provision for write-down of
assets of $19,091 in previously accrued rental income relating to the property
in Pensacola, Florida. The tenant of this property was experiencing financial
difficulties. The accrued rental income was the accumulated amount of non-cash
accounting adjustments previously recorded in order to recognize future
scheduled rent increases as income evenly over the term of the lease. The
provision represented the difference between the carrying value of the property,
including the accumulated accrued rental income, at December 31, 2000 and the
general partners' estimated net realizable value for the property. In 2001, the
tenant of this Property assigned its lease to Denny's, Inc.
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
recorded a provision for write-down of assets of $172,496 in previously accrued
rental income relating to its property. The accrued rental income was the
accumulated amount of non-cash accounting adjustments previously recorded in
order to recognize future scheduled rent increases as income evenly over the
term of the lease. The provision represented the difference between the carrying
value of the property, including the accumulated accrued rental income, and
estimated net sales proceeds from the anticipated sale of the Property. In
December 1999, CNL/GC El Cajon Joint Venture, the Partnership's consolidated
joint venture, sold its property to its tenant, as described above in "Capital
Resources."
In addition, during 2000, the Partnership recorded a provision for
write-down of assets in the amount of $193,464, including $106,365 in previously
accrued rental income, for its Property in Kentwood, Michigan. The tenant of
this Property defaulted under the terms of its lease and ceased restaurant
operations. The accrued rental income was the accumulated amount of non-cash
accounting adjustments previously recorded in order to recognize future
scheduled rent increases as income evenly over the term of the lease. The
provision represented the difference between the carrying value of the Property
, including the accumulated accrued rental income, 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. In June 2001, the Partnership sold
this Property, as described below.
As of December 31, 1999, the Partnership recorded a provision for
write-down of assets of $34,951 in previously accrued rental income relating to
the property in Long Beach, California. The tenant of this Property filed for
bankruptcy in October 1998, and during 1999, rejected the lease relating to this
Property. The accrued rental income was the accumulated amount of non-cash
accounting adjustments previously recorded in order to recognize future
scheduled rent increases as income evenly over the term of the lease. The
provision represented the difference between the carrying value of the property,
including the accumulated accrued rental income, at December 31, 1999 and the
general partners' estimated net realizable value for the property. During 2000,
the Partnership increased the provision for write-down of assets by $353,622 to
$388,573. The provision represented the difference between the carrying value of
the Property, including the accumulated accrued rental income, and the net sales
proceeds received from the sale of this Property.
As of December 31, 1999, the Partnership recorded a provision for
write-down of assets of $24,693 in previously accrued rental income relating to
the property in Inglewood, California. The tenant of this Property filed for
bankruptcy in October 1998, and during 1999, rejected the lease relating to this
Property. The accrued rental income was the accumulated amount of non-cash
accounting adjustments previously recorded in order to recognize future
scheduled rent increases as income evenly over the term of the lease. The
provision represented the difference between the carrying value of the property,
including the accumulated accrued rental income, at December 31, 1999 and the
general partners' estimated net realizable value for the property. During 2000,
the Partnership increased the provision for write-down of assets by $477,971 to
$502,664. The provision represented the difference between the carrying value of
the Property, including the accumulated accrued rental income, and the General
Partners' estimated net realizable value for this Property. During 2001, the
Partnership increased the provision for write-down of assets by $39,575 to
reflect the difference between the carrying value of the Property and the
anticipated net sales proceeds to be received by the Partnership. In September
2001, the Partnership sold this Property to a third party. Due to the fact that
the Partnership had previously recorded a provision for write-down for this
Property, no additional gain or loss was recognized during 2001 relating to the
actual sale of the Property.
In addition, the decrease in operating expenses during 2001 was
partially offset by the fact that the Partnership incurred additional state
taxes due to changes in tax laws of a state in which the Partnership conducts
business and due to an increase in the costs incurred for administrative
expenses for servicing the Partnership and its Properties, as permitted by the
Partnership agreement.
The decrease in operating expenses during 2001, as compared to 2000,
and the increase in 2000, as compared to 1999, was partially attributable to the
fact that in 2000 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 2001 and
2000, the Partnership sold the three vacant Boston Market Properties and the Mr.
Fable's Property; therefore, the Partnership will not continue to incur these
expenses for these Properties. However, the Partnership will continue to incur
certain expenses, such as legal fees, real estate taxes, insurance, and
maintenance relating to the remaining vacant Property in Mesquite, Nevada until
a new tenant or purchaser is located due to the fact that the lease of this
Property was rejected by PRG in 2001, as described above. The Partnership is
currently seeking either a replacement tenant or purchaser for the vacant
Property.
The decrease in operating expenses during 2001, as compared to 2000,
was partially due to a decrease in depreciation expense due to the fact that the
Partnership sold five Properties throughout 2001 and 2000, as described above in
"Capital Resources." 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 decrease in operating expenses during 2001, as compared to 2000, was
partially due to, and the increase in 2000, as compared to 1999, was partially
offset by, the fact that during 2000 and 1999, the Partnership incurred
approximately $18,700 and $84,800 in transaction costs related to the General
Partners retaining financial and legal advisors to assist them in evaluating and
negotiating the proposed merger with CNL American Properties Fund, Inc. ("APF").
In June 1999, the General Partners and APF mutually agreed to terminate the
merger. No such expenses were incurred during 2001.
During 2001, as described above in "Capital Resources," the Partnership
sold its Property in Houston, Texas, and recorded a gain of $4,284, and sold the
Property in Kentwood, Michigan, and recorded a loss of $38,877. During 2001, the
Partnership also sold its Property in El Dorado, California, as described above
in "Capital Resources" and recorded a gain of $345,572. In addition, during
September 2000, the Partnership sold the Property in Warner Robins, Georgia,
resulting in a gain of $17,447. No Properties were sold during 1999.
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, as described
above in "Capital Resources." No such loss was recorded during 2001 and 2000.
The restaurant industry, as a whole, has been one of the many
industries affected by the general slowdown in the economy. While the
Partnership has experienced some losses due to the financial difficulties of a
limited number of restaurant operators, the General Partners remain confident in
the overall performance of the fast-food and family style restaurants, the
concepts that comprise the Partnership's portfolio. Industry data shows that
these restaurant concepts continue to outperform and remain more stable than
higher-end restaurants, those that have been more adversely affected by the
slowing economy.
The Partnership's leases as of December 31, 2001, 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 based rent at specified times
during the term of the lease. Inflation, overall, has had a minimal effect on
results of operations of the Partnership. Continued inflation 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 July 2001, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 141 "Business Combinations" (FAS 141) and
Statement of Financial Accounting Standards No. 142 "Goodwill and Other
Intangible Assets" (FAS 142). The Partnership has reviewed both statements and
has determined that both FAS 141 and FAS 142 do not apply to the Partnership as
of December 31, 2001.
