Filed Pursuant to Rule 424b(b)(3)
File Number 333-9943
CNL AMERICAN REALTY FUND, INC.
Supplement No. 2, dated March 6, 1998
to Prospectus, dated July 9, 1997
This Supplement is part of, and should be read in conjunction with, the
Prospectus dated July 9, 1997. 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 in this Supplement is provided as of February 24, 1998. As
of February 24, 1998, the Company had not acquired any Properties nor entered
into any initial commitments to acquire Properties. Proposed properties for
which the Company receives initial commitments, as well as property acquisitions
that occur after February 24, 1998, will be reported in a subsequent Supplement.
THE OFFERING
As of October 15, 1997, the Company had received aggregate subscription
proceeds of $2,774,580, which exceeded the minimum offering amount of
$2,500,000, and $2,652,330 of the funds, excluding funds from Pennsylvania
investors, were released from escrow. As of December 4, 1997, the Company had
received aggregate subscription proceeds of $8,253,530, and funds from
Pennsylvania investors were released from escrow. As of February 24, 1998, the
Company had received total subscription proceeds of $15,435,890 (1,543,589
Shares), including $1,056 (106 Shares) issued pursuant to the Reinvestment Plan,
from 808 stockholders in connection with this offering. As of February 24, 1998,
the Company had approximately $12,280,000 available to invest in Properties
following deduction of Selling Commissions, Marketing Support and Due Diligence
Expense Reimbursement Fees, Organizational and Offering Expenses, Acquisition
Fees and Acquisition Expenses.
MANAGEMENT COMPENSATION
For information concerning compensation and fees paid to the Advisor
and its Affiliates since the date of inception of the Company, see "Certain
Tansactions."
CONFLICTS OF INTEREST
As of December 31, 1997, CNL American Properties Fund, Inc. and CNL Income
& Growth Fund VIII, Ltd. had approximately $51,200,000 and $2,900,000,
respectively, available for investment.
BUSINESS
GENERAL
The Properties, which typically will be freestanding and will be
located across the United States, will be leased to operators of Restaurant
Chains and Hotel Chains to be selected by the Advisor and approved by the Board
of Directors. Each Property acquisition and Mortgage Loan will be submitted to
the Board of Directors for approval. Properties purchased by the Company are
expected to be leased under arrangements
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generally requiring base annual rent equal to a specified percentage of the
Company's cost of purchasing a particular Property, with automatic rent
increases and/or percentage rent based on gross sales above specified levels.
See "Business - Description of Leases - Computation of Lease Payments," in the
Prospectus.
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. By the year 2000, food service sales are
expected to exceed $392 billion. Industry publications project that restaurant
industry sales will increase from $173.7 billion in 1985 to $335.3 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 1997.
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 43
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. Additionally, according
to The Wall Street Journal (May 11, 1992), the average American spends $19,791
on fast-food in a lifetime. Further, according to Nation's Restaurant News, the
100 largest restaurant chains are posting an average of 4.59% growth in their
systemwide sales figures for 1996. Casual- theme dining concepts are among the
chains showing the strongest growth. In 1996, the sandwich segment experienced
sales growth of 3.61% over 1995 figures, and, the casual-dining segment
experienced systemwide sales growth in 1996 of 12.37%, compared to 12.99% 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) 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 September
30, 1997:
Approximate Aggregate
Dollars Invested Percentage of Number of
Restaurant Chain by Affiliates Dollars Invested Prior Programs
- ---------------- ------------- ---------------- --------------
Golden Corral $150,613,000 16.6% 26
Burger King 105,659,000 11.7% 25
Jack in the Box 94,041,000 10.4% 15
Denny's 91,365,000 10.1% 20
Hardee's 58,599,000 6.5% 13
Boston Market 51,351,000 5.7% 8
Shoney's 37,240,000 4.1% 13
IHOP 34,165,000 3.8% 6
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Long John Silver's 32,029,000 3.5% 6
TGI Friday's 30,228,000 3.3% 9
Wendy's 30,011,000 3.3% 16
Darryl's 22,296,000 2.5% 4
Checkers 21,263,000 2.3% 7
Perkins 16,311,000 1.8% 9
Pizza Hut 15,578,000 1.7% 8
KFC 14,436,000 1.6% 11
Black-eyed Pea 10,602,000 1.2% 4
Popeyes 10,589,000 1.2% 9
Arby's 10,493,000 1.2% 6
Taco Bell 7,435,000 0.8% 8
Tumbleweed Southwest
Mesquite Grill & Bar 6,402,000 0.7% 1
Houlihan's 4,741,000 0.5% 1
The Company may also invest 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 and extended stay hotels serving the economy to moderate
pricing segments and full service hotels serving the moderate and upscale
pricing segments of the hotel industry. According to Smith Travel Research, a
leading provider of lodging industry statistical research, the hotel industry
has been steadily improving its financial performance over the past six
consecutive years. Also according to Smith Travel Research, in 1997, the
industry will reach its highest absolute level of pre-tax profit in its history
at approximately $14.5 billion, an increase of approximately 16% over 1996. 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. Revenue per
available room also increased by 5% from $46.03 in 1996 to $48.48 in 1997. In
1997, for the first time since 1992, 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 65.2% in 1996.
According to the Smith Travel Research data, in 1997, there were 47,000
hotel properties which included over 3.5 million hotel rooms recording over $61
billion 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, travel and tourism provides over 6.6 million direct jobs, generating
over $121 billion in payroll expenditures. Nationally, 11% of total hotel rooms
available are located in urban areas, 47% in suburban areas, 30% in highway
locations, 5% in airport areas, and the remaining 7% in resort locations.
The Company may 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
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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.
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 a revolving Line of Credit in an amount up to
$45,000,000, and may, in addition, also obtain Permanent Financing. 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 engaged in
discussions with a potential lender but has not yet executed a commitment for
the Line of Credit or any Permanent Financing and there is no assurance that the
Company will obtain the Line of Credit or any Permanent Financing on
satisfactory terms.
As of the date of this Supplement, the Company had not entered into any
arrangements that create a reasonable probability that the Company will purchase
any Property or enter into any Mortgage Loan or Secured Equipment Lease. The
Company presently is negotiating the acquisition of certain Properties, but as
of February 24, 1998, had not acquired any such Properties or entered into a
commitment to acquire such Properties.
DESCRIPTION OF PROPERTY LEASES
Computation of Lease Payments. During the initial term of the lease,
the tenant will pay the Company, as lessor, minimum annual rent equal to a
specified percentage of the Company's cost of purchasing the Property. In the
case of acquisition of Properties that are to be constructed or renovated
pursuant to a development agreement, the Company's costs of purchasing the
Property will include the purchase price of the land, including all fees, costs,
and expenses paid by the Company in connection with its purchase of the land,
and all fees, costs, and expenses disbursed by the Company for construction of
building improvements. See "Site Selection and Acquisition of Properties -
Construction and Renovation" in the Prospectus. In addition to minimum annual
rent, the tenant will generally pay the Company "percentage rent" and/or
automatic increases in the minimum annual rent at predetermined intervals during
the term of the lease. Percentage rent is generally computed as a percentage of
the gross sales above a specified level at a particular Property.
In the case of Properties in which the Company owns only the building,
the Company will structure its leases to have recovered its investment in the
building by the expiration of the lease.
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 a revolving Line of Credit in an 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. The Company has engaged in discussions with a
potential lender but has not yet executed a commitment for the Line of Credit or
any Permanent Financing and there is no assurance that the Company will obtain
the Line of Credit or any Permanent Financing on satisfactory terms.
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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>
1997 (1) 1996 (2)
------------- ---------
<S> <C>
Year Ended December 31:
Revenues $ 46,071 $ -
Net earnings 22,852 -
Cash distributions declared 29,776 -
Funds from operations (3) 22,852 -
Earnings per Share 0.03 -
Cash distributions declared per Share 0.05 -
Weighted average number of Shares outstanding (4) 686,063 -
At December 31:
Total assets $9,443,476 $598,190
Total stockholders' equity 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) Funds from operations ("FFO"), based on the revised definition adopted
by the Board of Governors of NAREIT and as used herein, means net
earnings determined in accordance with generally accepted accounting
principles ("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 consolidated 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.
(4) The weighted average number of Shares outstanding is based upon the
period the Company was operational.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Company has been formed recently, has not yet acquired any
Properties and has 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,
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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.
Pending investment in suitable Properties and Mortgage Loans, Company
funds will be invested in short-term, highly liquid U.S. Government securities
or in other short-term, highly liquid investments with appropriate safety of
principal. In addition, it is anticipated that the proceeds of the Line of
Credit or any Permanent Financing will be obtained from lenders from time to
time as funds are needed to purchase Assets. Management anticipates that after
the Company has invested in Assets, Company revenues sufficient to pay operating
expenses, provide cash Distributions to the stockholders and service debt will
be derived from the lease and mortgage payments paid to the Company by the
tenants and borrowers.
The Company's primary investment objectives are to preserve, protect,
and enhance the Company's assets while (i) making distributions commencing in
the initial year of Company operations; (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 from Mortgage Loans and Secured Equipment Leases; (iii)
qualifying and remaining qualified as a REIT for federal income tax purposes;
and (iv) providing stockholders of the Company with liquidity of their
investment within five to ten years after commencement of the offering, either
in whole or in part, through (a) Listing, or (b) the commencement of orderly
sales of the Company's assets, and distribution of the proceeds thereof (outside
the ordinary course of business and consistent with its objective of qualifying
as a REIT).
LIQUIDITY AND CAPITAL RESOURCES
During the period June 12, 1996 (date of inception) through December
31, 1996, the Company received initial capital contributions of $200,000 for
20,000 shares of common stock from CNL Fund Advisors, Inc. In February 1997, CNL
Real Estate Advisors, Inc. purchased the Company's outstanding common stock from
CNL Fund Advisors, Inc. and became the sole stockholder of the Company.
Effective July 1997, the Company commenced its offering of Shares of
common stock. As of December 31, 1997, the Company had received aggregate
subscription proceeds totalling $11,325,402 (1,132,540 Shares), including $1,056
(106 Shares) through the Company's Reinvestment Plan.
As of December 31, 1997, net proceeds to the Company from its offering
of Shares and capital contributions from the Advisor, after deduction of Selling
Commissions, the marketing support and due diligence expense reimbursement fee
and Organizational and Offering Expenses totalled $9,220,841. The Company used
$535,792 to pay for Acquisition Fees and Acquisition Expenses, leaving
$8,658,049 in Net Offering Proceeds available for investment in Properties and
Mortgage Loans. As of February 24, 1998, the Company had received subscription
proceeds of $15,435,890 (1,543,589 Shares) from its offering of Shares. As of
February 24, 1998, net proceeds to the Company from its offering of Shares and
capital contributions from the Advisor, after deduction of Selling Commissions,
the marketing support and due diligence expense reimbursement fee and
Organizational and Offering Expenses totalled approximately $13,000,000. The
Company used approximately $720,000 to pay for Acquisition Fees and Acquisition
Expenses, leaving approximately $12,280,000 in Net Offering Proceeds available
for investment in Properties and Mortgage Loans. As of February 24, 1998, the
Company had not acquired any Properties or entered into any 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 a revolving Line
of Credit in an amount up to $45,000,000, and may, in addition, also obtain
Permanent Financing. The Line of Credit may be repaid with
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offering proceeds, working capital or Permanent Financing. Although the Board of
Directors anticipates that the Line of Credit will be in the amount of
$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. The Company has engaged in discussions with a
potential lender but has not yet executed a commitment for the Line of Credit or
any Permanent Financing and there is no assurance that the Company will obtain
the Line of Credit or any Permanent Financing on satisfactory terms.
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 December 31, 1997, the
Company had $8,869,838 invested in such short-term investments as compared to
$2,084 at December 31, 1996. The increase in the amount invested in short-term
investments reflects subscription proceeds derived from the sale of Shares
during the year ended December 31, 1997. These 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 meet other Company expenses and, in
management's discretion, to create cash reserves.
During the year ended December 31, 1997 and the period June 12, 1996
(date of inception) through December 31, 1996, Affiliates of the Company
incurred on behalf of the Company $638,274 and $555,812, respectively, for
certain Organizational and Offering Expenses. In addition, during the year ended
December 31, 1997, Affiliates of the Company incurred on behalf of the Company
$26,149 for certain Acquisition Expenses and $11,003 for certain Operating
Expenses. As of December 31, 1997 and 1996, the Company owed the Advisor
$193,254 and $386,561, respectively, for such amounts, unpaid fees and
accounting 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 year ended December 31, 1997, the Company generated cash
from operations (which includes interest received less cash paid for operating
expenses) of $22,469. Based on current and anticipated future cash from
operations the Company declared Distributions to its stockholders of $29,776
during the period October 15, 1997 (the date operations commenced) through
December 31, 1997. No Distributions were paid or declared for the period June
12, 1996 (date of inception) through October 14, 1997 because operations had not
commenced. On January 1, 1998, the Company declared Distributions to
stockholders of record on January 1, 1998, totalling $28,814 ($0.025 per share),
payable in March 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. For the year ended December 31, 1997, 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 February 24, 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 stockholders' Invested Capital.
Due to anticipated low operating expenses, rental income expected to be
obtained from Properties after they are acquired, the fact that the Line of
Credit and Permanent Financing have 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.
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As of February 24, 1998, the Company had not entered into any
arrangements creating a reasonable probability that a Property would be acquired
by the Company or that a particular Mortgage Loan or Secured Equipment Lease
would be funded. The number of Properties to be acquired and Mortgage Loans to
be invested in will depend upon the amount of net offering proceeds and loan
proceeds available to the Company. The amount invested in Secured Equipment
Leases will not exceed 10% of the Gross Proceeds.
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. The Company did not acquire any
Properties or enter into any Mortgage Loans during the year ended December 31,
1997.
During the year ended December 31, 1997, the Company earned $46,071 in
interest income from investments in money market accounts. Interest income is
expected to increase as the Company invests subscription proceeds received in
the future in highly liquid investments pending investment in Properties and
Mortgage Loans. However, 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 $23,219 for
the year ended December 31, 1997. Operating expenses, including amortization
expense, represent only a portion of operating expenses which the Company is
expected to incur during a full year in which the Company owns Properties or in
which the Company is operational. The dollar amount of operating expenses is
expected to increase as the Company acquires Properties and invests in Mortgage
Loans; however, operating expenses as a percentage of total revenues is expected
to decrease as the Company acquires Properties and invests in Mortgage Loans.
The Company anticipates that its leases will be triple-net leases and
will contain provisions that management believes will mitigate the adverse
effect of inflation. Such provisions will include clauses requiring the payment
of percentage rent based on certain gross sales above a specified level and/or
automatic increases in base rent at specified times during the term of the
lease. Management expects that increases in gross sales volumes due to inflation
and real sales growth should result in an increase in rental income over time.
Continued inflation also may cause capital appreciation of the Company's
Properties. Inflation and changing prices, however, also may have an adverse
impact on the sales of the Properties and on potential capital appreciation of
the Properties.
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 as it relates to its preferred stock. 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 required by this
Statement are not applicable.
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
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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.
The Advisor of the Company is in the process of assessing and
addressing the impact of the year 2000 on its computer package software. The
hardware and built-in software are believed to be year 2000 compliant.
Accordingly, the Company does not expect this matter to materially impact how it
conducts business nor its future results of operations or financial position.
Management is not aware of any known trends or uncertainties, other
than national economic conditions, which may reasonably be expected to have a
material impact, favorable or unfavorable, on revenues or income from the
acquisition and operations of real properties, other than those referred to in
the Prospectus.
There currently are no material changes being considered in the
objectives and policies of the Company as set forth in the Prospectus.
