FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT of 1934
For the quarterly period ended June 30, 2003
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OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT of 1934
For the transition period from ____________________ to _____________________
Commission file number
0-22485
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CNL Income Fund XVII, Ltd.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Florida 59-3295393
- ------------------------------------- ------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
450 South Orange Avenue
Orlando, Florida 32801
- ------------------------------------- ------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number
(including area code) (407) 540-2000
------------------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No ____
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act): Yes___ No X
CONTENTS
Part I Page
Item 1. Financial Statements: ----
Condensed Balance Sheets 1
Condensed Statements of Income 2
Condensed Statements of Partners' Capital 3
Condensed Statements of Cash Flows 4
Notes to Condensed Financial Statements 5-7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8-11
Item 3. Quantitative and Qualitative Disclosures About
Market Risk 11
Item 4. Controls and Procedures 11
Part II
Other Information 12-14
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
CONDENSED BALANCE SHEETS
June 30, December 31,
2003 2002
------------------ -------------------
ASSETS
Real estate properties with operating leases, net $ 14,733,368 $ 15,022,053
Net investment in direct financing leases 405,064 410,120
Investment in joint ventures 5,694,132 5,749,285
Cash and cash equivalents 717,036 829,739
Receivables, less allowance for doubtful accounts
of $35,101 in 2003 6,493 37,006
Accrued rental income 441,399 502,962
Other assets 9,922 12,370
------------------ -------------------
$ 22,007,414 $ 22,563,535
================== ===================
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable and accrued expenses $ 8,700 $ 3,494
Real estate taxes payable 44,056 13,457
Distributions payable 600,000 600,000
Due to related parties 13,538 26,600
Rents paid in advance 31,910 31,910
Deferred rental income 48,234 49,998
------------------ -------------------
Total liabilities 746,438 725,459
Partners' capital 21,260,976 21,838,076
------------------ -------------------
$ 22,007,414 $ 22,563,535
================== ===================
See accompanying notes to condensed financial statements.
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF INCOME
Quarter Ended Six Months Ended
June 30, June 30,
2003 2002 2003 2002
------------- -------------- ------------- -------------
Revenues:
Rental income from operating leases $ 461,653 $ 414,911 $ 856,587 $ 826,814
Earned income from direct financing leases 10,854 24,424 21,776 48,995
Interest and other income 807 6,073 1,112 22,857
------------- -------------- ------------- -------------
473,314 445,408 879,475 898,666
------------- -------------- ------------- -------------
Expenses:
General operating and administrative 41,321 52,543 97,944 116,434
Property related 897 7,866 4,410 13,071
Management fees to related parties 7,994 6,249 11,696 12,305
State and other taxes -- 1,149 25,246 9,258
Depreciation and amortization 80,560 74,963 162,232 147,945
Provision for write-down of assets 213,000 -- 213,000 --
------------- -------------- ------------- -------------
343,772 142,770 514,528 299,013
------------- -------------- ------------- -------------
Income Before Equity in Earnings of Joint Ventures 129,542 302,638 364,947 599,653
Equity in Earnings of Joint Ventures 128,919 163,823 257,953 240,684
------------- -------------- ------------- -------------
Income from Continuing Operations 258,461 466,461 622,900 840,337
------------- -------------- ------------- -------------
Discontinued Operations:
Income from discontinued operations -- 52,751 -- 105,478
Gain on disposal of discontinued operations -- 285,677 -- 285,677
------------- -------------- ------------- -------------
-- 338,428 -- 391,155
------------- -------------- ------------- -------------
Net Income $ 258,461 $ 804,889 $ 622,900 $1,231,492
============= ============== ============= =============
Income Per Limited Partner Unit
Continuing operations $ 0.09 $ 0.16 $ 0.21 $ 0.28
Discontinued operations -- 0.11 -- 0.13
------------- -------------- ------------- -------------
$ 0.09 $ 0.27 $ 0.21 $ 0.41
============= ============== ============= =============
Weighted Average Number of Limited Partner
Units Outstanding 3,000,000 3,000,000 3,000,000 3,000,000
============= ============== ============= =============
See accompanying notes to condensed financial statements.