In October 2001, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 144 "Accounting for the
Impairment or Disposal of Long-Lived Assets" (FAS 144). This statement requires
that a long-lived asset be tested for recoverability whenever events or changes
in circumstances indicate that its carrying amount may not be recoverable. The
carrying amount of a long-lived asset is not recoverable if it exceeds the sum
of the undiscounted cash flows expected to result from the use and eventual
disposition of the asset. The assessment is based on the carrying amount of the
asset at the date it is tested for recoverability. An impairment loss is
recognized when the carrying amount of a long-lived asset exceeds its fair
value. If an impairment is recognized, the adjusted carrying amount of a
long-lived asset is its new cost basis. The adoption of FAS 144 did not have any
effect on the partnership's recording of impairment losses as this Statement
retained the fundamental provisions of FAS No. 121 "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of".
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 20
Financial Statements:
Balance Sheets 21
Statements of Income 22
Statements of Partners' Capital 23
Statements of Cash Flows 24-25
Notes to Financial Statements 26-45
Report of Independent Certified Public Accountants
To the Partners
CNL Income Fund XVII, Ltd.
In our opinion, the accompanying balance sheets and the related statements of
income, of partners' capital and of cash flows present fairly, in all material
respects, the financial position of CNL Income Fund XVII, Ltd. (a Florida
limited partnership) at December 31, 2001 and 2001, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 2001 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 8, 2002, except for Note 12, as to which the date is March 22, 2002
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
BALANCE SHEETS
December 31,
2001 2000
----------------- ------------------
ASSETS
Land and buildings on operating leases, net $ 16,975,990 $ 18,604,190
Net investment in direct financing leases 988,429 1,805,572
Investment in joint ventures 3,658,974 1,978,787
Cash and cash equivalents 673,924 1,597,502
Restricted cash 297,288 --
Receivables, less allowance for doubtful
accounts of $286,567 and $254,586, respectively 2,709 33,711
Due from related parties 19,289 4,893
Accrued rental income, less allowance for
doubtful accounts of $47,735 in 2000 571,891 633,062
Other assets 5,854 17,893
----------------- ------------------
$ 23,194,348 $ 24,675,610
================= ==================
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable and accrued expenses $ 8,974 $ 4,385
Accrued real estate taxes payable -- 22,277
Distributions payable 600,000 600,000
Due to related parties 11,582 13,819
Rents paid in advance and deposits 8,350 35,403
Deferred rental income 53,478 56,958
----------------- ------------------
Total liabilities 682,384 732,842
Partners' capital 22,511,964 23,942,768
----------------- ------------------
$ 23,194,348 $ 24,675,610
================= ==================
See accompanying notes to financial statements.
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
STATEMENTS OF INCOME
Year Ended December 31,
2001 2000 1999
---------------- --------------- ----------------
Revenues:
Rental income from operating leases $ 1,898,595 $ 2,088,220 $ 2,271,450
Earned income from direct financing leases 65,082 144,616 352,850
Interest and other income 57,719 62,955 68,463
---------------- --------------- ----------------
2,021,396 2,295,791 2,692,763
---------------- --------------- ----------------
Expenses:
General operating and administrative 235,944 146,978 130,270
Professional services 43,800 50,721 30,086
Management fee to related party 21,315 22,591 25,246
Real estate taxes 38,973 61,764 20,254
State and other taxes 34,733 12,064 13,505
Depreciation and amortization 346,902 395,456 384,985
Provision for write-down of assets 505,491 1,107,919 232,140
Transaction costs -- 18,695 84,765
---------------- --------------- ----------------
1,227,158 1,816,188 921,251
---------------- --------------- ----------------
Income Before Loss on Dissolution of Consolidated Joint
Venture, Gain on Sale of Assets, Minority Interest in
Income of Consolidated Joint Venture, and Equity in
Earnings (Loss) of Unconsolidated Joint Ventures, 794,238 479,603 1,771,512
Loss on Dissolution of Consolidated Joint Venture -- -- (82,914 )
Gain on Sale of Assets 310,979 17,447 --
Minority Interest in Income of Consolidated
Joint Venture -- -- (31,461 )
Equity in Earnings (Loss) of Unconsolidated Joint Ventures (136,021 ) 176,088 182,132
---------------- --------------- ----------------
Net Income $ 969,196 $ 673,138 $ 1,839,269
================ =============== ================
Allocation of Net Income
General partners $ -- $ -- $ (3,850)
Limited partners 969,196 673,138 1,843,119
---------------- --------------- ----------------
969,196 $ 673,138 $ 1,839,269
================ =============== ================
Net Income Per Limited Partner Unit $ 0.32 $ 0.22 $ 0.61
================ =============== ================
Weighted Average Number of Limited Partner Units
Outstanding 3,000,000 3,000,000 3,000,000
================ =============== ================
See accompanying notes to financial statements.
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
STATEMENTS OF PARTNERS' CAPITAL
Years Ended December 31, 2001, 2000, and 1999
General Partners Limited Partners
----------------------------------- ----------------------------------------------------
Accumulated Accumulated
Contributions Earnings Contributions Distributions Earnings
---------------- -------------- ----------------- ---------------- -----------------
Balance, December 31, 1998 $ 1,000 $ (1,610 ) $ 30,000,000 $ (5,882,464 ) $ 5,703,435
Distributions to limited partners
($0.80 per limited partner unit) -- -- -- (2,400,000 ) --
Net income -- (3,850 ) -- -- 1,843,119
---------------- -------------- ----------------- ---------------- -----------------
Balance, December 31, 1999 1,000 (5,460 ) 30,000,000 (8,282,464 ) 7,546,554
Distributions to limited partners
($0.80 per limited partner unit) -- -- -- (2,400,000 ) --
Net income -- -- -- -- 673,138
---------------- -------------- ----------------- ---------------- -----------------
Balance, December 31, 2000 1,000 (5,460 ) 30,000,000 (10,682,464 ) 8,219,692
Distributions to limited partners
($0.80 per limited partner unit) -- -- -- (2,400,000 ) --
Net income -- -- -- -- 969,196
---------------- -------------- ----------------- ---------------- -----------------
Balance, December 31, 2001 $ 1,000 $ (5,460 ) $ 30,000,000 $ (13,082,464 ) $ 9,188,888
================ ============== ================= ================ =================
See accompanying notes to financial statements.
- --------------------
Syndication
Costs Total
-------------- --------------
$ (3,590,000 ) $26,230,361
-- (2,400,000 )
-- 1,839,269
-------------- --------------
(3,590,000 ) 25,669,630
-- (2,400,000 )
-- 673,138
-------------- --------------
(3,590,000 ) 23,942,768
-- (2,400,000 )
-- 969,196
-------------- --------------
$ (3,590,000 ) $22,511,964
============== ==============
See accompanying notes to financial statements.
