CNL HOSPITALITY PROPERTIES, INC.
(formerly CNL American Realty Fund, Inc.)
Supplement No. 2, dated September 23, 1998
to Prospectus, dated April 21, 1998
This Supplement is part of, and should be read in conjunction with, the
Prospectus dated April 21, 1998. This Supplement replaces all prior Supplements
to the Prospectus. Capitalized terms used in this Supplement have the same
meaning as in the Prospectus unless otherwise stated herein.
Information as to proposed properties for which the Company has
received initial commitments and as to the number and types of Properties
acquired by the Company is presented as of September 1, 1998, and all references
to commitments or Property acquisitions should be read in that context. Proposed
properties for which the Company receives initial commitments, as well as
property acquisitions that occur after September 1, 1998, will be reported in a
subsequent Supplement.
THE OFFERING
As of September 1, 1998, the Company had received aggregate
subscription proceeds of $26,736,275 (2,673,628 Shares), including $9,704 (970
Shares) issued pursuant to the Reinvestment Plan. As of September 1, 1998, the
Company had invested approximately $18,670,000 of such proceeds and $8,600,000
of advances from the Line of Credit in two hotel Properties, and had incurred
approximately $1,400,000 in Acquisition Fees and certain Acquisition Expenses,
leaving approximately $3,118,000 in Net Offering Proceeds available for
investment in additional Properties and Mortgage Loans.
The Company has elected to extend the offering of Shares until a date
no later than July 9, 1999.
MANAGEMENT COMPENSATION
The table below summarizes the types, recipients, methods of
computation, and estimated amounts of all compensation, fees, reimbursements and
distributions to be paid directly or indirectly by the Company to the Advisor
and its Affiliates, exclusive of any distributions to which the Advisor or its
Affiliates may be entitled by reason of their purchase and ownership of Shares.
See the section of the Prospectus entitled "The Advisor and the Advisory
Agreement." For information concerning compensation to the Directors, see the
section of the Prospectus entitled "Management."
A maximum of 15,000,000 Shares ($150,000,000) may be sold. An
additional 1,500,000 Shares ($15,000,000) may be sold to stockholders who
receive a copy of this Prospectus and who purchase Shares through the
Reinvestment Plan.
The following arrangements for compensation and fees to the Advisor and
its Affiliates were not determined by arm's-length negotiations. See the section
of the Prospectus entitled "Conflicts of Interest." There is no item of
compensation and no fee that can be paid to the Advisor or its Affiliates under
more than one category.
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<TABLE>
<CAPTION>
<S> <C>
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Type of
Compensation Estimated
and Recipient Method of Computation Maximum Amount
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Organizational Stage
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Selling Commissions to Selling Commissions of 7.5% per Share on all Shares sold, subject $11,250,000 if 15,000,000 Shares
Managing Dealer and to reduction under certain circumstances as described in "The are sold; $12,375,000 if
Soliciting Dealers Offering - Plan of Distribution." Soliciting Dealers may be 16,500,000 Shares (including
reallowed Selling Commissions of up to 7% with respect to Shares 1,500,000 Shares offered
they sell. pursuant to the Reinvestment
Plan) are sold. As of June 30,
1998, the Company had incurred
$1,768,371 in Selling
Commissions, $1,650,707 of which
was reallowed to unaffiliated
Soliciting Dealers.
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Marketing support and Expense allowance of 0.5% of Gross Proceeds to the Managing Dealer, $750,000 if 15,000,000 Shares
due diligence expense all or a portion of which may be reallowed to Soliciting Dealers are sold; $825,000 if 16,500,000
reimbursement fee to with prior written approval from, and in the sole discretion of, Shares (including 1,500,000
Managing Dealer and the Managing Dealer. The Managing Dealer will pay all sums Shares offered pursuant to the
Soliciting Dealers attributable to bona fide due diligence expenses from this fee, in Reinvestment Plan) are sold. As
the Managing Dealer's sole discretion. of June 30, 1998, the Company
had incurred $117,891 in these
fees.
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Reimbursement to the Actual expenses incurred, except that the Advisor will pay all such Amount is not determinable at
Advisor and its expenses in excess of 3% of Gross Proceeds. The Organizational and this time, but will not exceed
Affiliates for Organi- Offering Expenses paid by the Company in connection with the formation 3% of Gross Proceeds,
zational and Offering of the Company, together with the 7.5% Selling Commissions, the 0.5% $4,500,000 if 15,000,000
Expenses marketing support and due diligence reimbursement fee, and the Shares are sold; $4,950,000 if
Soliciting Dealer Servicing Fee incurred by the Company will not 16,500,000 Shares (including
exceed thirteen percent (13%) of the proceeds raised in connection 1,500,000 Shares offered
with this offering. pursuant to the Reinvestment
Plan) are sold.
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Acquisition Stage
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Acquisition Fee to the 4.5% of Total Proceeds payable to the Advisor as Acquisition Fees. $6,750,000 if 15,000,000 Shares
Advisor Shares are sold plus $2,025,000
if Permanent Financing equals
$45,000,000; $7,425,000 if
16,500,000 Shares (including
1,500,000 Shares offered pur-
suant to the Reinvestment Plan)
are sold plus $2,227,500 if
Permanent Financing equals
$49,500,000. As of June 30,
1998, the Company had incurred
$1,061,023 in Acquisition Fees
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Other Acquisition Fees Any fees paid to Affiliates of the Advisor in connection with the Amount is not determinable at
to Affiliates of the financing, development, construction or renovation of a Property. this time.
Advisor Such fees are in addition to 4.5% of Total Proceeds payable to the
Advisor as Acquisition Fees, and payment of such fees will be
subject to approval by the Board of Directors, including a majority
of the Independent Directors, not otherwise interested in the
transaction.
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Reimbursement of Reimbursement to the Advisor and its Affiliates for expenses Acquisition Expenses, which are
Acquisition Expenses actually incurred. based on a number of factors,
to the Advisor and its including the purchase price of
Affiliates The total of all Acquisition Fees and any Acquisition Expenses the Properties, are not
payable to the Advisor and its Affiliates shall be reasonable determinabile at this time.
and shall not exceed an amount equal to 6% of the Real Estate Asset
Value of a Property, or in the case of a Mortgage Loan, 6% of the
funds advanced, unless a majority of the Board of Directors,
including a majority of the Independent Directors not otherwise
interested in the transaction, approves fees in excess of this limit
subject to a determination that the transaction is commercially
competitive, fair and reasonable to the Company. Acquisition Fees
shall be reduced to the extent that, and if necessary to limit, the
total compensation paid to all persons involved in the acquisition
of any Property to the amount customarily charged in arms-length
transactions by other persons or entities rendering similar services
as an ongoing public activity in the same geographical location and
for comparable types of Properties, and to the extent that other
acquisition fees, finder's fees, real estate commissions, or other
similar fees or commissions are paid by any person in connection with
the transaction. "Real Estate Asset Value" means the amount actually
paid or allocated to the purchase, development, construction or
improvement of a Property, exclusive of Acquisition Fees and
Acquisition Expenses.
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Operational Stage
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Asset Management Fee A monthly Asset Management Fee in an amount equal to one- Amount is not determinable at
to the Advisor twelfth of .60% of the Company's Real Estate Asset Value and the this time. The amount of the
outstanding principal amount of any Mortgage Loans, as of the Asset Management Fee will
end of the preceding month. Specifically, Real Estate Asset Value depend upon, among other
equals the amount invested in the Properties wholly owned by the things, the cost of the Properties
Company, determined on the basis of cost, plus, in the case of and the amount invested in
Properties owned by any Joint Venture or partnership in which the Mortgage Loans. As of June
Company is a co-venturer or partner, the portion of the cost of 30, 1998, the Company had not
such Properties paid by the Company, exclusive of Acquisition incurred any asset management
Fees and Expenses. The Asset Management Fee, which will not fees.
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 Advisor. All
or any portion of the Asset 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 Advisor shall determine
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Reimbursement to the Operating Expenses (which, in general, are those expenses relating Amount is not determinable at this
Advisor and Affiliates to administration of the Company on an ongoin basis) will be time.
for operating expenses reimbursed by the Company. To the extent that Operating Ex-
penses payable or reimbursable by the Company, in any four con-
secutive fiscal quarters (the "Expense Year"), exceed the greater
of 2% of Average Invested Assets or 25% of Net Income (the
"2%/25% Guidelines"), the Advisor shall reimburse the Company
within 60 days after the end of the Expense Year the amount by
which the total Operating Expenses paid or incurred by the
Company exceed the 2%/25% Guidelines. "Average Invested
Assets" means, for a specified period, the average of the aggregate
book value of the assets of the Company invested, directly or
indirectly, in equity interests in and loans secured by real estate
before reserves for depreciation or bad debts or other similar non-
cash reserves, computed by taking the average of such values at
the end of each month during such period. "Net Income" means
for any period, the total revenues applicable to such period, less
the total expenses applicable to such period excluding additions to
reserves for depreciation, bad debts, or other similar non-cash
reserves; provided, however, Net Income for purposes of calcu-
lating total allowable Operating Expenses shall exclude the gain
from the sale of the Company's assets.
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Soliciting Dealer An annual fee of .20% of Invested Capital on December 31 of each year, Amount is not determinable at
Servicing Fee to commencing on December 31 of the year following the year in which the this time. Until such time as
Managing Dealer offering terminates, generally payable to the Managing Dealer, which, assets are sold, the estimated
in its sole discretion, in turn may reallow all or a portion of such amounts payable to the Managing
fee to Soliciting Dealers whose clients hold Shares on such date. In Dealer for each of the years
general, Invested Capital is the amount of cash paid by the stockholders following the year of
to the Company for their Shares, reduced by certain prior Distributions termination of the offering are
to the stockholders from the Sale of Assets. The Soliciting Dealer expected to be $300,000 if
Servicing Fee will terminate as of the beginning of any year in which 15,000,000 Shares are sold and
the Company is liquidated or in which Listing occurs, provided, however, $330,000 if 16,500,000 Shares
that any previously accrued but unpaid portion of the Soliciting Dealer (including 1,500,000 Shares
Servicing Fee may be paid in such year or any subsequent year. offered pursuant to the
Reinvestment Plan) are sold.
The maximum total amount payable
to the Managing Dealer through
December 31, 2005 is $1,800,000
if 15,000,000 Shares are sold
and $1,980,000 if 16,500,000
Shares are sold. No amounts had
been paid or accrued as of June
30,1998.
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Deferred, subordinated A deferred, subordinated real estate disposition fee, payable upon Amount is not determinable at
real estate disposition Sale of one or more Properties, in an amount equal to the lesser of this time. The amount of this
fee payable to the (i) one-half of a Competitive Real Estate Commission, or (ii) 3% of fee, if it becomes payable, will
Advisor from a Sale or the sales price of such Property or Properties. Payment of such fee depend upon the price at which
Sales of a Property not shall be made only if the Advisor provides a substantial amount of Properties are sold. No amounts
in liquidation of the services in connection with theh Sale of a Property or Properties and had been paid or accrued as of
Company shall be made only if the Advisor provides a substantial amount of June 30, 1998.
services in connection with the Sale of a Property or Properties and
shall be subordinated to receipt by the stockholders of Distributions
equal to the sum of (i) their aggregate Stockholders' 8% Return and
(ii) their aggregate Invested Capital. If, at the time of a Sale,
payment of the disposition fee is deferred because the subordination
conditions have not been satisfied, then the disposition fee shall be
paid at such later time as the subordination conditions are satisfied.
Upon Listing, if the Advisor has accrued but not been paid such real
estate disposition fee, then for purposes of determining whether the
subordination conditions have been satisfied, stockholders will be
deemed to have received a Distribution in the amount equal to the
product of the total number of Shares outstanding and the average
closing price of the Shares over a period, beginning 180 days after
Listing, of 30 days during which the Shares are traded. "Stockholders'
8% Return," as of each date, means an aggregate amount equal to an 8%
cumulative, noncompounded, annual return on Invested Capital.
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Type of
Compensation Estimated
and Recipient Method of Computation Maximum Amount
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Subordinated Incentive At such time, if any, as Listing occurs, the Advisor shall be paid Amount is not determinable
Fee payable to the the Subordinated Incentive Fee in an amount equal to 10% of the amount at this time. No amounts
Advisor at such time, by which (i) the market value of the Company (as defined below) plus the had been paid or accrued
if any, as Listing occurs total Distributions made to stockholders from the Company's inception until as of June 30, 1998.
the date of Listing exceeds (ii) the sum of (A) 100% of Invested Capital
and (B) the total Distributions required to be made to the stockholders
in order to pay the Stockholders' 8% Return from inception through the
date the market value is determined. For purposes of calculating the
Subordinated Incentive Fee, the market value of the Company
shall be the average closing price or average of bid and asked
price, as the case may be, over a period of 30 days during which
the Shares are traded with such period beginning 180 days after
Listing. The Subordinated Incentive Fee will be reduced by the
amount of any prior payment to the Advisor of a deferred, subordinated
share of Net Sales Proceeds from Sales of assets of the Company.
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Deferred, subordinated A deferred, subordinated share equal to 10% of Net Sales Proceeds Amount is not determinable at
share of Net Sales from Sales of assets of the Company payable after receipt by the this time. No amounts had
Proceeds from Sales of stockholders of Distributions equal to the sum of (i) the been paid or accrued as of
assets of the Company Stockholders' 8% Return and (ii) 100% of Invested Capital. June 30, 1998.
not in liquidation of Following Listing, no share of Net Sales Proceeds will be paid to
the Company payable the Advisor.
to the Advisor
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Secured Equipment A fee paid to the Advisor out of the proceeds of the Line of Credit Amount is not determinable at
Lease Servicing Fee to or Permanent Financing for negotiating Secured Equipment Leases and this time. No amounts had
the Advisor supervising the Secured Equipment Lease program equal to 2% of the been paid or accrued as of
purchase price of the Equipment subject to each Secured Equipment June 30, 1998.
Lease and paid upon entering into such lease.
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Reimbursement to the Repayment by the Company of actual expenses incurred. Amount not determinable at
Advisor and Affiliates this time.
for Secured Equipment
Lease servicing ex-
penses
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Type of
Compensation Estimated
and Recipient Method of Computation Maximum Amount
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Liquidation Stage
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Deferred, subordinated A deferred, subordinated real estate disposition fee, payable upon Amount is not determinable at
real estate disposition Sale of one or more Properties, in an amount equal to the lesser of this time. The amount of this
fee payable to the (i) one-half of a Competitive Real Estate Commission, or (ii) 3% fee, if it becomes payable,
Advisor from a Sale or of the sales price of such Property or Properties. Payment of such will depend upon the price at
Sales in liquidation of fee shall be made only if the Advisor provides a substantial amount of which Properties are sold.
the Company services in connection with the Sale of a Property or Properties and
shall be subordinated to receipt by the stockholders of Distributions
equal to the sum of (i) their aggregate Stockholders' 8% Return and (ii)
their aggregate Invested Capital. If, at the time of a Sale, payment of
the disposition fee is deferred because the subordination conditions have
not been satisfied, then the disposition fee shall be paid at such later
time as the subordination conditions are satisfied.
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Deferred, subordinated A deferred, subordinated share equal to 10% of Net Sales Proceeds Amount is not determinable at
share of Net Sales from Sales of assets of the Company payable after receipt by the this time.
Proceeds from Sales of stockholders of Distributions equal to the sum of (i) the
assets of the Company Stockholders' 8% Return and (ii) 100% of Invested Capital.
in liquidation of the Following Listing, no share of Net Sales Proceeds will be paid to
Company payable to the Advisor.
the Advisor
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</TABLE>
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CONFLICTS OF INTEREST
The Advisor and certain other Affiliates of the Company are affiliated
with CNL American Properties Fund, Inc., a public program whose offering of
securities is ongoing. As of September 1, 1998, CNL American Properties Fund,
Inc. had approximately $92,600,000 available for investment.
BUSINESS
GENERAL
The Company is a Maryland corporation that was organized on June 12,
1996. On June 15, 1998, the Company formed CNL Hospitality Partners, LP, a
wholly owned Delaware limited partnership (the "Partnership"). Properties
acquired are expected to be held by the Partnership and, as a result, owned by
the Company through the Partnership. The term "Company" includes CNL Hospitality
Properties, Inc. and its subsidiaries, CNL Hospitality GP Corp., CNL Hospitality
LP Corp. and CNL Hospitality Partners, LP.
The Company has not specified any percentage of Net Offering Proceeds
to be invested in either restaurant or hotel Properties. To the extent the
Company invests in restaurant Properties, it is expected that those will be
Properties of selected Restaurant Chains that are national and regional
restaurant chains, primarily fast-food, family- style, and casual-dining chains.
Fast-food restaurants feature quality food and quick service, which often
includes drive-through service, and offer a variety of menu items such as
hamburgers, steaks, seafood, chili, pizza, pasta dishes, chicken, hot and cold
sandwiches, and salads. Family-style restaurants feature services that generally
are associated with full-service restaurants, such as full table service and
cooked-to-order food, but at more moderate prices. The casual-dining (or dinner
house) concept features a variety of popular contemporary foods, full table
service, moderate prices, and surroundings that are appealing to families. The
casual-dining segment of the restaurant industry, like the family-style segment,
features services that generally are associated with the full-service restaurant
category. According to forecasts appearing in the January 1, 1997 issue of
Restaurants and Institutions, it is projected that the casual-dining segment of
full-service restaurant sales will experience 3.8% real growth in sales in 1997,
with sales predicted to reach $49 billion. The top 15 casual-dining chains by
sales have a total of 3,581 restaurants throughout the United States.
The restaurant industry is one of the largest industries in the United
States in volume of sales and number of employees (more than 9 million persons)
and includes fast-food outlets, cafeterias, lunchrooms, convenience stores,
family-style restaurants, casual-dining facilities, full-service restaurants,
and contract and industrial feeders. Industry publications project that
restaurant industry sales will increase from $173.7 billion in 1985 to $336
billion in 1998. Restaurant industry sales for 1997 are projected to be $321.3
billion. Nominal growth, which is comprised of real growth and inflationary
growth, is estimated to be 4.7% in 1998. Real growth of the restaurant industry
in 1997 was 1.7%, and industry analysts currently estimate that the restaurant
industry will achieve 1.8% real growth in 1998; however, according to the
National Restaurant Association, fast-food restaurants should outpace the
industry average for real growth, with a projected 2.1% increase over 1997.
Sales in this segment of the restaurant industry are projected to be $105.7
billion for 1998.
The Company may invest in the fast-food, family-style, and
casual-dining segments of the restaurant industry, the most rapidly growing
segments in recent years. According to the National Restaurant Association, 51%
of adults eat at a quick-service restaurant and 42% of adults patronize a
moderately-priced family restaurant at least once each week. In addition, the
National Restaurant Association indicates that Americans spend approximately 44
cents of every food dollar on dining away from home. Surveys published in
Restaurant Business indicate that families with children choose quick-service
restaurants four out of every five times they dine out. Further, according to
Nation's Restaurant News, the 100 largest restaurant chains are posting an
average of 8.65% growth in their systemwide sales figures for 1997. Casual-theme
dining concepts are among the chains showing the strongest
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growth. In 1997, the sandwich segment experienced sales growth of 4.48% over
1996 figures, and the casual-dining segment experienced systemwide sales growth
in 1997 of 10.63%, compared to 9.98% in 1995. Management believes that the
Company will have the opportunity to participate in this growth through the
ownership of Properties leased to operators of the Restaurant Chains.
The fast-food, family-style and casual-dining segments of the
restaurant industry have demonstrated their ability to adapt to changes in
consumer preferences, such as health and dietary issues, decreases in the
disposable income of consumers and environmental awareness, through various
innovative techniques, including special value pricing and promotions, increased
advertising, menu changes featuring low-calorie, low-cholesterol menu items, and
new packaging and energy conservation techniques.
The table set forth below provides information with respect to certain
Restaurant Chains in which Affiliates of the Company (consisting of an unlisted
public REIT, 18 public partnerships and 8 private partnerships) had invested as
of June 30, 1998, and a listed public REIT (which was managed by an Affiliate
through December 31, 1997, at which time such Affiliate merged with the REIT)
had invested as of December 31, 1997:
<TABLE>
<CAPTION>
Approximate Aggregate
Dollars Invested Percentage of Number of
Restaurant Chain by Affiliates Dollars Invested Prior Programs
- ---------------- ------------- ---------------- --------------
<S> <C>
Golden Corral $136,039,000 13.9% 23
Burger King 96,791,000 9.9% 24
Jack in the Box 93,458,000 9.6% 15
Denny's 61,601,000 6.3% 19
Boston Market 57,501,000 5.9% 11
Hardee's 54,108,000 5.5% 12
Bennigan's 38,299,000 3.9% 4
Shoney's 33,513,000 3.4% 10
IHOP 32,307,000 3.3% 9
Wendy's 31,765,000 3.3% 14
Long John Silver's 29,045,000 3.0% 6
Steak & Ale 27,060,000 2.8% 1
TGI Friday's 25,075,000 2.6% 7
Darryl's 22,296,000 2.3% 4
Checkers 21,125,000 2.2% 8
Arby's 18,691,000 1.9% 9
Chevy's Fresh Mex 18,551,000 1.9% 6
Pizza Hut 17,964,000 1.8% 9
Ground Round 15,751,000 1.6% 3
Black-eyed Pea 15,211,000 1.6% 4
Perkins 15,157,000 1.6% 9
KFC 14,463,000 1.5% 12
Tumbleweed Southwest
Mesquite Grill & Bar 9,323,000 1.0% 1
Sonny's Real Pit Bar-B-Q 9,000,000 0.9% 1
Popeyes 8,900,000 0.9% 9
Taco Bell 8,039,000 0.8% 8
Quincy's 5,968,000 0.6% 5
</TABLE>
The Company also invests Net Offering Proceeds in Properties of
selected national and regional limited service, extended stay and full service
Hotel Chains. The Company believes that attractive opportunities exist to
acquire limited service, extended stay and full service hotels in urban and
resort locations. According to Smith
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Travel Research, a leading provider of lodging industry statistical research,
the hotel industry has been steadily improving its financial performance over
the past seven consecutive years. Also according to Smith Travel Research, in
1997, the industry reached its highest absolute level of pre-tax profit in its
history at approximately $17 billion, an increase of approximately 36% over
1996.
Pre-Tax Profits
of Hospitality Industry
(in billions)
Year Profitability
---- -------------
1993 $ 2.4
1994 5.5
1995 8.5
1996 12.5
1997 17.0
Source: Smith Travel Research
As indicated in the table below, the average daily room rate increased
6.1% in 1997, from $70.81 in 1996 to $75.16 in 1997, resulting in nine
consecutive years of room rate growth.
Hospitality Industry Average
Daily Room Rate By Year
Year Rate
---- ----
1987 $52.58
1988 54.47
1989 56.35
1990 57.96
1991 58.08
1992 58.91
1993 60.53
1994 62.86
1995 65.81
1996 70.81
1997 75.16
Source: Smith Travel Research
Revenue per available room also increased by 5.3% from $46.03 in 1996
to $48.48 in 1997. In 1997, for the first time since 1991, growth in room supply
exceeded growth in room demand and resulted in a slight dip in occupancy. In
1997, total occupancy fell 0.8% from 65% in 1996 to 64.5%. Growth in room demand
exceeded the growth in new room supply for each year from 1992 through 1996 and
industry-wide occupancy increased from a 20 year low of 61.8% in 1991 to 65% in
1996.
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<PAGE>
According to American Hotel & Motel Association data, in 1997,
Americans traveling in the United States spent more than $1.38 billion per day,
$57.4 million per hour and $955,800 per minute on travel and tourism. Total
travel expenditures in the United States generated $481.5 billion in sales. In
addition, there were 49,000 hotel properties which included over 3.8 million
hotel rooms recording $85.6 billion in revenue. Hotels are a vital part of
travel and tourism. In the United States, the tourism industry, which globally
is the world's largest industry, is currently ranked third behind auto sales and
retail food sales. In terms of employment, the hotel industry supports over 7
million direct jobs, generating $18.93 billion in wages. Nationally, 13.8% of
total hotel rooms available are located in urban areas, 35.3% in suburban areas,
33.2% in highway locations, 6.4% in airport areas, and the remaining 11.3% in
resort locations.
The Company will acquire limited service, extended stay or full service
hotel Properties. Limited service hotels generally minimize non-guest room space
and offer limited food service such as complimentary continental breakfasts and
do not have restaurant or lounge facilities on-site. Extended stay hotels
generally contain guest suites with a kitchen area and living area separate from
the bedroom. Extended stay hotels vary with respect to providing on-site
restaurant facilities. Full service hotels generally have conference or meeting
facilities and on-site food and beverage facilities.
Management intends to structure the Company's investments to allow it
to participate, to the maximum extent possible, in any sales growth in the
restaurant and hotel industries, as reflected in the Properties that it owns.
The Company therefore intends to generally structure its leases with percentage
rent requirements which are based on gross sales of the particular business over
specified levels located on the Property. Gross sales may increase even absent
real growth because increases in the costs typically are passed on to the
consumers through increased prices, and increased prices are reflected in gross
sales. In an effort to provide regular cash flow to the Company, the Company
intends to structure its leases to provide a minimum level of rent which is
payable regardless of the amount of gross sales at a particular Property. The
Company also will endeavor to maximize growth and minimize risks associated with
ownership and leasing of real estate that operates in these industry segments
through careful selection and screening of its tenants (as described in
"Standards for Investment" below) in order to reduce risks of default;
monitoring statistics relating to restaurant and hotel chains and continuing to
develop relationships in the industry in order to reduce certain risks
associated with investment in real estate. See "Standards for Investment" below
for a description of the standards which the Board of Directors will employ in
selecting Restaurant Chains, Hotel Chains and particular Properties for
investment.
Management expects to acquire Properties in part with a view to
diversification among the geographic location of the Properties. There are no
restrictions on the geographic area or areas within the United States in which
Properties acquired by the Company may be located. It is anticipated that the
Properties acquired by the Company will be located in various states and regions
within the United States.
The Company believes that freestanding, "triple-net" leased properties
of the type in which the Company will generally invest are attractive to tenants
because freestanding properties typically offer high visibility to passing
traffic, ease of access from a busy thoroughfare, tenant control over the site
to set hours of operation and maintenance standards and distinctive building
designs conducive to customer name recognition.
The Company may provide Mortgage Loans, generally for the purchase of
buildings by tenants that lease the underlying land from the Company. However,
because it prefers to focus on investing in Properties, which have the potential
to appreciate, the Company currently expects to provide Mortgage Loans in the
aggregate principal amount of approximately 5% to 10% of Gross Proceeds.
Mortgage Loans will be secured by the building and improvements on the land. The
Company expects that the interest rate and terms (generally, 10 to 20 years) of
the Mortgage Loans will be similar to those of its leases.
The Company also intends to offer Secured Equipment Leases to operators
of Restaurant Chains and Hotel Chains. The Secured Equipment Leases will consist
primarily of leases of, and loans for the purchase of, Equipment. As of the date
of this Prospectus, the Company has neither identified any prospective operators
of Restaurant Chains
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or Hotel Chains that will participate in such financing arrangements nor
negotiated any specific terms of a Secured Equipment Lease. The Company cannot
predict terms and conditions of the Secured Equipment Leases, although the
Company expects that the Secured Equipment Leases will (i) have terms that equal
or exceed the useful life of the subject Equipment (although such terms will not
exceed 7 years), (ii) in the case of the leases, include an option for the
lessee to acquire the subject Equipment at the end of the lease term for a
nominal fee, (iii) include a stated interest rate, and (iv) in the case of the
leases, provide that the Company and the lessees will each treat the Secured
Equipment Leases as loans secured by personal property for federal income tax
purposes. See "Federal Income Tax Considerations - Characterization of Secured
Equipment Leases." In addition, the Company expects that each of the Secured
Equipment Leases will be secured by the Equipment to which it relates. Payments
received from lessees under Secured Equipment Leases will be treated as payments
of principal and interest. All Secured Equipment Leases will be negotiated by
the Advisor and approved by the Board of Directors including a majority of the
Independent Directors.
The Company will borrow money to acquire Assets and to pay certain
fees. The Company intends to encumber Assets in connection with the borrowing.
The Company plans to obtain one or more revolving Lines of Credit in an
aggregate amount up to $45,000,000, and may, in addition, also obtain Permanent
Financing. On July 31, 1998, the Company entered into an initial $30,000,000
revolving Line of Credit to be used to acquire hotel Properties. See "Business -
Borrowings" for a description of the $30,000,000 Line of Credit. The Board of
Directors anticipates that the aggregate amount of any Permanent Financing, if
obtained, will not exceed 30% of the Company's total assets. The Permanent
Financing would be used to acquire Assets and pay a fee of 4.5% of any Permanent
Financing, excluding amounts to fund Secured Equipment Leases, as Acquisition
Fees, to the Advisor. The Line of Credit may be repaid with offering proceeds,
working capital or Permanent Financing. The Line of Credit and Permanent
Financing are the only source of funds for making Secured Equipment Leases and
for paying the Secured Equipment Lease Servicing Fee. The Company has not yet
received a commitment for any Permanent Financing and there is no assurance that
the Company will obtain any Permanent Financing on satisfactory terms.
As of September 1, 1998, the Company had acquired two hotel Properties
consisting of land and building, and had initial commitments to acquire three
additional Properties. However, as of September 1, 1998, the Company had not
entered into any arrangements that create a reasonable probability that the
Company will enter into any Mortgage Loan or Secured Equipment Lease.
INVESTMENT OF OFFERING PROCEEDS
The Company has undertaken to supplement this Prospectus during the
offering period to disclose the acquisition of Properties at such time as the
Company believes that a reasonable probability exists that any such Property
will be acquired by the Company. Based upon the experience and acquisition
methods of the Affiliates of the Company and the Advisor, this normally will
occur, with regard to acquisition of Properties, as of the date on which (i) a
commitment letter is executed by a proposed lessee, (ii) a satisfactory credit
underwriting for the proposed lessee has been completed, and (iii) a
satisfactory site inspection has been completed. The initial disclosure of any
proposed acquisition, however, cannot be relied upon as an assurance that the
Company ultimately will consummate such proposed acquisition or that the
information provided concerning the proposed acquisition will not change between
the date of such supplement and the actual purchase or extension of financing.
The terms of any borrowing by the Company will also be disclosed by supplement
following receipt by the Company of an acceptable commitment letter from a
potential lender.
Acquisition of a restaurant Property generally involves an investment
in land and building of approximately $400,000 to $1,250,000, although higher or
lower figures for individual Properties are possible. Based on their past
experience in acquiring similar properties and in light of current market
conditions, management of the Company and the Advisor have estimated an average
purchase price of $800,000 to $900,000 per restaurant Property. Based on the
purchase prices of the two Properties acquired by the Company as of September 1,
1998 and current market conditions, the Company and the Advisor have estimated
an average purchase price of $10,000,000 to $35,000,000
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per hotel Property. If 15,000,000 Shares ($150,000,000) are sold, the Company
could (i) invest in only hotel Properties, in which case it could acquire
between 4 to 13 hotel Properties or (ii) invest in both restaurant and hotel
Properties, although in this instance the number of restaurant Properties and
hotel Properties would vary significantly depending upon the value of the hotel
Properties acquired. Assuming that the Net Offering Proceeds are divided evenly
between restaurant and hotel Properties, as to which there is no assurance, the
Company could invest in approximately 70 to 80 restaurant Properties and 2 to 6
hotel Properties. In certain cases, the Company may become a co-venturer in a
Joint Venture that will own the Property. In each such case, the Company's cost
to purchase an interest in such Property will be less than the total purchase
price and the Company therefore will be able to acquire interests in a greater
number of Properties. The Company may also borrow to acquire Assets. See
"Business Borrowing." Management estimates that approximately 30% to 50% of the
Company's investment in a restaurant Property generally will be for the cost of
land, and 50% to 70% generally will be for the cost of the building. For a hotel
Property, management estimates that 10% to 20% of the Company's investment will
be for cost of land and 80% to 90% for the cost of the building. See "Joint
Venture Arrangements" below and "Risk Factors - Investment Risks - Possible Lack
of Diversification." Management cannot estimate the number of Mortgage Loans
that may be entered into. The Company may also borrow money to make Mortgage
Loans.
Although management cannot estimate the number of Secured Equipment
Leases that may be entered into, it expects to fund the Secured Equipment Lease
program from the proceeds of the Line of Credit or Permanent Financing in an
amount not to exceed 10% of Gross Proceeds and management has undertaken,
consistent with its objective of qualifying as a REIT for federal income tax
purposes, to ensure that the total value of all Secured Equipment Leases will
not exceed 25% of the Company's total assets, and that Secured Equipment Leases
to a single lessee, in the aggregate, will not exceed 5% of total assets.
PROPERTY ACQUISITIONS
On July 31, 1998, the Company acquired two hotel Properties. The
Properties are the Residence Inn by Marriott located in the Buckhead (Lenox
Park) area of Atlanta, Georgia (the"Buckhead (Lenox Park) Property"), and the
Residence Inn by Marriott located at Gwinnett Place in Duluth, Georgia (the
"Gwinnett Place Property").
The Company acquired the Buckhead (Lenox Park) Property for $15,731,414
from Buckhead Residence Associates, L.L.C. and the Gwinnett Place Property for
$11,514,125 from Gwinnett Residence Associates, L.L.C. In connection with the
purchase of the two Properties, the Company, as lessor, entered into two
separate, long-term lease agreements. The lessee of the Buckhead (Lenox Park)
and the Gwinnett Place Properties is the same unaffiliated lessee. The leases on
both Properties are cross-defaulted. The general terms of the lease agreements
are described in "Business -- Description of Property Leases." The principal
features of the leases are as follows:
(0) The initial term of each lease expires in approximately 19 years, on
August 31, 2017.
(0) At the end of the initial lease term, the tenant will have three
consecutive renewal options of five years.
(0) The leases will require minimum rent payments to the Company
aggregating $1,651,798 per year for the Buckhead (Lenox Park) Property
and $1,208,983 per year for the Gwinnett Place Property.
(0) Minimum rent payments will increase to $1,691,127 per year for the
Buckhead (Lenox Park) Property and $1,237,768 per year for the Gwinnett
Place Property after the first lease year.
(0) In addition to minimum rent, for each calendar year, the leases will
require percentage rent equal to 15% of the aggregate amount of all
revenues combined, for the Buckhead (Lenox Park) and the Gwinnett Place
Properties, in excess of $8,080,000.
(0) A security deposit equal to $819,000 for the Buckhead (Lenox Park)
Property and $598,500 for the
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Gwinnett Place Property will be retained by the Company as security for
the tenant's obligations under the leases.
(0) Management fees payable to Stormont Trice Management Corporation for
operation of the Buckhead (Lenox Park) and Gwinnett Place Properties
are subordinated to minimum rents due to the Company.
(0) The tenant of the Buckhead (Lenox Park) and Gwinnett Place Properties
will establish a capital expenditures reserve fund which will be used
for the replacement and renewal of furniture, fixtures and equipment
relating to the hotel Properties (the "FF&E Reserve"). Deposits to the
FF&E Reserve will be made monthly as follows: 3% of gross receipts for
the first lease year; 4% of gross receipts for the second lease year;
and 5% of gross receipts every lease year thereafter. Funds in the FF&E
Reserve and all property purchased with funds from the FF&E Reserve
shall be paid, granted and assigned to the Company as additional rent.
(0) Stormont Trice Corporation, Stormont Trice Development Corporation and
Stormont Trice Management Corporation jointly and severally will
guarantee the obligations of the tenant under the leases for the
Buckhead (Lenox Park) and the Gwinnett Place Properties combined. The
guarantee terminates on the earlier of the end of the third lease year
or at such time as the net operating income from the Buckhead (Lenox
Park) and the Gwinnett Place Properties exceeds minimum rent due under
the leases by 25% for any trailing 12 month period. The guarantee is
equal to $2,835,000 for the first two years, and $1,197,000 for the
third year.
The estimated federal income tax basis of the depreciable portion of
the Buckhead (Lenox Park) Property and the Gwinnett Place Property is
$14,400,000 and $11,000,000, respectively.
The Buckhead (Lenox Park) Property and the Gwinnett Place Property are
newly constructed hotels which commenced operations on August 7, 1997 and July
29, 1997, respectively. The Buckhead (Lenox Park) Property is situated in a 22
acre mixed-use development and has 150 guest suites. The Gwinnett Place Property
is located 30 minutes from downtown Atlanta and has 132 guest suites. Other
lodging facilities located in proximity to the Buckhead (Lenox Park) Property
include an Embassy Suites, a Summerfield Suites, a Homewood Suites, an
Amerisuites, a Courtyard by Marriott and another Residence Inn by Marriott.