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF PARTNERS' CAPITAL
Six Months Ended Year Ended
June 30, December 31,
2003 2002
--------------------- ------------------
General partners:
Beginning balance $ (4,460 ) $ (4,460 )
Net income -- --
--------------------- ------------------
(4,460 ) (4,460 )
--------------------- ------------------
Limited partners:
Beginning balance 21,842,536 22,516,424
Net income 622,900 1,726,112
Distributions ($0.40 and $0.80 per limited partner
unit, respectively) (1,200,000 ) (2,400,000 )
--------------------- ------------------
21,265,436 21,842,536
--------------------- ------------------
Total partners' capital $ 21,260,976 $ 21,838,076
===================== ==================
See accompanying notes to condensed financial statements.
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
CONDENSED STATEMENTS OF CASH FLOWS
Six Months Ended
June 30,
2003 2002
--------------- --------------
Increase (Decrease) in Cash and Cash Equivalents
Net Cash Provided by Operating Activities $ 1,087,297 $ 1,145,942
--------------- --------------
Cash Flows from Investing Activities:
Proceeds from sale of real estate properties -- 3,499,595
Additions to real estate properties with operating leases -- (1,364,194 )
Investment in joint ventures -- (424,807 )
Increase in restricted cash -- (1,381,420 )
--------------- --------------
Net cash provided by investing activities -- 329,174
--------------- --------------
Cash Flows from Financing Activities:
Distributions to limited partners (1,200,000 ) (1,200,000 )
--------------- --------------
Net cash used in financing activities (1,200,000 ) (1,200,000 )
--------------- --------------
Net Increase (Decrease) in Cash and Cash Equivalents (112,703 ) 275,116
Cash and Cash Equivalents at Beginning of Period 829,739 673,924
--------------- --------------
Cash and Cash Equivalents at End of Period $ 717,036 $ 949,040
=============== ==============
Supplemental Schedule of Non-Cash Financing
Activities:
Distributions declared and unpaid at end of
Period $ 600,000 $ 600,000
=============== ==============
See accompanying notes to condensed financial statements.
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS
Quarters and Six Months Ended June 30, 2003 and 2002
1. Basis of Presentation:
The accompanying unaudited condensed financial statements have been
prepared in accordance with the instructions to Form 10-Q and do not
include all of the information and note disclosures required by generally
accepted accounting principles. The financial statements reflect all
adjustments, consisting of normal recurring adjustments, which are, in the
opinion of the general partners, necessary for a fair statement of the
results for the interim periods presented. Operating results for the
quarter and six months ended June 30, 2003, may not be indicative of the
results that may be expected for the year ending December 31, 2003. Amounts
as of December 31, 2002, included in the financial statements, have been
derived from audited financial statements as of that date.
These unaudited financial statements should be read in conjunction with the
financial statements and notes thereto included in Form 10-K of CNL Income
Fund XVII, Ltd. (the "Partnership") for the year ended December 31, 2002.
In January 2003, FASB issued FASB Interpretation No. 46 ("FIN 46"),
"Consolidation of Variable Interest Entities" to expand upon and strengthen
existing accounting guidance that addresses when a company should include
the assets, liabilities and activities of another entity in its financial
statements. To improve financial reporting by companies involved with
variable interest entities (more commonly referred to as special-purpose
entities or off-balance sheet structures), FIN 46 requires that a variable
interest entity be consolidated by a company if that company is subject to
a majority risk of loss from the variable interest entity's activities or
entitled to receive a majority of the entity's residual returns or both.
Prior to FIN 46, a company generally included another entity in its
consolidated financial statements only if it controlled the entity through
voting interests. The consolidation requirements of FIN 46 apply
immediately to variable interest entities created after January 31, 2003,
and to older entities, in the first fiscal year or interim period beginning
after June 15, 2003. The general partners believe adoption of this standard
may result in either consolidation or additional disclosure requirements
with respect to the Partnership's unconsolidated joint ventures, which are
currently accounted for under the equity method. However, such
consolidation is not expected to significantly impact the Partnership's
results of operations.
