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CNL HOSPITALITY PROPERTIES, INC.
Supplement No. 2, dated November 17, 1999
to Prospectus, dated June 4, 1999
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This Supplement is part of, and should be read in conjunction with, the
Prospectus dated June 4, 1999. This Supplement replaces all prior Supplements to
the Prospectus. Capitalized terms used in this Supplement have the same meaning
as in the Prospectus unless otherwise stated herein.
Information as to proposed properties for which the Company has
received initial commitments and as to the number and types of Properties
acquired by the Company is presented as of November 4, 1999, and all references
to commitments or Property acquisitions should be read in that context. Proposed
properties for which the Company receives initial commitments, as well as
property acquisitions that occur after November 4, 1999, will be reported in a
subsequent Supplement.
THE OFFERINGS
Upon completion of its Initial Offering on June 17, 1999, the Company
had received aggregate subscriptions for 15,007,264 Shares totalling
$150,072,637 in Gross Proceeds, from 5,567 stockholders, including 7,264 Shares
($72,637) issued pursuant to the Reinvestment Plan. Following the completion of
the Initial Offering, the Company commenced this offering of up to 27,500,000
Shares. As of November 4, 1999, the Company had received aggregate subscriptions
for 24,726,401 Shares totalling $247,264,005 in Gross Proceeds, including 30,510
Shares ($305,103) issued pursuant to the Reinvestment Plan from its Initial
Offering and this offering. As of November 4, 1999, net proceeds to the Company
from its offerings of Shares and capital contributions from the Advisor, after
deduction of Selling Commissions, marketing support and due diligence expense
reimbursement fees and Organizational and Offering Expenses totalled
approximately $220,700,000. The Company has used Net Offering Proceeds from the
offerings to invest, directly or indirectly, approximately $63,100,000 in nine
hotel Properties, to pay $6,320,000 as deposits on four additional hotel
Properties, to redeem 5,885 Shares of Common Stock for $54,142 and to pay
approximately $12,300,000 in Acquisition Fees and certain Acquisition Expenses,
leaving approximately $139,000,000 available to invest in Properties and
Mortgage Loans. See "Business -- Pending Investments" for information on four
Properties the Company has entered into commitments to acquire.
As described in "The Offering" section of the Prospectus, the Board of
Directors may determine to engage in future offerings of Common Stock. In
connection therewith, the Board of Directors has approved a third offering by
the Company (the "2000 Offering") of 45,000,000 Shares which is expected to
commence immediately following the completion of this offering. Of the
45,000,000 Shares expected to be offered, up to 5,000,000 are expected to be
available to stockholders purchasing through the Reinvestment Plan. Until such
time, if any, as the stockholders approve an increase in the number of
authorized Shares of Common Stock of the Company, the 2000 Offering will be
limited to 20,000,000 Shares. The Board of Directors expects to submit, for a
vote of the stockholders at a meeting expected to be held in May 2000, a
proposal to increase the number of authorized Shares of Common Stock of the
Company from 60,000,000 to 150,000,000. The price per Share and the other terms
of the 2000 Offering, including the percentage of gross proceeds payable to the
Managing Dealer for Selling Commissions and expenses in connection with the
offering, payable to the Advisor for Acquisition Fees and Acquisition Expenses
and reimbursable to the Advisor for Offering Expenses, are expected to be the
same as those for this offering. Net proceeds from the 2000 Offering are
expected to be invested in additional Properties and Mortgage Loans. The Company
believes that the net proceeds received from the 2000 Offering and any
additional offerings will enable the Company to continue to grow and take
advantage of acquisition opportunities until such time, if any, that the
Company's Shares are listed on a national securities exchange or
over-the-counter market. Under the Company's Articles of Incorporation, if the
Company does not List by December 31, 2007, it will commence an orderly
liquidation of its Assets, and the distribution of the proceeds therefrom to its
stockholders.
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
Transactions."
CONFLICTS OF INTEREST
The following information updates and replaces the "Conflicts of
Interest" section as well as the last paragraph under the heading "Acquisition
of Properties" on page 31 of the Prospectus.
The Company will be subject to various conflicts of interest arising
out of its relationship to the Advisor and its Affiliates, as described below.
The following indicates the relationship between the Advisor and CNL
Group, Inc., including its Affiliates that will provide services to the Company.
CNL Group, Inc. (1)
Subsidiaries, Affiliates and Strategic Business Units
Capital Markets: Retail:
CNL Investment Company Commercial Net Lease Realty, Inc. (4)
CNL Securities Corp. (2)
Corporate Services: Restaurant:
CNL Shared Services, Inc. (3) CNL American Properties Fund, Inc. (5)
Hospitality:
CNL Hospitality Corp.
(formerly CNL Hospitality Advisors,
Inc.) (6)
CNL Hotel Development Company
Health Care:
CNL Health Care Corp.
(formerly CNL Health Care Advisors,
Inc.)
CNL Health Care Development, Inc.
Financial Services:
CNL Capital Corp.
CNL Advisory Services, Inc.
Corporate Properties:
CNL Corporate Properties, Inc.
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(1) James M. Seneff, Jr., Chairman of the Board and Chief Executive Officer
of the Company, shares ownership and voting control of CNL Group, Inc.
with Dayle L. Seneff, his wife.
(2) CNL Securities Corp. (a wholly owned subsidiary of CNL Investment
Company) has served as managing dealer in the offerings for various CNL
public and private real estate programs, including the Company.
(3) CNL Shared Services, Inc. (formerly CNL Corporate Services, Inc.) (a
wholly owned subsidiary of CNL Group, Inc.) and other Affiliates
provide administrative and accounting services for various CNL
entities, including the Company.
(4) Commercial Net Lease Realty, Inc. is a REIT listed on the New York
Stock Exchange. Effective January 1, 1998, CNL Realty Advisors, Inc.
and Commercial Net Lease Realty, Inc. merged, at which time Commercial
Net Lease Realty, Inc. became self advised. James M. Seneff, Jr.
continues to hold the positions of Chief Executive Officer and Chairman
of the Board, and Robert A. Bourne continues to hold the position of
Vice Chairman of the Board of Commercial Net Lease Realty, Inc.
(5) CNL American Properties Fund, Inc. is a public, unlisted REIT.
Effective September 1, 1999, CNL Fund Advisors, Inc., CNL Financial
Services, Inc., CNL Financial Corp. and CNL American Properties Fund,
Inc. merged, at which time CNL American Properties Fund, Inc. became
self advised. James M. Seneff, Jr. continues to hold the position of
Chairman of the Board and Robert A. Bourne continues to hold the
position of Vice Chairman of the Board of CNL American Properties Fund,
Inc.
(6) CNL Hospitality Corp. (a majority owned subsidiary of CNL Group, Inc.)
provides management and advisory services to the Company pursuant to
the Advisory Agreement.
ACQUISITION OF PROPERTIES
The Company will supplement this Prospectus during the offering period
to disclose the acquisition of a Property at such time as the Advisor believes
that a reasonable probability exists that the Company will acquire the Property,
including an acquisition from the Advisor or its Affiliates. Based upon the
experience of management of the Company and the Advisor and the proposed
acquisition methods, a reasonable probability that the Company will acquire a
Property normally will occur as of the date on which (i) a commitment letter is
executed by a proposed tenant, (ii) a satisfactory credit underwriting for the
proposed tenant has been completed, (iii) a satisfactory site inspection has
been completed, and (iv) a nonrefundable deposit has been paid on the Property.
BUSINESS
GENERAL
The following information updates and replaces the paragraph at the
bottom of page 39, the table at the top of page 40 , the last full paragraph on
page 40 and the first paragraph under the heading "Investment of Offering
Proceeds" on page 42 of the Prospectus.
The Company will 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, extended stay and full service hotels in urban and resort
locations. 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 eight consecutive years. Also according
to Smith Travel Research, in 1998, the industry reached its highest absolute
level of pre-tax profit in its history at approximately $21 billion.
Pre-Tax Profits
of Hospitality Industry
(in billions)
Year Profitability
1993 $ 2.4
1994 5.5
1995 8.5
1996 12.5
1997 17.0
1998 20.9
Source: Smith Travel Research
According to American Hotel & Motel Association data, in 1997,
Americans traveling in the United States spent more than $1.38 billion per day,
$57.4 million per hour and $955,800 per minute on travel and tourism. Total
travel expenditures in the United States generated $481.5 billion in sales. In
addition, there were 49,000 hotel properties which included over 3.8 million
hotel rooms. Hotels are a vital part of travel and tourism. In the United
States, the tourism industry, which globally is the world's largest industry, is
currently ranked third behind auto sales and retail food sales. In terms of
employment, the hotel industry supports over 7 million direct jobs, generating
$18.93 billion in wages. According to Smith Travel Research data, United States
lodging industry revenues reached over $93 billion in 1998.
INVESTMENT OF OFFERING PROCEEDS
The Company has undertaken to supplement this Prospectus during the
offering period to disclose the use of proceeds of this offering to acquire
Properties at such time as the Company believes that a reasonable probability
exists that any such Property will be acquired by the Company. Based upon the
experience and acquisition methods of the Affiliates of the Company and the
Advisor, this normally will occur, with regard to acquisition of Properties, as
of the date on which (i) a commitment letter is executed by a proposed tenant,
(ii) a satisfactory credit underwriting for the proposed tenant has been
completed, (iii) a satisfactory site inspection has been completed, and (iv) a
nonrefundable deposit has been paid on the Property. However, the initial
disclosure of any proposed acquisition, cannot be relied upon as an assurance
that the Company ultimately will consummate such proposed acquisition or that
the information provided concerning the proposed acquisition will not change
between the date of such supplement and the actual purchase or extension of
financing. The terms of any borrowing by the Company will also be disclosed by
supplement following receipt by the Company of an acceptable commitment letter
from a potential lender.
PROPERTY ACQUISITIONS
The following information updates and replaces the "Property
Acquisitions" section of the Prospectus.
Atlanta Portfolio. On July 31, 1998, the Company acquired two hotel
Properties. The Properties are the Residence Inn(R) by Marriott(R) located in
the Buckhead (Lenox Park) area of Atlanta, Georgia (the "Buckhead (Lenox Park)
Property"), and the Residence Inn by Marriott located at Gwinnett Place in
Duluth, Georgia (the "Gwinnett Place Property").
The Company acquired the Buckhead (Lenox Park) Property for $15,731,414
from Buckhead Residence Associates, L.L.C. and the Gwinnett Place Property for
$11,514,125 from Gwinnett Residence Associates, L.L.C. In connection with the
purchase of the two Properties, the Company, as landlord, entered into two
separate, long-term lease agreements. The tenant of the Buckhead (Lenox Park)
and the Gwinnett Place Properties is the same unaffiliated tenant. The leases on
both Properties are cross-defaulted. The general terms of the lease agreements
are described in "Business -- Description of Property Leases." The principal
features of the leases are as follows:
o The initial term of each lease expires on August 31, 2017.
o At the end of the initial lease term, the tenant will have three
consecutive renewal options of five years.
o The leases require minimum rent payments to the Company of $1,651,798
per year for the Buckhead (Lenox Park) Property and $1,208,983 per year
for the Gwinnett Place Property.
o Minimum rent payments increased to $1,691,127 per year for the Buckhead
(Lenox Park) Property and $1,237,768 per year for the Gwinnett Place
Property after the first lease year.
o In addition to minimum rent, for each calendar year, the leases require
percentage rent equal to 15% of the aggregate amount of all revenues
combined, for the Buckhead (Lenox Park) and the Gwinnett Place
Properties, in excess of $8,080,000.
o A security deposit equal to $819,000 for the Buckhead (Lenox Park)
Property and $598,500 for the Gwinnett Place Property has been retained
by the Company as security for the tenant's obligations under the
leases.
o Management fees payable to Stormont Trice Management Corporation for
operation of the Buckhead (Lenox Park) and Gwinnett Place Properties
are subordinated to minimum rents due to the Company.
o The tenant of the Buckhead (Lenox Park) and Gwinnett Place Properties
has established a reserve fund which will be used for the replacement
and renewal of furniture, fixtures and equipment relating to the hotel
Properties (the "FF&E Reserve"). Deposits to the FF&E Reserve are made
monthly as follows: 3% of gross receipts for the first lease year; 4%
of gross receipts for the second lease year; and 5% of gross receipts
every lease year thereafter. Funds in the FF&E Reserve and all property
purchased with funds from the FF&E Reserve shall be paid, granted and
assigned to the Company as additional rent.
o Stormont Trice Corporation, Stormont Trice Development Corporation and
Stormont Trice Management Corporation jointly and severally have
guaranteed the obligations of the tenant under the leases for the
Buckhead (Lenox Park) and the Gwinnett Place Properties combined. The
guarantee terminates on the earlier of the end of the third lease year
or at such time as the net operating income from the Buckhead (Lenox
Park) and the Gwinnett Place Properties exceeds minimum rent due under
the leases by 25% for any trailing 12 month period. The guarantee is
equal to $2,835,000 for the first two years, and $1,197,000 for the
third year.
In connection with the acquisition of these two Properties , the
Company may be required to make an additional payment (the "Earnout Amount") of
up to $1 million if certain earnout provisions are achieved by July 31, 2001.
After July 31, 2001, the Company will no longer be obligated to make any
payments under the earnout provision. The Earnout Amount is equal to the
difference between earnings before interest, taxes, depreciation and
amortization expense adjusted by the earnout factor (7.44), and the initial
purchase price. Rental income will be adjusted upward in accordance with the
lease agreements for any amount paid.
The federal income tax basis of the depreciable portion of the Buckhead
(Lenox Park) Property and the Gwinnett Place Property is approximately
$14,700,000 and $11,100,000, respectively.
The Buckhead (Lenox Park) Property and the Gwinnett Place Property are
newly constructed hotels which commenced operations on August 7, 1997 and July
29, 1997, respectively. The Buckhead (Lenox Park) Property is situated in a 22
acre mixed-use development and has 150 guest suites. The Gwinnett Place Property
is located 30 minutes from downtown Atlanta and has 132 guest suites. Other
lodging facilities located in proximity to the Buckhead (Lenox Park) Property
include an Embassy Suites, a Summerfield Suites, a Homewood Suites, an
Amerisuites, a Courtyard(R) by Marriott(R) and another Residence Inn by
Marriott. Other lodging facilities located in proximity to the Gwinnett Place
Property include a Courtyard by Marriott, an Amerisuites, a Sumner Suites and a
Hampton Inn. The average occupancy rate, the average daily room rate and the
revenue per available room for the periods the hotels have been operational are
as follows:
<TABLE>
<CAPTION>
<S> <C>
Buckhead (Lenox Park) Property Gwinnett Place Property
------------------------------------------------------ -------------------------------------------------
Average Average Revenue Average Average Revenue
Occupancy Daily Room per Available Occupancy Daily Room per Available
Year Rate Rate Room Rate Rate Room
- ------------- ------------- --------------- ------------------ ------------- ------------- ---------------
*1997 42.93% $ 91.15 $39.13 39.08% $85.97 $33.60
**1998 75.20% 99.70 75.01 74.10% 87.36 64.73
***1999 81.30% 105.10 85.46 83.50% 88.91 74.23
</TABLE>
* Data for the Buckhead (Lenox Park) Property represents the period
August 7, 1997 through December 31, 1997 and data for the Gwinnett
Place Property represents the period August 1, 1997 through December
31, 1997.
** Data for 1998 represents the period January 1, 1998 through December 31,
1998.
*** Data for 1999 represents the period January 1, 1999 through September 30,
1999.
The Company believes that the results achieved by the Properties for
year-end 1997, are not indicative of their long-term operating potential, as
both Properties had been open for less than six months during the reporting
period. On a proforma basis, had the Company owned the Properties as of January
1, 1998, combined net operating income before subordinated management fees would
have been 1.19 times base rent for the 12 months ended December 31, 1998. Actual
combined net income before subordinated management fees for the period January
1, 1999 through September 30, 1999, was 1.32 times base rent.
Western International Portfolio. In February 1999, the Company executed
a series of agreements with Five Arrows Realty Securities II L.L.C. ("Five
Arrows"), pursuant to which the Company and Five Arrows formed a jointly owned
real estate investment trust, CNL Hotel Investors, Inc. ("Hotel Investors"), for
the purpose of acquiring up to eight hotel Properties from various sellers
affiliated with Western International (the "Hotels"). At the time the agreement
was entered into, the eight Hotels (four Courtyard by Marriott hotels, three
Residence Inn by Marriott hotels, and one Marriott Suites(R)) were either newly
constructed or in various stages of completion. As of November 4, 1999, Hotel
Investors owned seven of the newly constructed Hotels.
The Advisor is also the advisor to Hotel Investors pursuant to a
separate advisory agreement. However, in no event will the Company pay the
Advisor fees, including the Company's pro rata portion of Hotel Investors'
advisory fees, in excess of amounts payable under its Advisory Agreement. The
Advisor entered into separate purchase agreements for each of the eight Hotels.
The purchase agreements included customary closing conditions, including
performing due diligence on and inspection of the completed Properties. The
aggregate purchase price of all eight Hotels, once the final Hotel is acquired,
will be approximately $184 million, excluding closing costs.
In order to fund these purchases, Five Arrows committed to make an
investment of up to $50.9 million in Hotel Investors. The Company committed to
make an investment of up to $40 million in Hotel Investors, through one of its
wholly owned subsidiaries, CNL Hospitality Partners, LP ("Hospitality
Partners"). Hotel Investors funded and expects to fund the remaining amount of
approximately $96.6 million with permanent financing from Jefferson-Pilot Life
Insurance Company, secured by Hotel Investors' interests in the Properties (the
"Hotel Investors Loan").
In return for their respective funding commitments, Five Arrows
received a 51% common stock interest and Hospitality Partners received a 49%
common stock interest in Hotel Investors. As funds are continually advanced to
Hotel Investors, Five Arrows will receive up to 50,886 shares of Hotel
Investors' 8% Class A cumulative, preferred stock ("Class A Preferred Stock"),
and Hospitality Partners will receive up to 39,982 shares of Hotel Investors'
9.76% Class B cumulative, preferred stock ("Class B Preferred Stock"). The Class
A Preferred Stock is exchangeable upon demand into Common Stock of the Company,
as determined pursuant to a formula that is intended to make the conversion not
dilutive to funds from operations (based on the revised definition adopted by
the Board of Governors of the National Association of Real Estate Investment
Trusts which means net earnings determined in accordance with generally accepted
accounting principles, 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) per share
of the Company's Common Stock.
On February 25, 1999, Hotel Investors purchased four of the eight
Hotels for an aggregate purchase price of approximately $90 million (the
"Initial Hotels") and paid $10 million as a deposit on the four remaining
Hotels. The Initial Hotels are the Courtyard by Marriott located in Plano, Texas
(the "Legacy Park Property"), the Marriott Suites located in Dallas, Texas (the
"Market Center Property"), the Residence Inn by Marriott located in Las Vegas,
Nevada (the "Hughes Center Property") and the Residence Inn by Marriott located
in Plano, Texas (the "Dallas Plano Property"). On June 16, 1999, Hotel Investors
purchased three additional Hotels of the eight Hotels (the "Additional Hotels")
for an aggregate purchase price of approximately $77 million. The Additional
Hotels are the Courtyard by Marriott located in Scottsdale, Arizona (the
"Scottsdale Downtown Property"), the Courtyard by Marriott located in Seattle,
Washington (the "Lake Union Property") and the Residence Inn by Marriott located
in Phoenix, Arizona (the "Phoenix Airport Property"). Hotel Investors applied $7
million of the $10 million deposit toward the acquisition of the Additional
Hotels. As a result of these purchases and the deposit, Five Arrows has funded
approximately $48 million of its commitment and purchased 48,337 shares of Class
A Preferred Stock and the Company has funded approximately $38 million of its
commitment to Hotel Investors and purchased 37,979 shares of Class B Preferred
Stock. Hotel Investors has obtained advances totalling approximately $88 million
relating to the Hotel Investors Loan in order to facilitate the acquisition of
the Initial Hotels and the Additional Hotels (the "Seven Hotels"). Hotel
Investors intends to use the remaining committed capital contributions from Five
Arrows and the Company, and proceeds from the Hotel Investors Loan
proportionately to fund the remaining Property acquisition.
Five Arrows also committed to invest up to $15 million in the Company
through the purchase of Common Stock pursuant to the Company's Initial Offering
and this offering, the proceeds of which have been and will be used by the
Company to fund approximately 38% of its funding commitment to Hotel Investors.
As of February 24, 1999, Five Arrows had invested $9,297,056 in the Company. Due
to the stock ownership limitations specified in the Company's Articles of
Incorporation at the time of Five Arrows' initial investment, $5,612,311 was
invested in the Company's Common Stock through the purchase of 590,770 Shares
and $3,684,745 was advanced to the Company as a convertible loan, bearing an
interest rate of eight percent. Due to additional subscription proceeds received
from February 24, 1999 to April 30, 1999, the loan was converted to 387,868
Shares of the Company's Common Stock on April 30, 1999. On June 17, 1999, Five
Arrows invested an additional $4,952,566 through the purchase of 521,322 Shares
of Common Stock. Therefore, as of September 30, 1999, Five Arrows had invested
$14,249,622 of its $15 million commitment in the Company. In addition to the
above investments, Five Arrows has purchased a 10% interest in the Advisor. In
connection with Five Arrows' commitment to invest $15 million in the Company,
the Advisor and certain Affiliates have agreed to waive certain fees otherwise
payable to them by the Company.
Cash flow from operations of Hotel Investors is distributed first to
Five Arrows with respect to dividends payable on the Class A Preferred Stock.
Such dividends are calculated based on Five Arrows' "special investment amount"
which is $1,294.78 per share, representing the sum of its investment in Hotel
Investors and its $15 million investment in the Company on a per share basis,
adjusted for any distributions received from the Company. Then, cash flow from
operations is distributed to the Company with respect to its Class B Preferred
Stock. Next, cash flow is distributed to 100 CNL Group, Inc. and subsidiaries'
associates who each own one share of Class C preferred stock in Hotel Investors,
to provide a quarterly, cumulative, compounded 8% return. All remaining cash
flow from operations is distributed pro rata with respect to the interest in the
common shares.
Hotel Investors acquired the Legacy Park Property for $12,694,000 from
PLC Hotel Property, Ltd., the Market Center Property for $32,973,000 from Marcen
Property, Ltd., the Hughes Center Property for $33,097,000 from LVHC Hotel
Property, Ltd., the Dallas Plano Property for $11,684,000 from PLR1 Hotel
Property, Ltd, the Scottsdale Downtown Property for $19,614,216 from SAHD
Property, LP, the Lake Union Property for $35,801,212 from Westlake Hotel
Property, LP and the Phoenix Airport Property for $21,351,707 from APRI Hotel
Property, LP. In connection with the purchase of the Seven Hotels, Hotel
Investors, as lessor, entered into seven separate, long-term lease agreements.
The lessee of the Seven Hotels is the same unaffiliated lessee. The leases on
all seven Properties are cross-defaulted. The general terms of the lease
agreements are described in the section of the Prospectus entitled "Business --
Description of Property Leases." The principal features of the leases are as
follows:
o The initial term of each lease expires on December 28, 2018.
o At the end of the initial lease term, the tenant will have three
consecutive renewal options of fifteen years.
o The leases require minimum rent payments as follows.
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Minimum Annual Rent
------------------------------------
Year 2 and
Property Location Year 1 Thereafter
-------------------------------- ------------ -------------- --------------
Legacy Park Property Plano, TX $1,308,673 $1,341,390
Market Center Property Dallas, TX 3,399,319 3,484,302
Hughes Center Property Las Vegas, NV 3,412,068 3,497,369
Dallas Plano Property Plano, TX 1,204,485 1,234,597
Scottsdale Downtown Property Scottsdale, AZ 2,022,084 2,072,636
Lake Union Property Seattle, WA 3,690,847 3,783,118
Phoenix Airport Property Phoenix, AZ 2,201,207 2,256,237
</TABLE>
o In addition to minimum rent, for lease years one and two, the leases
require percentage rent equal to 7.75% of the aggregate amount of all
room revenues combined, for the Seven Hotels, in excess of a combined
quarterly threshold of $11,885,000. For lease year three and
thereafter, the leases require percentage rent equal to 7.75% of the
aggregate amount of all room revenues combined, for the Seven Hotels,
in excess of lease year two actual room revenues.
o The tenant of the Seven Hotels has established a FF&E Reserve which
will be used for the replacement and renewal of furniture, fixtures and
equipment relating to the hotel Properties. Deposits to the FF&E
Reserve are made once every four weeks as follows: (i) for the Legacy
Park, Hughes Center, Dallas Plano, Scottsdale Downtown, Lake Union and
Phoenix Airport Properties, 1% of gross receipts for the first lease
year; 3% of gross receipts for the second lease year; and 5% of gross
receipts every lease year thereafter and (ii) for the Market Center
Property, 1% of gross receipts for the first lease year; 2% of gross
receipts for the second lease year; 3% of gross receipts for the third
through fifth lease years; 4% of gross receipts for the sixth through
tenth lease years; and 5% of gross receipts for the eleventh lease year
and thereafter. Funds in the FF&E Reserve and all property purchased
with funds from the FF&E Reserve shall be paid, granted and assigned to
Hotel Investors.
o The tenant under each lease is required to maintain, for up to three
years from the commencement of the last lease for the Hotels to be
executed (but the period will in no event end earlier than December 31,
2003), a liquid net worth equal to a minimum amount (the "Net Worth
Requirement"), which may be used solely to make payments under the
leases. The Net Worth Requirement may be reduced after twelve months to
the extent by which payment of rent exceeds cash available for lease
payments (gross revenues less property expenses) derived from the
leased Hotels during the one-year period. In addition, providing that
all of the Hotels have been opened for one year, the Net Worth
Requirement will terminate at such time that cash available for lease
payments for all of the leased Hotels equals 125% of total minimum rent
due under the leases for 12 consecutive months; or that the lease is
terminated pursuant to its terms (other than for an event of default).
The estimated federal income tax basis of the depreciable portion of
the Seven Hotels is as follows.
Legacy Park Property $11,200,000
Market Center Property 30,500,000
Hughes Center Property 29,700,000
Dallas Plano Property 10,400,000
Scottsdale Downtown Property 16,900,000
Lake Union Property 29,300,000
Phoenix Airport Property 19,300,000
Each of the Seven Hotels is a newly constructed hotel which recently
commenced operations. The Legacy Park Property is located approximately 25 miles
north of the city of Dallas and has 153 guest rooms and five suites. The Market
Center Property is approximately two miles northwest of the Dallas central
business district and has 266 guest suites. The Dallas Plano Property is located
approximately 25 miles north of the city of Dallas and has 126 guest suites.
According to Hospitality Valuation Services (HVS) data, Dallas has more than 200
planned industrial districts and is home to over 250 insurance companies and
many major oil companies. Since 1996, more than 20 regional and national
companies have relocated to or completed expansions in the area. Other lodging
facilities located in proximity to the Legacy Park Property include a Hampton
Inn, a Fairfield Inn(R) by Marriott(R), a LaQuinta Inn & Suites and another
Courtyard by Marriott. Other lodging facilities located in proximity to the
Market Center Property include a Renaissance(R) Hotel, an Embassy Suites, a
Sheraton Suites, a Wyndham Garden Hotel and a Courtyard by Marriott. Other
lodging facilities located in proximity to the Dallas Plano Property include a
Homewood Suites, a Bradford Suites, a Mainstay Suites, a La Quinta Inn & Suites,
a Courtyard by Marriott and another Residence Inn by Marriott.
The Hughes Center Property is in a commercial park located east of the
Las Vegas strip and has 256 guest suites. According to HVS data, in 1998, Las
Vegas hosted approximately 4,000 conventions with more than 3.3 million people
in attendance. The 1998 economic impact of conventions was an estimated $4.2
billion. In addition, Las Vegas is known a the "Entertainment Capital of the
World," drawing more than 30 million visitors in 1998 and generating a 1998
hotel occupancy rate of 85.8% compared to the United States national average
occupancy rate of 64%. Other lodging facilities located in proximity to the
Hughes Center Property include an AmeriSuites, a Hawthorn Suites and another
Residence Inn by Marriott.
The Scottsdale Downtown Property is located approximately 15 miles
northeast of Phoenix Sky Harbor International Airport and has 176 guest rooms
and four suites. The Phoenix Airport Property is located approximately three
miles north of Phoenix Sky Harbor International Airport and has 200 guest
suites. According to HVS data, Arizona is one of the top two fastest growing
states in the nation, second only to the state of Nevada. Phoenix is the
fifteenth largest metropolis in the United States. Due to its location and
climate, Phoenix has become a convention destination with more than 347,238 room
nights booked in 1998. Other lodging facilities located in proximity to the
Scottsdale Downtown Property include a Hampton Inn, a Fairfield Inn by Marriott,
a Holiday Inn, a Comfort Suites, a Quality Suites, a Days Inn and a Ramada.