Other lodging facilities located in proximity to the Gwinnett Place Property
include a Courtyard by Marriott, an Amerisuites, a Sumner Suites and a Hampton
Inn. The average occupancy rate and the revenue per available room for the
periods the hotels have been operational are as follows:
<TABLE>
<CAPTION>
<S> <C>
Buckhead (Lenox Park) Property Gwinnett Place Property
Average Average Revenue Average Average Revenue
Occupancy Daily Room per Occupancy Daily Room per
Year Rate Rate Available Room Rate Rate Available Room
------ ------------ ------------- -------------- ------------ ------------- --------------
*1997 42.93% $91.15 $39.13 39.08% $85.97 $33.60
**1998 77.57% 98.27 74.92 71.97% 87.29 62.67
</TABLE>
* Data for the Buckhead (Lenox Park) Property represents the period
August 7, 1997 through December 31, 1997 and data for the Gwinnett
Place Property represents the period August 1, 1997 through December
31, 1997.
** Data for 1998 represents the period January 1, 1998 through July 31,
1998.
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The Company believes that the results achieved by the Properties for
year-end 1997, are not indicative of their long-term operating potential, as
both Properties had been open for less than six months during the reporting
period.
Marriott International is one of the world's leading hospitality
companies. According to Marriott data as of April 1998, Marriott International
had nearly 1,700 units, offering more than 229,000 rooms worldwide. Although
Marriott International is the franchisor for these Properties, it is not
affiliated with the lessee and has not guaranteed the payments due under the
leases.
Each Residence Inn offers complimentary breakfast and newspaper every
morning, an evening hospitality hour, a swimming pool, heated whirlpool and
sport court. Guest suites provide in-room modem jacks, separate living and
sleeping areas and a fully equipped kitchen with appliances and cooking
utensils. According to Marriott, as of April 1998, there were 273 Residence Inn
hotels in the United States and four in Canada and Mexico. The Company believes
that the Residence Inn by Marriott brand is the leading upscale brand in the
extended stay segment of the United States hotel industry.
PENDING INVESTMENTS
As of September 1, 1998, the Company had initial commitments to acquire
indirectly, three hotel properties. The acquisition of each of these properties
is subject to the fulfillment of certain conditions, including, but not limited
to, a satisfactory environmental survey and property appraisal. In order to
acquire these properties, the Company must obtain additional funds through the
receipt of additional offering proceeds and debt financing. There can be no
assurance that any or all of the conditions will be satisfied or, if satisfied,
that one or more of these properties will be acquired by the Company. If
acquired, the leases of these properties are expected to be entered into on
substantially the same terms described in "Business -- Description of Property
Leases."
Set forth below are summarized terms expected to apply to the leases
for each of the properties. More detailed information relating to a property and
its related lease will be provided at such time, if any, as the property is
acquired.
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<TABLE>
<CAPTION>
Estimated Purchase Lease Term and Minimum Annual
Property Price Renewal Options Rent Percentage Rent
- -------- ----- --------------- ---- ---------------
<S> <C>
Courtyard by Marriott (2) 15 years; two ten-year 10% of the Company's total for each lease year
Orlando, FL (1) renewal options cost to purchase the property after the second lease
(the "Courtyard Little year, 7% of revenues
Lake Bryan Property") in excess of revenues
Hotel to be constructed for the second lease
year
Fairfield Inn by Marriott (2) 15 years; two ten-year 10% of the Company's total
Orlando, FL (1) renewal options cost to purchase the property for each lease year
(the "Fairfield Inn Little after the second lease
Lake Bryan Property") year, 7% of revenues
Hotel to be constructed in excess of revenues
for the second lease
Fairfield Suites by (2) 15 years; two ten-year 10% of the Company's total year
Marriott renewal options cost to purchase the property
Orlando, FL (1) for each lease year
(the "Fairfield Suites after the second lease
Little Lake Bryan year, 7% of revenues
Property") in excess of revenues
Hotel to be constructed for the second lease
year
</TABLE>
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- ------------------------------------
FOOTNOTES:
(1) The leases for the Courtyard Little Lake Bryan, the Fairfield Inn
Little Lake Bryan and the Fairfield Suites Little Lake Bryan Properties
are expected to be with the same unaffiliated lessee.
(2) The anticipated aggregate purchase price for the Courtyard Little Lake
Bryan, Fairfield Inn Little Lake Bryan and Fairfield Suites Little Lake
Bryan Properties is between $90 million and $100 million.
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The following chart provides additional information on systemwide
occupancy levels for Marriott lodging brands:
Total Occupancy Rate for 1997
Marriott Brand as Compared to
U.S. Lodging Industry
Occupancy Rate
U.S. Lodging Industry 66.0%
Courtyard by Marriott 78.2%
Fairfield Inns & Suites 73.0%
Marriott Hotels, Resorts & Suites 76.6%
Residence Inn by Marriott 80.6%
Source: Marriott International, Inc. 1997 Annual Report
SITE SELECTION AND ACQUISITION OF PROPERTIES
Construction and Renovation. Under the development agreement, the
developer generally will be obligated to complete the construction or renovation
of the building improvements within a specified period of time from the date of
the development agreement, which generally will be between 4 to 5 months for
restaurant Properties and between 12 to 18 months for hotel Properties. If the
construction or renovation is not completed within that time and the developer
fails to remedy this default within 10 days after notice from the Company, the
Company will have the option to grant the developer additional time to complete
the construction, to take over construction or renovation of the building
improvements, or to terminate the development agreement and require the
developer to purchase the Property at a price equal to the sum of (i) the
Company's purchase price of the land, including all fees, costs, and expenses
paid by the Company in connection with its purchase of the land, (ii) all fees,
costs, and expenses disbursed by the Company pursuant to the development
agreement for construction of the building improvements, and (iii) the Company's
"construction financing costs." The "construction financing costs" of the
Company is an amount equal to a return, at the annual percentage rate used in
calculating the minimum annual rent under the lease, on all Company payments and
disbursements described in clauses (i) and (ii) above.
DESCRIPTION OF PROPERTIES
The two hotel Properties owned by the Company as of September 1, 1998,
conform, and the Advisor expects that any Properties purchased by the Company
will conform, to the following specifications of size, cost, and type of land
and buildings.
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Restaurant Properties. Lot sizes generally range from 25,000 to 60,000
square feet depending upon building size and local demographic factors.
Restaurants located on land within shopping centers will be freestanding and may
be located on smaller parcels if sufficient common parking is available.
Restaurant sites purchased by the Company will be in locations zoned for
commercial use which have been reviewed for traffic patterns and volume of
traffic. There is substantial competition for quality sites; accordingly, land
costs may be high and are generally expected to range from $150,000 to $500,000,
although the cost of the land for particular Properties may be higher or lower
in some cases.
The restaurant buildings generally will be rectangular and constructed
from various combinations of stucco, steel, wood, brick, and tile. Building
sizes generally will range from 2,500 to 6,000 square feet, with the larger
restaurants having greater seating and equipment areas. Building and site
preparation costs vary depending upon the size of the building and the site and
the area in which the restaurant Property is located. It is estimated that
building and site preparation costs generally will range from $250,000 to
$750,000 for each restaurant Property.
DESCRIPTION OF PROPERTY LEASES
Special Conditions. Certain leases may provide that the lessee will not
be permitted to own or operate, directly or indirectly, another Property of the
same or similar type as the leased Property that is or will be located within a
specified distance of the leased Property.
JOINT VENTURE ARRANGEMENTS
The Company may acquire Properties from time to time by issuing limited
partnership units in CNL Hospitality Partners, LP to sellers of such Properties
pursuant to which the seller, as owner, would receive partnership interests
convertible at a later date into Common Stock of the Company. The Company is the
general partner of CNL Hospitality Partners, LP. This structure enables a
property owner to transfer property without incurring immediate tax liability,
and therefore may allow the Company to acquire Properties on more favorable
terms than otherwise.
BORROWING
The Company will borrow money to acquire Assets and to pay certain
related fees. The Company intends to encumber Assets in connection with any
borrowing. The Company plans to obtain one or more revolving Lines of Credit in
an aggregate amount up to $45,000,000, and may, in addition, also obtain
Permanent Financing. The Line of Credit may be repaid with offering proceeds,
working capital or Permanent Financing. The Line of Credit and Permanent
Financing are the only source of funds for making Secured Equipment Leases and
for paying the Secured Equipment Lease Servicing Fee.
On July 31, 1998, the Company entered into a revolving line of credit
and security agreement with a bank to be used by the Company to acquire hotel
Properties. The Line of Credit provides that the Company will be able to receive
advances of up to $30,000,000 until July 30, 2003, with an annual review to be
performed by the bank to indicate that there has been no substantial
deterioration, in the bank's reasonable discretion, of the credit quality.
Interest expense on each advance shall be payable monthly, with all unpaid
interest and principal due no later than five years from the date of the
advance. Advances under the Line of Credit will bear interest at either (i) a
rate per annum equal to 318 basis points above the LIBOR or (ii) a rate per
annum equal to 30 basis points above the bank's base rate, whichever the Company
selects at the time advances are made. In addition a fee of .5% per loan will be
due and payable to the bank on funds as advanced. Each loan made under the Line
of Credit will be secured by the assignment of rents and leases. In addition,
the Line of Credit provides that the Company will not be able to further
encumber the applicable hotel Property during the term of the loan without the
bank's consent. The Company will be required, at each closing, to pay all costs,
fees and expenses arising in connection with the Line of Credit. The Company
must also pay the bank's attorneys fees, subject to a maximum cap, incurred in
connection with the Line of Credit
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and each advance. As of September 1, 1998, the Company had obtained two advances
totalling $8,600,000 relating to the Line of Credit. In connection with the Line
of Credit, the Company incurred a commitment fee, legal fees and closing costs
of $60,266. The proceeds were used in connection with the purchase of two hotel
Properties described in "Business -- Property Acquisitions."
Management believes that any financing obtained during the offering
period will allow the Company to make investments in Assets that the Company
otherwise would be forced to delay until it raised a sufficient amount of
proceeds from the sale of Shares. By eliminating this delay, the Company will
also eliminate the risk that these investments will no longer be available, or
the terms of the investment will be less favorable, when the Company has raised
sufficient offering proceeds. Alternatively, Affiliates of the Advisor could
make such investments, pending receipt by the Company of sufficient offering
proceeds, in order to preserve the investment opportunities for the Company.
However, Assets acquired by the Company in this manner would be subject to
closing costs both on the original purchase by the Affiliate and on the
subsequent purchase by the Company, which would increase the amount of expenses
associated with the acquisition of Assets and reduce the amount of offering
proceeds available for investment in income-producing assets. Management
believes that the use of borrowings will enable the Company to reduce or
eliminate the instances in which the Company will be required to pay duplicate
closing costs, which may be substantial in certain states.
Similarly, management believes that the borrowings will benefit the
Company by allowing it to take advantage of its ability to borrow at favorable
interest rates. Specifically, the Company intends to structure the terms of any
financing so that the lease rates for Properties acquired and the interest rates
for Mortgage Loans and Secured Equipment Leases made with the loan proceeds will
exceed the interest rate payable on the financing. To the extent that the
Company is able to structure the financing on these terms, the Company will
increase its net revenues. In addition, the use of financing will increase the
diversification of the Company's portfolio by allowing it to acquire more Assets
than would be possible using only the Gross Proceeds from the offering.
As a result of existing relationships between Affiliates of the Advisor
and certain financing sources, the Company may have the opportunity to obtain
financing at more favorable interest rates than the Company could otherwise
obtain. In connection with any financing obtained by the Company as a result of
any such relationship, the Company will pay a loan origination fee to the
Affiliate. In addition, certain lenders may require, as a condition of providing
financing to the Company, that the Affiliate with which the lender has an
existing relationship act as a loan servicing agent. In connection with any such
arrangement the Company will pay a loan servicing fee to the Affiliate. Any loan
origination fee or loan servicing fee paid to an Affiliate of the Company is
subject to the approval by a majority of the Board of Directors (including a
majority of the Independent Directors) not otherwise interested in the
transaction as fair and reasonable to the Company and on terms not less
favorable to the Company than those available from unaffiliated third parties
and not less favorable than those available from the Advisor or its Affiliates
in transactions with unaffiliated third parties.
See "Conflicts of Interest - Certain Conflict Resolution Procedures."
The Company may also borrow funds for the purpose of preserving its
status as a REIT. For example, the Company may borrow to the extent necessary to
permit the Company to make Distributions required in order to enable the Company
to qualify as a REIT for federal income tax purposes; however, the Company will
not borrow for the purpose of returning Invested Capital to the stockholders
unless necessary to eliminate corporate-level tax to the Company. The aggregate
borrowing of the Company, secured and unsecured, shall be reasonable in relation
to Net Assets of the Company and shall be reviewed by the Board of Directors at
least quarterly. The Board of Directors anticipates that the aggregate amounts
of any Lines of Credit will be up to $45,000,000 and that the aggregate amount
of the Permanent Financing will not exceed 30% of the Company's total assets.
However, in accordance with the Company's Articles of Incorporation, the maximum
amount of borrowing in relation to Net Assets, in the absence of a satisfactory
showing that a higher level of borrowing is appropriate, shall not exceed 300%
of Net Assets. Any excess in borrowing over such 300% level shall occur only
with approval by a majority of the Independent Directors and will be disclosed
and explained to stockholders in the first quarterly report of the Company
prepared after such approval occurs.
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SELECTED FINANCIAL DATA
The following table sets forth certain financial information for the
Company, and should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the Financial
Statements included in Exhibit B.
<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, 1998 June 30, 1997 December 31
(Unaudited) (Unaudited) 1997 (1) 1996 (2)
----------- ----------- -------- --------
<S> <C>
Interest Income $ 371,159$ - $ 46,071 $ -
Net earnings 201,973 - 22,852 -
Cash distributions declared (3) 257,086 - 29,776 -
Funds from operations (4) 201,973 - 22,852 -
Earnings per Share 0.11 - 0.03 -
Cash distributions declared per Share 0.15 - 0.05 -
Weighted average number of Shares outstanding (5) 1,820,362 - 686,063 -
June 30, 1998 June 30, 1997 December 31, December 31,
(Unaudited) (Unaudited) 1997 1996
-------------- ------------- ------------ ------------
Total assets $20,332,910 $712,487 $9,443,476 $598,190
Total stockholders' equity 20,240,660 200,000 9,233,917 200,000
</TABLE>
(1) No operations commenced until the Company received minimum offering
proceeds and funds were released from escrow on October 15, 1997.
(2) Selected financial data for 1996 represents the period June 12, 1996
(date of inception) through December 31, 1996.
(3) Approximately 21% and 23% of cash distributions for the six months
ended June 30, 1998 and the year ended December 31, 1997, respectively,
represent a return of capital in accordance with generally accepted
accounting principles ("GAAP"). Cash distributions treated as a return
of capital on a GAAP basis represent the amount of cash distributions
in excess of accumulated net earnings on a GAAP basis. The Company has
not treated such amount as a return of capital for purposes of
calculating Invested Capital and the Stockholders' 8% Return.
(4) Funds from operations ("FFO"), based on the revised definition adopted
by the Board of Governors of the National Association of Real Estate
Investment Trusts ("NAREIT") and as used herein, means net earnings
determined in accordance with GAAP, excluding gains or losses from debt
restructuring and sales of property, plus depreciation and amortization
of real estate assets and after adjustments for unconsolidated
partnerships and joint ventures. FFO was developed by NAREIT as a
relative measure of performance and liquidity of an equity REIT in
order to recognize that income-producing real estate historically has
not depreciated on the basis determined under GAAP. However, FFO (i)
does not represent cash generated from operating activities determined
in accordance with GAAP (which, unlike FFO, generally reflects all cash
effects of transactions and other events that enter into the
determination of net earnings), (ii) is not necessarily indicative of
cash flow available to fund cash needs and (iii) should not be
considered as an alternative to net earnings determined in accordance
with GAAP as an indication of the Company's operating performance, or
to cash flow from operating activities determined in accordance with
GAAP as a measure of either liquidity or the Company's ability to make
distributions. Accordingly, the Company believes that in order to
facilitate a clear understanding of the historical operating results of
the Company, FFO should be considered in conjunction with the Company's
net earnings and cash flows as reported in the accompanying financial
statements and notes thereto. See Exhibit B -- Financial Information.
(5) The weighted average number of Shares outstanding is based upon the
period the Company was operational.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION OF THE COMPANY
This information contains forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Act of 1934. Although the Company believes that the expectations reflected in
such forward-looking statements are based upon reasonable assumptions, the
Company's actual results could differ materially from those set forth in the
forward-looking statements. Certain factors that might cause such a difference
include the following: changes in general economic conditions, changes in local
and national real estate conditions, continued availability of proceeds from the
Company's offering, the ability of the Company to obtain permanent financing on
satisfactory terms, the ability of the Company to identify suitable investments,
the ability of the Company to locate suitable tenants for its Properties and
borrowers for its Mortgage Loans and Secured Equipment Leases, and the ability
of such tenants and borrowers to make payments under their respective leases,
Mortgage Loans or Secured Equipment Leases.
The Company is a Maryland corporation that was organized on June 12,
1996. On June 15, 1998, the Company formed CNL Hospitality Partners, LP, a
wholly owned Delaware limited partnership (the "Partnership"). Properties
acquired are expected to be held by the Partnership and, as a result, owned by
the Company through the Partnership. The term "Company" includes CNL Hospitality
Properties, Inc. and its subsidiaries, CNL Hospitality GP Corp., CNL Hospitality
LP Corp. and CNL Hospitality Partners, LP.
As of June 30,1998, the Company had not yet acquired any Properties and
had no significant operating history. Since leases generally will be entered
into on a "triple-net" basis, the Company does not expect, although it has the
right, to maintain a reserve for operating expenses. The Company's Properties,
Mortgage Loans and Secured Equipment Leases will not be readily marketable and
their value may be affected by general market conditions. Nevertheless,
management believes that capital and revenues of the Company will be sufficient
to fund the Company's anticipated investments, proposed operations, and cash
Distributions to the stockholders.
LIQUIDITY AND CAPITAL RESOURCES
Effective July 9, 1997, the Company commenced its offering of Shares of
common stock. As of June 30, 1998, the Company had received aggregate
subscription proceeds of $23,578,169 (2,357,817 Shares) from the offering,
including $9,704 (970 Shares) through the Company's Reinvestment Plan.
As of June 30, 1998, net proceeds to the Company from its offering of
Shares and capital contributions from the Advisor, after deduction of Selling
Commissions, marketing support and due diligence expense reimbursement fees and
Organizational and Offering Expenses totalled approximately $20,283,000. As of
June 30, 1998, the Company has invested $50,000 as earnest money deposits on two
Properties, and had incurred approximately $1,107,500 in Acquisition Fees and
Acquisition Expenses, leaving approximately $19,125,500 in Net Offering Proceeds
available for investment in Properties and Mortgage Loans.
The Company will use Net Offering Proceeds from this offering to
purchase Properties and to invest in Mortgage Loans. See "Investment Objectives
and Policies." In addition, the Company intends to borrow money to acquire
Assets and to pay certain related fees. The Company intends to encumber Assets
in connection with such borrowing. The Company plans to obtain one or more
revolving Lines of Credit in an aggregate amount up to $45,000,000, and may, in
addition, also obtain Permanent Financing. The Line of Credit may be repaid with
offering proceeds, working capital or Permanent Financing. Although the Board of
Directors anticipates that the Line of Credit will be in the amount up to
$45,000,000 and that the aggregate amount of any Permanent Financing will not
exceed 30% of the Company's total assets, the maximum amount the Company may
borrow, absent a satisfactory showing that a higher level of borrowing is
appropriate as approved by a majority of the Independent Directors, is 300% of
the Company's Net Assets.
-23-
<PAGE>
On July 31, 1998, the Company entered into an initial revolving line of
credit and security agreement with a bank to be used by the Company to acquire
hotel Properties. The initial Line of Credit provides that the Company will be
able to receive advances of up to $30,000,000 until July 30, 2003, with an
annual review to be performed by the bank to indicate that there has been no
substantial deterioration, in the bank's reasonable discretion, of the credit
quality. Interest expense on each advance shall be payable monthly, with all
unpaid interest and principal due no later than five years from the date of the
advance. Advances under the Line of Credit will bear interest at either (i) a
rate per annum equal to 318 basis points above the LIBOR or (ii) a rate per
annum equal to 30 basis points above the bank's base rate, whichever the Company
selects at the time advances are made. In addition a fee of .5% per advance will
be due and payable to the bank on funds as advanced. Each advance made under the
Line of Credit will be secured by the assignment of rents and leases. In
addition, the Line of Credit provides that the Company will not be able to
further encumber the applicable hotel Property during the term of the advance
without the bank's consent. The Company will be required, at each closing, to
pay all costs, fees and expenses arising in connection with the Line of Credit.
The Company must also pay the bank's attorneys fees, subject to a maximum cap,
incurred in connection with the Line of Credit and each advance. On July 31,
1998, the Company obtained two advances totalling $8,600,000 relating to the
Line of Credit. In connection with the Line of Credit, the Company incurred a
commitment fee, legal fees and closing costs of $60,266. The proceeds were used
in connection with the purchase of the two hotel Properties. The Company has not
yet received a commitment for any Permanent Financing and there is no assurance
that the Company will obtain any Permanent Financing on satisfactory terms.
As of September 1, 1998, the Company had received subscription proceeds
of $26,736,275 (2,673,628 Shares) from its offering of Shares. As of September
1, 1998, net proceeds to the Company from its offering of Shares and capital
contributions from the Advisor, after deduction of Selling Commissions,
marketing support and due diligence expense reimbursement fees and
Organizational and Offering Expenses totalled approximately $23,188,000. As of
September 1, 1998, the Company had invested approximately $18,670,000 of Net
Offering Proceeds and $8,600,000 of advances from the Line of Credit in two
hotel Properties, and had incurred approximately $1,400,000 in Acquisition Fees
and Acquisition Expenses, leaving approximately $3,118,000 in Net Offering
Proceeds available for investment in additional Properties and Mortgage Loans.
As of September 1, 1998, the Company had initial commitments to acquire
three hotel Properties. The acquisition of each of these Properties is subject
to the fulfillment of certain conditions including, but not limited to, a
satisfactory environmental survey and property appraisal. In order to acquire
these Properties, the Company must obtain additional funds through the receipt
of additional offering proceeds and/or advances on the Line of Credit. There can
be no assurance that any or all of the conditions will be satisfied or, if
satisfied, that one or more of these Properties will be acquired by the Company.
As of September 1, 1998, the Company had not entered into any arrangements
creating a reasonable probability a particular Mortgage Loan or Secured
Equipment Lease would be funded. The Company is presently negotiating to acquire
additional Properties, but as of September 1, 1998, the Company had not acquired
any such Properties or entered into any Mortgage Loans.
Properties will be leased on a long-term, triple-net basis, meaning
that tenants are generally required to pay all repairs and maintenance, property
taxes, insurance and utilities. Rental payments under the leases are expected to
exceed the Company's operating expenses. For these reasons, no short-term or
long-term liquidity problems associated with operating the Properties are
currently anticipated by management.
Until Properties are acquired, or Mortgage Loans are entered into, Net
Offering Proceeds are held in short-term, highly liquid investments which
management believes to have appropriate safety of principal. This investment
strategy provides high liquidity in order to facilitate the Company's use of
these funds to acquire Properties at such time as Properties suitable for
acquisition are located or to fund Mortgage Loans. At June 30, 1998, the Company
had $19,156,223 invested in such short-term investments (including certificates
of deposit totalling $1,500,417) as compared to $8,869,838 at December 31, 1997.
The increase in the amount invested in short-term investments reflects
subscription proceeds derived from the sale of Shares during the six months
ended June 30, 1998. The majority of these funds were used to acquire the two
Properties
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<PAGE>
described above. The remaining funds will be used primarily to purchase and
develop or renovate Properties, to make Mortgage Loans, to pay Organizational
and Offering Expenses and Acquisition Expenses, to pay Distributions to
stockholders, to pay other Company expenses and, in management's discretion, to
create cash reserves.
During the six months ended June 30, 1998 and 1997, Affiliates of the
Company incurred on behalf of the Company $58,403 and $87,774, respectively, for
certain Organizational and Offering Expenses. In addition, during the six months
ended June 30, 1998, Affiliates of the Company incurred on behalf of the Company
$20,302 for certain Acquisition Expenses and $58,172 for certain Operating
Expenses. As of June 30, 1998, the Company owed the Advisor $60,918 for such
amounts, unpaid fees and administrative expenses. The Advisor has agreed to pay
or reimburse to the Company all Organizational and Offering Expenses in excess
of three percent of Gross Proceeds.
During the six months ended June 30, 1998, the Company generated cash
from operations (which includes interest received less cash paid for operating
expenses) of $210,452. Based on current and anticipated future cash from
operations, the Company declared Distributions to its stockholders of $257,086
during the six months ended June 30, 1998. No Distributions were paid or
declared for the six months ended June 30, 1997, because operations had not
commenced. On July 1, August 1, and September 1, 1998, the Company declared
Distributions to its stockholders totalling $99,631, $105,707 and $157,038,
respectively ($0.0417, $0.0417 and $0.058 per share, respectively), payable in
September 1998. For the six months ended June 30, 1998, 100 percent of the
Distributions received by stockholders were considered to be ordinary income for
federal income tax purposes. No amounts distributed or to be distributed to the
stockholders as of September 1, 1998, were required to be or have been treated
by the Company as a return of capital for purposes of calculating the
Stockholders' 8% Return on Invested Capital.
Due to anticipated low operating expenses, rental income expected to be
obtained from Properties after they are acquired, the fact that Permanent
Financing has not been obtained and that the Company has not entered into
Mortgage Loans or Secured Equipment Leases, management does not believe that
working capital reserves will be necessary at this time. Management has the
right to cause the Company to maintain reserves if, in their discretion, they
determine such reserves are required to meet the Company's working capital
needs.
Management is not aware of any material trends, favorable or
unfavorable, in either capital resources or the outlook for long-term cash
generation, nor does management expect any material changes in the availability
and relative cost of such capital resources, other than as referred to in the
Prospectus.
Management expects that the cash to be generated from operations will
be adequate to pay operating expenses and to make Distributions to stockholders.
RESULTS OF OPERATIONS
No operations commenced until the Company received the minimum offering
proceeds of $2,500,000 on October 15, 1997. As of June 30, 1998, the Company had
not yet acquired any Properties nor entered into any Mortgage Loans or Secured
Equipment Leases.
During the quarter and six months ended June 30, 1998, the Company
earned $232,006 and $371,159, respectively, in interest income from investments
in money market accounts and other short-term, highly liquid investments. As Net
Offering Proceeds are invested in Properties and used to make Mortgage Loans,
the percentage of the Company's total revenues from interest income from
investments in money market accounts or other short term, highly liquid
investments is expected to decrease.
Operating expenses, including amortization expense, were $77,341 and
$169,186 for the quarter and six months ended June 30, 1998, respectively.
Operating expenses, including amortization expense, represent only a portion of
operating expenses which the Company is expected to incur during a full period
in which
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<PAGE>
the Company owns Properties. The dollar amount of operating expenses is expected
to increase as the Company acquires Properties and invests in Mortgage Loans.
However, general and administrative expenses as a percentage of total revenues
is expected to decrease as the Company acquires Properties and invests in
Mortgage Loans.
Effective January 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income." This Statement
requires the reporting of net earnings and all other changes to equity during
the period, except those resulting from investments by owners and distributions
to owners, in a separate statement that begins with net earnings. Currently, the
Company's only component of comprehensive income is net earnings.
In March 1998, the Emerging Issues Task Force of the Financial
Accounting Standards Board reached a consensus in EITF 97-11, entitled
"Accounting for Internal Costs Relating to Real Estate Property Acquisitions."
EITF 97-11 provides that internal costs of identifying and acquiring operating
Property should be expensed as incurred. Due to the fact that the Company does
not have an internal acquisitions function and instead, contracts these services
from the Advisor, the effectiveness of EITF 97-11 had no material effect on the
Company's financial position or results of operations.
In April 1998, the American Institute of Certified Public Accountants
issued Statement of Position (SOP) 98-5, "Reporting on the Costs of Start-Up
Activities," which is effective for the Company as of January 1, 1999. This SOP
requires start-up and organization costs to be expensed as incurred and also
requires previously deferred start-up costs to be recognized as a cumulative
effect adjustment in the statement of income. The Company does not believe that
adoption of this SOP will have a material effect on the Company's financial
position or results of operations.
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The Directors and executive officers of the Company are listed below:
Name Age Position with the Company
---- --- -------------------------
James M. Seneff, Jr. 52 Director, Chairman of the Board,
and Chief Executive Officer
Robert A. Bourne 51 Director and President
G. Richard Hostetter 58 Independent Director
J. Joseph Kruse 65 Independent Director
Richard C. Huseman 59 Independent Director
Charles A. Muller 40 Executive Vice President
John T. Walker 39 Executive Vice President
Jeanne A. Wall 40 Executive Vice President
Lynn E. Rose 49 Secretary and Treasurer
COMMITTEES OF THE BOARD OF DIRECTORS
The Company has a standing Audit Committee, the members of which are
selected by the full Board of Directors each year. The Audit Committee makes
recommendations to the Board of Directors in accordance with those of the
independent accountants of the Company. The Board of Directors shall review with
such accounting firm the scope of the audit and the results of the audit upon
its completion.
In addition, the Company has formed a Compensation Committee, the
members of which are selected by the full Board of Directors each year.
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<PAGE>
At least a majority of the members of each committee of the Company's
Board of Directors must be Independent Directors.
THE ADVISOR AND THE ADVISORY AGREEMENT
THE ADVISORY AGREEMENT
The Advisory Agreement, which was entered into by the Company with the
unanimous approval of the Board of Directors, including the Independent
Directors, expires one year after the date of execution, on July 10, 1999,
subject to successive one-year renewals upon mutual consent of the parties. In
the event that a new Advisor is retained, the previous Advisor will cooperate
with the Company and the Directors in effecting an orderly transition of the
advisory functions. The Board of Directors (including a majority of the
Independent Directors) shall approve a successor Advisor only upon a
determination that the Advisor possesses sufficient qualifications to perform
the advisory functions for the Company and that the compensation to be received
by the new Advisor pursuant to the new Advisory Agreement is justified.
CERTAIN TRANSACTIONS
The Managing Dealer is entitled to receive Selling Commissions
amounting to 7.5% of the total amount raised from the sale of Shares of common
stock for services in connection with the offering of Shares, a substantial
portion of which has been or will be paid as commissions to other
broker-dealers. For the period January 1, 1998 through September 1, 1998, and
the year ended December 31, 1997, the Company incurred $1,155,816 and $849,405,
respectively, of such fees, a substantial portion of which was paid by the
Managing Dealer as commissions to other broker-dealers.
In addition, the Managing Dealer is entitled to receive a Marketing
Support and Due Diligence Expense Reimbursement Fee equal to 0.5% of the total
amount raised from the sale of Shares, a portion of which may be reallowed to
other broker-dealers. For the period January 1, 1998 through September 1, 1998,
and the year ended December 31, 1997, the Company incurred $77,054 and $56,627,
respectively, of such fees, substantially all of which were reallowed to other
broker-dealers and from which all bona fide due diligence expenses were paid.
The Advisor is entitled to receive Acquisition Fees for services in
identifying the Properties and structuring the terms of the acquisition and
leases of the Properties and structuring the terms of the Mortgage Loans equal
to 4.5% of the total amount raised from the sale of Shares, loan proceeds from
Permanent Financing and amounts outstanding on the Line of Credit, if any, at
the time of Listing, but excluding that portion of the Permanent Financing used
to finance Secured Equipment Leases. For the period January 1, 1998 through
September 1, 1998, and the year ended December 31, 1997, the Company incurred
$693,489 and $509,643, respectively, of such fees.
The Advisor and its Affiliates provide administrative services to the
Company (including administrative services in connection with the offering of
Shares) on a day-to-day basis. For the six months ended June 30, 1998, the year
ended December 31, 1997 and the period June 12, 1996 (date of inception) through
December 31, 1996, the Company incurred a total of $230,419, $192,224 and
$28,665, respectively, for these services, $154,337, $185,335 and $28,665,
respectively, of such costs representing stock issuance costs and $76,082,
$6,889 and $0, respectively, representing general operating and administrative
expenses, including costs related to preparing and distributing reports required
by the Securities and Exchange Commission.
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<PAGE>
PRIOR PERFORMANCE INFORMATION
The information presented in this section represents the historical
experience of certain real estate programs organized by certain officers and
directors of the Advisor. PRIOR PUBLIC PROGRAMS HAVE INVESTED ONLY IN RESTAURANT
PROPERTIES AND HAVE NOT INVESTED IN HOTEL PROPERTIES. INVESTORS IN THE COMPANY
SHOULD NOT ASSUME THAT THEY WILL EXPERIENCE RETURNS, IF ANY, COMPARABLE TO THOSE
EXPERIENCED BY INVESTORS IN SUCH PRIOR PUBLIC REAL ESTATE PROGRAMS. INVESTORS
WHO PURCHASE SHARES IN THE COMPANY WILL NOT THEREBY ACQUIRE ANY OWNERSHIP
INTEREST IN ANY PARTNERSHIPS OR CORPORATIONS TO WHICH THE FOLLOWING INFORMATION
RELATES.
Two Directors of the Company, Robert A. Bourne and James M. Seneff,
Jr., individually or with others have served as general partners of 88 and 89
real estate limited partnerships, respectively, including the 18 publicly
offered CNL Income Fund partnerships, and as directors and officers of CNL
American Properties Fund, Inc., which purchased restaurant properties similar to
those to be acquired by the Company, listed in the table below. None of these
limited partnerships or the unlisted REIT has been audited by the IRS. Of
course, there is no guarantee that the Company will not be audited. Based on an
analysis of the operating results of the prior partnerships, the general
partners of these partnerships believe that each of such partnerships has met or
is meeting its principal investment objectives in a timely manner.
CNL Realty Corporation, which was organized as a Florida corporation in
November 1985 and whose sole stockholders are Messrs. Bourne and Seneff,
currently serves as the corporate general partner with Messrs. Bourne and Seneff
as individual general partners of 18 CNL Income Fund limited partnerships, all
of which were organized to invest in fast-food, family-style and in the case of
two of the partnerships, casual-dining restaurant properties similar to those
that the Company intends to acquire and have investment objectives similar to
those of the Company. In addition, Messrs. Bourne and Seneff currently serve as
directors and officers of CNL American Properties Fund, Inc., an unlisted public
REIT, which was organized to invest in fast-food, family-style and casual-dining
restaurant properties, mortgage loans and secured equipment leases similar to
those that the Company intends to invest in and has investment objectives
similar to those of the Company. As of June 30, 1998, the 18 partnerships and
the unlisted REIT had raised a total of $1,129,500,099 from a total of 72,558
investors, and had invested in 1,033 fast-food, family-style and casual-dining
restaurant properties. Certain additional information relating to the offerings
and investment history of the 18 public partnerships and the unlisted public
REIT is set forth below.
<TABLE>
<CAPTION>
Number of Date 90% of Net
Limited Proceeds Fully
Maximum Partnership Invested or
Name of Offering Units or Committed to
Entity Amount (1) Date Closed Shares Sold Investment (2)
- ------ ---------- ----------- ----------- --------------
<S> <C>
CNL Income $15,000,000 December 31, 1986 30,000 December 1986
Fund, Ltd. (30,000 units)
CNL Income $25,000,000 August 21, 1987 50,000 November 1987
Fund II, Ltd. (50,000 units)
CNL Income $25,000,000 April 29, 1988 50,000 June 1988
Fund III, Ltd. (50,000 units)
CNL Income $30,000,000 December 6, 1988 60,000 February 1989
Fund IV, Ltd. (60,000 units)
CNL Income $25,000,000 June 7, 1989 50,000 December 1989
Fund V, Ltd. (50,000 units)
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<PAGE>
CNL Income $35,000,000 January 19, 1990 70,000 May 1990
Fund VI, Ltd. (70,000 units)
CNL Income $30,000,000 August 1, 1990 30,000,000 January 1991
Fund VII, Ltd. (30,000,000 units)
CNL Income $35,000,000 March 7, 1991 35,000,000 September 1991
Fund VIII, Ltd. (35,000,000 units)
CNL Income $35,000,000 September 6, 1991 3,500,000 November 1991
Fund IX, Ltd. (3,500,000 units)
CNL Income $40,000,000 April 22, 1992 4,000,000 June 1992
Fund X, Ltd. (4,000,000 units)
CNL Income $40,000,000 October 8, 1992 4,000,000 September 1992
Fund XI, Ltd. (4,000,000 units)
CNL Income $45,000,000 April 15, 1993 4,500,000 July 1993
Fund XII, Ltd. (4,500,000 units)
CNL Income $40,000,000 September 13, 1993 4,000,000 August 1993
Fund XIII, Ltd. (4,000,000 units)
CNL Income $45,000,000 March 23, 1994 4,500,000 May 1994
Fund XIV, Ltd. (4,500,000 units)
CNL Income $40,000,000 September 22, 1994 4,000,000 December 1994
Fund XV, Ltd. (4,000,000 units)
CNL Income $45,000,000 July 18, 1995 4,500,000 August 1995
Fund XVI, Ltd. (4,500,000 units)
CNL Income $30,000,000 October 10, 1996 3,000,000 December 1996
Fund XVII, (3,000,000 units)
Ltd.