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. 51 Director, Chairman of the Board, and Chief
Executive Officer
Robert A. Bourne 50 Director and President
G. Richard Hostetter 58 Independent Director
J. Joseph Kruse 65 Independent Director
Richard C. Huseman 59 Independent Director
Charles A. Muller 39 Executive Vice President
John T. Walker 39 Executive Vice President
Jeanne A. Wall 39 Executive Vice President
Lynn E. Rose 49 Secretary and Treasurer
James M. Seneff, Jr. Director, Chairman of the Board, and Chief
Executive Officer. Mr. Seneff currently holds the position of Chairman of the
Board, Chief Executive Officer and director of CNL Real Estate Advisors, Inc.,
the Advisor. Mr. Seneff also serves as Chairman of the Board, Chief Executive
Officer and a director of CNL American Properties Fund, Inc. and CNL Fund
Advisors, Inc. Mr. Seneff is a principal stockholder of CNL Group, Inc., a
diversified real estate company, and has served as its Chairman of the Board of
Directors, director, and Chief Executive Officer since its formation in 1980.
CNL Group, Inc. is the parent company of CNL Securities Corp., which is acting
as the Managing Dealer in this offering, CNL Investment Company, CNL Fund
Advisors, Inc. and CNL Real Estate Advisors, Inc. Mr. Seneff has been Chief
Executive Officer, a director and registered principal of CNL Securities Corp.
since its formation in 1979. Mr. Seneff also has held the position of President
and a director of CNL Management Company, a registered investment advisor, since
its formation in 1976, has served as Chief Executive Officer and Chairman of the
Board of CNL Investment Company, and Chief Executive Officer and Chairman of the
Board of Commercial Net Lease Realty, Inc. since 1992, served as Chief Executive
Officer and Chairman of the Board of CNL Realty Advisors, Inc. from its
inception in 1991 through 1997 at which time such company merged with Commercial
Net Lease Realty, Inc., and has held the position of Chief Executive Officer and
a director of CNL Institutional Advisors, Inc., a registered investment advisor,
since its inception in 1990. Mr. Seneff previously served on the Florida State
Commission on Ethics and is a former member and past Chairman of the State of
Florida Investment Advisory Council, which recommends to the Florida Board of
Administration investments for various Florida employee retirement funds. The
Florida Board of Administration, Florida's principal investment advisory and
money management agency, oversees the investment of more than $60 billion of
retirement funds. Since 1971, Mr. Seneff has been active in the acquisition,
development, and management of real estate projects and, directly
-9-
<PAGE>
or through an affiliated entity, has served as a general partner or joint
venturer in over 100 real estate ventures involved in the financing,
acquisition, construction, and rental of restaurants, office buildings,
apartment complexes, hotels, and other real estate. Included in these real
estate ventures are approximately 65 privately offered real estate limited
partnerships with investment objectives similar to one or more of the Company's
investment objectives, in which Mr. Seneff, directly or through an affiliated
entity, serves or has served as a general partner. Mr. Seneff received his
degree in Business Administration from Florida State University in 1968.
Robert A. Bourne. Director and President. Mr. Bourne currently holds
the position of President and director of CNL Real Estate Advisors, Inc., the
Advisor. Mr. Bourne also serves as President and a director of CNL American
Properties Fund, Inc. Mr. Bourne currently holds the position of Vice Chairman
of the Board of Directors, director and Treasurer of CNL Fund Advisors, Inc. Mr.
Bourne served as President of CNL Fund Advisors, Inc. from the date of its
inception through October 1997. Mr. Bourne is President and Treasurer of CNL
Group, Inc., President, Treasurer, a director, and a registered principal of CNL
Securities Corp. (the Managing Dealer of this offering), President and a
director of CNL Investment Company, and Chief Investment Officer Vice Chairman
of the Board of Directors, a director and Treasurer of CNL Institutional
Advisors, Inc., a registered investment advisor. Mr. Bourne served as President
of CNL Institutional Advisors, Inc. from the date of its inception through June
30, 1997. Mr. Bourne served as President and a director from July 1992 to
February 1996, served as Secretary and Treasurer from February 1996 through
December 1997, and has served as Vice Chairman of the Board of Directors since
February 1996, of Commercial Net Lease Realty, Inc. In addition, Mr. Bourne
served as President of CNL Realty Advisors, Inc. from 1991 to February 1996, and
served as a director of CNL Realty Advisors, Inc. from 1991 through December
1997, and as Treasurer and Vice Chairman from February 1996 through December
1997, at which time such company merged with Commercial Net Lease Realty, Inc.
Upon graduation from Florida State University in 1970, where he received a B.A.
in Accounting, with honors, Mr. Bourne worked as a certified public accountant
and, from September 1971 through December 1978 was employed by Coopers &
Lybrand, Certified Public Accountants, where he held the position of tax manager
beginning in 1975. From January 1979 until June 1982, Mr. Bourne was a partner
in the accounting firm of Cross & Bourne and from July 1982 through January 1987
he was a partner in the accounting firm of Bourne & Rose, P.A., Certified Public
Accountants. Mr. Bourne, who joined CNL Securities Corp. in 1979, has
participated as a general partner or joint venturer in over 100 real estate
ventures involved in the financing, acquisition, construction, and rental of
restaurants, office buildings, apartment complexes, hotels, and other real
estate. Included in these real estate ventures are approximately 64 privately
offered real estate limited partnerships with investment objectives similar to
one or more of the Company's investment objectives, in which Mr. Bourne,
directly or through an affiliated entity, serves or has served as a general
partner.
G. Richard Hostetter, Esq. Independent Director. Mr. Hostetter also
serves as a director of CNL American Properties Fund, Inc. Mr. Hostetter was
associated with the law firm of Miller and Martin from 1966 through 1989, the
last ten years of such association as a senior partner. As a lawyer, he served
for more than 20 years as counsel for various corporate real estate groups,
fast-food companies and public companies, including The Krystal Company,
resulting in his extensive participation in transactions involving the sale,
lease, and sale/leaseback of approximately 250 restaurant units. Mr. Hostetter
graduated from the University of Georgia and received his J.D. from Emory Law
School in 1966. He is licensed to practice law in Tennessee and Georgia. From
1989 to date, Mr. Hostetter has served as President and General Counsel of
Mills, Ragland & Hostetter, Inc., the corporate general partner of MRH, L.P., a
holding company involved in corporate acquisitions, in which he also is a
general and limited partner.
J. Joseph Kruse. Independent Director. Mr. Kruse also serves as a
director of CNL American Properties Fund, Inc. From 1993 to the present, Mr.
Kruse has been President and Chief Executive Officer of Kruse & Co., Inc., a
merchant banking company engaged in real estate. Formerly, Mr. Kruse was a
Senior Vice President with Textron, Inc. for twenty years, and then served as
Senior Vice President at G. William Miller & Co., a firm founded by the former
Chairman of the Federal Reserve Board and the Treasury Secretary. Mr. Kruse was
responsible for evaluations of commercial real estate and retail shopping mall
projects and continues to serve of counsel to the firm. Mr. Kruse received a
Bachelors of Science in Education
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<PAGE>
degree from the University of Florida in 1957 and a Masters of Science in
Administration in 1958 from Florida State University. He also graduated from the
Advanced Management Program of the Harvard Graduate School of Business.
Richard C. Huseman. Independent Director. Mr. Huseman also serves as a
director of CNL American Properties Fund, Inc. Mr. Huseman is presently a
professor in the College of Business Administration, and from 1990 through 1995,
served as the Dean of the College of Business Administration of the University
of Central Florida. He has served as a consultant in the area of managerial
strategies to a number of Fortune 500 corporations, including IBM, AT&T, and 3M,
as well as to several branches of the U.S. government, including the U.S.
Department of Health and Human Services, the U.S. Department of Justice, and the
Internal Revenue Service. Mr. Huseman received a B.A. from Greenville College in
1961 and an M.A. and a Ph.D. from the University of Illinois in 1963 and 1965,
respectively.
Charles A. Muller. Executive Vice President. Mr. Muller joined CNL in
October 1996 and is responsible for the planning and implementation of CNL's
interest in hotel industry investments, including acquisitions, development,
project analysis and due diligence. Mr. Muller currently serves as Executive
Vice President of CNL Real Estate Advisors, Inc., the Advisor, and Chief
Operating Officer of CNL Hotel Development Company. Mr. Muller joined CNL
following more than 15 years of broadbased hotel industry experience. From 1993
to 1996, Mr. Muller served as a Director of Operations for Tishman Hotel
Corporation where he was responsible for the company's market review and
valuation analysis efforts. At Tishman, Mr. Muller played a significant role in
the development of a new 600-room golf resort in Puerto Rico, and was active in
several project management, asset management and development assignments. From
1989 to 1993, Mr. Muller served as a Development Manager for Wyndham Hotels &
Resorts where he was responsible for new business development and company growth
through acquisitions, development and management contracts. At Wyndham, Mr.
Muller was also responsible for market review and feasibility analysis efforts
in markets across the United States and the Caribbean. Prior to joining Wyndham,
Mr. Muller worked for Pannell Kerr Forster as a hotel industry consultant and
spent four years with AIRCOA (currently Richfield Hospitality) where he was
responsible for capital expenditure planning, property renovations and
construction management. From 1981 through 1985, Mr. Muller held several
management positions in hotel operations. Mr. Muller received a Bachelor of
Science degree in Hotel Administration from Cornell University in 1981, has
served on the Market, Finance and Investment Analysis Committee of the American
Hotel & Motel Association.
John T. Walker. Executive Vice President. Mr. Walker joined CNL Fund
Advisors, Inc. in September 1994, as Senior Vice President, responsible for
Research and Development. He currently serves as the Executive Vice President of
CNL Real Estate Advisors, Inc., the Advisor. Mr. Walker is also Chief Operating
Officer and Executive Vice President of CNL American Properties Fund, Inc. and
CNL Fund Advisors, Inc. From May 1992 to May 1994, he was Executive Vice
President for Finance and Administration and Chief Financial Officer of Z Music,
Inc., a cable television network which was subsequently acquired by Gaylord
Entertainment, where he was responsible for overall financial and administrative
management and planning. From January 1990 through April 1992, Mr. Walker was
Chief Financial Officer of the First Baptist Church in Orlando, Florida. From
April 1984 through December 1989, he was a partner in the accounting firm of
Chastang, Ferrell & Walker, P.A., where he was the partner in charge of audit
and consulting services, and from 1981 to 1984, Mr. Walker was a Senior
Consultant/Audit Senior at Price Waterhouse. Mr. Walker is a Cum Laude graduate
of Wake Forest University with a B.S. in Accountancy and is a certified public
accountant.
Jeanne A. Wall. Executive Vice President. Ms. Wall serves as Executive
Vice President of CNL Real Estate Advisors, Inc., the advisor to the Company.
Ms. Wall is also Executive Vice President of CNL American Properties Fund, Inc.
and CNL Fund Advisors, Inc. Ms. Wall has served as Chief Operating Officer of
CNL Investment Company and of CNL Securities Corp. since November 1994 and has
served as Executive Vice President of CNL Investment Company since January 1991.
In 1984, Ms. Wall joined CNL Securities Corp. In 1985, Ms. Wall became Vice
President of CNL Securities Corp. in 1987, she became a Senior Vice President
and in July 1997, she became Executive Vice President of CNL Securities Corp. In
this capacity, Ms. Wall serves as national marketing and sales director and
oversees the national marketing plan for the CNL
-11-
<PAGE>
investment programs. In addition, Ms. Wall oversees product development,
partnership administration and investor services for programs offered through
participating brokers and corporate communications for CNL Group, Inc. and
Affiliates. Ms. Wall also has served as Senior Vice President of CNL
Institutional Advisors, Inc., a registered investment advisor, from 1990 to
1993, as Vice President of CNL Realty Advisors, Inc. since its inception in 1991
through 1997, and as Vice President of Commercial Net Lease Realty, Inc. since
1992 through 1997. Ms. Wall holds a B.A. in Business Administration from
Linfield College and is a registered principal of CNL Securities Corp. Ms. Wall
currently serves as a trustee on the Board of the Investment Program Association
and on the Direct Participation Program committee for the National Association
of Securities Dealers.
Lynn E. Rose. Secretary and Treasurer. Ms. Rose serves as Secretary,
Treasurer and a director of CNL Real Estate Advisors, Inc., the Advisor. Ms.
Rose is also Secretary and Treasurer of CNL American Properties Fund, Inc. and
Secretary, Treasurer and a director of CNL Fund Advisors, Inc. Ms. Rose, a
certified public accountant, has served as Secretary of CNL Group, Inc. since
1987, as Chief Financial Officer of CNL Group, Inc., since December 1993, and
served as Controller of CNL Group, Inc. from 1987 until December 1993. In
addition, Ms. Rose has served as Chief Financial Officer and Secretary of CNL
Securities Corp. since July 1994. She has served as Chief Operating Officer,
Vice President and Secretary of CNL Corporate Services, Inc. since November
1994. Ms. Rose also has served as Chief Financial Officer and Secretary of CNL
Institutional Advisors, Inc. since its inception in 1990 as Secretary and a
director of CNL Realty Advisors, Inc. from its inception in 1991 through 1997,
and as Treasurer of CNL Realty Advisors, Inc. from 1991 to February 1996. In
addition, Ms. Rose served as Secretary and Treasurer of Commercial Net Lease
Realty, Inc. from 1992 to February 1996. Ms. Rose also currently serves as
Secretary for approximately 50 additional corporations. Ms. Rose oversees the
management information services, administration, legal compliance, accounting,
tenant compliance, and reporting for over 250 corporations, partnerships and
joint ventures. Prior to joining CNL, Ms. Rose was a partner with Robert A.
Bourne in the accounting firm of Bourne & Rose, P.A., Certified Public
Accountants. Ms. Rose holds a B.A. in Sociology from the University of Central
Florida. She was licensed as a certified public accountant in 1979.
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 February 24, 1998, and
the year ended December 31, 1997, the Company incurred $308,287 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 February 24, 1998,
and the year ended December 31, 1997, the Company incurred $20,552 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
February 24, 1998, and the year ended December 31, 1997, the Company incurred
$184,972 and $509,643, respectively, of such fees.
The Advisor and its Affiliates provide accounting and administrative
services to the Company
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<PAGE>
(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
Company incurred a total of $192,224 and $28,665, respectively, for these
services, $185,335 and $28,665, respectively, of such costs representing stock
issuance costs and $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.
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 85 and 86
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, 1997, the 18 partnerships and
the unlisted REIT had raised a total of $826,052,689 from a total of 59,630
investors, and had invested in 865 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)
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<PAGE>
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)
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 March 18, 1992 4,000,000 June 1992
Fund X, Ltd. (4,000,000 units)
CNL Income $40,000,000 September 28, 1992 4,000,000 September 1992
Fund XI, Ltd. (4,000,000 units)
CNL Income $45,000,000 March 15, 1993 4,500,000 July 1993
Fund XII, Ltd. (4,500,000 units)
CNL Income $40,000,000 August 26, 1993 4,000,000 August 1993
Fund XIII, Ltd. (4,000,000 units)
CNL Income $45,000,000 February 22, 1994 4,500,000 May 1994
Fund XIV, Ltd. (4,500,000 units)
CNL Income $40,000,000 September 1, 1994 4,000,000 December 1994
Fund XV, Ltd. (4,000,000 units)
CNL Income $45,000,000 June 12, 1995 4,500,000 August 1995
Fund XVI, Ltd. (4,500,000 units)
CNL Income $30,000,000 September 19, 1996 3,000,000 December 1996
Fund XVII, Ltd. (3,000,000 units)
CNL Income $35,000,000 (3) (3) (3)
Fund XVIII, Ltd (3,500,000 units)
CNL American $425,000,000 (4) (4) (4)
Properties Fund, (42,500,000 shares)
Inc.
</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) As of June 30, 1997, CNL Income Fund XVIII, Ltd., which is offering a
maximum of 3,500,000 limited partnership units ($35,000,000), had
received subscriptions totaling $22,192,212 (2,219,221 units). As of
such date, CNL Income Fund XVIII, Ltd. had purchased 17 properties.
(4) 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. As of June 30, 1997,
CNL American Properties Fund, Inc. had received subscriptions totalling
$73,251,412 (7,325,141 shares), including $643,293 (64,329 shares)
through the reinvestment plan from the 1997 Offering. As of such date,
CNL American Properties Fund, Inc.
had purchased 174 properties.