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
STATEMENTS OF CASH FLOWS
Year Ended December 31,
2001 2000 1999
--------------- ---------------- ----------------
Increase (Decrease) in Cash and Cash Equivalents:
Cash Flows from Operating Activities:
Cash received from tenants $ 1,872,564 $ 2,046,220 $ 2,436,836
Distributions from unconsolidated joint
ventures 246,426 158,725 182,752
Cash paid for expenses (374,234 ) (388,529 ) (213,754 )
Interest received 39,687 29,806 44,184
--------------- ---------------- ----------------
Net cash provided by operating activities 1,784,443 1,846,222 2,450,018
--------------- ---------------- ----------------
Cash Flows from Investing Activities:
Additions to land and buildings on
operating leases (1,216,598 ) (1,630,164 ) --
Proceeds from sale of assets 3,272,711 1,136,991 --
Investment in joint ventures (2,066,846 ) (12 ) (527,864 )
Proceeds from dissolution of consolidated joint
venture -- -- 2,094,231
Increase in restricted cash (297,288 ) -- --
--------------- ---------------- ----------------
Net cash provided by (used in) investing
activities (308,021 ) (493,185 ) 1,566,367
--------------- ---------------- ----------------
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 )
Distribution to holder of minority interest on
dissolution of consolidated joint venture -- -- (417,696 )
--------------- ---------------- ----------------
Net cash used in financing activities (2,400,000 ) (2,400,000 ) (2,864,263 )
--------------- ---------------- ----------------
Net Increase (Decrease) in Cash and Cash Equivalents (923,578 ) (1,046,963 ) 1,152,122
Cash and Cash Equivalents at Beginning of Year 1,597,502 2,644,465 1,492,343
--------------- ---------------- ----------------
Cash and Cash Equivalents at End of Year $ 673,924 $ 1,597,502 $ 2,644,465
=============== ================ ================
See accompanying notes to financial statements.
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
STATEMENTS OF CASH FLOWS - CONTINUED
Year Ended December 31,
2001 2000 1999
--------------- ---------------- ----------------
Reconciliation of Net Income to Net Cash
Provided by Operating Activities:
Net income $ 969,196 $ 673,138 $ 1,839,269
--------------- ---------------- ----------------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 342,690 391,244 372,148
Amortization 4,212 4,212 12,837
Provision for write-down of assets 505,491 918,692 --
Loss on dissolution of joint venture -- -- 82,914
Minority interest in income of consolidated
joint venture -- -- 31,461
Equity in earnings of unconsolidated joint
ventures, net of distributions 382,447 (15,970 ) 620
Gain on sale of assets (310,979 ) (17,447 ) --
Decrease (increase) in receivables 26,719 13,632 (47,223 )
Increase in due from related parties (14,396 ) (954 ) (439 )
Decrease in net investment in direct financing
leases 35,649 35,011 38,950
Decrease (increase) in accrued rental income (118,167 ) 18,396 (67,188 )
Decrease (increase) in other assets 12,039 (14,241 ) (3,122 )
Increase (decrease) in accounts payable,
accrued expenses, and accrued real estate
taxes payable (17,688 ) (62,522 ) 85,586
Increase (decrease) in due to related parties (2,237 ) (9,778 ) 9,149
Increase (decrease) in rents paid in advance
and deposits (27,053 ) (83,710 ) 98,535
Decrease in deferred rental income (3,480 ) (3,481 ) (3,479 )
--------------- ---------------- ----------------
Total adjustments 815,247 1,173,084 610,749
--------------- ---------------- ----------------
Net Cash Provided by Operating Activities $ 1,784,443 $ 1,846,222 $ 2,450,018
=============== ================ ================
Supplemental Schedule of Non-Cash Investing and
Financing Activities:
Distributions declared and unpaid at December 31 $ 600,000 $ 600,000 $ 600,000
=============== ================ ================
See accompanying notes to financial statements.
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
Years Ended December 31, 2001, 2000, and 1999
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.
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% 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, 2001, 2000, and 1999
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,
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, 2001, 2000, and 1999
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% 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; Ocean Shores Joint Venture; and CNL VII & XVII
Lincoln Joint Venture; and a property in Corpus Christi, Texas; a
property in Akron, Ohio; a property in Fayetteville, North Carolina; a
property in Zephyrhills, Florida; and Waldorf, Maryland, for which each
property is held as tenants-in-common, are accounted for using the
equity method since each joint venture agreement requires the consent
of all partners on all key decisions affecting the operations of the
underlying property.
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. See "Income Taxes"
footnote for a reconciliation of net income for financial reporting
purposes to net income for federal income tax purposes.
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2001, 2000, and 1999
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 2001 presentation.
These reclassifications had no effect on total 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. 141 ("FAS 141") and
Statement of Financial Accounting Standards No. 142 ("FAS 142") - In
July 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 141 "Business Combinations" and
Statement of Financial Accounting Standards No. 142 "Goodwill and Other
Intangible Assets". The Partnership has reviewed both statements and
has determined that both FAS 141 and FAS 142 do not apply to the
Partnership as of December 31, 2001.
Statement of Financial Accounting Standards No. 144 ("FAS 144") - In
October 2001, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 144 "Accounting for the
Impairment or Disposal of Long-Lived Assets". This statement requires
that a long-lived asset be tested for recoverability whenever events or
changes in circumstances indicate that its carrying amount may not be
recoverable. The carrying amount of a long-lived asset is not
recoverable if it exceeds the sum of the undiscounted cash flows
expected to result from the use and eventual disposition of the asset.
The assessment is based on the carrying amount of the asset at the date
it is tested for recoverability. An impairment loss is recognized when
the carrying amount of a long-lived asset exceeds its fair value. If an
impairment is recognized, the adjusted carrying amount of a long-lived
asset is its new cost basis. The
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2001, 2000, and 1999
1. Significant Accounting Policies - Continued:
adoption of FAS 144 did not have any effect on the partnership's
recording of impairment losses as this Statement retained the
fundamental provisions of FAS No. 121 "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of."
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:
2001 2000
------------------- -------------------
Land $ 8,117,235 $ 9,055,815
Buildings 10,449,654 11,118,005
------------------- -------------------
18,566,889 20,173,820
Less accumulated depreciation (1,590,899 ) (1,569,630 )
------------------- -------------------
$ 16,975,990 $ 18,604,190
=================== ===================
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2001, 2000, and 1999
3. Land and Buildings on Operating Leases - Continued:
During 1999, the Partnership's consolidated Joint Venture, CNL/GC El
Cajon Joint Venture, recorded a provision for write-down of assets of
approximately $172,496 in previously accrued rental income relating to
its property. The accrued rental income was the accumulated amount of
non-cash accounting adjustments previously recorded in order to
recognize future scheduled rent increases as income evenly over the
term of the lease. The provision represented the difference between the
carrying value of the property, including the accumulated accrued
rental income, and estimated net sales proceeds from the anticipated
sale of the Property. 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. 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 9).