CNL Income $35,000,000 February 6, 1998 3,500,000 December 1997
Fund XVIII, (3,500,000 units)
Ltd.
CNL American $745,000,000 (3) (3) (3)
Properties (74,500,000
Fund, Inc. shares)
</TABLE>
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<PAGE>
- ------------------------------------
(1) The amount stated includes the exercise by the general partners of each
partnership of their option to increase by $5,000,000 the maximum size of
the offering of CNL Income Fund, Ltd., CNL Income Fund II, Ltd., CNL
Income Fund III, Ltd., CNL Income Fund IV, Ltd., CNL Income Fund VI, Ltd.,
CNL Income Fund VIII, Ltd., CNL Income Fund X, Ltd., CNL Income Fund XII,
Ltd., CNL Income Fund XIV, Ltd., CNL Income Fund XVI, Ltd. and CNL Income
Fund XVIII, Ltd.
(2) For a description of the property acquisitions by these programs, see the
table set forth on the following page.
(3) In April 1995, CNL American Properties Fund, Inc. commenced an offering of
a maximum of 15,000,000 shares of common stock ($150,000,000), excluding
1,500,000 shares ($15,000,000), available to investors participating in
the distribution reinvestment plan. On February 6, 1997, the initial
offering closed upon receipt of subscriptions totalling $150,591,765
(15,059,177 shares), including $591,765 (59,177 shares) through the
reinvestment plan. Following completion of the initial offering on
February 6, 1997, CNL American Properties Fund, Inc. commenced a
subsequent offering (the "1997 Offering") of up to 27,500,000 shares
($275,000,000) of common stock. On March 2, 1998, the 1997 Offering closed
upon receipt of subscriptions totalling $251,872,648 (25,187,265 shares),
including $1,872,648 (187,265 shares) through the reinvestment plan.
Following completion of the 1997 Offering on March 2, 1998, CNL American
Properties Fund, Inc. commenced a subsequent offering (the "1998
Offering") of up to 34,500,000 shares ($345,000,000) of common stock. As
of June 30, 1998, CNL American Properties Fund, Inc. had received
subscriptions totalling $111,880,663 (11,188,006 shares), including
$1,828,291 (182,829 shares) through the reinvestment plan, from the 1998
Offering. As of such date, CNL American Properties Fund, Inc. had
purchased 320 properties.
As of June 30, 1998, Mr. Seneff and Mr. Bourne, directly or through
affiliated entities, also had served as joint general partners of 69 nonpublic
real estate limited partnerships. The offerings of 68 of these 69 nonpublic
limited partnerships had terminated as of June 30, 1998. These 68 partnerships
raised a total of $170,327,353 from approximately 4,241 investors, and
purchased, directly or through participation in a joint venture or limited
partnership, interests in a total of 206 projects as of June 30, 1998. These 206
projects consist of 19 apartment projects (comprising 11% of the total amount
raised by all 68 partnerships), 13 office buildings (comprising 5% of the total
amount raised by all 68 partnerships), 159 fast-food or family-style restaurant
property and business investments (comprising 68% of the total amount raised by
all 68 partnerships), one condominium development (comprising .5% of the total
amount raised by all 68 partnerships), four hotels/motels (comprising 5% of the
total amount raised by all 68 partnerships), eight commercial/retail properties
(comprising 10% of the total amount raised by all 68 partnerships), and two
tracts of undeveloped land (comprising .5% of the total amount raised by all 68
partnerships). The offering of the one remaining nonpublic limited partnership
(offering totalling $15,000,000) had raised $13,637,500 from 263 investors
(approximately 90.91% of the total offering amount) as of June 30, 1998.
Mr. Bourne also has served, without Mr. Seneff, as a general partner of
one additional nonpublic real estate limited partnership program which raised a
total of $600,000 from 13 investors and purchased, through participation in a
limited partnership, one apartment building located in Georgia with a purchase
price of $1,712,000.
Mr. Seneff also has served, without Mr. Bourne, as a general partner of
two additional nonpublic real estate limited partnerships which raised a total
of $240,000 from 12 investors and purchased two office buildings with an
aggregate purchase price of $928,390. Both of the office buildings are located
in Florida.
Of the 89 real estate limited partnerships whose offerings had closed
as of June 30, 1998 (including 18 CNL Income Fund limited partnerships) in which
Mr. Seneff and/or Mr. Bourne serve or have served as general partners in the
past ten years, 38 invested in restaurant properties leased on a "triple-net"
basis, including seven which also invested in franchised restaurant businesses
(accounting for approximately 93% of the total amount raised by all 89 real
estate limited partnerships).
The following table sets forth summary information, as of June 30,
1998, regarding property acquisitions by the 18 limited partnerships and the one
unlisted REIT that, either individually or through a joint venture or
partnership arrangement, acquired restaurant properties and that have investment
objectives similar to those of the Company.
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<PAGE>
<TABLE>
<CAPTION>
Name of Type of Method of Type of
Entity Property Location Financing Program
- ------ -------- -------- --------- -------
<S> <C>
CNL Income 22 fast-food or AL, AZ, CA, FL, All cash Public
Fund, Ltd. family-style GA, LA, MD, OK,
restaurants PA, TX, VA, WA
CNL Income 49 fast-food or AL, AZ, CO, FL, All cash Public
Fund II, Ltd. family-style GA, IL, IN, KS,
restaurants LA, MI, MN, MO,
NC, NM, OH, TN,
TX, WA, WY
CNL Income 37 fast-food or AZ, CA, CO, FL, All cash Public
Fund III, Ltd. family-style GA, IA, IL, IN,
restaurants KS, KY, MD, MI,
MN, MO, NC,
NE, OK, TX
CNL Income 45 fast-food or AL, DC, FL, GA, All cash Public
Fund IV, Ltd. family-style IL, IN, KS, MA,
restaurants MD, MI, MS, NC,
OH, PA, TN, TX,
VA
CNL Income 35 fast-food or AZ, FL, GA, IL, All cash Public
Fund V, Ltd. family-style IN, MI, NH, NY,
restaurants OH, SC, TN, TX,
UT, WA
CNL Income 55 fast-food or AR, AZ, FL, GA, All cash Public
Fund VI, Ltd. family-style IL, IN, KS, MA,
restaurants MI, MN, NC, NE,
NM, NY, OH,
OK, PA, TN, TX,
VA, WA, WY
CNL Income 49 fast-food or AZ, CO, FL, GA, All cash Public
Fund VII, Ltd. family-style IN, LA, MI, MN,
restaurants NC, OH, SC, TN,
TX, UT, WA
CNL Income 42 fast-food or AZ, FL, IN, LA, All cash Public
Fund VIII, Ltd. family-style MI, MN, NC, NY,
restaurants OH, TN, TX, VA
CNL Income 43 fast-food or AL, CO, FL, GA, All cash Public
Fund IX, Ltd. family-style IL, IN, LA, MI,
restaurants MN, MS, NC, NH,
NY, OH, SC, TN,
TX
CNL Income 51 fast-food or AL, CA, CO, FL, All cash Public
Fund X, Ltd. family-style ID, IL, LA, MI,
restaurants MO, MT, NC,
NH, NM, NY,
OH, PA, SC, TN,
TX
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<PAGE>
CNL Income 40 fast-food or AL, AZ, CA, CO, All cash Public
Fund XI, Ltd. family-style CT, FL, KS, LA,
restaurants MA, MI, MS, NC,
NH, NM, OH,
OK, PA, SC, TX,
VA, WA
CNL Income 49 fast-food or AL, AZ, CA, FL, All cash Public
Fund XII, Ltd. family-style GA, LA, MO, MS,
restaurants NC, NM, OH, SC,
TN, TX, WA
CNL Income 50 fast-food or AL, AR, AZ, CA, All cash Public
Fund XIII, Ltd. family-style CO, FL, GA, IN,
restaurants KS, LA, MD, NC,
OH, PA, SC, TN,
TX, VA
CNL Income 64 fast-food or AL, AZ, CO, FL, All cash Public
Fund XIV, Ltd. family-style GA, KS, LA, MN,
restaurants MO, MS, NC, NJ,
NV, OH, SC, TN,
TX, VA
CNL Income 55 fast-food or AL, CA, FL, GA, All cash Public
Fund XV, Ltd. family-style KS, KY, MN,
restaurants MO, MS, NC, NJ,
NM, OH, OK, PA,
SC, TN, TX, VA
CNL Income 47 fast-food or AZ, CA, CO, DC, All cash Public
Fund XVI, Ltd. family-style FL, GA, ID, IN,
restaurants KS, MN, MO, NC,
NM, NV, OH, TN,
TX, UT, WI
CNL Income 29 fast-food, CA, FL, GA, IL, All cash Public
Fund XVII, Ltd. family-style or IN, MI, NC, NV,
casual-dining OH, SC, TN, TX
restaurant properties
CNL Income 23 fast-food, AZ, CA, FL, GA, All cash Public
Fund XVIII, Ltd. family-style or IL, KY, MD, MN,
casual-dining NC, NV, NY, OH,
restaurant properties TN, TX
-32-
<PAGE>
CNL American 320 fast-food, AL, AZ, CA, CO, All cash Public REIT
Properties Fund, Inc. family-style or CT, DE, FL, GA,
casual-dining IA, ID, IL, IN,
restaurants KS, KY, MD, MI,
MN, MO, NC,
NE, NJ, NM, NV,
NY, OH, OK, OR,
PA, RI, SC, TN,
TX, UT, VA, WA,
WI, WV
</TABLE>
-----------------------------------------------------------------------
A more detailed description of the acquisitions by real estate limited
partnerships and the unlisted REIT sponsored by Messrs. Bourne and Seneff is set
forth in prior performance Table VI, included in Part II of the registration
statement filed with the Securities and Exchange Commission for this offering. A
copy of Table VI is available to stockholders from the Company upon request,
free of charge. In addition, upon request to the Company, the Company will
provide, without charge, a copy of the most recent Annual Report on Form 10-K
filed with the Securities and Exchange Commission for CNL Income Fund, Ltd., CNL
Income Fund II, Ltd., CNL Income Fund III, Ltd., CNL Income Fund IV, Ltd., CNL
Income Fund V, Ltd., CNL Income Fund VI, Ltd., CNL Income Fund VII, Ltd., CNL
Income Fund VIII, Ltd., CNL Income Fund IX, Ltd., CNL Income Fund X, Ltd., CNL
Income Fund XI, Ltd., CNL Income Fund XII, Ltd., CNL Income Fund XIII, Ltd., CNL
Income Fund XIV, Ltd., CNL Income Fund XV, Ltd., CNL Income Fund XVI, Ltd., CNL
Income Fund XVII, Ltd., CNL Income Fund XVIII, Ltd. and CNL American Properties
Fund, Inc. as well as a copy, for a reasonable fee, of the exhibits filed with
such reports.
In order to provide potential purchasers of Shares in the Company with
information to enable them to evaluate the prior experience of the Messrs.
Seneff and Bourne as general partners of real estate limited partnerships and as
directors and officers of the unlisted REIT, including those set forth in the
foregoing table, certain financial and other information concerning those
limited partnerships and the unlisted REIT with investment objectives similar to
one or more of the Company's investment objectives is provided in the Prior
Performance Tables included as Exhibit C. Information about the previous public
partnerships, the offerings of which became fully subscribed between July 1993
and June 1998, is included therein. Potential stockholders are encouraged to
examine the Prior Performance Tables attached as Exhibit C (in Table III), which
include information as to the operating results of these prior partnerships, for
more detailed information concerning the experience of Messrs. Seneff and
Bourne.
INVESTMENT OBJECTIVES AND POLICIES
GENERAL
The Company's primary investment objectives are to preserve, protect,
and enhance the Company's assets while (i) making quarterly Distributions; (ii)
obtaining fixed income through the receipt of base rent, and increasing the
Company's income (and Distributions) and providing protection against inflation
through automatic increases in base rent and/or receipt of percentage rent, and
obtaining fixed income through the receipt of payments on Mortgage Loans and
Secured Equipment Leases; (iii) continuing to qualify as a REIT for federal
income tax purposes; and (iv) providing stockholders of the Company with
liquidity of their investment, either in whole or in part, within five to ten
years after commencement of the offering, through (a) Listing, or, (b) if
Listing does not occur within ten years after commencement of the offering, the
commencement of orderly Sales of the Company's assets, outside the ordinary
course of business and consistent with its objective of qualifying as a REIT,
and distribution of the proceeds thereof. The sheltering from tax of income from
other sources is not an objective of the Company. If the Company
-33-
<PAGE>
is successful in achieving its investment and operating objectives, the
stockholders (other than tax-exempt entities) are likely to recognize taxable
income in each year. While there is no order of priority intended in the listing
of the Company's objectives, stockholders should realize that the ability of the
Company to meet these objectives may be severely handicapped by any lack of
diversification of the Company's investments and the terms of the leases.
DISTRIBUTIONS
The following table reflects total Distributions and Distributions per
Share declared and paid by the Company for each month since the Company
commenced operations.
Total Distributions
Month Distributions Per Share
- ----- ------------- ---------
November 1997 $10,757 $0.02500
December 1997 19,019 0.002500
January 1998 28,814 0.002500
February 1998 32,915 0.002500
March 1998 39,627 0.002500
April 1998 46,677 0.002500
May 1998 52,688 0.002500
June 1998 56,365 0.002500
In addition, in July, August and September 1998, the Company declared
Distributions totalling $99,631, $105,707 and $157,038, respectively
(representing $0.0417, $0.0417 and $0.0583 per share, respectively), payable in
September 1998. The Company intends to continue to make regular Distributions to
stockholders. The payment of Distributions commenced in December 1997.
Distributions will be made to those stockholders who are stockholders as of the
record date selected by the Directors. Distributions will be declared monthly
during the offering period, declared monthly during any subsequent offering,
paid on a quarterly basis during an offering period, and declared and paid
quarterly thereafter. The Company is required to distribute annually at least
95% of its real estate investment trust taxable income to maintain its objective
of qualifying as a REIT. Generally, income distributed will not be taxable to
the Company under federal income tax laws if the Company complies with the
provisions relating to qualification as a REIT. If the cash available to the
Company is insufficient to pay such Distributions, the Company may obtain the
necessary funds by borrowing, issuing new securities, or selling assets. These
methods of obtaining funds could affect future Distributions by increasing
operating costs. To the extent that Distributions to stockholders exceed
earnings and profits, such amounts constitute a return capital for federal
income tax purposes, although such Distributions will not reduce stockholders'
aggregate Invested Capital. Distributions in kind shall not be permitted, except
for distributions of readily marketable securities; distributions of beneficial
interests in a liquidating trust established for the dissolution of the Company
and the liquidation of its assets in accordance with the terms of the Articles
of Incorporation; or distributions of in-kind property as long as the Directors
(i) advise each stockholder of the risks associated with direct ownership of the
property; (ii) offer each stockholder the election of receiving in-kind property
distributions; and (iii) distribute in-kind property only to those stockholders
who accept the Directors' offer.
For the period October 15, 1997 (the date operations of the Company
commenced) through December 31, 1997, 100 percent of the Distributions declared
and paid were considered ordinary income for federal income tax purposes. Due to
the fact that the Company had not yet acquired any Properties and was still in
the offering stage as of December 31, 1997, the characterization of
Distributions for federal income tax purposes is not necessarily considered by
management to be representative of the characterization of Distributions in
future years.
-34-
<PAGE>
FEDERAL INCOME TAX CONSIDERATIONS
TAXATION OF THE COMPANY
General. The Company has elected to be taxed as a REIT for federal
income tax purposes, as defined in Sections 856 through 860 of the Code,
commencing with its taxable year ending December 31, 1997. The Company believes
that it is organized and will operate in such a manner as to qualify as a REIT,
and the Company intends to continue to operate in such a manner, but no
assurance can be given that it will operate in a manner so as to qualify or
remain qualified as a REIT. The provisions of the Code pertaining to REITs are
highly technical and complex. Accordingly, this summary is qualified in its
entirety by the applicable Code sections, rules and regulations issued
thereunder, and administrative and judicial interpretations thereof.
If the Company qualifies for taxation as a REIT, it generally will not
be subject to federal corporate income tax on its net income that is currently
distributed to holders of Shares. This treatment substantially eliminates the
"double taxation" (at the corporate and stockholder levels) that generally
results from an investment in a corporation. However, the Company will be
subject to federal income tax in the following circumstances. First, the Company
will be taxed at regular corporate rates on any undistributed real estate
investment trust taxable income, including undistributed net capital gains.
Second, under certain circumstances, the Company may be subject to the
alternative minimum tax on its items of tax preference. Third, if the Company
has net income from foreclosure property, it will be subject to tax on such
income at the highest corporate rate. Foreclosure property generally means real
property (and any personal property incident to such real property) which is
acquired as a result of a default either on a lease of such property or on
indebtedness which such property secured and with respect to which an
appropriate election is made. Fourth, if the Company has net income derived from
prohibited transactions, such income will be subject to a 100% tax. A prohibited
transaction generally includes a sale or other disposition of property (other
than foreclosure property) that is held primarily for sale to customers in the
ordinary course of business. Fifth, if the Company should fail to satisfy the
75% gross income test or the 95% gross income test (as discussed below), but has
nonetheless maintained its qualification as a REIT because certain other
requirements have been met, it will be subject to a 100% tax on the net income
attributable to the greater of the amount by which the Company fails the 75% or
95% test. Sixth, if, during each calendar year, the Company fails to distribute
at least the sum of (i) 85% of its real estate investment trust ordinary income
for such year; (ii) 95% of its real estate investment trust capital gain net
income for such year; and (iii) any undistributed taxable income from prior
periods, the Company will be subject to a 4% excise tax on the excess of such
required distribution over the amounts actually distributed. Seventh, if the
Company acquires any asset from a C corporation (i.e. a corporation generally
subject to full corporate level tax) in a transaction in which the basis of the
asset in the Company's hands is determined by reference to the basis of the
asset (or any other property) in the hands of the corporation, and the Company
recognizes gain on the disposition of such asset during the 10-year period
beginning on the date on which such asset was acquired by the Company, then, to
the extent of such property's "built-in gain" (the excess of the fair market
value of such property at the time of acquisition by the Company over the
adjusted basis in such property at such time), such gain will be subject to tax
at the highest regular corporate rate applicable (as provided in regulations
promulgated by the United States Department of Treasury under the Code
("Treasury Regulations") that have not yet been promulgated). (The results
described above with respect to the recognition of "built-in gain" assume that
the Company will make an election pursuant to IRS Notice 88-19.)
EXPERTS
The audited balance sheets of the Company as of December 31, 1997 and
1996, and the related statements of earnings, stockholders' equity and cash
flows for the year ended December 31, 1997, and for the period June 12, 1996
(date of inception) through December 31, 1996, included in this Prospectus, have
been included herein in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of that firm as experts in
accounting and auditing.
-35-
<PAGE>
DEFINITIONS
"Line of Credit" means one or more lines of credit in an aggregate
amount up to $45,000,000, the proceeds of which will be used to acquire
Properties and make Mortgage Loans and Secured Equipment Leases and to pay the
Secured Equipment Lease Servicing Fee. The Line of Credit may be in addition to
any Permanent Financing.
-36-
<PAGE>
EXHIBIT B
FINANCIAL INFORMATION
THE FINANCIAL STATEMENTS INCLUDED IN
THIS EXHIBIT B UPDATE AND REPLACE
EXHIBIT B TO THE ATTACHED PROSPECTUS,
DATED APRIL 21, 1998.
<PAGE>
EXHIBIT B
FINANCIAL INFORMATION
<PAGE>
INDEX TO FINANCIAL STATEMENTS
CNL HOSPITALITY PROPERTIES, INC.
AND SUBSIDIARIES
(formerly CNL American Realty Fund, Inc.)
Pro Forma Consolidated Financial Information (unaudited):
Pro Forma Consolidated Balance Sheet as of June 30, 1998 B-2
Pro Forma Consolidated Statement of Earnings for the six
months ended June 30, 1998 B-3
Pro Forma Consolidated Statement of Earnings for the year
ended December 31, 1997 B-4
Notes to Pro Forma Consolidated Financial Statements for
the six months ended June 30, 1998 and the year ended
December 31, 1997 B-5
Updated Unaudited Condensed Consolidated Financial Statements:
Condensed Consolidated Balance Sheets as of June 30, 1998
and December 31, 1997 B-7
Condensed Consolidated Statements of Earnings for the six
months ended June 30, 1998 and 1997 B-8
Condensed Consolidated Statements of Stockholders' Equity
for the six months ended June 30, 1998 and the year
ended December 31, 1997 B-9
Condensed Consolidated Statements of Cash Flows for the six
months ended June 30, 1998 and 1997 B-10
Notes to Condensed Consolidated Financial Statements for
the six months ended June 30, 1998 and 1997 B-12
Audited Financial Statements:
Report of Independent Accountants B-19
Balance Sheets as of December 31, 1997 and 1996 B-20
Statements of Earnings for the year ended December 31,
1997 and the period June 12, 1996 (date of inception)
through December 31, 1996 B-21
Consolidated Statements of Stockholders' Equity for the
year ended December 31, 1997 and the period June 12,
1996 (date of inception) through December 31, 1996 B-22
Consolidated Statements of Cash Flows for the year ended
December 31, 1997 and the period June 12, 1996 (date
of inception) through December 31, 1996 B-23
Notes to Consolidated Financial Statements for the year
ended December 31, 1997 and the period June 12, 1996
(date of inception) through December 31, 1996 B-25
<PAGE>
PRO FORMA FINANCIAL INFORMATION
The following Pro Forma Consolidated Balance Sheet of CNL Hospitality
Properties, Inc. and subsidiaries (the "Company") gives effect to (i) the
receipt of $23,578,282 in gross offering proceeds from the sale of 2,357,828
shares of common stock pursuant to a registration statement on Form S-11 under
the Securities Act of 1933, as amended, effective July 9, 1997, for the period
from inception through June 30, 1998 (ii) the receipt of $3,157,993 in gross
offering proceeds from the sale of 315,799 additional shares and $8,600,000 from
borrowings on the line of credit, for the period July 1, 1998 through September
1, 1998, and (iii) the application of such funds to purchase two properties, and
to pay offering expenses, acquisition fees, and miscellaneous acquisition
expenses, all as reflected in the pro forma adjustments described in the related
notes. The Pro Forma Consolidated Balance Sheet as of June 30, 1998, includes
the transactions described in (i) above, from its historical balance sheet,
adjusted to give effect to the transactions in (ii) and (iii) above, as if they
had occurred on June 30, 1998.
The Pro Forma Consolidated Statements of Earnings for the six months
ended June 30, 1998 and the year ended December 31, 1997, include the historical
operating results of the properties described in (iii) above that were acquired
by the Company during the period July 1, 1998 through September 1, 1998, from
the later of (1) the date the property became operational or (2) October 15,
1997, the date the Company became operational, to the end of the pro forma
period presented.
This pro forma financial information is presented for informational
purposes only and does not purport to be indicative of the Company's financial
results or condition if the various events and transactions reflected therein
had occurred on the dates, or been in effect during the periods, indicated. This
pro forma financial information should not be viewed as predictive of the
Company's financial results or conditions in the future.
B-1
<PAGE>
CNL HOSPITALITY PROPERTIES, INC.
AND SUBSIDIARIES
(formerly CNL American Realty Fund, Inc.)
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
JUNE 30, 1998
<TABLE>
<CAPTION>
Pro Forma
ASSETS Historical Adjustments Pro Forma
---------- ----------- ---------
<S> <C>
Investment in hotel properties $ - $28,705,899 (a) $28,705,899
Cash and cash equivalents 17,655,806 (15,947,615)(a) 1,708,191
Certificates of deposit 1,500,417 - 1,500,417
Prepaid expenses 2,046 - 2,046
Organization costs 17,167 17,167
Other assets 1,157,474 (917,493)(a) 239,981
$20,332,910 $11,840,791 $32,173,701
=========== =============== ===========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Line of credit $ - $ 8,600,000 (a) $ 8,600,000
Accounts payable and accrued
expenses 7,000 - 7,000
Due to related parties 85,250 335,437 (a) 420,687
----------- ----------- -----------
Total liabilities 92,250 8,935,437 9,027,687
----------- ----------- -----------
STOCKHOLDERS' EQUITY
Preferred stock, without par
value. Authorized and
unissued 3,000,000 shares - - -
Excess shares, $.01 par value
per share. Authorized and
unissued 63,000,000 shares - - -
Common stock, $.01 par value
per share. Authorized
60,000,000 shares; issued
and outstanding 2,377,828
shares; issued and outstanding,
as adjusted, 2,693,628 shares 23,778 3,158 (a) 26,936
Capital in excess of par value 20,278,919 2,902,196 (a) 23,181,115
Accumulated distributions in
excess of net earnings (62,037) - (62,037)
----------- ---------- -----------
Total stockholders' equity 20,240,660 2,905,354 23,146,014
----------- ---------- ----------
$20,332,910 $11,840,791 $32,173,701
=========== =========== ===========
</TABLE>
See accompanying notes to unaudited pro forma consolidated balance sheet.
B-2
<PAGE>
CNL HOSPITALITY PROPERTIES, INC.
AND SUBSIDIARIES
(formerly CNL American Realty Fund, Inc.)
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF EARNINGS
SIX MONTHS ENDED JUNE 30, 1998
<TABLE>
<CAPTION>
Pro Forma
Historical Adjustments Pro Forma
---------- ----------- ---------
<S> <C>
Revenues:
Rental income from
operating leases $ - $1,462,913 (1) $1,462,913
Interest income 371,159 (362,674)(2) 8,485
---------- ---------- ----------
371,159 1,100,239 1,471,398
---------- ---------- ----------
Expenses:
General operating and
administrative 146,656 146,656
Professional fees 20,530 20,530
Asset management fees
to related party - 81,737 (3) 81,737
Interest expense - 378,400 (4) 378,400
Depreciation and amortization 2,000 491,304 (5) 493,304
---------- ---------- ----------
169,186 951,441 1,120,627
---------- ---------- ----------
Net Earnings $ 201,973 $ 148,798 $ 350,771
========== ========== ==========
Earnings Per Share of
Common Stock (Basic
and Diluted) (6) $ 0.11 $ 0.16
========== ==========
Weighted Average Number of
Shares of Common Stock
Outstanding (6) 1,820,362 2,145,446
=========== ==========
</TABLE>
See accompanying notes to unaudited pro forma consolidated financial statements.
B-4
<PAGE>
CNL HOSPITALITY PROPERTIES, INC.
AND SUBSIDIARIES
(formerly CNL American Realty Fund, Inc.)
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF EARNINGS
YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
Pro Forma
Historical Adjustments Pro Forma
---------- ----------- ---------
<S> <C>
Revenues:
Rental income from
operating leases $ - $ 623,899 (1) $ 623,899
Interest income 46,071 (46,071)(2) -
---------- ---------- ----------
46,071 577,828 623,899
---------- ---------- ----------
Expenses:
General operating and
administrative 22,386 22,386
Asset and mortgage management
fees to related party - 27,245 (3) 27,245
Interest expense - 157,667 (4) 157,667
Depreciation and amortization 833 204,710 (5) 205,543
---------- ---------- ----------
23,219 389,622 412,841
---------- ---------- ----------
Net Earnings $ 22,852 $ 188,206 $ 211,058
========== ========== ==========
Earnings Per Share of
Common Stock (Basic
and Diluted) (6) $ 0.03 $ 0.10
========== ==========
Weighted Average Number of
Shares of Common Stock
Outstanding (6) 686,063 2,115,004
========== ==========
</TABLE>
See accompanying notes to unaudited pro forma consolidated financial statements.
B-6
<PAGE>
CNL HOSPITALITY PROPERTIES, INC.
AND SUBSIDIARIES
(formerly CNL American Realty Fund, Inc.)
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND
THE YEAR ENDED DECEMBER 31, 1997
Pro Forma Consolidated Balance Sheet:
- -------------------------------------
(a) Represents gross proceeds of $3,157,993 from the sale of 315,799 shares
during the period July 1, 1998 through September 1, 1998, the receipt
of $8,600,000 on borrowings from the line of credit and $15,947,615 of
cash and cash equivalents used (i) to acquire two properties for
$27,245,539, (ii) to pay acquisition fees and costs of $155,867
($13,757 of which was accrued as due to related parties at June 30,
1998), to accrue acquisition fees of $387,000 relating to the acquired
properties, and reclassify from other assets $917,493 of acquisition
fees previously incurred relating to the acquired properties, and (iii)
to pay selling commissions and offering expenses (syndication costs) of
$304,202 which have been netted against stockholders' equity (a total
of $51,563 of which had been incurred as of June 30, 1998).
The pro forma adjustments to investment in hotel properties as a result
of the above transactions were as follows:
<TABLE>
<CAPTION>
Estimated Acquisition
purchase price fees
(including allocated
closing costs) to property Total
-------------- ----------- -----
<S> <C>
Residence Inn Buckhead
(Lenox Park) in Atlanta, GA $15,731,414 $ 843,203 $16,574,617
Residence Inn Gwinnett Place 11,514,125 617,157 12,131,282
in Duluth, GA ----------- ---------- -----------
$27,245,539 $1,460,360 $28,705,899
=========== ========== ===========
</TABLE>
Pro Forma Consolidated Statements of Earnings:
- ----------------------------------------------
(1) Represents rental income from operating leases for the properties
acquired during the period July 1, 1998 through September 1, 1998,
which were operational prior to the acquisition of the property by the
Company (the "Pro Forma Properties "), for the period commencing the
later of (i) the date the Pro Forma Property became operational by the
previous owner or (ii) October 15, 1997, the date the Company became
operational, to the end of the pro forma period presented. The
following presents the actual date the Pro Forma Properties were
acquired or placed in service by the Company as compared to the date
the Pro Forma Properties were treated as becoming operational as a
rental property for purposes of the Pro Forma Consolidated Statement of
Earnings.
B-8
<PAGE>
Date Pro Forma
Date Placed Property Became
in Service Operational as
By the Company Rental Property
-------------- ---------------
Residence Inn Buckhead (Lenox
Park) in Atlanta, GA July 31, 1998 October 15, 1997
Residence Inn Gwinnett Place
in Duluth, GA July 31, 1998 October 15, 1997
Generally, the leases provide for the payment of percentage rent in
addition to base rental income. However, due to the fact that no
percentage rent was due under the leases for the Pro Forma Properties
during the portion of 1997 and 1998 that the previous owners held the
properties, no pro forma adjustment was made for percentage rental
income for the six months ended June 30, 1998 and year ended December
31, 1997.
B-9
<PAGE>
CNL HOSPITALITY PROPERTIES, INC.
AND SUBSIDIARIES
(formerly CNL American Realty Fund, Inc.)
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL
STATEMENTS - CONTINUED
FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND
THE YEAR ENDED DECEMBER 31, 1997
Pro Forma Consolidated Statements of Earnings - Continued:
- ----------------------------------------------------------
(2) Represents adjustment to interest income due to the decrease in the
amount of cash available for investment in interest bearing accounts
during the periods commencing the later of (i) the dates the Pro Forma
Properties became operational by the previous owners or (ii) October
15, 1997, the date the Company became operational, through the end of
the pro forma period presented, as described in Note (1) above. The
estimated pro forma adjustment is based upon the fact that (i) all of
the net offering proceeds received during the year ended December 31,
1997 and invested in interest bearing accounts for historical purposes
were considered invested in Pro Forma Properties for pro forma purposes
and (ii) interest income from interest bearing accounts was earned at a
rate of approximately four percent per annum by the Company during the
six months ended June 30, 1998.
(3) Represents asset management fees relating to the Pro Forma Properties
for the period commencing the later of (i) the date the Pro Forma
Properties became operational by the previous owners or (ii) October
15, 1997, the date the Company became operational, through the end of
the pro forma period presented, as described in Note (1) above. Asset
management fees are equal to 0.60% of the Company's Real Estate Asset
Value (estimated to be approximately $27,245,539 for the Pro Forma
Properties for the six months ended June 30, 1998 and the year ended
December 31, 1997), as defined in the Company's prospectus.
B-10
<PAGE>
(4) Represents interest expense incurred at a rate of 8.8% per annum in
connection with the assumed borrowings from the line of credit of
$8,600,000 on October 15, 1997.
(5) Represents depreciation expense of the building and the furniture,
fixture and equipment ( "FF&E ") portions of the Pro Forma Properties
accounted for as operating leases using the straight-line method. The
buildings and FF&E are depreciated over useful lives of 40 and seven
years, respectively. Also represents amortization of the loan
origination fee of $43,000 (.5% on the $8,600,000 from borrowings on
the line of credit) and $17,266 of other miscellaneous closing costs,
amortized under the straight-line method over a period of five years.
(6) Historical earnings per share were calculated based upon the weighted
average number of shares of common stock outstanding during the period
the Company was operational, October 15, 1997 (the date following when
the Company received the minimum offering proceeds and funds were
released from escrow) through December 31, 1997 and the six months
ended June 30, 1998.
As a result of the two Pro Forma Properties being treated in the Pro
Forma Consolidated Statement of Earnings as placed in service on
October 15, 1997 (the date the Company became operational), the Company
assumed approximately 2,095,004 shares of common stock were sold, and
the net offering proceeds were available for investment, on October 15,
1997. Due to the fact that approximately 1,817,546 of these shares of
common stock were actually sold subsequently, during the period October
15, 1997 through May 1, 1998, the weighted average number of shares
outstanding for the pro forma period was adjusted. Pro forma earnings
per share were calculated based upon the weighted average number of
shares of common stock outstanding, as adjusted, during the period the
Company was operational, October 15, 1997 through June 30, 1998.
B-11
<PAGE>
CNL HOSPITALITY PROPERTIES, INC.
AND SUBSIDIARIES
(formerly known as CNL American Realty Fund, Inc.)
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
ASSETS 1998 1997
----------- ------------
<S> <C>
Cash and cash equivalents $17,655,806 $ 8,869,838
Certificates of deposit 1,500,417 -
Due from related party - 7,500
Prepaid expenses 2,046 11,179
Organization costs, less
accumulated amortization of
$2,833 and $833, respectively 17,167 19,167
Other assets 1,157,474 535,792
----------- -----------
$20,332,910 $ 9,443,476
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued
expenses $ 7,000 $ 16,305
Due to related parties 85,250 193,254
----------- -----------
Total liabilities 92,250 209,559
----------- -----------
Commitments (Note 7)
Stockholders' equity:
Preferred stock, without par
value. Authorized and unissued
3,000,000 shares - -
Excess shares, $.01 par value per
share. Authorized and unissued
63,000,000 shares - -
Common stock, $.01 par value per
share. Authorized 60,000,000
shares, issued and outstanding
2,377,828 and 1,152,540,
respectively 23,778 11,525
Capital in excess of par value 20,278,919 9,229,316
Accumulated distributions in excess
of net earnings (62,037) (6,924)
----------- -----------
Total stockholders' equity 20,240,660 9,233,917
----------- -----------
$20,332,910 $ 9,443,476
=========== ===========
</TABLE>
See accompanying notes to condensed consolidated
financial statements.
B-12
<PAGE>
CNL HOSPITALITY PROPERTIES, INC.
AND SUBSIDIARIES
(formerly known as CNL American Realty Fund, Inc.)
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
June 30, June 30,
1998 1997 1998 1997
---------- ---------- ---------- -------
<S> <C>
Revenues:
Interest income $ 232,006 $ - $ 371,159 $ -
---------- ---------- ---------- ---------
Expenses:
General operating and
administrative 61,263 - 146,656 -
Professional services 15,078 - 20,530 -
Amortization 1,000 - 2,000 -
---------- ---------- ---------- ---------
77,341 - 169,186 -
---------- ---------- ---------- ---------
Net Earnings $ 154,665 $ - $ 201,973 $ -
========== ========== ========== =========
Earnings Per Share of
Common Stock (Basic
and Diluted) $ 0.07 $ - $ 0.11 $ -
========== ========== ========== =========
Weighted Average Number
of Shares of Common
Stock Outstanding 2,162,300 - 1,820,362 -
========== ========== ========== =========
</TABLE>
See accompanying notes to condensed consolidated
financial statements.