2. Reclassification:
Certain items in the prior year's financial statements have been
reclassified to conform to 2003 presentation. These reclassifications had
no effect on total partners' capital or net income.
3. Real Estate Properties with Operating Leases:
During the quarter and six months ended June 30, 2003, the Partnership
recorded a provision for write-down of assets of $213,000 relating to the
property in Warner Robins, Georgia. The provision represented the
difference between the carrying value of the property and its estimated
fair value. The tenant of this property experienced financial difficulties,
and in July 2003, the tenant surrendered the premises.
4. Investment in Joint Ventures:
In May 2003, Ocean Shores Joint Venture, in which the Partnership owns a
30.94% interest, entered into an agreement, with a third party, to sell its
property in Ocean Shores, Washington. As a result, the joint venture
reclassified the asset from real estate property with an operating lease to
real estate held for sale. The reclassified asset was recorded at the lower
of its carrying amount or fair value, less cost to sell. In addition, the
joint venture stopped recording depreciation once the property was
identified for sale. The joint venture had recorded a provision for
write-down of assets in a previous year relating to this property.
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS
Quarters and Six Months Ended June 30, 2003 and 2002
4. Investment in Joint Ventures - Continued:
The financial results relating to the property in Ocean Shores, Washington
and a property sold in August 2002 by Mansfield Joint Venture, in which the
Partnership owns a 21% interest, are classified as Discontinued Operations
in the combined condensed financial information presented below.
As of June 30, 2003, CNL Mansfield Joint Venture, CNL Kingston Joint
Venture, Ocean Shores Joint Venture, CNL VII & XVII Lincoln Joint Venture,
Katy Joint Venture and the Partnership and affiliates, as tenants-in-common
in six 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:
June 30, December 31,
2003 2002
----------------- ----------------
Real estate properties with operating leases, net $ 11,526,529 $ 11,649,517
Real estate held for sale 374,035 377,303
Cash 43,380 37,123
Receivables, less allowance for doubtful
accounts 518 6,735
Accrued rental income 279,865 237,749
Liabilities 29,022 20,858
Partners' capital 12,195,305 12,287,569
Quarter Ended June 30, Six Months Ended June 30,
2003 2002 2003 2002
------------- ------------- ------------- --------------
Rental revenues $ 356,590 $ 552,886 $ 709,641 $ 798,135
Expenses (60,456 ) (52,306 ) (124,021 ) (103,495 )
------------- ------------- ------------- --------------
Income from continuing operations 296,134 500,580 585,620 694,640
------------- ------------- ------------- --------------
Discontinued operations:
Income (loss) from discontinued
operations (9,067 ) 15,286 (11,718 ) 21,425
------------- ------------- ------------- --------------
Net income $ 287,067 $ 515,866 $ 573,902 $ 716,065
============= ============= ============= ==============
The Partnership recognized income of $257,953 and $240,684 during the six
months ended June 30, 2003 and 2002, respectively, of which $128,919 and
$163,823 were earned during the quarters ended June 30, 2003 and 2002,
respectively, from these joint ventures and tenants-in-common arrangements.
CNL INCOME FUND XVII, LTD.
(A Florida Limited Partnership)
NOTES TO CONDENSED FINANCIAL STATEMENTS
Quarters and Six Months Ended June 30, 2003 and 2002
5. Concentration of Credit Risk:
The following schedule presents total rental revenues from individual
lessees, each representing more than ten percent of rental revenues
(including the Partnership's share of rental revenues from the joint
ventures and the properties held as tenants-in-common with affiliates of
the general partners), for each of the six months ended June 30:
2003 2002
--------------- ---------------
Golden Corral Corporation $ 299,401 $ 299,192
Carrols Corporation and Texas Taco Cabana, LP 166,852 N/A
National Restaurant Enterprises, Inc. 152,473 212,348
RTM Indianapolis and RTM Southwest Texas, Inc. 131,901 132,007
In addition, the following schedule presents total rental revenues from
individual restaurant chains, each representing more than ten percent of
rental revenues (including the Partnership's share of rental revenues from
the joint ventures and the properties held as tenants-in-common with
affiliates of the general partners), for each of the six months ended June
30:
2003 2002
--------------- --------------
Golden Corral Family Steakhouse Restaurants $ 299,401 $ 299,192
Burger King 169,713 230,871
Taco Cabana 149,612 N/A
Arby's 140,931 140,861
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 revenues.