During 1999, the Partnership recorded a provision for write-down of
assets of $34,951 in previously accrued rental income relating to the
property in Long Beach, California. The tenant of this Property filed
for bankruptcy in October 1998, and during 1999, rejected the lease
relating to this Property. The accrued rental income was the
accumulated amount of non-cash accounting adjustments previously
recorded in order to recognize future scheduled rent increases as
income evenly over the term of the lease. The provision represented the
difference between the carrying value of the property, including the
accumulated accrued rental income, at December 31, 1999 and the general
partners' estimated net realizable value for the property. During 2000,
the Partnership increased the provision for write-down of assets by
$353,622 to $388,573, including $34,951 in previously accrued rental
income, relating to this Property. The provision represented the
difference between the carrying value of the Property, including the
accumulated accrued rental income, and the net sales proceeds received
from the sale of this 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 a provision for write-down of assets for this
property, no additional gain or loss was recognized in October 2000
relating to the sale of the property.
During 1999, the Partnership recorded a provision for write-down of
assets of $24,693 in previously accrued rental income relating to the
property in Inglewood, California. The tenant of this Property filed
for bankruptcy in October 1998, and during 1999, rejected the lease
relating to this Property. The accrued rental income was the
accumulated amount of non-cash accounting adjustments previously
recorded in order to recognize future scheduled rent increases as
income evenly over the term of the lease. The provision represented the
difference between the carrying value of the property, including the
accumulated accrued rental income, at December 31, 1999 and the general
partners' estimated net realizable value for the property. During 2000,
the Partnership increased
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2001, 2000, and 1999
3. Land and Buildings on Operating Leases - Continued:
the provision for write-down of assets by $477,971 to $502,664. The
provision represented the difference between the carrying value of the
Property, including the accumulated accrued rental income, at December
31, 2000 and the general partners' estimated net realizable value for
this property. At June 30, 2001, the Partnership increased the
provision by $39,575 to $542,239. The adjusted provision represented
the difference between the carrying value of the property at June 30,
2001 and the net sales proceeds anticipated to be received from the
sale of the property. In September 2001, the Partnership sold this
property to a third party for $300,000 and received net sales proceeds
of approximately $298,300. Due to the fact that during second quarter,
the Partnership had recorded a provision for write-down of this
property, no additional gain or loss was recognized in September 2001
relating to the sale of the property.
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. During 2000,
the Partnership recorded a provision for write-down of assets of
$19,091 in previously accrued rental income relating to the property in
Pensacola, Florida. The tenant of this property was experiencing
financial difficulties. The accrued rental income was the accumulated
amount of non-cash accounting adjustments previously recorded in order
to recognize future scheduled rent increases as income evenly over the
term of the lease. The provision represented the difference between the
carrying value of the property, including the accumulated accrued
rental income, at December 31, 2000 and the general partners' estimated
net realizable value for the property.
In addition, during 2000, the Partnership recorded a provision for
write-down of assets of $35,127 in previously accrued rental income
relating to the property located in Houston, Texas. In October 1998,
the tenant of this Boston Market Property filed for bankruptcy, and in
July 2000, rejected, the lease relating to this Property. As a result,
the tenant discontinued making rental payments on the rejected lease.
The accrued rental income was the accumulated amount of non-cash
accounting adjustments previously recorded in order to recognize future
scheduled rent increases as income evenly over the term of the lease.
The provision represented the difference between the carrying value of
the property, including the accumulated accrued rental income, and the
general partners' estimated net realizable value of the property. In
January 2001, the Partnership sold its property in Houston, Texas to a
third party for $812,696 and received net sales proceeds of
approximately $782,700, resulting in a gain of $4,284.
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2001, 2000, and 1999
3. Land and Buildings on Operating Leases - Continued:
In 2000, the Partnership recorded a provision for write-down of assets
in the amount of $193,464, including $106,365 in previously accrued
rental income, for its Property in Kentwood, Michigan. The tenant of
this Property defaulted under the terms of its lease and ceased
restaurant operations. The accrued rental income was the accumulated
amount of non-cash accounting adjustments previously recorded in order
to recognize future scheduled rent increases as income evenly over the
term of the lease. The provision represented the difference between the
carrying value of the Property, including the accumulated accrued
rental income, at December 31, 2000 and the estimated net realizable
value of the Property. In June 2001, the Partnership sold this
property, received net sales proceeds of approximately $681,200 and
recorded a loss of $38,877.
During December 2000, the Partnership recorded a provision for
write-down of assets of $28,644 in previously accrued rental income
relating to the property in Mesquite, Nevada. The tenant of this
property was experiencing financial difficulties. The accrued rental
income was the accumulated amount of non-cash accounting adjustments
previously recorded in order to recognize future scheduled rent
increases as income evenly over the term of the lease. The provision
represented the difference between the carrying value of the property,
including the accumulated accrued rental income, at December 31, 2000
and the general partners' estimated net realizable value for the
property. As a result of the PRG bankruptcy, as of October 2001, the
Partnership increased the provision for write-down of assets by $89,960
to $118,604 in previously accrued rental income relating to this
property. The provision represented the difference between the carrying
value of the property, including the accumulated accrued rental income,
and the general partners' estimated net realizable value of the
Property. During December 2001, the Partnership increased the provision
for write-down of assets by $264,914 to $383,518, including $118,604 in
previously accrued rental income, relating to this property. The
provision represented the difference between the carrying value of the
property, and the estimated net sales proceeds from the anticipated
sale of the Property. As of March 15, 2002, the sale had not occurred.
In September 2001, the Partnership also sold its property in El Dorado,
California to a third party for $1,553,500 and received net sales
proceeds of approximately $1,510,500 resulting in a gain of $345,572
(see Note 6). In December 2001, the Partnership reinvested
approximately $1,216,600 of net sales proceeds received in a Property
in Austin, Texas. The Partnership acquired this Property from 2001-A,
LP, an affiliate of the general partners (see Note 9).
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2001, 2000, and 1999
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, 2001:
2002 $1,833,160
2003 1,846,717
2004 1,849,361
2005 1,867,839
2006 1,896,155
Thereafter 16,835,325
----------------
$26,128,557
================
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:
2001 2000
----------------- -----------------
Minimum lease payments
receivable $ 1,733,118 $ 3,308,029
Estimated residual values 271,355 485,703
Less unearned income (1,016,044 ) (1,988,160 )
-----------------
-----------------
Net investment in direct
financing leases $ 988,429 $ 1,805,572
================= =================
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2001, 2000, and 1999
4. Net Investment in Direct Financing Leases - Continued:
During 2001, the Partnership established a provision for write-down of
assets of $111,042 for its property in Mesquite, Nevada due to the fact
that the on October 31, 2001, Phoenix Restaurant Group, Inc. and its
Subsidiaries (collectively referred to as "PRG"), a tenant of the
Partnership, filed for Chapter 11 bankruptcy protection and rejected
the lease relating to this property. The provision represented the
difference between the carrying value of the net investment in the
direct financing lease and the general partners' estimated net
realizable value of the investment in the direct financing lease at
December 31, 2001. The Partnership reclassified the rejected lease from
direct financing leases to land and buildings on operating leases. In
accordance with the Statement of Financial Accounting Standards No. 13,
"Accounting for Leases," the Partnership recorded the reclassified
leases at the lower of original cost, present fair value, or present
carrying amount. No losses on the termination of direct financing
leases were recorded.