Other lodging facilities located in proximity to the Phoenix Airport Property
include a Double Tree Suites, an Embassy Suites, an Embassy Suites West, a
Wyndham Garden Hotel and a Holiday Inn Select.
The Lake Union Property is in downtown Seattle, near the University
district and the Seattle Center area and has 248 guest rooms and two suites.
According to HVS data, computer and electronic jobs in Seattle have grown by 300
percent in the past 20 years. Other lodging facilities located in proximity to
the Lake Union Property include a Residence Inn by Marriott, a Hampton Inn &
Suites, a Cavanaugh's Inn, a Warwick Hotel, a Mayflower and a Roosevelt Hotel.
Since the Seven Hotels are newly constructed properties, limited
operating history is available. Of the Seven Hotels, the Hughes Center Property
and the Dallas Plano Property were the earliest to commence operations, in
October 1998. Based on information provided to the Company by Western
International for the period ended December 31, 1998, the hotels located on
these Properties generated gross operating profits of $690,000 and $188,000,
respectively, which resulted in net operating profits (earnings before interest,
taxes and depreciation) of $394,000 and $55,000 respectively. The average
occupancy rate, the average daily room rate and the revenue per available room
for the periods the hotels have been operational are as follows:
<TABLE>
<CAPTION>
<S> <C>
Average Average Revenue
Occupancy Daily Room per
Property Location Year Rate Rate Available Room
- -------------------------- ---------- ---------- ------------- -------------- -------------------
Legacy Park Property Plano, TX *1998 8.20% $ 45.28 $ 3.70
**1999 61.20% 91.57 56.01
Market Center Property Dallas, TX *1998 37.90% $100.95 $ 38.26
**1999 72.10% 113.69 81.99
Hughes Center Property Las Vegas, NV *1998 47.30% $107.86 $ 51.00
**1999 80.30% 91.16 73.22
Dallas Plano Property Plano, TX *1998 46.70% $ 88.79 $ 41.47
**1999 71.70% 76.15 54.60
Scottsdale Downtown
Property Scottsdale, AZ **1999 27.80% $ 66.96 $ 18.63
Lake Union Property Seattle, WA **1999 73.70% $117.83 $ 86.80
Phoenix Airport Property Phoenix, AZ **1999 36.50% $ 75.67 $ 27.60
</TABLE>
* Data for the Legacy Park Property represents the period December 23,
1998 through January 1, 1999, data for the Market Center Property
represents the period November 11, 1998 through January 1, 1999, data
for the Hughes Center Property represents the period October 1, 1998
through January 1, 1999 and data for the Dallas Plano Property
represents the period October 12, 1998 through January 1, 1999.
** Data for the Legacy Park, Market Center, Hughes Center and Dallas Plano
Properties represents the period January 2, 1999 through October 8,
1999, and data for the Scottsdale Downtown, Lake Union and Phoenix
Airport Properties represents the period May 22, 1999 through October
8, 1999.
The Company believes that the results achieved by the Seven Hotels, as
shown in the table above, are not indicative of their long-term operating
potential since they each had been open for less than one year.
Marriott Brands. The brands, Residence Inn by Marriott, Courtyard by
Marriott and Marriott Hotels, Resorts and Suites(R) are part of Marriott
International's portfolio of brands. According to data obtained in February 1999
from Marriott's Market Planning & Feasibility department, Marriott International
is one of the world's leading hospitality companies, managing the most hotels
worldwide, and is ranked as the sixth largest hotel company overall by brand
(based on number of rooms in 1997). According to Marriott data, as of January
1999, Marriott International had more than 1,800 units (or properties), for an
aggregate of more than 325,000 rooms worldwide. Although Marriott International
has entered into a management agreement relating to the Seven Hotels, it has not
guaranteed the payments due under the leases.
Each Residence Inn by Marriott hotel typically offers daily
complimentary breakfast and newspaper, an evening hospitality hour, a swimming
pool, heated whirlpool and SportCourt(R). Guest suites provide in-room modem
jacks, separate living and sleeping areas and a fully equipped kitchen with
appliances and cooking utensils. According to Marriott, as of January 1999,
there were over 294 Residence Inn by Marriott hotels in the United States and
four in Canada and Mexico. With a usage rate of more than 83% among extended
stay chains, Residence Inn by Marriott is the top U.S. extended stay lodging
brand, appealing to travelers who need a room for five or more consecutive
nights, according to data obtained in February 1999 from Marriott's Marketing
Planning & Feasibility department.
Each Courtyard by Marriott features a residential atmosphere, a
restaurant, lounge, meeting space, exercise room and swimming pool. According to
data obtained in February 1999 from Marriott's Marketing Planning & Feasibility
department, Courtyard by Marriott is a leading moderate price lodging chain
featuring a residential atmosphere. According to Marriott, as of January 1999,
there were more than 415 Courtyard by Marriott hotels across the United States,
Canada and abroad.
Marriott Hotels, Resorts and Suites is Marriott International's
flagship brand of upscale, full-service hotels and resorts. Each of the Marriott
Hotels, Resorts and Suites features multiple restaurants and lounges, health
club, swimming pool, gift shop, concierge level, business center and meeting
facilities. According to Marriott, as of January 1999, there were over 351
Marriott Hotels, Resorts and Suites worldwide.
In connection with the acquisition of certain of the Properties, the
Company and Hotel Investors have entered into agreements with Marriott
International or one of its affiliates. Among other things, these agreements
require under certain circumstances that the Company or Hotel Investors obtain
the consent of, or offer the Property to, Marriott International or one of its
affiliates in the event that the Company or Hotel Investors wishes to sell the
Property to a third party. The Company believes that these agreements and the
terms thereof are consistent with standard practices in the hospitality
industry.
PENDING INVESTMENTS
The following information updates and replaces the "Pending
Investments" section of the Prospectus.
As of November 4, 1999, the Company had initial commitments to acquire,
directly or indirectly, four hotel properties. These Properties are two
Courtyards by Marriott, one located in Orlando, Florida, and one located in
Addison, Texas, one Fairfield Inn by Marriott located in Orlando, Florida and
one SpringHill Suites located in Orlando, Florida. The acquisition of each of
these properties is subject to the fulfillment of certain conditions. There can
be no assurance that any or all of the conditions will be satisfied or, if
satisfied, that one or more of these properties will be acquired by the Company.
If acquired, the leases of these properties are expected to be entered into on
substantially the same terms described in the section of the Prospectus entitled
"Business -- Description of Property Leases." In order to acquire all of these
properties, the Company must obtain additional funds through the receipt of
additional offering proceeds and/or debt financing.
Leases. Set forth below are summarized terms expected to apply to the
leases for each of the properties. More detailed information relating to a
property and its related lease will be provided at such time, if any, as the
property is acquired.
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Estimated Purchase Lease Term and Minimum Annual
Property Price Renewal Options Rent Percentage Rent
- -------- ----- --------------- ---- ---------------
Courtyard by Marriott (2) 15 years; two ten-year 10% of the Company's total for each lease year after the
Orlando, FL (1) renewal options cost to purchase the property second lease year, 7% of
(the "Courtyard Little revenues in excess of revenues
Lake Bryan for the second lease year
Property")
Hotel under construction
Fairfield Inn by Marriott (2) 15 years; two ten-year 10% of the Company's total cost for each lease year after the
Orlando, FL (1) renewal options to purchase the property second lease year, 7% of
(the "Fairfield Inn Little revenues in excess of revenues
Lake Bryan for the second lease year
Property")
Hotel under construction
SpringHill Suites by Marriott (2) 15 years; two ten-year 10% of the Company's total cost for each lease year after the
Orlando, FL (1) renewal options to purchase the property second lease year, 7% of
(the "SpringHill Suites Little revenues in excess of revenues
Lake Bryan Property") for the second lease year
Hotel under construction
Courtyard by Marriott $17,085,000 approximately 20 years; 10.309% of the total cost to for the first and second lease
Addison, TX (3)(4)(5) three 15-year renewal purchase the property; years, 7.75% of room revenues
(the "Courtyard Addison options increases to 10.567% after the in excess of the second year
Property") first lease year pro forma revenues; and for
Hotel under construction the third lease year and
thereafter, 7.75% of room
revenues in excess of the
second year actual revenues
</TABLE>
- ------------------------------------
FOOTNOTES:
(1) The leases for the Courtyard Little Lake Bryan, the Fairfield Inn
Little Lake Bryan and the SpringHill Suites Little Lake Bryan
Properties are expected to be with the same unaffiliated lessee.
(2) The anticipated aggregate purchase price for the Courtyard Little Lake
Bryan, Fairfield Inn Little Lake Bryan and SpringHill Suites Little
Lake Bryan Properties is approximately $100 million.
(3) The Company, together with an institutional investor, will indirectly
acquire this hotel property (in addition to the Seven Hotels) through
Hotel Investors. (See "Property Acquisitions" above.)
(4) In connection with the acquisition of this property, Hotel Investors is
expected to obtain approximately $8,776,000 in long-term, permanent
financing to be used to fund a portion of the purchase price. Such
financing will be secured by the property, bear interest at a market
rate and be nonrecourse to Hotel Investors. (See "Property
Acquisitions" above.)
(5) In connection with the acquisition of this hotel property (in addition
to the Seven Hotels), an investment of $15,000,000 in the Company and
the acquisition of a ten percent interest in the Advisor by the
institutional investor, the Advisor and certain of its Affiliates have
waived or reduced certain fees otherwise payable by the Company. (See
"Property Acquisitions" above.) In connection with these transactions,
Hotel Investors paid the advisor of the institutional investor a
commitment fee.
<PAGE>
Little Lake Bryan. Three of the Properties are located in Little Lake
Bryan, a 300-acre community planned by The Little Lake Bryan Company. Included
in the proposed acquisition are a 314-room Courtyard by Marriott, a 389-room
Fairfield Inn by Marriott and a 398-room SpringHill Suites(TM) by Marriott(R)
(formerly Fairfield Suites(R) by Marriott(R)). The hotels are being developed by
Marriott International, Inc. with completion scheduled for the year 2000. The
community is less than five miles from the WALT DISNEY WORLD(R) Resort and less
than ten miles from SeaWorld(R) Orlando, Universal Studios Escape(R) and the
Orange County Convention Center.
As shown below, the lodging market in the Lake Buena Vista area
averaged 77% occupancy and an average daily room rate of $121 for 1998. The Lake
Buena Vista lodging market also achieved a 9.6% growth in room demand on a
compounded annual basis over the last ten years. The following table reflects
the hotel occupancy rates and daily room rates for hotels in the Orlando area:
ORLANDO AREA HOTEL OCCUPANCY RATES
AND AVERAGE DAILY ROOM RATES
ORLANDO LAKE BUENA VISTA*
AVERAGE DAILY AVERAGE DAILY
YEAR OCCUPANCY RATE ROOM RATE OCCUPANCY RATE ROOM RATE
- ---- -------------- --------- -------------- ---------
1993 72.2% $64.61 74.7% $103.09
1994 71.3% 65.85 76.3% 100.26
1995 74.6% 68.55 80.3% 96.99
1996 80.1% 73.04 82.5% 104.65
1997 78.7% 80.99 80.2% 116.18
1998 74.7% 84.64 76.9% 121.48
* Little Lake Bryan is part of the Lake Buena Vista market area.
Source: Smith Travel Research
According to the Orlando/Orange County Convention & Visitors Bureau
1998 Research report, Central Florida is one of the top five travel destinations
in the United States and leisure travel to Orlando continues to grow. The number
of domestic non-Florida leisure travelers visiting Orlando in 1997 increased
16.1% over 1996. In 1997, Universal Studios Escape(R) drew an estimated 8.9
million visitors and SeaWorld(R) Orlando had an estimated 4.9 million visitors.
Area attractions continue to grow with new developments.
In addition, according to the Orlando/Orange County Convention &
Visitors Bureau 1998 Research report, visitor arrivals at Orlando International
Airport increased from approximately 21,500,000 passengers in 1993, to
27,300,000 passengers in 1997. The number of domestic non-Florida business
travelers during 1997 increased 22.1% over 1996. In addition, more than six
million international visitors arrived in Florida in 1997, for a national market
share of 25.1%. The Orlando area claimed 11.5% of the national market share. On
average, international visitors spent $800 per person/per trip, excluding
airfare, while visiting Orlando in 1997.
The Orange County Convention Center recently completed a new phase of
development. With 1.1 million square feet of exhibition space, an independent
study ranked the center as number two in the nation for continuous exhibition
space. The following table reflects the number of events which took place at the
Orange County Convention Center between 1994 and 1998 and attendance levels for
those events:
ORANGE COUNTY CONVENTION
CENTER ATTENDANCE
Year Number of Events Attendance
---- ---------------- ----------
1994 188 705,824
1995 168 700,429
1996 240 1,017,679
1997 260 930,219
1998 244 967,363
Source: Orlando/Orange County CVB
Western International. The remaining hotel property which the Company
has an initial commitment to acquire an interest, is a 176-room Courtyard by
Marriott, located in Addison, Texas, a northern suburb of Dallas, in close
proximity to high-rise office buildings, retail centers and restaurants.
According to HVS data, Addison has a daytime office population of more than
100,000 people.
Marriott Brands. Fairfield Inn by Marriott is an economy lodging brand
appealing to both business and leisure travelers. According to Marriott, as of
January 1999, there are more than 376 Fairfield Inn by Marriott hotels in 47
states.
SpringHill Suites by Marriott is Marriott's new, moderately priced,
all-suite lodging brand, with guest suites that are up to 25 percent larger than
standard hotel rooms. All SpringHill Suites feature a complimentary continental
breakfast, indoor swimming pool and exercise room. According to Marriott, as of
January 1999, SpringHill Suites by Marriott is projected to grow to 115
properties by 2002.
The following chart provides additional information on systemwide
occupancy levels for Marriott lodging brands:
Total Occupancy Rate for 1998
Marriott Brand as Compared to
U.S. Lodging Industry
Occupancy Rate
--------------
U.S. Lodging Industry 64.0%
Courtyard by Marriott 77.6%
Fairfield Inn by Marriott 72.4%
Marriott Hotels, Resorts and Suites 75.9%
Residence Inn by Marriott 80.6%
Source: Smith Travel Research (U.S. Lodging Industry only) and Marriott
International, Inc. 1998 Form 10-K
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 Appendix B.
<TABLE>
<CAPTION>
<S> <C>
Nine Months Ended
September 30, 1999 September 30, 1998 Year Ended December 31,
(Unaudited) (Unaudited) 1998 1997 (1) 1996 (2)
----------- ----------- ---- -------- --------
Revenues $6,402,130 $1,026,740 $1,955,461 $ 46,071 $ -
Net earnings 4,314,045 583,842 958,939 22,852 -
Cash distributions declared (3) 6,331,072 619,131 1,168,145 29,776 -
Funds from operations (4) 6,129,738 737,508 1,343,105 22,852 -
Earnings per Share:
Basic 0.34 0.28 0.40 0.03 -
Diluted 0.33 0.28 0.40 0.03 -
Cash distributions declared per
Share 0.54 0.29 0.46 0.05 -
Weighted average number of
Shares outstanding (5) :
Basic 12,652,059 2,082,845 2,402,344 686,063 -
Diluted 17,509,791 2,082,845 2,402,344 686,063 -
September 30, 1999 September 30, 1998 December 31,
(Unaudited) (Unaudited) 1998 1997 1996
----------- ----------- ---- ---- ----
Total assets $198,384,857 $36,387,230 $48,856,690 $9,443,476 $598,190
Total stockholders' equity 196,460,350 24,567,655 37,116,491 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) Cash distributions are declared by the Board of Directors and generally
are based on various factors, including cash available from operations.
Approximately 32%, 6%, 18% and 23% of cash distributions for the nine
months ended September 30, 1999 and 1998, and the years ended December
31, 1998 and 1997, respectively, represent a return of capital in
accordance with generally accepted accounting principles ("GAAP"). Cash
distributions treated as a return of capital on a GAAP basis represent
the amount of cash distributions in excess of accumulated net earnings
on a GAAP basis, including deductions for depreciation expense. The
Company has not treated such amount as a return of capital for purposes
of calculating Invested Capital and the Stockholders' 8% Return.
(4) Funds from operations ("FFO"), based on the revised definition adopted
by the Board of Governors of the National Association of Real Estate
Investment Trusts ("NAREIT") and as used herein, means net earnings
determined in accordance with GAAP, excluding gains or losses from debt
restructuring and sales of property, plus depreciation and amortization
of real estate assets and after adjustments for unconsolidated
partnerships and joint ventures. FFO was developed by NAREIT as a
relative measure of performance and liquidity of an equity REIT in
order to recognize that income-producing real estate historically has
not depreciated on the basis determined under GAAP. However, FFO (i)
does not represent cash generated from operating activities determined
in accordance with GAAP (which, unlike FFO, generally reflects all cash
effects of transactions and other events that enter into the
determination of net earnings), (ii) is not necessarily indicative of
cash flow available to fund cash needs and (iii) should not be
considered as an alternative to net earnings determined in accordance
with GAAP as an indication of the Company's operating performance, or
to cash flow from operating activities determined in accordance with
GAAP as a measure of either liquidity or the Company's ability to make
distributions. Accordingly, the Company believes that in order to
facilitate a clear understanding of the historical operating results of
the Company, FFO should be considered in conjunction with the Company's
net earnings and cash flows as reported in the accompanying financial
statements and notes thereto. See Appendix B-- Financial Information
included in this Prospectus Supplement and in the Prospectus.
(5) 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 following information should be read in conjunction with the
section of the Prospectus entitled "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
The following information, including, without limitation, the Year 2000
Readiness disclosure, that are not historical facts may be forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Act of 1934. These statements generally are
characterized by the use of terms such as "believe", "expect" and "may."
Although the Company believes that the expectations reflected in such
forward-looking statements are based upon reasonable assumptions, the Company's
actual results could differ materially from those set forth in the
forward-looking statements. Certain factors that might cause such a difference
include the following: changes in general economic conditions, changes in local
and national real estate conditions, availability of capital from borrowings
under the Company's Line of Credit and security agreement, continued
availability of proceeds from the Company's offering, the ability of the Company
to obtain permanent financing on satisfactory terms, the ability of the Company
to identify suitable investments, the ability of the Company to locate suitable
tenants for its Properties and borrowers for its Mortgage Loans and Secured
Equipment Leases, and the ability of such tenants and borrowers to make payments
under their respective leases, Mortgage Loans or Secured Equipment Leases. Given
these uncertainties, readers are cautioned not to place undue reliance on such
statements.
The Company is a Maryland corporation that was organized on June 12,
1996. CNL Hospitality GP Corp. and CNL Hospitality LP Corp. are wholly owned
subsidiaries of CNL Hospitality Properties, Inc., organized in Delaware in June
1998. CNL Hospitality Partners, LP is a Delaware limited partnership formed in
June 1998. CNL Hospitality GP Corp. and CNL Hospitality LP Corp. are the general
and limited partners, respectively, of CNL Hospitality Partners, LP. The term
"Company" includes, unless the context otherwise requires, CNL Hospitality
Properties, Inc., CNL Hospitality Partners, LP, CNL Hospitality GP Corp. and CNL
Hospitality LP Corp. The Company was formed to acquire Properties located across
the United States to be leased on a long-term, "triple-net" basis to operators
of selected national and regional limited service, extended stay and full
service Hotel Chains. The Company may also provide Mortgage Loans and Secured
Equipment Leases to operators of Hotel Chains. Secured Equipment Leases will be
funded from the proceeds of financing to be obtained by the Company. The
aggregate outstanding principal amount of Secured Equipment Leases will not
exceed 10% of gross proceeds from the Company's offerings of Shares of Common
Stock.
LIQUIDITY AND CAPITAL RESOURCES
COMMON STOCK OFFERINGS
The Company was formed in June 1996, at which time it received initial
capital contributions from the Advisor of $200,000 for 20,000 Shares of Common
Stock. On July 9, 1997, the Company commenced its Initial Offering of Shares of
Common Stock. Upon completion of the Initial Offering on June 17, 1999, the
Company had received aggregate subscriptions for 15,007,264 Shares totalling
$150,072,637 in Gross Proceeds, including $72,637 (7,264 Shares) through the
Company's Reinvestment Plan. Following the completion of its Initial Offering,
the Company commenced this offering of up to 27,500,000 Shares of Common Stock
($275,000,000). Of the 27,500,000 Shares of Common Stock offered, 2,500,000 are
available only to stockholders purchasing Shares through the Reinvestment Plan.
As of September 30, 1999, the Company had received subscriptions for 7,324,841
Shares totalling $73,248,406 in Gross Proceeds from this offering, including
$232,466 (23,246 Shares) through the Company's Reinvestment Plan. The price per
Share and the other terms of this offering, including the percentage of gross
proceeds payable (i) to the Managing Dealer for Selling Commissions and expenses
in connection with the offering and (ii) to the Advisor for Acquisition Fees,
are substantially the same as those for the Initial Offering.
As of September 30, 1999, net proceeds to the Company from its Initial
Offering and this offering of Shares and capital contributions from the Advisor,
after deduction of Selling Commissions, marketing support and due diligence
expense reimbursement fees and Organizational and Offering Expenses totalled
approximately $199,000,000. The Company has used net proceeds from the offerings
to invest, directly or indirectly, approximately $63,100,000 in nine hotel
Properties, to pay $6,320,000 as deposits on four additional hotel Properties,
to redeem 3,000 Shares of Common Stock for $27,600 and to pay approximately
$11,300,000 in Acquisition Fees and certain Acquisition Expenses, leaving
approximately $118,000,000 as of September 30, 1999, available for investment in
Properties and Mortgage Loans.
On October 26, 1999, the Company filed a registration statement on Form
S-11 with the Securities and Exchange Commission in connection with the proposed
sale by the Company of up to an additional 45,000,000 Shares of Common Stock
($450,000,000) (the "2000 Offering") in an offering expected to commence
immediately following the completion of this offering. Of the 45,000,000 Shares
of Common Stock expected to be offered, up to 5,000,000 are expected to be
available to stockholders purchasing shares through the Reinvestment Plan. The
price per Share and the other terms of the 2000 Offering, including the
percentage of gross proceeds payable (i) to the Managing Dealer for Selling
Commissions and expenses in connection with the offering and (ii) to the Advisor
for Acquisition Fees, are expected to be substantially the same as those for the
Initial Offering and this offering.
As of November 4, 1999, the Company had received aggregate
subscriptions for 24,726,401 Shares totalling $247,264,005 in Gross Proceeds
from its Initial Offering and this offering, including 30,510 Shares totalling
$305,103 through the Reinvestment Plan. As of November 4, 1999, net proceeds to
the Company from its offerings of Shares and capital contributions from the
Advisor, after deduction of Selling Commissions, marketing support and due
diligence expense reimbursement fees and Organizational and Offering Expenses
totalled approximately $220,700,000. The Company has used net proceeds from the
offerings to invest, directly or indirectly, approximately $63,100,000 in nine
hotel Properties, to pay $6,320,000 as deposits on four additional hotel
Properties, to redeem 5,885 Shares of Common Stock for $54,142 and to pay
approximately $12,300,000 in Acquisition Fees and certain Acquisition Expenses,
leaving approximately $139,000,000 available for investment in Properties and
Mortgage Loans. See "Business -- Pending Investments" for information on four
Properties the Company has entered into commitments to acquire.
The Company expects to use net proceeds it has received from its
Initial Offering and this offering, plus any additional net proceeds from the
sale of Shares , to purchase additional Properties and, to a lesser extent, make
Mortgage Loans. See the section of the Prospectus entitled "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 currently has a
$30,000,000 initial Line of Credit, as described below. The Line of Credit may
be repaid with offering proceeds, working capital or Permanent Financing. 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.
LINE OF CREDIT AND SECURITY AGREEMENT
On July 31, 1998, the Company entered into an initial Line of Credit
and security agreement with a bank to be used by the Company to acquire hotel
Properties. The initial Line of Credit provides that the Company will be able to
receive advances of up to $30,000,000 until July 30, 2003, with an annual review
to be performed by the bank to indicate that there has been no substantial
deterioration, as determined by the bank in its reasonable discretion, of the
credit quality. Interest expense on each advance shall be payable monthly, with
all unpaid interest and principal due no later than five years from the date of
the advance. Advances under the Line of Credit will bear interest at either (i)
a rate per annum equal to 318 basis points above the London Interbank Offered
Rate (LIBOR) or (ii) a rate per annum equal to 30 basis points above the bank's
base rate, whichever the Company selects at the time advances are made. In
addition, a fee of 0.5% per advance will be due and payable to the bank on funds
as advanced. Each advance made under the Line of Credit will be collateralized
by an assignment of rents and leases. In addition, the Line of Credit provides
that the Company will not be able to further encumber the applicable hotel
Property during the term of the advance without the bank's consent. The Company
will be required, at each closing, to pay all costs, fees and expenses arising
in connection with the Line of Credit. The Company must also pay the bank's
attorney's fees, subject to a maximum cap, incurred in connection with the Line
of Credit and each advance. In connection with the Line of Credit, the Company
incurred a commitment fee, legal fees and closing costs of approximately
$94,000. The proceeds from the Line of Credit were used in connection with the
purchase of two hotel Properties and the commitment to acquire three additional
Properties. As of September 30, 1999, the Company has no amounts outstanding
under the Line of Credit. The Company has not yet received a commitment for any
Permanent Financing and there is no assurance that the Company will obtain any
Permanent Financing on satisfactory terms.
INTEREST RATE RISK
The Company may be subject to interest rate risk through any
outstanding balances on its variable rate Line of Credit. The Company may
mitigate this risk by paying down any outstanding balances on the Line of Credit
from offering proceeds should interest rates rise substantially.
PROPERTY ACQUISITIONS AND INVESTMENTS
In February 1999, the Company executed a series of agreements with Five
Arrows pursuant to which the Company and Five Arrows formed a jointly owned real
estate investment trust, Hotel Investors, for the purpose of acquiring up to
eight Hotels. At the time the agreement was entered into, the eight Hotels (four
Courtyard by Marriott hotels, three Residence Inn by Marriott hotels, and one
Marriott Suites) were either newly constructed or in various stages of
completion. As of September 30, 1999, Hotel Investors owns seven of the newly
constructed Hotels.
The Advisor is also the advisor to Hotel Investors pursuant to a
separate advisory agreement. However, in no event will the Company pay the
Advisor fees, including the Company's pro rata portion of Hotel Investors'
advisory fees, in excess of amounts payable under its Advisory Agreement. The
Advisor entered into separate purchase agreements for each of the eight Hotels.
The purchase agreements included customary closing conditions, including
performing due diligence on and inspection of the completed Properties. The
aggregate purchase price of all eight Hotels, once the remaining Hotel under
construction is acquired, will be approximately $184 million, excluding closing
costs.
In order to fund these purchases, Five Arrows committed to make an
investment of up to $50.9 million in Hotel Investors. The Company committed to
make an investment of up to $40 million in Hotel Investors, which investment has
been and will be made through its wholly owned subsidiary, CNL Hospitality
Partners, LP. Hotel Investors funded and expects to fund the remaining amount of
approximately $96.6 million (including closing costs) with permanent financing
from Jefferson-Pilot Life Insurance Company consisting of eight separate loans,
collateralized by the Hotel Investors Loan.
In return for their respective funding commitments, Five Arrows
received a 51% common stock interest and Hospitality Partners, LP received a 49%
common stock interest in Hotel Investors. As funds are continually advanced to
Hotel Investors, Five Arrows will receive up to 50,886 shares of Class A
Preferred Stock, and CNL Hospitality Partners, LP will receive up to 39,982
shares of Class B Preferred Stock. The Class A Preferred Stock is exchangeable
upon demand into Common Stock of the Company, as determined pursuant to a
predetermined formula that is intended to make the conversion not dilutive to
funds from operations (based on the revised definition adopted by the Board of
Governors of the National Association of Real Estate Investment Trusts which
means net earnings determined in accordance with generally accepted accounting
principles, 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) per share of the
Company's common stock.