Although the Partnership's properties have some geographical diversity in
the United States and the Partnership's lessees operate a variety of
restaurant concepts, default by any of these lessees or restaurant chains
will significantly impact the results of operations of the Partnership if
the Partnership is not able to re-lease the properties in a timely manner.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
CNL Income Fund XVII, Ltd. (the "Partnership") is a Florida limited
partnership that was organized on February 10, 1995, to acquire for cash, either
directly or through joint venture arrangements, both newly constructed and
existing restaurant properties, as well as land upon which restaurants were to
be constructed, to be leased primarily to operators of national and regional
fast-food, family-style and casual dining restaurant chains (collectively, the
"Properties"). The leases generally are triple-net leases, with the lessee
responsible for all repairs and maintenance, property taxes, insurance and
utilities. The Partnership owned 16 Properties directly as of June 30, 2003 and
2002. The Partnership owned eleven and ten Properties indirectly through joint
venture or tenancy in common arrangements as of June 30, 2003 and 2002,
respectively.
Capital Resources
Cash from operating activities was $1,087,297 and $1,145,942 for the six
months ended June 30, 2003 and 2002, respectively. Cash and cash equivalents of
the Partnership were $717,036 at June 30, 2003, as compared to $829,739 at
December 31, 2002. At June 30, 2003, these funds were held in demand deposit
accounts at commercial banks. The funds remaining at June 30, 2003, will be used
to pay distributions and other liabilities of the Partnership.
Short-Term Liquidity
The Partnership's investment strategy of acquiring Properties for cash
and leasing them under triple-net leases to operators who meet specified
financial standards minimizes the Partnership's operating expenses. The general
partners believe that the leases will generate net cash flow in excess of
operating expenses.
The Partnership's short-term liquidity requirements consist primarily of
the operating expenses of the Partnership.
The general partners have the right, but not the obligation, to make
additional capital contributions if they deem it appropriate in connection with
the Partnership's operations.
The Partnership generally distributes cash from operations remaining
after the payment of operating expenses of the Partnership, to the extent that
the general partners determine that such funds are available for distribution.
Based on current and anticipated future cash from operations, the Partnership
declared distributions to limited partners of $1,200,000 for each of the six
months ended June 30, 2003 and 2002 ($600,000 for each of the quarters ended
June 30, 2003 and 2002). This represents distributions for each applicable six
months of $0.40 per unit ($0.20 per unit for each applicable quarter). No
distributions were made to the general partners for the quarters and six months
ended June 30, 2003 and 2002. No amounts distributed to the limited partners for
the six months ended June 30, 2003 and 2002, are required to be or have been
treated by the Partnership as a return of capital for purposes of calculating
the limited partners' return on their adjusted capital contributions. The
Partnership intends to continue to make distributions of cash available for
distribution to the limited partners on a quarterly basis.
Total liabilities of the Partnership, including distributions payable,
were $746,438 at June 30, 2003, as compared to $725,459 at December 31, 2002.
Total liabilities at June 30, 2003, 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.
Results of Operations
Total rental revenues were $878,363 for the six months ended June 30,
2003 as compared to $875,809 in the same period in 2002, of which $472,507 and
$439,335 were earned during the second quarter of 2003 and 2002, respectively.
The increase in rental revenues during the six months ended June 30, 2003, as
compared to the same period in 2002, was primarily due to the acquisition of a
Property in Houston, Texas in June 2002 with the majority of the net sales
proceeds received from the 2002 sales of the Properties in Mesquite, Nevada and
Knoxville, Tennessee.