The following is a schedule of future minimum lease payments to be
received on direct financing leases at December 31, 2001:
2002 $ 121,091
2003 121,091
2004 121,091
2005 121,091
2006 121,091
Thereafter 1,127,663
-----------------
$1,733,118
=================
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; Akron, Ohio; and Zephyrhills, Florida, as
tenants-in-common with affiliates of the general partners. As of
December 31, 2001, the Partnership owned interests in these properties
of 19.56%, 27.42%, 36.91% and 24%, respectively.
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2001, 2000, and 1999
5. Investment in Joint Ventures - Continued:
The Partnership has a 21%, a 60.06% and a 30.94%interest in the profits
and losses of CNL Mansfield Joint Venture, CNL Kingston Joint Venture,
and Ocean Shores Joint Venture, respectively. The remaining interests
in these joint ventures are held by affiliates of the Partnership which
have the same general partners.
In April 2001, the Partnership entered into a joint venture
arrangement, CNL VII & XVII Lincoln Joint Venture, with CNL Income Fund
VII, Ltd., a Florida limited partnership and an affiliate of the
general partners, to hold one restaurant property. The joint venture
acquired this property from CNL BB Corp., an affiliate of the general
partners (see Note 9). The Partnership contributed approximately
$1,496,700 to the joint venture to acquire the restaurant property. As
of December 31, 2001, the Partnership owns an 86% interest in the
profits and losses of the joint venture.
In July 2001, the Partnership invested in a property in Waldorf,
Maryland as tenants-in-common with CNL Income Fund VI, Ltd. and CNL
Income Fund IX, Ltd., each of which are Florida limited partnerships
and affiliates of the general partners. As of December 31, 2001, the
Partnership contributed approximately $570,100 for a 25% interest in
the property.
CNL Mansfield Joint Venture, CNL Kingston Joint Venture, Ocean Shores
Joint Venture, CNL VII & XVII Lincoln Joint Venture and the Partnership
and affiliates, as tenants-in-common in five 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:
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2001, 2000, and 1999
5. Investment in Joint Ventures - Continued:
2001 2000
----------------- ----------------
Land and buildings on operating leases, net $ 8,923,289 $ 5,260,304
Net investment in direct financing lease -- 792,921
Cash 107,183 51,798
Receivables, less allowance for doubtful
accounts 2,119 66,996
Accrued rental income 207,980 297,196
Other assets 1,252 533
Liabilities 54,184 33,082
Partners' capital 9,187,639 6,436,666
Revenues 622,988 700,747
Provision for write-down of assets (980,739 ) --
Net income (loss) (688,116 ) 583,366
The Partnership recognized loss totaling $136,021, and income totaling
$176,088 and $182,132 during the years ended December 31, 2001, 2000,
and 1999 from these joint ventures and the properties held as
tenants-in-common with affiliates.
6. Restricted Cash:
At December 31, 2001, a portion of the net sales proceeds from the sale
of the property in El Dorado, California, was being held in an
interest-bearing escrow account pending the release of funds by the
escrow agent to the Partnership.
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2001, 2000, and 1999
7. 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.
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.
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2001, 2000, and 1999
7. Allocations and Distributions - Continued:
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, 2001 and 2000.
During each of the years ended December 31, 2001, 2000, and 1999, 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, 2001, 2000, and 1999
8. Income Taxes:
The following is a reconciliation of net income for financial reporting
purposes to net income for federal income tax purposes for the years
ended December 31:
2001 2000 1999
--------------- -------------- --------------
Net income for financial reporting purposes $ 969,196 $ 673,138 $ 1,839,269
Depreciation for financial reporting purposes
less than depreciation for tax reporting purposes 37,122 50,099 20,470
Amortization for financial reporting purposes
less than (in excess of) amortization for tax
reporting purposes (848 ) (5,087 ) 2,501
Direct financing leases recorded as operating
leases for tax reporting purposes 35,649 35,010 38,951
Equity in earnings of unconsolidated joint
ventures for financial reporting purposes
less than (in excess of) equity in earnings of
unconsolidated joint ventures for tax reporting
purposes 426,474 (747 ) (21,316 )
Minority interest in timing differences of
consolidated joint venture -- -- (23,193 )
Capitalization (deduction) of transaction costs
for tax reporting purposes -- (84,765 ) 84,765
Accrued rental income (105,700 ) (162,072 ) (251,628 )
Rents paid in advance (14,806 ) (11,437 ) 14,014
Deferred rental income (15,948 ) (12,239 ) (51,181 )
Allowance for doubtful accounts 31,981 206,448 46,855
Gain on sale of assets for financial
reporting purposes less than (in excess of)
gain for tax reporting purposes (51,709 ) (327,494 ) 74,630
Gain and loss on sale of assets for financial
reporting purposes less than loss for tax
reporting purposes (673,475 ) -- --
Loss on dissolution for financial reporting
purposes in excess of loss on dissolution for
tax purposes -- -- (14,866 )
Provision for write-down of assets 505,491 1,107,919 232,140
Other -- -- (11,318 )
--------------- -------------- --------------
Net income for federal income tax purposes $ 1,143,427 $ 1,468,773 $ 1,980,093
=============== ============== ==============
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2001, 2000, and 1999
9. 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 Group, Inc., a wholly owned subsidiary of CNL Holdings, Inc. CNL
APF Partners, LP (the "Advisor") is a wholly owned subsidiary of CNL
American Properties Fund, Inc. ("APF"). CNL Fund Advisors, Inc., a
majority owned subsidiary of CNL Financial Group, Inc. until it merged
with and into APF effective September 1, 1999, served as the
Partnership's advisor until it assigned its rights and obligations
under a management agreement with the Partnership to the Advisor
effective July 1, 2000. 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 $21,315, $22,591, and $25,246,
for the years ended December 31, 2001, 2000, and 1999, 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.
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2001, 2000, and 1999
9. Related Party Transactions - Continued:
During the years ended December 31, 2001, 2000, and 1999, the Advisor
and its affiliates provided accounting and administrative services to
the Partnership on a day-to-day basis, including services during 2000
and 1999 relating to the proposed and terminated merger. The
Partnership incurred $189,320, $77,769, and $81,811, for the years
ended December 31, 2001, 2000, and 1999, respectively, for such
services.
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.