As of June 30, 1997, Mr. Seneff and Mr. Bourne, directly or through
affiliated entities, also had served as joint general partners of 67 nonpublic
real estate limited partnerships. The offerings of 65 of these 67 nonpublic
limited partnerships had terminated as of June 30, 1997. These 65 partnerships
raised a total of $166,969,266 from approximately 4,180 investors, and
purchased, directly or through participation in a joint venture or limited
partnership, interests in a total of 203 projects as of June 30, 1997. These 203
projects consist of 19 apartment projects (comprising 11% of the total amount
raised by all 65 partnerships), 13 office buildings (comprising 5% of the total
amount raised by all 65 partnerships), 157 fast-food or family-style restaurant
property and business investments (comprising 68% of the total amount raised by
all 65 partnerships), one condominium development (comprising .5% of the total
amount raised by all 65 partnerships), four hotels/motels (comprising 5% of the
total amount raised by all 65 partnerships), seven commercial/retail properties
(comprising 10% of the total amount raised by all 65 partnerships), and two
tracts of undeveloped land (comprising .5% of the total amount raised by all 65
partnerships). The offering of the two remaining nonpublic limited partnerships
(offerings aggregating $16,750,000) had raised $9,700,000 from 201 investors
(approximately 57.9% of the total offering amount) as of June 30, 1997.
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 85 real estate limited partnerships whose offerings had closed
as of June 30, 1997 (including 17 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, 35 invested in restaurant properties leased on a "triple-net"
basis, including six which also invested in franchised restaurant businesses
(accounting for approximately 93% of the total amount raised by all 85 real
estate limited partnerships).
The following table sets forth summary information, as of June 30,
1997, 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 20 fast-food or AL, AZ, CA, FL, All cash Public
Fund, Ltd. family-style GA, LA, MD, OK,
restaurants TX, VA
CNL Income 44 fast-food or AL, AZ, CO, FL, All cash Public
Fund II, Ltd. family-style GA, IL, IN, LA, MI,
restaurants MN, MO, NC, NM,
OH, TX, WY
CNL Income 33 fast-food or AZ, CA, FL, GA, All cash Public
Fund III, Ltd. family-style IA, IL, IN, KS, KY,
restaurants 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 30 fast-food or FL, GA, IL, IN, MI, All cash Public
Fund V, Ltd. family-style NH, NY, OH, SC,
restaurants TN, TX, UT, WA
CNL Income 48 fast-food or AR, AZ, FL, IN, All cash Public
Fund VI, Ltd. family-style MA, MI, MN, NC,
restaurants NE, NM, NY, OH,
OK, PA, TN, TX,
VA, WY
CNL Income 47 fast-food or AZ, CO, FL, GA, All cash Public
Fund VII, Ltd. family-style IN, LA, MI, MN,
restaurants 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 42 fast-food or AL, FL, GA, IL, IN, All cash Public
Fund IX, Ltd. family-style LA, MI, MN, MS,
restaurants NC, NH, NY, OH,
SC, TN, TX
CNL Income 49 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
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
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<PAGE>
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 49 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 62 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 54 fast-food or AL, CA, FL, GA, All cash Public
Fund XV, Ltd. family-style KS, KY, MN, MO,
restaurants MS, NC, NJ, NM,
OH, OK, PA, SC,
TN, TX, VA
CNL Income 44 fast-food or AZ, CA, CO, DC, All cash Public
Fund XVI, Ltd. family-style FL, GA, ID, IN, KS,
restaurants MN, MO, NC, NM,
NV, OH, TN, TX,
UT, WI
CNL Income 27 fast-food, family- CA, FL, GA, IL, IN, All cash Public
Fund XVII, Ltd. style or casual-dining MI, NC, NV, OH,
restaurant properties SC, TN, TX
CNL Income 17 fast-food, family- CA, GA, KY, MD, All cash Public
Fund XVIII, Ltd. style or casual-dining MN, NC, NV, OH,
restaurant properties TN, TX
CNL American 174 fast-food, AL, AZ, CA, CO, All cash Public REIT
Properties Fund, Inc. family- DE, FL, IA, ID, IL,
style or casual-dining IN, KY, MD, MI,
restaurants MN, MO, NC, NE,
NM, NV, OH, OK,
OR, PA, TN, TX,
UT, VA, WA, 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
-17-
<PAGE>
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 1992
and June 1997, 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.
DISTRIBUTION POLICY
GENERAL
In order to qualify as a REIT for federal income tax purposes, among
other things, the Company must make distributions each taxable year (not
including any return of capital for federal income tax purposes) equal to at
least 95% of its real estate investment trust taxable income, although the Board
of Directors, in its discretion, may increase that percentage as it deems
appropriate. See "Federal Income Tax Considerations - Taxation of the Company
Distribution Requirements" in the Prospectus. The declaration of Distributions
is within the discretion of the Board of Directors and depends upon the
Company's distributable funds, current and projected cash requirements, tax
considerations and other factors.
DISTRIBUTIONS
The Company intends 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, the Company declared and paid
Distributions totaling $29,776. All of such amount was characterized as 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
-18-
<PAGE>
of Distributions in future years.
Distributions will be made at the discretion of the Directors,
depending primarily on net cash from operations (which includes cash received
from tenants except to the extent that such cash represents a return of
principal in regard to the lease of a Property consisting of building only,
distributions from joint ventures, and interest income from lessees of Equipment
and borrowers under Mortgage Loans, less expenses paid) and the general
financial condition of the Company, subject to the obligation of the Directors
to cause the Company to qualify and remain qualified as a REIT for federal
income tax purposes. The Company intends to increase Distributions in accordance
with increases in net cash from operations.
FEDERAL INCOME TAX CONSIDERATIONS
TAXATION OF THE COMPANY
General. The Company expects to elect 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.
Opinion of Counsel. Based upon representations made by officers of the
Company with respect to relevant factual matters, upon the existing Code
provisions, rules and regulations promulgated thereunder (including proposed
regulations) and reported administrative and judicial interpretations thereof,
upon Counsel's independent review of such documents as Counsel deemed relevant
in the circumstances and upon the assumption that the Company will operate in
the manner described in this Prospectus, Counsel has advised the Company that,
in its opinion, the Company qualified as a REIT under the Code for the taxable
year ending December 31, 1997, the Company is organized in conformity with the
requirements for qualification as a REIT, and the Company's proposed method of
operation will enable it to continue to meet the requirements for qualification
as a REIT. It must be emphasized, however, that the Company's ability to qualify
and remain qualified as a REIT is dependent upon actual operating results and
future actions by and events involving the Company and others, and no assurance
can be given that the actual results of the Company's operations and future
actions and events will enable the Company to satisfy in any given year the
requirements for qualification and taxation as a REIT.
Income Tests. A REIT also must meet two separate tests with respect to
its sources of gross income for each taxable year.
(a) The 75 Percent and 95 Percent Tests. In general, at least 75% of a
REIT's gross income for each taxable year must be from "rents from real
property," interest on obligations secured by mortgages on real property, gains
from the sale or other disposition of real property and certain other sources,
including "qualified temporary investment income." For these purposes,
"qualified temporary investment income" means any income (i) attributable to a
stock or debt instrument purchased with the proceeds received by the REIT in
exchange for stock (or certificates of beneficial interest) in such REIT (other
than amounts received pursuant to a distribution reinvestment plan) or in a
public offering of debt obligations with a maturity of at least five years and
(ii) received or accrued during the one-year period beginning on the date the
REIT receives such capital. In addition, a REIT must derive at least 95% of its
gross income for each taxable year from any combination of the items of income
which qualify under the 75% test, from dividends and interest, and from gains
from the sale, exchange or other disposition of certain stock and securities.
Initially, the bulk of the Company's income will be derived from rents
with respect to the Properties. Rents from Properties received by the Company
qualify as "rents from real property" in satisfying these two tests only if
-19-
<PAGE>
several conditions are met. First, the rent must not be based in whole or in
part, directly or indirectly, on the income or profits of any person. An amount
received or accrued generally will not be excluded from the term "rents from
real property" solely by reason of being based on a fixed percentage or
percentages of receipts or sales. Second, the Code provides that rents received
from a tenant will not qualify as "rents from real property" if the REIT, or a
direct or indirect owner of 10% or more of the REIT owns, directly or
constructively, 10% or more of such tenant (a "Related Party Tenant"). Third, if
rent attributable to personal property leased in connection with a lease of real
property is greater than 15% of the total rent received under the lease, then
the portion of rent attributable to such personal property will not qualify as
"rents from real property." Finally, for rents to qualify as "rents from real
property," a REIT generally must not operate or manage the property or furnish
or render services to the tenants of such property, other than through an
independent contractor from whom the REIT derives no revenue, except that a REIT
may directly perform services which are "usually or customarily rendered" in
connection with the rental of space for occupancy, other than services which are
considered to be rendered to the occupant of the property. However, a REIT is
currently permitted to earn up to one percent of its gross income from tenants,
determined on a property-by-property basis, by furnishing services that are
noncustomary or provided directly to the tenants, without causing the rental
income to fail to qualify as rents from real property.
The Company has represented with respect to its leasing of the
Properties that it will not (i) charge rent for any Property that is based in
whole or in part on the income or profits of any person (except by reason of
being based on a percentage or percentages of receipts or sales, as described
above); (ii) charge rent that will be attributable to personal property in an
amount greater than 15% of the total rent received under the applicable lease;
(iii) directly perform services considered to be rendered to the occupant of a
Property or which are not usually or customarily furnished or rendered in
connection with the rental of real property; or (iv) enter into any lease with a
Related Party Tenant. Specifically, the Company expects that virtually all of
its income will be derived from leases of the type described in "Business -
Description of Leases," and it does not expect such leases to generate income
that would not qualify as rents from real property for purposes of the 75% and
95% income tests.
In addition, the Company will be paid interest on the Mortgage Loans.
All interest income qualifies under the 95% gross income test. If a Mortgage
Loan is secured by both real property and other property, all the interest on it
will nevertheless qualify under the 75% gross income test if the amount of the
loan did not exceed the fair market value of the real property at the time of
the loan commitment. The Company has represented that this will always be the
case. Therefore, in the opinion of Counsel, income generated through the
Company's investments in Mortgage Loans will be treated as qualifying income
under the 75% gross income test.
The Company will also receive payments under the terms of the Secured
Equipment Leases. Although the Secured Equipment Leases will be structured as
leases or loans, Counsel is of the opinion that, subject to certain assumptions,
they will be treated as loans secured by personal property for federal income
tax purposes. See "Federal Income Tax Considerations - Characterization of the
Secured Equipment Leases" in the Prospectus. If the Secured Equipment Leases are
treated as loans secured by personal property for federal income tax purposes
then, the portion of the payments under the terms of the Secured Equipment
Leases that represent interest, rather than a return of capital for federal
income tax purposes, will not satisfy the 75% gross income test (although it
will satisfy the 95% gross income test). The Company believes, however, that the
aggregate amount of such non-qualifying income will not cause the Company to
exceed the limits on non-qualifying income under the 75% gross income test.
If, contrary to the opinion of Counsel, the Secured Equipment Leases
are treated as true leases, rather than as loans secured by personal property
for federal income tax purposes, the payments under the terms of the Secured
Equipment Leases would be treated as rents from personal property. Rents from
personal property will satisfy either the 75% or 95% gross income tests if they
are received in connection with a lease of real property and the rent
attributable to the personal property does not exceed 15% of the total rent
received from the tenant in connection with the lease. However, if rents
attributable to personal property exceed 15% of the total rent received from a
particular tenant, then the portion of the total rent attributable to personal
property will not satisfy either the 75% or 95% gross income tests.
If, notwithstanding the above, the Company fails to satisfy one or both
of the 75% or 95% tests for any
-20-
<PAGE>
taxable year, it may still qualify as a REIT if (i) such failure is due to
reasonable cause and not willful neglect; (ii) it reports the nature and amount
of each item of its income on a schedule attached to its tax return for such
year; and (iii) the reporting of any incorrect information is not due to fraud
with intent to evade tax. However, even if these three requirements are met and
the Company is not disqualified as a REIT, a penalty tax would be imposed by
reference to the amount by which the Company failed the 75% or 95% test
(whichever amount is greater).
(b) The Impact of Default Under the Secured Equipment Leases. In
applying the gross income tests to the Company, it is necessary to consider the
impact that a default under one or more of the Secured Equipment Leases would
have on the Company's ability to satisfy such tests. A default under one or more
of the Secured Equipment Leases would result in the Company directly holding the
Equipment securing such leases for federal income tax purposes. In the event of
a default, the Company may choose to either lease or sell such Equipment.
However, any income resulting from a rental or sale of Equipment not
incidental to the rental or sale of real property would not qualify under the
75% and 95% gross income tests. In addition, in certain circumstances, income
derived from a sale or other disposition of Equipment could be considered "net
income from prohibited transactions," subject to a 100% tax. The Company does
not, however, anticipate that its income from the rental or sale of Equipment
would be material in any taxable year.
TAXATION OF STOCKHOLDERS
Taxable Domestic Stockholders. For any taxable year in which the
Company qualifies as a REIT for federal income tax purposes, Distributions made
by the Company to its stockholders that are United States persons (generally,
any person other than a nonresident alien individual, a foreign trust or estate
or a foreign partnership or corporation) generally will be taxed as ordinary
income. Amounts received by such United States persons that are properly
designated as capital gain dividends by the Company generally will be taxed as
long-term capital gain, without regard to the period for which such person has
held its Shares, to the extent that they do not exceed the Company's actual net
capital gain for the taxable year. Corporate stockholders may be required to
treat up to 20% of certain capital gains dividends as ordinary income. Such
ordinary income and capital gain are not eligible for the dividends received
deduction allowed to corporations. In addition, the Company may elect to retain
and pay income tax on its long-term capital gains. If the Company so elects,
each stockholder will take into income the stockholder's share of the retained
capital gain as long-term capital gain and will receive a credit or refund for
that stockholder's share of the tax paid by the Company. The stockholder will
increase the basis of such stockholder's share by an amount equal to the excess
of the retained capital gain included in the stockholder's income over the tax
deemed paid by such stockholder. Distributions to such United States persons in
excess of the Company's current or accumulated earnings and profits will be
considered first a tax-free return of capital for federal income tax purposes,
reducing the tax basis of each stockholder's Shares, and then, to the extent the
Distribution exceeds each stockholder's basis, a gain realized from the sale of
Shares. The Company will notify each stockholder as to the portions of each
Distribution which, in its judgment, constitute ordinary income, capital gain or
return of capital for federal income tax purposes. Any Distribution that is (i)
declared by the Company in October, November or December of any calendar year
and payable to stockholders of record on a specified date in such months and
(ii) actually paid by the Company in January of the following year, shall be
deemed to have been received by each stockholder on December 31 of such calendar
year and, as a result, will be includable in gross income of the stockholder for
the taxable year which includes such December 31. Stockholders who elect to
participate in the Reinvestment Plan will be treated as if they received a cash
Distribution from the Company and then applied such Distribution to purchase
Shares in the Reinvestment Plan. Stockholders may not deduct on their income tax
returns any net operating or net capital losses of the Company.
Foreign Stockholders. The rules governing United States federal income
taxation of nonresident alien individuals, foreign corporations, foreign
participants and other foreign stockholders (collectively, "Non-U.S.
Stockholders") are complex, and no attempt will be made herein to provide more
than a summary of such rules. The following discussion assumes that the income
from investment in the Shares will not be effectively connected with the
Non-U.S. Stockholders' conduct of a United States trade or business. Prospective
Non-U.S. Stockholders should consult with their own tax advisors to determine
the impact of federal, state and local laws with regard to
-21-
<PAGE>
an investment in Shares, including any reporting requirements. Non-U.S.
Stockholders will be admitted as stockholders with the approval of the Advisor.