On February 25, 1999, Hotel Investors purchased the four Initial Hotels
for an aggregate purchase price of approximately $90 million and paid $10
million as a deposit on the four remaining Hotels. The Initial Hotels are the
Courtyard by Marriott located in Plano, Texas, the Marriott Suites located in
Dallas, Texas, the Residence Inn by Marriott located in Las Vegas, Nevada and
the Residence Inn by Marriott located in Plano, Texas. On June 16, 1999, Hotel
Investors purchased three additional hotels of the eight Hotels (the "Additional
Hotels") for an aggregate purchase price of approximately $77 million. The
Additional Hotels are the Courtyard by Marriott located in Scottsdale, Arizona,
the Courtyard by Marriott located in Seattle, Washington and the Residence Inn
by Marriott located in Phoenix, Arizona. Hotel Investors applied $7 million of
the $10 million deposit toward the acquisition of the Additional Hotels. As a
result of these purchases and the deposit, Five Arrows has funded approximately
$48 million of its commitment and purchased 48,337 shares of Hotel Investors'
Class A Preferred Stock and the Company has funded approximately $38 million of
its commitment to Hotel Investors and purchased 37,979 shares of Hotel
Investors' Class B Preferred Stock. Hotel Investors has obtained advances
totalling approximately $88 million relating to the Hotel Investors Loan in
order to facilitate the acquisition of the Seven Hotels. Hotel Investors intends
to use the remaining committed capital contributions from Five Arrows and the
Company, and proceeds from the Hotel Investors Loan proportionately to fund the
remaining Property acquisition.
Five Arrows also committed to invest up to $15 million in the Company
through the purchase of Common Stock pursuant to the Company's Initial Offering
and this offering, the proceeds of which have been and will be used by the
Company to fund approximately 38% of its funding commitment to Hotel Investors.
As of February 24, 1999, Five Arrows had invested $9,297,056 in the Company. Due
to the stock ownership limitations specified in the Company's Articles of
Incorporation at the time of Five Arrows' initial investment, $5,612,311 was
invested in the Company's Common Stock through the purchase of 590,770 Shares
and $3,684,745 was advanced to the Company as a convertible loan, bearing an
interest rate of eight percent. Due to additional subscription proceeds received
from February 24, 1999 to April 30, 1999, the loan was converted to 387,868
Shares of the Company's Common Stock on April 30, 1999. On June 17, 1999, Five
Arrows invested an additional $4,952,566 through the purchase of 521,322 Shares
of Common Stock. As of September 30, 1999, Five Arrows had invested $14,249,622
of its $15 million commitment in the Company. In addition to the above
investments, Five Arrows has purchased a 10% interest in the Advisor. In
connection with Five Arrows' commitment to invest $15 million in the Company,
the Advisor and certain Affiliates have agreed to waive certain fees otherwise
payable to them by the Company.
Cash flow from operations of Hotel Investors is distributed first to
Five Arrows with respect to dividends payable on the Class A Preferred Stock.
Such dividends are calculated based on Five Arrows' "special investment amount,"
or $1,294.78 per share, which represents the sum of its investment in Hotel
Investors and its $15 million investment in the Company on a per share basis,
adjusted for any distributions received from the Company. Cash flow from
operations is distributed to the Company with respect to its Class B Preferred
Stock. Next, cash flow is distributed to 100 CNL Group, Inc. and subsidiaries'
associates who each own one share of Class C preferred stock in Hotel Investors,
to provide a quarterly, cumulative, compounded 8% return. All remaining cash
flow from operations is distributed pro rata with respect to the interest in the
common shares.
CAPITAL COMMITMENTS
As of November 4, 1999, the Company had initial commitments to acquire,
directly or indirectly, four hotel Properties. The acquisition of each of these
Properties is subject to the fulfillment of certain conditions. In order to
acquire all of these Properties, the Company must obtain additional funds
through the receipt of additional offering proceeds and/or advances on the Line
of Credit. In connection with three of these agreements, the Company has a
deposit, in the form of a letter of credit, collateralized by a certificate of
deposit, amounting to $5 million. In connection with the remaining agreement,
Hotel Investors has a deposit of $3 million held in escrow . Of this amount,
Five Arrows contributed $1.68 million and the Company contributed $1.32 million.
There can be no assurance that any or all of the conditions will be satisfied
or, if satisfied, that one or more of these Properties will be acquired by the
Company.
As of November 4, 1999, the Company had not entered into any
arrangements creating a reasonable probability a Mortgage Loan or Secured
Equipment Lease would be funded. The Company is presently negotiating to acquire
additional Properties, but as of November 4, 1999, the Company had not acquired
any such Properties or entered into any Mortgage Loans.
CASH AND CASH EQUIVALENTS
Until Properties are acquired, or Mortgage Loans are entered into, Net
Offering Proceeds are held in short-term (defined as investments maturing in
less than 30 days), highly liquid investments, such as demand deposit accounts
at commercial banks, certificates of deposit and money market accounts . 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 September 30, 1999, the
Company had $118,019,624 invested in such short-term investments as compared to
$13,228,923 at December 31, 1998. The increase in the amount invested in
short-term investments is primarily attributable to proceeds received from the
sale of Shares of Common Stock. These funds will be used to purchase additional
Properties and make Mortgage Loans, to pay Offering Expenses and Acquisition
Expenses, to pay Distributions to stockholders and other Company expenses and,
in management's discretion, to create cash reserves.
LIQUIDITY REQUIREMENTS
The Company expects to meet its short-term liquidity requirements,
other than for acquisition and development of Properties and investment in
Mortgage Loans and Secured Equipment Leases, through cash flow provided by
operating activities. The Company believes that cash flow provided by operating
activities will be sufficient to fund normal recurring Operating Expenses,
regular debt service requirements and Distributions to stockholders. To the
extent that the Company's cash flow provided by operating activities is not
sufficient to meet such short-term liquidity requirements as a result, for
example, of unforeseen expenses due to tenants defaulting under the terms of
their lease agreements, the Company will use borrowings under its Line of
Credit.
Due to the fact that the Company leases its Properties on a triple-net
basis, meaning that tenants are generally required to pay all repairs and
maintenance, property taxes, insurance and utilities, management does not
believe that working capital reserves are necessary at this time. Management
believes that the Properties are adequately covered by insurance. In addition,
the Advisor has obtained contingent liability and property coverage for the
Company. This insurance policy is intended to reduce the Company's exposure in
the unlikely event a tenant's insurance policy lapses or is insufficient to
cover a claim relating to a Property.
The Company expects to meet its other short-term liquidity requirements,
including Property acquisition and development and investment in Mortgage Loans
and Secured Equipment Leases, with additional advances under its Line of Credit
and proceeds from its offerings.
The Company expects to meet its long-term liquidity requirements through
short or long-term, unsecured or secured debt financing or equity financing.
DISTRIBUTIONS
During the nine months ended September 30, 1999 and 1998, the Company
generated cash from operations (which includes cash received from tenants, and
dividend, interest and other income received, less cash paid for operating
expenses) of $4,642,118 and $2,047,046, respectively. Based on current and
anticipated future cash from operations and dividends due to the Company from
Hotel Investors at September 30, 1999 (and received in October 1999), the
Company declared and paid Distributions to its stockholders of $6,331,072 and
$619,131 during the nine months ended September 30, 1999 and 1998, respectively.
In addition, on October 1, 1999 and November 1, 1999, the Company declared
Distributions to stockholders of record on October 1, 1999 and November 1, 1999,
totalling $1,352,274 and $1,468,292, respectively ($0.0604 per Share), payable
in December 1999. For the nine months ended September 30, 1999 and 1998,
approximately 73 percent and 94 percent, respectively, of the Distributions
received by stockholders were considered to be ordinary income and approximately
27 percent and 6 percent, respectively, was considered a return of capital for
federal income tax purposes. The characterization for tax purposes of
Distributions declared for the nine months ended September 30, 1999, may not be
indicative of actual results for the year ending December 31, 1999. No amounts
distributed or to be distributed to the stockholders as of November 4, 1999,
were required to be or have been treated by the Company as a return of capital
for purposes of calculating the Stockholders' 8% Return on Invested Capital.
AMOUNTS DUE TO RELATED PARTIES
During the nine months ended September 30, 1999 and 1998, Affiliates of
the Company incurred on behalf of the Company $2,387,955 and $158,184,
respectively, for certain Organizational and Offering Expenses, $530,233 and
$220,575, respectively, for certain Acquisition Expenses and $285,847 and
$64,422, respectively, for certain Operating Expenses. As of September 30, 1999
and December 31, 1998, the Company owed the Advisor $307,977 and $318,937,
respectively, for expenditures incurred on behalf of the Company and for
Acquisition Fees. The Advisor has agreed to pay or reimburse to the Company all
Offering Expenses in excess of three percent of gross offering proceeds.
RESULTS OF OPERATIONS
REVENUES
As of September 30, 1999, the Company had acquired nine Properties,
either directly or indirectly through Hotel Investors, consisting of land,
buildings and equipment, and had entered into a long-term, triple-net lease
agreement relating to each of these Properties. The Property leases provide for
minimum base annual rental payments ranging from approximately $1,204,000 to
$3,691,000, which are payable in monthly installments. The leases also provide
that, commencing in the second lease year, the annual base rent required under
the terms of the leases will increase. In addition to annual base rent, the
tenants pay contingent rent computed as a percentage of gross sales of the
Property. The Company's leases also require the establishment of the FF&E
Reserves. The FF&E Reserves established for the tenant of the wholly owned
Properties at September 30, 1999, are owned by the Company, or owned indirectly
in the case of the seven Properties owned by Hotel Investors, and have been
reported as additional rent.
During the nine months ended September 30, 1999 and 1998, the Company
earned rental income of $2,255,968 and $487,400, respectively, from the two
wholly owned Properties ($769,442 and $487,400 of which was earned during the
quarters ended September 30, 1999 and 1998, respectively). Contingent rental
income of $38,342 and $62,668 was earned for the quarter and nine months ended
September 30, 1999, respectively. No contingent rental income was earned for the
nine months ended September 30, 1998. The Company also earned $194,301 and
$41,099 in FF&E Reserve income during the nine months ended September 30, 1999
and 1998, respectively ($68,268 and $41,099 of which was earned during the
quarters ended September 30, 1999 and 1998, respectively). The increase in
rental income, contingent rental income and FF&E Reserve income is due to the
fact that the Company owned its two wholly owned Properties for the full nine
months ended September 30, 1999, as compared to approximately three months
during the nine months ended September 30, 1998. Because the Company has not yet
acquired all of its Properties, revenues for the nine months ended September 30,
1999, represent only a portion of revenues which the Company is expected to earn
in future periods.
During the nine months ended September 30, 1999, the Company acquired
and leased seven Properties indirectly through its investment in Hotel
Investors, as described above in "Liquidity and Capital Resources." In
connection with its investment, during the quarter and nine months ended
September 30, 1999, the Company recognized $926,687 and $1,826,818,
respectively, in dividend income and $167,283 and $557,733, respectively, in
equity in loss after deduction of preferred stock dividends, resulting in net
earnings attributable to this investment of $759,404 and $1,269,085,
respectively.
During the nine months ended September 30, 1999 and 1998, the Company
also earned $2,125,043 and $498,241, respectively, in interest income from
investments in money market accounts and other short-term, highly liquid
investments and other income ($1,217,304 and $127,082 of which was earned during
the quarters ended September 30, 1999 and 1998, respectively). The increase in
interest income during the nine months ended September 30, 1999, as compared to
the nine months ended September 30, 1998, was attributable to the receipt of
subscription proceeds being temporarily invested in money market accounts or
other short-term, highly liquid investments pending investment in Properties or
Mortgage Loans. As Net Offering Proceeds from the Company's Initial Offering and
this offering 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.
SIGNIFICANT TENANTS
During the nine months ended September 30, 1999, two lessees, STC
Leasing Associates, LLC (which operates and leases the two Properties directly
owned by the Company) and WI Hotel leasing, LLC (which leases the seven
Properties in which the Company owns an interest through Hotel Investors) each
contributed more than ten percent of the Company's total rental income
(including the Company's share of total rental income from Hotel Investors). In
addition, all of the Company's rental income (including the Company's share of
total rental income from Hotel Investors) was earned from Properties operating
as Marriott(R) brand chains. Although the Company intends to acquire additional
Properties located in various states and regions and to carefully screen its
tenants in order to reduce risks of default, failure of these lessees or the
Marriott(R) brand chains could significantly impact the results of operations of
the Company. However, management believes that the risk of such a default is
reduced due to the essential or important nature of these Properties for the
ongoing operations of the lessees. It is expected that the percentage of total
rental income contributed by these lessees will decrease as additional
Properties are acquired and leased during 1999 and subsequent years.
EXPENSES
Operating expenses, including interest expense and depreciation and
amortization expense, were $1,530,352 and $442,898 for the nine months ended
September 30, 1999 and 1998, respectively ($392,902 and $273,712 of which were
incurred for the quarters ended September 30, 1999 and 1998, respectively).
Total operating expenses were greater due to the fact that the Company owned its
two wholly owned Properties for the full nine months ended September 30, 1999,
as compared to approximately three months during the nine months ended September
30, 1998. Asset Management Fees and depreciation and amortization expenses are
expected to increase as the Company acquires additional Properties and invests
in Mortgage Loans.
OTHER
The tenants of the Properties owned by the Company, either directly or
indirectly through Hotel Investors, have established FF&E Reserve funds which
will be used for the replacement and renewal of furniture, fixtures and
equipment relating to the hotel Properties. Funds in the FF&E Reserve have been
paid, granted and assigned to the Company, or in the case of the seven
Properties owned indirectly, to Hotel Investors. For the nine months ended
September 30, 1999, revenues relating to the FF&E Reserve of the Properties
directly owned by the Company totalled $194,301, and indirectly owned through
Hotel Investors totalled $257,259. Due to the fact that the Properties are
leased on a long term, triple-net basis, management does not believe that other
working capital reserves are necessary at this time. Management has the right to
cause the Company to maintain additional reserves if, in their discretion, they
determine such reserves are required to meet the Company's working capital
needs.
YEAR 2000 READINESS DISCLOSURE
OVERVIEW OF YEAR 2000 PROBLEM
The year 2000 problem concerns the inability of information and
non-information technology systems to properly recognize and process date-
sensitive information beyond January 1, 2000. The failure to accurately
recognize the year 2000 could result in a variety of problems from data
miscalculations to the failure of entire systems.
INFORMATION AND NON-INFORMATION TECHNOLOGY SYSTEMS
The Company generally does not directly own information technology
systems . The Advisor and its Affiliates generally provide all services
requiring the use of information and some non-information technology systems
pursuant to a management agreement with the Company. The information technology
system of the Advisor and its Affiliates consists of a network of personal
computers and servers built using hardware and software from mainstream
suppliers. The non-information technology systems of the Advisor, its Affiliates
and the Company are primarily facility related and include hotel and building
security systems, elevators, fire suppressions, HVAC, electrical systems and
other utilities. The Advisor and its Affiliates have no internally generated
programmed software coding to correct, because substantially all of the software
utilized by the Affiliates is purchased or licensed from external providers. The
maintenance of non-information technology systems at the Company's hotel
Properties is the responsibility of the tenants of the Properties and any
repairs or replacements will be paid out of the FF&E Reserve in accordance with
the terms of the Company's leases. To the extent that such expenditures are in
excess of the amounts available in the FF&E Reserve, the Company will be
required to fund such amounts. Rental income will be adjusted upward in
accordance with the lease agreements for any such amount paid.
THE Y2K TEAM
In early 1998, Affiliates of the Advisor formed a Year 2000 committee
(the "Y2K Team") for the purpose of identifying, understanding and addressing
the various issues associated with the year 2000 problem. The Y2K Team consists
of members from the Advisor and its Affiliates, including representatives from
senior management, information systems, telecommunications, legal, office
management, accounting and property management.
ASSESSING YEAR 2000 READINESS
The Y2K Team's initial step in assessing year 2000 readiness consists
of identifying any systems that are date sensitive and, accordingly, could have
potential year 2000 problems. The Y2K Team has conducted inspections, interviews
and tests to identify which of the systems used by the Company could have a
potential year 2000 problem.
The information system of the Advisor and its Affiliates is comprised
of hardware and software applications from mainstream suppliers. Accordingly,
the Y2K Team has contacted and is evaluating documentation from the respective
vendors and manufacturers to verify the year 2000 compliance of their products.
The Y2K Team has also requested and is evaluating documentation from the
non-information technology systems providers of the Advisor, its Affiliates and
the Company.
In addition, the Y2K Team has requested and is evaluating documentation
from other companies with which the Advisor, its Affiliates and the Company have
material third party relationships. Such third parties, in addition to the
providers of information and non-information technology systems, consist of the
Company's transfer agent and financial institutions. The Company depends on its
transfer agent to maintain and track investor information and its financial
institutions for availability of cash.
As of September 30, 1999, the Y2K Team had received responses from
approximately 62% of the third parties of the Advisor, its Affiliates and the
Company. All of the responses were in writing. Of the third parties responding,
all indicated that they are currently year 2000 compliant or will be year 2000
compliant prior to the end of year 2000. Although the Y2K Team continues to
receive positive responses from the companies with which the Advisor, its
Affiliates and the Company have third party relationships regarding their year
2000 compliance, the Advisor, its Affiliates and the Company cannot be assured
that the third parties have adequately considered the impact of the year 2000.
In addition, the Y2K Team has requested documentation from the
Company's tenants. The Y2K Team is in the process of obtaining the responses and
expects to complete this process by November 30, 1999. The Company has also
instituted a policy of requiring any new tenants to indicate that their systems
are year 2000 compliant or are expected to be year 2000 compliant prior to the
year 2000.
ACHIEVING YEAR 2000 COMPLIANCE
The Y2K Team has identified and completed upgrades for the hardware
equipment that was not year 2000 compliant. In addition, the Y2K Team has
identified and completed upgrades of the software applications that were not
year 2000 compliant, although the Advisor, its Affiliates and the Company cannot
be assured that the upgrade solutions provided by the vendors have addressed all
possible year 2000 issues.
The cost for these upgrades and other remedial measures is the
responsibility of the Advisor and its Affiliates. The Advisor and its Affiliates
do not expect that the Company will incur any costs in connection with the year
2000 remedial measures.
ASSESSING THE RISKS TO THE COMPANY OF NON-COMPLIANCE AND DEVELOPING CONTINGENCY
PLANS
RISK OF FAILURE OF INFORMATION AND NON-INFORMATION TECHNOLOGY SYSTEMS USED BY
THE COMPANY
The Advisor believes that the reasonably likely worst case scenario
with regard to the information and non-information technology systems used by
the Company is the failure of one or more of these systems as a result of year
2000 problems. Because the Company's major source of income is rental payments
under long-term triple-net leases, any failure of information or non-information
technology systems used by the Company is not expected to have a material impact
on the results of operations of the Company. Even if such systems failed, the
payment of rent under the Company's leases would not be affected. In addition,
the Y2K Team is expected to correct any Y2K problems within the control of the
Advisor and its Affiliates before the year 2000.
The Y2K Team has determined that a contingency plan to address this
risk is not necessary at this time. However, if the Y2K Team identifies
additional risks associated with the year 2000 compliance of the information or
non-information technology systems used by the Company, the Y2K Team will
develop a contingency plan if deemed necessary at that time.
RISK OF INABILITY OF TRANSFER AGENT TO ACCURATELY MAINTAIN COMPANY RECORDS
The Advisor believes that the reasonably likely worst case scenario
with regard to the Company's transfer agent is that the transfer agent will fail
to achieve year 2000 compliance of its systems and will not be able to
accurately maintain the records of the Company. This could result in the
inability of the Company to accurately identify its stockholders for purposes of
Distributions, delivery of disclosure materials and transfers of Common Stock.
The Y2K Team has received certification from the Company's transfer agent of its
year 2000 compliance. Despite the positive response from the transfer agent, the
Advisor, its Affiliates and the Company cannot be assured that the transfer
agent has addressed all possible year 2000 issues.
The Y2K Team has developed a contingency plan pursuant to which the
Advisor and its Affiliates would maintain the records of the Company manually,
in the event that the systems of the transfer agent are not year 2000 compliant.
The Advisor and its Affiliates would have to allocate resources to internally
perform the functions of the transfer agent. The Advisor and its Affiliates do
not anticipate that the additional cost of these resources would have a material
impact on the results of operations of the Company.
RISK OF LOSS OF SHORT-TERM LIQUIDITY FROM FAILURE OF FINANCIAL INSTITUTIONS TO
ACHIEVE YEAR 2000 COMPLIANCE
The Advisor believes that the reasonably likely worst case scenario
with regard to the Company's financial institutions is that some or all of its
funds on deposit with such financial institutions may be temporarily
unavailable. The Y2K Team has received responses from 100% of the Company's
financial institutions indicating that their systems are currently year 2000
compliant or are expected to be year 2000 compliant prior to the year 2000.
Despite the positive responses from the financial institutions, the Advisor
cannot be assured that the financial institutions have addressed all possible
year 2000 issues. The loss of short-term liquidity could affect the Company's
ability to pay its expenses on a current basis. The Advisor does not anticipate
that a loss of short-term liquidity would have a material impact on the results
of operations of the Company.
Based upon the responses received from the Company's financial
institutions and the inability of the Y2K team to identify a suitable
alternative for the deposit of funds that is not subject to potential year 2000
problems, the Y2K Team has determined not to develop a contingency plan to
address this risk.
RISKS OF LATE PAYMENT OR NON-PAYMENT OF RENT BY TENANTS
The Advisor believes that the reasonably likely worst case scenario
with regard to the Company's tenants is that some of the tenants may make rental
payments late as the result of the failure of the tenants to achieve year 2000
compliance of their systems used in the payment of rent, the failure of the
tenants' financial institutions to achieve year 2000 compliance, or the
temporary disruption of the tenants' businesses. The Y2K Team is in the process
of requesting responses from the Company's tenants indicating the extent to
which their systems are currently year 2000 compliant or are expected to be year
2000 compliant prior to the year 2000. The Advisor cannot be assured that the
tenants have addressed all possible year 2000 issues. The late payment of rent
by one or more tenants would affect the results of operations of the Company in
the short-term.
The Advisor is also aware of predictions that the year 2000 problem, if
uncorrected, may result in a global economic crisis. The Advisor is not able to
determine if such predictions are true. A widespread disruption of the economy
could affect the ability of the Company's tenants to pay rent and, accordingly,
could have a material impact on the results of operations of the Company.
Because payment of rent is under the control of the Company's tenants,
the Y2K Team is not able to develop a contingency plan to address these risks.
In the event of late payment or non-payment of rent, the Company will assess the
remedies available to it under its lease agreements.
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following information updates and replaces the "Directors and
Executive Officers" section of the Prospectus.
The Directors and executive officers of the Company are listed below:
Name Age Position with the Company
---- --- -------------------------
James M. Seneff, Jr. 53 Director, Chairman of the Board, and Chief
Executive Officer
Robert A. Bourne 52 Director, Vice Chairman of the Board, and
President
Matthew W. Kaplan 36 Director
Charles E. Adams 37 Independent Director
Lawrence A. Dustin 54 Independent Director
John A. Griswold 50 Independent Director
Craig M. McAllaster 48 Independent Director
Charles A. Muller 41 Chief Operating Officer and Executive Vice
President
C. Brian Strickland 37 Vice President of Finance and Administration
Jeanne A. Wall 41 Executive Vice President
Lynn E. Rose 50 Secretary and Treasurer
James M. Seneff, Jr. Director, Chairman of the Board and Chief
Executive Officer. Mr. Seneff currently holds the position of director, Chairman
of the Board and Chief Executive Officer of CNL Hospitality Corp., the Advisor.
Mr. Seneff also serves as a director, Chairman of the Board and Chief Executive
Officer of CNL Health Care Properties, Inc., a public, unlisted real estate
investment trust, and CNL Health Care Corp., its advisor. Mr. Seneff serves as a
director and Chairman of the Board of CNL American Properties Fund, Inc. and
previously served as Chief Executive Officer from May 1994 through August 1999.
Mr. Seneff also served as a director, Chairman of the Board and Chief Executive
Officer of CNL Fund Advisors, Inc., the advisor to CNL American Properties Fund,
Inc., from the date of its inception in 1994 through August 1999, at which time
such company merged with CNL American Properties Fund, Inc., a public, unlisted
real estate investment trust. Mr. Seneff is a principal stockholder of CNL
Group, Inc., a diversified real estate company, and has served as a director,
Chairman of the Board and Chief Executive Officer since its formation in 1980.
CNL Group, Inc. is the parent company of CNL Investment Company and its
subsidiary, CNL Securities Corp., which is acting as the Managing Dealer in this
offering, and CNL Hospitality Corp. Mr. Seneff also serves as a director,
Chairman of the Board and Chief Executive Officer of CNL Securities Corp. and
CNL Investment Company. Mr. Seneff also has held the position of a director,
Chairman of the Board, Chief Executive Officer and President of CNL Management
Company, a registered investment advisor, since its formation in 1976. Mr.
Seneff has served as Chairman of the Board and Chief Executive Officer of
Commercial Net Lease Realty, Inc. since 1992, and served as Chairman of the
Board and Chief Executive Officer of CNL Realty Advisors, Inc. from its
inception in 1991 through 1997 at which time such company merged with Commercial
Net Lease Realty, Inc., a public real estate investment trust that is listed on
the New York Stock Exchange. Mr. Seneff has also held the position of a
director, Chairman of the Board and Chief Executive Officer of CNL Institutional
Advisors, Inc., a registered investment advisor, since its inception in 1990.
Mr. Seneff also serves as Chairman of the Board of Alliance Bank and as a
director of First Union National Bank of Florida, N.A. 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 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, Vice Chairman of the Board and President.
Mr. Bourne currently holds the position of director, Vice Chairman of the Board
and President of CNL Hospitality Corp., the Advisor. Mr. Bourne also serves as a
director and President of CNL Health Care Properties, Inc., a public, unlisted
real estate investment trust, and CNL Health Care Corp., its advisor. Mr. Bourne
serves as a director and Vice Chairman of the Board of CNL American Properties
Fund, Inc. and previously served as President from May 1994, and Treasurer from
February 1999, through August 1999. Mr. Bourne served as President of CNL Fund
Advisors, Inc., the advisor to CNL American Properties Fund, Inc., from the date
of its inception in 1994 through October 1997. In addition, Mr. Bourne served as
Treasurer, director and Vice Chairman of the Board through August 1999, at which
time such company merged with CNL American Properties Fund, Inc., a public,
unlisted real estate investment trust. Mr. Bourne is President and Treasurer of
CNL Group, Inc., a director, President, Treasurer and a registered principal of
CNL Securities Corp. (the Managing Dealer of this offering), a director,
President and Treasurer of CNL Investment Company, and a director, Treasurer and
Chief Investment Officer 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. In
addition, Mr. Bourne served as President from July 1992 to February 1996, served
as Secretary and Treasurer from February 1996 through December 1997, and has
served as a director since July 1992 and Vice Chairman of the Board since
February 1996, of Commercial Net Lease Realty, Inc., a public real estate
investment trust that is listed on the New York Stock Exchange. Mr. Bourne also
served as President from 1991 to February 1996, as a director from 1991 through
December 1997, and as Vice Chairman of the Board and Treasurer from February
1996 through December 1997, of CNL Realty Advisors, Inc. at which time such
company merged with Commercial Net Lease Realty, Inc. Mr. Bourne also serves as
a director of Alliance Bank. 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.
Matthew W. Kaplan. Director. Mr. Kaplan serves as a director of the
Advisor and Hotel Investors. Mr. Kaplan is a managing director of Rothschild
Realty Inc. where he has served since 1992, and where he is responsible for
securities investment activities including acting as portfolio manager of Five
Arrows Realty Securities LLC, a $900 million private investment fund. From 1990
to 1992, Mr. Kaplan served in the corporate finance department of Rothschild
Inc., an affiliate of Rothschild Realty Inc. Mr. Kaplan served as a director of
Ambassador Apartments Inc. from August 1996 through May 1998 and is a member of
the Urban Land Institute. Mr. Kaplan received a B.A. with honors from Washington
University in 1984 and a M.B.A. from the Wharton School of Finance and Commerce
at the University of Pennsylvania in 1988.