The increase in rental revenues during the six months ended June 30,
2003, as compared to the same period in 2002, was partially offset due to the
fact that AmeriKing Corporation, the parent company to National Restaurant
Enterprises, Inc., which is the tenant of the Properties in Harvey, Lyons and
Chicago Ridge, Illinois, experienced financial difficulties and filed for
bankruptcy protection in December 2002. The tenant has continued paying rent for
each of these Properties; however, during the six months ended June 30, 2003,
the Partnership granted a rent reduction of approximately $24,800 to the tenant
of these Properties, and a second temporary rent reduction of approximately
$49,600 for the period September through December 2003. While the tenant has
neither rejected nor affirmed the leases, there can be no assurance that they
will not be rejected in the future. The lost revenues that would result if the
tenant rejects these leases will have an adverse effect on the results of
operations of the Partnership if the Partnership is unable to lease the
Properties in a timely manner.
In July 2003, Pasta Concepts, LLC surrendered the premises relating to
the Property in Warner Robins, Georgia because the tenant had been experienced
financial difficulties, and therefore, the Partnership stopped recording rental
revenues. The lost revenues resulting from the vacant Property will have an
adverse effect on the results of operations of the Partnership if the
Partnership is unable to lease the Property in a timely manner. The Partnership
is seeking a replacement tenant.
During the six months ended June 30, 2003 and 2002, the Partnership
earned $257,953 and $240,684, respectively, attributable to net income earned by
joint ventures, of which $128,919 and $163,823 were earned during the second
quarter of 2003 and 2002, respectively. The increase in net income earned by
joint ventures during the six months ended June 30, 2003, as compared to the
same period in 2002, was primarily due to the Partnership investing during 2002
the majority of the net proceeds from the sales of the Properties in Mesquite,
Nevada and Wilmette, Illinois in Katy Joint Venture and a tenancy in common
arrangement for a Property in Kenosha, Wisconsin, with affiliates of the general
partners and Florida limited partnerships.
During the quarter and six months ended June 30, 2002, net income earned
by joint ventures was favorably impacted by the collection of $309,700 in past
due rents. Phoenix Restaurant Group, Inc., the former tenant of the Property in
Corpus Christi in which the Partnership owns an approximate 27% interest, ceased
paying rent and filed for bankruptcy in 2001. During April 2002, the bankruptcy
court assigned the lease to a new tenant, an affiliate of the general partners,
and as a result, the tenancy in common collected the past due rents from the new
tenant. All other lease terms remained unchanged and are substantially the same
as the Partnership's other leases.
Ocean Shores Joint Venture, in which the Partnership owns an approximate
31% interest, has not recorded rental revenues since 2001 due to the fact that
the tenant of the Property owned by this joint venture experienced financial
difficulties and vacated the Property in April 2001. In March 2003, the joint
venture executed a termination of the tenant's lease rights, and the tenant
surrendered the premises. In May 2003, the joint venture entered into an
agreement with a third party to sell the Property. Based on the sales agreement,
no impairment has been deemed necessary because the Partnership had written-down
the Property to its estimated fair value in a previous year. As of August 7,
2003, the sale had not occurred. The lost revenues resulting from the vacant
Property will continue to have an adverse effect on the equity in earnings of
joint ventures until the joint venture sells this Property and reinvests the
proceeds in another Property.
During the six months ended June 30, 2003, four lessees of the
Partnership, Golden Corral Corporation, Carrols Corporation and Texas Taco
Cabana, LP (which are affiliated entities under common control) (hereinafter
referred as "Carrols Corporation."), National Restaurant Enterprises, 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 ten percent of the Partnership's total rental revenues
(including rental revenues from the Partnership's share of rental income from
Properties owned by joint ventures and Properties owned with separate affiliates
of the general partners as tenants-in-common). 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
revenues. In addition, four restaurant chains, Golden Corral, Burger King, Taco
Cabana, and Arby's, each accounted for more than ten percent of the
Partnership's total rental revenues during the six months ended June 30, 2003
(including rental revenues from the Partnership's share of rental income from
Properties owned by joint ventures and Properties owned with separate affiliates
of the general partners as tenants-in-common). It is anticipated that each of
these four restaurant chains will continue to contribute more than ten percent
of the Partnership's rental revenues to which the Partnership is entitled under
the terms of the leases. Any failure of these lessees or restaurant chains will
have a material adverse affect on the Partnership's results of operations if the
Partnership is not able to re-lease or sell the Properties in a timely manner.