Distributions that are not attributable to gain from sales or exchanges
by the Company of United States real property interests and not designated by
the Company as capital gain dividends will be treated as dividends of ordinary
income to the extent that they are made out of current and accumulated earnings
and profits of the Company. Such dividends ordinarily will be subject to a
withholding tax equal to 30% of the gross amount of the dividend, unless an
applicable tax treaty reduces or eliminates that tax. A number of U.S. tax
treaties that reduce the rate of withholding tax on corporate dividends do not
reduce, or reduce to a lesser extent, the rate of withholding applied to
dividends from a REIT. The Company expects to withhold U.S. income tax at the
rate of 30% on the gross amount of any such distributions paid to a Non-U.S.
Stockholder unless (i) a lower treaty rate applies (and, with regard to payments
on or after January 1, 1999, the Non-U.S. Stockholder files IRS Form W-8 with
the Company and, if the Shares are not traded on an established securities
market, acquires a taxpayer identification number from the IRS) or (ii) the
Non-U.S. Stockholder files an IRS Form 4224 (or, with respect to payments on or
after January 1, 1999, files IRS Form W-8 with the Company) with the Company
claiming that the distribution is effectively connected income. Distributions in
excess of the Company's current and accumulated earnings and profits will not be
taxable to a stockholder to the extent that such distributions paid do not
exceed the adjusted basis of the stockholder's Shares, but rather will reduce
the adjusted basis of such Shares. To the extent that distributions in excess of
current and accumulated earnings and profits exceed the adjusted basis of a
Non-U.S. Stockholders' Shares, such distributions will give rise to tax
liability if the Non-U.S. Stockholder would otherwise be subject to tax on any
gain from the sale or disposition of the Shares, as described below. If it
cannot be determined at the time a distribution is paid whether or not such
distribution will be in excess of current and accumulated earnings and profits,
the distribution will be subject to withholding at the rate of 30%. However, a
Non-U.S. Stockholder may seek a refund of such amounts from the IRS if it is
subsequently determined that such distribution was, in fact, in excess of the
Company's current and accumulated earnings and profits. Beginning with payments
made on or after January 1, 1999, the Company will be permitted, but not
required, to make reasonable estimates of the extent to which distributions
exceed current or accumulated earnings and profits. Such distributions will
generally be subject to a 10% withholding tax, which may be refunded to the
extent they exceed the stockholder's actual U.S. tax liability, provided the
required information is furnished to the IRS.
For any year in which the Company qualifies as a REIT, distributions
that are attributable to gain from sales or exchanges by the Company of United
States real property interests will be taxed to a Non-U.S. Stockholder under the
provisions of the Foreign Investment in Real Property Tax Act of 1980, as
amended ("FIRPTA"). Under FIRPTA, distributions attributable to gain from sales
of United States real property interests are taxed to a Non-U.S. Stockholder as
if such gain were effectively connected with a United States business. Non-U.S.
Stockholders would thus be taxed at the normal capital gain rates applicable to
U.S. Stockholders (subject to applicable alternative minimum tax and a special
alternative minimum tax in the case of nonresident alien individuals). Also,
distributions subject to FIRPTA may be subject to a 30% branch profits tax in
the hands of a foreign corporate stockholder not entitled to treaty exemption or
rate reduction. The Company is required by applicable Treasury Regulations to
withhold 35% of any distribution that could be designated by the Company as a
capital gain dividend. This amount is creditable against the Non-U.S.
Stockholder's FIRPTA tax liability.
Gain recognized by a Non-U.S. Stockholder upon a sale of Shares
generally will not be taxed under FIRPTA if the Company is a "domestically
controlled REIT," defined generally as a REIT in which at all times during a
specified testing period less than 50% in value of the stock was held directly
or indirectly by foreign persons. It is currently anticipated that the Company
will be a "domestically controlled REIT," and in such case the sale of Shares
would not be subject to taxation under FIRPTA. However, gain not subject to
FIRPTA nonetheless will be taxable to a Non-U.S. Stockholder if (i) investment
in the Shares is treated as "effectively connected" with the Non-U.S.
Stockholders' U.S. trade or business or (ii) the Non-U.S. Stockholder is a
nonresident alien individual who was present in the United States for 183 days
or more during the taxable year and certain other conditions are met.
Effectively connected gain realized by a foreign corporate shareholder may be
subject to an additional 30% branch profits tax, subject to possible exemption
or rate reduction under an applicable tax treaty. If the gain on the sale of
Shares were to be subject to taxation under FIRPTA, the Non-U.S. Stockholder
would be subject to the same
-22-
<PAGE>
treatment as U.S. Stockholders with respect to such gain (subject to applicable
alternative minimum tax and a special alternative minimum tax in the case of
nonresident alien individuals), and the purchaser of the Shares would be
required to withhold and remit to the Service 10% of the purchase price.
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 Coopers & Lybrand L.L.P.,
independent accountants, given on the authority of that firm as experts in
accounting and auditing.
-23-
<PAGE>
EXHIBIT B
FINANCIAL INFORMATION
THE FINANCIAL STATEMENTS INCLUDED
IN THIS EXHIBIT B UPDATE AND
REPLACE EXHIBIT B TO THE ATTACHED
PROSPECTUS, DATED JULY 9, 1997.
<PAGE>
INDEX TO FINANCIAL STATEMENTS
CNL AMERICAN REALTY FUND, INC.
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Accountants B-2
Financial Statements:
Balance Sheets at December 31, 1997 and 1996 B-3
Statements of Earnings for the year ended December
31, 1997 and the period June 12, 1996 (date of
inception) through December 31, 1996 B-4
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-5 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-6
Notes to Financial Statements B-8
</TABLE>
B-1
<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 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 audits provide 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-2
<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-3
<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-4
<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
Common stock distributions
------------ 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-5
<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-6
<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-7
<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-8
<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
B-9
<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:
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.
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-10
<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 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-11
<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-12
<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-13
<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-14
<PAGE>
<PAGE>
EXHIBIT C
PRIOR PERFORMANCE TABLES
THE FOLLOWING INFORMATION UPDATES
AND REPLACES THE CORRESPONDING
INFORMATION IN EXHIBIT C TO THE
ATTACHED PROSPECTUS, DATED JULY 9, 1997.
<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, 1997. 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 1992 and June 1997.
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 1992 and June 1997. 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, 1997.
Table III - Operating Results of Prior Programs
Table III presents a summary of operating results for the period from
inception through June 30, 1997, of the Prior Public Programs, the offerings of
which became fully subscribed between July 1992 and June 1997.
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 1992 and June 30,
1997.
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 XI, Fund XII, Fund XIII, Fund XIV,
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 83.0% 83.0% 82.5% 82.5%
Acquisition fees paid
to affiliates 5.0 5.0 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 3/18/92 9/29/92 3/31/93 8/27/93
Length of offering (in
months) 6 6 5 6
Months to invest 90% of
amount available for
investment measured
from date of offering 6 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. registered for sale $165,000,000 of shares of
common stock (the "Initial Offering of Shares"). The Initial Offering
of Shares of CNL American Properties Fund, Inc. commenced April 19,
1995, and upon completion of the Initial Offering of Shares 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, CNL American Properties Fund, Inc. registered for sale
$275,000,000 of shares of common stock (the "1997 Offering of Shares").
The 1997 Offering of Shares of CNL American Properties Fund, Inc.
commenced following the completion of the Initial Offering of Shares on
February 6, 1997.
Note 2: 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. and CNL Income Fund XVIII, Ltd. each registered
for sale $30,000,000 of units of limited partnership interest (the
"Units"). The offering of Units of CNL Income Fund XVII, Ltd. commenced
September 2, 1995. Pursuant to the Registration Statement, the offering
of Units of CNL Income Fund XVIII, Ltd. could not commence until the
offering of Units of CNL Income Fund XVII, Ltd.
C-3
<PAGE>
<TABLE>
<CAPTION>
CNL Income CNL Income CNL American CNL Income CNL Income
Fund XV, Fund XVI, Properties Fund, Fund XVII, Fund XVIII,
Ltd. Ltd. Inc. Ltd. Ltd.
---------- ---------- ---------------- ---------- -----------
(Note 1) (Note 2)
<S><C>
Dollar amount offered $40,000,000 $45,000,000 $150,591,765 $30,000,000
=========== =========== ============ ===========
Dollar amount raised 100.0% 100.0% 91.3% 100.0%
----------- ----------- ------------ -----------
Less offering expenses:
Selling commissions
and discounts (8.5) (8.5) (7.5) (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) (11.0) (12.0)
----------- ----------- ------------ -----------
Reserve for operations -- -- -- --
----------- ----------- ------------ -----------
Percent available for
investment 88.0% 88.0% 89.0% 88.0%
=========== =========== ============ ===========
Acquisition costs:
Cash down payment 82.5% 82.5% 84.5% 83.5%
Acquisition fees paid
to affiliates 5.5 5.5 4.5 4.5
Loan costs -- -- -- --
----------- ----------- ------------ -----------
Total acquisition costs 88.0% 88.0% 89.0% 88.0%
=========== =========== ============ ===========
Percent leveraged
(mortgage financing
divided by total
acquisition costs) -- -- -- --
Date offering began 2/23/94 9/02/94 4/19/95 9/02/95
Length of offering (in 6 9 22 12
months)
Months to invest 90% of
amount available for
investment measured 10 11 23 15
from date of offering
</TABLE>
had terminated. CNL Income Fund XVII, Ltd. terminated its offering of Units on
September 19, 1996, at which time subscriptions for an aggregate 3,000,000 Units
($30,000,000) had been received. Upon the termination of the offering of
Units of CNL Income Fund XVII, Ltd., CNL Income Fund XVIII, Ltd. commenced its
offering to the public of 3,500,000 Units ($35,000,000).
C-4
<PAGE>
TABLE II
COMPENSATION TO SPONSOR
<TABLE>
<CAPTION>
CNL Income CNL Income CNL Income CNL Income
Fund XI, Fund XII, Fund XIII, Fund XIV,
Ltd. Ltd. Ltd. Ltd.
---------- ---------- ---------- ----------
<S><C>
Date offering commenced 3/18/92 9/29/92 3/31/93 8/27/93
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 2,000,000 2,250,000 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 5,600,000 6,300,000 5,800,000 6,525,000
=========== =========== =========== ===========
Dollar amount of cash generated
from operations before
deducting payments to
sponsor:
1997 (6 months) 1,841,174 1,981,123 1,708,175 1,856,053
1996 3,734,852 4,089,655 3,494,528 3,841,163
1995 3,758,271 3,928,473 3,482,461 3,823,939
1994 3,574,474 3,933,486 3,232,046 2,897,432
1993 3,434,512 3,320,549 1,148,550 329,957
1992 1,525,462 63,401 - -
1991 - - - -
1990 - - - -
1989 - - - -
1988 - - - -
1987 - - - -
1986 - - - -
1985 - - - -
1984 - - - -
1983 - - - -
1982 - - - -
1981 - - - -
1980 - - - -
1979 - - - -
1978 - - - -
Amount paid to sponsor from
operations (administrative,
accounting and management
fees):
1997 (6 months) 48,260 49,885 48,767 48,170
1996 133,138 137,966 126,947 134,867
1995 106,086 109,111 103,083 114,095
1994 76,533 84,524 83,046 84,801
1993 78,926 73,789 27,003 8,220
1992 30,237 2,031 - -
1991 - - - -
1990 - - - -
1989 - - - -
1988 - - - -
1987 - - - -
1986 - - - -
1985 - - - -
1984 - - - -
1983 - - - -
1982 - - - -
1981 - - - -
1980 - - - -
1979 - - - -
1978 - - - -
Dollar amount of property
sales and refinancing
before deducting payments
to sponsor:
Cash 1,044,750 1,640,000 836,411 3,196,603
Notes - - - -
Amount paid to sponsors
from property sales and
refinancing:
Real estate commissions - - - -
Incentive fees - - - -
Other - - - -
</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. registered for sale $165,000,000 of shares of
common stock (the "Initial Offering of Shares"). The Initial Offering
of Shares of CNL American Properties Fund, Inc. commenced April 19,
1995, and upon completion of the Initial Offering of Shares 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,
as amended, effective January 31, 1997, CNL American Properties Fund,
Inc. registered for sale $275,000,000 of shares of common stock (the
"1997 Offering of Shares"). The 1997 Offering of Shares of CNL
American Properties Fund, Inc. commenced following the completion of
the Initial Offering of Shares on February 6, 1997. The amounts shown
represent the combined results of the Initial Offering of Shares and
the 1997 Offering of Shares as of June 30, 1997.
Note 2: 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. and CNL Income Fund XVIII, Ltd. each registered for sale
$30,000,000 of units of limited
C-5
<PAGE>
<TABLE>
<CAPTION>
CNL Income CNL Income CNL American CNL Income CNL Income
Fund XV, Fund XVI, Properties Fund, Fund XVII, Fund XVIII,
Ltd. Ltd. Inc. Ltd. Ltd.
---------- ---------- ---------------- ---------- -----------
(Note 1) (Note 2)
<S><C>
Date offering commenced 2/23/94 9/02/94 4/19/95 and 2/6/97 9/02/95
Dollar amount raised $40,000,000 $45,000,000 $223,843,177 $30,000,000
=========== =========== ============ ===========
Amount paid to sponsor from
proceeds of offering:
Selling commissions and
discounts 3,400,000 3,825,000 16,788,238 2,550,000
Real estate commissions - - - -
Acquisition fees 2,200,000 2,475,000 10,072,943 1,350,000
Marketing support and
due diligence expense
reimbursement fees
(includes amounts
reallowed to
unaffiliated entities) 200,000 225,000 1,119,216 150,000
----------- ----------- ------------ -----------
Total amount paid to sponsor 5,800,000 6,525,000 27,980,397 4,050,000
=========== =========== ============ ===========
Dollar amount of cash generated
from operations before
deducting payments to
sponsor:
1997 (6 months) 1,716,242 1,938,911 6,583,211 1,232,910
1996 3,557,073 3,911,609 5,817,143 1,340,159
1995 3,361,477 2,619,840 566,475 11,671
1994 1,154,454 212,171 - -
1993 - - - -
1992 - - - -
1991 - - - -
1990 - - - -
1989 - - - -
1988 - - - -
1987 - - - -
1986 - - - -
1985 - - - -
1984 - - - -
1983 - - - -
1982 - - - -
1981 - - - -
1980 - - - -
1979 - - - -
1978 - - - -
Amount paid to sponsor from
operations (administrative,
accounting and management
fees):
1997 (6 months) 42,619 50,756 269,208 53,768
1996 122,391 157,883 334,603 107,211
1995 122,107 138,445 68,016 2,659
1994 37,620 7,023 - -
1993 - - - -
1992 - - - -
1991 - - - -
1990 - - - -
1989 - - - -
1988 - - - -
1987 - - - -
1986 - - - -
1985 - - - -
1984 - - - -
1983 - - - -
1982 - - - -
1981 - - - -
1980 - - - -
1979 - - - -
1978 - - - -
Dollar amount of property
sales and refinancing
before deducting payments
to sponsor:
Cash 3,312,297 1,385,384 5,254,083 -
Notes - - - -
Amount paid to sponsors
from property sales and
refinancing:
Real estate commissions - - - -
Incentive fees - - - -
Other - - - -
</TABLE>
partnership interest (the "Units"). The offering of Units of CNL Income
Fund XVII, Ltd. commenced September 2, 1995.Pursuant to the
Registration Statement, the offering of Units of CNL Income Fund XVIII,
Ltd. could not commence until the offering of Units of CNL Income Fund
XVII, Ltd. had terminated. CNL Income Fund XVII, Ltd. terminated its
offering of Units on September 19, 1996, at which time subscriptions
for an aggregate 3,000,000 Units ($30,000,000) had been received. Upon
the termination of the offering of Units of CNL Income Fund XVII, Ltd.,
CNL Income Fund XVIII, Ltd. commenced its offering to the public of
3,500,000 Units ($35,000,000). As of June 30, 1997, CNL Income Fund
XVIII, Ltd. had sold 2,219,221 Units, representing $22,192,212 of
capital contributed by limited partners, and 17 properties had been
acquired. From commencement of the offering through June 30, 1997,
total selling commissions and discounts were $1,886,338, due diligence
expense reimbursement fees were $110,961, and acquisition fees were
$998,650, for a total amount paid to sponsor of $2,995,949. CNL Income
Fund XVIII, Ltd. had cash generated from operations for the period
October 11, 1996 (the date funds were originally released from escrow)
through June 30, 1997, of $490,897. CNL Income Fund XVIII, Ltd. made
payments of $33,405 to the sponsor from operations for this period.