Charles E. Adams. Independent Director. Mr. Adams is the president and
a founding principal with Celebration Associates, Inc., a real estate advisory
and development firm with offices in Celebration, Florida and Charlotte, North
Carolina. Celebration Associates specializes in large-scale master planned
communities, seniors' housing and specialty commercial developments. Mr. Adams
joined The Walt Disney Company in 1990 and from 1996 until May 1997 served as
vice president of community business development for The Celebration Company and
Walt Disney Imagineering. He was responsible for Celebration Education,
Celebration Network, Celebration Health and Celebration Foundation, as well as
new business development, strategic alliances, retail sales and leasing,
commercial sales and leasing, the development of Little Lake Bryan and
Celebration. Previously, Mr. Adams was responsible for the initial residential,
amenity, sales and marketing, consumer research and master planning efforts for
Celebration. Additionally, Mr. Adams participated in the planning for
residential development at EuroDisney in Paris, France. He was a founding member
of the Celebration School Board of Trustees and served as president and founding
member of the Celebration Foundation Board of Directors. Mr. Adams is a founding
member of the Health Magic Steering Committee and council member on the
Recreation Development Council for the Urban Land Institute. Before joining The
Walt Disney Company in 1990, Mr. Adams worked with Trammell Crow Residential
developing luxury apartment communities in the Orlando and Jacksonville, Florida
areas. Mr. Adams received a B.A. from Northeast Louisiana University in 1984 and
a M.B.A. from Harvard Graduate School of Business in 1989.
Lawrence A. Dustin. Independent Director. Mr. Dustin is a principal of
BBT, an advisory company specializing in hotel operations, marketing and
development. Mr. Dustin has 29 years of experience in the hospitality industry.
From 1994 to September 1998, Mr. Dustin served as senior vice president of
lodging of Universal Studios Recreation Group, where he was responsible for
matters related to hotel development, marketing, operations and management. Mr.
Dustin supervised the overall process of developing the five highly themed
hotels and related recreational amenities within Universal Studios Escape and
provided guidance for hotel projects in Universal City, California, Japan and
Singapore. From 1989 to 1994, Mr. Dustin served as a shareholder, chief
executive officer and director of AspenCrest Hospitality, Inc., a professional
services firm which helped hotel owners enhance both the operating performance
and asset value of their properties. From 1969 to 1989, Mr. Dustin held various
positions in the hotel industry, including 14 years in management with Westin
Hotels & Resorts. Mr. Dustin received a B.A. from Michigan State University in
1968.
John A. Griswold. Independent Director. Mr. Griswold serves as
president of Tishman Hotel Corporation, an operating unit of Tishman Realty &
Construction Co., Inc., founded in 1898. Tishman Hotel Corporation is a hotel
developer, owner and operator, and has provided such services for more than 85
hotels, totalling more than 30,000 rooms. Mr. Griswold joined Tishman Hotel
Corporation 1985. From 1981 to 1985, Mr. Griswold served as general manager of
the Buena Vista Palace Hotel in The Walt Disney World Village. From 1978 to
1981, he served as vice president and general manager of the Homestead Resort, a
luxury condominium resort in Glen Arbor, Michigan. Mr. Griswold served as an
operations manager for The Walt Disney Company from 1971 to 1978. He was
responsible for operational, financial and future planning for multi-unit dining
facilities in Walt Disney World Village and Lake Buena Vista Country Club. He is
a member of the board of directors of the Florida Hotel & Motel Association and
the First Orlando Foundation. Mr. Griswold received a B.S. from the School of
Hotel Administration at Cornell University in Ithaca, New York.
Craig M. McAllaster. Independent Director. Dr. McAllaster has served as
director of the executive MBA program at the Roy E. Crummer Graduate School of
Business at Rollins College since 1994. Besides his duties as director, he is on
the management faculty and serves as executive director of the international
consulting practicum programs at the Crummer School. Prior to Rollins College,
Dr. McAllaster was on the faculty at the School of Industrial and Labor
Relations and the Johnson Graduate School of Management, both at Cornell
University, and the University of Central Florida. Dr. McAllaster spent over ten
years in the consumer services and electronics industry in management,
organizational and executive development positions. He is a consultant to many
domestic and international companies in the areas of strategy and leadership.
Dr. McAllaster received a B.S. from the University of Arizona in 1973, a M.S.
from Alfred University in 1981 and a M.A. and Doctorate from Columbia University
in 1987.
Charles A. Muller. Chief Operating Officer and Executive Vice
President. Mr. Muller joined CNL Hospitality Corp. 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. He currently serves as the Chief Operating Officer and Executive
Vice President of CNL Hospitality Corp., the Advisor, and Executive Vice
President of CNL Hotel Development Company. Mr. Muller joined CNL following more
than 15 years of broadbased hotel industry experience with firms such as Tishman
Hotel Corporation, Wyndham Hotels & Resorts, Pannell Kerr Forster, and AIRCOA
Hospitality Services. Mr. Muller's background includes responsibility for market
review and valuation efforts, property acquisitions and development, capital
improvement planning, hotel operations and project management for renovations
and new construction. Mr. Muller served on the former Market, Finance and
Investment Analysis Committee of the American Hotel & Motel Association and is a
founding member of the Lodging Industry Investment Council. He holds a
bachelor's degree in Hotel Administration from Cornell University.
C. Brian Strickland. Vice President of Finance and Administration. Mr.
Strickland currently serves as Senior Vice President of Finance and
Administration of CNL Hospitality Corp., the Advisor, and CNL Hotel Development
Company. Mr. Strickland supervises the companies' financial reporting, financial
control and accounting functions as well as forecasting, budgeting and cash
management activities. He is also responsible for SEC compliance, equity and
debt financing activities and insurance for the companies. Mr. Strickland joined
CNL Hospitality Corp. in April 1998 with an extensive accounting background.
Prior to joining CNL, he served as vice president of taxation with Patriot
American Hospitality, Inc., where he was responsible for implementation of tax
planning strategies on corporate mergers and acquisitions and where he performed
or assisted in strategic processes in the REIT industry. From 1989 to 1997, Mr.
Strickland served as director of tax and asset management for Wyndham Hotels &
Resorts where he was integrally involved in structuring acquisitive
transactions, including the roll-up and initial public offering of Wyndham Hotel
Corporation and its subsequent merger with Patriot American Hospitality, Inc. In
his capacity of director of asset management, he was instrumental in the
development and opening of a hotel and casino in San Juan, Puerto Rico. Prior to
1989, Mr. Strickland was senior tax accountant for Trammell Crow Company where
he provided tax consulting services to regional development offices. From 1986
to 1988, Mr. Strickland was tax accountant for Ernst & Whinney where he was a
member of the real estate practice group. Mr. Strickland is a certified public
accountant and holds a bachelor's degree in accounting.
Jeanne A. Wall. Executive Vice President. Ms. Wall serves as Executive
Vice President and director of CNL Hospitality Corp., the Advisor. Ms. Wall also
serves as Executive Vice President of CNL Health Care Properties, Inc., a
public, unlisted real estate investment trust, and CNL Health Care Corp., its
advisor. Ms. Wall previously served as Executive Vice President of CNL American
Properties Fund, Inc. and CNL Fund Advisors, Inc., its advisor, from November
1994 through August 1999, at which time such company merged with CNL American
Properties Fund, Inc., a public, unlisted real estate investment trust. Ms. Wall
currently serves as Executive Vice President of CNL Group, Inc., a diversified
real estate company. 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. and in 1985, became Vice
President. In 1987, she became a Senior Vice President and in July 1997, 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 investment programs. In addition, Ms. Wall oversees
product development and communications and investor services for programs
offered through participating brokers. 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., a public real estate investment trust that is listed on the New
York Stock Exchange, from 1992 through 1997. Ms. Wall also serves as a director
of Alliance Bank. 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 is a
member of the Corporate Advisory Council for the International Association for
Financial Planning and previously served on the Direct Participation Program
committee for the National Association of Securities Dealers, Inc.
Lynn E. Rose. Secretary and Treasurer. Ms. Rose serves as Secretary,
Treasurer and a director of CNL Hospitality Corp., the Advisor. Ms. Rose also
serves as Secretary and Treasurer of CNL Health Care Properties, Inc., a public,
unlisted real estate investment trust, and Secretary, Treasurer and a director
of CNL Health Care Corp., its advisor. Ms. Rose previously served as Treasurer
of CNL American Properties Fund, Inc. from December 1994 through February 1999,
and Secretary from December 1994 through August 1999. Ms. Rose also previously
served as Secretary and a director of CNL Fund Advisors, Inc., the advisor to
CNL American Properties Fund, Inc., from the date of its inception in 1994
through August 1999, at which time such company merged with CNL American
Properties Fund, Inc., a public, unlisted real estate investment trust. Ms.
Rose, a certified public accountant, has served as Secretary since 1987, as
Chief Financial Officer since December 1993, and previously served as Controller
from 1987 until December 1993 of CNL Group, Inc. In addition, Ms. Rose has
served as Chief Financial Officer and Secretary of CNL Securities Corp. since
July 1994. She also previously served as Chief Operating Officer and Vice
President of CNL Shared Services, Inc. (formerly CNL Corporate Services, Inc.)
from November 1994 to January 1999 and has served as Secretary since November
1994. Ms. Rose also has served as Chief Financial Officer and Secretary of CNL
Institutional Advisors, Inc. since its inception in 1990. In addition, she
served 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., a public real estate investment
trust listed on the New York Stock Exchange, from 1992 to February 1996. Ms.
Rose also currently serves as Secretary for approximately 50 additional
corporations. Ms. Rose oversees the 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.
THE ADVISOR AND THE ADVISORY AGREEMENT
THE ADVISOR
CNL Hospitality Corp. (formerly CNL Hospitality Advisors, Inc.) is a
Florida corporation organized in January 1997 to provide management, advisory
and administrative services. The Company originally entered into the Advisory
Agreement with the Advisor effective July 9, 1997. CNL Hospitality Corp., as
Advisor, has a fiduciary responsibility to the Company and the stockholders.
The directors and executive officers of the Advisor are as follows:
James M. Seneff, Jr...........Chairman of the Board, Chief Executive
Officer, and Director
Robert A. Bourne..............Vice Chairman of the Board, President,
and Director
Matthew W. Kaplan.............Director
Charles A. Muller.............Chief Operating Officer and Executive
Vice President
C. Brian Strickland...........Senior Vice President of Finance and
Administration
Jeanne A. Wall................Executive Vice President and Director
Lynn E. Rose..................Secretary, Treasurer and Director
Management anticipates that any transaction by which the Company would
become self-administered would be submitted to the stockholders for approval.
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 may be paid as commissions to other broker-dealers. For the
years ended December 31, 1998 and 1997, the Company incurred $2,377,026 and
$849,405, respectively, of such fees in connection with the Initial Offering, of
which $2,200,516 and $792,832, respectively, was paid by the Managing Dealer as
commissions to other broker-dealers. In addition, during the period January 1,
1999 through June 17, 1999, the Company incurred $6,904,047 of such fees in
connection with the Initial Offering, and during the period June 18, 1999
through November 4, 1999, the Company incurred $7,289,352 of such fees in
connection with this offering, the majority of which has been or will be paid 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 years ended December 31, 1998 and 1997, the
Company incurred $158,468 and $56,627, respectively, of such fees in connection
with the Initial Offering, the majority of which were reallowed to other
broker-dealers and from which all bona fide due diligence expenses were paid. In
addition, during the period January 1, 1999 through June 17, 1999, the Company
incurred $460,270 of such fees in connection with the Initial Offering, and
during the period June 18, 1999 through November 4, 1999, the Company incurred
$485,957 of such fees in connection with this offering, the majority of which
were reallowed to other broker-dealers and from which all bona fide due
diligence expenses were paid.
The Advisor is entitled to receive Acquisition Fees for services in
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 years ended December 31, 1998 and
1997, the Company incurred $1,426,216 and $509,643, respectively, of such fees
in connection with the Initial Offering. In addition, during the period January
1, 1999 through June 17, 1999, the Company incurred $4,712,413 of such fees in
connection with the Initial Offering, and during the period June 18, 1999
through November 4, 1999, the Company incurred $4,373,611 of such fees in
connection with this offering.
The Company and the Advisor have entered into an Advisory Agreement
pursuant to which the Advisor will receive a monthly Asset Management Fee of
one-twelfth of 0.60% of the Company's Real Estate Asset Value and the
outstanding principal balance of any Mortgage Loans as of the end of the
preceding month. The Asset Management Fee, which will not exceed fees which are
competitive for similar services in the same geographic area, may or may not be
taken, in whole or in part as to any year, in the sole discretion of the
Advisor. All or any portion of the Asset Management Fee not taken as to any
fiscal year shall be deferred without interest and may be taken in such other
fiscal year as the Advisor shall determine. During the nine months ended
September 30, 1999 and the year ended December 31, 1998, the Company incurred
$87,146 and $68,114, respectively, of such fees.
The Company incurs Operating Expenses which, in general, are those
expenses relating to administration of the Company on an ongoing basis. Pursuant
to the Advisory Agreement described above, the Advisor is required to reimburse
the Company the amount by which the total Operating Expenses paid or incurred by
the Company exceed in any four consecutive fiscal quarters (the "Expense Year"),
the greater of 2% of Average Invested Assets or 25% of Net Income (the "Expense
Cap"). During the year ended December 31, 1998, the Company's Operating Expenses
exceeded the Expense Cap by $92,733; therefore, the Advisor reimbursed the
Company such amount in accordance with the Advisory Agreement.
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 nine
months ended September 30, 1999, and the years ended December 31, 1998 and 1997,
the Company incurred a total of $2,676,528, $644,189 and $192,224, respectively,
for these services, $2,467,852, $494,729 and $185,335, respectively, of such
costs representing stock issuance costs, $0, $9,084 and $0, respectively,
representing acquisition related costs and $208,676, $140,376 and $6,889,
respectively, representing general operating and administrative expenses,
including costs related to preparing and distributing reports required by the
Securities and Exchange Commission.
All amounts paid by the Company to Affiliates are believed by the
Company to be fair and comparable to amounts that would be paid for similar
services provided by unaffiliated third parties.
PRIOR PERFORMANCE INFORMATION
The information presented in this section represents the historical
experience of certain real estate programs organized by certain officers and
directors of the Advisor. Prior public programs have invested only in restaurant
properties and have not invested in hotel properties. Investors in the Company
should not assume that they will experience returns, if any, comparable to those
experienced by investors in such prior public real estate programs. Investors
who purchase Shares in the Company will not thereby acquire any ownership
interest in any partnerships or corporations to which the following information
relates.
Two Directors of the Company, Robert A. Bourne and James M. Seneff,
Jr., individually or with others have served as general partners of 88 and 89
real estate limited partnerships, respectively, including 18 publicly offered
CNL Income Fund partnerships, and as directors and/or officers of two unlisted
public REITs. None of these limited partnerships or the unlisted REITs have 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 programs,
Messrs. Bourne and Seneff believe that each of such programs 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. In addition,
Messrs. Bourne and Seneff currently serve as directors of CNL American
Properties Fund, Inc., an unlisted public REIT organized to invest in fast-food,
family-style and casual-dining restaurant properties, mortgage loans and secured
equipment leases; and as directors and officers of CNL Health Care Properties,
Inc., an unlisted public REIT organized to invest in health care and seniors'
housing facilities. Both of the unlisted public REITs have investment objectives
similar to those of the Company. As of September 30, 1999, the 18 partnerships
and the two unlisted REITs had raised a total of approximately $1.5 billion from
a total of approximately 81,000 investors, and owned interests in approximately
1,400 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 two unlisted public REITs is set forth below.
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Number of Date 90% of Net
Limited Proceeds Fully
Maximum Partnership Invested or
Name of Offering Units or Shares Committed to
Entity Amount (1) Date Closed Sold Investment (2)
- ------ ---------- ----------- ---- --------------
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)
<PAGE>
Number of Date 90% of Net
Limited Proceeds Fully
Maximum Partnership Invested or
Name of Offering Units or Shares Committed to
Entity Amount (1) Date Closed Sold Investment (2)
- ------ ---------- ----------- ---- --------------
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 April 22, 1992 4,000,000 June 1992
Fund X, Ltd. (4,000,000 units)
CNL Income $40,000,000 October 8, 1992 4,000,000 September 1992
Fund XI, Ltd. (4,000,000 units)
CNL Income $45,000,000 April 15, 1993 4,500,000 July 1993
Fund XII, Ltd. (4,500,000 units)
CNL Income $40,000,000 September 13, 1993 4,000,000 August 1993
Fund XIII, Ltd. (4,000,000 units)
CNL Income $45,000,000 March 23, 1994 4,500,000 May 1994
Fund XIV, Ltd. (4,500,000 units)
CNL Income $40,000,000 September 22, 1994 4,000,000 December 1994
Fund XV, Ltd. (4,000,000 units)
CNL Income $45,000,000 July 18, 1995 4,500,000 August 1995
Fund XVI, Ltd. (4,500,000 units)
CNL Income $30,000,000 October 10, 1996 3,000,000 December 1996
Fund XVII, Ltd. (3,000,000 units)
CNL Income Fund $35,000,000 February 6, 1998 3,500,000 December 1997
XVIII, Ltd. (3,500,000 units)
CNL American $747,464,413 January 20, 1999 (3) 74,746,441 (3) February 1999 (3)
Properties Fund, Inc. (74,746,441 shares)
CNL Health Care $155,000,000 (4) (4) (4)
Properties, Inc. (15,500,000 shares)
</TABLE>
(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. The number of shares of common stock for CNL American
Properties Fund, Inc. ("APF") represents the number of shares prior to a
one-for-two reverse stock split, which was effective on June 3, 1999.
(2) For a description of the property acquisitions by these programs, see the
table set forth on the following page.
(3) In April 1995, APF commenced an offering of a maximum of 16,500,000 shares
of common stock ($165,000,000). 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, APF
commenced a subsequent offering (the "1997 Offering") of up to 27,500,000
shares ($275,000,000) of common stock. On March 2, 1998, the 1997 Offering
closed upon receipt of subscriptions totalling $251,872,648 (25,187,265
shares), including $1,872,648 (187,265 shares) through the reinvestment
plan. Following completion of the 1997 Offering on March 2, 1998, APF
commenced a subsequent offering (the "1998 Offering") of up to 34,500,000
shares ($345,000,000) of common stock. As of December 31, 1998, APF had
received subscriptions totalling $345,000,000 (34,500,000 shares),
including $3,107,848 (310,785 shares) through the reinvestment plan, from
the 1998 Offering. The 1998 Offering closed in January 1999, upon receipt
of the proceeds from the last subscriptions. As of March 31, 1999, net
proceeds to APF from its three offerings totalled $670,151,200 and all of
such amount had been invested or committed for investment in properties
and mortgage loans.
(4) Effective September 18, 1998, CNL Health Care Properties, Inc. commenced
an offering of up to 15,500,000 shares ($155,000,000) of common stock. As
of September 30, 1999, CNL Health Care Properties, Inc. had not yet
acquired any properties.
As of September 30, 1999, Mr. Seneff and Mr. Bourne, directly or
through affiliated entities, also had served as joint general partners of 69
nonpublic real estate limited partnerships. The offerings of all of these 69
nonpublic limited partnerships had terminated as of September 30, 1999. These 69
partnerships raised a total of $185,927,353 from approximately 4,519 investors,
and purchased, directly or through participation in a joint venture or limited
partnership, interests in a total of 216 projects as of September 30, 1999.
These 216 projects consist of 19 apartment projects (comprising 10% of the total
amount raised by all 69 partnerships), 13 office buildings (comprising 5% of the
total amount raised by all 69 partnerships), 169 fast-food, family-style, or
casual-dining restaurant property and business investments (comprising 69% of
the total amount raised by all 69 partnerships), one condominium development
(comprising 0.5% of the total amount raised by all 69 partnerships), four
hotels/motels (comprising 5% of the total amount raised by all 69 partnerships),
eight commercial/retail properties (comprising 10% of the total amount raised by
all 69 partnerships), and two tracts of undeveloped land (comprising 0.5% of the
total amount raised by all 69 partnerships).
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 90 real estate limited partnerships whose offerings had closed
as of September 30, 1999 (including 18 CNL Income Fund limited partnerships) in
which Mr. Seneff and/or Mr. Bourne serve or have served as general partners in
the past, 39 invested in restaurant properties leased on a "triple-net" basis,
including eight which also invested in franchised restaurant businesses
(accounting for approximately 93% of the total amount raised by all 90 real
estate limited partnerships).
The following table sets forth summary information, as of September 30,
1999, regarding property acquisitions by the 18 limited partnerships and the two
unlisted REITs.
<TABLE>
<CAPTION>
<S> <C>
Name of Type of Method of Type of
Entity Property Location Financing Program
- ------ -------- -------- --------- -------
CNL Income 22 fast-food or AL, AZ, CA, FL, GA, All cash Public
Fund, Ltd. family-style LA, MD, OK, PA, TX,
restaurants VA, WA
CNL Income 49 fast-food or AL, AZ, CO, FL, GA, All cash Public
Fund II, Ltd. family-style IL, IN, KS, LA, MI,
restaurants MN, MO, NC, NM, OH,
TN, TX, WA, WY
CNL Income 38 fast-food or AL, AZ, CA, CO, FL, All cash Public
Fund III, Ltd. family-style GA, IA, IL, IN, KS,
restaurants KY, MD, MI, MN, MO,
NC, NE, OK, TX
CNL Income 47 fast-food or AL, DC, FL, GA, IL, All cash Public
Fund IV, Ltd. family-style IN, KS, MA, MD, MI,
restaurants MS, NC, OH, PA, TN,
TX, VA
CNL Income 35 fast-food or AZ, FL, GA, IL, IN, All cash Public
Fund V, Ltd. family-style MI, NH, NY, OH, SC,
restaurants TN, TX, UT, WA
CNL Income 56 fast-food or AR, AZ, FL, GA, IL, All cash Public
Fund VI, Ltd. family-style IN, KS, MA, MI, MN,
restaurants NC, NE, NM, NY, OH,
OK, PA, TN, TX, VA,
WA, WY
CNL Income 49 fast-food or AZ, CO, FL, GA, IN, All cash Public
Fund VII, Ltd. family-style LA, MI, MN, NC, OH,
restaurants SC, TN, TX, UT, WA
CNL Income 42 fast-food or AZ, FL, IN, LA, MI, All cash Public
Fund VIII, Ltd. family-style MN, NC, NY, OH, TN,
restaurants TX, VA
Name of Type of Method of Type of
Entity Property Location Financing Program
- ------ -------- -------- --------- -------
CNL Income 44 fast-food or AL, CO, FL, GA, IL, All cash Public
Fund IX, Ltd. family-style IN, LA, MI, MN, MS,
restaurants NC, NH, NY, OH, SC,
TN, TX
CNL Income 54 fast-food or AL, CA, CO, FL, ID, All cash Public
Fund X, Ltd. family-style IL, LA, MI, MO, MT,
restaurants NC, NE, NH, NM, NY,
OH, PA, SC, TN, TX,
WA
CNL Income 43 fast-food or AL, AZ, CA, CO, CT, All cash Public
Fund XI, Ltd. family-style FL, KS, LA, MA, MI,
restaurants MS, NC, NH, NM, OH,
OK, PA, SC, TX, VA,
WA
CNL Income 50 fast-food or AL, AZ, CA, FL, GA, All cash Public
Fund XII, Ltd. family-style LA, MO, MS, NC, NM,
restaurants OH, SC, TN, TX, WA
CNL Income 50 fast-food or AL, AR, AZ, CA, CO, All cash Public
Fund XIII, Ltd. family-style FL, GA, IN, KS, LA,
restaurants MD, NC, OH, PA, SC,
TN, TX, VA
CNL Income 65 fast-food or AL, AZ, CO, FL, GA, All cash Public
Fund XIV, Ltd. family-style KS, LA, MN, MO, MS,
restaurants NC, NJ, NV, OH, SC,
TN, TX, VA
CNL Income 55 fast-food or AL, CA, FL, GA, KS, All cash Public
Fund XV, Ltd. family-style KY, MN, MO, MS, NC,
restaurants NJ, NM, OH, OK, PA,
SC, TN, TX, VA
CNL Income 48 fast-food or AZ, CA, CO, DC, FL, All cash Public
Fund XVI, Ltd. family-style GA, ID, IN, KS, MN,
restaurants MO, NC, NM, NV, OH,
TN, TX, UT, WI
CNL Income 31 fast-food, CA, FL, GA, IL, IN, All cash Public
Fund XVII, Ltd. family-style or MI, NC, NV, OH, SC,
casual-dining TN, TX, WA
restaurants
Name of Type of Method of Type of
Entity Property Location Financing Program
- ------ -------- -------- --------- -------
CNL Income 25 fast-food, AZ, CA, FL, GA, IL, All cash Public
Fund XVIII, Ltd. family-style or KY, MD, MN, NC, NV,
casual-dining NY, OH, TN, TX, VA
restaurants
CNL American 616 fast-food, AL, AZ, CA, CO, CT, (1) Public REIT
Properties Fund, family-style or DE, FL, GA, IA, ID,
Inc. casual-dining IL, IN, KS, KY, LA,
restaurants MD, MI, MN, MO, MS,
NC, NE, NH, NJ, NM,
NV, NY, OH, OK, OR,
PA, RI, SC, TN, TX,
UT, VA, WA, WI, WV
CNL Health Care (2) (2) (2) Public REIT
Properties, Inc.
</TABLE>
(1) As of March 31, 1999, all of APF's net offering proceeds had been
invested or committed for investment in properties and mortgage loans.
Since April 1, 1999, APF has used proceeds from its line of credit to
acquire and develop properties and to fund mortgage loans and secured
equipment leases.
(2) As of September 30, 1999, CNL Health Care Properties, Inc. had not
acquired any properties.
A more detailed description of the acquisitions by real estate limited
partnerships and the two unlisted REITs sponsored by Messrs. Bourne and Seneff
is set forth in prior performance Table VI, included in Part II of the
registration statement filed with the Securities and Exchange Commission for
this offering. A copy of Table VI is available to stockholders from the Company
upon request, free of charge. In addition, upon request to the Company, the
Company will provide, without charge, a copy of the most recent Annual Report on
Form 10-K filed with the Securities and Exchange Commission for CNL Income Fund,
Ltd., CNL Income Fund II, Ltd., CNL Income Fund III, Ltd., CNL Income Fund IV,
Ltd., CNL Income Fund V, Ltd., CNL Income Fund VI, Ltd., CNL Income Fund VII,
Ltd., CNL Income Fund VIII, Ltd., CNL Income Fund IX, Ltd., CNL Income Fund X,
Ltd., CNL Income Fund XI, Ltd., CNL Income Fund XII, Ltd., CNL Income Fund XIII,
Ltd., CNL Income Fund XIV, Ltd., CNL Income Fund XV, Ltd., CNL Income Fund XVI,
Ltd., CNL Income Fund XVII, Ltd., CNL Income Fund XVIII, Ltd., CNL American
Properties Fund, Inc. and CNL Health Care Properties, 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 two unlisted REITs, including those set forth in
the foregoing table, certain financial and other information concerning those
limited partnerships and the two unlisted REITs, with investment objectives
similar to one or more of the Company's investment objectives, is provided in
the Prior Performance Tables included as Appendix C. Information about the
previous public partnerships, the offerings of which became fully subscribed
between July 1994 and June 1999, is included therein. Potential stockholders are
encouraged to examine the Prior Performance Tables attached as Appendix 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
DISTRIBUTIONS
The following table reflects total Distributions and Distributions per
Share declared and paid by the Company for each month since the Company
commenced operations.
Total Distributions
Month Distributions Per Share
- ----- ------------- ---------
November 1997 $ 10,757 $0.025000
December 1997 19,019 0.025000
January 1998 28,814 0.025000
February 1998 32,915 0.025000
March 1998 39,627 0.025000
April 1998 46,677 0.025000
May 1998 52,688 0.025000
June 1998 56,365 0.025000
July 1998 99,589 0.041700
August 1998 105,708 0.041700
September 1998 156,747 0.058300
October 1998 167,848 0.058300
November 1998 183,302 0.058300
December 1998 197,865 0.058300
January 1999 251,967 0.058300
February 1999 314,928 0.058300
March 1999 431,757 0.058300
April 1999 554,807 0.060400
May 1999 687,916 0.060400
June 1999 811,246 0.060400
July 1999 964,253 0.060400
August 1999 1,086,760 0.060400
September 1999 1,227,438 0.060400
In addition, in October and November 1999, the Company declared
Distributions totalling $1,352,274 and $1,468,292, respectively (each
representing $0.0604 per Share), payable in December 1999. The Company intends
to continue to make regular Distributions to stockholders. The payment of
Distributions commenced in December 1997. Distributions will be made to those
stockholders who are stockholders as of the record date selected by the
Directors. Distributions will be declared monthly during the offering period,
declared monthly during any subsequent offering, paid on a quarterly basis
during an offering period, and declared and paid quarterly thereafter. The
Company is required to distribute annually at least 95% of its real estate
investment trust taxable income to maintain its objective of qualifying as a
REIT. Generally, income distributed will not be taxable to the Company under
federal income tax laws if the Company complies with the provisions relating to
qualification as a REIT. If the cash available to the Company is insufficient to
pay such Distributions, the Company may obtain the necessary funds by borrowing,
issuing new securities, or selling Assets. These methods of obtaining funds
could affect future Distributions by reducing revenues or increasing operating
costs. To the extent that Distributions to stockholders exceed earnings and
profits, such amounts constitute a return of capital for federal income tax
purposes, although such Distributions might 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 nine months ended September 30, 1999, the year ended December
31, 1998, and the period October 15, 1997 (the date operations of the Company
commenced) through December 31, 1997, approximately 73%, 76% and 100%,
respectively, of the Distributions declared and paid were considered to be
ordinary income and for the nine months ended September 30, 1999 and the year
ended December 31, 1998, approximately 27% and 24%, respectively, were
considered a return of capital for federal income tax purposes. Due to the fact
that the Company had not yet acquired all of its Properties and was still in the
offering stage as of December 31, 1998 and September 30, 1999, the
characterization of Distributions for federal income tax purposes is not
necessarily considered by management to be representative of the
characterization of Distributions in future periods.