During the six months ended June 30, 2003 and 2002, the Partnership also
earned $1,112 and $22,857, respectively, in interest and other income, of which
$807 and $6,073 were earned during the second quarter of 2003 and 2002,
respectively. During the six months ended June 30, 2002, interest and other
income were higher as compared to the same period in 2003 due to the Partnership
recognizing as other income the collection of unreimbursed property expenses of
approximately $11,200, which were written-off in previous years.
Operating expenses, including depreciation and amortization expense and
provision for write-down of assets, were $514,528 and $299,013 for the six
months ended June 30, 2003 and 2002, respectively, of which $343,772 and
$142,770 were incurred during the second quarter of 2003 and 2002, respectively.
The increase in operating expenses during the quarter and six months ended June
30, 2003 was primarily due to the fact that during the quarter and six months
ended June 30, 2003, the Partnership recorded a provision for write-down of
assets of $213,000 relating to the Property in Warner Robins, Georgia. The
provision represented the difference between the carrying value of the Property
and its estimated fair value. The tenant of this Property experienced financial
difficulties, and in July 2003, the tenant surrendered the premises.
The increase in operating expenses during the six months ended June 30,
2003 was also partially due to an increase in depreciation expense as a result
of a Property acquisition in 2002, and the reclassification of the lease
relating to the Property in Muncie, Indiana from direct financing leases to
operating leases due to an amendment to the lease. The increase in operating
expenses was also partially due to an increase in state tax expense relating to
several states in which the Partnership conducts business. The increase in
operating expenses during the quarter and six months ended June 30, 2003 was
partially offset by a decrease in the costs incurred for administrative expenses
for servicing the Partnership and its Properties during 2003.
During the year ended December 31, 2002, the Partnership identified and
sold three Properties that were classified as Discontinued Operations in the
accompanying financial statements. The Partnership recognized net rental income
(rental revenues less property expenses) of $52,751 and $105,478 during the
quarter and six months ended June 30, 2002, respectively, relating to these
Properties. The Partnership sold the Property in Mesquite, Nevada in March 2002.
Because the Partnership recorded provisions for write-down of assets for this
Property in previous years, no gain or loss was recognized in March 2002
relating to this sale. In May and June 2002, the Partnership sold its Properties
in Knoxville, Tennessee and Wilmette, Illinois resulting in a total gain of
approximately $285,700.
During the quarter ended June 30, 2003, Ocean Shores Joint Venture, in
which the Partnership owns an approximate 31% interest, entered into an
agreement to sell its Property in Ocean Shores, Washington, as described above.
The financial results relating to the Property in Ocean Shores, Washington and a
Property sold in August 2002 by Mansfield Joint Venture, in which the
Partnership owns a 21% interest, were classified as Discontinued Operations in
the combined, condensed financial information reported in the footnotes to the
accompanying financial statements for the joint ventures and the tenancies in
common with affiliates. The Partnership's pro-rata share of these amounts is
included in equity in earnings of joint ventures in the accompanying financial
statements.
In January 2003, FASB issued FASB Interpretation No. 46 ("FIN 46"),
"Consolidation of Variable Interest Entities" to expand upon and strengthen
existing accounting guidance that addresses when a company should include the
assets, liabilities and activities of another entity in its financial
statements. To improve financial reporting by companies involved with variable
interest entities (more commonly referred to as special-purpose entities or
off-balance sheet structures), FIN 46 requires that a variable interest entity
be consolidated by a company if that company is subject to a majority risk of
loss from the variable interest entity's activities or entitled to receive a
majority of the entity's residual returns or both. Prior to FIN 46, a company
generally included another entity in its consolidated financial statements only
if it controlled the entity through voting interests. The consolidation
requirements of FIN 46 apply immediately to variable interest entities created
after January 31, 2003, and to older entities, in the first fiscal year or
interim period beginning after June 15, 2003. The general partners believe
adoption of this standard may result in either consolidation or additional
disclosure requirements with respect to the Partnership's unconsolidated joint
ventures, which are currently accounted for under the equity method. However,
such consolidation is not expected to significantly impact the Partnership's
results of operations.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 4. CONTROLS AND PROCEDURES
The general partners maintain a set of disclosure controls and
procedures designed to ensure that information required to be disclosed in the
Partnership's filings under the Securities Exchange Act of 1934 is recorded,
processed, summarized and reported within the time periods specified in the
Securities and Exchange Commission's rules and forms. The principal executive
and financial officers of the corporate general partner have evaluated the
Partnership's disclosure controls and procedures as of the end of the period
covered by this Quarterly Report on Form 10-Q and have determined that such
disclosure controls and procedures are effective.