C-6
<PAGE>
TABLE III
Operating Results of Prior Programs CNL
INCOME FUND XI, LTD.
<TABLE>
<CAPTION>
1991
(Note 1) 1992 1993 1994
-------- ------------ ------------ ------------
<S><C>
Gross revenue $ 0 $ 1,269,086 $ 3,831,648 $ 3,852,107
Equity in earnings of unconsolidated
joint ventures 0 33,367 121,059 119,370
Profit from sale of properties (Note 5) 0 0 0 0
Interest income 0 150,535 24,258 30,894
Less: Operating expenses 0 (63,390) (206,987) (179,717)
Interest expense 0 0 0 0
Depreciation and amortization 0 (180,631) (469,127) (481,226)
Minority interests in income of
consolidated joint ventures 0 (23,529) (68,399) (68,936)
------------ ------------ ------------ ------------
Net income - GAAP basis 0 1,185,438 3,232,452 3,272,492
============ ============ ============ ============
Taxable income
- from operations 0 1,295,104 2,855,026 2,947,445
============ ============ ============ ============
- from gain on sale 0 0 0 0
============ ============ ============ ============
Cash generated from operations
(Notes 2 and 4) 0 1,495,225 3,355,586 3,497,941
Cash generated from sales (Note 5) 0 0 0 0
Cash generated from refinancing 0 0 0 0
------------ ------------ ------------ ------------
Cash generated from operations, sales
and refinancing 0 1,495,225 3,355,586 3,497,941
Less: Cash distributions to investors
(Note 6)
- from operating cash flow 0 (1,205,030) (2,495,002) (3,400,001)
- from sale of properties 0 0 0 0
- from cash flow from prior period 0 0 0 0
------------ ------------ ------------ ------------
Cash generated (deficiency) after cash
distributions 0 290,195 860,584 97,940
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
Minority interests' capital
contributions 0 426,367 0 0
Organization costs 0 (10,000) 0 0
Syndication costs 0 (3,922,875) 0 0
Acquisition of land and buildings 0 (26,428,556) (276,157) 0
Investment in direct financing
leases 0 (6,716,561) (276,206) 0
Increase in restricted cash 0 0 0 0
Decrease in restricted cash 0 0 0 0
Investment in joint ventures 0 (1,658,925) (772) 0
Reimbursement of syndication and
acquisition costs paid on behalf
of CNL Income Fund XI, Ltd. by
related parties 0 (1,011,487) (900) 0
Increase in other assets 0 (122,024) 0 0
Distributions to holders of minority
interests 0 (17,467) (51,562) (57,641)
------------ ------------ ------------ ------------
Cash generated (deficiency) after cash
distributions and special items 1,000 828,667 254,987 40,299
============ ============ ============ ============
TAX AND DISTRIBUTION DATA PER
$1,000 INVESTED
Federal income tax results:
Ordinary income (loss)
- from operations 0 45 71 73
============ ============ ============ ============
- from recapture 0 0 0 0
============ ============ ============ ============
Capital gain (loss) 0 0 0 0
============ ============ ============ ============
</TABLE>
C-7
<PAGE>
<TABLE>
<CAPTION>
6 months
1995 1996 1997
------------ ------------ ------------
<S><C>
Gross revenue $ 3,820,990 $ 3,877,311 $ 1,847,371
Equity in earnings of unconsolidated
joint ventures 118,384 118,211 105,163
Profit from sale of properties (Note 5) 0 213,685 0
Interest income 51,192 51,381 21,104
Less: Operating expenses (237,126) (247,569) (136,290)
Interest expense 0 0 0
Depreciation and amortization (481,226) (478,198) (229,919)
Minority interests in income of
consolidated joint ventures (70,038) (70,116) (34,598)
------------ ------------ ------------
Net income - GAAP basis 3,202,176 3,464,705 1,572,831
============ ============ ============
Taxable income
- from operations 2,985,221 2,965,514 1,447,710
============ ============ ============
- from gain on sale 0 0 0
============ ============ ============
Cash generated from operations
(Notes 2 and 4) 3,652,185 3,601,714 1,792,914
Cash generated from sales (Note 5) 0 1,044,750 0
Cash generated from refinancing 0 0 0
------------ ------------ ------------
Cash generated from operations, sales
and refinancing 3,652,185 4,646,464 1,792,914
Less: Cash distributions to investors
(Note 6)
- from operating cash flow (3,500,023) (3,540,024) (1,790,012)
- from sale of properties 0 0 0
- from cash flow from prior period 0 0 0
------------ ------------ ------------
Cash generated (deficiency) after cash
distributions 152,162 1,106,440 2,902
Special items (not including sales and
refinancing):
Limited partners' capital
contributions 0 0 0
General partners' capital
contributions 0 0 0
Minority interests' capital
contributions 0 0 0
Organization costs 0 0 0
Syndication costs 0 0 0
Acquisition of land and buildings 0 0 0
Investment in direct financing
leases 0 0 0
Increase in restricted cash 0 (1,044,750) 0
Decrease in restricted cash 0 0 1,044,750
Investment in joint ventures 0 0 (1,044,750)
Reimbursement of syndication and
acquisition costs paid on behalf
of CNL Income Fund XI, Ltd. by
related parties 0 0 0
Increase in other assets 0 0 0
Distributions to holders of minority
interests (54,227) (58,718) (29,095)
------------ ------------ ------------
Cash generated (deficiency) after cash
distributions and special items 97,935 2,972 (26,193)
============ ============ ============
TAX AND DISTRIBUTION DATA PER
$1,000 INVESTED
Federal income tax results:
Ordinary income (loss)
- from operations 74 73 36
============ ============ ============
- from recapture 0 0 0
============ ============ ============
Capital gain (loss) 0 0 0
============ ============ ============
</TABLE>
C-8
<PAGE>
TABLE III - CNL INCOME FUND XI, LTD. (continued)
<TABLE>
<CAPTION>
1991
(Note 1) 1992 1993 1994
------------ ------------ ------------ -----------
<S><C>
Cash distributions to investors
Source (on GAAP basis)
- from investment income 0 41 62 81
- from capital gain 0 0 0 0
- from investment income from
prior period 0 0 0 4
- from return of capital (Note 3) 0 1 0 0
------------ ------------ ------------ ------------
Total distributions on GAAP basis
(Note 6) 0 42 62 85
============ ============ ============ ============
Source (on cash basis)
- from sales 0 0 0 0
- from refinancing 0 0 0 0
- from operations 0 42 62 85
- from cash flow from prior
period 0 0 0 0
------------ ------------ ------------ ------------
Total distributions on cash basis
(Note 6) 0 42 62 85
============ ============ ============ ============
Total cash distributions as a
percentage of original $1,000
investment (Notes 7 and 8) 0.00% 6.17% 8.31% 8.56%
Total cumulative cash distributions
per $1,000 investment from inception 0 42 104 189
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 5) N/A 100% 100% 100%
</TABLE>
Note 1: The registration statement relating to the offering of Units by CNL
Income Fund XI, Ltd. became effective on March 12, 1992. Activities
through April 22, 1992, 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 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 CNL Income
Fund XI, Ltd. has not treated this amount as a return of capital for
any other purpose.
Note 4: 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 XI, Ltd.
Note 5: In November 1996, CNL Income Fund XI, Ltd. sold one if its properties
and received net sales proceeds of $1,044,750, resulting in a gain of
$213,685 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: 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 and 1996, are reflected in the 1994, 1995, 1996 and
1997 columns, respectively, for distributions on a cash basis due to
the payment of such distributions in January 1994, 1995, 1996 and 1997,
respectively. As a result of 1994, 1995, 1996 and 1997 distributions
being presented on a cash basis, distributions declared and unpaid as
of December 31, 1994, 1995 and 1996, and June 30, 1997 are not included
in the 1994, 1995, 1996 and 1997 totals, respectively.
Note 7: On December 31, 1995 and 1996, CNL Income Fund XI, Ltd. declared a
special distribution of cumulative excess operating reserves equal to
.10% for each year of the total invested capital. Accordingly, the
total yield for each of 1995 and 1996 was 8.85%.
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-9
<PAGE>
<TABLE>
<CAPTION>
6 months
1995 1996 1997
------------ ------------ ------------
<S><C>
Cash distributions to investors
Source (on GAAP basis)
- from investment income 79 81 39
- from capital gain 0 5 0
- from investment income from
prior period 9 3 2
- from return of capital (Note 3) 0 0 4
------------ ------------ ------------
Total distributions on GAAP basis
(Note 6) 88 89 45
============ ============ ============
Source (on cash basis)
- from sales 0 0 0
- from refinancing 0 0 0
- from operations 88 89 45
- from cash flow from prior
period 0 0 0
------------ ------------ ------------
Total distributions on cash basis
(Note 6) 88 89 45
============ ============ ============
Total cash distributions as a
percentage of original $1,000
investment (Notes 7 and 8) 8.85% 8.85% 8.75%
Total cumulative cash distributions
per $1,000 investment from inception 277 366 411
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 5) 100% 97% 100%
</TABLE>
C-10
<PAGE>
TABLE III
Operating Results of Prior Programs CNL
INCOME FUND XII, LTD.
<TABLE>
<CAPTION>
1991
(Note 1) 1992 1993 1994
------------ ------------ ------------ ------------
<S><C>
Gross revenue $ 0 $ 25,133 $ 3,374,640 $ 4,397,881
Equity in earnings of joint ventures 0 46 49,604 85,252
Profit (Loss) from sale of properties
(Note 7) 0 0 0 0
Interest income 0 45,228 190,082 65,447
Less: Operating expenses 0 (7,211) (193,804) (192,951)
Interest expense 0 0 0 0
Depreciation and amortization 0 (3,997) (286,293) (327,795)
------------ ------------ ------------ ------------
Net income - GAAP basis 0 59,199 3,134,229 4,027,834
============ ============ ============ ============
Taxable income
- from operations 0 58,543 2,749,072 3,301,005
============ ============ ============ ============
- from gain (loss) on sale 0 0 0 0
============ ============ ============ ============
Cash generated from operations
(Notes 2 and 5) 0 61,370 3,246,760 3,848,962
Cash generated from sales (Note 7) 0 0 0 0
Cash generated from refinancing 0 0 0 0
------------ ------------ ------------ ------------
Cash generated from operations, sales
and refinancing 0 61,370 3,246,760 3,848,962
Less: Cash distributions to investors
(Note 6)
- from operating cash flow 0 (61,370) (1,972,769) (3,768,754)
- from sale of properties 0 0 0 0
- from return of capital (Note 4) 0 (60,867) 0 0
- from cash flow from prior period 0 0 0 0
------------ ------------ ------------ ------------
Cash generated (deficiency) after cash
distributions 0 (60,867) 1,273,991 80,208
Special items (not including sales and
refinancing):
Limited partners' capital
contributions 0 21,543,270 23,456,730 0
General partners' capital
contributions 1,000 0 0 0
Organization costs 0 (10,000) 0 0
Syndication costs 0 (2,066,937) (2,277,637) 0
Acquisition of land and buildings 0 (7,536,009) (15,472,737) (230)
Investment in direct financing
leases 0 (2,503,050) (11,875,100) (591)
Loan to tenant of joint venture,
net of repayments 0 0 (207,189) 6,400
Investment in joint ventures 0 (372,045) (468,771) (4,400)
Increase in restricted cash 0 0 0 0
Payment of lease costs 0 0 0 0
Reimbursement of syndication and
acquisition costs paid on behalf
of CNL Income Fund XII, Ltd. by
related parties 0 (704,923) (432,749) 0
Increase in other assets 0 (654,497) 0 0
Other 0 0 0 973
------------ ------------ ------------ ------------
Cash generated (deficiency) after cash
distributions and special items 1,000 7,634,942 (6,003,462) 82,360
============ ============ ============ ============
TAX AND DISTRIBUTION DATA PER
$1,000 INVESTED
Federal income tax results:
Ordinary income (loss)
- from operations 0 5 64 73
============ ============ ============ ============
- from recapture 0 0 0 0
============ ============ ============ ============
Capital gain (loss) 0 0 0 0
============ ============ ============ ============
</TABLE>
C-11
<PAGE>
<TABLE>
<CAPTION>
6 months
1995 1996 1997
------------ ------------ ------------
<S><C>
Gross revenue $ 4,404,792 $ 4,264,273 $ 2,058,864
Equity in earnings of joint ventures 81,582 200,499 141,356
Profit (Loss) from sale of properties
(Note 7) 0 (15,355) 0
Interest income 84,197 88,286 37,968
Less: Operating expenses (228,404) (279,341) (132,808)
Interest expense 0 0 0
Depreciation and amortization (327,795) (315,319) (159,551)
------------ ------------ ------------
Net income - GAAP basis 4,014,372 3,943,043 1,945,829
============ ============ ============
Taxable income
- from operations 3,262,046 3,275,495 1,617,525
============ ============ ============
- from gain (loss) on sale 0 (41,506) 0
============ ============ ============
Cash generated from operations
(Notes 2 and 5) 3,819,362 3,951,689 1,931,238
Cash generated from sales (Note 7) 0 1,640,000 0
Cash generated from refinancing 0 0 0
------------ ------------ ------------
Cash generated from operations, sales
and refinancing 3,819,362 5,591,689 1,931,238
Less: Cash distributions to investors
(Note 6)
- from operating cash flow (3,819,362) (3,870,008) (1,912,504)
- from sale of properties 0 0 0
- from return of capital (Note 4) 0 0 0
- from cash flow from prior period (5,645) 0 0
------------ ------------ ------------
Cash generated (deficiency) after cash
distributions (5,645) 1,721,681 18,734
Special items (not including sales and
refinancing):
Limited partners' capital
contributions 0 0 0
General partners' capital
contributions 0 0 0
Organization costs 0 0 0
Syndication costs 0 0 0
Acquisition of land and buildings 0 0 (55,000)
Investment in direct financing
leases 0 0 0
Loan to tenant of joint venture,
net of repayments 7,008 7,741 4,171
Investment in joint ventures 0 (1,645,024) 0
Increase in restricted cash 0 0 0
Payment of lease costs 0 0 (24,052)
Reimbursement of syndication and
acquisition costs paid on behalf
of CNL Income Fund XII, Ltd. by
related parties 0 0 0
Increase in other assets 0 0 0
Other 0 0 0
------------ ------------ ------------
Cash generated (deficiency) after cash
distributions and special items 1,363 84,398 (56,147)
============ ============ ============
TAX AND DISTRIBUTION DATA PER
$1,000 INVESTED
Federal income tax results:
Ordinary income (loss)
- from operations 72 72 36
============ ============ ============
- from recapture 0 0 0
============ ============ ============
Capital gain (loss) 0 (1) 0
============ ============ ============
</TABLE>
C-12
<PAGE>
TABLE III - CNL INCOME FUND XII, LTD. (continued)
<TABLE>
<CAPTION>
1991 6 months
(Note 1) 1992 1993 1994 1995 1996 1997
----------- --------- --------- --------- --------- --------- --------
<S><C>
Cash distributions to investors
Source (on GAAP basis)
- from investment income 0 5 46 84 85 86 43
- from capital gain 0 0 0 0 0 0 0
- from investment income from
prior period 0 0 0 0 0 0 0
- from return of capital (Note 3) 0 7 0 0 0 0 0
----------- --------- --------- --------- --------- --------- ---------
Total distributions on GAAP basis
(Note 6) 0 12 46 84 85 86 43
=========== ========= ========= ========= ========= ========= =========
Source (on cash basis)
- from sales 0 0 0 0 0 0 0
- from refinancing 0 0 0 0 0 0 0
- from operations 0 6 46 84 85 86 43
- from return of capital (Note 4) 0 6 0 0 0 0 0
- from cash flow from prior period 0 0 0 0 0 0 0
----------- --------- --------- --------- --------- --------- ---------
Total distributions on cash basis
(Note 6) 0 12 46 84 85 86 43
=========== ========= ========= ========= ========= ========= =========
Total cash distributions as a
percentage of original $1,000
investment (Notes 8 and 9) 0.00% 5.00% 6.75% 8.50% 8.60% 8.50% 8.50%
Total cumulative cash distributions
per $1,000 investment from inception 0 12 58 142 227 313 356
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% 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 XII, Ltd. ("CNL XII") and CNL
Income Fund XI, Ltd. each registered for sale $40,000,000 units of
limited partnership interests ("Units"). The offering of Units of CNL
Income Fund XI, Ltd. commenced March 12, 1992. Pursuant to the
registration statement, CNL XII could not commence until the offering
of Units of CNL Income Fund XI, Ltd. was terminated. CNL Income Fund
XI, Ltd. terminated its offering of Units on September 28, 1992, 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 XI, Ltd., CNL XII commenced its offering of Units. Activities
through October 8, 1992, 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 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 CNL Income
Fund XII, Ltd. has not treated this amount as a return of capital for
any other purpose.