B-13
<PAGE>
CNL HOSPITALITY PROPERTIES, INC.
AND SUBSIDIARIES
(formerly known as CNL American Realty Fund, Inc.)
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Six Months Ended June 30, 1998 and
Year Ended December 31, 1997
<TABLE>
<CAPTION>
Accumulated
distributions
Common stock Capital in in excess
Number Par excess of of net
of shares value par value earnings Total
--------- ----- --------- -------- -----
<S> <C>
Balance at
December 31, 1996 20,000 $ 200 $ 199,800 $ - $ 200,000
Subscriptions
received for
common stock
through public
offering and
distribution
reinvestment
plan 1,132,540 11,325 11,314,077 - 11,325,402
Stock issuance
costs - - (2,284,561) - (2,284,561)
Net earnings - - - 22,852 22,852
Distributions
declared and
paid ($.05
per share) - - - (29,776) (29,776)
---------- ------- ----------- --------- -----------
Balance at
December 31, 1997 1,152,540 11,525 9,229,316 (6,924) 9,233,917
Subscriptions
received for
common stock
through public
offering and
distribution
reinvestment
plan 1,225,288 12,253 12,240,627 - 12,252,880
Stock issuance
costs - - (1,191,024) - (1,191,024)
Net earnings - - - 201,973 201,973
Distributions
declared and
paid ($.15
per share) - - - (257,086) (257,086)
---------- ------- ----------- --------- -----------
Balance at
June 30, 1998 2,377,828 $23,778 $20,278,919 $ (62,037) $20,240,660
========== ======= =========== ========== ===========
</TABLE>
See accompanying notes to condensed consolidated
financial statements.
B-16
<PAGE>
CNL HOSPITALITY PROPERTIES, INC.
AND SUBSIDIARIES
(formerly known as CNL American Realty Fund, Inc.)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended
June 30,
1998 1997
----------- ---------
<S> <C>
Increase (Decrease) in Cash and Cash
Equivalents:
Net cash provided by
operating activities $ 210,452 $ -
----------- ----------
Cash Flows From Investing
Activities:
Investment in certificates
of deposit (1,500,000) -
Increase in other assets (633,866) -
Other - (67)
----------- -----------
Net cash used in
investing activities (2,133,866) (67)
----------- -----------
Cash Flows From Financing
Activities:
Reimbursement of acquisition
and stock issuance costs
paid by related parties on
behalf of the Company (70,150) -
Subscriptions received from
stockholders 12,252,880 -
Distributions to stockholders (257,086) -
Payment of stock issuance
costs (1,213,762) -
Other (2,500) -
----------- ----------
Net cash provided by
financing activities 10,709,382 -
----------- ----------
Net Increase (Decrease) in Cash and
Cash Equivalents 8,785,968 (67)
Cash and Cash Equivalents at
Beginning of Period 8,869,838 2,084
----------- -----------
Cash and Cash Equivalents at End
of Period $17,655,806 $ 2,017
=========== ===========
</TABLE>
See accompanying notes to condensed consolidated
financial statements.
B-17
<PAGE>
CNL HOSPITALITY PROPERTIES, INC.
AND SUBSIDIARIES
(formerly known as CNL American Realty Fund, Inc.)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
<TABLE>
<CAPTION>
Six Months Ended
June 30,
1998 1997
----------- ---------
<S> <C>
Supplemental Schedule of Non-Cash
Investing and Financing
Activities:
Related parties paid certain acquisition
and stock issuance costs on behalf
of the Company as follows:
Acquisition costs $ 20,302 $ -
Stock issuance costs 58,403 87,774
----------- -----------
$ 78,705 $ 87,774
=========== ===========
</TABLE>
See accompanying notes to condensed consolidated
financial statements.
B-18
<PAGE>
CNL HOSPITALITY PROPERTIES, INC.
AND SUBSIDIARIES
(formerly known as CNL American Realty Fund, Inc.)
NOTES TO CONDENSED FINANCIAL STATEMENTS
Quarters and Six Months Ended June 30, 1998 and 1997
1. Organization and Nature of Business:
CNL Hospitality Properties, Inc., formerly known as CNL American Realty
Fund, Inc., was organized in Maryland on June 12, 1996. CNL Hospitality
GP Corp. and CNL Hospitality LP Corp. are wholly owned subsidiaries of
the Company, organized in Delaware in June 1998. CNL Hospitality
Partners, LP is a Delaware limited partnership formed in June 1998. CNL
Hospitality GP Corp. and CNL Hospitality LP Corp. are the general and
limited partners, respectively, of CNL Hospitality Partners, LP. The
term "Company" includes, unless the context otherwise requires, CNL
Hospitality Properties, Inc., CNL Hospitality Partners LP, CNL
Hospitality GP Corp. and CNL Hospitality LP Corp.
The Company was formed primarily to acquire properties ("Properties")
located across the United States to be leased on a long-term,
triple-net basis. The Company intends to invest the proceeds from its
public offering, after deducting offering expenses, in hotel Properties
to be leased to operators of national and regional limited service,
extended stay and full service hotel chains (the "Hotel Chains") and in
restaurant Properties to be leased to operators of selected national
and regional fast-food, family-style and casual dining restaurant
chains (the "Restaurant Chains"). The Company may also provide mortgage
financing (the "Mortgage Loans"). The Company also intends to offer
furniture, fixture and equipment financing ("Secured Equipment Leases")
to operators of Hotel Chains and Restaurant Chains.
The accompanying unaudited condensed consolidated financial statements
include the accounts of the Company, CNL Hospitality Properties, Inc.,
and its wholly owned subsidiaries, CNL Hospitality GP Corp. and CNL
Hospitality LP Corp., as well as the accounts of CNL Hospitality
Partners, LP. All significant intercompany balances and transactions
have been eliminated.
2. Basis of Presentation:
The accompanying unaudited condensed financial statements have been
prepared in accordance with the instructions to Form 10-Q and do not
include all of the information and note disclosures required by
generally accepted accounting principles. The financial statements
reflect all adjustments, consisting of normal recurring adjustments,
which are, in the opinion of management, necessary to a fair statement
of the results for the interim period presented. Operating results for
the quarter and six months ended June 30, 1998, may not be indicative
of the results that may be expected for the year
B-19
<PAGE>
CNL HOSPITALITY PROPERTIES, INC.
AND SUBSIDIARIES
(formerly known as CNL American Realty Fund, Inc.)
NOTES TO CONDENSED FINANCIAL STATEMENTS
Quarters and Six Months Ended June 30, 1998 and 1997
2. Basis of Presentation - Continued:
ending December 31, 1998. Amounts as of December 31, 1997, 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 the Company's
Form 10-K for the year ended December 31, 1997.
The Company was a development stage enterprise from June 12, 1996
through October 15, 1997. Since operations had not begun, activities
through October 15, 1997 were devoted to organization of the Company.
Effective January 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income." This
Statement requires the reporting of net earnings and all other changes
to equity during the period, except those resulting from investments by
owners and distributions to owners, in a separate statement that begins
with net earnings. Currently the Company's only component of
comprehensive income is net earnings.
In March 1998, the Emerging Issues Task Force of the Financial
Accounting Standards Board ("FASB") reached a consensus in EITF 97-11,
entitled "Accounting for Internal Costs Relating to Real Estate
Property Acquisitions." EITF 97-11 provides that internal costs of
identifying and acquiring operating Property should be expensed as
incurred. Due to the fact that the Company does not have an internal
acquisitions function and instead, contracts these services from an
external advisor, the effectiveness of EITF 97-11 had no material
effect on the Company's financial position or results of operations.
In April 1998, the American Institute of Certified Public Accountants
issued Statement of Position (SOP) 98-5, "Reporting on the Costs of
Start-Up Activities," which is effective for the Company as of January
1, 1999. This SOP requires start-up and organization costs to be
expensed as incurred and also requires previously deferred start-up
costs to be recognized as a cumulative effect adjustment in the
statement of income. The Company does not believe that adoption of this
SOP will have a material effect on the Company's financial position or
results of operations.
B-20
<PAGE>
CNL HOSPITALITY PROPERTIES, INC.
AND SUBSIDIARIES
(formerly known as CNL American Realty Fund, Inc.)
NOTES TO CONDENSED FINANCIAL STATEMENTS
Quarters and Six Months Ended June 30, 1998 and 1997
3. Other Assets:
Other assets consisted of the following at:
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
---- ----
<S> <C>
Acquisition fees and mis-
cellaneous acquisition
expenses to be allocated
to future properties $1,107,474 $ 535,792
Deposits on properties 50,000 -
---------- ----------
$1,157,474 $ 535,792
========== ==========
</TABLE>
4. Stock Issuance Costs:
The Company has incurred certain expenses of its offering of shares,
including commissions, marketing support and due diligence expense
reimbursement fees, filing fees, legal, accounting, printing and escrow
fees, which have been deducted from the gross proceeds of the offering.
Preliminary costs incurred prior to raising capital were advanced by an
affiliate of the Company, CNL Real Estate Advisors, Inc. (the
"Advisor"). The Advisor has agreed to pay all organizational and
offering expenses (excluding commissions and marketing support and due
diligence expense reimbursement fees) which exceed three percent of the
gross offering proceeds received from the sale of shares of the
Company.
During the six months ended June 30, 1998 and the year ended December
31, 1997, the Company incurred $1,191,024 and $2,304,561, respectively,
in organizational and offering costs, including $980,230 and $906,032,
respectively, in commissions and marketing support and due diligence
expense reimbursement fees (see Note 6). Of these amounts $1,191,024
and $2,284,561, respectively, have been treated as stock issuance costs
and $20,000 have been treated as organization costs. The stock issuance
costs have been charged to stockholders' equity subject to the three
percent cap described above.
B-22
<PAGE>
CNL HOSPITALITY PROPERTIES, INC.
AND SUBSIDIARIES
(formerly known as CNL American Realty Fund, Inc.)
NOTES TO CONDENSED FINANCIAL STATEMENTS
Quarters and Six Months Ended June 30, 1998 and 1997
5. Distributions:
For the six months ended June 30, 1998, 100 percent of the
distributions paid to stockholders were considered ordinary income. No
amounts distributed to the stockholders for the six months ended June
30, 1998 are required to be or have been treated by the Company as a
return of capital for purposes of calculating the stockholders' return
on their invested capital. The characterization for tax purposes of
distribu-tions declared for the six months ended June 30, 1998 may not
be indicative of the results that may be expected for the year ending
December 31, 1998.
6. Related Party Transactions:
During the six months ended June 30, 1998, the Company incurred
$918,966 in selling commissions due to CNL Securities Corp. for
services in connection with the offering of shares. A substantial
portion of this amount ($857,875) was or will be paid by CNL Securities
Corp. as commissions to other broker dealers.
In addition, CNL Securities Corp. is entitled to receive a marketing
support and due diligence expense reimbursement fee equal to 0.5% of
the total amount raised from the sale of shares, a portion of which may
be reallowed to other broker-dealers. During the six months ended June
30, 1998, the Company incurred $61,264 of such fees, the majority of
which were reallowed to other broker-dealers and from which all bona
fide due diligence expenses were paid.
The Advisor is entitled to receive acquisition fees for services in
finding, negotiating the leases of and acquiring Properties on behalf
of the Company equal to 4.5% of gross proceeds, loan proceeds from
permanent financing and amounts outstanding on the line of credit, if
any, at the time of listing, but excluding that portion of the
permanent financing used to finance Secured Equipment Leases. During
the six months ended June 30, 1998, the Company incurred $551,380 of
such fees. Such fees are included in other assets at June 30, 1998.
B-24
<PAGE>
CNL HOSPITALITY PROPERTIES, INC.
AND SUBSIDIARIES
(formerly known as CNL American Realty Fund, Inc.)
NOTES TO CONDENSED FINANCIAL STATEMENTS
Quarters and Six Months Ended June 30, 1998 and 1997
6. Related Party Transactions - Continued:
The Advisor and its affiliates provide various administrative services
to the Company, including services related to accounting; financial,
tax and regulatory compliance reporting; stockholder distributions and
reporting; due diligence and marketing; and investor relations
(including administrative services in connection with the offering of
shares), on a day-to-day basis. The expenses incurred for these
services were classified as follows for the six months ended June 30:
1998 1997
-------- ------
Deferred offering costs $ - $ 38,152
Stock issuance costs 154,337 -
General operating and
administrative expenses 76,082 -
-------- -------
$230,419 $ 38,152
======== ========
The amounts due to related parties consisted of the following at:
June 30, December 31,
1998 1997
---- ----
Due to CNL Securities Corp.:
Commissions $ 22,811 $100,709
Marketing support and due
diligence expense reim-
bursement fee 1,521 7,268
-------- --------
24,332 107,977
-------- --------
Due to CNL Real Estate
Advisors, Inc.:
Expenditures incurred on
behalf of the Company
and accounting and
administrative services 47,231 39,105
Acquisition fees 13,687 46,172
-------- --------
60,918 85,277
-------- --------
$ 85,250 $193,254
======== ========
B-26
<PAGE>
CNL HOSPITALITY PROPERTIES, INC.
AND SUBSIDIARIES
(formerly known as CNL American Realty Fund, Inc.)
NOTES TO CONDENSED FINANCIAL STATEMENTS
Quarters and Six Months Ended June 30, 1998 and 1997
7. Commitments:
In April 1998, the Company entered into agreements to acquire two
Properties for purchase prices totalling $27,000,000 excluding closing
costs. In connection with the agreements, the Company placed refundable
deposits totalling $50,000 ($25,000 for each Property) with an escrow
agent. These Properties were acquired on July 31, 1998 (see Note 8).
8. Subsequent Events:
During the period July 1, 1998 through August 3, 1998, the Company
received subscription proceeds for an additional 174,616 shares
($1,746,157) of common stock.
B-27
<PAGE>
On July 1, 1998 and August 1, 1998, the Company declared distributions
totalling $99,631 and $105,707, respectively, or $.0417 per share of
common stock, payable in September 1998, to stockholders of record on
July 1, 1998 and August
1, 1998, respectively.
On July 31, 1998, the Company acquired the two Properties referenced
above for cash and advances on the line of credit at a total cost of
approximately $27,246,000 (see Note 7). In connection with the purchase
of each Property, the Company, as lessor, entered into a long-term
lease
agreement.
On July 31, 1998, the Company entered into a revolving line of credit
and security agreement with a bank to be used by the Company to acquire
hotel Properties. The line of credit provides that the Company will be
able to receive advances of up to $30,000,000 until July 30, 2003, with
an annual review to be performed by the bank to indicate that there has
been no substantial deterioration, in the bank's reasonable discretion,
of the credit quality. Interest expense on each advance shall be
payable monthly, with all unpaid interest and principal due no later
than five years from the date of the advance. Advances under the line
of credit will bear interest at either (i) a rate per annum equal to
318 basis points above the LIBOR or (ii) a rate per annum equal to 30
basis points above the bank's base rate, whichever the Company selects
at the time advances are made. In addition a fee of .5% per advance
will be due and payable to the bank on funds as advanced. Each advance
made under the line of credit will be secured by the assignment of
rents and leases. In addition, the line of credit provides that the
Company will not be able to further encumber the applicable hotel
Property during the
B-28
<PAGE>
CNL HOSPITALITY PROPERTIES, INC.
AND SUBSIDIARIES
(formerly known as CNL American Realty Fund, Inc.)
NOTES TO CONDENSED FINANCIAL STATEMENTS
Quarters and Six Months Ended June 30, 1998 and 1997
8. Subsequent Events - Continued:
term of the advance without the bank's consent. The Company will be
required, at each closing, to pay all costs, fees and expenses arising
in connection with the line of credit. The Company must also pay the
bank's attorneys fees, subject to a maximum cap, incurred in connection
with the line of credit and each advance. On July 31, 1998, the Company
obtained two advances totalling $8,600,000 relating to the line of
credit. In connection with the line of credit, the Company incurred a
commitment fee, legal fees and closing costs of $60,266. The proceeds
were used in connection with the purchase of the two hotel Properties
referenced above.
B-29
<PAGE>
Report of Independent Accountants
To the Board of Directors
CNL American Realty Fund, Inc.
We have audited the accompanying balance sheets of CNL American Realty Fund,
Inc. (a Maryland corporation) as of December 31, 1997 and 1996, and the related
statements of earnings, stockholders' equity, and cash flows for the year ended
December 31, 1997 and for the period June 12, 1996 (date of inception) through
December 31, 1996. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and per-form 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. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits pro-vide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of CNL American Realty Fund, Inc.
as of December 31, 1997 and 1996, and the results of its operations and its cash
flows for the year ended December 31, 1997 and the period June 12, 1996 (date of
inception) through December 31, 1996, in conformity with generally accepted
accounting principles.
/s/Coopers & Lybrand L.L.P.
Coopers & Lybrand L.L.P.
Orlando, Florida
January 22, 1998
B-30
<PAGE>
CNL AMERICAN REALTY FUND, INC.
BALANCE SHEETS
--------------
December 31,
ASSETS 1997 1996
------------ --------
Cash and cash equivalents $8,869,838 $ 2,084
Due from related party 7,500 -
Prepaid expenses 11,179 -
Organization costs, less accumulated
amortization of $833 in 1997 19,167 -
Deferred offering costs - 596,106
Other assets 535,792 -
---------- ---------
$9,443,476 $ 598,190
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued expenses $ 16,305 $ 11,629
Due to related parties 193,254 386,561
---------- ----------
Total liabilities 209,559 398,190
---------- ----------
Stockholders' equity:
Preferred stock, without par value.
Authorized and unissued 3,000,000
shares in 1997 - -
Excess shares, $.01 par value per
share. Authorized and unissued
63,000,000 shares in 1997 - -
Common stock, $.01 par value per
share. Authorized 60,000,000
shares and 100,000 shares,
respectively, issued and
outstanding 1,152,540 and 20,000,
respectively 11,525 200
Capital in excess of par value 9,229,316 199,800
Accumulated distributions in excess
of net earnings (6,924 ) -
---------- ----------
Total stockholders' equity 9,233,917 200,000
---------- ----------
$9,443,476 $ 598,190
========== ==========
See accompanying notes to financial statements.
B-31
<PAGE>
CNL AMERICAN REALTY FUND, INC.
STATEMENTS OF EARNINGS
June 12, 1996
(Date of
Inception)
Year Ended through
December 31, December 31,
1997 1996
------------ ---------
Interest income $ 46,071 $ -
---------- ---------
Expenses:
General operating and
administrative 22,386 -
Amortization 833 -
---------- ---------
23,219 -
---------- ---------
Net Earnings $ 22,852 $ -
========== =========
Earnings Per Share of Common
Stock (Basic and Diluted) $ 0.03 $ -
========== =========
Weighted Average Number of
Shares of Common Stock
Outstanding 686,063 -
========== =========
See accompanying notes to financial statements.
B-32
<PAGE>
CNL AMERICAN REALTY FUND, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
----------------------------------
Year Ended December 31, 1997 and the
Period June 12, 1996 (Date of Inception) through
December 31, 1996
<TABLE>
<CAPTION>
Accumulated
distributions
Common stock Capital in in excess
Number Par excess of of net
of shares value par value earnings Total
--------- ----- --------- -------- -----
<S> <C>
Balance at
June 12, 1996 - $ - $ - $ - $ -
Sale of common
stock to related
party 20,000 200 199,800 - 200,000
---------- ------- ----------- --------- -----------
Balance at
December 31, 1996 20,000 200 199,800 - 200,000
Subscriptions
received for
common stock
through public
offering and
distribution
reinvestment plan 1,132,540 11,325 11,314,077 - 11,325,402
Stock issuance costs - - (2,284,561) - (2,284,561)
Net earnings - - - 22,852 22,852
Distributions
declared ($0.05
per share) - - - (29,776) (29,776)
---------- ------- ----------- --------- -----------
Balance at
December 31, 1997 1,152,540 $11,525 $ 9,229,316 $ (6,924) $ 9,233,917
========== ======= =========== ========= ===========
</TABLE>
See accompanying notes to financial statements.
B-33
<PAGE>
CNL AMERICAN REALTY FUND, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
June 12, 1996
(Date of
Inception)
Year Ended through
December 31, December 31,
1997 1996
------------ ---------
<S> <C>
Increase (Decrease) in Cash and Cash
Equivalents:
Cash Flows From Operating Activities:
Interest received $ 46,071 $ -
Cash paid for expenses (23,602) -
------------ -----------
Net cash provided by operating
activities 22,469 -
------------ -----------
Cash Flows From Investing Activities:
Increase in other assets (463,470) -
------------ -----------
Net cash used in investing
activities (463,470) -
------------ -----------
Cash Flows From Financing Activities:
Reimbursement of acquisition, organi-
zation and stock issuance costs paid
by related parties on behalf of the
Company (1,003,031) (197,916)
Sale of common stock to related party - 200,000
Subscriptions received from stock-
holders 11,327,900 -
Distributions to stockholders (29,776) -
Payment of stock issuance costs (986,338) -
------------ -----------
Net cash provided by financing
activities 9,308,755 2,084
------------ ------------
Net Increase in Cash and Cash Equivalents 8,867,754 2,084
Cash and Cash Equivalents at Beginning of
Period 2,084 -
------------ ------------
Cash and Cash Equivalents at End of Period $ 8,869,838 $ 2,084
============ ============
</TABLE>
See accompanying notes to financial statements.
B-35
<PAGE>
CNL AMERICAN REALTY FUND, INC.
STATEMENTS OF CASH FLOWS - CONTINUED
------------------------------------
<TABLE>
<CAPTION>
June 12, 1996
(Date of
Inception)
Year Ended through
December 31, December 31,
1997 1996
------------ --------------
<S> <C>
Reconciliation of Net Earnings to Net Cash
Provided by Operating Activities:
Net earnings $ 22,852 $ -
------------ -----------
Adjustments to reconcile net earnings
to net cash provided by operating
activities:
Amortization 833 -
Increase in prepaid expenses (11,179) -
Increase in accounts payable and
accrued expenses 6,141 -
Increase in due to related parties,
excluding reimbursement of acqui-
sition, organization and stock
issuance costs paid on behalf
of the Company 3,822 -
------------ -----------
Total adjustments (383) -
------------ -----------
Net Cash Provided by Operating Activities $ 22,469 $ -
============ ===========
Supplemental Schedule of Non-Cash
Investing and Financing Activities:
Related parties paid certain acquisition,
organization and stock issuance
costs on behalf of the Company as follows:
Acquisition costs $ 26,149 $ -
Organization costs - 20,000
Deferred offering costs - 535,812
Stock issuance costs 638,274 -
------------ ------------
$ 664,423 $ 555,812
============ ============
</TABLE>
See accompanying notes to financial statements.
B-36
<PAGE>
CNL AMERICAN REALTY FUND, INC.
NOTES TO FINANCIAL STATEMENTS
Year Ended December 31, 1997 and the Period
June 12, 1996 (Date of Inception) through
December 31, 1996
1. Significant Accounting Policies:
Organization and Nature of Business - CNL American Realty Fund, Inc.
(the "Company") was organized in Maryland on June 12, 1996 primarily to
acquire properties ("Properties") located across the United States to
be leased on a long-term triple-net basis. The Company intends to
invest the proceeds from its public offering, after deducting offering
expenses, in hotel Properties to be leased to operators of national and
regional limited service, extended stay and full service hotel chains
(the "Hotel Chains") and in restaurant Properties to be leased to
operators of selected national and regional fast-food, family-style and
casual dining restaurant chains (the "Restaurant Chains"). The Company
may also provide mortgage financing ( the "Mortgage Loans"). The
Company also intends to offer furniture, fixture and equipment
financing (the "Secured Equipment Leases") to operators of Hotel Chains
and Restaurant Chains.
The Company was a development stage enterprise from June 12, 1996
through October 15, 1997. Since operations had not begun, activities
through October 15, 1997 were devoted to organization of the Company.
Cash and Cash Equivalents - The Company 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 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 Company in demand deposits at
commercial banks and money market funds may exceed federally insured
levels; however, the Company has not experienced any losses in such
accounts. The Company limits investment of temporary cash investments
to financial institutions with high credit standing; therefore,
management believes it is not exposed to any significant credit risk on
cash and cash equivalents.
Organization Costs - Organization costs are amortized over five years
using the straight-line method.
B-37
<PAGE>
CNL AMERICAN REALTY FUND, INC.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Year Ended December 31, 1997 and the Period
June 12, 1996 (Date of Inception) through
December 31, 1996
1. Significant Accounting Policies - Continued:
Income Taxes - The Company intends to make an election to be taxed as a
real estate investment trust ("REIT") under Sections 856 through 860 of
the Internal Revenue Code of 1986, as amended, commencing with its
taxable year ended December 31, 1997. If the Company qualifies for
taxation as a REIT, the Company generally will not be subject to
federal corporate income taxes to the extent it distributes its REIT
taxable income to its stockholders, so long as it distributes at least
95 percent of its REIT taxable income and meets certain other
requirements for qualifying as a REIT. Accordingly, no provision for
federal income taxes has been made in the financial statements. Even if
the Company qualifies for taxation as a REIT, it may be subject to
certain state and local taxes on its income and property, and federal
income and excise taxes on its undistributed income.
Earnings Per Share - Basic earnings per share are calculated based upon
net earnings (income available to common stockholders) divided by the
weighted average number of shares of common stock outstanding during
the reporting period. The Company does not have any dilutive potential
common shares.
Use of Estimates - Management of the Company has 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. Actual results could differ from those
estimates.
New Accounting Standard - In February 1997, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards No.
129, "Disclosure of Information about Capital Structure." The
Statement, which is effective for fiscal years ending after December
15, 1997, provides for disclosure of the Company's capital structure.
At this time, the Company's Board of Directors has not determined the
relative rights, preferences, and privileges of each class or series of
preferred stock authorized. Since the Company has not issued preferred
shares, the disclosures to this Statement are not applicable.
B-38
<PAGE>
CNL AMERICAN REALTY FUND, INC.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Year Ended December 31, 1997 and the Period
June 12, 1996 (Date of Inception) through
December 31, 1996
1. Significant Accounting Policies - Continued:
In June 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 130, "Reporting Comprehensive
Income." The Statement, which is effective for fiscal years beginning
after December 15, 1997, requires the reporting of net earnings and all
other changes to equity during the period, except those resulting from
investments by owners and distributions to owners, in a separate
statement that begins with net earnings. Currently, the Company's only
component of comprehensive income is its net earnings. The Company does
not believe that adoption of this Statement will have a material effect
on the Company's financial position or results of operations.
2. Public Offering:
The Company has filed a currently effective registration statement on
Form S-11 with the Securities and Exchange Commission.
A maximum of 16,500,000 shares ($165,000,000) may be sold, including
1,500,000 shares ($15,000,000) which is available only to stockholders
who elect to participate in the Company's reinvestment plan. The
Company has adopted a reinvestment plan pursuant to which stockholders
may elect to have the full amount of their cash distributions from the
Company reinvested in additional shares of common stock of the Company.
As of December 31, 1997, the Company had received subscription proceeds
of $11,325,402 (1,132,540 shares), including $1,056 (106 shares)
through the reinvestment plan.
3. Other Assets:
Other assets at December 31, 1997, consisted of acquisition fees and
miscellaneous acquisition expenses which will be allocated to future
Properties.
B-40
<PAGE>
CNL AMERICAN REALTY FUND, INC.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Year Ended December 31, 1997 and the Period
June 12, 1996 (Date of Inception) through
December 31, 1996
4. Stock Issuance Costs:
The Company has incurred certain expenses of its offering of shares,
including commissions, marketing support and due diligence expense
reimbursement fees, filing fees, legal, accounting, printing and escrow
fees, which have been deducted from the gross proceeds of the offering.
Preliminary costs incurred prior to raising capital were advanced by an
affiliate of the Company, CNL Real Estate Advisors, Inc. (the
"Advisor"). The Advisor has agreed to pay all organizational and
offering
B-41
<PAGE>
expenses (excluding commissions and marketing support and due diligence
expense reimbursement fees) which exceed three percent of the gross
offering proceeds received from the sale of shares of the Company.
As of December 31, 1997, the Company had incurred $2,304,561 in
organizational and offering costs, including $906,032 in commissions
and marketing support and due diligence expense reimbursement fees (see
Note 6). Of this amount $2,284,561 has been treated as stock issuance
costs and $20,000 has been treated as organization costs. The stock
issuance costs have been charged to stockholders' equity subject to the
three percent cap described above.
5. Distributions:
For the year ended December 31, 1997, 100 percent of the distributions
were considered to be ordinary income for federal income tax purposes.
No amounts distributed to stockholders for the year ended December 31,
1997, are required to be or have been treated by the Company as a
return of capital for purposes of calculating the stockholders' return
on their invested capital.
6. Related Party Transactions:
Certain affiliates of the Company will receive fees and compensation in
connection with the offering, and the acquisition, management, and sale
of the assets of the Company.
On June 12, 1996 (date of inception), CNL Fund Advisors, Inc.
contributed $200,000 in cash to the Company and became its sole
stockholder. In February 1997, the Advisor purchased the Company's
outstanding common stock from CNL Fund Advisors, Inc. and became the
sole stockholder of the Company.
B-42
<PAGE>
CNL AMERICAN REALTY FUND, INC.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Year Ended December 31, 1997 and the Period
June 12, 1996 (Date of Inception) through
December 31, 1996
6. Related Party Transactions - Continued:
CNL Securities Corp. is entitled to receive commissions amounting to
7.5% of the total amount raised from the sale of shares for services in
connection with the offering of the shares, a substantial portion of
which has been or will be paid as commissions to other broker-dealers.
During the year ended December 31, 1997, the Company incurred $849,405
of such fees of which $792,832 were or will be paid by CNL Securities
Corp. as commissions to other broker-dealers.
In addition, CNL Securities Corp. is entitled to receive a marketing
support and due diligence expense reimbursement fee equal to 0.5% of
the total amount raised from the sale of shares, a portion of which may
be reallowed to other broker-dealers. During the year ended December
31, 1997, the Company incurred $56,627 of such fee, the majority of
which were reallowed to other broker-dealers and from which all bona
fide due diligence expenses were paid.
CNL Securities Corp. will also receive a soliciting dealer servicing
fee payable annually by the Company beginning on December 31 of the
year following the year in which the offering is completed in the
amount of 0.20% of the stockholders' investment in the Company. As of
December 31, 1997, no such fees had been incurred.
The Advisor is entitled to receive acquisition fees for services in
finding, negotiating the leases of and acquiring properties on behalf
of the Company equal to 4.5% of gross proceeds, loan proceeds from
permanent financing and amounts outstanding on the line of credit, if
any, at the time of Listing, but excluding that portion of the
permanent financing used to finance Secured Equipment Leases. During
the year ended December 31, 1997, the Company incurred $509,643 of such
fees. Such fees are included in other assets at December 31, 1997.
B-43
<PAGE>
CNL AMERICAN REALTY FUND, INC.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Year Ended December 31, 1997 and the Period
June 12, 1996 (Date of Inception) through
December 31, 1996
6. Related Party Transactions - Continued:
The due to related parties consisted of the following at December 31:
1997 1996
---------- ---------
Due to CNL Securities Corp.:
Commissions $100,709 $ -
Marketing support and due
diligence expense reim-
bursement fee 7,268 -
-------- -------
107,977 -
-------- -------
Due to CNL Real Estate Advisors,
Inc.:
Expenditures incurred for
organizational and offering
expenses on behalf
of the Company 21,729 357,896
Accounting and administrative
services 17,376 28,665
Acquisition fees 46,172 -
-------- -------
85,277 386,561
-------- --------
$193,254 $386,561
======== ========
B-45
<PAGE>
CNL AMERICAN REALTY FUND, INC.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Year Ended December 31, 1997 and the Period
June 12, 1996 (Date of Inception) through
December 31, 1996
6. Related Party Transactions - Continued:
The Advisor and its affiliates provide accounting and administrative
services to the Company (including accounting and administrative
services in connection with the offering of shares) on a day-to-day
basis. For the year ended December 31, 1997 and the period June 12,
1996 (date of inception) through December 31, 1996, the expenses
incurred for these services were classified as follows:
June 12, 1996
(Date of
Inception)
Year Ended through
December 31, December 31,
1997 1996
------------ ---------
Deferred offering costs $ - $ 28,665
Stock issuance costs 185,335 -
General operating and
administrative expenses 6,889 -
-------- -------
$192,224 $ 28,665
======== ========
7. Subsequent Events:
During the period January 1, 1998 through January 22, 1998, the Company
received subscription proceeds of 130,262 shares ($1,302,620) of common
stock.
On January 1, 1998, the Company declared distributions of $28,814 or
$0.025 per share of common stock, payable in March 1998, to
stockholders of record on January 1, 1998.
On January 16, 1998, the Company declared distributions of $0.025 per
share of common stock to stockholders of record on February 1, 1998,
also payable in March 1998.
B-47
<PAGE>
INDEX TO OTHER FINANCIAL STATEMENTS
The following financial information is provided in connection with the Company's
acquisition of the Buckhead (Lenox Park) and the Gwinnett Place Properties. Due
to the fact that the tenant of the Company is a newly formed entity, the
information presented represents the historical financial performance of the
hotel businesses. The Buckhead (Lenox Park) Property and the Gwinnett Place
Property became operational on August 7, 1997 and July 29, 1997, respectively.
This information was obtained from the seller of the Properties. The Company has
acquired the hotel Properties and does not own any interest in the hotel
businesses. For information on the Properties and the long-term, triple-net
leases in which the Company has entered, see "Business -- Property
Acquisitions."
BUCKHEAD RESIDENCE ASSOCIATES, L.L.C.
Updated Financial Statements (unaudited):
Balance Sheet as of June 30, 1998 B-33
Statement of Loss for the six months ended June 30, 1998 B-34
Audited Financial Statements:
Report of Independent Public Accountants B-35
Balance Sheet as of December 31, 1997 B-36
Statement of Loss for the year ended December 31, 1997 B-37
Statement of Member's Equity for the year ended December
31, 1997 B-38
Statement of Cash Flows for the year ended December 31,
1997 B-39
Notes to Financial Statement for the year ended December
31, 1997 B-40
GWINNETT RESIDENCE ASSOCIATES, L.L.C.
Updated Financial Statements (unaudited):
Balance Sheet as of June 30, 1998 B-45
Statement of Loss for the six months ended June 30, 1998 B-46
Audited Financial Statements:
Report of Independent Public Accountants B-47
Balance Sheet as of December 31, 1997 B-48
Statement of Loss for the year ended December 31, 1997 B-49
Statement of Member's Deficit for the year ended December
31, 1997 B-50
Statement of Cash Flows for the year ended December 31,
1997 B-51
Notes to Financial Statement for the year ended December 31,
1997 B-52
B-48
<PAGE>
BUCKHEAD RESIDENCE ASSOCIATES, L.L.C.
BALANCE SHEET
JUNE 30, 1998
<TABLE>
<CAPTION>
ASSETS LIABILITIES AND MEMBERS' EQUITY
------ -------------------------------
<S> <C>
CURRENT ASSETS: CURRENT LIABILITIES:
Cash $ 1,229,955 Accounts payable $ 711,974
Accounts receivable, net 173,287 Accrued liabilities 427,306
-----------
Prepaid expenses 18,080
------------ Total current liabilities 1,139,280
Total current assets 1,421,322
------------
PROPERTY, at cost: FIRST MORTGAGE LOAN 10,634,958
Land 1,505,591
Buildings 8,842,642
Furniture, fixtures, and equipment 1,470,899 MEZZANINE LOAN 1,601,152
------------ -----------
11,819,132 Total liabilities 13,375,390
Less accumulated depreciation (467,063)
------------
Net property 11,352,069
------------
LOAN COSTS, net of accumulated MEMBERS' EQUITY 62,078
amortization of $109,395 377,910 -----------
------------
ORGANIZATION COSTS, net of Total liabilities and members'
accumulated amortization of equity $13,437,468
$38,269 43,272 ===========
------------
FRANCHISE COSTS, net of
accumulated amortization of
$2,750 57,250
------------
DEVELOPMENT IN PROGRESS 185,645
------------
Total assets $ 13,437,468
============
</TABLE>
B-49
<PAGE>
BUCKHEAD RESIDENCE ASSOCIATES, L.L.C.