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.
DEFINITIONS
"Advisor" means CNL Hospitality Corp. (formerly CNL Hospitality
Advisors, Inc.), a Florida corporation, any successor advisor to the Company, or
any person or entity to which CNL Hospitality Corp. or any successor advisors
subcontracts substantially all of its functions.
"Bank" means SouthTrust Bank, N.A., escrow agent for the offering.
"Initial Offering" means the initial offering of the Company which
commenced on July 9, 1997 and terminated on June 17, 1999, at which time this
offering commenced.
<PAGE>
ADDENDUM TO
APPENDIX B
FINANCIAL INFORMATION
------------------------------------------------
| |
| THE UPDATED PRO FORMA FINANCIAL STATEMENTS |
| AND THE UNAUDITED FINANCIAL STATEMENTS OF |
| CNL HOSPITALITY PROPERTIES, INC. CONTAINED |
| IN THIS ADDENDUM SHOULD BE READ IN |
| CONJUNCTION WITH APPENDIX B TO THE ATTACHED |
| PROSPECTUS, DATED JUNE 4, 1999. |
| |
------------------------------------------------
<PAGE>
INDEX TO FINANCIAL STATEMENTS
CNL HOSPITALITY PROPERTIES, INC.
AND SUBSIDIARIES
Page
----
Pro Forma Consolidated Financial Information (unaudited):
Pro Forma Consolidated Balance Sheet as of September 30, 1999 B-2
Pro Forma Consolidated Statement of Earnings for the nine months
ended September 30, 1999 B-3
Pro Forma Consolidated Statement of Earnings for the year ended
December 31, 1998 B-4
Notes to Pro Forma Consolidated Financial Statements for the
nine months ended September 30, 1999 and the year ended December
31, 1998 B-5
Updated Unaudited Condensed Consolidated Financial Statements:
Condensed Consolidated Balance Sheets as of September 30, 1999 and
December 31, 1998 B-9
Condensed Consolidated Statements of Earnings for the quarters and
nine months ended September 30, 1999 and 1998 B-10
Condensed Consolidated Statements of Stockholders' Equity for the
nine months ended September 30, 1999 and the year ended December
31, 1998 B-11
Condensed Consolidated Statements of Cash Flows for the nine months
ended September 30, 1999 and 1998 B-12
Notes to Condensed Consolidated Financial Statements for the quarters
and nine months ended September 30, 1999 and 1998 B-14
<PAGE>
PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
The following Unaudited Pro Forma Consolidated Balance Sheet of CNL
Hospitality Properties, Inc. and subsidiaries (the "Company") gives effect to
(i) the receipt of $223,321,044 in gross offering proceeds from the sale of
22,332,104 shares of common stock for the period from inception through
September 30, 1999, and the application of such funds to purchase two
properties, to invest in an unconsolidated subsidiary which owned seven
properties as of September 30, 1999, to redeem 3,000 shares of common stock
pursuant to the Company's redemption plan, and to pay offering expenses,
acquisition fees and miscellaneous acquisition expenses, (ii) the receipt of
$23,942,963 in gross offering proceeds from the sale of 2,394,296 additional
shares for the period October 1, 1999 through November 4, 1999, (iii) the
application of such funds to redeem 2,885 shares of common stock pursuant to the
Company's redemption plan, and to pay offering expenses, acquisition fees and
miscellaneous acquisition expenses, all as reflected in the pro forma
adjustments described in the related notes. The Unaudited Pro Forma Consolidated
Balance Sheet as of September 30, 1999, includes the transactions described in
(i) above, from its historical balance sheet, adjusted to give effect to the
transactions in (ii) and (iii) above as if they had occurred on September 30,
1999.
The Unaudited Pro Forma Consolidated Statements of Earnings for the
nine months ended September 30, 1999 and the year ended December 31, 1998,
includes the historical operating results of the properties described in (i)
above from the date of their acquisitions plus operating results from (A) the
later of (1) the date the property became operational or (2) January 1, 1998, to
(B) the earlier of (1) the date the property was acquired by the Company or its
unconsolidated subsidiary or (2) to the end of the pro forma period presented.
This pro forma consolidated financial information is presented for
informational purposes only and does not purport to be indicative of the
Company's financial results or condition if the various events and transactions
reflected therein had occurred on the dates, or been in effect during the
periods, indicated. This pro forma financial information should not be viewed as
indicative of the Company's financial results or conditions in the future.
<PAGE>
CNL HOSPITALITY PROPERTIES, INC.
AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
<S> <C>
Pro Forma
ASSETS Historical Adjustments Pro Forma
------------- -------------- --------------
Land, buildings and equipment on operating leases $27,676,298 $ -- $27,676,298
Investment in unconsolidated subsidiary 38,882,550 -- 38,882,550
Cash and cash equivalents 118,019,624 20,429,662 (a) 138,449,286
Restricted cash 250,177 -- 250,177
Certificate of deposit 5,015,822 -- 5,015,822
Due from related party 24,743 -- 24,743
Receivables 67,980 -- 67,980
Dividends receivable 1,214,772 -- 1,214,772
Loan costs 60,141 -- 60,141
Accrued rental income 80,523 -- 80,523
Other assets 7,092,227 1,077,434 (a) 8,169,661
-------------- ------------- --------------
$198,384,857 $21,507,096 $219,891,953
=============== ============= ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued expenses $ 11,303 $ (1,200 ) (a) $ 10,103
Due to related parties 495,704 (492,688 ) (a) 3,016
Security deposits 1,417,500 -- 1,417,500
--------------- ------------- --------------
Total liabilities 1,924,507 (493,888 ) 1,430,619
--------------- ------------- --------------
Commitments and contingencies
Stockholders' equity:
Preferred stock, without par value.
Authorized and unissued 3,000,000 shares -- -- --
Excess shares, $.01 par value per share.
Authorized and unissued 63,000,000 shares -- -- --
Common stock, $.01 par value per share.
Authorized 60,000,000 shares; issued
22,352,104 and outstanding 22,349,104
shares; issued 24,746,400 and outstanding
24,740,515 shares, as adjusted 223,491 23,914 (a) 247,405
Capital in excess of par value 198,470,016 21,977,070 (a) 220,447,086
Accumulated distributions in excess of net earnings (2,233,157 ) -- (2,233,157 )
--------------- ------------- --------------
Total stockholders' equity 196,460,350 22,000,984 218,461,334
--------------- ------------- --------------
$198,384,857 $21,507,096 $219,891,953
=============== ============= ==============
See accompanying notes to unaudited pro forma
consolidated financial statements.
<PAGE>
CNL HOSPITALITY PROPERTIES, INC.
AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF EARNINGS
NINE MONTHS ENDED SEPTEMBER 30, 1999
Pro Forma
Historical Adjustments Pro Forma
------------- -------------- --------------
Revenues:
Rental income from operating
leases $2,255,968 $ -- $2,255,968
FF&E reserve income 194,301 -- 194,301
Dividend income 1,826,818 461,106 (3) 2,287,924
Interest and other income 2,125,043 (201,013 ) (4) 1,924,030
-------------- ---------------- ----------------
6,402,130 260,093 6,662,223
-------------- ---------------- ----------------
Expenses:
Interest 239,922 -- 239,922
General operating and
administrative 415,245 -- 415,245
Professional services 45,478 -- 45,478
Asset management fees to
related party 87,146 24,392 (7) 111,538
Other 5,968 -- 5,968
Depreciation and amortization 736,593 -- 736,593
-------------- ---------------- ----------------
1,530,352 24,392 1,554,744
-------------- ---------------- ----------------
Earnings Before Equity in Loss of
Unconsolidated Subsidiary After
Deduction of Preferred Stock
Dividends 4,871,778 235,701 5,107,479
Equity in Loss of Unconsolidated
Subsidiary After Deduction of
Preferred Stock Dividends (557,733 ) (144,635 ) (9) (702,368 )
-------------- ---------------- ----------------
Net Earnings $4,314,045 $ 91,066 $4,405,111
============== ================ ================
Earnings Per Share of Common Stock:
Basic $ 0.34 $ 0.35
============== ================
Diluted $ 0.33 $ 0.35
============== ================
Weighted Average Number of Shares
Outstanding:
Basic 12,652,059 12,679,594
============== ================
Diluted 17,509,791 12,679,594
============== ================
See accompanying notes to unaudited pro forma
consolidated financial statements.
<PAGE>
CNL HOSPITALITY PROPERTIES, INC.
AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF EARNINGS
YEAR ENDED DECEMBER 31, 1998
Pro Forma
Historical Adjustments Pro Forma
------------ -------------- --------------
Revenues:
Rental income from
operating leases $1,218,500 $1,706,732 (1) $2,925,232
FF&E reserve income 98,099 140,000 (2) 238,099
Dividend income -- 423,938 (3) 423,938
Interest income 638,862 (609,975 )(4) 28,887
------------- ---------------- ----------------
1,955,461 1,660,695 3,616,156
------------- ---------------- ----------------
Expenses:
Interest and loan cost amortization 350,322 448,718 (5) 799,040
General operating and
administrative 167,951 92,733 (6) 260,684
Professional services 21,581 -- 21,581
Asset management fees to
related party 68,114 106,571 (7) 174,685
Depreciation and amortization 388,554 538,125 (8) 926,679
------------- ---------------- ----------------
996,522 1,186,147 2,182,669
------------- ---------------- ----------------
Earnings Before Equity in Loss
of Unconsolidated Subsidiary
After Deductions of Preferred
Stock Dividends 958,939 474,548 1,433,487
Equity in Loss of Unconsolidated
Subsidiary After Deduction of
Preferred Stock Dividends -- (56,464 )(9) (56,464 )
------------- ---------------- ----------------
Net Earnings $ 958,939 $ 418,084 $1,377,023
============= ================ ================
Earnings Per Share of Common Stock
(Basic and Diluted) (10) $ 0.40 $ 0.51
============= ================
Weighted Average Number of Shares of
Common Stock Outstanding (10) 2,402,344 2,697,355
============= ================
</TABLE>
See accompanying notes to unaudited pro forma
consolidated financial statements.
<PAGE>
CNL HOSPITALITY PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND
THE YEAR ENDED DECEMBER 31, 1998
Unaudited Pro Forma Consolidated Balance Sheet:
(a) Represents gross proceeds of $23,942,963 from the sale of 2,394,296
shares during the period October 1, 1999 through November 4, 1999, used
(i) to pay acquisition fees and costs of $1,204,333 ($126,899 of which
was accrued at September 30, 1999) which has been capitalized as other
assets, and to pay selling commissions and offering expenses of
$2,282,426 which have been netted against stockholders' equity (a total
of $366,989 of which was accrued as of September 30, 1999) and (ii) to
redeem 2,885 shares of common stock for $26,542, leaving $20,429,662
for future investment.
Unaudited Pro Forma Consolidated Statements of Earnings:
(1) Represents adjustment to rental income from operating leases for the
properties acquired by the Company as of November 4, 1999, (the "Pro
Forma Properties"), for the period commencing (A) the later of (i) the
date the Pro Forma Property became operational by the previous owner or
(ii) January 1, 1998, to (B) the earlier of (i) the date the Pro Forma
Property was acquired by the Company or (ii) the end of the pro forma
period presented. The following presents the actual date the Pro Forma
Properties were acquired or placed in service by the Company as
compared to the date the Pro Forma Properties were treated as becoming
operational as a rental property for purposes of the Pro Forma
Consolidated Statements of Earnings.
Date Pro Forma
Date Placed Property Became
in Service Operational as
By the Company Rental Property
-------------- ---------------
Residence Inn Buckhead (Lenox
Park) in Atlanta, GA July 31, 1998 January 1, 1998
Residence Inn Gwinnett Place
in Duluth, GA July 31, 1998 January 1, 1998
Generally, the leases provide for the payment of percentage rent in
addition to base rental income. However, due to the fact that no
percentage rent was due under the leases for the Pro Forma Properties
during the portion of 1998 that the Company held the properties, no pro
forma adjustment was made for percentage rental income for the year
ended December 31, 1998.
(2) Represents reserve funds which will be used for the replacement and
renewal of furniture, fixtures and equipment relating to the Pro Forma
Properties (the "FF&E Reserve"). The funds in the FF&E reserve and all
property purchased with funds from the FF&E reserve will be paid,
granted and assigned to the Company as additional rent. In connection
therewith, FF&E reserve income was earned at approximately $10,000 per
month, per Pro Forma Property.
(3) Represents adjustment to dividend income earned on the Company's
$37,978,272 investment at September 30, 1999, in the 9.76% Class B
cumulative preferred stock of the unconsolidated subsidiary, for the
period commencing (A) the later of (i) the date the properties owned by
the unconsolidated subsidiary became operational by the previous owner
or (ii) January 1, 1998, to (B) the earlier of (i) the date the
properties owned by the unconsolidated subsidiary were acquired or (ii)
the end of the pro forma period presented. The cash from the Company's
investment, along with loan proceeds and funds from an institutional
investor were used to purchase seven hotel properties which were
operational prior to the Company's investment in the unconsolidated
subsidiary. The following presents the actual date the unconsolidated
subsidiary
<PAGE>
CNL HOSPITALITY PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL
STATEMENTS - CONTINUED
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND
THE YEAR ENDED DECEMBER 31, 1998
Unaudited Pro Forma Consolidated Statements of Earnings - Continued:
properties were acquired or placed in service by the unconsolidated
subsidiary as compared to the date the unconsolidated subsidiary's
properties were treated as becoming operational for purposes of the Pro
Forma Consolidated Statements of Earnings:
<TABLE>
<CAPTION>
<S> <C>
Pro forma
Date Unconsolidated
Date Placed Subsidiary
in Service Properties Became
By the Operational as
Unconsolidated Subsidiary Rental Property
------------------------- ---------------
Residence Inn Las Vegas, NV February 25, 1999 October 1, 1998
Residence Inn Plano, TX February 25, 1999 October 12, 1998
Marriott Suites Dallas, TX February 25, 1999 November 11, 1998
Courtyard Plano, TX February 25, 1999 December 23, 1998
Residence Inn Phoenix, AZ June 16, 1999 May 14, 1999
Courtyard Scottsdale, AZ June 16, 1999 May 21, 1999
Courtyard Seattle, WA June 16, 1999 May 22, 1999
</TABLE>
(4) Represents adjustment to interest income due to the decrease in the
amount of cash available for investment in interest bearing accounts
during the periods commencing (A) the later of (i) the dates the Pro
Forma Properties and the unconsolidated subsidiary's properties became
operational by the previous owners or (ii) January 1, 1998, through (B)
the earlier of (i) the actual date the Pro Forma Properties and the
unconsolidated subsidiary's properties were acquired or (ii) the end of
the pro forma period presented, as described in Note (1) and Note (3)
above. The estimated pro forma adjustment is based upon the fact that
interest income from interest bearing accounts was earned at a rate of
approximately four percent per annum by the Company during the year
ended December 31, 1998 and the nine months ended September 30, 1999.
(5) Represents adjustment to interest expense incurred at a rate ranging
from 8.05% to 8.8% per annum in connection with the assumed borrowings
from the line of credit of $8,600,000 on January 1, 1998 for the period
January 1, 1998 through July 31, 1998. Also represents amortization of
the loan origination fee of $43,000 (.5% on the $8,600,000 from
borrowings on the line of credit) and $19,149 of other miscellaneous
closing costs, amortized under the straight-line method over a period
of five years.
(6) The Company has incurred operating expenses which, in general, are
those expenses relating to administration of the Company on an ongoing
basis. Pursuant to the advisory agreement, CNL Hospitality Corp. (the
"Advisor") is required to reimburse the Company the amount by which the
total operating expenses paid or incurred by the Company exceed in any
four consecutive fiscal quarters the greater of two percent of average
invested assets or 25 percent of net income (the "Expense Cap"). During
the year ended December 31, 1998, the Company's operating expenses
exceeded the Expense Cap by $92,733; therefore, the Advisor reimbursed
the Company such amount in accordance with the advisory agreement.
However, as a result of the increase in pro forma earnings for the year
ended December 31, 1998, the Company's operating expenses no longer
exceeded the Expense Cap. Therefore, this reimbursement was reversed
for pro forma purposes.
(7) Represents increase in asset management fees relating to the Pro Forma
Properties and the investment in unconsolidated subsidiary for the
period commencing (A) the later of (i) the date the Pro Forma
Properties and the unconsolidated subsidiary's properties became
operational by the previous owners or (ii) January 1, 1998, through (B)
the earlier of (i) the date the Pro Forma Properties and the
unconsolidated subsidiary's
<PAGE>
CNL HOSPITALITY PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL
STATEMENTS - CONTINUED
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND
THE YEAR ENDED DECEMBER 31, 1998
Unaudited Pro Forma Consolidated Statements of Earnings - Continued:
properties were acquired or (ii) the end of the pro forma period
presented, as described in Notes (1) and (3) above. Asset management
fees are equal to 0.60% per year of the Company's Real Estate Asset
Value, including the investment in the unconsolidated subsidiary, as
defined in the Company's prospectus.
(8) Represents incremental increase in depreciation expense of the building
and the furniture, fixture and equipment ("FF&E") portions of the Pro
Forma Properties accounted for as operating leases using the
straight-line method. The buildings and FF&E are depreciated over
useful lives of 40 and seven years, respectively.
(9) Represents adjustment to equity in loss of unconsolidated subsidiary
after deduction of preferred stock dividends for the period commencing
(A) the date the unconsolidated subsidiary's properties became
operational by the previous owner, through (B) the earlier of (i) the
date the properties were acquired by the unconsolidated subsidiary or
(ii) the end of the pro forma period presented, as described in Note
(3) above. The following represents the Company's share of pro forma
net earnings or loss after deduction of preferred stock dividends
declared for the pro forma period ending:
<TABLE>
<CAPTION>
<S> <C>
September 30, December 30,
1999 1998
--------------- -------------
Unconsolidated Subsidiary Pro Forma
Earnings Before Preferred Stock Dividends $ 3,311,596 $ 752,368
8% Class A Cumulative Preferred Stock
Dividends (institutional investor) (2,451,076) (442,261)
9.76% Class B Cumulative Preferred Stock
Dividends (the Company) (2,287,925) (423,938)
8% Class C Cumulative Preferred Stock
Dividends (other investors) (6,000) (1,402)
-------------- ------------
Pro Forma Net Loss of Unconsolidated Subsidiary
After Preferred Stock Dividends $(1,433,405) $(115,233)
============== ============
The Company's 49% Interest in the Pro Forma
Loss of the Unconsolidated Subsidiary $ (702,368) $ (56,464)
============== ============
</TABLE>
(10) Historical earnings per share were calculated based upon the weighted
average number of shares of common stock outstanding during the nine
months ended September 30, 1999 and the year ended December 31, 1998.
As a result of the two Pro Forma Properties being treated in the Pro
Forma Consolidated Statements of Earnings as operational since January
1, 1998, the Company assumed approximately 2,206,573 shares of common
stock were sold, and the net offering proceeds were available for
purchase of these properties. Due to the fact that approximately
1,929,115, of these shares of common stock were actually sold
subsequently, during the period January 1, 1998 through May 21, 1998,
the weighted average number of shares outstanding for the pro forma
period was adjusted.
In addition, as a result of the investment in the unconsolidated
subsidiary being treated in the Pro Forma Consolidated Statements of
Earnings as invested pro rata beginning on October 1, 1998 (the date
the first property became operational), the Company assumed additional
shares of common stock were sold and net offering proceeds were
available for investment during the period October 1, 1998 through
December 31,
<PAGE>
CNL HOSPITALITY PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL
STATEMENTS - CONTINUED
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND
THE YEAR ENDED DECEMBER 31, 1998
Unaudited Pro Forma Consolidated Statements of Earnings - Continued:
1998 and the period January 1, 1999 through January 26, 1999. Due to
the fact that approximately 857,020 of these shares of common stock
were actually sold during the nine months ended September 30, 1999, the
weighted average number of shares outstanding for the pro forma period
was adjusted. Pro forma earnings per share were calculated based upon
the weighted average number of shares of common stock outstanding, as
adjusted, during the nine months ended September 30, 1999 and the year
ended December 31, 1998.
<PAGE>
CNL HOSPITALITY PROPERTIES, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
<S> <C>
September 30, December 31,
1999 1998
-------------- ----------------
ASSETS
Land, buildings and equipment on operating leases,
less accumulated depreciation of $1,076,251 and
$384,166, respectively $27,676,298 $ 28,368,383
Investment in unconsolidated subsidiary 38,882,550 --
Cash and cash equivalents 118,019,624 13,228,923
Restricted cash 250,177 82,407
Certificate of deposit 5,015,822 5,016,575
Due from related party 24,743 --
Receivables 67,980 28,257
Dividends receivable 1,214,772 --
Organization costs, less accumulated amortization of $5,221 -- 19,752
Loan costs, less accumulated amortization of $78,455
and $12,980, respectively 60,141 78,282
Accrued rental income 80,523 44,160
Other assets 7,092,227 1,989,951
---------------- ------------------
$198,384,857 $ 48,856,690
================ ==================
LIABILITIES AND STOCKHOLDERS' EQUITY
Line of credit $ -- $ 9,600,000
Interest payable -- 66,547
Accounts payable and accrued expenses 11,303 337,215
Due to related parties 495,704 318,937
Security deposits 1,417,500 1,417,500
---------------- ------------------
Total liabilities 1,924,507 11,740,199
---------------- ------------------
Commitments and contingencies
Stockholders' equity:
Preferred stock, without par value.
Authorized and unissued 3,000,000 shares -- --
Excess shares, $.01 par value per share.
Authorized and unissued 63,000,000 shares -- --
Common stock, $.01 par value per share.
Authorized 60,000,000 shares, issued 22,352,104
and 4,321,908 shares, respectively, and outstanding
22,349,104 and 4,321,908 shares, respectively 223,491 43,219
Capital in excess of par value 198,470,016 37,289,402
Accumulated distributions in excess of net earnings (2,233,157 ) (216,130 )
---------------- ------------------
Total stockholders' equity 196,460,350 37,116,491
---------------- ------------------
$198,384,857 $ 48,856,690
================ ==================
See accompanying notes to condensed consolidated
financial statements.
<PAGE>
CNL HOSPITALITY PROPERTIES, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
Quarter Ended Nine Months Ended
September 30, September 30,
1999 1998 1999 1998
-------------- --------------- ------------- ------------
Revenues:
Rental income from operating
leases $ 769,442 $ 487,400 $2,255,968 $ 487,400
FF&E reserve income 68,268 41,099 194,301 41,099
Dividend income 926,687 -- 1,826,818 --
Interest and other income 1,217,304 127,082 2,125,043 498,241
--------------- --------------- -------------- --------------
2,981,701 655,581 6,402,130 1,026,740
--------------- --------------- -------------- --------------
Expenses:
Interest 6,592 139,416 239,922 139,416
General operating and
administrative 107,216 44,979 415,245 212,165
Professional services 16,206 -- 45,478 --
Asset management fees to
related party 19,710 27,246 87,146 27,246
Reimbursement of operating
expenses -- (92,733 ) -- (92,733 )
Other -- -- 5,968 --
Depreciation and amortization 243,178 154,804 736,593 156,804
--------------- --------------- -------------- --------------
392,902 273,712 1,530,352 442,898
--------------- --------------- -------------- --------------
Earnings Before Equity in Loss of
Unconsolidated Subsidiary After
Deduction of Preferred Stock
Dividends 2,588,799 381,869 4,871,778 583,842
Equity in Loss of Unconsolidated
Subsidiary After Deduction of
Preferred Stock Dividends (167,283 ) -- (557,733 ) --
--------------- --------------- -------------- --------------
Net Earnings $2,421,516 $ 381,869 $4,314,045 $ 583,842
=============== =============== ============== ==============
Earnings Per Share of Common Stock:
Basic $ 0.13 $ 0.15 $ 0.34 $ 0.28
=============== =============== ============== ==============
Diluted $ 0.12 $ 0.15 $ 0.33 $ 0.28
=============== =============== ============== ==============
Weighted Average Number of Shares
Outstanding:
Basic 19,073,159 2,599,251 12,652,059 2,082,845
=============== =============== ============== ==============
Diluted 26,437,719 2,599,251 17,509,791 2,082,845
=============== =============== ============== ==============
See accompanying notes to condensed consolidated
financial statements.
<PAGE>
CNL HOSPITALITY PROPERTIES, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF
STOCKHOLDERS' EQUITY Nine Months Ended September 30,
1999 and Year Ended December 31, 1998
Accumulated
Common stock distributions
--------------------------- Capital in in excess
Number Par excess of of net
of Shares value par value earnings Total
----------- ----------- ------------- --------------- ------------
Balance at December 31, 1997 1,152,540 $ 11,525 $ 9,229,316 $ (6,924 ) $ 9,233,917
Subscriptions received for common
stock through public offering
and 3,169,368 31,694 31,661,984 -- 31,693,678
distribution reinvestment plan
Stock issuance costs -- -- (3,601,898 ) -- (3,601,898)
Net earnings -- -- -- 958,939 958,939
Distributions declared and paid
($0.46 per share) -- -- -- (1,168,145 ) (1,168,145)
------------ ------------ -------------- --------------- --------------
Balance at December 31, 1998 4,321,908 43,219 37,289,402 (216,130 ) 37,116,491
Subscriptions received for common
stock through public offerings
and 18,030,196 180,302 180,121,661 -- 180,301,963
distribution reinvestment plan
Retirement of common stock (3,000 ) (30 ) (27,570 ) -- (27,600)
Stock issuance costs -- -- (18,913,477 ) -- (18,913,477)
Net earnings -- -- -- 4,314,045 4,314,045
Distributions declared and paid
($0.54 per share) -- -- -- (6,331,072 ) (6,331,072)
------------ ------------ -------------- --------------- --------------
Balance at September 30, 1999 22,349,104 $223,491 $198,470,016 $(2,233,157 ) $196,460,350
============ ============ ============== =============== ==============
See accompanying notes to condensed consolidated
financial statements.
<PAGE>
CNL HOSPITALITY PROPERTIES, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended
September 30,
1999 1998
--------------- ----------------
Increase (Decrease) in Cash and Cash Equivalents:
Net Cash Provided by Operating Activities $ 4,642,118 $2,047,046
---------------- -----------------
Cash Flows from Investing Activities:
Investment in unconsolidated subsidiary (37,172,644 ) --
Additions to land, buildings and equipment
on operating leases -- (27,245,538 )
Investment in certificates of deposit -- (5,000,000 )
Increase in restricted cash (167,770 ) --
Increase in other assets (7,529,504 ) (983,305 )
---------------- -----------------
Net cash used in investing activities (44,869,918 ) (33,228,843 )
---------------- -----------------
Cash Flows from Financing Activities:
Reimbursement of acquisition and stock
issuance costs paid by related parties
on behalf of the Company (2,855,472 ) (168,369 )
Payment on line of credit (9,600,000 ) --
Increase in loan costs (47,334 ) --
Proceeds from borrowings on line of credit -- 9,600,000
Subscriptions received from stockholders 180,301,963 17,133,319
Retirement of shares of common stock (27,600 ) --
Distributions to stockholders (6,331,072 ) (619,131 )
Payment of stock issuance costs (16,413,155 ) (1,634,250 )
Other (8,829 ) 12,500
---------------- -----------------
Net cash provided by financing activities 145,018,501 24,324,069
---------------- -----------------
Net Increase (Decrease) in Cash and Cash Equivalents 104,790,701 (6,857,728 )
Cash and Cash Equivalents at Beginning of Period 13,228,923 8,869,838
---------------- -----------------
Cash and Cash Equivalents at End of Period $118,019,624 $2,012,110
================ =================
See accompanying notes to condensed consolidated
financial statements.