Note 4: CNL Income Fund XII, Ltd. makes its distributions in the current period
rather than in arrears based on estimated operating results. In cases
where distributions exceed cash from operations in the current period,
once finally determined, subsequent distributions are lowered
accordingly in order to avoid any return of capital. This amount is not
required to be presented as a return of capital except for purposes of
this table, and CNL Income Fund XII, Ltd. has not treated this amount
as a return of capital for any other purpose.
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 CNL Income Fund XII, Ltd.
Note 6: 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 and 1996, are reflected in the 1994, 1995, 1996 and
1997 columns, respectively, for distributions on a cash basis due to
the payment of such distributions in January 1994, 1995, 1996 and 1997,
respectively. As a result of 1994, 1995, 1996 and 1997 distributions
being presented on a cash basis, distributions declared and unpaid as
of December 31, 1994, 1995 and 1996, and June 30, 1997 are not included
in the 1994, 1995, 1996 and 1997 totals, respectively.
C-13
<PAGE>
Note 7: In April 1996, CNL Income Fund XII, Ltd. sold one of its properties to
an unrelated third party for $1,640,000. As a result of this
transaction, CNL Income Fund XII, Ltd. recognized a loss of $15,355 for
financial reporting purposes primarily due to acquisition fees and
miscellaneous acquisition expenses CNL Income Fund XII, Ltd. had
allocated to this property. In May 1996, CNL Income Fund XII, Ltd.
reinvested the proceeds from this sale, along with additional funds,
for a total of $1,645,024 in Middleburg Joint Venture.
Note 8: On December 31, 1995, CNL Income Fund XII, Ltd. declared a special
distribution of cumulative excess operating reserves equal to .10% of
the total invested capital. Accordingly, the total yield for 1995 was
8.60%.
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 6 above)
Note 10: Certain data for columns representing less than 12 months have
been annualized.
C-14
<PAGE>
TABLE III
Operating Results of Prior Programs CNL
INCOME FUND XIII, LTD.
<TABLE>
<CAPTION>
1992 6 months
(Note 1) 1993 1994 1995 1996 1997
---------- ------------ ------------ ------------ ------------ ------------
<S> <C>
Gross revenue $ 0 $ 966,564 $ 3,558,447 $ 3,806,944 $ 3,685,280 $ 1,796,451
Equity in earnings of joint ventures 0 1,305 43,386 98,520 60,654 70,503
Profit (Loss) from sale of properties
(Notes 4 and 5) 0 0 0 (29,560) 82,855 0
Provision for loss on land and net
investment in direct financing leases
(Note 8) 0 0 0 0 0 (41,202)
Interest income 0 181,568 77,379 51,410 49,820 18,246
Less: Operating expenses 0 (59,390) (183,311) (214,705) (253,360) (128,593)
Interest expense 0 0 0 0 0 0
Depreciation and amortization 0 (148,170) (378,269) (393,435) (393,434) (197,265)
---------- ------------ ------------ ------------ ------------ ------------
Net income - GAAP basis 0 941,877 3,117,632 3,319,174 3,231,815 1,518,140
========== ============ ============ ============ ============ ============
Taxable income
- from operations 0 978,535 2,703,252 2,920,859 2,972,159 1,387,838
========== ============ ============ ============ ============ ============
- from gain (loss) on sale 0 0 0 0 0 0
========== ============ ============ ============ ============ ============
Cash generated from operations
(Notes 2 and 3) 0 1,121,547 3,149,000 3,379,378 3,367,581 1,659,408
Cash generated from sales (Notes 4 and 5) 0 0 0 286,411 550,000 0
Cash generated from refinancing 0 0 0 0 0 0
---------- ------------ ------------ ------------ ------------ ------------
Cash generated from operations, sales
and refinancing 0 1,121,547 3,149,000 3,665,789 3,917,581 1,659,408
Less: Cash distributions to investors
(Note 6)
- from operating cash flow 0 (528,364) (2,800,004) (3,350,014) (3,367,581) (1,659,408)
- from sale of properties 0 0 0 0 0 0
- from cash flow from prior period 0 0 0 0 (32,427) (40,596)
---------- ------------ ------------ ------------ ------------ ------------
Cash generated (deficiency) after
cash distributions 0 593,183 348,996 315,775 517,573 (40,596)
Special items (not including sales
and refinancing):
Limited partners' capital
contributions 0 40,000,000 0 0 0 0
General partners' capital
contributions 1,000 0 0 0 0 0
Syndication costs 0 (3,932,017) (181) 0 0 0
Acquisition of land and buildings 0 (19,691,630) (5,764,308) (336,116) 0 0
Investment in direct financing leases 0 (6,760,624) (1,365,075) 0 0 0
Investment in joint ventures 0 (314,998) (545,139) (140,052) 0 (550,000)
Increase in restricted cash 0 0 0 0 (550,000) 0
Decrease in restricted cash 0 0 0 0 0 550,000
Loan to tenant 0 0 0 0 0 (190,997)
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) 0 0
Increase in other assets 0 (454,909) 9,226 0 0 0
Other 0 0 0 954 0 0
---------- ------------ ------------ ------------ ------------ ------------
Cash generated (deficiency) after cash
distributions and special items 1,000 8,639,025 (7,341,517) (162,513) (32,427) (231,593)
========== ============ ============ ============ ============ ============
TAX AND DISTRIBUTION DATA PER
$1,000 INVESTED
Federal income tax results:
Ordinary income (loss)
- from operations 0 33 67 72 74 34
========== ============ ============ ============ ============ ============
- from recapture 0 0 0 0 0 0
========== ============ ============ ============ ============ ============
Capital gain (loss) (Notes 4 and 5) 0 0 0 0 0 0
========== ============ ============ ============ ============ ============
C-15
<PAGE>
TABLE III - CNL INCOME FUND XIII, LTD. (continued)
</TABLE>
<TABLE>
<CAPTION>
1992 6 months
(Note 1) 1993 1994 1995 1996 1997
-------- -------- -------- ------- -------- --------
<S> <C>
Cash distributions to investors
Source (on GAAP basis)
- from investment income 0 18 70 82 78 38
- from capital gain 0 0 0 0 2 0
- from investment income from prior
period 0 0 0 2 5 5
-------- -------- -------- -------- -------- --------
Total distributions on GAAP basis (Note 6) 0 18 70 84 85 43
======== ======== ======== ======== ======== ========
Source (on cash basis)
- from sales 0 0 0 0 0 0
- from refinancing 0 0 0 0 0 0
- from operations 0 18 70 84 84 42
- from cash flow from prior period 0 0 0 0 1 1
-------- -------- -------- -------- -------- --------
Total distributions on cash basis (Note 6) 0 18 70 84 85 43
======== ======== ======== ======== ======== ========
Total cash distributions as a percentage
of original $1,000 investment (Note 7) 0.00% 5.33% 7.56% 8.44% 8.50% 8.50%
Total cumulative cash distributions per
$1,000 investment from inception 0 18 88 172 257 300
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% 99% 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: 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
and 1996, are reflected in the 1994, 1995, 1996 and 1997
columns, respectively, for distributions on a cash basis due to
the payment of such distributions in January 1994, 1995, 1996
and 1997, respectively. As a result of 1994, 1995, 1996 and
1997 distributions being presented on a cash basis,
distributions declared and unpaid as of December 31, 1994, 1995
and 1996, and June 30, 1997, are not included in the 1994, 1995,
1996 and 1997 totals, respectively.
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 6 above)
Note 8: During the six months ended June 30, 1997, the partnership
recorded an allowance for loss on land and net investment in the
direct financing lease of $41,202, for financial reporting
purposes, relating to one of its properties. The loss represents
the difference between the property's land carrying value and
the carrying value of the net investment in the direct financing
lease, as compared to the estimated net realizable value, based
on the anticipated sales price of this property from a third
party.
Note 9: Certain data for columns representing less than 12 months have been
annualized.
C-17
<PAGE>
TABLE III
Operating Results of Prior Programs CNL
INCOME FUND XIV, LTD.
<TABLE>
<CAPTION>
1992 6 months
(Note 1) 1993 1994 1995 1996 1997
--------- ------------ ------------ ------------ ------------ ------------
<S> <C>
Gross revenue $ 0 $ 256,234 $ 3,135,716 $ 4,017,266 $ 3,999,813 $ 1,964,870
Equity in earnings of joint ventures 0 1,305 35,480 338,717 459,137 152,823
Profit (Loss) from sale of properties
(Note 4) 0 0 0 (66,518) 0 0
Interest income 0 27,874 200,499 50,724 44,089 23,015
Less: Operating expenses 0 (14,049) (181,980) (248,840) (246,621) (148,962)
Interest expense 0 0 0 0 0 0
Depreciation and amortization 0 (28,918) (257,640) (340,112) (340,089) (170,055)
-------- ------------ ------------ ------------ ------------ -----------
Net income - GAAP basis 0 242,446 2,932,075 3,751,237 3,916,329 1,821,691
======== ============ ============ ============ ============ ===========
Taxable income
- from operations 0 278,845 2,482,240 3,162,165 3,236,329 1,594,605
======== ============ ============ ============ ============ ===========
- from gain on sale 0 0 0 0 0 47,256
======== ============ ============ ============ ============ ===========
Cash generated from operations
(Notes 2 and 3) 0 321,737 2,812,631 3,709,844 3,706,296 1,807,883
Cash generated from sales (Note 4) 0 0 0 696,012 0 0
Cash generated from refinancing 0 0 0 0 0 0
-------- ------------ ------------ ------------ ------------ -----------
Cash generated from operations, sales
and refinancing 0 321,737 2,812,631 4,405,856 3,706,296 1,807,883
Less: Cash distributions to investors
(Note 5)
- from operating cash flow 0 (9,050) (2,229,952) (3,543,751) (3,706,296) (1,807,883)
- from sale of properties 0 0 0 0 0 0
- from cash flow from prior period 0 0 0 0 (6,226) (48,377)
-------- ------------ ------------ ------------
Cash generated (deficiency) after cash
distributions 0 312,687 582,679 862,105 (6,226) (48,377)
Special items (not including sales and
refinancing):
Limited partners' capital
contributions 0 28,785,100 16,214,900 0 0 0
General partners' capital
contributions 1,000 0 0 0 0 0
Syndication costs 0 (2,771,892) (1,618,477) 0 0 0
Acquisition of land and buildings 0 (13,758,004) (11,859,237) (964,073) 0 0
Investment in direct financing leases 0 (4,187,268) (5,561,748) (75,352) 0 0
Investment in joint ventures 0 (315,209) (1,561,988) (1,087,218) (7,500) 0
Return of capital from joint venture 0 0 0 0 0 51,950
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) 0 0
Increase in other assets 0 (444,267) 0 0 0 0
Other 0 0 0 5,530 0 0
-------- ------------ ------------ ------------ ------------ ------------
Cash generated (deficiency) after cash
distributions and special items 1,000 6,914,932 (4,180,609) (1,259,585) (13,726) 3,573
======== ============ ============ ============ ============ ============
TAX AND DISTRIBUTION DATA PER
$1,000 INVESTED
Federal income tax results:
Ordinary income (loss)
- from operations 0 16 56 70 71 35
======== ============ ============ ============ ============ ============
- from recapture 0 0 0 0 0 0
======== ============ ============ ============ ============ ============
Capital gain (loss) (Note 4) 0 0 0 0 0 1
======== ============ ============ ============ ============ ============
</TABLE>
C-19
<PAGE>
TABLE III - CNL INCOME FUND XIV, LTD. (continued)
<TABLE>
<CAPTION>
1992 6 months
(Note 1) 1993 1994 1995 1996 1997
----------- ----------- ----------- ----------- ----------- -----------
<S> <C>
Cash distributions to investors
Source (on GAAP basis)
- from investment income 0 1 51 79 83 40
- from capital gain 0 0 0 0 0 0
- from return of capital 0 0 0 0 0 0
- from investment income from prior
period 0 0 0 0 0 1
----------- ----------- ----------- ----------- ----------- -----------
Total distributions on GAAP basis (Note 5) 0 1 51 79 83 41
=========== =========== =========== =========== =========== ===========
Source (on cash basis)
- from sales 0 0 0 0 0 0
- from refinancing 0 0 0 0 0 0
- from operations 0 1 51 79 83 40
- from cash flow from prior period 0 0 0 0 0 1
----------- ----------- ----------- ----------- ----------- -----------
Total distributions on cash basis (Note 5) 0 1 51 79 83 41
=========== =========== =========== =========== =========== ===========
Total cash distributions as a percentage
of original $1,000 investment (Note 6) 0.00% 4.50% 6.50% 8.06% 8.25% 8.25%
Total cumulative cash distributions
per $1,000 investment from inception 0 1 52 131 214 255
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 100% 100% 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.
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
and 1996, are reflected in the 1994, 1995, 1996 and 1997
columns, respectively, for distributions on a cash basis due to
the payment of such distributions in January 1994, 1995, 1996
and 1997, respectively. As a result of 1994, 1995, 1996 and
1997 distributions being presented on a cash basis,
distributions declared and unpaid as of December 31, 1994, 1995
and 1996, and June 30, 1997 are not included in the 1994, 1995,
1996 and 1997 totals, respectively.
Note 6: 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 7: Certain data for columns representing less than 12 months have
been annualized.
C-21
<PAGE>
TABLE III
Operating Results of Prior Programs CNL
INCOME FUND XV, LTD.