There was no change in internal control over financial reporting that
occurred during the most recent fiscal quarter that has materially affected, or
is reasonably likely to materially affect, internal control over financial
reporting.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings. Inapplicable.
Item 2. Changes in Securities. Inapplicable.
Item 3. Default upon Senior Securities. Inapplicable.
Item 4. Submission of Matters to a Vote of Security Holders. Inapplicable.
Item 5. Other Information. Inapplicable.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
**3.1 Affidavit and Certificate of Limited Partnership of
CNL Income Fund XVII, Ltd. (Filed as Exhibit 3.1 to
the Registrant's Registration Statement on Form S-11,
No. 33-90998, incorporated herein by reference.)
**3.2 Amended and Restated Agreement of Limited Partnership
of CNL Income Fund XVII, Ltd. (Included as Exhibit
4.2 to Form 10-K filed with the Securities and
Exchange Commission on March 21, 1996, and
incorporated herein by reference.)
**4.1 Affidavit and Certificate of Limited Partnership of
CNL Income Fund XVII, Ltd. (Filed as Exhibit 3.1 to
Registration Statement No. 33-90998 on Form S-11 and
incorporated herein by reference.)
**4.2 Amended and Restated Agreement of Limited Partnership
of CNL Income Fund XVII, Ltd. (Included as Exhibit
4.2 to Form 10-K filed with the Securities and
Exchange Commission on March 21, 1996, and
incorporated herein by reference.)
**4.3 Form of Agreement between CNL Income Fund XVII, Ltd.
and MMS Escrow and Transfer Agency, Inc. and between
CNL Income Fund XVIII, Ltd. and MMS Escrow and
Transfer Agency, Inc. relating to the Distribution
Reinvestment Plans (Filed as Exhibit 4.4 to the
Registrant's Registration Statement on Form S-11, No.
33-90998, incorporated herein by reference.)
**8.3 Opinion of Baker & Hostetler regarding certain
material issues relating to the Distribution
Reinvestment Plan of CNL Income Fund XVII, Ltd.
(Filed as Exhibit 8.3 to Amendment No. Three to the
Registrant's Registration Statement on Form S-11, No.
33-90998, incorporated herein by reference.)
**10.1 Management Agreement between CNL Income Fund XVII,
Ltd. and CNL Fund Advisors, Inc. (Included as Exhibit
10.1 to Form 10-K filed with the Securities and
Exchange Commission on March 21, 1996, and
incorporated herein by reference.)
**10.2 Assignment of Management Agreement from CNL Fund
Advisors, Inc. to CNL APF Partners, LP. (Included as
Exhibit 10.2 to Form 10-Q filed with the Securities
and Exchange Commission on August 13, 2001, and
incorporated herein by reference.)
**10.3 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.)
**10.4 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.)
**10.15 Assignment of Management Agreement from CNL APF
Partners, LP to CNL Restaurants XVIII, Inc. (Included
as Exhibit 10.5 to Form 10-Q filed with the
Securities and Exchange Commission on August 14,
2002, and incorporated herein by reference.)
31.1 Certification of Chief Executive Officer of Corporate
General Partner Pursuant to Rule 13a-14 as Adopted
Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002. (Filed herewith.)
31.2 Certification of Chief Financial Officer of Corporate
General Partner Pursuant to Rule 13a-14 as Adopted
Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002. (Filed herewith.)
32.1 Certification of Chief Executive Officer of Corporate
General Partner Pursuant to 18 U.S.C. Section 1350 as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002. (Filed herewith.)