<PAGE>
CNL HOSPITALITY PROPERTIES, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
Nine Months Ended
September 30,
1999 1998
--------------- ----------------
Supplemental Schedule of Non-Cash Investing and
Financing Activities:
Related parties paid certain acquisition and stock
issuance costs on behalf of the Company as follows:
Acquisition costs $ 530,233 $ 220,575
Stock issuance costs 2,387,955 158,184
----------------- ----------------
$ 2,918,188 $ 378,759
================= ================
</TABLE>
See accompanying notes to condensed consolidated
financial statements.
<PAGE>
CNL HOSPITALITY PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Quarters and Nine Months Ended September 30, 1999 and 1998
1. Organization and Nature of Business:
CNL Hospitality Properties, Inc. was organized in Maryland on June 12,
1996. CNL Hospitality GP Corp. and CNL Hospitality LP Corp. were
organized in Delaware in June 1998. CNL Hospitality Partners, LP is a
Delaware limited partnership formed in June 1998. CNL Hospitality GP
Corp. and CNL Hospitality LP Corp. are the general and limited partner,
respectively, of CNL Hospitality Partners, LP. The term "Company"
includes, unless the context otherwise requires, CNL Hospitality
Properties, Inc., CNL Hospitality Partners, LP, CNL Hospitality GP
Corp. and CNL Hospitality LP Corp.
The Company was formed primarily to acquire properties (the
"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"). The Company may also provide mortgage financing (the
"Mortgage Loans") and furniture, fixture and equipment financing
("Secured Equipment Leases") to operators of Hotel Chains.
2. Basis of Presentation:
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with the instructions to Form 10-Q and
do not include all of the information and note disclosures required by
generally accepted accounting principles. The condensed consolidated
financial statements reflect all adjustments, consisting of normal
recurring adjustments, which are, in the opinion of the management,
necessary to fairly reflect the results of operations for the interim
periods presented. Operating results for the quarter and nine months
ended September 30, 1999, may not be indicative of the results that may
be expected for the year ending December 31, 1999. Amounts as of
December 31, 1998, included in the condensed consolidated financial
statements, have been derived from audited consolidated financial
statements as of that date.
These unaudited condensed consolidated financial statements should be
read in conjunction with the consolidated financial statements and
notes thereto included in the Company's Form 10-K for the year ended
December 31, 1998.
The accompanying unaudited condensed consolidated financial statements
include the accounts of the Company, CNL Hospitality Properties, Inc.,
and its wholly owned subsidiaries, CNL Hospitality GP Corp. and CNL
Hospitality LP Corp., as well as the accounts of CNL Hospitality
Partners, LP. All significant intercompany balances and transactions
have been eliminated. The Company accounts for its 49% interest in the
common stock of CNL Hotel Investors, Inc. using the equity method and
accounts for its preferred stock investment in CNL Hotel Investors,
Inc. using the cost method.
Certain items in the prior year's consolidated financial statements
have been reclassified to conform with the 1999 presentation. These
reclassifications had no effect on stockholders' equity or net
earnings.
<PAGE>
CNL HOSPITALITY PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS - CONTINUED Quarters and Nine Months
Ended September 30, 1999 and 1998
3. Public Offerings:
On June 17, 1999, the Company completed its offering of 16,500,000
shares of common stock ($165,000,000) (the "Initial Offering"), which
included 1,500,000 shares ($15,000,000) available only to stockholders
who elected to participate in the Company's reinvestment plan.
Following the completion of the Initial Offering, the Company commenced
an offering of up to 27,500,000 additional shares of common stock
($275,000,000) (the "1999 Offering"). Of the 27,500,000 shares of
common stock to be offered, 2,500,000 will be available only to
stockholders purchasing shares through the reinvestment plan. The price
per share and the other terms of the 1999 Offering, including the
percentage of gross proceeds payable (i) to the managing dealer for
selling commissions and expenses in connection with the offering and
(ii) to CNL Hospitality Corp. (formerly known as CNL Hospitality
Advisors, Inc.) (the "Advisor") for acquisition fees, are substantially
the same as those for the Company's Initial Offering. The Company
expects to use the net proceeds from the 1999 Offering to purchase
additional Properties and, to a lesser extent, make Mortgage Loans.
4. Investment in Unconsolidated Subsidiary:
In February 1999, the Company executed a series of agreements with Five
Arrows Realty Securities II L.L.C. ("Five Arrows") pursuant to which
the Company and Five Arrows formed a jointly owned real estate
investment trust, CNL Hotel Investors, Inc. ("Hotel Investors"), for
the purpose of acquiring up to eight hotel Properties from various
sellers affiliated with Western International (the "Hotels"). At the
time the agreement was entered into, the eight Hotels (four as
Courtyard(R) by Marriott(R) hotels, three as Residence Inn(R) by
Marriott(R) hotels, and one as a Marriott Suites(R)) were either newly
constructed or in various stages of completion. As of September 30,
1999, Hotel Investors owns seven of the newly constructed Hotels.
The Company's Advisor is also the advisor to Hotel Investors pursuant
to a separate advisory agreement. However, in no event will the Company
pay the Advisor fees, including the Company's pro rata portion of Hotel
Investors' advisory fees, in excess of amounts payable under its
advisory agreement. The Advisor entered into separate purchase
agreements for each of the eight Hotels. The purchase agreements
included customary closing conditions, including performing due
diligence and inspection of the completed Properties. The aggregate
purchase price of all eight Hotels, once the final Hotel is acquired,
will be approximately $184 million, excluding closing costs.
In order to fund these purchases, Five Arrows committed to make an
investment of up to $50.9 million in Hotel Investors. The Company
committed to make an investment of up to $40 million in Hotel Investors
through its wholly owned subsidiary, CNL Hospitality Partners, LP.
Hotel Investors funded and expects to fund the remaining amount of
approximately $96.6 million (including closing costs) with permanent
financing from Jefferson-Pilot Life Insurance Company consisting of
eight separate loans (the "Hotel Investors Loan"), collateralized by
Hotel Investors' interests in the Properties.
On February 25, 1999, Hotel Investors purchased four of the eight
Hotels for an aggregate purchase price of approximately $90 million
(the "Initial Hotels") and paid $10 million as a deposit on the four
remaining Hotels. The Initial Hotels are the Courtyard by Marriott
located in Plano, Texas, the Marriott Suites located in Dallas, Texas,
the Residence Inn by Marriott located in Las Vegas, Nevada and the
Residence Inn by Marriott located in Plano, Texas. On June 16, 1999,
Hotel Investors purchased three additional hotels of the eight Hotels
(the "Additional Hotels") for an aggregate purchase price of
approximately $77 million. The Additional Hotels are the Courtyard by
Marriott
<PAGE>
CNL HOSPITALITY PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS - CONTINUED Quarters and Nine Months
Ended September 30, 1999 and 1998
4. Investment in Unconsolidated Subsidiary - Continued:
located in Scottsdale, Arizona, the Courtyard by Marriott located in
Seattle, Washington and the Residence Inn by Marriott located in
Phoenix, Arizona. Hotel Investors applied $7 million of the $10 million
deposit toward the acquisition of the Additional Hotels. As a result of
these purchases and the deposit, Five Arrows has funded approximately
$48 million of its commitment and purchased 48,337 shares of Hotel
Investors' 8% Class A cumulative, preferred stock ("Class A Preferred
Stock") and the Company has funded approximately $38 million of its
commitment and purchased 37,979 shares of Hotel Investors' 9.76% Class
B cumulative, preferred stock ("Class B Preferred Stock"). Hotel
Investors has obtained advances totalling approximately $88 million
relating to the Hotel Investors Loan in order to facilitate the
acquisition of the Initial Hotels and Additional Hotels. Hotel
Investors has and intends to use future funds from Five Arrows, the
Company and the Hotel Investors Loan proportionately to fund the
remaining Property acquisition.
In return for their respective funding commitments, Five Arrows
received a 51% common stock interest and CNL Hospitality Partners, LP
received a 49% common stock interest in Hotel Investors. As funds are
continually advanced to Hotel Investors, Five Arrows will receive up to
50,886 shares of Class A Preferred Stock and CNL Hospitality Partners,
LP will receive up to 39,982 shares of Class B Preferred Stock. The
Class A Preferred Stock is exchangeable upon demand into common stock
of the Company, as determined pursuant to a predetermined formula.
Five Arrows also committed to invest up to $15 million in the Company
through the purchase of common stock pursuant to the Company's Initial
Offering and the 1999 Offering, the proceeds of which have been and
will be used by the Company to fund approximately 38% of its funding
commitment to Hotel Investors. As of February 24, 1999, Five Arrows had
invested $9,297,056 in the Company. Due to the stock ownership
limitations specified in the Company's Articles of Incorporation at the
time of Five Arrows' initial investment, $5,612,311 was invested in the
Company's common stock through the purchase of 590,770 shares and
$3,684,745 was advanced to the Company as a convertible loan bearing an
interest rate of eight percent. Due to additional subscription proceeds
received from February 24, 1999 to April 30, 1999, the loan was
converted to 387,868 shares of the Company's common stock on April 30,
1999. On June 17, 1999, Five Arrows invested an additional $4,952,566
through the purchase of 521,322 shares of common stock. Therefore, as
of September 30, 1999, Five Arrows had invested $14,249,622 of its $15
million commitment in the Company. In addition to the above
investments, Five Arrows has purchased a 10% interest in the Advisor.
In connection with Five Arrows' commitment to invest $15 million in the
Company, the Advisor and certain affiliates have agreed to waive
certain fees otherwise payable to them by the Company.
Cash flow from operations of Hotel Investors will be distributed first
to Five Arrows with respect to dividends payable on the Class A
Preferred Stock. Such dividends are calculated based on Five Arrows'
"special investment amount," or $1,294.78 per share, which represents
the sum of its investment in Hotel Investors and its $15 million
investment in the Company on a per share basis, adjusted for any
distributions received from the Company. Cash flow from operations will
then be distributed to the Company with respect to its Class B
Preferred Stock. Next, cash flow will be distributed to 100 CNL Group,
Inc. and subsidiaries' associates who each own one share of Class C
preferred stock in Hotel Investors, to provide a quarterly, cumulative,
compounded 8% return. All remaining cash flow from operations will be
distributed pro rata with respect to the interest in the common shares.
<PAGE>
CNL HOSPITALITY PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS - CONTINUED Quarters and Nine Months
Ended September 30, 1999 and 1998
4. Investment in Unconsolidated Subsidiary - Continued:
The following presents condensed financial information for Hotel
Investors as of and for the nine months ended September 30, 1999:
Land, buildings and equipment on operating
leases, less accumulated depreciation $166,267,909
Cash 4,692,582
Loan costs, less accumulated amortization 723,579
Accrued rental income 183,218
Deposits and other assets 3,127,123
Liabilities 91,507,263
Redeemable preferred stock - Class A 48,336,090
Total stockholders' equity 83,487,148
Revenues 8,462,868
Net earnings 2,646,788
During the quarter and nine months ended September 30, 1999, the
Company recorded $926,687 and $1,826,818, respectively, in dividend
income and $167,283 and $557,733, respectively, in equity in loss after
deduction of preferred stock dividends, resulting in net earnings of
$759,404 and $1,269,085, respectively, attributable to this investment.
5. Convertible Loan:
As described above in Note 4, $3,684,745 was advanced to the Company by
Five Arrows as a convertible loan, bearing interest at a rate of eight
percent per annum payable at the time the loan was converted to shares
of common stock. On April 30, 1999, the loan was converted to 387,868
shares of common stock of the Company. For the nine months ended
September 30, 1999, the Company incurred approximately $54,000 in
interest expense on this convertible loan.
6. Other Assets:
Other assets consists of acquisition fees, miscellaneous acquisition
expenses that will be allocated to future Properties, and prepaid
expenses.
7. Redemption of Shares:
The Company has a redemption plan under which the Company may elect to
redeem shares, subject to certain conditions and limitations. During
the nine months ended September 30, 1999, 3,000 shares of common stock
were redeemed and retired.
8. Stock Issuance Costs:
The Company has incurred certain expenses associated with its offerings
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 offerings. Preliminary costs incurred prior to raising capital were
advanced by the Advisor. The Advisor has agreed to pay all 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 in
connection with the current offering.
<PAGE>
CNL HOSPITALITY PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS - CONTINUED Quarters and Nine Months
Ended September 30, 1999 and 1998
8. Stock Issuance Costs - Continued:
During the nine months ended September 30, 1999 and 1998, the Company
incurred $18,913,477 and $1,769,263, respectively, in organizational
and offering costs, including $13,224,189 and $1,370,665, respectively,
in commissions and marketing support and due diligence expense
reimbursement fee (see Note 10). Of these amounts, $18,913,477 and
$1,764,292, respectively, have been treated as stock issuance costs and
for the nine months ended September 30, 1998, $4,971 has been treated
as organization costs. The stock issuance costs have been charged to
stockholders' equity.
9. Distributions:
For the nine months ended September 30, 1999 and 1998, approximately 73
and 94 percent, respectively, of distributions paid to stockholders
were considered ordinary income and approximately 27 percent and 6
percent, respectively, were considered a return of capital to
stockholders for federal income tax purposes. No amounts distributed to
the stockholders for the nine months ended September 30, 1999 and 1998,
are required to be or have been treated by the Company as a return of
capital for purposes of calculating the stockholders' 8 percent return
on their invested capital. The characterization for tax purposes of
distributions declared for the nine months ended September 30, 1999,
may not be indicative of the results that may be expected for the year
ending December 31, 1999.
10. Related Party Transactions:
During the nine months ended September 30, 1999 and 1998, the Company
incurred $12,397,677 and $1,284,999, respectively, in selling
commissions due to CNL Securities Corp. for services in connection with
the offering of shares. A substantial portion of these amounts
($11,569,902 and $1,199,289, respectively) were or will be paid by CNL
Securities Corp. as commissions to other brokers.
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, all or a portion of
which may be reallowed to other broker-dealers. During the nine months
ended September 30, 1999 and 1998, the Company incurred $826,512 and
$85,667, respectively, of such fees, the majority of which will be
reallowed to other broker-dealers and from which all bona fide due
diligence expenses will be paid.
In addition, in connection with its current offering of common stock,
the Company has agreed to issue and sell soliciting dealer warrants
("Soliciting Dealer Warrants") to CNL Securities Corp., the managing
dealer of the Company. The price for each warrant will be $0.0008 and
one warrant will be issued for every 25 shares sold by the managing
dealer. All or a portion of the Soliciting Dealer Warrants may be
reallowed to soliciting dealers with prior written approval from, and
in the sole discretion of, the managing dealer, except where prohibited
by either federal or state securities laws. The holder of a Soliciting
Dealer Warrant will be entitled to purchase one share of common stock
from the Company at a price of $12.00 during the five year period
commencing the date the current offering began. No Soliciting Dealer
Warrants, however, will be exercisable until one year from the date of
issuance.
The Advisor is entitled to receive acquisition fees for services
rendered in connection with identifying and acquiring Properties,
negotiating leases and obtaining financing on behalf of the Company.
The fee is equal to 4.5% of gross proceeds of the offerings, loan
proceeds from permanent financing and amounts outstanding on the line
of credit, if any at the time the Company's stock is listed on a
national or regional
<PAGE>
CNL HOSPITALITY PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS - CONTINUED Quarters and Nine Months
Ended September 30, 1999 and 1998
10. Related Party Transactions - Continued:
stock exchange, but excluding that portion of the permanent financing
used to finance Secured Equipment Leases. During the nine months ended
September 30, 1999 and 1998, the Company incurred $8,007,241 and
$770,999, respectively, of such fees. Such fees are included in land,
buildings and equipment on operating leases, the investment in
unconsolidated subsidiary and other assets at September 30, 1999 and
1998.
The Company and the Advisor have entered into an advisory agreement
pursuant to which the Advisor will receive a monthly asset management
fee of one-twelfth of 0.60% of the Company's real estate value and the
outstanding principal balance of any Mortgage Loans as of the end of
the preceding month. During the nine months ended September 30, 1999
and 1998, the Company incurred $87,146 and $27,246 of such fees,
respectively.
The Advisor and its affiliates provide various administrative services
to the Company, including services related to accounting; financial,
tax and regulatory compliance reporting; stockholder distributions and
reporting; due diligence and marketing; and investor relations
(including administrative services in connection with the offering of
shares), on a day-to-day basis. The expenses incurred for these
services were classified as follows for the nine months ended September
30:
1999 1998
------------- ------------
Stock issuance costs $2,467,852 $236,942
General operating and
administrative expenses 208,676 95,441
============== =============
$2,676,528 $332,383
============== =============
10. Related Party Transactions - Continued:
The amounts due to related parties consisted of the following at:
September 30, December 31,
1999 1998
------------ -------------
Due to CNL Securities Corp.:
Commissions $174,354 $66,063
Marketing support and due
diligence expense
reimbursement fee 13,373 4,404
------------- --------------
187,727 70,467
------------- --------------
Due to the Advisor:
Expenditures incurred on
behalf of the Company 184,930 110,496
Acquisition fees 123,047 137,974
------------- --------------
307,977 248,470
------------- --------------
$495,704 $318,937
============= ==============
<PAGE>
CNL HOSPITALITY PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS - CONTINUED Quarters and Nine Months
Ended September 30, 1999 and 1998
11. Concentration of Credit Risk:
Two lessees, STC Leasing Associates, LLC (which operates and leases the
two Properties directly owned by the Company) and WI Hotel Leasing, LLC
(which leases the seven Properties in which the Company owns an
interest through Hotel Investors) each contributed more than ten
percent of the Company's total rental income (including the Company's
share of total rental income from Hotel Investors) for the nine months
ended September 30, 1999. In addition, all of the Company's rental
income (including the Company's share of rental income from Hotel
Investors) was earned from Properties operating as Marriott(R) brand
chains. Although the Company intends to acquire Properties located in
various states and regions and to carefully screen its tenants in order
to reduce risks of default, failure of these lessees or the Marriott
brand chains could significantly impact the results of operations of
the Company. However, management believes that the risk of such a
default is reduced due to the essential or important nature of these
Properties for the ongoing operations of the lessees.
It is expected that the percentage of total rental income contributed
by these lessees will decrease as additional Properties are acquired
and leased during 1999 and subsequent years.
12. Earnings Per Share:
Basic earnings per share ("EPS") excludes dilution and is computed by
dividing income available to common stockholders by the weighted
average number of common shares outstanding for the period. Diluted EPS
reflects the potential dilution that could occur if other contracts to
issue common stock were exercised and shared in the earnings of the
Company. For the quarter and nine months ended September 30, 1999,
approximately 7.36 million and 4.86 million shares, respectively,
related to the conversion of Hotel Investors' Class A Preferred Stock
to the Company's common stock, were considered dilutive after the
application of the if converted method and were included in the
denominator of the diluted EPS calculation. The numerator in the
diluted EPS calculation includes an adjustment for the net earnings of
Hotel Investors for the applicable period.
13. Commitments and Contingencies:
As of September 30, 1999, the Company has entered into four agreements
to acquire, directly or indirectly, four hotel Properties. In
connection with three of these agreements, the Company has a deposit in
the form of a letter of credit, which is collateralized by a
certificate of deposit, amounting to $5 million. In connection with the
remaining agreement, Hotel Investors has a deposit of $3 million held
in escrow. Of this amount, Five Arrows contributed $1.68 million and
the Company contributed $1.32 million.
In connection with the acquisition of the two Properties owned by the
Company, the Company may be required to make an additional payment (the
"Earnout Amount") of up to $1 million if certain earnout provisions are
achieved by July 31, 2001. After July 31, 2001, the Company will no
longer be obligated to make any payments under the earnout provision.
The Earnout Amount is equal to the difference between earnings before
interest, taxes, depreciation and amortization expense adjusted by the
earnout factor (7.44), and the initial purchase price. Rental income
will be adjusted upward in accordance with the lease agreements for any
amount paid.
<PAGE>
CNL HOSPITALITY PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS - CONTINUED Quarters and Nine Months
Ended September 30, 1999 and 1998
14. Subsequent Events:
During the period October 1, 1999, through November 4, 1999, the
Company received subscription proceeds for an additional 2,394,296
shares ($23,942,963) of common stock.
On October 1, 1999 and November 1, 1999, the Company declared
distributions totalling $1,352,274 and $1,468,292, respectively, or
$0.0604 per share of common stock, payable in December 1999, to
stockholders of record on October 1, 1999 and November 1, 1999,
respectively.
On October 26, 1999, the Company filed a registration statement on Form
S-11 with the Securities and Exchange Commission in connection with the
proposed sale by the Company of up to an additional 45,000,000 shares
of common stock ($450,000,000) (the "2000 Offering") in an offering
expected to commence immediately following the completion of the
Company's 1999 Offering. Of the 45,000,000 shares of common stock to be
offered, 5,000,000 will be available to stockholders purchasing shares
through the reinvestment plan.
<PAGE>
ADDENDUM TO
APPENDIX C
PRIOR PERFORMANCE TABLES
-------------------------------------------
| |
| THE FOLLOWING INFORMATION UPDATES AND |
| REPLACES THE CORRESPONDING INFORMATION |
| IN APPENDIX C TO THE ATTACHED |
| PROSPECTUS, DATED JUNE 4, 1999. |
| |
-------------------------------------------
<PAGE>
APPENDIX C
PRIOR PERFORMANCE TABLES
The information in this Appendix 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 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,
or in the case of CNL Health Care Properties, Inc., to invest in health care
properties. 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.,
CNL American Properties Fund, Inc., and CNL Health Care Properties, 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 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, 1999. 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 1994 and June 1999.
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 two of the Company's principals and
their Affiliates which sponsored 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 1994 and June 1999. 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, 1999.
Table III - Operating Results of Prior Programs
Table III presents a summary of operating results for the period from
inception through June 30, 1999, of the Prior Public Programs, the offerings of
which became fully subscribed between July 1994 and June 1999.
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 an investing or financing nature.
These items include proceeds from capital contributions of investors and
disbursements made from these sources of funds, such as syndication (or stock
issuance) and organizational costs, acquisition of the properties and other
costs which are related more to the organization of the entity and the
acquisition of properties than to the actual operations of the entities.
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 Appendix C because none of the Prior
Public Programs have completed operations (meaning they no longer hold
properties).
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 1994 and June 1999.
The Table includes the selling price of the property, the cost of the
property, the date acquired and the date of sale.
<PAGE>
TABLE I
EXPERIENCE IN RAISING AND INVESTING FUNDS
<TABLE>
<CAPTION>
<S> <C>
CNL Income CNL Income CNL American CNL Income
Fund XV, Fund XVI, Properties Fund XVII,
Ltd. Ltd. Fund, Ltd.
Inc.
------------- ------------- ---------------- -------------
(Note 1)
Dollar amount offered $40,000,000 $45,000,000 $745,000,000 $30,000,000
============= ============= ================ =============
Dollar amount raised 100.0 % 100.0 % 100.0 % 100.0 %
------------- ------------- ---------------- -------------
Less offering expenses:
Selling commissions and discounts (8.5 ) (8.5 ) (7.5 ) (8.5 )
Organizational expenses (3.0 ) (3.0 ) (2.2 ) (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 ) (10.2 ) (12.0 )
------------- ------------- ---------------- -------------
Reserve for operations -- -- -- --
------------- ------------- ---------------- -------------
Percent available for investment 88.0 % 88.0 % 89.8 % 88.0 %
============= ============= ================ =============
Acquisition costs:
Cash down payment 82.5 % 82.5 % 85.3 % 83.5 %
Acquisition fees paid to affiliates 5.5 5.5 4.5 4.5
Loan costs -- -- -- --
------------- ------------- ---------------- -------------
Total acquisition costs 88.0 % 88.0 % 89.8 % 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
2/06/97 and 3/02/98
Length of offering (in months) 6 9 22, 13 and 9, 12
respectively
Months to invest 90% of amount
available for investment measured
from date of offering 10 11 23, 16 and 11, 15
respectively
Note 1: Pursuant to a Registration Statement on Form S-11 under the
Securities Act of 1933, as amended, effective March 29, 1995, CNL
American Properties Fund, Inc. ("APF") registered for sale
$165,000,000 of shares of common stock (the "Initial Offering"),
including $15,000,000 available only to stockholders participating
in the company's reinvestment plan. The Initial Offering of APF
commenced April 19, 1995, and upon completion of the Initial
Offering on February 6, 1997, had received subscription proceeds of
$150,591,765 (15,059,177 shares), including $591,765 (59,177
shares) issued pursuant to the reinvestment plan. Pursuant to a
Registration Statement on Form S-11 under the Securities Act of
1933, as amended, effective January 31, 1997, APF registered for
sale $275,000,000 of shares of common stock (the "1997 Offering"),
including $25,000,000 available only to stockholders participating
in the company's reinvestment plan. The 1997 Offering of APF
commenced following the completion of the Initial Offering on
February 6, 1997, and upon completion of the 1997 Offering on March
2, 1998, had received subscription proceeds of $251,872,648
(25,187,265 shares), including $1,872,648 (187,265 shares) issued
pursuant to the reinvestment plan. Pursuant to a Registration
Statement on Form S-11 under the Securities Act of 1933, as
amended, effective May 12, 1998, APF registered for sale
$345,000,000 of shares of common stock (the "1998 Offering"). The
1998 Offering of APF commenced following the completion of the 1997
Offering on March 2, 1998. As of January 31, 1999, APF had received
subscriptions totalling approximately $345,000,000 from the 1998
Offering, including $3,107,848 issued pursuant to the company's
reinvestment plan. The 1998 Offering became fully subscribed in
December 1998 and proceeds from the last subscriptions were
received in January 1999.
<PAGE>
CNL Income CNL Health Care
Fund XVIII, Properties,
Ltd. Inc.
- ---------------- ------------------
(Note 2)
$35,000,000
================
100.0 %
- ----------------
(8.5 )
(3.0 )
(0.5 )
- ----------------
(12.0 )
- ----------------
--
- ----------------
88.0 %
================
83.5 %
4.5
--
- ----------------
88.0 %
================
--
9/20/96
17
17
Note 2: Pursuant to a Registration Statement on Form S-11 under the
Securities Act of 1933, as amended, effective September 18, 1998,
CNL Health Care Properties, Inc. registered for sale $155,000,000
of shares of common stock, including $5,000,000 available only to
stockholders participating in the company's reinvestment plan. The
offering of shares of CNL Health Care Properties, Inc. commenced
September 18, 1998.
<PAGE>
TABLE II
COMPENSATION TO SPONSOR
CNL Income CNL Income CNL American CNL Income
Fund XV, Fund XVI, Properties Fund, Fund XVII,
Ltd. Ltd. Inc. Ltd.