<TABLE>
<CAPTION>
1993 6 months
(Note 1) 1994 1995 1996 1997
------------ ------------ ------------ ------------ ------------
<S> <C>
Gross revenue $ 0 $ 1,143,586 $ 3,546,320 $ 3,632,699 $ 1,799,379
Equity in earnings of joint ventures 0 8,372 280,606 392,862 117,311
Profit (Loss) from sale of properties
(Note 4) 0 0 (71,023) 0 0
Interest income 0 167,734 88,059 43,049 24,263
Less: Operating expenses 0 (62,926) (228,319) (235,319) (123,377)
Interest expense 0 0 0 0 0
Depreciation and amortization 0 (70,848) (243,175) (248,232) (124,149)
------------ ------------ ------------ ------------ ------------
Net income - GAAP basis 0 1,185,918 3,372,468 3,585,059 1,693,427
============ ============ ============ ============ ============
Taxable income
- from operations 0 1,026,715 2,861,912 2,954,318 1,430,120
============ ============ ============ ============ ============
- from gain on sale 0 0 0 0 47,256
============ ============ ============ ============ ============
Cash generated from operations
(Notes 2 and 3) 0 1,116,834 3,239,370 3,434,682 1,673,623
Cash generated from sales (Note 4) 0 0 811,706 0 0
Cash generated from refinancing 0 0 0 0 0
------------ ------------ ------------ ------------ ------------
Cash generated from operations, sales
and refinancing 0 1,116,834 4,051,076 3,434,682 1,673,623
Less: Cash distributions to investors
(Note 5)
- from operating cash flow 0 (635,944) (2,650,003) (3,200,000) (1,673,623)
- from sale of properties 0 0 0 0 0
- from cash flow from prior period (6,377)
Cash generated (deficiency) after cash ------------- ------------ ----------- ------------ --------------
distributions 0 480,890 1,401,073 234,682 (6,377)
Special items (not including sales and
refinancing):
Limited partners' capital contra-
bunions 0 40,000,000 0 0 0
General partners' capital contra-
bunions 1,000 0 0 0 0
Syndication costs 0 (3,892,003) 0 0 0
Acquisition of land and buildings 0 (22,152,379) (1,625,601) 0 0
Investment in direct financing
leases 0 (6,792,806) (2,412,973) 0 0
Investment in joint venture 0 (1,564,762) (720,552) (129,939) 0
Return of capital from joint venture 0 0 0 0 51,950
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 0
Increase in other assets 0 (187,757) 0 0 0
Other (38) (6,118) 25,150 0 0
------------ ------------ ------------ ------------ ------------
Cash generated (deficiency) after cash
distributions and special items 962 4,786,868 (3,356,410) 104,743 45,573
============ ============ ============ ============ ============
TAX AND DISTRIBUTION DATA PER $1,000
INVESTED
Federal income tax results:
Ordinary income (loss)
- from operations 0 33 71 73 35
============ ============ ============ ============ ============
- from recapture 0 0 0 0 0
============ ============ ============ ============ ============
Capital gain (loss) (Note 4) 0 0 0 0 1
============ ============ ============ ============ ============
</TABLE>
C-23
<PAGE>
TABLE III - CNL INCOME FUND XV, LTD. (continued)
<TABLE>
<CAPTION>
1993 6 months
(Note 1) 1994 1995 1996 1997
------------ -------------- ------------ -------- -------
<S> <C>
Cash distributions to investors
Source (on GAAP basis)
- from investment income 0 21 66 80 42
- from capital gain 0 0 0 0 0
Total distributions on GAAP basis (Note 5) 0 21 66 80 42
============ ============ ============ ============ =======
Source (on cash basis)
- from sales 0 0 0 0 0
- from refinancing 0 0 0 0 0
- from operations 0 21 66 80 42
------------ ------------ ------------ ------------ =======
Total distributions on cash basis (Note 5) 0 21 66 80 42
============ ============ ============ ============ =======
Total cash distributions as a percentage
of orginal $1,000 investment (Notes 6
and 7). 0 5.00% 7.25% 8.20% 8.00%
Total cumulative cash distributions per
$1,000 investment from inception 0 21 87 167 209
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) N/A 100% 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.
Note 5: Distributions declared for the quarters ended December 31, 1994,
1995 and 1996 are reflected in the 1995, 1996 and 1997 columns,
respectively, due to the payment of such distributions in January 1995,
1996 and 1997, respectively. As a result of distributions being
presented on a cash basis, distributions declared and unpaid as of
December 31, 1994, 1995 and 1996, and June 30, 1997 are not included in
the 1994, 1995, 1996 and 1997 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: Certain data for columns representing less than 12 months have been
annualized.
C-25
<PAGE>
TABLE III
Operating Results of Prior Programs CNL
INCOME FUND XVI, LTD.
<TABLE>
<CAPTION>
1993 6 months
(Note 1) 1994 1995 1996 1997
------------ ------------ ------------ -------- -------------
<S><C>
Gross revenue $ 0 $ 186,257 $ 2,702,504 $ 4,343,390 $ 2,145,424
Equity in earnings from joint venture 0 0 0 19,668 36,620
Profit from sale of properties (Notes 4
and 5) 0 0 0 124,305 41,148
Interest income 0 21,478 321,137 75,160 34,155
Less: Operating expenses 0 (10,700) (274,595) (261,878) (134,647)
Interest expense 0 0 0 0 0
Depreciation and amortization 0 (9,458) (318,205) (552,447) (282,050)
------------ ------------ ------------ ------------ -------------
Net income - GAAP basis 0 187,577 2,430,841 3,748,198 1,840,650
============ ============ ============ ============ =============
Taxable income
- from operations 0 189,864 2,139,382 3,239,830 1,598,010
============ ============ ============ ============ =============
- from gain on sale (Notes 4 and 5) 0 0 0 0 41,148
============ ============ ============ ============ =============
Cash generated from operations
(Notes 2 and 3) 0 205,148 2,481,395 3,753,726 1,888,155
Cash generated from sales (Notes 4 and 5) 0 0 0 775,000 610,384
Cash generated from refinancing 0 0 0 0 0
------------ ------------ ------------ ------------ ------------
Cash generated from operations, sales
and refinancing 0 205,148 2,481,395 4,528,726 (2,498,539)
Less: Cash distributions to investors
(Note 4)
- from operating cash flow 0 (2,845) (1,798,921) (3,431,251) 1,800,000
- from sale of properties 0 0 0 0 0
------------ ------------ ------------ ------------ ----------
Cash generated (deficiency) after cash
distributions 0 202,303 682,474 1,097,475 698,539
Special items (not including sales and
refinancing):
Limited partners' capital contri-
butions 0 20,174,172 24,825,828 0 0
General partners' capital contri-
butions 1,000 0 0 0 0
Syndication costs 0 (1,929,465) (2,452,743) 0 0
Acquisition of land and buildings 0 (13,170,132) (16,012,458) (2,355,627) (29,257)
Investment in direct financing 0
leases 0 (975,853) (5,595,236) (405,937)
Investment in joint venture 0 0 0 (775,000) 0
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) 0
Collection of overpayment of acqui-
sition and syndication costs paid
by related parties on behalf of the
partnership 0 0 0 0 0
Increase in other assets 0 (443,625) (58,720) 0 0
Other (36) (20,714) 20,714 0 0
------------ ------------ ------------ ------------ --------
Cash generated (deficiency) after cash
distributions and special items 964 2,982,532 1,004,290 (2,441,583) 669,282
============ ============ ============ ============ =========
TAX AND DISTRIBUTION DATA PER $1,000
INVESTED
Federal income tax results:
Ordinary income (loss)
- from operations 0 17 53 71 35
============ ============ ============ ============ ========
- from recapture 0 0 0 0 0
============ ============ ============ ============ ========
Capital gain (loss) (Notes 4 and 5) 0 0 0 0 1
============ ============ ============ ============ ========
C-27
<PAGE>
TABLE III - CNL INCOME FUND XVI, LTD. (continued)
</TABLE>
<TABLE>
<CAPTION>
1993 6 months
(Note 1) 1994 1995 1996 1997
------------ ------------ ------------ -------- ---------
<S> <C>
Cash distributions to investors
Source (on GAAP basis)
- from investment income 0 1 45 76 39
- from capital gain 0 0 0 0 1
- from investment income from
prior period 0 0 0 0 0
------------ ------------ ------------ ------------ ------
Total distributions on GAAP basis (Note 6) 0 1 45 76 40
============ ============ ============ ============ ======
Source (on cash basis)
- from sales 0 0 0 0 0
- from refinancing 0 0 0 0 0
- from operations 0 1 45 76 40
------------ ------------ ------------ ------------ ------
Total distributions on cash basis (Note 6) 0 1 45 76 40
============ ============ ============ ============ ======
Total cash distributions as a percentage
of original $1,000 investment (Note 7) 0.00% 4.50% 6.00% 7.88% 8.00%
Total cumulative cash distributions per
$1,000 investment from inception 0 1 46 122 162
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% 99%
</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.
Note 6: Distributions declared for the quarters ended December 31, 1994,
1995 and 1996 are reflected in the 1995, 1996 and 1997 columns,
respectively, due to the payment of such distributions in January 1995,
1996 and 1997, respectively. As a result of distributions being
presented on a cash basis, distributions declared and unpaid as of
December 31, 1994, 1995 and 1996, and June 30, 1997 are not included in
the 1994, 1995, 1996 and 1997 totals, respectively.
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 6 above)
Note 8: Certain data for columns representing less than 12 months have been
annualized.
C-29
<PAGE>
TABLE III Operating Results
of Prior Programs CNL AMERICAN
PROPERTIES FUND, INC.
<TABLE>
<CAPTION>
6 months
1994 1995 1996 1997
(Note 1) (Note 2) (Note 2) (Note 2)
------------ ------------ ------------ ----------
<S> <C>
Gross revenue $ 0 $ 539,776 $ 4,363,456 $ 4,972,237
Equity in earnings of joint venture 0 0 0 0
Interest income 0 119,355 1,843,228 1,742,997
Less: Operating expenses 0 (186,145) (908,924) (893,009)
Interest expense 0 0 0 0
Depreciation and amortization 0 (104,131) (521,871) (579,404)
Minority interest in income of
consolidated joint venture 0 (76) (29,927) (15,726)
------------ ------------ ------------ ------------
Net income - GAAP basis 0 368,779 4,745,962 5,227,095
============ ============ ============ ============
Taxable income
- from operations (Note 7) 0 379,935 4,894,262 6,696,419
============ ============ ============ ============
- from gain on sale 0 0 0 0
============ ============ ============ ============
Cash generated from operations
(Notes 3 and 4) 0 498,459 5,482,540 6,314,003
Cash generated from sales (Note 6) 0 0 0 5,254,083
Cash generated from refinancing 0 0 0 0
------------ ------------ ------------ ------------
Cash generated from operations, sales
and refinancing 0 498,459 5,482,540 11,568,086
Less: Cash distributions to investors
- from operating cash flow 0 (498,459) (5,439,404) (6,282,470)
- from sale of properties 0 0 0 0
- from other 0 (136,827) 0 0
------------ ------------ ------------ ------------
Cash generated (deficiency) after cash
distributions 0 (136,827) 43,136 5,285,616
Special items (not including sales and
refinancing):
Subscriptions received from
stockholders 0 38,454,158 100,792,991 84,646,030
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) (17,035)
Stock issuance costs (19) (3,680,704) (8,486,188) (8,145,622)
Acquisition of land and buildings 0 (18,835,969) (36,104,148) (75,111,847)
Investment in direct financing
leases 0 (1,364,960) (13,372,621) (14,391,675)
Proceeds from sale of equipment direct
financing leases 0 0 0 962,274
Investment in mortgage notes
receivable 0 0 (13,547,264) (4,401,982)
Collections on mortgage notes
receivable 0 0 133,850 117,192
Proceeds of borrowing on line of
credit 0 0 3,666,896 2,888,163
Payment on line of credit 0 0 (145,080) (1,653,321)
Payment of loan costs 0 0 (54,533) (6,101)
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) (1,524,434)
Increase in other assets 0 (628,142) (1,103,896) 0
------------ ------------ ------------ ------------
Cash generated (deficiency) after cash
distributions and special items 945 11,507,500 30,941,643 (11,352,742)
============ ============ ============ ============
TAX AND DISTRIBUTION DATA PER $1,000
INVESTED
Federal income tax results:
Ordinary income (loss)
- from operations (Note 7) 0 20 61 38
============ ============ ============ ============
- from recapture 0 0 0 0
============ ============ ============ ============
Capital gain (loss) 0 0 0 0
============ ============ ============ ============
</TABLE>
C-31
<PAGE>
TABLE III - CNL AMERICAN PROPERTIES FUND, INC. (continued)
<TABLE>
<CAPTION>
6 months
1994 1995 1996 1997
(Note 1) (Note 2) (Note 2) (Note 2)
------------ ------------ ------------ ----------
<S> <C>
Cash distributions to investors
Source (on GAAP basis)
- from investment income 0 19 59 29
- from capital gain 0 0 0 0
- from investment income from
prior period 0 0 0 0
- from return of capital 0 14 8 6
------------ ------------ ------------ ------------
Total distributions on GAAP basis 0 33 67 35
============ ============ ============ ============
Source (on cash basis)
- from sales 0 0 0 0
- from refinancing 0 0 0 0
- from operations 0 26 67 35
- from return of capital 0 7 0 0
------------ ------------ ------------ ------------
Total distributions on cash basis 0 33 67 35
============ ============ ============ ============
Total cash distributions as a percentage
of original $1,000 investment (Note 5) 0.00% 3.34% 6.73% 7.05%
Total cumulative cash distributions per
$1,000 investment from inception 0 33 100 135
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 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. registered for sale $165,000,000 of shares of
common stock (the "Initial Offering of Shares"). The Initial Offering
of Shares of CNL American Properties Fund, Inc. commenced April 19,
1995, and upon completion of the Initial Offering of Shares 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,
as amended, effective January 31, 1997, CNL American Properties Fund,
Inc. registered for sale $275,000,000 of shares of common stock (the
"1997 Offering of Shares"). The 1997 Offering of Shares of CNL
American Properties Fund, Inc. commenced following the completion of
the Initial Offering of Shares on February 6, 1997. Activities through
June 1, 1995, were devoted to organization of CNL American Properties
Fund, Inc. and operations had not begun.
Note 2: The amounts shown represent the combined results of the Initial
Offering of Shares and the 1997 Offering of Shares.
Note 3: Cash generated from operations includes cash received from tenants,
less cash paid for expenses, plus interest received.
Note 4: 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 American Properties Fund, Inc.
Note 5: Total cash distributions as a percentage of original $1,000
investment are calculated based on actual distributions declared for
the period.
Note 6: In May 1997, CNL American Properties Fund, Inc. sold four of its
properties to the tenant for $5,254,083, which was equal to the
carrying value of the properties at the time of sale. As a result, no
gain or loss was recognized for financial reporting purposes.
Note 7: Taxable income presented is before the dividends paid deduction.
Note 8: Certain data for columns representing less than 12 months have been
annualized.
C-32
<PAGE>
TABLE III
Operating Results of Prior Programs CNL
INCOME FUND XVII, LTD.
<TABLE>
<CAPTION>
1995 6 months
(Note 1) 1996 1997
------------ ------------ --------
<S> <C>
Gross revenue $ 0 $ 1,195,263 $ 1,237,898
Equity in earnings of unconsolidated
joint ventures 0 4,834 45,358
Interest income 12,153 244,406 48,537
Less: Operating expenses (3,493) (169,536) (103,397)
Interest expense 0 0 0
Depreciation and amortization (309) (179,208) (188,038)
Minority interest in income of
consolidated joint venture 0 (10,432)
------------ ------------ ------------
Net income - GAAP basis 8,351 1,095,759 1,029,926
============ ============ ============
Taxable income
- from operations 12,153 1,114,964 1,138,900
============ ============ ============
- from gain on sale 0 0 0
============ ============ ============
Cash generated from operations
(Notes 2 and 3) 9,012 1,232,948 1,179,142
Cash generated from sales 0 0 0
Cash generated from refinancing 0 0 0
------------ ------------ ------------
Cash generated from operations, sales
and refinancing 9,012 1,232,948 1,179,142
Less: Cash distributions to investors
(Note 4)
- from operating cash flow (1,199) (703,681) (1,015,084)
- from sale of properties 0 0 0
------------ ------------ ------------
Cash generated (deficiency) after cash
distributions 7,813 529,267 164,058
Special items (not including sales and
refinancing):
Limited partners' capital contri-
butions 5,696,921 24,303,079 0
General partners' capital contri-
butions 1,000 0 0
Contributions from minority interest 0 140,676 278,170
Syndication costs (604,348) (2,407,317) 0
Acquisition of land and buildings (332,928) (19,735,346) (1,978,419)
Investment in direct financing
leases 0 (1,784,925) (1,009,775)
Investment in joint ventures 0 (201,501) (934,196)
Increase in restricted cash 0 0 0
Reimbursement of organization,
syndication and acquisition costs
paid on behalf of CNL Income Fund
XVII, Ltd. by related parties (347,907) (326,483) (26,068)
Increase in other assets (221,282) 0 0
Distributions to holder of minority
interest 0 0 (16,943)
Other (410) 410 0
------------ ------------ ------------
Cash generated (deficiency) after cash
distributions and special items 4,198,859 517,860 (3,523,173)
============ ============ ============
TAX AND DISTRIBUTION DATA PER $1,000
INVESTED
Federal income tax results:
Ordinary income (loss)
- from operations 36 37 38
============ ============ ============
- from recapture 0 0 0
============ ============ ============
Capital gain (loss) 0 0 0
============ ============ ============
</TABLE>
C-33
<PAGE>
TABLE III - CNL INCOME FUND XVII, LTD. (continued)
<TABLE>
<CAPTION>
1995 6 months
(Note 1) 1996 1997
------------ ------------ --------
<S> <C>
Cash distributions to investors
Source (on GAAP basis)
- from investment income 4 23 34
- from capital gain 0 0 0
- from investment income from
prior period 0 0 0
------------ ------------ ------------
Total distributions on GAAP basis (Note 4) 0 23 34
============ ============ ============
Source (on cash basis)
- from sales 0 0 0
- from refinancing 0 0 0
- from operations 4 23 34
------------ ------------ ------------
Total distributions on cash basis (Note 4) 4 23 34
============ ============ ============
Total cash distributions as a percentage
of original $1,000 investment (Note 5) 5.00% 5.50% 7.25%
Total cumulative cash distributions per
$1,000 investment from inception 4 27 61
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 98% 100%
</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 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,
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 XVII, Ltd.