STATEMENT OF LOSS
FOR THE SIX MONTHS ENDED JUNE 30, 1998
REVENUES:
Rooms $ 2,007,424
Telephone 79,188
Other 50,203
-------------
Total revenues 2,136,815
-------------
EXPENSES:
Rooms 453,769
Telephone 18,730
Other operating departments 9,368
Administrative and general 158,036
Credit card commissions 44,111
Franchise fees 80,337
Advertising, marketing, and promotion 141,041
Repairs and maintenance 66,750
Utilities 52,275
Property insurance and taxes 117,165
Management fees 64,098
Other 5,134
Interest 604,186
Depreciation and amortization 337,891
-------------
Total expenses 2,152,891
-------------
NET LOSS $ (16,076)
=============
B-50
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Members of
Buckhead Residence Associates, L.L.C.:
We have audited the accompanying balance sheet of BUCKHEAD RESIDENCE ASSOCIATES,
L.L.C. as of December 31, 1997 and the related statement of loss, members'
equity, and cash flows for the year then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards 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. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Buckhead Residence Associates,
L.L.C. as of December 31, 1997 and the results of its operations and its cash
flows for the year then ended in conformity with generally accepted accounting
principles.
/s/ Arthur Andersen LLP
Arthur Andersen LLP
Atlanta, Georgia
February 27, 1998
B-51
BUCKHEAD RESIDENCE ASSOCIATES, L.L.C.
BALANCE SHEET
DECEMBER 31, 1997
<TABLE>
<CAPTION>
ASSETS LIABILITIES AND MEMBERS' EQUITY
------ -------------------------------
<S> <C>
CURRENT ASSETS: CURRENT LIABILITIES:
Cash and short-term investments, including Accounts payable $ 285,134
restricted cash of $18,387 $ 225,703 Accrued liabilities 140,911
Accounts receivable, net of allowance for doubtful Current portion of mortgage loan 38,522
accounts of $1,973 114,685 -----------
Prepaid expenses 12,398 Total current liabilities 464,567
------------
Total current assets 352,786
------------
PROPERTY, at cost: DEFERRED DEVELOPMENT FEE 619,000
Land 1,505,591
Buildings 8,969,838
Furniture, fixtures, and equipment 1,470,899 FIRST MORTGAGE LOAN, less current portion 9,949,319
------------ (Note 2)
11,946,328
Less accumulated depreciation (211,216)
Net property 11,735,112 MEZZANINE LOAN (Note 2) 1,533,202
------------ -----------
LOAN COSTS, net of accumulated amortization of $49,725 437,580 Total liabilities 12,566,088
------------
ORGANIZATION COSTS, net of accumulated amortization of
$17,395 64,146 COMMITMENTS AND CONTINGENCIES (Note 2)
------------
FRANCHISE COSTS, net of accumulated amortization of
$1,250 58,750 MEMBERS' EQUITY 82,286
------------ -----------
Total assets $ 12,648,374 Total liabilities and members'
============ equity $12,648,374
===========
</TABLE>
The accompanying notes are an integral part of
this balance sheet.
B-52
<PAGE>
BUCKHEAD RESIDENCE ASSOCIATES, L.L.C.
STATEMENT OF LOSS
FOR THE YEAR ENDED DECEMBER 31, 1997
REVENUES:
Rooms $ 862,815
Telephone 40,832
Other 15,684
----------
Total revenues 919,331
----------
EXPENSES:
Rooms 280,204
Telephone 8,603
Other operating departments 2,725
Administrative and general 103,471
Credit card commissions 19,124
Franchise fees 34,513
Advertising, marketing, and promotion 88,954
Repairs and maintenance 46,188
Utilities 37,097
Property insurance and taxes 18,758
Management fees 27,580
Other 34,541
Interest 447,026
Depreciation and amortization 279,586
----------
Total expenses 1,428,370
----------
NET LOSS $ (509,039)
==========
The accompanying notes are an integral part of this statement.
B-53
<PAGE>
BUCKHEAD RESIDENCE ASSOCIATES, L.L.C.
STATEMENT OF MEMBERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1997
Stormont
Trice
Development RI HWE
Corporation Partners IV Total
----------- -------- --- -----
BALANCE, December 31, 1996 $ 193,800 $ 193,800 $ 203,725 $ 591,325
Net loss (193,800) (193,800) (121,439) (509,039)
---------- ---------- --------- ---------
BALANCE, December 31, 1997 $ 0 $ 0 $ 82,286 $ 82,286
========== ========== ========= =========
The accompanying notes are an integral part of this statement.
B-54
<PAGE>
BUCKHEAD RESIDENCE ASSOCIATES, L.L.C.
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1997
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (509,039)
Adjustments to reconcile net loss to net cash provided
by operating activities:
Depreciation and amortization 279,586
Changes in assets and liabilities:
Accounts receivable, net (114,685)
Prepaid expenses (12,398)
Accounts payable 285,134
Accrued liabilities 130,196
-----------
Total adjustments 567,833
-----------
Net cash provided by operating activities 58,794
-----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (8,627,218)
Organization costs (7,361)
-----------
Net cash used in investing activities (8,634,579)
-----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal received from loans payable 8,715,244
Loan costs (7,362)
-----------
Net cash provided by financing activities 8,707,882
-----------
NET INCREASE IN CASH AND CASH EQUIVALENTS 132,097
-----------
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 93,606
-----------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 225,703
===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest during the year $ 0
===========
The accompanying notes are an integral part of this statement.
B-55
<PAGE>
BUCKHEAD RESIDENCE ASSOCIATES, L.L.C.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Operations
Buckhead Residence Associates, L.L.C. (the "Company") is a Georgia limited
liability company that was organized for the purpose of constructing,
operating, and owning the Residence Inn Lenox Park (the "Hotel") in
Atlanta, Georgia. The Hotel is comprised of 150 suites and became
operational on August 7, 1997.
The members of the Company (the"Members"), their ownership percentages, and
their initial capital contributions are as follows:
Initial
Ownership Capital
Percentage Contribution
---------- ------------
Members:
Stormont Trice Development
Corporation ("STDC" or the
"Manager ") 40.74% $212,000
RI Partners ( "RI ") 40.74 212,000
HWE IV 18.52 212,000
The operating agreement provides for allocation of profits, losses, and
cash distributions, as follows:
Profits
o To the Members in proportion to their respective ownership
percentage interests, as defined in the agreement
Losses
o First, to the Members in proportion to their respective ownership
percentage interests until any Member's capital account is reduced
to zero
o Second, to the Member, if any, to the extent of its remaining
positive capital account balance (as adjusted to reflect any prior
allocation of loss)
B-56
<PAGE>
o Third, to the partners in proportion to their respective ownership
percentage interests
Notwithstanding the above loss allocations, to the extent losses
allocated to a Member would cause a Member to have an adjusted capital
account deficit, such losses shall not be allocated to such Member but
instead shall be allocated to other Members in proportion to, and to
the extent that, the amounts in which losses may be allocated to the
other Members without causing the other Members to have an adjusted
capital account deficit and then to the Members in proportion to their
respective contribution percentage interests.
Cash Distributions
o First, to the repayment or prepayment of such debts or
liabilities, other than any debts of the Company to any of the
Members, as the Manager shall determine to be in the best interest
of the Company
o Second, to the establishment of such reserves as the Manager deems
appropriate
o Third, to the repayment or prepayment of any back-up loans, as
defined in the agreement
o Fourth, to the repayment or prepayment of any Member loans
o Fifth, to the Members in equal shares until such time as $63,600
has been distributed to the Members
o Sixth, in equal amounts to the Manager and RI until such time as
$50,871 has been distributed to the Members
o Seventh, the balance available to the Members in proportion to
their respective ownership percentage interests
Allocation of profits, losses, and cash distributions from the sale or
refinancing of the property are allocated in a different manner and will be
affected by the terms of notes payable agreements discussed in Note 2.
Cash and Cash Equivalents
For purposes of reporting cash flows, the Company considers cash on hand,
deposits in banks, and short-term investments with original maturities of
90 days or less to be cash and cash equivalents.
The first mortgage, mezzanine loan, and management agreements require the
Hotel to establish a furniture, fixtures, and equipment reserve, as
follows: 0% in year one, 2% in year two, 3% in year three, 4% in year four,
and 5% in year five of gross revenues, as defined in the loan agreement. As
of December 31, 1997, $18,387 of cash and cash equivalents was designated
as the furniture, fixtures, and equipment reserve.
B-57
<PAGE>
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Franchise and Organization Expenses
A franchise application fee has been capitalized and is being amortized
over the 20-year life of the franchise agreement. Organization costs have
been capitalized and are being amortized over 5 years.
Property
Property is recorded at cost, including capitalized interest, and is
depreciated using the straight-line method over the estimated useful lives
of the assets, which are 30 years for buildings and 3 to 7 years for
furniture, fixtures, and equipment. Expenditures for replacements and
betterments are capitalized, while expenditures for maintenance and repairs
are expensed as incurred.
Income Taxes
No provisions for income taxes have been made in the accounts of the
Company, since the Members report their respective shares of taxable income
and loss in their individual tax returns.
2. NOTES PAYABLE
First Mortgage Loan
On August 29, 1996, the Company entered into a loan agreement with Ocwen
Federal Bank FSB ("Ocwen"), formerly Berkeley Federal Bank & Trust FSB, for
a total available amount of $11,262,500 to fund costs of developing and
operating the Hotel. The note bears 10.25% interest until its maturity date
of August 31, 2001. The loan is collateralized by the Company's interest in
the Hotel. Interest accrues monthly and is added to the outstanding balance
until the budgeted interest reserve is depleted or September 1, 1998,
whichever is earlier. Beginning October 1, 1998, interest and principal are
due monthly, with all remaining repaid principal and interest being due on
August 31, 2001. The principal outstanding at December 31, 1997 is
repayable as follows:
1998 $ 38,522
1999 164,304
2000 181,960
2001 9,603,055
-----------
$ 9,987,841
===========
B-58
<PAGE>
In addition, Ocwen receives noncumulative participating interest based on a
percentage of the Company's excess cash flow, as defined in the loan
agreement. These percentages are as follows: 22.5% in year one, 25% in
years two and three, and 30% in years four and five. No amounts were
payable in 1997.
In the event the Company sells the Hotel or refinances the loan, an amount
shall be due to Ocwen as follows: in year one, the greater of $525,000 or
22.5% of the greater of the net proceeds or net economic value, as defined
in the loan; in years two or three, the greater of $525,000 or 25% of the
greater of the net proceeds or net economic value; in year four, the
greater of $800,000 or 30% of the greater of the net proceeds or net
economic value; in year five, the greater of $1,300,000 or 30% of the
greater of the net proceeds or net economic value.
Mezzanine Loan
On August 29, 1996, the Company entered into a loan agreement with Heller
Financial, Inc. ("Heller") for a total available amount of $1,621,800. At
December 31, 1997, $1,533,202 is outstanding, including $181,702 of accrued
interest. The note bears an interest rate of 10% and is interest only until
its maturity date of August 31, 2001. Interest is due monthly, commencing
when the accrued interest exceeds $270,300 or 20% of the outstanding
principal amount of the loan or when distributable cash flow, as defined,
is available. In addition, Heller receives quarterly, as additional
consideration, the excess of the percentage of the Company's excess cash
flow, as defined in the loan agreement, over the amount of interest accrued
during the previous quarter. These percentages are as follows: 42.625% in
year one, 41.25% in years two and three, and 38.5% in years four and five
(effectively, this equals 55% of the cash flow after paying Ocwen's
participating interest).
Through August 31, 2006, upon the occurrence of any participation event, as
defined in the loan agreement, Heller will receive an amount calculated as
follows: in year one, the greater of $800,000 or 55% of the net adjusted
proceeds, as defined in the loan agreement, less $250,000 and the Company's
equity (the "Participation Amount"); in year two, the greater of $1,100,000
or 55% of the Participation Amount; in year three, the greater of
$1,200,000 or 55% of the Participation Amount; in year four, the greater of
$1,400,000 or 55% of the Participation Amount; in year five and thereafter,
the greater of $1,500,000 or 55% of the Participation Amount. In no event
may Heller's participation exceed 49.9% of the total profit of the
participation event.
3. FRANCHISE AND MANAGEMENT AGREEMENTS
The Hotel is operated under a franchise agreement with Marriott
International, Inc. ("Marriott"). The term of the agreement is 20 years
unless otherwise extended or terminated. The Company paid Marriott an
application fee of $60,000. This has been capitalized as franchise costs in
the accompanying balance sheet. Amortization began when the Hotel became
operational, and the cost is being amortized over the life of the franchise
agreement. The agreement provides for the Hotel to reimburse Marriott for
certain common expenses, including, but not limited to, the use of
Marriott's national reservation system. The Hotel also pays Marriott
certain fees, as follows:
B-59
<PAGE>
o Royalty Fee. Percent of the gross sales, as defined in the
agreement. Royalty fees for the year ended December 31, 1997 were
$34,513.
o Marketing Fund Fee. Percent of gross sales. Marketing fund fees
for the year ended December 31, 1997 were $21,571 and are included
in advertising, marketing, and promotion expenses in the
accompanying statement of loss.
The Hotel is operated under a management agreement with Stormont Trice
Management Corporation ("STMC"), an affiliate of STDC. The term of the
management agreement is ten years. Under the terms of the agreement, the
Company pays STMC 3% of gross revenues, as defined in the agreement. At
December 31, 1997, $6,907 in management fees were payable to STMC.
Management fee expense for 1997 was $27,580.
4. RELATED-PARTY TRANSACTIONS
In addition to the management agreement (Note 3), Stormont Trice
Corporation, an affiliate of STDC, provides workers' compensation, group
insurance, and certain employee benefits to all of the Stormont Trice
Corporation group of hotels, and a pro rata portion of the total insurance
and certain employee benefits expense is allocated to each hotel. The
amount allocated to the Company for the year ended December 31, 1997 was
$11,493.
Stormont Trice Corporation also provides property, umbrella, and casualty
insurance to all of the Stormont Trice Corporation group of hotels, and a
pro rata portion of the total insurance expense is allocated to each hotel.
The amount allocated to the Company for the year ended December 31, 1997
was $15,925.
STDC provided development management services to the Company in
construction of the Hotel. The costs for these services in 1997 were
$619,000 and are included in buildings in the accompanying balance sheet.
Amounts due to STDC for these services are $619,000 at December 31, 1997.
In accordance with the terms of the agreement, the fee will not be payable
until the Company repays all of the Ocwen loan obligation and a portion of
the Heller loan obligation, as defined.
STDC also provided the director of design and development for the Hotel.
The cost for these services in 1997 was $34,082 and is included in
buildings in the accompanying balance sheet. Amounts due to STDC for these
services were approximately $14,000 at December 31, 1997 and are included
in accounts payable in the accompanying balance sheet.
B-60
<PAGE>
GWINNETT RESIDENCE ASSOCIATES, L.L.C.
BALANCE SHEET
JUNE 30, 1998
<TABLE>
<CAPTION>
ASSETS LIABILITIES AND MEMBERS' DEFICIT
------ --------------------------------
<S> <C>
CURRENT ASSETS: CURRENT LIABILITIES:
Cash $ 768,261 Accounts payable $ 459,653
Accounts receivable, net 106,194 Accrued liabilities 292,461
-----------
Prepaid expenses 18,985
----------- Total current liabilities 752,114
Total current assets 893,440
-----------
PROPERTY, at cost: FIRST MORTGAGE LOAN 7,691,138
Land 800,000
Buildings 6,509,423
Furniture, fixtures, and equipment 1,311,137 MEZZANINE LOAN 1,204,270
----------- -----------
8,620,560 Total liabilities 9,647,522
Less accumulated depreciation (369,063)
-----------
Net property 8,251,497
-----------
LOAN COSTS, net of accumulated MEMBERS' DEFICIT (75,739)
amortization of $86,686 299,461 -----------
-----------
ORGANIZATION COSTS, net of Total liabilities and members'
accumulated amortization of deficit $ 9,571,783
$39,585 44,664 ===========
-----------
FRANCHISE COSTS, net of
accumulated amortization of
$2,420 50,380
-----------
DEVELOPMENT IN PROGRESS 32,341
-----------
Total assets $ 9,571,783
===========
</TABLE>
B-61
<PAGE>
GWINNETT RESIDENCE ASSOCIATES, L.L.C.
STATEMENT OF LOSS
FOR THE SIX MONTHS ENDED JUNE 30, 1998
REVENUES:
Rooms $ 1,454,846
Telephone 66,129
Other 44,609
------------
Total revenues 1,565,584
------------
EXPENSES:
Rooms 290,519
Telephone 10,900
Other operating departments 14,259
Administrative and general 134,926
Credit card commissions 33,083
Franchise fees 58,194
Advertising, marketing, and promotion 120,237
Repairs and maintenance 64,418
Utilities 62,361
Property insurance and taxes 66,783
Management fees 62,623
Other 4,010
Interest 439,034
Depreciation and amortization 272,287
------------
Total expenses 1,633,634
------------
NET LOSS $ (68,050)
============
B-62
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Members of
Gwinnett Residence Associates, L.L.C.:
We have audited the accompanying balance sheet of GWINNETT RESIDENCE ASSOCIATES,
L.L.C. as of December 31, 1997 and the related statement of loss, members'
deficit, and cash flows for the year then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards 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. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Gwinnett Residence Associates,
L.L.C. as of December 31, 1997 and the results of its operations and its cash
flows for the year then ended in conformity with generally accepted accounting
principles.
/s/ Arthur Andersen LLP
Arthur Andersen LLP
Atlanta, Georgia
February 27, 1998
B-63
<PAGE>
GWINNETT RESIDENCE ASSOCIATES, L.L.C.
BALANCE SHEET
DECEMBER 31, 1997
<TABLE>
<CAPTION>
ASSETS LIABILITIES AND MEMBERS' DEFICIT
------ --------------------------------
<S> <C>
CURRENT ASSETS: CURRENT LIABILITIES:
Cash and short-term investments, including Accounts payable $ 311,598
restricted cash of $15,483 $ 212,745 Accrued liabilities 105,740
Accounts receivable, net of allowance for Current portion of mortgage loan 27,736
doubtful accounts of $744 51,372 ----------
Prepaid expenses 24,414 Total current liabilities 445,074
------------
Total current assets 288,531
------------
PROPERTY, at cost: DEFERRED DEVELOPMENT FEE 451,000
Land 800,000
Buildings 6,509,423
Furniture, fixtures, and equipment 1,311,137 FIRST MORTGAGE LOAN, less current portion 7,163,684
------------ (Note 2)
8,620,560
Less accumulated depreciation (166,971)
------------
Net property 8,453,589 MEZZANINE LOAN (Note 2) 1,153,163
------------- ----------
LOAN COSTS, net of accumulated amortization Total liabilities 9,212,921
of $39,403 346,744
------------
ORGANIZATION COSTS, net of accumulated
amortization of $17,993 66,256 COMMITMENTS AND CONTINGENCIES (Note 2)
------------
FRANCHISE COSTS, net of accumulated amortization of
$1,100 51,700 MEMBERS' DEFICIT (6,101)
------------ ----------
Total assets $ 9,206,820 Total liabilities and members' deficit $9,206,820
============ ==========
</TABLE>
The accompanying notes are an integral part of this balance sheet.
B-64
<PAGE>
GWINNETT RESIDENCE ASSOCIATES, L.L.C.
STATEMENT OF LOSS
FOR THE YEAR ENDED DECEMBER 31, 1997
REVENUES:
Rooms $ 691,864
Telephone 32,821
Other 19,473
----------
Total revenues 744,158
----------
EXPENSES:
Rooms 226,612
Telephone 4,079
Other operating departments 3,257
Administrative and general 100,206
Credit card commissions 15,073
Franchise fees 27,675
Advertising, marketing, and promotion 62,531
Repairs and maintenance 46,072
Utilities 46,892
Property insurance and taxes 17,298
Management fees 29,759
Other 9,030
Interest 328,707
Depreciation and amortization 225,467
---------
Total expenses 1,142,658
---------
NET LOSS $(398,500)
=========
The accompanying notes are an integral part of this statement.
B-65
<PAGE>
GWINNETT RESIDENCE ASSOCIATES, L.L.C.
STATEMENT OF MEMBERS' DEFICIT
FOR THE YEAR ENDED DECEMBER 31, 1997
Stormont
Trice
Development RI HWE
Corporation Partners IV Total
----------- -------- --- -----
BALANCE, December 31, 1996 $ 128,197 $ 128,197 $ 136,005 $ 392,399
Net loss (130,703) (130,703) (137,094) (398,500)
--------- --------- --------- ---------
BALANCE, December 31, 1997 $ (2,506) $ (2,506) $ (1,089) $ (6,101)
========= ========= ========= =========
The accompanying notes are an integral part of this statement.
B-66
<PAGE>
GWINNETT RESIDENCE ASSOCIATES, L.L.C.
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1997
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (398,500)
-----------
Adjustments to reconcile net loss to net cash provided
by operating activities:
Depreciation and amortization 225,467
Changes in assets and liabilities:
Accounts receivable, net (51,372)
Prepaid expenses (24,414)
Accounts payable 311,598
Accrued liabilities 97,282
-----------
Total adjustments 558,561
-----------
Net cash provided by operating activities 160,061
-----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (6,086,029)
Start-up costs (7,129)
-----------
Net cash used in investing activities (6,093,158)
-----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal received from loans payable 6,142,121
Loan costs (7,129)
-----------
Net cash provided by financing activities 6,134,992
-----------
NET INCREASE IN CASH AND CASH EQUIVALENTS 201,895
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 10,850
-----------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 212,745
===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest during the year $ 0
===========
The accompanying notes are an integral part of this statement.
B-67
<PAGE>
GWINNETT RESIDENCE ASSOCIATES, L.L.C.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Operations
Gwinnett Residence Associates, L.L.C. (the "Company") is a Georgia limited
liability company that was organized for the purpose of constructing,
operating, and owning the Gwinnett Residence Inn (the "Hotel") in Atlanta,
Georgia. The Hotel is comprised of 132 suites and became operational on
July 29, 1997.
The members of the Company (the"Members"), their ownership percentages, and
their initial capital contributions are as follows:
Initial
Ownership Capital
Percentage Contribution
---------- ------------
Members:
Stormont Trice Development
Corporation ("STDC" or the
"Manager ") 41.08% $142,000
RI Partners ( "RI ") 41.08 142,000
HWE IV 17.84 142,000
The operating agreement provides for allocation of profits, losses, and
cash distributions, as follows:
Profits
o To the Members in proportion to their respective ownership
percentage interests, as defined in the agreement
Losses
o First, to the Members in proportion to their respective ownership
percentage interests until any Member's capital account is reduced
to zero
o Second, to the Member, if any, to the extent of its remaining
positive capital account balance (as adjusted to reflect any prior
allocation of loss)
B-68
<PAGE>
o Third, to the partners in proportion to their respective ownership
percentage interests
Notwithstanding the above loss allocations, to the extent losses
allocated to a Member would cause a Member to have an adjusted capital
account deficit, such losses shall not be allocated to such Member but
instead shall be allocated to other Members in proportion to, and to
the extent that, the amounts in which losses may be allocated to the
other Members without causing the other Members to have an adjusted
capital account deficit and then to the Members in proportion to their
respective ownership percentage interests.
Cash Distributions
o First, to the repayment or prepayment of such debts or
liabilities, other than any debts of the Company to any of the
Members, as the Manager shall determine to be in the best interest
of the Company
o Second, to the establishment of such reserves as the Manager deems
appropriate
o Third, to the repayment or prepayment of any back-up loans, as
defined in the agreement
o Fourth, to the repayment or prepayment of any Member loans
o Fifth, to the Members in equal shares until such time as $42,600
has been distributed to the Members
o Sixth, in equal amounts to the Manager and RI until such time as
$36,996 has been distributed to the Members
o Seventh, the balance available to the Members in proportion to
their respective ownership percentage interests
Allocation of profits, losses, and cash distributions from the sale or
refinancing of the property are allocated in a different manner and will be
affected by the terms of notes payable agreements discussed in Note 2.
Cash and Cash Equivalents
For purposes of reporting cash flows, the Company considers cash on hand,
deposits in banks, and short-term investments with original maturities of
90 days or less to be cash and cash equivalents.
The first mortgage, mezzanine loan, and management agreements require the
Hotel to establish a furniture, fixtures, and equipment reserve, as
follows: 0% in year one, 2% in year two, 3% in year three, 4% in year four,
and 5% in year five of gross revenues, as defined in the loan agreement. As
of December 31, 1997, $15,483 of cash and cash equivalents was designated
as the furniture, fixtures, and equipment reserve.
B-69
<PAGE>
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Franchise and Organization Expenses
A franchise application fee has been capitalized and is being amortized
over the 20-year life of the franchise agreement. Organization costs have
been capitalized and are being amortized over 5 years.
Property
Property is recorded at cost, including capitalized interest, and is
depreciated using the straight-line method over the estimated useful lives
of the assets, which are 30 years for buildings and 3 to 7 years for
furniture, fixtures, and equipment. Expenditures for replacements and
betterments are capitalized, while expenditures for maintenance and repairs
are expensed as incurred.
Income Taxes
No provisions for income taxes have been made in the accounts of the
Company since the Members report their respective shares of taxable income
and loss in their individual tax returns.
2. NOTES PAYABLE
First Mortgage Loan
On August 29, 1996, the Company entered into a loan agreement with Ocwen
Federal Bank FSB ("Ocwen"), formerly Berkeley Federal Bank & Trust FSB, for
a total available amount of $8,174,500 to fund costs of developing and
operating the Hotel. The note bears 10.25% interest until its maturity date
of August 31, 2001. The loan is collateralized by the Company's interest in
the Hotel. Interest accrues monthly and is added to the outstanding balance
until the budgeted interest reserve is depleted or September 1, 1998,
whichever is earlier. Beginning October 1, 1998, interest and principal are
due monthly, with all remaining repaid principal and interest being due on
August 31, 2001. The principal outstanding at December 31, 1997 is
repayable as follows:
1998 $ 27,736
1999 118,301
2000 131,014
2001 6,914,369
----------
$7,191,420
==========
B-70
<PAGE>
In addition, Ocwen receives noncumulative participating interest based on a
percentage of the Company's excess cash flow, as defined in the loan
agreement. These percentages are as follows: 22.5% in year one, 25% in
years two and three, and 30% in years four and five. No amounts were
payable in 1997.
In the event the Company sells the Hotel or refinances the loan, an amount
shall be due to Ocwen as follows: in year one, the greater of $400,000 or
22.5% of the greater of the net proceeds or net economic value, as defined
in the loan; in years two or three, the greater of $400,000 or 25% of the
greater of the net proceeds or net economic value; in year four, the
greater of $700,000 or 30% of the greater of the net proceeds or net
economic value; in year five, the greater of $1,000,000 or 30% of the
greater of the net proceeds or net economic value.
Mezzanine Loan
On August 29, 1996, the Company entered into a loan agreement with Heller
Financial, Inc. ("Heller") for a total available amount of $1,219,800. At
December 31, 1997, $1,153,163 is outstanding, including $136,663 of accrued
interest. The note bears an interest rate of 10% and is interest only until
its maturity date of August 31, 2001. Interest is due monthly, commencing
when the accrued interest exceeds $203,300 or 20% of the outstanding
principal amount of the loan or when distributable cash flow, as defined,
is available. In addition, Heller receives quarterly, as additional
consideration, the excess of the percentage of the Company's excess cash
flow, as defined in the loan agreement, over the amount of interest accrued
during the previous quarter. These percentages are as follows: 44.175% in
year one, 42.75% in years two and three, and 39.9% in years four and five
(effectively, this equals 57% of the cash flow after paying Ocwen's
participating interest).
Through August 31, 2006, upon the occurrence of any participation event, as
defined in the loan agreement, Heller will receive an amount calculated as
follows: in year one, the greater of $700,000 or 57% of the net adjusted
proceeds, as defined in the loan agreement, less $451,000 and the Company's
equity (the "Participation Amount"); in year two, the greater of $1,000,000
or 57% of the Participation Amount; in year three, the greater of
$1,100,000 or 57% of the Participation Amount; in year four, the greater of
$1,200,000 or 57% of the Participation Amount; in year five and thereafter,
the greater of $1,300,000 or 57% of the Participation Amount. In no event
may Heller's participation exceed 49.9% of the total profit of the
participation event.
3. FRANCHISE AND MANAGEMENT AGREEMENTS
The Hotel is operated under a franchise agreement with Marriott
International, Inc. ("Marriott"). The term of the agreement is 20 years
unless otherwise extended or terminated. The Company paid Marriott an
application fee of $52,800. This has been capitalized as franchise costs in
the accompanying balance sheet. Amortization began when the Hotel became
operational, and the cost is being amortized over the life of the franchise
agreement. The agreement provides for the Hotel to reimburse Marriott for
certain common expenses, including, but not limited to, the use of
Marriott's national reservation system. The Hotel also pays Marriott
certain fees, as follows:
B-71
<PAGE>
o Royalty Fee. Percent of the gross sales, as defined in the
agreement. Royalty fees for the year ended December 31, 1997 were
$27,675.
o Marketing Fund Fee. Percent of gross sales. Marketing fund fees
for the year ended December 31, 1997 were $17,296 and are included
in advertising, marketing, and promotion expenses in the
accompanying statement of loss.
The Hotel is operated under a management agreement with Stormont Trice
Management Corporation ("STMC"), an affiliate of STDC. The term of the
management agreement is ten years. Under the terms of the agreement, the
Company pays STMC 4% of gross revenues, as defined in the agreement. At
December 31, 1997, $6,622 in management fees were payable to STMC.
Management fee expense for 1997 was $29,759.
4. RELATED-PARTY TRANSACTIONS
Julian LeCraw & Co, Inc. ("LeCraw"), which is related to one of the Members
through common ownership, provided general contracting services to the
Company in construction of the Hotel. The costs for these services in 1997
were approximately $3,682,183 and are included in buildings in the
accompanying balance sheet. Amounts due to LeCraw for these services are
approximately $20,000 at December 31, 1997 and are included in accounts
payable in the accompanying balance sheet.
In addition to the management agreement (Note 3), Stormont Trice
Corporation, an affiliate of STDC, provides workers' compensation, group
insurance, and certain employee benefits to all of the Stormont Trice
Corporation group of hotels, and a pro rata portion of the total insurance
and certain employee benefits expense is allocated to each hotel. The
amount allocated to the Company for the year ended December 31, 1997 was
$9,388.
Stormont Trice Corporation also provides property, umbrella, and casualty
insurance to all of the Stormont Trice Corporation group of hotels, and a
pro rata portion of the total insurance expense is allocated to each hotel.
The amount allocated to the Company for the year ended December 31, 1997
was $14,379.
STDC provided development management services to the Company in
construction of the Hotel. The costs for these services in 1997 were
$451,000 and are included in buildings in the accompanying balance sheet.
Amounts due to STDC for these services are approximately $451,000 at
December 31, 1997. In accordance with the terms of the agreement, the fee
will not be payable until the Company repays all of the Ocwen loan
obligation and a portion of the Heller loan obligation, as defined.
STDC also provided the director of design and development for the Hotel.
The cost for these services in 1997 was $40,982 and is included in
buildings in the accompanying balance sheet. Amounts due to STDC for these
services were $20,900 at December 31, 1997 and are included in accounts
payable in the accompanying balance sheet.
B-72
<PAGE>
ADDENDUM TO
EXHIBIT C
PRIOR PERFORMANCE TABLES
THE FOLLOWING INFORMATION UPDATES
AND REPLACES THE CORRESPONDING
INFORMATION IN EXHIBIT C TO THE
ATTACHED PROSPECTUS, DATED APRIL
21, 1998.
<PAGE>
EXHIBIT C
PRIOR PERFORMANCE TABLES
<PAGE>
EXHIBIT C
PRIOR PERFORMANCE TABLES
The information in this Exhibit C contains certain relevant summary
information concerning certain prior public programs sponsored by two of the
Company's principals (who also serve as the Chairman of the Board and President
of the Company) and their Affiliates (the "Prior Public Programs") which like
the Company, were formed to invest in restaurant properties leased on a
triple-net basis to operators of national and regional fast-food and
family-style restaurant chains similar to those in which the Company may invest.
No Prior Public Programs sponsored by the Company's Affiliates have invested in
hotel properties leased on a triple-net basis to operators of national and
regional limited-service, extended-stay and full-service hotel chains.
A more detailed description of the acquisitions by the Prior Public
Programs is set forth in Part II of the registration statement filed with the
Securities and Exchange Commission for this Offering and is available from the
Company upon request, without charge. In addition, upon request to the Company,
the Company will provide, without charge, a copy of the most recent Annual
Report on Form 10-K filed with the Securities and Exchange Commission for CNL
Income Fund, Ltd., CNL Income Fund II, Ltd., CNL Income Fund III, Ltd., CNL
Income Fund IV, Ltd., CNL Income Fund V, Ltd., CNL Income Fund VI, Ltd., CNL
Income Fund VII, Ltd., CNL Income Fund VIII, Ltd., CNL Income Fund IX, Ltd., CNL
Income Fund X, Ltd., CNL Income Fund XI, Ltd., CNL Income Fund XII, Ltd., CNL
Income Fund XIII, Ltd., CNL Income Fund XIV, Ltd., CNL Income Fund XV, Ltd., CNL
Income Fund XVI, Ltd., CNL Income Fund XVII, Ltd., CNL Income Fund XVIII, Ltd.,
and CNL American Properties Fund, Inc., as well as a copy, for a reasonable fee,
of the exhibits filed with such reports.
The investment objectives of the Prior Public Programs generally
include preservation and protection of capital, the potential for increased
income and protection against inflation, and potential for capital appreciation,
all through investment in restaurant properties. In addition, the investment
objectives of the Prior Public Programs included making partially tax-sheltered
distributions.
STOCKHOLDERS SHOULD NOT CONSTRUE INCLUSION OF THE FOLLOWING TABLES AS
IMPLYING THAT THE COMPANY WILL HAVE RESULTS COMPARABLE TO THOSE REFLECTED IN
SUCH TABLES. DISTRIBUTABLE CASH FLOW, FEDERAL INCOME TAX DEDUCTIONS, OR OTHER
FACTORS COULD BE SUBSTANTIALLY DIFFERENT. STOCKHOLDERS SHOULD NOTE THAT, BY
ACQUIRING SHARES IN THE COMPANY, THEY WILL NOT BE ACQUIRING ANY INTEREST IN ANY
PRIOR PUBLIC PROGRAMS.
Description of Tables
The following Tables are included herein:
Table I - Experience in Raising and Investing Funds
Table II - Compensation to Sponsor
Table III - Operating Results of Prior Programs
Table V - Sales or Disposal of Properties
Unless otherwise indicated in the Tables, all information contained in
the Tables is as of June 30, 1998. The following is a brief description of the
Tables:
Table I - Experience in Raising and Investing Funds
Table I presents information on a percentage basis showing the
experience of two of the principals of the Company and their Affiliates in
raising and investing funds for the Prior Public Programs, the offerings of
which became fully subscribed between July 1993 and June 1998.
C-1
<PAGE>
The Table sets forth information on the offering expenses incurred and
amounts available for investment expressed as a percentage of total dollars
raised. The Table also shows the percentage of property acquisition cost
leveraged, the date the offering commenced, and the time required to raise funds
for investment.
Table II - Compensation to Sponsor
Table II provides information, on a total dollar basis, regarding
amounts and types of compensation paid to the general partners of the Prior
Public Programs.
The Table indicates the total offering proceeds and the portion of such
offering proceeds paid or to be paid to two of the principals of the Company and
their Affiliates in connection with the Prior Public Programs, the offerings of
which became fully subscribed between July 1993 and June 1998. The Table also
shows the amounts paid to two of the principals of the Company and their
Affiliates from cash generated from operations and from cash generated from
sales or refinancing by each of the Prior Public Programs on a cumulative basis
commencing with inception and ending June 30, 1998.
Table III - Operating Results of Prior Programs
Table III presents a summary of operating results for the period from
inception through June 30, 1998, of the Prior Public Programs, the offerings of
which became fully subscribed between July 1993 and June 1998.
The Table includes a summary of income or loss of the Prior Public
Programs, which are presented on the basis of generally accepted accounting
principles ("GAAP"). The Table also shows cash generated from operations, which
represents the cash generated from operations of the properties of the Prior
Public Programs, as distinguished from cash generated from other sources
(special items). The section of the Table entitled "Special Items" provides
information relating to cash generated from or used by items which are not
directly related to the operations of the properties of the Prior Public
Programs, but rather are related to items of a partnership nature. These items
include proceeds from capital contributions of limited partners and
disbursements made from these sources of funds, such as syndication and
organizational costs, acquisition of the properties and other costs which are
related more to the organization of the partnership and the acquisition of
properties than to the actual operations of the partnerships.