32.2 Certification of Chief Financial Officer of Corporate
General Partner Pursuant to 18 U.S.C. Section 1350 as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002. (Filed herewith.)
** previously filed.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended June 30,
2003.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
DATED this 11th day of August, 2003.
CNL INCOME FUND XVII, LTD.
By: CNL REALTY CORPORATION
General Partner
By: /s/ James M. Seneff, Jr.
------------------------------
JAMES M. SENEFF, JR.
Chief Executive Officer
(Principal Executive Officer)
By: /s/ Robert A. Bourne
------------------------------
ROBERT A. BOURNE
President and Treasurer
(Principal Financial and
Accounting Officer)
EXHIBIT INDEX
Exhibit Number
(c) Exhibits
**3.1 Affidavit and Certificate of Limited Partnership of
CNL Income Fund XVII, Ltd. (Filed as Exhibit 3.1 to
the Registrant's Registration Statement on Form
S-11, No. 33-90998, incorporated herein by
reference.)
**3.2 Amended and Restated Agreement of Limited
Partnership of CNL Income Fund XVII, Ltd. (Included
as Exhibit 4.2 to Form 10-K filed with the
Securities and Exchange Commission on March 21,
1996, and incorporated herein by reference.)
**4.1 Affidavit and Certificate of Limited Partnership of
CNL Income Fund XVII, Ltd. (Filed as Exhibit 3.1 to
Registration Statement No. 33-90998 on Form S-11
and incorporated herein by reference.)
**4.2 Amended and Restated Agreement of Limited
Partnership of CNL Income Fund XVII, Ltd. (Included
as Exhibit 4.2 to Form 10-K filed with the
Securities and Exchange Commission on March 21,
1996, and incorporated herein by reference.)
**4.3 Form of Agreement between CNL Income Fund XVII,
Ltd. and MMS Escrow and Transfer Agency, Inc. and
between CNL Income Fund XVIII, Ltd. and MMS Escrow
and Transfer Agency, Inc. relating to the
Distribution Reinvestment Plans (Filed as Exhibit
4.4 to the Registrant's Registration Statement on
Form S-11, No. 33-90998, incorporated herein by
reference.)
**8.3 Opinion of Baker & Hostetler regarding certain
material issues relating to the Distribution
Reinvestment Plan of CNL Income Fund XVII, Ltd.
(Filed as Exhibit 8.3 to Amendment No. Three to the
Registrant's Registration Statement on Form S-11,
No. 33-90998, incorporated herein by reference.)
**10.1 Management Agreement between CNL Income Fund XVII,
Ltd. and CNL Fund Advisors, Inc. (Included as
Exhibit 10.1 to Form 10-K filed with the Securities
and Exchange Commission on March 21, 1996, and
incorporated herein by reference.)
**10.2 Assignment of Management Agreement from CNL Fund
Advisors, Inc. to CNL APF Partners, LP. (Included
as Exhibit 10.2 to Form 10-Q filed with the
Securities and Exchange Commission on August 13,
2001, and incorporated herein by reference.)
**10.3 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.)
**10.4 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.)
**10.15 Assignment of Management Agreement from CNL APF
Partners, LP to CNL Restaurants XVIII, Inc.
(Included as Exhibit 10.5 to Form 10-Q filed with
the Securities and Exchange Commission on August
14, 2002, and incorporated herein by reference.)
31.1 Certification of Chief Executive Officer of
Corporate General Partner Pursuant to Rule 13a-14
as Adopted Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002. (Filed herewith.)
31.2 Certification of Chief Financial Officer of
Corporate General Partner Pursuant to Rule 13a-14
as Adopted Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002. (Filed herewith.)
32.1 Certification of Chief Executive Officer of
Corporate General Partner Pursuant to 18 U.S.C.
Section 1350 as Adopted Pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002. (Filed herewith.)
32.2 Certification of Chief Financial Officer of
Corporate General Partner Pursuant to 18 U.S.C.
Section 1350 as Adopted Pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002. (Filed herewith.)
** previously filed.
EXHIBIT 31.1
EXHIBIT 31.2
EXHIBIT 32.1
EXHIBIT 32.2