Note 4: Distributions declared for the quarters ended December 31, 1995 and
1996 are reflected in the 1996 and 1997 columns, respectively, due to
the payment of such distributions in January 1996 and 1997,
respectively. As a result of distributions being presented on a cash
basis, distributions declared and unpaid as of December 31, 1996 and
June 30, 1997 are not included in the 1996 and 1997 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-34
<PAGE>
TABLE V
SALES OR DISPOSALS OF PROPERTIES
<TABLE>
<CAPTION>
===================================================================================================================================
Selling Price, Net of
Including Closing and
Closing Costs and GAAP Adjustments
Soft Costs
------------------------------------------- ---------------------------
Purchase Total
Cash money Adjustments acquisition
received Mortgage mortgage resulting cost, capital
net of balance taken from Original improvements
Date Date of closing at time back by application mortgage closing and
Property Acquired Sale costs of sale program of GAAP Total financing soft costs (1)
===================================================================================================================================
<S> <C>
CNL Income Fund, Ltd.:
Burger King -
San Dimas, CA 02/05/87 06/12/92 $1,169,021 0 0 0 $1,169,021 0 $955,000
Wendy's -
Fairfield, CA 07/01/87 10/03/94 1,018,490 0 0 0 1,018,490 0 861,500
CNL Income Fund II, Ltd.:
Golden Corral -
Salisbury, NC 05/29/87 07/21/93 746,800 0 0 0 746,800 0 642,800
Pizza Hut -
Graham, TX 08/24/87 07/28/94 261,628 0 0 0 261,628 0 205,500
Golden Corral -
Medina, OH 11/18/87 11/30/94 626,582 0 0 0 626,582 0 743,000
Denny's -
Show Low, AZ (8) 05/22/87 01/31/97 620,800 0 0 0 620,800 0 484,185
KFC -
Eagan, MN 06/01/87 06/02/97 623,882 0 42,000 0 665,882 0 601,100
CNL Income Fund III, Ltd.:
Wendy's -
Chicago, IL 06/02/88 01/10/97 496,418 0 0 0 496,418 0 591,362
Perkins -
Bradenton, FL 06/30/88 03/14/97 1,310,001 0 0 0 1,310,001 0 1,080,500
Pizza Hut -
Kissimmee, FL 02/23/88 04/08/97 673,159 0 0 0 673,159 0 474,755
Burger King -
Roswell, GA 06/08/88 06/20/97 257,981 0 685,000 0 942,981 0 775,226
CNL Income Fund IV, Ltd.:
Taco Bell -
York, PA 03/22/89 04/27/94 712,000 0 0 0 712,000 0 616,501
Burger King -
Hastings, MI 08/12/88 12/15/95 518,650 0 0 0 518,650 0 419,936
Wendy's -
Tampa, FL 12/30/88 09/20/96 1,049,550 0 0 0 1,049,550 0 828,350
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 0 986,418
Ponderosa -
St. Cloud, FL (6) 06/01/89 10/24/96 73,713 0 1,057,299 0 1,131,012 0 996,769
Franklin National Bank -
Franklin, TN 06/26/89 01/07/97 960,741 0 0 0 960,741 0 1,138,164
</TABLE>
TABLE V
SALES OR DISPOSALS OF PROPERTIES
<TABLE>
<CAPTION>
===========================================================
Cost of Properties
Closing Costs and GAAP Adjustments
Excess
(deficiency)
of property
operating cash
receipts over
cash
Property Total expenditures
========================================================
<S> <C>
CNL Income Fund, Ltd.:
Burger King -
San Dimas, CA $955,000 $214,021
Wendy's -
Fairfield, CA 861,500 156,990
CNL Income Fund II, Ltd.:
Golden Corral -
Salisbury, NC 642,800 104,000
Pizza Hut -
Graham, TX 205,500 56,128
Golden Corral -
Medina, OH 743,000 (116,418)
Denny's -
Show Low, AZ (8) 484,185 136,615
KFC -
Eagan, MN 601,100 64,782
CNL Income Fund III, Ltd.:
Wendy's -
Chicago, IL 591,362 (94,944)
Perkins -
Bradenton, FL 1,080,500 229,501
Pizza Hut -
Kissimmee, FL 474,755 198,404
Burger King -
Roswell, GA 775,226 167,755
CNL Income Fund IV, Ltd.:
Taco Bell -
York, PA 616,501 95,499
Burger King -
Hastings, MI 419,936 98,714
Wendy's -
Tampa, FL 828,350 221,200
CNL Income Fund V, Ltd.:
Perkins -
Myrtle Beach, SC (2) 986,418 53,582
Ponderosa -
St. Cloud, FL (6) 996,769 134,243
Franklin National Bank -
Franklin, TN 1,138,164 (177,423)
</TABLE>
C-35
<PAGE>
TABLE V
SALES OR DISPOSALS OF PROPERTIES
<TABLE>
<CAPTION>
===============================================================================================
Including Closing and
Soft Costs
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
===============================================================================================
<S> <C>
Shoney's -
Smyrna, TN 03/22/89 05/13/97 636,788 0 0 0
CNL Income Fund VI, Ltd.:
Hardee's -
Batesville, AR 11/02/89 05/24/94 791,211 0 0 0
Hardee's -
Heber Springs, AR 02/13/90 05/24/94 638,270 0 0 0
Hardee's -
Little Canada, MN 11/28/89 06/29/95 899,503 0 0 0
Jack in the Box -
Dallas, TX 06/28/94 12/09/96 982,980 0 0 0
Denny's -
Show Low, AZ (8) 05/22/87 01/31/97 349,200 0 0 0
CNL Income Fund VII, Ltd.:
Taco Bell -
Kearns, UT 06/14/90 05/19/92 700,000 0 0 0
Hardee's -
St. Paul, MN 08/09/90 05/24/94 869,036 0 0 0
Perkins -
Florence, SC (3) 08/28/90 08/25/95 0 0 1,160,000 0
Church's Fried Chicken -
Jacksonville, FL (4) 04/30/90 12/01/95 0 0 240,000 0
Shoney's -
Colorado Springs, CO 07/03/90 07/24/96 1,044,909 0 0 0
Hardee's -
Hartland, MI 07/10/90 10/23/96 617,035 0 0 0
Hardee's -
Columbus, IN 09/04/90 05/30/97 223,590 0 0 0
CNL Income Fund VIII, Ltd.:
Denny's -
Ocoee, FL 03/16/91 07/31/95 1,184,865 0 0 0
Church's Fried Chicken -
Jacksonville, FL (4) 09/28/90 12/01/95 0 0 240,000 0
Church's Fried Chicken -
Jacksonville, FL (5) 09/28/90 12/01/95 0 0 220,000 0
Ponderosa -
Orlando, FL (6) 12/17/90 10/24/96 0 0 1,353,775 0
</TABLE>
<TABLE>
<CAPTION>
=============================================================================================
Cost of Properties
Selling Price, Net of
Closing Costs and GAAP Adjustments
Excess
Total (deficiency)
acquisition of property
cost, capital operating cash
Original improvements receipts over
mortgage closing and cash
Property Total financing soft costs (1) Total expenditures
=============================================================================================
<S> <C>
Shoney's -
Smyrna, TN 636,788 0 554,200 554,200 82,588
CNL Income Fund VI, Ltd.:
Hardee's -
Batesville, AR 791,211 0 605,500 605,500 185,711
Hardee's -
Heber Springs, AR 638,270 0 532,893 532,893 105,377
Hardee's -
Little Canada, MN 899,503 0 821,692 821,692 77,811
Jack in the Box -
Dallas, TX 982,980 0 964,437 964,437 18,543
Denny's -
Show Low, AZ (8) 349,200 0 272,354 272,354 76,846
CNL Income Fund VII, Ltd.:
Taco Bell -
Kearns, UT 700,000 0 560,202 560,202 139,798
Hardee's -
St. Paul, MN 869,036 0 742,333 742,333 126,703
Perkins -
Florence, SC (3) 1,160,000 0 1,084,905 1,084,905 75,095
Church's Fried Chicken -
Jacksonville, FL (4) 240,000 0 233,728 233,728 6,272
Shoney's -
Colorado Springs, CO 1,044,909 0 898,739 893,739 151,170
Hardee's -
Hartland, MI 617,035 0 841,642 841,642 (224,607)
Hardee's -
Columbus, IN 223,590 0 219,676 219,676 3,914
CNL Income Fund VIII, Ltd.:
Denny's -
Ocoee, FL 1,184,865 0 949,199 949,199 235,666
Church's Fried Chicken -
Jacksonville, FL (4) 240,000 0 238,153 238,153 1,847
Church's Fried Chicken -
Jacksonville, FL (5) 220,000 0 215,845 215,845 4,155
Ponderosa -
Orlando, FL (6) 1,353,775 0 1,179,210 1,179,210 174,565
</TABLE>
C-36
<PAGE>
TABLE V
SALES OR DISPOSALS OF PROPERTIES
<TABLE>
<CAPTION>
===============================================================================================
Including Closing and
Soft Costs
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
===============================================================================================
<S> <C>
CNL Income Fund IX, Ltd.:
Burger King -
Woodmere, OH 05/31/91 12/12/96 918,445 0 0 0
Burger King -
Alpharetta, GA 09/20/91 06/30/97 1,053,571 0 0 0
CNL Income Fund X, Ltd.:
Shoney's -
Denver, CO 03/04/92 08/11/95 1,050,186 0 0 0
CNL Income Fund XI, Ltd.:
Burger King -
Philadelphia, PA 09/29/92 11/07/96 1,044,750 0 0 0
CNL Income Fund XII, Ltd.:
Golden Corral -
Houston, TX 12/28/92 04/10/96 1,640,000 0 0 0
CNL Income Fund XIII, Ltd.:
Checkers -
Houston, TX 03/31/94 04/24/95 286,411 0 0 0
Checkers -
Richmond, VA 03/31/94 11/21/96 550,000 0 0 0
CNL Income Fund XIV, Ltd.:
Checkers -
Knoxville, TN 03/31/94 03/01/95 339,031 0 0 0
Checkers -
Dallas, TX 03/31/94 03/01/95 356,981 0 0 0
TGI Friday's -
Woodridge, NJ (7) 01/01/95 09/27/96 1,753,533 0 0 0
Wendy's -
Woodridge, NJ (7) 11/28/94 09/27/96 747,058 0 0 0
CNL Income Fund XV, Ltd.:
Checkers -
Knoxville, TN 05/27/94 03/01/95 263,221 0 0 0
Checkers -
Leavenworth, KS 06/22/94 03/01/95 259,600 0 0 0
Checkers -
Knoxville, TN 07/08/94 03/01/95 288,885 0 0 0
TGI Friday's -
Woodridge, NJ (7) 01/01/95 09/27/96 1,753,533 0 0 0
</TABLE>
<TABLE>
<CAPTION>
==============================================================================================
Cost of Properties
Selling Price, Net of
Closing Costs and GAAP Adjustments
Excess
Total (deficiency)
acquisition of property
cost, capital operating cash
Original improvements receipts over
mortgage closing and cash
Property Total financing soft costs (1) Total expenditures
==============================================================================================
<S> <C>
CNL Income Fund IX, Ltd.:
Burger King -
Woodmere, OH 918,445 0 918,445 918,445 0
Burger King -
Alpharetta, GA 1,053,571 0 713,866 713,866 339,705
CNL Income Fund X, Ltd.:
Shoney's -
Denver, CO 1,050,186 0 987,679 987,679 62,507
CNL Income Fund XI, Ltd.:
Burger King -
Philadelphia, PA 1,044,750 0 818,850 818,850 225,900
CNL Income Fund XII, Ltd.:
Golden Corral -
Houston, TX 1,640,000 0 1,636,643 1,636,643 3,357
CNL Income Fund XIII, Ltd.:
Checkers -
Houston, TX 286,411 0 286,411 286,411 0
Checkers -
Richmond, VA 550,000 0 413,288 413,288 136,712
CNL Income Fund XIV, Ltd.:
Checkers -
Knoxville, TN 339,031 0 339,031 339,031 0
Checkers -
Dallas, TX 356,981 0 356,981 356,981 0
TGI Friday's -
Woodridge, NJ (7) 1,753,533 0 1,510,245 1,510,245 243,288
Wendy's -
Woodridge, NJ (7) 747,058 0 672,746 672,746 74,312
CNL Income Fund XV, Ltd.:
Checkers -
Knoxville, TN 263,221 0 263,221 263,221 0
Checkers -
Leavenworth, KS 259,600 0 259,600 259,600 0
Checkers -
Knoxville, TN 288,885 0 288,885 288,885 0
TGI Friday's -
Woodridge, NJ (7) 1,753,533 0 1,510,245 1,510,245 243,288
</TABLE>
C-37
<PAGE>
TABLE V
SALES OR DISPOSALS OF PROPERTIES
<TABLE>
<CAPTION>
===============================================================================================
Including Closing and
Soft Costs
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
===============================================================================================
<S> <C>
Wendy's -
Woodridge, NJ (7) 11/28/94 09/27/96 747,058 0 0 0
CNL Income Fund XVI, Ltd.:
Long John Silver's -
Appleton, WI 06/24/95 04/24/96 775,000 0 0 0
Checker's -
Oviedo, FL 11/14/94 02/28/97 610,384 0 0 0
CNL American Properties
Fund, Inc.:
TGI Friday's -
Orange, CT 10/30/95 05/08/97 1,312,799 0 0 0
TGI Friday's -
Hazlet, NJ 07/15/96 05/08/97 1,324,109 0 0 0
TGI Friday's -
Marlboro, NJ 08/01/96 05/08/97 1,372,075 0 0 0
TGI Friday's -
Hamden, CT 08/26/96 05/08/97 1,245,100 0 0 0
</TABLE>
<TABLE>
<CAPTION>
==============================================================================================
Cost of Properties
Selling Price, Net of
Closing Costs and GAAP Adjustments
Excess
Total (deficiency)
acquisition of property
cost, capital operating cash
Original improvements receipts over
mortgage closing and cash
Property Total financing soft costs (1) Total expenditures
==============================================================================================
<S> <C>
Wendy's -
Woodridge, NJ (7) 747,058 0 672,746 672,746 74,312
CNL Income Fund XVI, Ltd.:
Long John Silver's -
Appleton, WI 775,000 0 613,838 613,838 161,162
Checker's -
Oviedo, FL 610,384 0 506,311 506,311 104,073
CNL American Properties
Fund, Inc.:
TGI Friday's -
Orange, CT 1,312,799 0 1,310,980 1,310,980 1,819
TGI Friday's -
Hazlet, NJ 1,324,109 0 1,294,237 1,294,237 29,872
TGI Friday's -
Marlboro, NJ 1,372,075 0 1,324,288 1,324,288 47,787
TGI Friday's -
Hamden, CT 1,245,100 0 1,203,136 1,203,136 41,964
</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 each of 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.
(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 each of CNL Income Fund II, Ltd. and CNL Income Fund VI, Ltd.
represent each partnership's percent interest in the properties owned by
Show Low Joint Venture.
C-38