------------- -------------- ----------------- --------------
(Note 1)
Date offering commenced 2/23/94 9/02/94 4/19/95, 2/06/97 9/02/95
and 3/02/98
Dollar amount raised $40,000,000 $45,000,000 $747,464,420 $30,000,000
============= ============== ================= ==============
Amount paid to sponsor from proceeds of
offering:
Selling commissions and discounts 3,400,000 3,825,000 56,059,832 2,550,000
Real estate commissions -- -- -- --
Acquisition fees 2,200,000 2,475,000 33,604,618 1,350,000
Marketing support and due diligence
expense reimbursement fees
(includes amounts reallowed to
unaffiliated entities) 200,000 225,000 3,737,322 150,000
------------- -------------- ----------------- --------------
Total amount paid to sponsor 5,800,000 6,525,000 93,401,772 4,050,000
============= ============== ================= ==============
Dollar amount of cash generated from
operations before deducting payments
to sponsor:
1999 (6 months) 1,545,029 1,681,308 30,646,055 1,280,674
1998 3,343,292 3,765,104 42,216,874 2,638,733
1997 3,419,967 3,909,781 18,514,122 2,611,191
1996 3,557,073 3,911,609 6,096,045 1,340,159
1995 3,361,477 2,619,840 594,425 11,671
1994 1,154,454 212,171 -- --
1993 -- -- -- --
Amount paid to sponsor from operations
(administrative, accounting and
management fees):
1999 (6 months) 76,270 80,719 2,389,763 50,370
1998 126,564 141,410 3,100,599 117,814
1997 113,372 129,357 1,437,908 116,077
1996 122,391 157,883 613,505 107,211
1995 122,107 138,445 95,966 2,659
1994 37,620 7,023 -- --
1993 -- -- -- --
Dollar amount of property sales and
refinancing before deducting payments
to sponsor:
Cash (Note 3) 3,312,297 1,385,384 11,233,372 --
Notes -- -- -- --
Amount paid to sponsors from property
sales and refinancing:
Real estate commissions -- -- -- --
Incentive fees -- -- -- --
Other (Note 2) -- -- -- --
Note 1: Pursuant to a Registration Statement on Form S-11 under the
Securities Act of 1933, as amended, effective March 29, 1995, CNL
American Properties Fund, Inc. ("APF") registered for sale
$165,000,000 of shares of common stock (the "Initial Offering"),
including $15,000,000 available only to stockholders participating
in the company's reinvestment plan. The Initial Offering of APF
commenced April 19, 1995, and upon completion of the Initial
Offering on February 6, 1997, had received subscription proceeds of
$150,591,765 (15,059,177 shares), including $591,765 (59,177
shares) issued pursuant to the reinvestment plan. Pursuant to a
Registration Statement on Form S-11 under the Securities Act of
1933, as amended, effective January 31, 1997, APF registered for
sale $275,000,000 of shares of common stock (the "1997 Offering"),
including $25,000,000 available only to stockholders participating
in the company's reinvestment plan. The 1997 Offering of APF
commenced following the completion of the Initial Offering on
February 6, 1997, and upon completion of the 1997 Offering on March
2, 1998, had received subscription proceeds of $251,872,648
(25,187,265 shares), including $1,872,648 (187,265 shares) issued
pursuant to the reinvestment plan. Pursuant to a Registration
Statement on Form S-11 under the Securities Act of 1933, as
amended, effective May 12, 1998, APF registered for sale
$345,000,000 of shares of common stock (the "1998 Offering"). The
1998 Offering of APF commenced following the completion of the 1997
Offering on March 2, 1998. As of January 31, 1999, APF had received
subscriptions totalling approximately $345,000,000 from the 1998
Offering, including $3,107,848 issued pursuant to the company's
reinvestment plan. The 1998 Offering became fully subscribed in
December 1998 and proceeds from the last subscriptions were
received in January 1999. The amounts shown represent the combined
results of the Initial Offering, the 1997 Offering and the 1998
Offering as of January 31, 1999, including shares issued pursuant
to the company's reinvestment plans.
<PAGE>
CNL Income CNL Health Care
Fund XVIII, Properties,
Ltd. Inc.
- ---------------- ------------------
(Note 4)
9/20/96
$35,000,000
================
2,975,000
--
1,575,000
175,000
- ----------------
4,725,000
================
1,502,770
2,964,628
1,459,963
30,126
--
--
--
52,883
132,890
98,207
2,980
--
--
--
--
--
--
--
--
Note 2: For negotiating secured equipment leases and supervising the
secured equipment lease program, APF is entitled to receive a
one-time secured equipment lease servicing fee of two percent of
the purchase price of the equipment that is the subject of a
secured equipment lease. During the six months ended June 30, 1999
and the years ended December 31, 1998, 1997 and 1996, APF incurred
$67,967, $54,998, $87,665 and $70,070, respectively, in secured
equipment lease servicing fees.
Note 3: Excludes properties sold and substituted with replacement
properties, as permitted under the terms of the lease agreements.
Note 4: Pursuant to a Registration Statement on Form S-11 under the
Securities Act of 1933, as amended, effective September 18, 1998,
CNL Health Care Properties, Inc. registered for sale $155,000,000
of shares of common stock, including $5,000,000 available only to
stockholders participating in the company's reinvestment plan. The
offering of shares of CNL Health Care Properties, Inc. commenced
September 18, 1998. As of June 30, 1999, CNL Health Care
Properties, Inc. had received subscription proceeds of $2,490,300
(249,030 shares) from the offering. Until subscription proceeds
totalling $2,500,000 are received, the proceeds will be held in
escrow.
Note 5: In addition to acquisition fees paid on gross proceeds from the
offerings, the company also incurred acquisition fees relating to
proceeds from its line of credit to the extent the proceeds were
used to acquire properties. Such fees were paid using proceeds from
the line of credit, and as of June 30, 1999, the company had
incurred $4,483,456 of such fees.
<PAGE>
TABLE III
Operating Results of Prior Programs CNL
INCOME FUND XV, LTD.
1993
(Note 1) 1994 1995 1996
-------------- ------------- ------------- -------------
Gross revenue $ 0 $ 1,143,586 $ 3,546,320 $ 3,632,699
Equity in earnings of joint ventures 0 8,372 280,606 392,862
Profit (Loss) from sale of properties
(Note 4) 0 0 (71,023 ) 0
Provision for loss on land and buildings
(Note 7 and 8) 0 0 0 0
Interest income 0 167,734 88,059 43,049
Less: Operating expenses 0 (62,926 ) (228,319 ) (235,319 )
Transaction costs 0 0 0 0
Interest expense 0 0 0 0
Depreciation and amortization 0 (70,848 ) (243,175 ) (248,232 )
============== ============= ============= =============
Net income - GAAP basis 0 1,185,918 3,372,468 3,585,059
============== ============= ============= =============
Taxable income
- from operations 0 1,026,715 2,861,912 2,954,318
============== ============= ============= =============
- from gain on sale 0 0 0 0
============== ============= ============= =============
Cash generated from operations (Notes 2
and 3) 0 1,116,834 3,239,370 3,434,682
Cash generated from sales (Note 4) 0 0 811,706 0
Cash generated from refinancing 0 0 0 0
-------------- ------------- ------------- -------------
Cash generated from operations, sales and
refinancing 0 1,116,834 4,051,076 3,434,682
Less: Cash distributions to investors
(Notes 5, 6 and 10)
- from operating cash flow 0 (639,944 ) (2,650,003 ) (3,200,000 )
- from sale of properties 0 0 0 0
- from cash flow from prior period 0 0 0 0
-------------- ------------- ------------- -------------
Cash generated (deficiency) after cash
distributions 0 480,890 1,401,073 234,682
Special items (not including sales and
refinancing):
Limited partners' capital
contributions 0 40,000,000 0 0
General partners' capital
contributions 1,000 0 0 0
Syndication costs 0 (3,892,003 ) 0 0
Acquisition of land and buildings 0 (22,152,379 ) (1,625,601 ) 0
Investment in direct financing leases 0 (6,792,806 ) (2,412,973 ) 0
Investment in joint ventures 0 (1,564,762 ) (720,552 ) (129,939 )
Return of capital from joint venture 0 0 0 0
Reimbursement of organization,
syndication and acquisition costs
paid on behalf of CNL Income
Fund XV, Ltd. by related parties 0 (1,098,197 ) (23,507 ) 0
Increase in other assets 0 (187,757 ) 0 0
Other (38 ) (6,118 ) 25,150 0
-------------- ------------- ------------- -------------
Cash generated (deficiency) after cash
distributions and special items 962 4,786,868 (3,356,410 ) 104,743
============== ============= ============= =============
TAX AND DISTRIBUTION DATA PER
$1,000 INVESTED
Federal income tax results:
Ordinary income (loss)
- from operations 0 33 71 73
============== ============= ============= =============
- from recapture 0 0 0 0
============== ============= ============= =============
Capital gain (loss) (Note 4) 0 0 0 0
============== ============= ============= =============
<PAGE>
6 months
1997 1998 1999
- ---------------- -------------- -------------
$ 3,622,123 $ 3,179,911 $ 1,610,248
239,249 236,553 123,928
0 0 0
0 (280,907 ) (132,446 )
46,642 54,576 18,059
(224,761 ) (242,552 ) (160,072 )
0 (23,196 ) (107,297 )
0 0 0
(248,348 ) (281,888 ) (150,547 )
================ ============== =============
3,434,905 2,642,497 1,201,873
================ ============== =============
2,856,893 2,847,638 1,210,384
================ ============== =============
47,256 0 0
================ ============== =============
3,306,595 3,216,728 1,468,759
0 0 0
0 0 0
- ---------------- -------------- -------------
3,306,595 3,216,728 1,468,759
(3,280,000 ) (3,216,728 ) (1,468,759 )
0 0 0
0 (183,272 ) (131,241 )
- ---------------- -------------- -------------
26,595 (183,272 ) (131,241 )
0 0 0
0 0 0
0 0 0
0 0 0
0 0 0
0 (216,992 ) 0
51,950 0 0
0 0 0
0 0 0
0 0 0
================ ============== =============
78,545 (400,264 ) (131,241 )
================ ============== =============
71 70 30
================ ============== =============
0 0 0
================ ============== =============
1 0 0
================ ============== =============
<PAGE>
TABLE III - CNL INCOME FUND XV, LTD. (continued)
1993
(Note 1) 1994 1995 1996
-------------- ------------- ------------- -------------
Cash distributions to investors
Source (on GAAP basis)
- from investment income 0 21 66 80
- from capital gain 0 0 0 0
- from investment income from prior
period 0 0 0 0
============== ============= ============= =============
Total distributions on GAAP basis (Note 5) 0 21 66 80
============== ============= ============= =============
Source (on cash basis)
- from sales 0 0 0 0
- from refinancing 0 0 0 0
- from operations 0 21 66 80
- from investment income from prior
period 0 0 0 0
============== ============= ============= =============
Total distributions on cash basis (Note 5) 0 21 66 80
============== ============= ============= =============
Total cash distributions as a percentage
of original $1,000 investment (Notes 6,
9 and 10) 0.00 % 5.00 % 7.25 % 8.20 %
Total cumulative cash distributions per
$1,000 investment from inception 0 21 87 167
Amount (in percentage terms) remaining
invested in program properties at the
end of each year (period) presented
(original total acquisition cost of
properties retained, divided by original
total acquisition cost of all properties
in program) (Note 4) N/A 100 % 100 % 100 %
Note 1: The registration statement relating to this offering of Units of
CNL Income Fund XV, Ltd. became effective February 23, 1994.
Activities through March 23, 1994, were devoted to organization of
the partnership and operations had not begun.
Note 2: Cash generated from operations includes cash received from tenants,
plus distributions from joint venture, less cash paid for expenses,
plus interest received.
Note 3: Cash generated from operations per this table agrees to cash
generated from operations per the statement of cash flows included
in the financial statements of CNL Income Fund XV, Ltd.
Note 4: During 1995, the partnership sold three of its properties to a
tenant for its original purchase price, excluding acquisition fees
and miscellaneous acquisition expenses. The majority of the net
sales proceeds were used to acquire additional properties. As a
result of these transactions, the partnership recognized a loss for
financial reporting purposes of $71,023 primarily due to
acquisition fees and miscellaneous acquisition expenses the
partnership had allocated to the three properties and due to the
accrued rental income relating to future scheduled rent increases
that the partnership had recorded and reversed at the time of sale.
In addition, during 1996, Wood-Ridge Real Estate Joint Venture, in
which the partnership owns a 50% interest, sold its two properties
to the tenant and recognized a gain of approximately $261,100 for
financial reporting purposes. As a result, the partnership's pro
rata share of such gain of approximately $130,550 is included in
equity in earnings of unconsolidated joint ventures for 1996.
Note 5: Distributions declared for the quarters ended December 31, 1994,
1995, 1996, 1997 and 1998 are reflected in the 1995, 1996, 1997,
1998 and 1999 columns, respectively, due to the payment of such
distributions in January 1995, 1996, 1997, 1998 and 1999,
respectively. As a result of distributions being presented on a
cash basis, distributions declared and unpaid as of December 31,
1994, 1995, 1996, 1997, 1998 and June 30, 1999 are not included in
the 1994, 1995, 1996, 1997, 1998 and 1999 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: During the year ended December 31, 1998, the Partnership
established an allowance for loss on land and buildings of $280,907
for financial reporting purposes relating to two of the four Long
John Silver's properties, one in each of Lancaster, South Carolina
and Lexington, North Carolina, whose leases were rejected by the
tenant. The tenant of these properties filed for bankruptcy and
ceased payment of rents under the terms of the lease agreements.
The loss represents the difference between the carrying value of
the Properties at December 31, 1998 and the current estimated net
realizable value for these Properties.
<PAGE>
6 months
1997 1998 1999
- ------------------ -------------- -------------
82 65 30
0 0 0
0 20 10
================== ============== =============
82 85 40
================== ============== =============
0 0 0
0 0 0
82 80 37
0 5 3
================== ============== =============
82 85 40
================== ============== =============
8.00 % 8.50 % 8.00 %
249 334 374
100 % 100 % 100 %
Note 8: At June 30, 1999, the Partnership recorded a provision for loss on
building in the amount of $132,446 for financial reporting
purposes relating to a Long John Silver's Property in Gastonia,
North Carolina, the lease for which was rejected by the tenant in
June 1998. The tenant of this Property filed for bankruptcy and
ceased payment of rents under the terms of its lease agreement. The
impairment represents the difference between the carrying value of
the Property at June 30, 1999 and the estimated net sales proceeds
from the sale of the Property based on a pending sales contract
with an unrelated third party.
Note 9: Total cash distributions as a percentage of original $1,000
investment are calculated based on actual distributions declared
for the period. (See Note 5 above)
Note 10: Cash distributions for 1998 include an additional amount equal to
0.50% of invested capital which was earned in 1997 or prior
years, but declared payable in the first quarter of 1998.
Note 11: Certain data for columns representing less than 12 months have been
annualized.
<PAGE>
TABLE III
Operating Results of Prior Programs CNL
INCOME FUND XVI, LTD.
1993
(Note 1) 1994 1995 1996
-------------- -------------- -------------- -------------
Gross revenue $ 0 $ 186,257 $ 2,702,504 $ 4,343,390
Equity in earnings from joint venture 0 0 0 19,668
Profit from sale of properties (Notes 4
and 5) 0 0 0 124,305
Provision for loss on building (Notes 8 and 9) 0 0 0 0
Interest income 0 21,478 321,137 75,160
Less: Operating expenses 0 (10,700 ) (274,595 ) (261,878 )
Transaction costs 0 0 0 0
Interest expense 0 0 0 0
Depreciation and amortization 0 (9,458 ) (318,205 ) (552,447 )
============== ============== ============== =============
Net income - GAAP basis 0 187,577 2,430,841 3,748,198
============== ============== ============== =============
Taxable income
- from operations 0 189,864 2,139,382 3,239,830
============== ============== ============== =============
- from gain on sale (Notes 4 and 5) 0 0 0 0
============== ============== ============== =============
Cash generated from operations (Notes 2
and 3) 0 205,148 2,481,395 3,753,726
Cash generated from sales (Notes 4 and 5) 0 0 0 775,000
Cash generated from refinancing 0 0 0 0
-------------- -------------- -------------- -------------
Cash generated from operations, sales and
refinancing 0 205,148 2,481,395 4,528,726
Less: Cash distributions to investors
(Note 6)
- from operating cash flow 0 (2,845 ) (1,798,921 ) (3,431,251 )
- from sale of properties 0 0 0 0
-------------- -------------- -------------- -------------
Cash generated (deficiency) after cash
distributions 0 202,303 682,474 1,097,475
Special items (not including sales and
refinancing):
Limited partners' capital
contributions 0 20,174,172 24,825,828 0
General partners' capital
contributions 1,000 0 0 0
Syndication costs 0 (1,929,465 ) (2,452,743 ) 0
Acquisition of land and buildings 0 (13,170,132 ) (16,012,458 ) (2,355,627 )
Investment in direct financing leases 0 (975,853 ) (5,595,236 ) (405,937 )
Investment in joint ventures 0 0 0 (775,000 )
Reimbursement of organization,
syndication and acquisition costs
paid on behalf of CNL Income
Fund XVI, Ltd. by related parties 0 (854,154 ) (405,569 ) (2,494 )
Increase in other assets 0 (443,625 ) (58,720 ) 0
Increase (decrease) in restricted cash 0 0 0 0
Reimbursement from developer of
construction costs 0 0 0 0
Other (36 ) (20,714 ) 20,714 0
-------------- -------------- -------------- -------------
Cash generated (deficiency) after cash
distributions and special items 964 2,982,532 1,004,290 (2,441,583 )
============== ============== ============== =============
TAX AND DISTRIBUTION DATA PER
$1,000 INVESTED
Federal income tax results:
Ordinary income (loss)
- from operations 0 17 53 71
============== ============== ============== =============
- from recapture 0 0 0 0
============== ============== ============== =============
Capital gain (loss) (Notes 4 and 5) 0 0 0 0
============== ============== ============== =============
<PAGE>
6 months
1997 1998 1999
- ---------------- -------------- -------------
$ 4,308,853 $ 3,901,555 $ 1,874,675
73,507 132,002 79,712
41,148 0 0
0 (266,257 ) (84,478 )
73,634 60,199 28,862
(272,932 ) (270,489 ) (178,006 )
0 (24,652 ) (116,210 )
0 ) 0 0
(563,883 (555,360 ) (293,087 )
================ ============== =============
3,660,327 2,976,998 1,311,468
================ ============== =============
3,178,911 3,153,618 1,422,726
================ ============== =============
64,912 0 0
================ ============== =============
3,780,424 3,623,694 1,600,589
610,384 0 0
0 0 0
- ---------------- -------------- -------------
4,390,808 3,623,694 1,600,589
(3,600,000 ) (3,623,694 ) (1,600,589 )
0 (66,306 ) (199,411 )
- ---------------- -------------- -------------
790,808 (66,306 ) (199,411 )
0 0 0
0 0 0
0 0 0
(23,501 ) (3,545 ) 0
(29,257 ) (28,403 ) 0
0 (744,058 ) (158,512 )
0 0 0
0 0 0
(610,384 ) 610,384 0
0 161,648 0
0 0 (11,809 )
================ ============== =============
127,666 (70,280 ) (369,732 )
================ ============== =============
70 69 31
================ ============== =============
0 0 0
================ ============== =============
1 0 0
================ ============== =============
<PAGE>
TABLE III - CNL INCOME FUND XVI, LTD. (continued)
1993
(Note 1) 1994 1995 1996
-------------- ------------- ------------- -------------
Cash distributions to investors
Source (on GAAP basis)
- from investment income 0 1 45 76
- from capital gain 0 0 0 0
- from investment income from prior
period 0 0 0 0
============== ============= ============= =============
Total distributions on GAAP basis (Note 6) 0 1 45 76
============== ============= ============= =============
Source (on cash basis)
- from sales 0 0 0 0
- from refinancing 0 0 0 0
- from operations 0 1 45 76
- from prior period 0 0 0 0
============== ============= ============= =============
Total distributions on cash basis (Note 6) 0 1 45 76
============== ============= ============= =============
Total cash distributions as a percentage of
original $1,000 investment (Notes 7 and 10) 0.00 % 4.50 % 6.00 % 7.88 %
Total cumulative cash distributions per
$1,000 investment from inception 0 1 46 122
Amount (in percentage terms) remaining
invested in program properties at the end
of each year (period) presented (original
total acquisition cost of properties
retained, divided by original total
acquisition cost of all properties in
program) (Notes 4 and 5) N/A 100 % 100 % 100 %
Note 1: Pursuant to a registration statement on Form S-11 under the
Securities Act of 1933, as amended, CNL Income Fund XVI, Ltd. ("CNL
XVI") and CNL Income Fund XV, Ltd. each registered for sale
$40,000,000 units of limited partnership interests ("Units"). The
offering of Units of CNL Income Fund XV, Ltd. commenced February
23, 1994. Pursuant to the registration statement, CNL XVI could not
commence until the offering of Units of CNL Income Fund XV, Ltd.
was terminated. CNL Income Fund XV, Ltd. terminated its offering of
Units on September 1, 1994, at which time the maximum offering
proceeds of $40,000,000 had been received. Upon the termination of
the offering of Units of CNL Income Fund XV, Ltd., CNL XVI
commenced its offering of Units. Activities through September 22,
1994, were devoted to organization of the partnership and
operations had not begun.
Note 2: Cash generated from operations includes cash received from tenants,
less cash paid for expenses, plus interest received.
Note 3: Cash generated from operations per this table agrees to cash
generated from operations per the statement of cash flows included
in the financial statements of CNL Income Fund XVI, Ltd.
Note 4: In April 1996, CNL Income Fund XVI, Ltd. sold one of its
properties and received net sales proceeds of $775,000, resulting
in a gain of $124,305 for financial reporting purposes. In October
1996, the partnership reinvested the net sales proceeds in an
additional property as tenants-in-common with an affiliate of the
general partners.
Note 5: In March 1997, CNL Income Fund XVI, Ltd. sold one of its
properties and received net sales proceeds of $610,384, resulting
in a gain of $41,148 for financial reporting purposes. In January
1998, the partnership reinvested the net sales proceeds in an
additional property as tenants-in-common with affiliates of the
general partners.
Note 6: Distributions declared for the quarters ended December 31, 1994,
1995, 1996, 1997 and 1998 are reflected in the 1995, 1996, 1997,
1998 and 1999 columns, respectively, due to the payment of such
distributions in January 1995, 1996, 1997, 1998 and 1999,
respectively. As a result of distributions being presented on a
cash basis, distributions declared and unpaid as of December 31,
1994, 1995, 1996, 1997, 1998 and June 30, 1999 are not included in
the 1994, 1995, 1996, 1997, 1998 and 1999 totals, respectively.
Note 7: Cash distributions for 1998 include an additional amount equal to
0.20% of invested capital which was earned in 1997 but declared
payable in the first quarter of 1998.
Note 8: During the year ended December 31, 1998, the Partnership recorded
a provision for loss on building of $266,257 for financial
reporting purposes relating to a Long John Silver's property in
Celina, Ohio. The tenant of this property filed for bankruptcy and
ceased payment of rents under the terms of its lease agreement. The
allowance represents the difference between the Property's carrying
value at December 31, 1998 and the estimated net realizable value
for this Property.
<PAGE>
6 months
1997 1998 1999
- ------------------ -------------- ---------------
80 65 29
0 0 0
0 17 11
================== ============== ===============
80 82 40
================== ============== ===============
0 0 0
0 0 0
80 81 36
0 1 4
================== ============== ===============
80 82 40
================== ============== ===============
8.00 % 8.20 % 8.00 %
202 284 324
100 % 100 % 100 %
Note 9: At June 30, 1999, the Partnership recorded a provision for loss on
building in the amount of $84,478 for financial reporting purposes
relating to a Boston Market Property in Lawrence, Kansas, the lease
for which was rejected by the tenant. The tenant of this property
filed for bankruptcy and ceased payments of rents under the terms
of its lease agreement. The allowance represents the difference
between the carrying value of the Property at June 30, 1999 and the
estimated net realizable value for the Property.
Note 10: 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 11: Certain data for columns representing less than 12 months have been
annualized.
<PAGE>
TABLE III Operating Results
of Prior Programs CNL AMERICAN
PROPERTIES FUND, INC.
1994 1997
(Note 1) 1995 1996 (Note 2)
-------------- -------------- ------------- --------------
Gross revenue $ 0 $ 539,776 $ 4,363,456 $ 15,516,102
Equity in earnings of joint venture 0 0 0 0
Loss on Sale of Properties (Note 7) 0 0 0 0
Provision for loss on land and buildings (Notes
12 and 14) 0 0 0 0
Interest income 0 119,355 1,843,228 3,941,831
Less: Operating expenses 0 (186,145 ) (908,924 ) (2,066,962 )
Transaction costs 0 0 0 0
Interest expense 0 0 0 0
Depreciation and amortization 0 (104,131 ) (521,871 ) (1,795,062 )
Minority interest in income of
consolidated joint venture 0 (76 ) (29,927 ) (31,453 )
============== ============== ============= ==============
Net income - GAAP basis 0 368,779 4,745,962 15,564,456
============== ============== ============= ==============
Taxable income
- from operations (Note 8) 0 379,935 4,894,262 15,727,311
============== ============== ============= ==============
- from gain (loss) on sale 0 0 0 (41,115 )
============== ============== ============= ==============
Cash generated from operations (Notes 4 and 5) 0 498,459 5,482,540 17,076,214
Cash generated from sales (Note 7) 0 0 0 6,289,236
Cash generated from refinancing 0 0 0 0
-------------- -------------- ------------- --------------
Cash generated from operations, sales and
refinancing 0 498,459 5,482,540 23,365,450
Less: Cash distributions to investors (Note 9)
- from operating cash flow 0 (498,459 ) (5,439,404 ) (16,854,297 )
- from sale of properties 0 0 0 0
- from cash flow from prior period 0 0 0 0
- from return of capital (Note 10) 0 (136,827 ) 0 0
-------------- -------------- ------------- --------------
Cash generated (deficiency) after cash 0 (136,827 ) 43,136 6,511,153
distributions
Special items (not including sales of real estate
and refinancing):
Subscriptions received from stockholders 0 38,454,158 100,792,991 222,482,560
Sale of common stock to CNL Fund
Advisors, Inc. 200,000 0 0 0
Retirement of shares of common stock
(Note 13) 0 0 0 0
Contributions from minority interest 0 200,000 97,419 0
Distributions to holder of minority interest 0 0 (39,121 ) (34,020 )
Stock issuance costs (19 ) (3,680,704 ) (8,486,188 ) (19,542,862 )
Acquisition of land and buildings 0 (18,835,969 ) (36,104,148 ) (143,542,667 )
Investment in direct financing leases 0 (1,364,960 ) (13,372,621 ) (39,155,974 )
Proceeds from sales of equipment direct
financing leases 0 0 0 962,274
Investment in joint venture 0 0 0 0
Purchase of other investments 0 0 0 0
Investment in mortgage notes receivable 0 0 (13,547,264 ) (4,401,982 )
Collections on mortgage notes receivable 0 0 133,850 250,732
Investment in equipment and other notes
receivable 0 0 0 (12,521,401 )
Collections on equipment and other notes
receivable 0 0 0 0
Investment in certificates of deposit 0 0 0 (2,000,000 )
Proceeds of borrowing on line of credit 0 0 3,666,896 19,721,804
Payment on line of credit 0 0 (145,080 ) (20,784,577 )
Reimbursement of organization, acquisition,
and deferred offering and stock issuance
costs paid on behalf of CNL American (199,036 ) (2,500,056 ) (939,798 ) (2,857,352 )
Properties Fund, Inc. by related parties
Increase in intangibles and other assets 0 (628,142 ) (1,103,896 ) 0
Payment of loan costs 0 0 0 0
Other 0 0 (54,533 ) 49,001
-------------- -------------- ------------- --------------
Cash generated (deficiency) after cash
distributions and special items 945 11,507,500 30,941,643 5,136,689
============== ============== ============= ==============
TAX AND DISTRIBUTION DATA PER
$1,000 INVESTED (Note 6)
Federal income tax results:
Ordinary income (loss) (Note 11)
- from operations (Note 8) 0 20 61 67
============== ============== ============= ==============
- from recapture 0 0 0 0
============== ============== ============= ==============
Capital gain (loss) (Note 7) 0 0 0 0
============== ============== ============= ==============
<PAGE>
6 months
1998 1999
(Note 3) (Note 3)
- --------------- ---------------
$33,202,491 27,958,975
16,018 48,851
0 (201,843 )
(611,534 ) (540,522 )
8,984,546 4,191,380
(5,354,859 ) (4,391,244 )
0 (483,005 )
0 0
(4,054,098 ) (3,711,674 )
(30,156 ) (17,610 )
=============== ===============
32,152,408 22,853,308
=============== ===============
33,553,390 24,450,902
=============== ===============
(149,948 ) (208,871 )
=============== ===============
39,116,275 28,256,292
2,385,941 2,186,720
0 0
- --------------- ---------------
41,502,216 30,443,012
(39,116,275 ) (28,256,292 )
0 0
(265,053 ) 0
(67,821 ) (219,858 )
- --------------- ---------------
2,053,067 1,966,862
385,523,966 210,736
0 0
(639,528 ) 0
0 366,289
(34,073 ) (21,105 )
(34,579,650 ) (735,785 )
(200,101,667 ) (170,153,724 )
(47,115,435 ) (44,186,644 )
0 1,487,187
(974,696 ) (117,663 )
(16,083,055 ) 0
(2,886,648 ) (2,596,244 )
291,990 224,373
(7,837,750 ) (22,358,869 )
1,263,633 626,959
0 0
7,692,040 151,437,245
(8,039 ) (12,580,289 )
(4,574,925 ) (1,258,062 )
(6,281,069 ) (3,198,326 )
0 (3,548,744 )
(95,101 ) 0
=============== ===============
75,613,060 (104,435,804 )
=============== ===============
63 33
=============== ===============
0 0
=============== ===============
0 0
=============== ===============
<PAGE>
TABLE III - CNL AMERICAN PROPERTIES FUND, INC. (continued)
1994 1997
(Note 1) 1995 1996 (Note 2)
-------------- ------------- -------------- -------------
Cash distributions to investors
Source (on GAAP basis)
- from investment income 0 19 59 66
- from capital gain 0 0 0 0
- from investment income from prior
period 0 0 0 0
- from return of capital (Note 10) 0 14 8 6
-------------- ------------- -------------- -------------
Total distributions on GAAP basis (Note 11) 0 33 67 72
============== ============= ============== =============
Source (on cash basis)
- from sales 0 0 0 0
- from refinancing 0 0 0 0
- from operations 0 26 67 72
- from cash flow from prior period 0 0 0 0
- from return of capital (Note 10) 0 7 0 0
-------------- ------------- -------------- -------------
Total distributions on cash basis (Note 11) 0 33 67 72
============== ============= ============== =============
Total cash distributions as a percentage of
original $1,000 investment (Note 6) 0.00 % 5.34 % 7.06 % 7.45 %
Total cumulative cash distributions per
$1,000 investment from inception 0 33 100 172
Amount (in percentage terms) remaining
invested in program properties at the end
of each year (period) presented (original
total acquisition cost of properties
retained, divided by original total
acquisition cost of all properties in
program) (Note 7) N/A 100 % 100 % 100 %
Note 1: Pursuant to a Registration Statement on Form S-11 under the
Securities Act of 1933, as amended, effective March 29, 1995, CNL
American Properties Fund, Inc. ("APF") registered for sale
$165,000,000 of shares of common stock (the "Initial Offering"),
including $15,000,000 available only to stockholders participating
in the company's reinvestment plan. The Initial Offering of APF
commenced April 19, 1995, and upon completion of the Initial
Offering on February 6, 1997, had received subscription proceeds of
$150,591,765 (15,059,177 shares), including $591,765 (59,177
shares) issued pursuant to the reinvestment plan. Pursuant to a
Registration Statement on Form S-11 under the Securities Act of
1933, as amended, effective January 31, 1997, APF registered for
sale $275,000,000 of shares of common stock (the "1997 Offering"),
including $25,000,000 available only to stockholders participating
in the company's reinvestment plan. The 1997 Offering of APF
commenced following the completion of the Initial Offering on
February 6, 1997, and upon completion of the 1997 Offering on March
2, 1998, had received subscription proceeds of $251,872,648
(25,187,265 shares), including $1,872,648 (187,265 shares) issued
pursuant to the reinvestment plan. Pursuant to a Registration
Statement on Form S-11 under the Securities Act of 1933, as
amended, effective May 12, 1998, APF registered for sale
$345,000,000 of shares of common stock (the "1998 Offering"). The
1998 Offering of APF commenced following the completion of the 1997
Offering on March 2, 1998. As of January 31, 1999, APF had received
subscriptions totalling approximately $345,000,000 from the 1998
Offering, including $3,107,848 issued pursuant to the company's
reinvestment plan. The 1998 Offering became fully subscribed in
December 1998 and proceeds from the last subscriptions were
received in January 1999. Activities through June 1, 1995, were
devoted to organization of APF and operations had not begun.