The Table also presents information pertaining to investment income,
returns of capital on a GAAP basis, cash distributions from operations, sales
and refinancing proceeds expressed in total dollar amounts as well as
distributions and tax results on a per $1,000 investment basis.
Table IV - Results of Completed Programs
Table IV is omitted from this Exhibit C because none of the directors
of the Company or their Affiliates has been involved in completed programs which
made investments similar to those of the Company.
Table V - Sales or Disposal of Properties
Table V provides information regarding the sale or disposal of
properties owned by the Prior Public Programs between July 1993 and June 1998.
The Table includes the selling price of the property, the cost of the
property, the date acquired and the date of sale.
C-2
<PAGE>
TABLE I
EXPERIENCE IN RAISING AND INVESTING FUNDS
<TABLE>
<CAPTION>
CNL Income CNL Income CNL Income CNL Income
Fund XIII, Fund XIV, Fund XV, Fund XVI,
Ltd. Ltd. Ltd. Ltd.
----------- ----------- ----------- -----------
<S> <C>
Dollar amount offered $40,000,000 $45,000,000 $40,000,000 $45,000,000
=========== =========== =========== ===========
Dollar amount raised 100.0% 100.0% 100.0% 100.0%
----------- ----------- ----------- -----------
Less offering expenses:
Selling commissions
and discounts (8.5) (8.5) (8.5) (8.5)
Organizational expenses (3.0) (3.0) (3.0) (3.0)
Marketing support and
due diligence expense
reimbursement fees
(includes amounts
reallowed to
unaffiliated
entities) (0.5) (0.5) (0.5) (0.5)
----------- ----------- ----------- -----------
(12.0) (12.0) (12.0) (12.0)
----------- ----------- ----------- -----------
Reserve for operations -- -- -- --
----------- ----------- ----------- -----------
Percent available for
investment 88.0% 88.0% 88.0% 88.0%
=========== =========== =========== ============
Acquisition costs:
Cash down payment 82.5% 82.5% 82.5% 82.5%
Acquisition fees paid
to affiliates 5.5 5.5 5.5 5.5
Loan costs -- -- -- --
----------- ----------- ----------- ------------
Total acquisition costs 88.0% 88.0% 88.0% 88.0%
=========== =========== =========== ============
Percent leveraged
(mortgage financing
divided by total
acquisition costs) -- -- -- --
Date offering began 3/31/93 8/27/93 2/23/94 9/02/94
Length of offering (in
months) 5 6 6 9
Months to invest 90% of
amount available for
investment measured
from date of offering 10 11 10 11
</TABLE>
Note 1: Pursuant to a Registration Statement on Form S-11 under the Securities
Act of 1933, as amended, effective March 29, 1995, CNL American
Properties Fund, Inc. ("APF") registered for sale $165,000,000 of
shares of common stock (the "Initial Offering"), including $15,000,000
available only to stockholders participating in the company's
reinvestment plan. The Initial Offering of APF commenced April 19,
1995, and upon completion of the Initial Offering on February 6, 1997,
had received subscription proceeds of $150,591,765 (15,059,177
shares), including $591,765 (59,177 shares) issued pursuant to the
reinvestment plan. Pursuant to a Registration Statement on Form S-11
under the Securities Act of 1933, as amended, effective January 31,
1997, APF registered for sale $275,000,000 of shares of common stock
(the "1997 Offering"), including $25,000,000 available only to
stockholders participating in the company's reinvestment plan. The
1997 Offering of APF commenced following the completion of the Initial
Offering on February 6, 1997, and upon completion of the 1997 Offering
on March 2, 1998, had received subscription proceeds of $251,872,648
(25,187,265 shares), including $1,872,648 (187,265 shares) issued
pursuant to the reinvestment plan. Pursuant to a Registration
Statement on Form S-11 under the Securities Act of 1933, as amended,
effective May 12, 1998, APF registered for sale $345,000,000 of shares
of common stock (the "1998 Offering"), including $20,000,000 available
only to stockholders participating in the company's reinvestment plan.
The 1998 Offering of APF commenced following the completion of the
1997 Offering on March 2, 1998. As of June 30, 1998, APF had received
subscriptions totalling $111,835,687 from the 1998 Offering, including
$1,823,518 issued pursuant to the company's reinvestment plan.
C-3
<PAGE>
<TABLE>
<CAPTION>
CNL American CNL Income CNL Income
Properties Fund, Fund XVII, Fund XVIII,
Inc. Ltd. Ltd.
(Note 1)
------------ ----------- -----------
<S> <C>
Dollar amount offered $400,000,000 $30,000,000 $35,000,000
============ =========== ===========
Dollar amount raised 100.0% 100.0% 100.0%
------------ ----------- -----------
Less offering expenses:
Selling commissions
and discounts (7.5) (8.5) (8.5)
Organizational expenses (3.0) (3.0) (3.0)
Marketing support and
due diligence expense
reimbursement fees
(includes amounts
reallowed to
unaffiliated
entities) (0.5) (0.5) (0.5)
------------ ----------- -----------
(11.0) (12.0) (12.0)
------------ ----------- -----------
Reserve for operations -- -- --
------------ ----------- ----------
Percent available for
investment 89.0% 88.0% 88.0%
============ =========== ===========
Acquisition costs:
Cash down payment 84.5% 83.5% 83.5%
Acquisition fees paid
to affiliates 4.5 4.5 4.5
Loan costs -- -- --
------------ ----------- ----------
Total acquisition costs 89.0% 88.0% 88.0%
============ =========== ===========
Percent leveraged
(mortgage financing
divided by total
acquisition costs) -- -- --
Date offering began 4/19/95 and 9/02/95 9/20/96
2/06/97
Length of offering (in
months) 22 and 13 12 17
Months to invest 90% of
amount available for
investment measured
from date of offering 23 and 16 15 17
</TABLE>
C-4
<PAGE>
TABLE II
COMPENSATION TO SPONSOR
<TABLE>
<CAPTION>
CNL Income CNL Income CNL Income CNL Income
Fund XIII, Fund XIV, Fund XV, Fund XVI,
Ltd. Ltd. Ltd. Ltd.
----------- ----------- ----------- -----------
<S> <C>
Date offering commenced 3/31/93 8/27/93 2/23/94 9/02/94
Dollar amount raised $40,000,000 $45,000,000 $40,000,000 $45,000,000
Amount paid to sponsor from =========== =========== =========== ===========
proceeds of offering:
Selling commissions and
discounts 3,400,000 3,825,000 3,400,000 3,825,000
Real estate commissions - - - -
Acquisition fees 2,200,000 2,475,000 2,200,000 2,475,000
Marketing support and
due diligence expense
reimbursement fees
(includes amounts
reallowed to
unaffiliated entities) 200,000 225,000 200,000 225,000
---------- ----------- ----------- -----------
Total amount paid to sponsor 5,800,000 6,525,000 5,800,000 6,525,000
=========== =========== =========== ===========
Dollar amount of cash generated
from operations before
deducting payments to
sponsor:
1998 (6 months) 1,782,788 1,898,767 1,755,734 1,969,826
1997 3,395,200 3,734,726 3,419,967 3,909,781
1996 3,494,528 3,841,163 3,557,073 3,911,609
1995 3,482,461 3,823,939 3,361,477 2,619,840
1994 3,232,046 2,897,432 1,154,454 212,171
1993 1,148,550 329,957 - -
Amount paid to sponsor from
operations (administrative,
accounting and
management fees):
1998 (6 months) 48,887 53,039 44,829 47,605
1997 121,643 128,536 113,372 129,357
1996 126,947 134,867 122,391 157,883
1995 103,083 114,095 122,107 138,445
1994 83,046 84,801 37,620 7,023
1993 27,003 8,220 - -
Dollar amount of property
sales and refinancing
before deducting payments
to sponsor:
Cash (Note 3) 1,769,260 4,770,015 3,312,297 1,385,384
Notes - - - -
Amount paid to sponsors
from property sales and
refinancing:
Real estate commissions - - - -
Incentive fees - - - -
Other (Note 2) - - - -
</TABLE>
Note 1: Pursuant to a Registration Statement on Form S-11 under the Securities
Act of 1933, as amended, effective March 29, 1995, CNL American
Properties Fund, Inc. ("APF") registered for sale $165,000,000 of
shares of common stock (the "Initial Offering"), including $15,000,000
available only to stockholders participating in the company's
reinvestment plan. The Initial Offering of APF commenced April 19,
1995, and upon completion of the Initial Offering on February 6, 1997,
had received subscription proceeds of $150,591,765 (15,059,177
shares), including $591,765 (59,177 shares) issued pursuant to the
reinvestment plan. Pursuant to a Registration Statement on Form S-11
under the Securities Act of 1933, as amended, effective January 31,
1997, APF registered for sale $275,000,000 of shares of common stock
(the "1997 Offering"), including $25,000,000 available only to
stockholders participating in the company's reinvestment plan. The
1997 Offering of APF commenced following the completion of the Initial
Offering on February 6, 1997, and upon completion of the 1997 Offering
on March 2, 1998, had received subscription proceeds of $251,872,648
(25,187,265 shares), including $1,872,648 (187,265 shares) issued
pursuant to the reinvestment plan. Pursuant to a Registration
Statement on Form S-11 under the Securities Act of 1933, as amended,
effective May 12, 1998, APF registered for sale $345,000,000 of shares
of common stock (the "1998 Offering"), including $20,000,000 available
only to stockholders participating in the company's reinvestment plan.
The 1998 Offering of APF commenced following the completion of the
1997 Offering on March 2, 1998. As of June 30, 1998, APF had received
subscriptions totalling $111,835,687 from the 1998 Offering, including
$1,823,518 issued pursuant to the company's reinvestment plan. The
amounts shown represent the combined results of the Initial Offering,
the 1997 Offering and the 1998 Offering as of June 30, 1998, including
shares issued pursuant to the company's reinvestment plans.
Note 2: For negotiating secured equipment leases and supervising the secured
equipment lease program, APF is entitled to receive a one-time secured
equipment lease servicing fee of two percent of the purchase price of
the equipment that is the subject of a secured equipment lease. During
the six months ended June 30, 1998 and the years ended December 31,
1997 and 1996, APF incurred $36,899, $366,865 and $70,070,
respectively, in secured equipment lease servicing fees.
Note 3: Excludes properties sold and substituted with replacement properties,
as permitted under the terms of the lease agreements.
C-5
<PAGE>
<TABLE>
<CAPTION>
CNL American CNL Income CNL Income
Properties Fund, Fund XVII, Fund XVIII,
Inc. Ltd. Ltd.
------------ ----------- -----------
(Note 1)
<S> <C>
Date offering commenced 4/19/95 and 2/06/97 9/02/95 9/20/96
Dollar amount raised $514,300,100 $30,000,000 $35,000,000
============ =========== ===========
Amount paid to sponsor from
proceeds of offering:
Selling commissions and
discounts
Real estate commissions 38,572,508 2,550,000 2,975,000
Acquisition fees - - -
Marketing support and 23,143,505 1,350,000 1,575,000
due diligence expense
reimbursement fees
(includes amounts
reallowed to
unaffiliated entities)
Total amount paid to sponsor 2,571,501 150,000 175,000
------------ ----------- -----------
64,287,514 4,050,000 4,725,000
Dollar amount of cash generated ============ =========== ===========
from operations before
deducting payments to
sponsor:
1998 (6 months)
1997
1996 17,846,454 1,315,440 1,517,300
1995 18,514,122 2,611,191 1,459,963
1994 6,096,045 1,340,159 30,126
1993 594,425 11,671 -
Amount paid to sponsor from - - -
operations (administrative, - - -
accounting and
management fees):
1998 (6 months)
1997
1996 1,245,501 41,356 58,088
1995 1,437,908 116,077 98,207
1994 613,505 107,211 2,980
1993 95,966 2,659 -
Dollar amount of property - - -
sales and refinancing - - -
before deducting payments
to sponsor:
Cash (Note 3)
Notes
Amount paid to sponsors 7,894,390 - -
from property sales and - - -
refinancing:
Real estate commissions
Incentive fees
Other (Note 2) - - -
- - -
- - -
</TABLE>
C-6
<PAGE>
TABLE III
Operating Results of Prior Programs CNL
INCOME FUND XIII, LTD.
<TABLE>
<CAPTION>
1992
(Note 1) 1993 1994 1995
------------ ------------ ------------ -------------
<S> <C>
Gross revenue $ 0 $ 966,564 $ 3,558,447 $ 3,806,944
Equity in earnings of joint ventures 0 1,305 43,386 98,520
Profit (loss) from sale of properties
(Notes 4, 5 and 6) 0 0 0 (29,560)
Interest income 0 181,568 77,379 51,410
Less: Operating expenses 0 (59,390) (183,311) (214,705)
Interest expense 0 0 0 0
Depreciation and amortization 0 (148,170) (378,269) (393,435)
------------ ------------ ------------ ------------
Net income - GAAP basis 0 941,877 3,117,632 3,319,174
============ ============ ============ ============
Taxable income
- from operations 0 978,535 2,703,252 2,920,859
============ ============ ============ ============
- from gain (loss) on sale 0 0 0 0
============ ============ ============ ============
Cash generated from operations
(Notes 2 and 3) 0 1,121,547 3,149,000 3,379,378
Cash generated from sales (Notes 4, 5 and 6) 0 0 0 286,411
Cash generated from refinancing 0 0 0 0
------------ ------------ ------------ ------------
Cash generated from operations, sales
and refinancing 0 1,121,547 3,149,000 3,665,789
Less: Cash distributions to investors
(Note 7)
- from operating cash flow 0 (528,364) (2,800,004) (3,350,014)
- from sale of properties 0 0 0 0
- from cash flow from prior period 0 0 0 0
------------ ------------ ------------ ------------
Cash generated (deficiency) after
cash distributions 0 593,183 348,996 315,775
Special items (not including sales
and refinancing):
Limited partners' capital
contributions 0 40,000,000 0 0
General partners' capital
contributions 1,000 0 0 0
Syndication costs 0 (3,932,017) (181) 0
Acquisition of land and buildings 0 (19,691,630) (5,764,308) (336,116)
Investment in direct financing leases 0 (6,760,624) (1,365,075) 0
Investment in joint ventures 0 (314,998) (545,139) (140,052)
Increase (decrease) in restricted cash 0 0 0 0
Reimbursement of organization,
syndication and acquisition costs
paid on behalf of CNL Income Fund
XIII, Ltd. by related parties 0 (799,980) (25,036) (3,074)
Increase in other assets 0 (454,909) 9,226 0
Loan to tenant 0 0 0 0
Collections on loan to tenant 0 0 0 0
Other 0 0 0 954
------------ ------------ ------------ ------------
Cash generated (deficiency) after cash
distributions and special items 1,000 8,639,025 (7,341,517) (162,513)
============ ============ ============ ============
TAX AND DISTRIBUTION DATA PER
$1,000 INVESTED
Federal income tax results:
Ordinary income (loss)
- from operations 0 33 67 72
============ ============ ============ ============
- from recapture 0 0 0 0
============ ============ ============ ============
Capital gain (loss) (Notes 4, 5 and 6) 0 0 0 0
============ ============ ============ ============
</TABLE>
C-7
<PAGE>
<TABLE>
<CAPTION>
6 months
1996 1997 1998
------------ ------------ --------------
<S> <C>
Gross revenue $ 3,685,280 $ 3,654,128 $ 1,488,274
Equity in earnings of joint ventures 60,654 150,417 121,482
Profit (loss) from sale of properties
(Notes 4, 5 and 6) 82,855 (48,538) 0
Interest income 49,820 27,925 22,448
Less: Operating expenses (253,360) (354,206) (122,065)
Interest expense 0 0 0
Depreciation and amortization (393,434) (394,099) (196,413)
------------ ------------ ------------
Net income - GAAP basis 3,231,815 3,035,627 1,313,726
============ ============ ============
Taxable income 2,972,159 2,470,268 1,512,381
============ ============ ============
- from operations 0 (9,715) 0
============ ============ ============
- from gain (loss) on sale
3,367,581 3,273,557 1,733,901
Cash generated from operations 550,000 932,849 0
(Notes 2 and 3) 0 0 0
Cash generated from sales (Notes 4, 5 and 6) ------------ ------------ ------------
Cash generated from refinancing
3,917,581 4,206,406 1,733,901
Cash generated from operations, sales
and refinancing
Less: Cash distributions to investors (3,367,581) (3,273,557) (1,700,004)
(Note 7) 0 0 0
- from operating cash flow (32,427) (126,451) 0
- from sale of properties ------------ ------------ ------------
- from cash flow from prior period
517,573 806,398 33,897
Cash generated (deficiency) after
cash distributions
Special items (not including sales
and refinancing): 0 0 0
Limited partners' capital
contributions 0 0 0
General partners' capital 0 0 0
contributions 0 0 0
Syndication costs 0 0 0
Acquisition of land and buildings 0 (1,482,849) 0
Investment in direct financing leases (550,000) 550,000 0
Investment in joint ventures
Increase (decrease) in restricted cash
Reimbursement of organization,
syndication and acquisition costs 0 0 0
paid on behalf of CNL Income Fund 0 0 0
XIII, Ltd. by related parties 0 (196,980) 0
Increase in other assets 0 127,843 0
Loan to tenant 0 0 0
Collections on loan to tenant ------------ ------------ ------------
Other
Cash generated (deficiency) after cash
distributions and special items (32,427) (195,588) 33,897
============ ============ ============
TAX AND DISTRIBUTION DATA PER
$1,000 INVESTED
Federal income tax results:
Ordinary income (loss)
- from operations 74 61 37
============ ============ ============
- from recapture 0 0 0
============ ============ ============
Capital gain (loss) (Notes 4, 5 and 6) 0 0 0
============ ============ ============
</TABLE>
C-8
<PAGE>
TABLE III - CNL INCOME FUND XIII, LTD. (continued)
<TABLE>
<CAPTION>
1992
(Note 1) 1993 1994 1995
------------ ------------ ------------ -------------
<S> <C>
Cash distributions to investors
Source (on GAAP basis)
- from investment income 0 18 70 82
- from capital gain 0 0 0 0
- from investment income from prior
period 0 0 0 2
- from return of capital 0 0 0 0
------------ ------------ ------------ ------------
Total distributions on GAAP basis (Note 7) 0 18 70 84
============ ============ ============ ============
Source (on cash basis)
- from sales 0 0 0 0
- from refinancing 0 0 0 0
- from operations 0 18 70 84
- from cash flow from prior period 0 0 0 0
------------ ------------ ------------ ------------
Total distributions on cash basis (Note 7) 0 18 70 84
============ ============ ============ ============
Total cash distributions as a percentage
of original $1,000 investment (Note 8) 0.00% 5.33% 7.56% 8.44%
Total cumulative cash distributions per
$1,000 investment from inception 0 18 88 172
Amount (in percentage terms) remaining
invested in program properties at the end
of each year (period) presented (original
total acquisition cost of properties
retained, divided by original total
acquisition cost of all properties
in program) (Notes 4, 5 and 6) N/A 100% 100% 100%
</TABLE>
Note 1: The registration statement relating to the offering of Units by
CNL Income Fund XIII, Ltd. became effective on March 17, 1993.
Activities through April 15, 1993, were devoted to organization of
the partnership and operations had not begun.
Note 2: Cash generated from operations includes cash received from
tenants, plus distributions from joint ventures, less cash paid
for expenses, plus interest received.
Note 3: Cash generated from operations per this table agrees to cash
generated from operations per the statement of cash flows included
in the financial statements of CNL Income Fund XIII, Ltd.
Note 4: During 1995, the partnership sold one of its properties to a
tenant for its original purchase price, excluding acquisition fees
and miscellaneous acquisition expenses. The net sales proceeds
were used to acquire an additional property. As a result of this
transaction, the partnership recognized a loss for financial
reporting purposes of $29,560 primarily due to acquisition fees
and miscellaneous acquisition expenses the partnership had
allocated to the property and due to the accrued rental income
relating to future scheduled rent increases that the partnership
had recorded and reversed at the time of sale.
Note 5: In November 1996, CNL Income Fund XIII, Ltd. sold one of its
properties and received net sales proceeds of $550,000, resulting
in a gain of $82,855 for financial reporting purposes. In January
1997, the partnership reinvested the net sales proceeds in an
additional property as tenants-in-common with an affiliate of the
general partners.
Note 6: In October 1997, the partnership sold one of its properties and
received net sales proceeds of $932,849, resulting in a loss of
$48,538 for financial reporting purposes. In December 1997, the
partnership reinvested the net sales proceeds in an additional
property as tenants-in-common with affiliates of the general
partners.
Note 7: As a result of the partnership's change in investor services
agents in 1993, distributions are now declared at the end of each
quarter and paid in the following quarter. Since this table
generally presents distributions on a cash basis (rather than
amounts declared), distributions on a cash basis for 1993 only
reflect payments for three quarters. Distributions declared for
the quarters ended December 31, 1993, 1994, 1995, 1996 and 1997,
are reflected in the 1994, 1995, 1996, 1997 and 1998 columns,
respectively, for distributions on a cash basis due to the
payment of such distributions in January 1994, 1995, 1996, 1997
and 1998, respectively. As a result of 1994, 1995, 1996, 1997 and
1998 distributions being presented on a cash basis, distributions
declared and unpaid as of December 31, 1994, 1995, 1996, 1997 and
June 30, 1998, are not included in the 1994, 1995, 1996, 1997 and
1998 totals, respectively.
Note 8: Total cash distributions as a percentage of original $1,000
investment are calculated based on actual distributions declared
for the period. (See Note 7 above)
Note 9: Certain data for columns representing less than 12 months have
been annualized.
C-9
<PAGE>
<TABLE>
<CAPTION>
6 months
1996 1997 1998
------------ ------------ -------------
<S> <C>
Cash distributions to investors
Source (on GAAP basis) 78 75 33
- from investment income 2 0 0
- from capital gain
- from investment income from prior 5 10 4
period 0 0 6
- from return of capital ------------ ------------ ------------
85 85 43
Total distributions on GAAP basis (Note 7) ============ ============ ============
Source (on cash basis)
- from sales 0 0 0
- from refinancing 0 0 0
- from operations 84 82 43
- from cash flow from prior period 1 3 0
------------ ------------ ------------
Total distributions on cash basis (Note 7) 85 85 43
============ ============ ============
Total cash distributions as a percentage
of original $1,000 investment (Note 8)
Total cumulative cash distributions per 8.50% 8.50% 8.50%
$1,000 investment from inception
Amount (in percentage terms) remaining 257 342 385
invested in program properties at the end
of each year (period) presented (original
total acquisition cost of properties
retained, divided by original total
acquisition cost of all properties
in program) (Notes 4, 5 and 6)
100% 99% 100%
</TABLE>
C-10
<PAGE>
TABLE III
Operating Results of Prior Programs CNL
INCOME FUND XIV, LTD.
<TABLE>
<CAPTION>
1992
(Note 1) 1993 1994 1995
------------ ------------ ------------ ------------
<S> <C>
Gross revenue $ 0 $ 256,234 $ 3,135,716 $ 4,017,266
Equity in earnings of joint ventures 0 1,305 35,480 338,717
Profit (Loss) from sale of properties
(Notes 4, 5, 6 and 7) 0 0 0 (66,518)
Interest income 0 27,874 200,499 50,724
Less: Operating expenses 0 (14,049) (181,980) (248,840)
Interest expense 0 0 0 0
Depreciation and amortization 0 (28,918) (257,640) (340,112)
------------ ------------ ------------ ------------
Net income - GAAP basis 0 242,446 2,932,075 3,751,237
============ ============ ============ ============
Taxable income
- from operations 0 278,845 2,482,240 3,162,165
============ ============ ============ ============
- from gain (loss) on sale 0 0 0 0
============ ============ ============ ============
Cash generated from operations
(Notes 2 and 3) 0 321,737 2,812,631 3,709,844
Cash generated from sales (Notes 4, 6,
7 and 8) 0 0 0 696,012
Cash generated from refinancing 0 0 0 0
------------ ------------ ------------ ------------
Cash generated from operations, sales
and refinancing 0 321,737 2,812,631 4,405,856
Less: Cash distributions to investors
(Note 5)
- from operating cash flow 0 (9,050) (2,229,952) (3,543,751)
- from sale of properties 0 0 0 0
- from cash flow from prior period 0 0 0 0
------------ ------------ ------------ ------------
Cash generated (deficiency) after cash
distributions 0 312,687 582,679 862,105
Special items (not including sales and
refinancing):
Limited partners' capital
contributions 0 28,785,100 16,214,900 0
General partners' capital
contributions 1,000 0 0 0
Syndication costs 0 (2,771,892) (1,618,477) 0
Acquisition of land and buildings 0 (13,758,004) (11,859,237) (964,073)
Investment in direct financing leases 0 (4,187,268) (5,561,748) (75,352)
Investment in joint ventures 0 (315,209) (1,561,988) (1,087,218)
Return of capital from joint venture 0 0 0 0
Reimbursement of organization,
syndication and acquisition costs
paid on behalf of CNL Income Fund
XIV, Ltd. by related parties 0 (706,215) (376,738) (577)
Increase in other assets 0 (444,267) 0 0
Increase in restricted cash 0 0 0 0
Other 0 0 0 5,530
------------ ------------ ------------ ------------
Cash generated (deficiency) after cash
distributions and special items 1,000 6,914,932 (4,180,609) (1,259,585)
============ ============ ============ ============
TAX AND DISTRIBUTION DATA PER
$1,000 INVESTED
Federal income tax results:
Ordinary income (loss)
- from operations 0 16 56 70
============ ============ ============ ============
- from recapture 0 0 0 0
============ ============ ============ ============
Capital gain (loss) (Notes 4, 6, 7 and 8) 0 0 0 0
============ ============ ============ ============
</TABLE>
C-11
<PAGE>
<TABLE>
<CAPTION>
6 months
1996 1997 1998
------------ ------------ -------------
<S> <C>
Gross revenue $ 3,999,813 $ 3,918,582 $ 1,626,212
Equity in earnings of joint ventures 459,137 309,879 164,631
Profit (Loss) from sale of properties
(Notes 4, 5, 6 and 7) 0 0 112,206
Interest income 44,089 40,232 42,434
Less: Operating expenses (246,621) (262,592) (140,356)
Interest expense 0 0 0
Depreciation and amortization (340,089) (340,161) (170,106)
------------ ------------ ------------
Net income - GAAP basis 3,916,329 3,665,940 1,635,021
============ ============ ============
Taxable income
- from operations 3,236,329 3,048,675 1,742,143
============ ============ ============
- from gain (loss) on sale 0 47,256 33,783
============ ============ ============
Cash generated from operations
(Notes 2 and 3) 3,706,296 3,606,190 1,845,728
Cash generated from sales (Notes 4, 6,
7 and 8) 0 0 1,250,140
Cash generated from refinancing 0 0 0
------------ ------------ ------------
Cash generated from operations, sales
and refinancing 3,706,296 3,606,190 3,095,868
Less: Cash distributions to investors
(Note 5)
- from operating cash flow (3,706,296) (3,606,190) (1,845,728)
- from sale of properties 0 0 0
- from cash flow from prior period (6,226) (106,330) (10,532)
------------ ------------ ------------
Cash generated (deficiency) after cash
distributions (6,226) (106,330) 1,239,608
Special items (not including sales and
refinancing):
Limited partners' capital
contributions 0 0 0
General partners' capital
contributions 0 0 0
Syndication costs 0 0 0
Acquisition of land and buildings 0 0 0
Investment in direct financing leases 0 0 0
Investment in joint ventures (7,500) (121,855) (310,097)
Return of capital from joint venture 0 51,950 0
Reimbursement of organization,
syndication and acquisition costs
paid on behalf of CNL Income Fund
XIV, Ltd. by related parties 0 0 0
Increase in other assets 0 0 0
Increase in restricted cash 0 0 (193,654)
Other 0 0 0
------------ ------------ ------------
Cash generated (deficiency) after cash
distributions and special items (13,726) (176,235) 735,857
============ ============ ============
TAX AND DISTRIBUTION DATA PER
$1,000 INVESTED
Federal income tax results:
Ordinary income (loss)
- from operations 71 67 38
============ ============ ============
- from recapture 0 0 0
============ ============ ============
Capital gain (loss) (Notes 4, 6, 7 and 8) 0 1 1
============ ============ ============
</TABLE>
C-12
<PAGE>
TABLE III - CNL INCOME FUND XIV, LTD. (continued)
<TABLE>
<CAPTION>
1992
(Note 1) 1993 1994 1995
------------ ------------ ------------ -------------
<S> <C>
Cash distributions to investors
Source (on GAAP basis)
- from investment income 0 1 51 79
- from capital gain 0 0 0 0
- from return of capital 0 0 0 0
- from investment income from prior
period 0 0 0 0
------------ ------------ ------------ ------------
Total distributions on GAAP basis (Note 5) 0 1 51 79
============ ============ ============ ============
Source (on cash basis)
- from sales 0 0 0 0
- from operations 0 1 51 79
- from cash flow from prior period 0 0 0 0
------------ ------------ ------------ ------------
Total distributions on cash basis (Note 5) 0 1 51 79
============ ============ ============ ============
Total cash distributions as a percentage of
original $1,000 investment (Note 9) 0.00% 4.50% 6.50% 8.06%
Total cumulative cash distributions
per $1,000 investment from inception 0 1 52 131
Amount (in percentage terms) remaining invest-
ed in program properties at the end of each
year (period) presented (original total
acquisition cost of properties retained,
divided by original total acquisition
cost of all properties in program)
(Notes 4, 6, 7 and 8) N/A 100% 100% 100%
</TABLE>
Note 1: Pursuant to a registration statement on Form S-11 under the
Securities Act of 1933, as amended, CNL Income Fund XIV, Ltd.
("CNL XIV") and CNL Income Fund XIII, Ltd. each registered for
sale $40,000,000 units of limited partnership interests ("Units").
The offering of Units of CNL Income Fund XIII, Ltd. commenced
March 17, 1993. Pursuant to the registration statement, CNL XIV
could not commence until the offering of Units of CNL Income Fund
XIII, Ltd. was terminated. CNL Income Fund XIII, Ltd. terminated
its offering of Units on August 26, 1993, at which time the
maximum offering proceeds of $40,000,000 had been received. Upon
the termination of the offering of Units of CNL Income Fund XIII,
Ltd., CNL XIV commenced its offering of Units. Activities through
September 13, 1993, were devoted to organization of the
partnership and operations had not begun.
Note 2: Cash generated from operations includes cash received from
tenants, plus distributions from joint ventures, less cash paid
for expenses, plus interest received.
Note 3: Cash generated from operations per this table agrees to cash
generated from operations per the statement of cash flows included
in the financial statements of CNL Income Fund XIV, Ltd.
Note 4: During 1995, the partnership sold two of its properties to a
tenant for its original purchase price, excluding acquisition fees
and miscellaneous acquisition expenses. The net sales proceeds
were used to acquire two additional properties. As a result of
these transactions, the partnership recognized a loss for
financial reporting purposes of $66,518 primarily due to
acquisition fees and miscellaneous acquisition expenses the
partnership had allocated to the property and due to the accrued
rental income relating to future scheduled rent increases that the
partnership had recorded and reversed at the time of sale. In
addition, during 1996, Wood-Ridge Real Estate Joint Venture, in
which the partnership owns a 50% interest, sold its two properties
to the tenant and recognized a gain of approximately $261,100 for
financial reporting purposes. As a result, the partnership's pro
rata share of such gain of approximately $130,550 is included in
equity in earnings of unconsolidated joint ventures for 1996.
Note 5: As a result of the partnership's change in investor services
agents in 1993, distributions are now declared at the end of each
quarter and paid in the following quarter. Since this table
generally presents distributions on a cash basis (rather than
amounts declared), distributions on a cash basis for 1993 only
reflect payments for three quarters. Distributions declared for
the quarters ended December 31, 1993, 1994, 1995, 1996 and 1997,
are reflected in the 1994, 1995, 1996, 1997 and 1998 columns,
respectively, for distributions on a cash basis due to the payment
of such distributions in January 1994, 1995, 1996, 1997 and 1998,
respectively. As a result of 1994, 1995, 1996, 1997 and 1998
distributions being presented on a cash basis, distributions
declared and unpaid as of December 31, 1994, 1995, 1996, 1997 and
June 30, 1998 are not included in the 1994, 1995, 1996, 1997 and
1998 totals, respectively.
Note 6: In January 1998, the partnership sold its property in Madison,
Alabama, to a third party for $740,000 and received net sales
proceeds of $696,486. Due to the fact that during 1997 the
partnership wrote off $13,314 in accrued rental income (non-cash
accounting adjustments relating to the straight-lining of future
scheduled rent increases over the lease term in accordance with
generally accepted accounting principles), no gain or loss was
incurred for financial reporting purposes in January 1998 relating
to this sale. In April 1998, the partnership reinvested a portion
of the net sales proceeds from the sale of the property in
Madison, Alabama in Melbourne Joint Venture, with an affiliate of
the partnership which has the same general partners. The
partnership intends to use the remaining proceeds to invest in an
additional property or for other partnership purposes.
Note 7: In January 1998, the partnership sold one of its properties in
Richmond, Virginia for $512,462 and received net sales proceeds of
$512,246, resulting in a gain of $70,798 for financial reporting
purposes. The partnership intends to reinvest the net sales
proceeds from the sale of the property in Richmond, Virginia in an
additional property.
Note 8: In April 1998, the partnership reached an agreement to accept
$360,000 for the property in Riviera Beach, Florida, which was
taken through a right of way taking in December 1997. The
partnership had received preliminary sales proceeds of $318,592 as
of December 31, 1997. Upon agreement and receipt of the final
sales price of $360,000, the partnership recognized a gain of
$41,408 for financial reporting purposes. The partnership intends
to reinvest the net sales proceeds from the sale of this property
in an additional property.
Note 9: Total cash distributions as a percentage of original $1,000
investment are calculated based on actual distributions declared
for the period. (See Note 5 above)
Note 10: Certain data for columns representing less than 12 months have
been annualized.
C-13
<PAGE>
<TABLE>
<CAPTION>
6 months
1996 1997 1998
------------ ------------ ------------
<S> <C>
Cash distributions to investors
Source (on GAAP basis)
- from investment income 83 81 36
- from capital gain 0 0 0
- from return of capital 0 0 0
- from investment income from prior
period 0 2 5
------------ ------------ ------------
Total distributions on GAAP basis (Note 5) 83 83 41
============ ============ ============
Source (on cash basis)
- from sales 0 0 0
- from operations 83 81 41
- from cash flow from prior period 0 2 0
------------ ------------ ------------
Total distributions on cash basis (Note 5) 83 83 41
============ ============ ============
Total cash distributions as a percentage of
original $1,000 investment (Note 9) 8.25% 8.25% 8.25%
Total cumulative cash distributions
per $1,000 investment from inception 214 297 338
Amount (in percentage terms) remaining invest-
ed in program properties at the end of each
year (period) presented (original total
acquisition cost of properties retained,
divided by original total acquisition
cost of all properties in program)
(Notes 4, 6, 7 and 8) 100% 100% 100%
</TABLE>
C-14
<PAGE>
TABLE III
Operating Results of Prior Programs CNL
INCOME FUND XV, LTD.