During 2001, the Partnership and CNL Income Fund VII, Ltd. through a
joint venture arrangement, CNL VII & XVII Lincoln Joint Venture,
acquired a Golden Corral property from CNL BB Corp., an affiliate of
the general partners, for a total purchase price of $1,740,374. CNL
Income Fund VII, Ltd. is a Florida limited partnership and 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 joint venture. The purchase price paid by the joint
venture represents the costs incurred by CNL BB Corp. to acquire and
carry the property, including closing costs.
In December 2001, the Partnership acquired a property located in
Austin, Texas from CNL Funding 2001-A, LP, for a purchase price of
approximately $1,216,600 (see Note 3). CNL Funding 2001-A, LP is a
Delaware limited partnership and an affiliate of the General Partners.
CNL Funding 2001-A, LP 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 Funding 2001-A, LP to acquire and carry the
property, including closing costs.
The amount due related parties at December 31, 2001 and 2000 totaled
$11,582 and $13,819, respectively.
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2001, 2000, and 1999
10. Concentration of Credit Risk:
The following schedule presents total rental and earned income from
individual lessees, or affiliated groups of lessees, each representing
more than ten percent of the Partnership's total rental and earned
income (including rental and earned income from the Partnership's
consolidated joint venture, the Partnership's share of rental income
from the unconsolidated joint ventures and the five properties held as
tenants-in-common with affiliates of the general partners) for each of
the years ended December 31:
2001 2000 1999
-------------- --------------- -------------
Golden Corral Corporation $555,303 $438,299 $439,790
National Restaurant Enterprises, Inc. 424,696 424,696 424,696
Jack in the Box Inc. (formerly
known as Foodmaker, Inc.) and
Jack in the Box Eastern Division,
L.P. 324,397 349,491 349,491
RTM Indianapolis and RTM
Southwest Texas, Inc. 264,878 N/A N/A
Phoenix Restaurant Group, Inc.
(formerly known as
DenAmerica Corp.) N/A N/A 386,065
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:
2001 2000 1999
--------------- --------------- ---------------
Golden Corral Family
Steakhouse Restaurants $555,303 $ 438,299 $ 599,869
Burger King 472,109 498,959 496,391
Jack in the Box 324,397 349,491 349,491
Arby's 282,266 282,551 283,884
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2001, 2000, and 1999
10. Concentration of Credit Risk - Continued:
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.
11. Selected Quarterly Financial Data:
The following table presents selected unaudited quarterly financial
data for each full quarter during the years ended December 31, 2001 and
2000:
2001 Quarter First Second Third Fourth Year
---------------------- --------------- ------------- --------------- --------------- ---------------
Revenues (1) $ 565,072 $ 540,359 $ 279,286 $ 500,658 $1,885,375
Net Income 300,532 198,750 314,746 155,168 969,196
Net income per
limited partner
unit 0.10 0.07 0.10 0.05 0.32
2000 Quarter First Second Third Fourth Year
---------------------- --------------- ------------- --------------- --------------- ---------------
Revenues (1) $ 607,331 $ 682,258 $ 554,011 $ 628,279 $2,471,879
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
(1) Revenues include equity in earnings of unconsolidated joint
ventures and minority interest in income of the consolidated
joint venture.
(2) Revenues have been adjusted to reclassify any reversals of
accrued rental income to provisions for write-down of assets.
This reclassification had no effect on total net income.
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years Ended December 31, 2001, 2000, and 1999
12. Subsequent Events:
In February 2002, a tenant, Sybra, Inc., filed for bankruptcy. The
Partnership has continued receiving rental payments relating to the
property in Zephyrhills, Florida, held with an affiliate of the general
partners, as tenants-in-common. While the tenant has not rejected or
affirmed the lease, there can be no assurance that it will not be
rejected in the future.
In March 2002, the Partnership entered into an agreement with an
unrelated third party to sell the Denny's property in Mesquite, Nevada.
As of December 31, 2001, the Partnership established a provision for
write-down of assets related to the anticipated sale of this property.
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 55. 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, Inc., formerly the Partnership's advisor, until it merged with a
wholly-owned subsidiary of APF in September 1999, and in June 2000, was
re-elected to those positions of CNL Fund Advisors, Inc. Mr. Seneff is a
principal stockholder of CNL Holdings, Inc., the parent company of CNL Financial
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 54. 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 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 CNL Fund Advisors, Inc. prior to its merger
with a wholly-owned subsidiary of 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.; Director, Vice Chairman of
the Board, President and Treasurer of CNL Hospitality Properties, Inc., a
public, unlisted real estate investment trust; as well as, Director, Vice
Chairman of the Board, President and Treasurer of CNL Hospitality Corp., its
advisor. In addition, Mr. Bourne serves as Director, Vice Chairman of the Board,
President and Treasurer of CNL Retirement Properties, Inc., a public, unlisted
real estate investment trust; as well as, a Director, Vice Chairman of the
Board, President and Treasurer 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 46. 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 CNL Fund Advisors, Inc., Mr. McWilliams served as President of
APF from February 1999 until September 1999. From February 1998 to February
1999, he served as Executive Vice President of APF. Mr. McWilliams joined CNL
Financial Group, Inc. in April 1997 and served as an Executive Vice President
from October 1997 until September 1999. In addition, Mr. McWilliams served as
President of CNL Fund Advisors, Inc. and CNL Financial Services, Inc. from April
1997 until the acquisition of such entities by wholly-owned subsidiaries of 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.
Steven D. Shackelford, age 38. Mr. Shackelford was promoted to
Executive Vice President of APF in June 2000. He served as Senior Vice President
from September 1999 until his promotion in June 2000. Mr. Shackelford has served
as Chief Financial Officer since January 1997 and has served as Secretary and
Treasurer of APF since September 1999. He also served as Chief Financial Officer
of CNL Fund Advisors, Inc. 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, 2002, 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, 2002, 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, 2001, 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, 2001
- --------------------------------- -------------------------------------- ------------------------------
Reimbursement to affiliates for Operating expenses are reimbursed at Accounting and
operating expenses the lower of cost or 90% of the admin-istrative services:
prevailing rate at which comparable $189,320
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 $21,315
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, 2001
- --------------------------------- -------------------------------------- ------------------------------
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, 2001
- --------------------------------- -------------------------------------- ------------------------------
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.
During 2001, the Partnership and CNL Income Fund VII, Ltd. through a joint
venture arrangement, CNL VII & XVII Lincoln Joint Venture, acquired a Golden
Corral property from CNL BB Corp., an affiliate of the general partners, for a
total purchase price of $1,740,374. CNL Income Fund VII, Ltd. is a Florida
limited partnership and 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 joint venture. The purchase price paid by the
joint venture represents the costs incurred by CNL BB Corp. to acquire and carry
the property, including closing costs.