<TABLE>
<CAPTION>
1993
(Note 1) 1994 1995 1996
------------ ------------ ------------ ------------
<S> <C>
Gross revenue $ 0 $ 1,143,586 $ 3,546,320 $ 3,632,699
Equity in earnings of joint ventures 0 8,372 280,606 392,862
Profit (Loss) from sale of properties
(Note 4) 0 0 (71,023) 0
Interest income 0 167,734 88,059 43,049
Less: Operating expenses 0 (62,926) (228,319) (235,319)
Interest expense 0 0 0 0
Depreciation and amortization 0 (70,848) (243,175) (248,232)
------------ ------------ ------------ ------------
Net income - GAAP basis 0 1,185,918 3,372,468 3,585,059
============ ============ ============ ============
Taxable income
- from operations 0 1,026,715 2,861,912 2,954,318
============ ============ ============ ============
- from gain on sale 0 0 0 0
============ ============ ============ ============
Cash generated from operations
(Notes 2 and 3) 0 1,116,834 3,239,370 3,434,682
Cash generated from sales (Note 4) 0 0 811,706 0
Cash generated from refinancing 0 0 0 0
------------ ------------ ------------ ------------
Cash generated from operations, sales
and refinancing 0 1,116,834 4,051,076 3,434,682
Less: Cash distributions to investors
(Notes 5, 6 and 8)
- from operating cash flow 0 (635,944) (2,650,003) (3,200,000)
- from sale of properties 0 0 0 0
- from cash flow from prior period 0 0 0 0
------------ ------------ ------------ ------------
Cash generated (deficiency) after cash
distributions 0 480,890 1,401,073 234,682
Special items (not including sales and
refinancing):
Limited partners' capital contri-
butions 0 40,000,000 0 0
General partners' capital contri-
butions 1,000 0 0 0
Syndication costs 0 (3,892,003) 0 0
Acquisition of land and buildings 0 (22,152,379) (1,625,601) 0
Investment in direct financing
leases 0 (6,792,806) (2,412,973) 0
Investment in joint ventures 0 (1,564,762) (720,552) (129,939)
Return of capital from joint venture 0 0 0 0
Reimbursement of organization,
syndication and acquisition costs
paid on behalf of CNL Income Fund
XV, Ltd. by related parties 0 (1,098,197) (23,507) 0
Increase in other assets 0 (187,757) 0 0
Other (38) (6,118) 25,150 0
------------ ------------ ------------ ------------
Cash generated (deficiency) after cash
distributions and special items 962 4,786,868 (3,356,410) 104,743
============ ============ ============ ============
TAX AND DISTRIBUTION DATA PER $1,000
INVESTED
Federal income tax results:
Ordinary income (loss)
- from operations 0 33 71 73
============ ============ ============ ============
- from recapture 0 0 0 0
============ ============ ============ ============
Capital gain (loss) (Note 4) 0 0 0 0
============ ============ ============ ============
</TABLE>
C-15
<PAGE>
<TABLE>
<CAPTION>
6 months
1997 1998
------------ -----------
<S> <C>
Gross revenue $ 3,622,123 $ 1,498,779
Equity in earnings of joint ventures 239,249 120,294
Profit (Loss) from sale of properties
(Note 4) 0 0
Interest income 46,642 33,275
Less: Operating expenses (224,761) (128,176)
Interest expense 0 0
Depreciation and amortization (248,348) (124,200)
------------ -----------
Net income - GAAP basis 3,434,905 1,399,972
============ ===========
Taxable income
- from operations 2,856,893 1,492,168
============ ===========
- from gain on sale 47,256 0
============ ===========
Cash generated from operations
(Notes 2 and 3) 3,306,595 1,710,905
Cash generated from sales (Note 4) 0 0
Cash generated from refinancing 0 0
------------ -----------
Cash generated from operations, sales
and refinancing 3,306,595 1,710,905
Less: Cash distributions to investors
(Notes 5, 6 and 8)
- from operating cash flow (3,280,000) (1,710,905)
- from sale of properties 0 0
- from cash flow from prior period 0 (89,095)
------------ -------------
Cash generated (deficiency) after cash
distributions 26,595 (89,095)
Special items (not including sales and
refinancing):
Limited partners' capital contri-
butions 0 0
General partners' capital contri-
butions 0 0
Syndication costs 0 0
Acquisition of land and buildings 0 0
Investment in direct financing
leases 0 0
Investment in joint ventures 0 (207,986)
Return of capital from joint venture 51,950 0
Reimbursement of organization,
syndication and acquisition costs
paid on behalf of CNL Income Fund
XV, Ltd. by related parties 0 0
Increase in other assets 0 0
Other 0 0
------------ ------------
Cash generated (deficiency) after cash
distributions and special items 78,545 (297,081)
TAX AND DISTRIBUTION DATA PER $1,000
INVESTED
Federal income tax results:
Ordinary income (loss)
- from operations 71 37
============ ============
- from recapture 0 0
============ ============
Capital gain (loss) (Note 4) 1 0
============ ============
</TABLE>
C-16
<PAGE>
TABLE III - CNL INCOME FUND XV, LTD. (continued)
<TABLE>
<CAPTION>
1993
(Note 1) 1994 1995 1996
------------ ------------ ------------ -----------
<S> <C>
Cash distributions to investors
Source (on GAAP basis)
- from investment income 0 21 66 80
- from capital gain 0 0 0 0
- from investment income from prior
period 0 0 0 0
------------ ------------ ------------ ------------
Total distributions on GAAP basis (Note 5) 0 21 66 80
============ ============ ============ ============
Source (on cash basis)
- from sales 0 0 0 0
- from refinancing 0 0 0 0
- from operations 0 21 66 80
- from investment income from prior period 0 0 0 0
------------ ------------ ------------ ------------
Total distributions on cash basis (Note 5) 0 21 66 80
============ ============ ============ ============
Total cash distributions as a percentage
of original $1,000 investment (Notes 6,
7 and 8). 0.00% 5.00% 7.25% 8.20%
Total cumulative cash distributions per
$1,000 investment from inception 0 21 87 167
Amount (in percentage terms) remaining
invested in program properties at the end
of each year (period) presented (original
total acquisition cost of properties
retained, divided by original total
acquisition cost of all properties
in program) (Note 4) N/A 100% 100% 100%
</TABLE>
Note 1 The registration statement relating to this offering of Units of
CNL Income Fund XV, Ltd. became effective February 23, 1994.
Activities through March 23, 1994, were devoted to organization of
the partnership and operations had not begun.
Note 2: Cash generated from operations includes cash received from
tenants, plus distributions from joint venture, less cash paid for
expenses, plus interest received.
Note 3: Cash generated from operations per this table agrees to cash
generated from operations per the statement of cash flows included
in the financial statements of CNL Income Fund XV, Ltd.
Note 4: During 1995, the partnership sold three of its properties to a
tenant for its original purchase price, excluding acquisition fees
and miscellaneous acquisition expenses. The majority of the net
sales proceeds were used to acquire additional properties. As a
result of these transactions, the partnership recognized a loss
for financial reporting purposes of $71,023 primarily due to
acquisition fees and miscellaneous acquisition expenses the
partnership had allocated to the three properties and due to the
accrued rental income relating to future scheduled rent increases
that the partnership had recorded and reversed at the time of
sale. In addition, during 1996, Wood-Ridge Real Estate Joint
Venture, in which the partnership owns a 50% interest, sold its
two properties to the tenant and recognized a gain of
approximately $261,100 for financial reporting purposes. As a
result, the partnership's pro rata share of such gain of
approximately $130,550 is included in equity in earnings of
unconsolidated joint ventures for 1996.
Note 5: Distributions declared for the quarters ended December 31, 1994,
1995, 1996 and 1997 are reflected in the 1995, 1996, 1997 and 1998
columns, respectively, due to the payment of such distributions in
January 1995, 1996, 1997 and 1998, respectively. As a result of
distributions being presented on a cash basis, distributions
declared and unpaid as of December 31, 1994, 1995, 1996, 1997 and
June 30, 1998 are not included in the 1994, 1995, 1996, 1997 and
1998 totals, respectively.
Note 6: On December 31, 1996, CNL Income Fund XV, Ltd. declared a special
distribution of cumulative excess operating reserves equal to .20%
of the total invested capital. Accordingly, the total yield for
1996 was 8.20%
Note 7: Total cash distributions as a percentage of original $1,000
investment are calculated based on actual distributions declared
for the period. (See Note 5 above)
Note 8: Cash distributions for 1998 include an additional amount equal to
0.50% of invested capital which was earned in 1997 or prior years,
but declared payable in the first quarter of 1998
Note 9: Certain data for columns representing less than 12 months have
been annualized.
C-17
<PAGE>
<TABLE>
<CAPTION>
6 months
1997 1998
------------ ------------
<S> <C>
Cash distributions to investors
Source (on GAAP basis)
- from investment income 82 35
- from capital gain 0 0
- from investment income from prior
period 0 10
------------ ------------
Total distributions on GAAP basis (Note 5) 82 45
============ ============
Source (on cash basis)
- from sales 0 0
- from refinancing 0 0
- from operations 82 43
- from investment income from prior period 0 2
------------ ------------
Total distributions on cash basis (Note 5)
82 45
Total cash distributions as a percentage ============ ============
of original $1,000 investment (Notes 6,
7 and 8). 8.00% 8.50%
Total cumulative cash distributions per
$1,000 investment from inception 249 294
Amount (in percentage terms) remaining
invested in program properties at the end
of each year (period) presented (original
total acquisition cost of properties
retained, divided by original total
acquisition cost of all properties
in program) (Note 4) 100% 100%
</TABLE>
C-18
<PAGE>
TABLE III
Operating Results of Prior Programs CNL
INCOME FUND XVI, LTD.
<TABLE>
<CAPTION>
1993
(Note 1) 1994 1995 1996
------------ ------------ ------------ ------------
<S> <C>
Gross revenue $ 0 $ 186,257 $ 2,702,504 $ 4,343,390
Equity in earnings from joint venture 0 0 0 19,668
Profit from sale of properties (Notes 4
and 5) 0 0 0 124,305
Interest income 0 21,478 321,137 75,160
Less: Operating expenses 0 (10,700) (274,595) (261,878)
Interest expense 0 0 0 0
Depreciation and amortization 0 (9,458) (318,205) (552,447)
------------ ------------ ------------ ------------
Net income - GAAP basis 0 187,577 2,430,841 3,748,198
============ ============ ============ ============
Taxable income
- from operations 0 189,864 2,139,382 3,239,830
============ ============ ============ ============
- from gain on sale (Notes 4 and 5) 0 0 0 0
============ ============ ============ ============
Cash generated from operations
(Notes 2 and 3) 0 205,148 2,481,395 3,753,726
Cash generated from sales (Notes 4 and 5) 0 0 0 775,000
Cash generated from refinancing 0 0 0 0
------------ ------------ ------------ ------------
Cash generated from operations, sales
and refinancing 0 205,148 2,481,395 4,528,726
Less: Cash distributions to investors
(Note 6)
- from operating cash flow 0 (2,845) (1,798,921) (3,431,251)
- from sale of properties 0 0 0 0
------------ ------------ ------------ ------------
Cash generated (deficiency) after cash
distributions 0 202,303 682,474 1,097,475
Special items (not including sales and
refinancing):
Limited partners' capital contri-
butions 0 20,174,172 24,825,828 0
General partners' capital contri-
butions 1,000 0 0 0
Syndication costs 0 (1,929,465) (2,452,743) 0
Acquisition of land and buildings 0 (13,170,132) (16,012,458) (2,355,627)
Investment in direct financing
leases 0 (975,853) (5,595,236) (405,937)
Investment in joint ventures 0 0 0 (775,000)
Reimbursement of organization,
syndication and acquisition costs
paid on behalf of CNL Income Fund
XVI, Ltd. by related parties 0 (854,154) (405,569) (2,494)
Increase in other assets 0 (443,625) (58,720) 0
Increase (decrease) in restricted cash 0 0 0 0
Reimbursement from developer of
construction costs 0 0 0 0
Other (36) (20,714) 20,714 0
------------ ------------ ------------ ------------
Cash generated (deficiency) after cash
distributions and special items 964 2,982,532 1,004,290 (2,441,583)
============ ============ ============ ============
TAX AND DISTRIBUTION DATA PER $1,000
INVESTED
Federal income tax results:
Ordinary income (loss)
- from operations 0 17 53 71
============ ============ ============ ============
- from recapture 0 0 0 0
============ ============ ============ ============
Capital gain (loss) (Notes 4 and 5) 0 0 0 0
============ ============ ============ ============
</TABLE>
C-19
<PAGE>
<TABLE>
<CAPTION>
6 months
1997 1998
------------ -------------
<S> <C>
Gross revenue $ 4,308,853 $ 1,987,937
Equity in earnings from joint venture 73,507 64,956
Profit from sale of properties (Notes 4
and 5) 41,148 0
Interest income 73,634 34,195
Less: Operating expenses (272,932) (132,020)
Interest expense 0 0
Depreciation and amortization (563,883) (268,997)
------------ ------------
Net income - GAAP basis 3,660,327 1,686,071
============ ============
Taxable income
- from operations 3,178,911 1,629,897
============ ============
- from gain on sale (Notes 4 and 5) 64,912 0
============ ============
Cash generated from operations
(Notes 2 and 3) 3,780,424 1,922,221
Cash generated from sales (Notes 4 and 5) 610,384 0
Cash generated from refinancing 0 0
------------ ------------
Cash generated from operations, sales
and refinancing 4,390,808 1,922,221
Less: Cash distributions to investors
(Note 6)
- from operating cash flow (3,600,000) (1,890,000)
- from sale of properties 0 0
-------------- -------------
Cash generated (deficiency) after cash
distributions 790,808 32,221
Special items (not including sales and
refinancing):
Limited partners' capital contri-
butions 0 0
General partners' capital contri-
butions 0 0
Syndication costs 0 0
Acquisition of land and buildings (23,501) 0
Investment in direct financing
leases (29,257) (31,504)
Investment in joint ventures 0 (607,896)
Reimbursement of organization,
syndication and acquisition costs
paid on behalf of CNL Income Fund
XVI, Ltd. by related parties 0 0
Increase in other assets 0 0
Increase (decrease) in restricted cash (610,384) 610,384
Reimbursement from developer of
construction costs 0 161,204
Other 0 0
-------------- -------------
Cash generated (deficiency) after cash
distributions and special items 127,666 164,409
============== =============
TAX AND DISTRIBUTION DATA PER $1,000
INVESTED
Federal income tax results:
Ordinary income (loss)
- from operations 70 36
============== ==============
- from recapture 0 0
============= ==============
Capital gain (loss) (Notes 4 and 5) 1 0
============= ==============
</TABLE>
C-20
<PAGE>
TABLE III - CNL INCOME FUND XVI, LTD. (continued)
<TABLE>
<CAPTION>
1993
(Note 1) 1994 1995 1996
------------ ------------ ------------ ------------
<S> <C>
Cash distributions to investors
Source (on GAAP basis)
- from investment income 0 1 45 76
- from capital gain 0 0 0 0
- from investment income from
prior period 0 0 0 0
------------ ------------ ------------ ------------
Total distributions on GAAP basis (Note 6) 0 1 45 76
============ ============ ============ ============
Source (on cash basis)
- from sales 0 0 0 0
- from refinancing 0 0 0 0
- from operations 0 1 45 76
------------ ------------ ------------ ------------
Total distributions on cash basis (Note 6) 0 1 45 76
============ ============ ============ ============
Total cash distributions as a percentage
of original $1,000 investment (Notes 7
and 8) 0.00% 4.50% 6.00% 7.88%
Total cumulative cash distributions per
$1,000 investment from inception 0 1 46 122
Amount (in percentage terms) remaining
invested in program properties at the
end of each year (period) presented
(original total acquisition cost of
properties retained, divided by original
total acquisition cost of all properties
in program) (Notes 4 and 5) N/A 100% 100% 100%
</TABLE>
Note 1: Pursuant to a registration statement on Form S-11 under the
Securities Act of 1933, as amended, CNL Income Fund XVI, Ltd.
("CNL XVI") and CNL Income Fund XV, Ltd. each registered for sale
$40,000,000 units of limited partnership interests ("Units"). The
offering of Units of CNL Income Fund XV, Ltd. commenced February
23, 1994. Pursuant to the registration statement, CNL XVI could
not commence until the offering of Units of CNL Income Fund XV,
Ltd. was terminated. CNL Income Fund XV, Ltd. terminated its
offering of Units on September 1, 1994, at which time the maximum
offering proceeds of $40,000,000 had been received. Upon the
termination of the offering of Units of CNL Income Fund XV, Ltd.,
CNL XVI commenced its offering of Units. Activities through
September 22, 1994, were devoted to organization of the
partnership and operations had not begun.
Note 2: Cash generated from operations includes cash received from
tenants, less cash paid for expenses, plus interest received.
Note 3: Cash generated from operations per this table agrees to cash
generated from operations per the statement of cash flows included
in the financial statements of CNL Income Fund XVI, Ltd.
Note 4: In April 1996, CNL Income Fund XVI, Ltd. sold one of its
properties and received net sales proceeds of $775,000, resulting
in a gain of $124,305 for financial reporting purposes. In October
1996, the partnership reinvested the net sales proceeds in an
additional property as tenants-in-common with an affiliate of the
general partners.
Note 5: In March 1997, CNL Income Fund XVI, Ltd. sold one of its
properties and received net sales proceeds of $610,384, resulting
in a gain of $41,148 for financial reporting purposes. In January
1998, the partnership reinvested the net sales proceeds in an
additional property as tenants-in-common with affiliates of the
general partners.
Note 6: Distributions declared for the quarters ended December 31, 1994,
1995, 1996 and 1997 are reflected in the 1995, 1996, 1997 and 1998
columns, respectively, due to the payment of such distributions in
January 1995, 1996, 1997 and 1998, respectively. As a result of
distributions being presented on a cash basis, distributions
declared and unpaid as of December 31, 1994, 1995, 1996, 1997 and
June 30, 1998 are not included in the 1994, 1995, 1996, 1997 and
1998 totals, respectively.
Note 7: Cash distributions for 1998 include an additional amount equal to
0.20% of invested capital which was earned in 1997 but declared
payable in the first quarter of 1998.
Note 8: Total cash distributions as a percentage of original $1,000
investment are calculated based on actual distributions declared
for the period. (See Note 6 above)
Note 9: Certain data for columns representing less than 12 months have
been annualized.
C-21
<PAGE>
<TABLE>
<CAPTION>
6 months
1997 1998
------------ ------------
<S> <C>
Cash distributions to investors
Source (on GAAP basis)
- from investment income
- from capital gain 80 37
- from investment income from 0 0
prior period 0 5
------------ ------------
80 42
Total distributions on GAAP basis (Note 6) ============ ============
Source (on cash basis)
- from sales 0 0
- from refinancing 0 0
- from operations 80 42
------------ ------------
Total distributions on cash basis (Note 6) 80 42
============ ============
Total cash distributions as a percentage
of original $1,000 investment (Notes 7
and 8) 8.00% 8.20%
Total cumulative cash distributions per
$1,000 investment from inception 202 244
Amount (in percentage terms) remaining
invested in program properties at the
end of each year (period) presented
(original total acquisition cost of
properties retained, divided by original
total acquisition cost of all properties
in program) (Notes 4 and 5) 100% 100%
</TABLE>
C-22
<PAGE>
TABLE III Operating Results
of Prior Programs CNL AMERICAN
PROPERTIES FUND, INC.
<TABLE>
<CAPTION>
1994 1997
(Note 1) 1995 1996 (Note 2)
------------ ------------ ------------ ----------
<S> <C>
Gross revenue $ 0 $ 539,776 $ 4,363,456 $ 15,516,102
Interest income 0 119,355 1,843,228 3,941,831
Less: Operating expenses 0 (186,145) (908,924) (2,066,962)
Interest expense 0 0 0 0
Depreciation and amortization 0 (104,131) (521,871) (1,795,062)
Minority interest in income of
consolidated joint venture 0 (76) (29,927) (31,453)
------------ ------------ ------------ ------------
Net income - GAAP basis 0 368,779 4,745,962 15,564,456
============ ============ ============ ============
Taxable income
- from operations (Note 8) 0 379,935 4,894,262 15,727,311
============ ============ ============ ============
- from gain (loss) on sale 0 0 0 (41,115)
============ ============ ============ ============
Cash generated from operations
(Notes 4 and 5) 0 498,459 5,482,540 17,076,214
Cash generated from sales (Note 7) 0 0 0 6,289,236
Cash generated from refinancing 0 0 0 0
------------ ------------ ------------ ------------
Cash generated from operations, sales
and refinancing 0 498,459 5,482,540 23,365,450
Less: Cash distributions to investors (Note 9)
- from operating cash flow 0 (498,459) (5,439,404) (16,854,297)
- from sale of properties 0 0 0 0
- from return of capital (Note 10) 0 (136,827) 0 0
------------ ------------ ------------ ------------
Cash generated (deficiency) after cash
distributions 0 (136,827) 43,136 6,511,153
Special items (not including sales of
real estate and refinancing):
Subscriptions received from
stockholders 0 38,454,158 100,792,991 222,482,560
Sale of common stock to CNL Fund
Advisors, Inc. 200,000 0 0 0
Contributions from minority interest 0 200,000 97,419 0
Distributions to holder of minority
interest 0 0 (39,121) (34,020)
Stock issuance costs (19) (3,680,704) (8,486,188) (19,542,862)
Acquisition of land and buildings 0 (18,835,969) (36,104,148) (143,542,667)
Investment in direct financing
leases 0 (1,364,960) (13,372,621) (39,155,974)
Proceeds from sale of equipment direct
financing leases 0 0 0 962,274
Investment in joint venture 0 0 0 0
Investment in mortgage notes
receivable 0 0 (13,547,264) (4,401,982)
Collections on mortgage notes
receivable 0 0 133,850 250,732
Investment in notes receivable 0 0 0 (12,521,401)
Collections on notes receivable 0 0 0 0
Investment in certificate of deposit 0 0 0 (2,000,000)
Proceeds of borrowing on line of
credit 0 0 3,666,896 19,721,804
Payment on line of credit 0 0 (145,080) (20,784,577)
Reimbursement of organization, acquisition,
and deferred offering and stock issuance
costs paid on behalf of CNL American
Properties Fund, Inc. by related parties (199,036) (2,500,056) (939,798) (2,857,352)
Increase in other assets 0 (628,142) (1,103,896) 0
Other 0 0 (54,333) 49,001
------------ ------------ ------------ ------------
Cash generated (deficiency) after cash
distributions and special items 945 11,507,500 30,941,643 5,136,689
============ ============ ============ ============
TAX AND DISTRIBUTION DATA PER $1,000
INVESTED (Note 6)
Federal income tax results:
Ordinary income (loss) (Note 11)
- from operations (Note 8) 0 20 61 67
============ ============ ============ ============
- from recapture 0 0 0 0
============ ============ ============ ============
Capital gain (loss) 0 0 0 0
============ ============ ============ ============
</TABLE>
C-23
<PAGE>
<TABLE>
<CAPTION>
6 months
1998
(Note 3)
--------------
<S> <C>
Gross revenue $ 13,829,348
Interest income 3,799,730
Less: Operating expenses (1,949,398)
Interest expense 0
Depreciation and amortization (1,648,827)
Minority interest in income of
consolidated joint venture (15,380)
--------------
Net income - GAAP basis 14,015,473
==============
Taxable income
- from operations (Note 8) 13,876,482
==============
- from gain (loss) on sale (108,690)
==============
Cash generated from operations
(Notes 4 and 5) 16,600,953
Cash generated from sales (Note 7) 1,233,679
Cash generated from refinancing 0
---------------
Cash generated from operations, sales
and refinancing 17,834,632
Less: Cash distributions to investors (Note 9)
- from operating cash flow (15,992,806)
- from sale of properties 0
- from return of capital (Note 10) 0
---------------
Cash generated (deficiency) after cash
distributions 1,841,826
Special items (not including sales of
real estate and refinancing):
Subscriptions received from
stockholders 152,570,391
Sale of common stock to CNL Fund
Advisors, Inc. 0
Contributions from minority interest 0
Distributions to holder of minority
interest (16,956)
Stock issuance costs (13,840,339)
Acquisition of land and buildings (36,742,586)
Investment in direct financing
leases (71,360,700)
Proceeds from sale of equipment direct
financing leases 0
Investment in joint venture (112,847)
Investment in mortgage notes
receivable 0
Collections on mortgage notes
receivable 147,051
Investment in notes receivable (2,903,600)
Collections on notes receivable 666,633
Investment in certificate of deposit 0
Proceeds of borrowing on line of
credit 2,979,403
Payment on line of credit 0
Reimbursement of organization, acquisition,
and deferred offering and stock issuance
costs paid on behalf of CNL American
Properties Fund, Inc. by related parties (2,570,126)
Increase in other assets (1,845,005)
Other (30,842)
--------------
Cash generated (deficiency) after cash
distributions and special items 28,782,303
==============
TAX AND DISTRIBUTION DATA PER $1,000
INVESTED (Note 6)
Federal income tax results:
Ordinary income (loss) (Note 11)
- from operations (Note 8) 32
==============
- from recapture 0
==============
Capital gain (loss) 0
==============
</TABLE>
C-24
<PAGE>
TABLE III - CNL AMERICAN PROPERTIES FUND, INC. (continued)
<TABLE>
<CAPTION>
1994 1997
(Note 1) 1995 1996 (Note 2)
------------ ------------ ------------ ----------
<S> <C>
Cash distributions to investors
Source (on GAAP basis)
- from investment income 0 19 59 66
- from capital gain 0 0 0 0
- from investment income from
prior period 0 0 0 0
- from return of capital (Note 10) 0 14 8 6
------------ ------------ ------------ ------------
Total distributions on GAAP basis (Note 11) 0 33 67 72
============ ============ ============ ============
Source (on cash basis)
- from sales 0 0 0 0
- from refinancing 0 0 0 0
- from operations 0 26 67 72
- from return of capital (Note 10) 0 7 0 0
------------ ------------ ------------ ------------
Total distributions on cash basis (Note 11) 0 33 67 72
============ ============ ============ ============
Total cash distributions as a percentage
of original $1,000 investment (Note 6 and 9) 0.00% 5.34% 7.06% 7.45%
Total cumulative cash distributions per
$1,000 investment from inception 0 33 100 172
Amount (in percentage terms) remaining
invested in program properties at the end of
each year (period) presented (original total
acquisition cost of properties retained,
divided by original total acquisition cost
of all properties in program) (Note 7) N/A 100% 100% 100%
</TABLE>
Note 1: Pursuant to a Registration Statement on Form S-11 under the
Securities Act of 1933, as amended, effective March 29, 1995, CNL
American Properties Fund, Inc. ("APF") registered for sale
$165,000,000 of shares of common stock (the "Initial Offering"),
including $15,000,000 available only to stockholders participating
in the company's reinvestment plan. The Initial Offering of APF
commenced April 19, 1995, and upon completion of the Initial
Offering on February 6, 1997, had received subscription proceeds
of $150,591,765 (15,059,177 shares), including $591,765 (59,177
shares) issued pursuant to the reinvestment plan. Pursuant to a
Registration Statement on Form S-11 under the Securities Act of
1933, as amended, effective January 31, 1997, APF registered for
sale $275,000,000 of shares of common stock (the "1997 Offering"),
including $25,000,000 available only to stockholders participating
in the company's reinvestment plan. The 1997 Offering of APF
commenced following the completion of the Initial Offering on
February 6, 1997, and upon completion of the 1997 Offering on
March 2, 1998, had received subscription proceeds of $251,872,648
(25,187,265 shares), including $1,872,648 (187,265 shares) issued
pursuant to the reinvestment plan. Pursuant to a Registration
Statement on Form S-11 under the Securities Act of 1933, as
amended, effective May 12, 1998, APF registered for sale
$345,000,000 of shares of common stock (the "1998 Offering"),
including $20,000,000 available only to stockholders participating
in the company's reinvestment plan. The 1998 Offering of APF
commenced following the completion of the 1997 Offering on March
2, 1998. As of June 30, 1998, APF had received subscriptions
totalling $111,835,687 from the 1998 Offering, including
$1,823,518 issued pursuant to the company's reinvestment plan.
Activities through June 1, 1995, were devoted to organization of
APF and operations had not begun.
Note 2: The amounts shown represent the combined results of the Initial
Offering and the 1997 Offering. Note 3: The amounts shown
represent the combined results of the Initial Offering, 1997
Offering and 1998 Offering.
Note 4: Cash generated from operations includes cash received from
tenants, less cash paid for expenses, plus interest received.
Note 5: Cash generated from operations per this table agrees to cash
generated from operations per the statement of cash flows included
in the financial statements of APF.
Note 6: Total cash distributions as a percentage of original $1,000
investment are calculated based on actual distributions declared
for the period.
Note 7: In May 1997 and July 1997, APF sold four properties and one
property, respectively, to a tenant for $5,254,083 and $1,035,153,
respectively, which was equal to the carrying value of the
properties at the time of sale. In May 1998, APF sold two
properties to third parties for $1,605,154 (and received net sales
proceeds of approximately $1,233,700 after deduction of
construction costs incurred but not paid by APF as of the date of
the sale) which approximated the carrying value of the properties
at the time of sale. As a result, no gain or loss was recognized
for financial reporting purposes. The company reinvested the
proceeds from the sale of properties in additional properties.
Note 8: Taxable income presented is before the dividends paid deduction.
Note 9: For the six months ended June 30, 1998 and the years ended
December 31, 1997, 1996 and 1995, 86.37%, 93.33%, 90.25% and
59.82%, respectively, of the distributions received by
stockholders were considered to be ordinary income and 13.63%,
6.67%, 9.75% and 40.18%, respectively, were considered a return of
capital for federal income tax purposes. No amounts distributed to
stockholders for the six months ended June 30, 1998 and the years
ended December 31, 1997, 1996 and 1995 are required to be or have
been treated by the company as a return of capital for purposes of
calculating the stockholders' return on their invested capital.
C-25
<PAGE>
<TABLE>
<CAPTION>
6 months
1998
(Note 3)
-------------
<S> <C>
Cash distributions to investors
Source (on GAAP basis)
- from investment income 32
- from capital gain 0
- from investment income from
prior period 0
- from return of capital (Note 10) 5
------------
37
============
Total distributions on GAAP basis (Note 11)
Source (on cash basis)
- from sales 0
- from refinancing 0
- from operations 37
- from return of capital (Note 10) 0
------------
Total distributions on cash basis (Note 11) 37
============
Total cash distributions as a percentage
of original $1,000 investment (Note 6 and 9) 7.62%
Total cumulative cash distributions per
$1,000 investment from inception 209
Amount (in percentage terms) remaining
invested in program properties at the end of
each year (period) presented (original total
acquisition cost of properties retained,
divided by original total acquisition cost
of all properties in program) (Note 7) 100%
</TABLE>
Note 10: Cash distributions presented above as a return of capital on a
GAAP basis represent the amount of cash distributions in excess of
accumulated net income on a GAAP basis. Accumulated net income
includes deductions for depreciation and amortization expense and
income from certain non-cash items. This amount is not required to
be presented as a return of capital except for purposes of this
table, and APF has not treated this amount as a return of capital
for any other purpose.
Note 11: Tax and distribution data and total distributions on GAAP basis
were computed based on the weighted average shares outstanding
during each period presented.
C-26
<PAGE>
TABLE III
Operating Results of Prior Programs CNL
INCOME FUND XVII, LTD.
<TABLE>
<CAPTION>
1995 6 months
(Note 1) 1996 1997 1998
------------ ------------ ------------ -------------
<S> <C>
Gross revenue $ 0 $ 1,195,263 $ 2,643,871 $ 1,417,608
Equity in earnings of unconsolidated
joint ventures 0 4,834 100,918 69,785
Interest income 12,153 244,406 69,779 24,834
Less: Operating expenses (3,493) (169,536) (181,865) (93,411)
Interest expense 0 0 0 0
Depreciation and amortization (309) (179,208) (387,292) (176,959)
Minority interest in income of
consolidated joint venture 0 (41,854) (31,219)
------------ ------------ ------------ ------------
Net income - GAAP basis 8,351 1,095,759 2,203,557 1,210,638
============ ============ ============ ============
Taxable income
- from operations 12,153 1,114,964 2,058,601 1,062,296
============ ============ ============ ============
- from gain on sale 0 0 0 0
============ ============ ============ ============
Cash generated from operations
(Notes 2 and 3) 9,012 1,232,948 2,495,114 1,274,084
Cash generated from sales 0 0 0 0
Cash generated from refinancing 0 0 0 0
------------ ------------ ------------ ------------
Cash generated from operations, sales
and refinancing 9,012 1,232,948 2,495,114 1,274,084
Less: Cash distributions to investors
(Note 4)
- from operating cash flow (1,199) (703,681) (2,177,584) (1,200,000)
- from sale of properties 0 0 0 0
------------ ------------ ------------ ------------
Cash generated (deficiency) after cash
distributions 7,813 529,267 317,530 74,084
Special items (not including sales and
refinancing):
Limited partners' capital contri-
butions 5,696,921 24,303,079 0 0
General partners' capital contri-
butions 1,000 0 0 0
Contributions from minority interest 0 140,676 278,170 0
Distribution to holder of minority
interest 0 0 (41,507) (24,426)
Syndication costs (604,348) (2,407,317) 0 0
Acquisition of land and buildings (332,928) (19,735,346) (1,740,491) 0
Investment in direct financing
leases 0 (1,784,925) (1,130,497) 0
Investment in joint ventures 0 (201,501) (1,135,681) (127,807)
Reimbursement of organization,
syndication and acquisition costs
paid on behalf of CNL Income Fund
XVII, Ltd. by related parties (347,907) (326,483) (25,444) 0
Increase in other assets (221,282) 0 0 0
Reimbursement from developer of
construction costs 0 0 0 322,897
Other (410) 410 0 (16,797)
------------ ------------ ------------ ------------
Cash generated (deficiency) after cash
distributions and special items 4,198,859 517,860 (3,477,920) 227,951
============ ============ ============ ============
TAX AND DISTRIBUTION DATA PER $1,000
INVESTED
Federal income tax results:
Ordinary income (loss)
- from operations 36 37 69 35
============ ============ ============ ============
- from recapture 0 0 0 0
============ ============ ============ ============
Capital gain (loss) 0 0 0 0
============ ============ ============ ============
</TABLE>
C-27
<PAGE>
TABLE III - CNL INCOME FUND XVII, LTD. (continued)
<TABLE>
<CAPTION>
1995 6 months
(Note 1) 1996 1997 1998
------------ ------------ ------------ --------
<S> <C>
Cash distributions to investors
Source (on GAAP basis)
- from investment income 4 23 73 40
- from capital gain 0 0 0 0
- from investment income from
prior period 0 0 0 0
----------- ------------ ------------ ------------
Total distributions on GAAP basis (Note 4) 0 23 73 40
============ ============ ============ ============
Source (on cash basis)
- from sales 0 0 0 0
- from refinancing 0 0 0 0
- from operations 4 23 73 40
------------ ------------ ------------ -------------
Total distributions on cash basis (Note 4) 4 23 73 40
============ ============ ============ =============
Total cash distributions as a percentage
of original $1,000 investment (Note 5) 5.00% 5.50% 7.625% 8.00
Total cumulative cash distributions per
$1,000 investment from inception 4 27 100 140
Amount (in percentage terms) remaining
invested in program properties at the
end of each year (period) presented
(original total acquisition cost of
properties retained, divided by original
total acquisition cost of all properties
in program) (Note 6) N/A 98% 100% 99%
</TABLE>
Note 1: Pursuant to a registration statement on Form S-11 under the
Securities Act of 1933, as amended, effective August 11, 1995, CNL
Income Fund XVII, Ltd. ("CNL XVII") and CNL Income Fund XVIII,
Ltd. each registered for sale $30,000,000 units of limited
partnership interests ("Units"). The offering of Units of CNL
Income Fund XVII, Ltd. commenced September 2, 1995. Pursuant to
the registration statement, CNL XVIII could not commence until the
offering of Units of CNL Income Fund XVII, Ltd. was terminated.
CNL Income Fund XVII, Ltd. terminated its offering of Units on
September 19, 1996, at which time subscriptions for the maximum
offering proceeds of $30,000,000 had been received. Upon the
termination of the offering of Units of CNL Income Fund XVII,
Ltd., CNL XVIII commenced its offering of Units. Activities
through November 3, 1995, were devoted to organization of the
partnership and operations had not begun.
Note 2: Cash generated from operations includes cash received from
tenants, plus distributions from joint ventures, less cash paid
for expenses, plus interest received.
Note 3: Cash generated from operations per this table agrees to cash
generated from operations per the statement of cash flows included
in the financial statements of CNL XVII.
Note 4: Distributions declared for the quarters ended December 31, 1995,
1996 and 1997 are reflected in the 1996, 1997 and 1998
columns, respectively, due to the payment of such distributions in
January 1996, 1997 and 1998, respectively. As a result of
distributions being presented on a cash basis, distributions
declared and unpaid as of December 31, 1996, 1997 and June 30,
1998 are not included in the 1996, 1997 and 1998 totals,
respectively.
Note 5: Total cash distributions as a percentage of original $1,000
investment are calculated based on actual distributions declared
for the period. (See Note 4 above)
Note 6: During 1998, CNL Income Fund XVII, Ltd. received approximately
$322,900 from the developer of the properties in Aiken, South
Carolina and Weatherford, Texas. This represents a reimbursement
from the developer upon final reconciliation of total construction
costs, to the total construction costs funded by the partnership
in accordance with the development agreement. The partnership
intends to reinvest the funds in additional properties.
Note 7: Certain data for columns representing less than 12 months have
been annualized.
C-28
<PAGE>
TABLE III
Operating Results of Prior Programs CNL
INCOME FUND XVIII, LTD.