In December 2001, the Partnership acquired a property located in Austin, Texas
from CNL Funding 2001-A, LP, for a purchase price of approximately $1,216,600
(see Note 3). CNL Funding 2001-A, LP is a Delaware limited partnership and an
affiliate of the General Partners. CNL Funding 2001-A, LP 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 Funding 2001-A, LP 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, 2001 and 2000
Statements of Income for the year ended December 31, 2001,
2000, and 1999
Statements of Partners' Capital for the year ended December
31, 2001, 2000 and 1999
Statements of Cash Flows for the year ended December 31, 2001,
2000, and 1999
Notes to Financial Statements
2. Financial Statement Schedules
Schedule II - Valuation and Qualifying Accounts for the years
ended December 31, 2001, 2000, and 1999
Schedule III - Real Estate and Accumulated Depreciation at
December 31, 2001
Notes to Schedule III - Real Estate and Accumulated
Depreciation at December 31, 2001
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 Assignment of Management Agreement from CNL Fund
Advisors, Inc. to CNL APF Partners, LP. (Including as
Exhibit 10.2 to Form 10-Q filed with the Securities
and Exchange Commission on August 13, 2001, and
incorporated herein by reference.)
**10.4 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.)
**10.5 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.)
**10.6 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.)
**10.7 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.)
**10.8 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.)
**10.9 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.)
**10.10 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.)
**10.11 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.)
**10.12 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.)
**10.13 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.)
**10.14 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, 2001 through December 31, 2001.
(c) Not applicable.
(d) Other Financial Information.
The Partnership is required to file audited financial
information of one of its tenants (Golden Corral Corporation)
as a result of this tenant leasing more than 20 percent of the
Partnership's total assets for the year ended December 31,
2001. Golden Corral Corporation is a privately-held company,
and its financial information is not available to the
Partnership to include in this filing. The Partnership will
file this financial information under cover of a Form 10-K/A
as soon as it is available.
**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 26th day of
March, 2002.
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 26, 2002
Robert A. Bourne (Principal Financial and Accounting
Officer)
/s/ James M. Seneff, Jr. Chief Executive Officer and Director March 26, 2002
James M. Seneff, Jr. (Principal Executive Officer)
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
Years Ended December 31, 2001, 2000, and 1999
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
- ---------- ----------------- -------------- --------------- ---------------- ------------- ------------ ------------
1999 Allowance for
doubtful
accounts (a) $ 1,283 $ -- $ 48,138 (b) $ -- (c) $ 1,283 $ 48,138
============== =============== ================ ============= ============ ============
2000 Allowance for
doubtful
accounts (a) $ 48,138 $ 35,807 $ 249,776 (b) $ 3,966 (c) $ 27,434 $ 302,321
============== =============== ================ ============= ============ ============
2001 Allowance for
doubtful
accounts (a) $ 302,321 $ 24,589 $ 209,629 (b) $ 249,972 (c) $ -- $ 286,567
============== =============== ================ ============= ============ ============
(a) Deducted from receivables and accrued rental income.
(b) Reduction of rental, earned and other income.
(c) Amounts written off as uncollectible.
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 2001
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 - -
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 - 670,452 -
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 - 862,571 -
Weatherford, Texas (g)- 345,926 - 691,222 -
Jack in the Box Restaurants:
Dinuba, California - 324,970 - 509,982 -
LaPorte, Texas - 355,929 - 560,485 -
Taco Cabana Restaurants:
Austin, Texas - 523,988 692,610 - -
Wendy's Old Fashioned
Hamburgers Restaurants:
Knoxville, Tennessee - 332,003 - 489,610 -
Livingston, Tennessee - 261,701 - - -
------------ ------------ ----------- -------
$8,212,604 $5,116,042 $5,503,157 -
============ ============ =========== =======
Costs Capitalized
Subsequent to
Initial Cost Acquisition
-------------------------- --------------------
Encum- Buildings and Improve- Carrying
brances Land Improvements ments Costs
-------- ------------ ------------ ----------- -------
Properties the Partnership has
Invested in Under Direct
Financing Leases:
Arby's Restaurant:
Muncie, Indiana - - $629,847 - -
Wendy's Old Fashioned
Hamburgers Restaurant:
Livingston, Tennessee - - - 455,575 -
------------ ------------ ----------- -------
- $629,847 $455,575 -
============ ============ =========== =======
Property in Which the
Partnership 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
Partnership 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) (h) $715,052 $726,004 - -
============ ============ =========== =======
Property in Which the Partnership
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 - -
============ ============ =========== =======
Costs Capitalized
Subsequent to
Initial Cost Acquisition
-------------------------- --------------------
Encum- Buildings and Improve- Carrying
brances Land Improvements ments Costs
------------ ------------ ----------- -------
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 (i)- $351,015 $789,560 - -
============ ============ =========== =======
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
86% Interest and has
Invested in Under an
Operating Lease:
Golden Corral Restaurant:
Lincoln, Nebraska - $485,390 $1,254,984 - -
============ ============ =========== =======
Property in which the
Partnership has a 25%
Interest as Tenants-in-
Common and has invested in
=Under an Operating Lease:
Bennigan's Restaurant:
Waldorf, Maryland - $968,984 $1,311,515 - -
============ ============ =========== =======
Net Cost Basis at Which Life on Which
Carried at Close of Period (b) Depreciation in
- ----------------------------------------- Date Latest Income
Buildings and Accumulated of Con- Date Statement is
Land Improvements Total Depreciation structionAcquired Computed
- ------------- ------------ ------------ ----------- ------- --------- -------------
$242,759 (d) $242,759 (e) 1995 03/96 (e)
348,245 470,577 818,822 86,788 1996 06/96 (c)
296,025 557,809 853,834 96,432 1996 10/96 (c)
832,288 827,640 1,659,928 52,877 2000 01/00 (c)
489,341 734,010 1,223,351 142,428 1996 03/96 (c)
771,965 699,556 1,471,521 131,478 1996 03/96 (c)
887,767 597,381 1,485,148 92,576 1997 11/96 (c)
277,709 500,907 778,616 6,816 1996 12/95 (e)
305,509 670,990 976,499 120,855 1996 08/96 (c)
300,482 421,898 722,380 72,551 1996 08/96 (c)
711,838 1,162,406 1,874,244 225,661 1996 03/96 (c)
508,790 862,571 1,371,361 159,735 1996 04/96 (c)
345,926 691,222 1,037,148 122,819 1996 03/96 (c)
324,970 509,982 834,952 90,924 1996 05/96 (c)
355,929 560,485 916,414 98,547 1996 07/96 (c)
523,988 692,610 1,216,598 1,924 1990 12/01 (c)
332,003 489,610 821,613 88,488 1996 05/96 (c)
261,701 (d) 261,701 (e) 1996 06/96 (e)
- ------------- ------------ ------------ -----------
$8,117,235 $10,449,654 $18,56,889 $1,590,899
============= ============ ============ ===========
Net Cost Basis at Which Life on Which
Carried at Close of Period (b) Depreciation in
- ----------------------------------------- Date Latest Income
Buildings and Accumulated of Con- Date Statement is
Land Improvements Total Depreciation structionAcquired Computed