<TABLE>
<CAPTION>
1995 6 months
(Note 1) 1996 1997 1998
------------ ------------ ------------ --------
<S> <C>
Gross revenue $ 0 $ 1,373 $ 1,291,416 $ 1,447,579
Equity in earnings of joint venture 0 0 0 0
Interest income 0 30,241 161,826 99,885
Less: Operating expenses 0 (3,992) (156,403) (103,375)
Interest expense 0 0 0 0
Depreciation and amortization 0 (712) (142,079) (178,935)
------------ ------------ ------------ ------------
Net income - GAAP basis 0 26,910 1,154,760 1,265,154
============ ============ ============ ============
Taxable income
- from operations 0 30,223 1,318,750 1,206,888
============ ============ ============ ============
- from gain on sale 0 0 0 0
============ ============ ============ ============
Cash generated from operations
(Notes 2 and 3) 0 27,146 1,361,756 1,459,212
Cash generated from sales 0 0 0 0
Cash generated from refinancing 0 0 0 0
------------ ------------ ------------ ------------
Cash generated from operations, sales
and refinancing 0 27,146 1,361,756 1,459,212
Less: Cash distributions to investors
(Note 4)
- from operating cash flow 0 (2,138) (855,957) (1,112,150)
- from sale of properties 0 0 0 0
------------ ------------ ------------ ------------
Cash generated (deficiency) after cash
distributions 0 25,008 505,799 347,062
Special items (not including sales and
refinancing):
Limited partners' capital contri-
butions 0 8,498,815 25,723,944 854,241
General partners' capital contri-
butions 1,000 0 0 0
Contributions from minority interest 0 0 0 0
Syndication costs 0 (845,657) (2,450,214) (161,141)
Acquisition of land and buildings 0 (1,533,446) (18,581,999) (2,219,267)
Investment in direct financing leases 0 0 (5,962,087) (877,348)
Investment in joint venture 0 0 0 0
Increase in restricted cash 0 0 0 0
Reimbursement of organization,
syndication and acquisition costs
paid on behalf of CNL Income Fund
XVIII, Ltd. by related parties 0 (497,420) (396,548) (35,055)
Increase in other assets 0 (276,848) 0 (48,378)
Other (20) (107) (66,893) (10,000)
------------ ------------ ------------ ------------
Cash generated (deficiency) after cash
distributions and special items 980 5,370,345 (1,227,998) (2,149,886)
============ ============ ============ ============
TAX AND DISTRIBUTION DATA PER $1,000
INVESTED
Federal income tax results:
Ordinary income (loss)
- from operations 0 6 57 34
============ ============ ============ ============
- from recapture 0 0 0 0
============ ============ ============ ============
Capital gain (loss) 0 0 0 0
============ ============ ============ ============
C-29
</TABLE>
<PAGE>
TABLE III - CNL INCOME FUND XVIII, LTD. (continued)
<TABLE>
<CAPTION>
1995 6 months
(Note 1) 1996 1997 1998
------------ ------------ ------------ ---------
<S> <C>
Cash distributions to investors
Source (on GAAP basis)
- from investment income 0 0 38 32
- from capital gain 0 0 0 0
- from investment income from prior
period 0 0 0 0
------------ ------------ ------------ -----------
Total distributions on GAAP basis (Note 4) 0 0 38 32
============ ============ ============ ===========
Source (on cash basis)
- from sales 0 0 0 0
- from refinancing 0 0 0 0
- from operations 0 0 38 32
------------ ------------ ------------ -----------
Total distributions on cash basis (Note 4) 0 0 38 32
============ ============ ============ ===========
Total cash distributions as a percentage
of original $1,000 investment from
inception 0.00 % 5.00 % 5.75 % 7.25 %
Total cumulative cash distributions per
$1,000 investment (Note 5) 0 0 38 70
Amount (in percentage terms) remaining
invested in program properties at the
end of each year (period) presented
(original total acquisition cost of
properties retained, divided by original
total acquisition cost of all properties
in program) N/A 83 % 95 % 99 %
</TABLE>
Note 1: Pursuant to a registration statement on Form S-11 under the
Securities Act of 1933, as amended, effective August 11, 1995, CNL
Income Fund XVIII, Ltd ("CNL XVIII") and CNL Income Fund XVII,
Ltd. each registered for sale $30,000,000 units of limited
partnership interest ("Units"). The offering of Units of CNL
Income Fund XVII, Ltd. commenced September 2, 1995. Pursuant to
the registration statement, CNL XVIII could not commence until the
offering of Units of CNL Income Fund XVII, Ltd. was terminated.
CNL Income Fund XVII, Ltd. terminated its offering of Units on
September 19, 1996, at which time the maximum offering proceeds of
$30,000,000 had been received. Upon the termination of the
offering of Units of CNL Income Fund XVII, Ltd., CNL XVIII
commenced its offering of Units. Activities through October 11,
1996, were devoted to organization of the partnership and
operations had not begun.
Note 2: Cash generated from operations includes cash received from
tenants, less cash paid for expenses, plus interest received.
Note 3: Cash generated from operations per this table agrees to cash
generated from operations per the statement of cash flows included
in the financial statements of CNL XVIII.
Note 4: Distributions declared for the quarters ended December 1996 and
1997 are reflected in the 1997 and 1998 columns, respectively, due
to the payment of such distributions in January 1997 and 1998,
respectively. As a result of distributions being presented on a
cash basis, distributions declared and unpaid as of December 31,
1997 and June 30, 1998 are not included in the 1997 and 1998
totals, respectively.
Note 5: Total cash distributions as a percentage of original $1,000
investment are calculated based on actual distributions declared
for the period. (See Note 4 above)
Note 6: Certain data for columns representing less than 12 months have
been annualized.
C-30
<PAGE>
TABLE V
SALES OR DISPOSALS OF PROPERTIES
<TABLE>
<CAPTION>
==========================================================================================================================
Selling Price, Net of
Closing Costs and GAAP Adjustments
----------------------------------------------------
Purchase
Cash money Adjustments
received Mortgage mortgage resulting
net of balance taken from
Date Date of closing at time back by application
Property Acquired Sale costs of sale program of GAAP Total
==========================================================================================================================
<S> <C>
CNL Income Fund, Ltd.:
Burger King -
San Dimas, CA (14) 02/05/87 06/12/92 $1,169,021 0 0 0 $1,169,021
Wendy's -
Fairfield, CA (14) 07/01/87 10/03/94 1,018,490 0 0 0 1,018,490
Wendy's -
Casa Grande, AZ 12/10/86 08/19/97 795,700 0 0 0 795,700
Wendy's -
North Miami, FL (9) 02/18/86 08/21/97 473,713 0 0 0 473,713
Popeye's -
Kissimmee, FL (14) 12/31/86 04/30/98 661,300 0 0 0 661,300
CNL Income Fund II, Ltd.:
Golden Corral -
Salisbury, NC 05/29/87 07/21/93 746,800 0 0 0 746,800
Pizza Hut -
Graham, TX 08/24/87 07/28/94 261,628 0 0 0 261,628
Golden Corral -
Medina, OH (11) 11/18/87 11/30/94 825,000 0 0 0 825,000
Denny's -
Show Low, AZ (8) 05/22/87 01/31/97 620,800 0 0 0 620,800
KFC -
Eagan, MN 06/01/87 06/02/97 623,882 0 42,000 0 665,882
KFC -
Jacksonville, FL 09/01/87 09/09/97 639,363 0 0 0 639,363
Wendy's -
Farmington Hills, MI (12) 05/18/87 10/09/97 833,031 0 0 0 833,031
Wendy's -
Farmington Hills, MI (13) 05/18/87 10/09/97 1,085,259 0 0 0 1,085,259
Denny's -
Plant City, FL 11/23/87 10/24/97 910,061 0 0 0 910,061
Pizza Hut -
Mathis, TX 12/17/87 12/04/97 297,938 0 0 0 297,938
KFC -
Avon Park, FL 09/02/87 12/10/97 501,975 0 0 0 501,975
CNL Income Fund III, Ltd.:
Wendy's -
Chicago, IL (14) 06/02/88 01/10/97 496,418 0 0 0 496,418
Perkins -
Bradenton, FL 06/30/88 03/14/97 1,310,001 0 0 0 1,310,001
Pizza Hut -
Kissimmee, FL 02/23/88 04/08/97 673,159 0 0 0 673,159
</TABLE>
<TABLE>
<CAPTION>
=============================================================================================
Cost of Properties
Including Closing and
Soft Costs
------------------------------------
Excess
Total (deficiency)
acquisition of property
cost, capital operating cash
Original improvements receipts over
mortgage closing and cash
Property financing soft costs (1) Total expenditures
==============================================================================================
<S> <C>
CNL Income Fund, Ltd.:
Burger King -
San Dimas, CA (14) 0 $955,000 $ 955,000 $214,021
Wendy's -
Fairfield, CA (14) 0 861,500 861,500 156,990
Wendy's -
Casa Grande, AZ 0 667,255 667,255 128,445
Wendy's -
North Miami, FL (9) 0 385,000 385,000 88,713
Popeye's -
Kissimmee, FL (14) 0 475,360 475,360 185,940
CNL Income Fund II, Ltd.:
Golden Corral -
Salisbury, NC 0 642,800 642,800 104,000
Pizza Hut -
Graham, TX 0 205,500 205,500 56,128
Golden Corral -
Medina, OH (11) 0 743,000 743,000 82,000
Denny's -
Show Low, AZ (8) 0 484,185 484,185 136,615
KFC -
Eagan, MN 0 601,100 601,100 64,782
KFC -
Jacksonville, FL 0 405,000 405,000 234,363
Wendy's -
Farmington Hills, MI (12) 0 679,000 679,000 154,031
Wendy's -
Farmington Hills, MI (13) 0 887,000 887,000 198,259
Denny's -
Plant City, FL 0 820,717 820,717 89,344
Pizza Hut -
Mathis, TX 0 202,100 202,100 95,838
KFC -
Avon Park, FL 0 345,000 345,000 156,975
CNL Income Fund III, Ltd.:
Wendy's -
Chicago, IL (14) 0 591,362 591,362 (94,944)
Perkins -
Bradenton, FL 0 1,080,500 1,080,500 229,501
Pizza Hut -
Kissimmee, FL 0 474,755 474,755 198,404
</TABLE>
C-31
<PAGE>
TABLE V
SALES OR DISPOSALS OF PROPERTIES
<TABLE>
<CAPTION>
==========================================================================================================================
Selling Price, Net of
Closing Costs and GAAP Adjustments
----------------------------------------------------
Purchase
Cash money Adjustments
received Mortgage mortgage resulting
net of balance taken from
Date Date of closing at time back by application
Property Acquired Sale costs of sale program of GAAP Total
==========================================================================================================================
<S> <C>
Burger King -
Roswell, GA 06/08/88 06/20/97 257,981 0 685,000 0 942,981
Wendy's -
Mason City, IA 02/29/88 10/24/97 217,040 0 0 0 217,040
Taco Bell -
Fernandina Beach, FL (14) 04/09/88 01/15/98 721,655 0 0 0 721,655
Denny's -
Daytona Beach, FL (14) 07/12/88 01/23/98 1,008,976 0 0 0 1,008,976
Wendy's -
Punta Gorda, FL 02/03/88 02/20/98 665,973 0 0 0 665,973
Po' Folks -
Hagerstown, MD 06/21/88 06/10/98 788,884 0 0 0 788,884
CNL Income Fund IV, Ltd.:
Taco Bell -
York, PA 03/22/89 04/27/94 712,000 0 0 0 712,000
Burger King -
Hastings, MI 08/12/88 12/15/95 518,650 0 0 0 518,650
Wendy's -
Tampa, FL 12/30/88 09/20/96 1,049,550 0 0 0 1,049,550
Checkers -
Douglasville, GA 12/08/94 11/07/97 380,695 0 0 0 380,695
Taco Bell -
Fort Myers, FL (14) 12/22/88 03/02/98 794,690 0 0 0 794,690
Denny's -
Union Township, OH (14) 11/01/88 03/31/98 674,135 0 0 0 674,135
CNL Income Fund V, Ltd.:
Perkins -
Myrtle Beach, SC (2) 02/28/90 08/25/95 0 0 1,040,000 0 1,040,000
Ponderosa -
St. Cloud, FL (6) (14) 06/01/89 10/24/96 73,713 0 1,057,299 0 1,131,012
Franklin National Bank -
Franklin, TN 06/26/89 01/07/97 960,741 0 0 0 960,741
Shoney's -
Smyrna, TN 03/22/89 05/13/97 636,788 0 0 0 636,788
KFC -
Salem, NH 05/31/89 09/22/97 1,272,137 0 0 0 1,272,137
Perkins -
Port St. Lucie, FL 11/14/89 09/23/97 1,216,750 0 0 0 1,216,750
Hardee's -
Richmond, VA 02/17/89 11/07/97 397,785 0 0 0 397,785
Wendy's -
Tampa, FL 02/16/89 12/29/97 805,175 0 0 0 805,175
</TABLE>
TABLE V
SALES OR DISPOSALS OF PROPERTIES
<TABLE>
<CAPTION>
=============================================================================================
Cost of Properties
Including Closing and
Soft Costs
-----------------------------------
Excess
Total (deficiency)
acquisition of property
cost, capital operating cash
Original improvements receipts over
mortgage closing and cash
Property financing soft costs (1) Total expenditures
==============================================================================================
<S> <C>
Burger King -
Roswell, GA 0 775,226 775,226 167,755
Wendy's -
Mason City, IA 0 190,252 190,252 26,788
Taco Bell -
Fernandina Beach, FL (14) 0 559,570 559,570 162,085
Denny's -
Daytona Beach, FL (14) 0 918,777 918,777 90,799
Wendy's -
Punta Gorda, FL 0 684,342 684,342 (18,369)
Po' Folks -
Hagerstown, MD 0 1,188,315 1,188,315 (399,431)
CNL Income Fund IV, Ltd.:
Taco Bell -
York, PA 0 616,501 616,501 95,499
Burger King -
Hastings, MI 0 419,936 419,936 98,714
Wendy's -
Tampa, FL 0 828,350 828,350 221,200
Checkers -
Douglasville, GA 0 363,768 363,768 16,927
Taco Bell -
Fort Myers, FL (14) 0 597,998 597,998 196,692
Denny's -
Union Township, OH (14) 0 872,850 872,850 (198,715)
CNL Income Fund V, Ltd.:
Perkins -
Myrtle Beach, SC (2) 0 986,418 986,418 53,582
Ponderosa -
St. Cloud, FL (6) (14) 0 996,769 996,769 134,243
Franklin National Bank -
Franklin, TN 0 1,138,164 1,138,164 (177,423)
Shoney's -
Smyrna, TN 0 554,200 554,200 82,588
KFC -
Salem, NH 0 1,079,310 1,079,310 192,827
Perkins -
Port St. Lucie, FL 0 1,203,207 1,203,207 13,543
Hardee's -
Richmond, VA 0 695,464 695,464 (297,679)
Wendy's -
Tampa, FL 0 657,800 657,800 147,375
</TABLE>
C-32
<PAGE>
TABLE V
SALES OR DISPOSALS OF PROPERTIES
<TABLE>
<CAPTION>
==========================================================================================================================
Selling Price, Net of
Closing Costs and GAAP Adjustments
----------------------------------------------------
Purchase
Cash money Adjustments
received Mortgage mortgage resulting
net of balance taken from
Date Date of closing at time back by application
Property Acquired Sale costs of sale program of GAAP Total
===========================================================================================================================
<S> <C>
Denny's -
Port Orange, FL (14) 07/10/89 01/23/98 1,283,096 0 0 0 1,283,096
Shoney's -
Tyler, TX 03/20/89 02/17/98 844,229 0 0 0 894,229
CNL Income Fund VI, Ltd.:
Hardee's -
Batesville, AR 11/02/89 05/24/94 791,211 0 0 0 791,211
Hardee's -
Heber Springs, AR 02/13/90 05/24/94 638,270 0 0 0 638,270
Hardee's -
Little Canada, MN 11/28/89 06/29/95 899,503 0 0 0 899,503
Jack in the Box -
Dallas, TX 06/28/94 12/09/96 982,980 0 0 0 982,980
Denny's -
Show Low, AZ (8) 05/22/87 01/31/97 349,200 0 0 0 349,200
KFC -
Whitehall Township, MI 02/26/90 07/09/97 629,888 0 0 0 629,888
Perkins -
Naples, FL 12/26/89 07/09/97 1,487,725 0 0 0 1,487,725
Burger King -
Plattsmouth, NE 01/19/90 07/18/97 699,400 0 0 0 699,400
Shoney's -
Venice, FL 08/03/89 09/17/97 1,206,696 0 0 0 1,206,696
Jack in the Box -
Yuma, AZ (10) 07/14/94 10/31/97 510,653 0 0 0 510,653
Denny's -
Deland, FL 03/22/90 01/23/98 1,236,97 0 0 0 1,236,97
Wendy's -
Liverpool, NY 12/08/89 02/09/98 145,221 0 0 0 145,221
Perkin's -
Melbourne, FL 02/03/90 02/12/98 552,910 0 0 0 552,910
Hardee's
Bellevue, NE 05/03/90 06/05/98 900,000 0 0 0 900,000
CNL Income Fund VII, Ltd.:
Taco Bell -
Kearns, UT 06/14/90 05/19/92 700,000 0 0 0 700,000
Hardee's -
St. Paul, MN 08/09/90 05/24/94 869,036 0 0 0 869,036
Perkins -
Florence, SC (3) 08/28/90 08/25/95 0 0 1,160,000 0 1,160,000
</TABLE>
<TABLE>
<CAPTION>
===========================================================================================
Cost of Properties
Including Closing and
Soft Costs
-----------------------------------
Excess
Total (deficiency)
acquisition of property
cost, capital operating cash
Original improvements receipts over
mortgage closing and cash
Property financing soft costs (1) Total expenditures
============================================================================================
<S> <C>
Denny's -
Port Orange, FL (14) 0 1,021,000 1,021,000 262,096
Shoney's -
Tyler, TX 0 770,300 770,300 73,929
CNL Income Fund VI, Ltd.:
Hardee's -
Batesville, AR 0 605,500 605,500 185,711
Hardee's -
Heber Springs, AR 0 532,893 532,893 105,377
Hardee's -
Little Canada, MN 0 821,692 821,692 77,811
Jack in the Box -
Dallas, TX 0 964,437 964,437 18,543
Denny's -
Show Low, AZ (8) 0 272,354 272,354 76,846
KFC -
Whitehall Township, MI 0 725,604 725,604 (95,716)
Perkins -
Naples, FL 0 1,083,869 1,083,869 403,856
Burger King -
Plattsmouth, NE 0 561,000 561,000 138,400
Shoney's -
Venice, FL 0 1,032,435 1,032,435 174,261
Jack in the Box -
Yuma, AZ (10) 0 448,082 448,082 62,571
Denny's -
Deland, FL 0 1,000,000 1,000,000 236,971
Wendy's -
Liverpool, NY 0 341,440 341,440 (196,219)
Perkin's -
Melbourne, FL 0 692,850 692,850 (139,940)
Hardee's
Bellevue, NE 0 899,512 899,512 488
CNL Income Fund VII, Ltd.:
Taco Bell -
Kearns, UT 0 560,202 560,202 139,798
Hardee's -
St. Paul, MN 0 742,333 742,333 126,703
Perkins -
Florence, SC (3) 0 1,084,905 1,084,905 75,095
</TABLE>
C-33
<PAGE>
TABLE V
SALES OR DISPOSALS OF PROPERTIES
<TABLE>
<CAPTION>
=========================================================================================================================
Selling Price, Net of
Closing Costs and GAAP Adjustments
----------------------------------------------------
Purchase
Cash money Adjustments
received Mortgage mortgage resulting
net of balance taken from
Date Date of closing at time back by application
Property Acquired Sale costs of sale program of GAAP Total
=========================================================================================================================
<S> <C>
Church's Fried Chicken -
Jacksonville, FL (4) (14) 04/30/90 12/01/95 0 0 240,000 0 240,000
Shoney's -
Colorado Springs, CO 07/03/90 07/24/96 1,044,909 0 0 0 1,044,909
Hardee's -
Hartland, MI 07/10/90 10/23/96 617,035 0 0 0 617,035
Hardee's -
Columbus, IN 09/04/90 05/30/97 223,590 0 0 0 223,590
KFC -
Dunnellon, FL 08/02/90 10/07/97 757,800 0 0 0 757,800
Jack in the Box -
Yuma, AZ (10) 07/14/94 10/31/97 471,372 0 0 0 471,372
CNL Income Fund VIII, Ltd.:
Denny's -
Ocoee, FL 03/16/91 07/31/95 1,184,865 0 0 0 1,184,865
Church's Fried Chicken -
Jacksonville, FL (4) (14) 09/28/90 12/01/95 0 0 240,000 0 240,000
Church's Fried Chicken -
Jacksonville, FL (5) (14) 09/28/90 12/01/95 0 0 220,000 0 220,000
Ponderosa -
Orlando, FL (6) (14) 12/17/90 10/24/96 0 0 1,353,775 0 1,353,775
CNL Income Fund IX, Ltd.:
Burger King -
Woodmere, OH (15) 05/31/91 12/12/96 918,445 0 0 0 918,445
Burger King -
Alpharetta, GA 09/20/91 06/30/97 1,053,571 0 0 0 1,053,571
CNL Income Fund X, Ltd.:
Shoney's -
Denver, CO 03/04/92 08/11/95 1,050,186 0 0 0 1,050,186
Jack in the Box -
Freemont, CA 03/26/92 09/23/97 1,366,550 0 0 0 1,366,550
Jack in the Box -
Sacramento, CA 12/19/91 01/20/98 1,234,175 0 0 0 1,234,175
CNL Income Fund XI, Ltd.:
Burger King -
Philadelphia, PA 09/29/92 11/07/96 1,044,750 0 0 0 1,044,750
CNL Income Fund XII, Ltd.:
Golden Corral -
Houston, TX 12/28/92 04/10/96 1,640,000 0 0 0 1,640,000
</TABLE>
<TABLE>
<CAPTION>
===============================================================================================
Cost of Properties
Including Closing and
Soft Costs
-----------------------------------
Excess
Total (deficiency)
acquisition of property
cost, capital operating cash
Original improvements receipts over
mortgage closing and cash
Property financing soft costs (1) Total expenditures
================================================================================================
<S> <C>
Church's Fried Chicken -
Jacksonville, FL (4) (14) 0 233,728 233,720 6,272
Shoney's -
Colorado Springs, CO 0 893,739 893,739 151,170
Hardee's -
Hartland, MI 0 841,642 841,642 (224,607)
Hardee's -
Columbus, IN 0 219,676 219,676 3,914
KFC -
Dunnellon, FL 0 546,333 546,333 211,467
Jack in the Box -
Yuma, AZ (10) 0 413,614 413,614 57,758
CNL Income Fund VIII, Ltd.:
Denny's -
Ocoee, FL 0 949,199 949,199 235,666
Church's Fried Chicken -
Jacksonville, FL (4) (14) 0 238,153 238,153 1,847
Church's Fried Chicken -
Jacksonville, FL (5) (14) 0 215,845 215,845 4,155
Ponderosa -
Orlando, FL (6) (14) 0 1,179,210 1,179,210 174,565
CNL Income Fund IX, Ltd.:
Burger King -
Woodmere, OH (15) 0 918,445 918,445 0
Burger King -
Alpharetta, GA 0 713,866 713,866 339,705
CNL Income Fund X, Ltd.:
Shoney's -
Denver, CO 0 987,679 987,679 62,507
Jack in the Box -
Freemont, CA 0 1,102,766 1,102,766 263,784
Jack in the Box -
Sacramento, CA 0 969,423 969,423 264,752
CNL Income Fund XI, Ltd.:
Burger King -
Philadelphia, PA 0 818,850 818,850 225,900
CNL Income Fund XII, Ltd.:
Golden Corral -
Houston, TX 0 1,636,643 1,636,643 3,357
</TABLE>
C-34
<PAGE>
TABLE V
SALES OR DISPOSALS OF PROPERTIES
<TABLE>
<CAPTION>
========================================================================================================================
Selling Price, Net of
Closing Costs and GAAP Adjustments
----------------------------------------------------
Purchase
Cash money Adjustments
received Mortgage mortgage resulting
net of balance taken from
Date Date of closing at time back by application
Property Acquired Sale costs of sale program of GAAP Total
========================================================================================================================
<S> <C>
CNL Income Fund XIII, Ltd.:
Checkers -
Houston, TX 03/31/94 04/24/95 286,411 0 0 0 286,411
Checkers -
Richmond, VA 03/31/94 11/21/96 550,000 0 0 0 550,000
Denny's -
Orlando, FL 09/01/93 10/24/97 932,849 0 0 0 932,849
CNL Income Fund XIV, Ltd.:
Checkers -
Knoxville, TN 03/31/94 03/01/95 339,031 0 0 0 339,031
Checkers -
Dallas, TX 03/31/94 03/01/95 356,981 0 0 0 356,981
TGI Friday's -
Woodridge, NJ (7) 01/01/95 09/27/96 1,753,533 0 0 0 1,753,533
Wendy's -
Woodridge, NJ (7) 11/28/94 09/27/96 747,058 0 0 0 747,058
Hardee's -
Madison, AL 12/14/93 01/08/98 700,950 0 0 0 700,950
Checkers -
Richmond, VA (#548) 03/31/94 01/29/98 512,462 0 0 0 512,462
Checkers -
Riviera Beach, FL 03/31/94 04/14/98 360,000 0 0 0 360,000
CNL Income Fund XV, Ltd.:
Checkers -
Knoxville, TN 05/27/94 03/01/95 263,221 0 0 0 263,221
Checkers -
Leavenworth, KS 06/22/94 03/01/95 259,600 0 0 0 259,600
Checkers -
Knoxville, TN 07/08/94 03/01/95 288,885 0 0 0 288,885
TGI Friday's -
Woodridge, NJ (7) 01/01/95 09/27/96 1,753,533 0 0 0 1,753,533
Wendy's -
Woodridge, NJ (7) 11/28/94 09/27/96 747,058 0 0 0 747,058
CNL Income Fund XVI, Ltd.:
Long John Silver's -
Appleton, WI 06/24/95 04/24/96 775,000 0 0 0 775,000
Checker's -
Oviedo, FL 11/14/94 02/28/97 610,384 0 0 0 610,384
Boston Market -
Madison, TN (16) 05/05/95 05/08/98 774,851 0 0 0 774,851
</TABLE>
<TABLE>
<CAPTION>
===============================================================================================
Cost of Properties
Including Closing and
Soft Costs
-----------------------------------
Excess
Total (deficiency)
acquisition of property
cost, capital operating cash
Original improvements receipts over
mortgage closing and cash
Property financing soft costs (1) Total expenditures
================================================================================================
<S> <C>
CNL Income Fund XIII, Ltd.:
Checkers -
Houston, TX 0 286,411 286,411 0
Checkers -
Richmond, VA 0 413,288 413,288 136,712
Denny's -
Orlando, FL 0 934,120 934,120 (1,271)
CNL Income Fund XIV, Ltd.:
Checkers -
Knoxville, TN 0 339,031 339,031 0
Checkers -
Dallas, TX 0 356,981 356,981 0
TGI Friday's -
Woodridge, NJ (7) 0 1,510,245 1,510,245 243,288
Wendy's -
Woodridge, NJ (7) 0 672,746 672,746 74,312
Hardee's -
Madison, AL 0 658,977 658,977 41,973
Checkers -
Richmond, VA (#548) 0 382,435 382,435 130,027
Checkers -
Riviera Beach, FL 0 276,409 276,409 83,591
CNL Income Fund XV, Ltd.:
Checkers -
Knoxville, TN 0 263,221 263,221 0
Checkers -
Leavenworth, KS 0 259,600 259,600 0
Checkers -
Knoxville, TN 0 288,885 288,885 0
TGI Friday's -
Woodridge, NJ (7) 0 1,510,245 1,510,245 243,288
Wendy's -
Woodridge, NJ (7) 0 672,746 672,746 74,312
CNL Income Fund XVI, Ltd.:
Long John Silver's -
Appleton, WI 0 613,838 613,838 161,162
Checker's -
Oviedo, FL 0 506,311 506,311 104,073
Boston Market -
Madison, TN (16) 0 774,851 774,851 0
</TABLE>
C-35
<PAGE>
TABLE V
SALES OR DISPOSALS OF PROPERTIES
<TABLE>
<CAPTION>
======================================================================================================================
Selling Price, Net of
Closing Costs and GAAP Adjustments
----------------------------------------------------
Purchase
Cash money Adjustments
received Mortgage mortgage resulting
net of balance taken from
Date Date of closing at time back by application
Property Acquired Sale costs of sale program of GAAP Total
======================================================================================================================
<S> <C>
Boston Market -
Chattanooga, TN (17) 05/05/95 06/16/98 713,386 0 0 0 713,386
CNL Income Fund XVII, Ltd.:
Boston Market -
Troy, OH (18) 07/24/96 06/16/98 857,487 0 0 0 857,487
CNL American Properties Fund, Inc.:
TGI Friday's -
Orange, CT 10/30/95 05/08/97 1,312,799 0 0 0 1,312,799
TGI Friday's -
Hazlet, NJ 07/15/96 05/08/97 1,324,109 0 0 0 1,324,109
TGI Friday's -
Marlboro, NJ 08/01/96 05/08/97 1,372,075 0 0 0 1,372,075
TGI Friday's -
Hamden, CT 08/26/96 05/08/97 1,245,100 0 0 0 1,245,100
Boston Market -
Southlake, TX 07/02/97 07/21/97 1,035,153 0 0 0 1,035,135
Boston Market -
Franklin, TN (19) 08/18/95 04/14/98 950,361 0 0 0 950,361
Boston Market -
Grand Island, NE (20) 09/19/95 04/14/98 837,656 0 0 0 837,656
Burger King -
Indian Head Park, IL 04/03/96 05/05/98 674,320 0 0 0 674,320
Boston Market -
Dubuque, IA (21) 10/04/95 05/08/98 969,159 0 0 0 969,159
Boston Market -
Merced, CA (22) 10/06/96 05/08/98 930,834 0 0 0 930,834
</TABLE>
<TABLE>
<CAPTION>
=============================================================================================
Cost of Properties
Including Closing and
Soft Costs
-----------------------------------
Excess
Total (deficiency)
acquisition of property
cost, capital operating cash
Original improvements receipts over
mortgage closing and cash
Property financing soft costs (1) Total expenditures
==============================================================================================
<S> <C>
Boston Market -
Chattanooga, TN (17) 0 713,386 713,386 0
CNL Income Fund XVII, Ltd.:
Boston Market -
Troy, OH (18) 0 857,487 857,487 0
CNL American Properties Fund, Inc.:
TGI Friday's -
Orange, CT 0 1,310,980 1,310,980 1,819
TGI Friday's -
Hazlet, NJ 0 1,294,237 1,294,237 29,872
TGI Friday's -
Marlboro, NJ 0 1,324,288 1,324,288 47,787
TGI Friday's -
Hamden, CT 0 1,203,136 1,203,136 41,964
Boston Market -
Southlake, TX 0 1,035,135 1,035,135 0
Boston Market -
Franklin, TN (19) 0 950,361 950,361 0
Boston Market -
Grand Island, NE (20) 0 837,656 837,656 0
Burger King -
Indian Head Park, IL 0 670,867 670,867 3,453
Boston Market -
Dubuque, IA (21) 0 969,159 969,159 0
Boston Market -
Merced, CA (22) 0 930,834 930,834 0
</TABLE>
(1) Amounts shown do not include pro rata share of original offering costs or
acquisition fees.
(2) Amount shown is face value and does not represent discounted current value.
The mortgage note bears interest at a rate of 10.25% per annum and provides
for a balloon payment of $1,006,004 in July 2000.
(3) Amount shown is face value and does not represent discounted current value
The mortgage note bears interest at a rate of 10.25% per annum and provides
for a balloon payment of $1,106,657 in July 2000.
(4) Amounts shown are face value and do not represent discounted current value.
Each mortgage note bears interest at a rate of 10.00% per annum and
provides for a balloon payment of $218,252 in December 2005.
(5) Amount shown is face value and does not represent discounted current value.
The mortgage note bears interest at a rate of 10.00% per annum and provides
for a balloon payment of $200,324 in December 2005.
(6) Amounts shown are face value and do not represent discounted current value.
Each mortgage note bears interest at a rate of 10.75% per annum and
provides for 12 monthly payments of interest only and thereafter, 168 equal
monthly payments of principal and interest.
(7) CNL Income Fund XIV, Ltd. and CNL Income Fund XV, Ltd. each owned a 50
percent interest in Wood-Ridge Real Estate Joint Venture, which owned two
properties. The amounts presented for CNL Income Fund XIV, Ltd. and CNL
Income Fund XV, Ltd. represent each partnership's 50 percent interest in
the properties owned by Wood-Ridge Real Estate Joint Venture.
C-36
<PAGE>
(8) CNL Income Fund II, Ltd. owns a 64 percent interest and CNL Income Fund VI,
Ltd. owns a 36 percent interest in this joint venture. The amounts
presented for CNL Income Fund II, Ltd. and CNL Income Fund VI, Ltd.
represent each partnership's percent interest in the property owned by Show
Low Joint Venture.
(9) CNL Income Fund, Ltd. owns a 50 percent interest in this joint venture. The
amounts presented represent the partnerships percent interest in the
property owned by Seventh Avenue Joint Venture. A third party owns the
remaining 50 percent interest in this joint venture.
(10) CNL Income Fund VI, Ltd. and CNL Income Fund VII, Ltd. own a 52 percent and
48 percent interest, respectively, in the property in Yuma, Arizona. The
amounts presented for CNL Income Fund VI, Ltd. and CNL Income Fund VII,
Ltd. represent each partnership's respective interest in the property.
(11) Cash received net of closing costs includes $198,000 received as a lease
termination fee.
(12) Cash received net of closing costs includes $93,885 received as a lease
termination fee.
(13) Cash received net of closing costs includes $120,115 received as a lease
termination fee.
(14) Closing costs deducted from net sales proceeds do not include deferred,
subordinated real estate disposition fees payable to CNL Fund Advisors or
its affiliates.
(15) The Burger King property in Woodmere, Ohio was exchanged on December 12,
1996 for a Burger King property in Carrboro, NC at the option of the tenant
as permitted under the terms of the lease agreement. Due to the exchange,
the Burger King property in Carrboro, NC is being leased under the same
lease as the Burger King property in Woodmere, OH.
(16) The Boston Market property in Madison, TN was exchanged on May 8, 1998 for
a Boston Market property in Lawrence, KS at the option of the tenant as
permitted under the terms of the lease agreement. Due to the exchange, the
Boston Market property in Lawrence, KS is being leased under the same lease
as the Boston Market property in Madison, TN.
(17) The Boston Market property in Chattanooga, TN was exchanged on June 16,
1998 for a Boston Market property in Indianapolis, IN at the option of the
tenant as permitted under the terms of the lease agreement. Due to the
exchange, the Boston Market property in Indianapolis, IN is being leased
under the same lease as the Boston Market property in Chattanooga, TN.
(18) The Boston Market property in Troy, OH was exchanged on June 16, 1998 for a
Boston Market property in Inglewood, CA at the option of the tenant as
permitted under the terms of the lease agreement. Due to the exchange, the
Boston Market property in Inglewood, CA is being leased under the same
lease as the Boston Market property in Troy, OH.
(19) The Boston Market property in Franklin, TN was exchanged on April 14, 1998
for a Boston Market property in Glendale, AZ at the option of the tenant as
permitted under the terms of the lease agreement. Due to the exchange, the
Boston Market property in Glendale, AZ is being leased under the same terms
as the Boston Market property in Franklin, TN.
(20) The Boston Market property in Grand Island, NE was exchanged on April 14,
1998 for a Boston Market property in Warwick, RI at the option of the
tenant as permitted under the terms of the lease agreement. Due to the
exchange, the Boston Market property in Warwick, RI is being leased under
the same terms as the Boston Market property in Grand Island, NE.
(21) The Boston Market property in Dubuque, IA was exchanged on May 8, 1998 for
a Boston Market property in Columbus, OH at the option of the tenant as
permitted under the terms of the lease agreement. Due to the exchange, the
Boston Market property in Columbus, OH is being leased under the same terms
as the Boston Market property in Dubuque, IA.
(22) Cash received net of closing costs includes $362,949 in construction costs
incurred but not paid by CNL American Properties Fund, Inc. as of the
closing date, which were deducted from the actual net sales proceeds
received by CNL American Properties Fund, Inc.
C-37