- ------------- ------------ ------------ ----------- ------- --------- -------------
- (d) (d) (e) 1995 03/96 (e)
- (d) (d) (e) 1996 06/96 (e)
- -------------
-
=============
$377,800 $587,700 $965,500 $102,718 1996 10/96 (c)
============= ============ ============ ===========
$584,525 $614,141 $1,198,666 $114,819 1992 01/97 (c)
============= ============ ============ ===========
$355,594 $517,030 $872,624 $84,924 1970 01/97 (c)
============= ============ ============ ===========
Net Cost Basis at Which Life on Which
Carried at Close of Period (b) Depreciation in
- ----------------------------------------- Date Latest Income
Buildings and Accumulated of Con- Date Statement is
Land Improvements Total Depreciation structionAcquired Computed
- ------------- ------------ ------------ ----------- ------- --------- -------------
$297,295 $482,914 $780,209 $77,256 1997 02/97 (c)
============= ============ ============ ===========
$189,452 $328,444 $517,896 $44,766 1997 09/97 (c)
============= ============ ============ ===========
$120,916 $281,310 $402,226 $15,122 1998 01/99 (c)
============= ============ ============ ===========
$260,146 $441,434 $701,580 $43,447 1990 01/99 (c)
============= ============ ============ ===========
$485,390 $1,254,984 $1,740,374 $31,375 2000 04/01 (c)
============= ============ ============ ===========
$968,984 $1,311,515 $2,280,499 $21,858 2001 07/01 (c)
============= ============ ============ ===========
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 2001
(a) Transactions in real estate and accumulated depreciation during 2001,
2000, and 1999 are summarized as follows:
Accumulated
Cost Depreciation
---------------- -----------------
Properties the Partnership has Invested
in Under Operating Leases:
Balance, December 31, 1998 $ 21,523,945 $ 875,817
Dispositions (974,793 ) --
Depreciation expense -- 372,148
---------------- -----------------
Balance, December 31, 1999 20,549,152 1,247,965
Acquisitions 1,659,927 --
Dispositions (1,470,189 ) (69,579 )
Provision for write-down of assets (565,070 ) --
Depreciation expense -- 391,244
---------------- -----------------
Balance, December 31, 2000 20,173,820 1,569,630
Acquisitions 1,216,598 --
Dispositions (3,189,492 ) (321,421 )
Reclassification from direct financing lease 670,452 --
Provision for write-down of assets (304,489 ) --
Depreciation expense -- 342,690
---------------- -----------------
Balance, December 31, 2001 $ 18,566,889 $ 1,590,899
================ =================
Property in Which the Partnership has a 19.56%
Interest as Tenants-in-Common and has Invested in
Under an Operating Lease:
Balance, December 31, 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
Depreciation expense -- 19,590
---------------- -----------------
Balance, December 31, 2001 $ 965,500 $ 102,718
================ =================
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED
DEPRECIATION - CONTINUED
December 31, 2001
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, 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
Provision for write-down of assets (h) (242,390 ) --
Depreciation expense -- 19,770
---------------- ----------------
Balance, December 31, 2001 $ 1,198,666 $ 114,819
================ ================
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, 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
Depreciation expense -- 17,234
---------------- ----------------
Balance, December 31, 2001 $ 872,624 $ 84,924
================ ================
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED
DEPRECIATION - CONTINUED
December 31, 2001
Accumulated
Cost Depreciation
---------------- ----------------
Property of Joint Venture in Which the Partnership has a
21% Interest and has Invested in Under an Operating
Lease:
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
Depreciation expense -- 16,098
---------------- ----------------
Balance, December 31, 2001 $ 780,209 $ 77,256
================ ================
Property of Joint Venture in which the Partnership has a
60.06% Interest and has Invested in under an
Operating Lease:
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
Depreciation expense -- 10,949
---------------- ----------------
Balance, December 31, 2001 $ 517,896 $ 44,766
================ ================
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED
DEPRECIATION - CONTINUED
December 31, 2001
Accumulated
Cost Depreciation
---------------- ----------------
Property of Joint Venture 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 --
Reclassification from direct financing lease 789,560 --
Provision for write-down of assets (738,349 ) --
Depreciation expense -- 15,122
---------------- ----------------
Balance, December 31, 2001 $ 402,226 $ 15,122
================ ================
Property in which the Partnership has a 24% Interest
as Tenants-in-Common and has Invested in Under an
Operating Lease:
Balance, December 31, 1998 $ -- $ --
Acquisition 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
Depreciation expense -- 14,714
---------------- ----------------
Balance, December 31, 2001 $ 701,580 $ 43,447
================ ================
Property of Joint Venture in which the Partnership has a
86% Interest and has Invested in Under an Operating
Lease:
Balance, December 31, 2000 $ -- $ --
Acquisition 1,740,374 --
Depreciation expense -- 31,375
---------------- ----------------
Balance, December 31, 2001 $ 1,740,374 $ 31,375
================ ================
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED
DEPRECIATION - CONTINUED
December 31, 2001
Accumulated
Cost Depreciation
---------------- ----------------
Property in which the Partnership has a 25% Interest as
Tenants-in-Common and has Invested in Under an
Operating Lease:
Balance, December 31, 2000 $ -- $ --
Acquisitions 2,280,499 --
Depreciation expense -- 21,858
---------------- ----------------
Balance, December 31, 2001 $ 2,280,499 $ 21,858
================ ================
(b) As of December 31, 2001, the aggregate cost of the Properties owned by
the Partnership and the joint venture for federal income tax purposes
was $19,984,630 and $10,459,655, 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) 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) 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,
investment in joint ventures and other assets at December 31, 2001.
(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) The undepreciated cost of the Property in Corpus Christi, Texas, in
which the Partnership owns an interest, as tenants-in-common with an
affiliate of the General Partners, was written down to net realizable
value due to an impairment in value. The Partnership recognized the
impairment by recording a provision for write-down of assets in the
amount of $242,390 at December 31, 2001. The provision represented the
difference between the Property's carrying value and the estimated net
realizable value of the Property at December 31, 2001. The cost of the
Property presented on this schedule is the net amount at which the
Property was carried at December 31, 2001, including the provision for
write-down of assets.
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED
DEPRECIATION - CONTINUED
December 31, 2001
(i) The undepreciated cost of the Property in Ocean Shores, Washington,
owned by Ocean Shores Joint Venture, was written down to net realizable
value due to an impairment in value. The Partnership recognized the
impairment by recording a provision for write-down of assets in the
amount of $738,349 at December 31, 2001. The impairment represented the
difference between the Property's carrying value and the estimated net
realizable value of the Property at December 31, 2001. The cost of the
Property presented on this schedule is the net amount at which the
Property was carried at December 31, 2001, including the provision for
write-down of assets.