Note 2: The amounts shown represent the combined results of the Initial
Offering and the 1997 Offering.
Note 3: The amounts shown represent the combined results of the Initial
Offering, 1997 Offering and 1998 Offering.
Note 4: Cash generated from operations includes cash received from tenants,
less cash paid for expenses, plus interest received.
Note 5: Cash generated from operations per this table agrees to cash
generated from operations per the statement of cash flows included
in the financial statements of APF.
Note 6: Total cash distributions as a percentage of original $1,000
investment are calculated based on actual distributions declared
for the period.
Note 7: In May 1997 and July 1997, APF sold four properties and one
property, respectively, to a tenant for $5,254,083 and $1,035,153,
respectively, which was equal to the carrying value of the
properties at the time of sale. In May and July 1998, APF sold two
and one properties, respectively, to third parties for $1,605,154
and $1,152,262, respectively (and received net sales proceeds of
<PAGE>
6 months
1998 1999
(Note 3) (Note 3)
- ------------------ ---------------
60 31
0 0
0 0
14 7
- ------------------ ---------------
74 38
================== ===============
0 0
0 0
73 38
1 0
0 0
- ------------------ ---------------
74 38
================== ===============
7.625 % 7.625 %
246 284
100 % 100 %
Note 7
(continued): approximately $1,233,700 and $629,435, respectively, after
deduction of construction costs incurred but not paid by APF as
of the date of the sale), which approximated the carrying value
of the properties at the time of sale. As a result, no gain or
loss was recognized for financial reporting purposes. In each of
April and May 1999, APF sold one property for $822,824 and
$1,363,896, respectively, which resulted in a total loss of
$201,843 for financial reporting purposes. The company reinvested
the proceeds from the sale of properties in additional properties.
Note 8: Taxable income presented is before the dividends paid deduction.
Note 9: For the six months ended June 30, 1999, and for the years ended
December 31, 1998, 1997, 1996 and 1995, 85.45%, 84.87%, 93.33%,
90.25% and 59.82%, respectively, of the distributions received by
stockholders were considered to be ordinary income and 14.55%,
15.13%, 6.67%, 9.75% and 40.18%, respectively, were considered a
return of capital for federal income tax purposes. No amounts
distributed to stockholders for the six months ended June 30, 1999
or for the years ended December 31, 1998, 1997, 1996 and 1995 are
required to be or have been treated by the company as a return of
capital for purposes of calculating the stockholders' return on
their invested capital.
Note 10: Cash distributions presented above as a return of capital on a
GAAP basis represent the amount of cash distributions in excess of
accumulated net income on a GAAP basis. Accumulated net income
includes deductions for depreciation and amortization expense and
income from certain non-cash items. This amount is not required to
be presented as a return of capital except for purposes of this
table, and APF has not treated this amount as a return of capital
for any other purpose.
Note 11: Tax and distribution data and total distributions on GAAP basis
were computed based on the weighted average dollars outstanding
during each period presented.
Note 12: During the year ended December 31, 1998, APF recorded provisions
for losses on land and buildings in the amount of $611,534 for
financial reporting purposes relating to two Shoney's Properties
and two Boston Market Properties. The tenants of these properties
experienced financial difficulties and ceased payment of rents
under the terms of their lease agreements. The allowances represent
the difference between the carrying value of the Properties at
December 31, 1998 and the estimated net realizable value for these
Properties.
Note 13: In October 1998, the Board of Directors of APF elected to implement
APF's redemption plan. Under the redemption plan, APF elected to
redeem shares, subject to certain conditions and limitations.
During the year ended December 31, 1998, 69,514 shares were
redeemed at $9.20 per share ($639,528) and retired from shares
outstanding of common stock.
<PAGE>
TABLE III - CNL AMERICAN PROPERTIES FUND, INC. (continued)
Note 14: During the six months ended June 30, 1999, APF recorded provisions
for losses on buildings in the amount of $540,522 for financial
reporting purposes relating to one Shoney's Property and three
Boston Market Properties. The tenants of these properties
experienced financial difficulties and ceased payment of rents
under the terms of their lease agreements. The allowances represent
the difference between the carrying value of the Properties at June
30, 1999 and the estimated net realizable value for these
Properties.
Note 15: Certain data for columns representing less than 12 months have been
annualized.
<PAGE>
TABLE III
Operating Results of Prior Programs CNL
INCOME FUND XVII, LTD.
1995
(Note 1) 1996 1997 1998
-------------- -------------- ------------- --------------
Gross revenue $ 0 $ 1,195,263 $ 2,643,871 $ 2,816,845
Equity in earnings of unconsolidated joint 0 4,834 100,918 140,595
ventures
Interest income 12,153 244,406 69,779 51,240
Less: Operating expenses (3,493 ) (169,536 ) (181,865 ) (168,542 )
Transaction costs 0 0 0 (14,139 )
Interest expense 0 0 0 0
Depreciation and amortization (309 ) (179,208 ) (387,292 ) (369,209 )
Minority interest in income of
consolidated joint venture 0 0 (41,854 ) (62,632 )
============== ============== ============= ==============
Net income - GAAP basis 8,351 1,095,759 2,203,557 2,394,158
============== ============== ============= ==============
Taxable income
- from operations 12,153 1,114,964 2,058,601 2,114,039
============== ============== ============= ==============
- from gain on sale 0 0 0 0
============== ============== ============= ==============
Cash generated from operations (Notes
2 and 3) 9,012 1,232,948 2,495,114 2,520,919
Cash generated from sales 0 0 0 0
Cash generated from refinancing 0 0 0 0
-------------- -------------- ------------- --------------
Cash generated from operations, sales and
refinancing 9,012 1,232,948 2,495,114 2,520,919
Less: Cash distributions to investors (Note 4)
- from operating cash flow (1,199 ) (703,681 ) (2,177,584 ) (2,400,000 )
- from sale of properties 0 0 0 0
-------------- -------------- ------------- --------------
Cash generated (deficiency) after cash
distributions 7,813 529,267 317,530 120,919
Special items (not including sales and
refinancing):
Limited partners' capital contributions 5,696,921 24,303,079 0 0
General partners' capital contributions 1,000 0 0 0
Contributions from minority interest 0 140,676 278,170 0
Distribution to holder of minority interest 0 0 (41,507 ) (49,023 )
Syndication costs (604,348 ) (2,407,317 ) 0 0
Acquisition of land and buildings (332,928 ) (19,735,346 ) (1,740,491 ) 0
Investment in direct financing leases 0 (1,784,925 ) (1,130,497 ) 0
Investment in joint ventures 0 (201,501 ) (1,135,681 ) (124,452 )
Reimbursement of organization, syndication
and acquisition costs paid on behalf of
CNL Income Fund XVII, Ltd. by related
parties (347,907 ) (326,483 ) (25,444 ) 0
Increase in other assets (221,282 ) 0 0 0
Reimbursement from developer of
construction costs 0 0 0 306,100
Other (410 ) 410 0 0
-------------- -------------- ------------- --------------
Cash generated (deficiency) after cash
distributions and special items 4,198,859 517,860 (3,477,920 ) 253,544
============== ============== ============= ==============
TAX AND DISTRIBUTION DATA PER
$1,000 INVESTED
Federal income tax results:
Ordinary income (loss)
- from operations 36 37 69 70
============== ============== ============= ==============
- from recapture 0 0 0 0
============== ============== ============= ==============
Capital gain (loss) 0 0 0 0
============== ============== ============= ==============
<PAGE>
6 months
1999
- -----------------
$ 1,309,393
87,684
20,538
(101,142 )
0
0
(194,337 )
(31,436 )
=================
1,090,700
=================
1,038,907
=================
0
=================
1,230,304
0
0
- -----------------
1,230,304
(1,200,000 )
0
- -----------------
30,304
0
0
0
(24,583 )
0
0
0
(527,864 )
0
0
0
0
- -----------------
(522,143 )
=================
34
=================
0
=================
0
=================
<PAGE>
TABLE III - CNL INCOME FUND XVII, LTD. (continued)
1995
(Note 1) 1996 1997 1998
-------------- ------------- -------------- -------------
Cash distributions to investors
Source (on GAAP basis)
- from investment income 4 23 73 79
- from capital gain 0 0 0 0
- from investment income from prior
period 0 0 0 1
-------------- ------------- -------------- -------------
Total distributions on GAAP basis (Note 4) 4 23 73 80
============== ============= ============== =============
Source (on cash basis)
- from sales 0 0 0 0
- from refinancing 0 0 0 0
- from operations 4 23 73 80
-------------- ------------- -------------- -------------
Total distributions on cash basis (Note 4) 4 23 73 80
============== ============= ============== =============
Total cash distributions as a percentage of
original $1,000 investment (Note 5) 5.00 % 5.50 % 7.625 % 8.00 %
Total cumulative cash distributions per
$1,000 investment from inception 4 27 100 180
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 %
Note 1: Pursuant to a registration statement on Form S-11 under the
Securities Act of 1933, as amended, effective August 11, 1995, CNL
Income Fund XVII, Ltd. ("CNL XVII") and CNL Income Fund XVIII, Ltd.
each registered for sale $30,000,000 units of limited partnership
interests ("Units"). The offering of Units of CNL Income Fund XVII,
Ltd. commenced September 2, 1995. Pursuant to the registration
statement, CNL XVIII could not commence until the offering of Units
of CNL Income Fund XVII, Ltd. was terminated. CNL Income Fund XVII,
Ltd. terminated its offering of Units on September 19, 1996, at
which time subscriptions for the maximum offering proceeds of
$30,000,000 had been received. Upon the termination of the offering
of Units of CNL Income Fund XVII, Ltd., CNL XVIII commenced its
offering of Units. Activities through November 3, 1995, were
devoted to organization of the partnership and operations had not
begun.
Note 2: Cash generated from operations includes cash received from
tenants, plus distributions from joint ventures, less cash paid for
expenses, plus interest received.
Note 3: Cash generated from operations per this table agrees to cash
generated from operations per the statement of cash flows included
in the financial statements of CNL XVII.
Note 4: Distributions declared for the quarters ended December 31, 1995,
1996, 1997 and 1998 are reflected in the 1996, 1997, 1998 and 1999
columns, respectively, due to the payment of such distributions in
January 1996, 1997, 1998 and 1999, respectively. As a result of
distributions being presented on a cash basis, distributions
declared and unpaid as of December 31, 1995, 1996, 1997, 1998 and
June 30, 1999 are not included in the 1995, 1996, 1997, 1998 and
1999 totals, respectively.
Note 5: Total cash distributions as a percentage of original $1,000
investment are calculated based on actual distributions declared
for the period. (See Note 4 above)
Note 6: During 1998, CNL Income Fund XVII, Ltd. received approximately
$306,100 in reimbursements from the developer upon final
reconciliation of total construction costs relating to the
properties in Aiken, South Carolina and Weatherford, Texas, in
accordance with the related development agreements. During the six
months ended June 30, 1999, the Partnership had reinvested these
amounts, plus additional funds, in a property as tenants-in-common
with an affiliate of the general partners and in Ocean Shores Joint
Venture, with an affiliate of the Partnership which has the same
general partners.
Note 7: Certain data for columns representing less than 12 months have been
annualized.
<PAGE>
6 months
1999
- ------------------
36
0
4
- ------------------
40
==================
0
0
40
- ------------------
40
==================
8.00%
220
100 %
<PAGE>
TABLE III
Operating Results of Prior Programs CNL
INCOME FUND XVIII, LTD.
1995
(Note 1) 1996 1997 1998
-------------- -------------- ------------- --------------
Gross revenue $ 0 $ 1,373 $ 1,291,416 $ 2,956,349
Equity in earnings of joint venture 0 0 0 0
Provision for loss on land (Note 5) 0 0 0 (197,466 )
Interest income 0 30,241 161,826 141,408
Less: Operating expenses 0 (3,992 ) (156,403 ) (207,974 )
Transaction costs 0 0 0 (15,522 )
Interest expense 0 0 0 0
Depreciation and amortization 0 (712 ) (142,079 ) (374,473 )
============== ============== ============= ==============
Net income - GAAP basis 0 26,910 1,154,760 2,302,322
============== ============== ============= ==============
Taxable income
- from operations 0 30,223 1,318,750 2,324,746
============== ============== ============= ==============
- from gain on sale 0 0 0 0
============== ============== ============= ==============
Cash generated from operations (Notes
2 and 3) 0 27,146 1,361,756 2,831,738
Cash generated from sales 0 0 0 0
Cash generated from refinancing 0 0 0 0
-------------- -------------- ------------- --------------
Cash generated from operations, sales and
refinancing 0 27,146 1,361,756 2,831,738
Less: Cash distributions to investors (Note 4)
- from operating cash flow 0 (2,138 ) (855,957 ) (2,468,400 )
- from sale of properties 0 0 0 0
-------------- -------------- ------------- --------------
Cash generated (deficiency) after cash
distributions 0 25,008 505,799 363,338
Special items (not including sales and
refinancing):
Limited partners' capital contributions 0 8,498,815 25,723,944 854,241
General partners' capital contributions 1,000 0 0 0
Contributions from minority interest 0 0 0 0
Syndication costs 0 (845,657 ) (2,450,214 ) (161,142 )
Acquisition of land and buildings 0 (1,533,446 ) (18,581,999 ) (3,134,046 )
Investment in direct financing leases 0 0 (5,962,087 ) (12,945 )
Investment in joint venture 0 0 0 (166,025 )
Increase in restricted cash 0 0 0 0
Reimbursement of organization, syndication
and acquisition costs paid on behalf of CNL
Income Fund XVIII, Ltd. by related parties 0 (497,420 ) (396,548 ) (37,135 )
Increase in other assets 0 (276,848 ) 0 0
Other (20 ) (107 ) (66,893 ) (10,000 )
-------------- -------------- ------------- --------------
Cash generated (deficiency) after cash
distributions and special items 980 5,370,345 (1,227,998 ) (2,303,714 )
============== ============== ============= ==============
TAX AND DISTRIBUTION DATA PER
$1,000 INVESTED
Federal income tax results:
Ordinary income (loss)
- from operations 0 6 57 66
============== ============== ============= ==============
- from recapture 0 0 0 0
============== ============== ============= ==============
Capital gain (loss) 0 0 0 0
============== ============== ============= ==============
<PAGE>
6 months
1999
- --------------------
$ 1,570,899
28,767
0
26,835
(125,230 )
0
0
(199,121 )
====================
1,302,150
====================
1,202,058
====================
0
====================
1,449,887
0
0
- --------------------
1,449,887
(1,400,000 )
0
- --------------------
49,887
0
0
0
0
(25,792 )
0
(526,138 )
0
(2,596 )
(117 )
0
- --------------------
(504,756 )
====================
34
====================
0
====================
0
====================
<PAGE>
TABLE III - CNL INCOME FUND XVIII, LTD. (continued)
1995
(Note 1) 1996 1997 1998
-------------- ------------- -------------- -------------
Cash distributions to investors
Source (on GAAP basis)
- from investment income 0 0 38 65
- from capital gain 0 0 0 0
- from investment income from prior
period 0 0 0 6
-------------- ------------- -------------- -------------
Total distributions on GAAP basis (Note 4) 0 0 38 71
============== ============= ============== =============
Source (on cash basis)
- from sales 0 0 0 0
- from refinancing 0 0 0 0
- from operations 0 0 38 71
-------------- ------------- -------------- -------------
Total distributions on cash basis (Note 4) 0 0 38 71
============== ============= ============== =============
Total cash distributions as a percentage of
original $1,000 investment from
inception 0.00 % 5.00 % 5.75 % 7.63 %
Total cumulative cash distributions per
$1,000 investment (Note 6) 0 0 38 109
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 %
Note 1: Pursuant to a registration statement on Form S-11 under the
Securities Act of 1933, as amended, effective August 11, 1995, CNL
Income Fund XVIII, Ltd ("CNL XVIII") and CNL Income Fund XVII, Ltd.
each registered for sale $30,000,000 units of limited partnership
interest ("Units"). The offering of Units of CNL Income Fund XVII,
Ltd. commenced September 2, 1995. Pursuant to the registration
statement, CNL XVIII could not commence until the offering of Units
of CNL Income Fund XVII, Ltd. was terminated. CNL Income Fund XVII,
Ltd. terminated its offering of Units on September 19, 1996, at
which time the maximum offering proceeds of $30,000,000 had been
received. Upon the termination of the offering of Units of CNL
Income Fund XVII, Ltd., CNL XVIII commenced its offering of Units.
Activities through October 11, 1996, were devoted to organization
of the partnership and operations had not begun.
Note 2: Cash generated from operations includes cash received from
tenants, less cash paid for expenses, plus interest received.
Note 3: Cash generated from operations per this table agrees to cash
generated from operations per the statement of cash flows included
in the financial statements of CNL XVIII.
Note 4: Distributions declared for the quarters ended December 1996, 1997
and 1998 are reflected in the 1997, 1998 and 1999 columns,
respectively, due to the payment of such distributions in January
1997, 1998 and 1999, respectively. As a result of distributions
being presented on a cash basis, distributions declared and unpaid
as of December 31, 1996, 1997, 1998 and June 30, 1999 are not
included in the 1996, 1997, 1998 and 1999 totals, respectively.
Note 5: During the year ended December 31, 1998, the partnership
established an allowance for loss on land of $197,466 for financial
reporting purposes relating to the property in Minnetonka,
Minnesota. The tenant of this Boston Market property declared
bankruptcy and rejected the lease relating to this property. The
loss represents the difference between the Property's carrying
value at December 31, 1998 and the current estimate of net
realizable value.
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 4 above)
Note 7: Certain data for columns representing less than 12 months have
been annualized.
<PAGE>
6 months
1999
- -----------------------
37
0
3
- -----------------------
40
=======================
0
0
40
- -----------------------
40
=======================
8.00 %
149
100 %
<PAGE>
TABLE V
SALES OR DISPOSALS OF PROPERTIES
Selling Price, Net of
Closing Costs and GAAP Adjustments
---------------------------------------------------------------
Purchase
Cash Mortgage money Adjustments
received net balance mortgage resulting from
Date Date of of closing at time taken back application of
Property Acquired Sale costs of sale by program GAAP Total
==========================================================================================================================
CNL Income Fund, Ltd.:
Burger King -
San Dimas, CA (14) 02/05/87 06/12/92 $1,169,021 0 0 0 $1,169,021
Wendy's -
Fairfield, CA (14) 07/01/87 10/03/94 1,018,490 0 0 0 1,018,490
Wendy's -
Casa Grande, AZ 12/10/86 08/19/97 795,700 0 0 0 795,700
Wendy's -
North Miami, FL (9) 02/18/86 08/21/97 473,713 0 0 0 473,713
Popeye's -
Kissimmee, FL (14) 12/31/86 04/30/98 661,300 0 0 0 661,300
CNL Income Fund II, Ltd.:
Golden Corral -
Salisbury, NC 05/29/87 07/21/93 746,800 0 0 0 746,800
Pizza Hut -
Graham, TX 08/24/87 07/28/94 261,628 0 0 0 261,628
Golden Corral -
Medina, OH (11) 11/18/87 11/30/94 825,000 0 0 0 825,000
Denny's -
Show Low, AZ (8) 05/22/87 01/31/97 620,800 0 0 0 620,800
KFC -
Eagan, MN 06/01/87 06/02/97 623,882 0 42,000 0 665,882
KFC -
Jacksonville, FL 09/01/87 09/09/97 639,363 0 0 0 639,363
Wendy's -
Farmington Hills, MI 05/18/87 10/09/97 833,031 0 0 0 833,031
(12)
Wendy's -
Farmington Hills, MI 05/18/87 10/09/97 1,085,259 0 0 0 1,085,259
(13) (14)
Denny's -
Plant City, FL 11/23/87 10/24/97 910,061 0 0 0 910,061
Pizza Hut -
Mathis, TX 12/17/87 12/04/97 297,938 0 0 0 297,938
KFC -
Avon Park, FL (14) 09/02/87 12/10/97 501,975 0 0 0 501,975
Golden Corral -
Columbia, MO 11/17/87 03/23/99 678,888 0 0 0 678,888
CNL Income Fund III, Ltd.:
Wendy's -
Chicago, IL (14) 06/02/88 01/10/97 496,418 0 0 0 496,418
Perkins -
Bradenton, FL 06/30/88 03/14/97 1,310,001 0 0 0 1,310,001
Pizza Hut -
Kissimmee, FL 02/23/88 04/08/97 673,159 0 0 0 673,159
Burger King -
Roswell, GA 06/08/88 06/20/97 257,981 0 685,000 0 942,981
<PAGE>
Cost of Properties
Including Closing and
Soft Costs
-------------------------------------
Excess
Total (deficiency)
acquisition of property
cost, operating
capital cash
improvements receipts
Original closing and over
mortgage soft costs cash
Property financing (1) Total expenditures
=========================================================================================
CNL Income Fund, Ltd.:
Burger King -
San Dimas, CA (14) 0 $955,000 $955,000 $214,021
Wendy's -
Fairfield, CA (14) 0 861,500 861,500 156,990
Wendy's -
Casa Grande, AZ 0 667,255 667,255 128,445
Wendy's -
North Miami, FL (9) 0 385,000 385,000 88,713
Popeye's -
Kissimmee, FL (14) 0 475,360 475,360 185,940
CNL Income Fund II, Ltd.:
Golden Corral -
Salisbury, NC 0 642,800 642,800 104,000
Pizza Hut -
Graham, TX 0 205,500 205,500 56,128
Golden Corral -
Medina, OH (11) 0 743,000 743,000 82,000
Denny's -
Show Low, AZ (8) 0 484,185 484,185 136,615
KFC -
Eagan, MN 0 601,100 601,100 64,782
KFC -
Jacksonville, FL 0 405,000 405,000 234,363
Wendy's -
Farmington Hills, MI 0 679,000 679,000 154,031
(12)
Wendy's -
Farmington Hills, MI 0 887,000 887,000 198,259
(13) (14)
Denny's -
Plant City, FL 0 820,717 820,717 89,344
Pizza Hut -
Mathis, TX 0 202,100 202,100 95,838
KFC -
Avon Park, FL (14) 0 345,000 345,000 156,975
Golden Corral -
Columbia, MO 0 511,200 511,200 167,688
CNL Income Fund III, Ltd.:
Wendy's -
Chicago, IL (14) 0 591,362 591,362 (94,944 )
Perkins -
Bradenton, FL 0 1,080,500 1,080,500 229,501
Pizza Hut -
Kissimmee, FL 0 474,755 474,755 198,404
Burger King -
Roswell, GA 0 775,226 775,226 167,755
<PAGE>
TABLE V
SALES OR DISPOSALS OF PROPERTIES
Selling Price, Net of
Closing Costs and GAAP Adjustments
---------------------------------------------------------------
Purchase
Cash Mortgage money Adjustments
received net balance mortgage resulting from
Date Date of of closing at time taken back application of
Property Acquired Sale costs of sale by program GAAP Total
==========================================================================================================================
Wendy's -
Mason City, IA 02/29/88 10/24/97 217,040 0 0 0 217,040
Taco Bell -
Fernandina Beach, FL 04/09/88 01/15/98 721,655 0 0 0 721,655
(14)
Denny's -
Daytona Beach, FL (14) 07/12/88 01/23/98 1,008,976 0 0 0 1,008,976
Wendy's -
Punta Gorda, FL 02/03/88 02/20/98 665,973 0 0 0 665,973
Po Folks -
Hagerstown, MD 06/21/88 06/10/98 788,884 0 0 0 788,884
Denny's-
Hazard, KY 02/01/88 12/23/98 432,625 0 0 0 432,625
Perkins -
Flagstaff, AZ 09/30/88 04/30/99 1,091,193 0 0 0 1,091,193
Denny's -
Hagerstown, MD 08/14/88 06/09/99 700,977 0 0 0 700,977
CNL Income Fund IV, Ltd.:
Taco Bell -
York, PA 03/22/89 04/27/94 712,000 0 0 0 712,000
Burger King -
Hastings, MI 08/12/88 12/15/95 518,650 0 0 0 518,650
Wendy's -
Tampa, FL 12/30/88 09/20/96 1,049,550 0 0 0 1,049,550
Checkers -
Douglasville, GA 12/08/94 11/07/97 380,695 0 0 0 380,695
Taco Bell -
Fort Myers, FL (14) 12/22/88 03/02/98 794,690 0 0 0 794,690
Denny's -
Union Township, OH (14) 11/01/88 03/31/98 674,135 0 0 0 674,135
Perkins -
Leesburg, FL 01/11/89 07/09/98 529,288 0 0 0 529,288
Taco Bell -
Naples, FL 12/22/88 09/03/98 533,127 0 0 0 533,127
CNL Income Fund V, Ltd.:
Perkins -
Myrtle Beach, SC (2) 02/28/90 08/25/95 0 0 1,040,000 0 1,040,000
Ponderosa -
St. Cloud, FL (14) (22) 06/01/89 10/24/96 73,713 0 1,057,299 0 1,131,012
Franklin National Bank -
Franklin, TN 06/26/89 01/07/97 960,741 0 0 0 960,741
Shoney's -
Smyrna, TN 03/22/89 05/13/97 636,788 0 0 0 636,788
KFC -
Salem, NH 05/31/89 09/22/97 1,272,137 0 0 0 1,272,137
<PAGE>
Cost of Properties
Including Closing and
Soft Costs
-------------------------------------
Excess
Total (deficiency)
acquisition of property
cost, operating
capital cash
improvements receipts
Original closing and over
mortgage soft costs cash
Property financing (1) Total expenditures
=========================================================================================
Wendy's -
Mason City, IA 0 190,252 190,252 26,788
Taco Bell -
Fernandina Beach, FL 0 559,570 559,570 162,085
(14)
Denny's -
Daytona Beach, FL (14) 0 918,777 918,777 90,799
Wendy's -
Punta Gorda, FL 0 684,342 684,342 (18,369 )
Po Folks -
Hagerstown, MD 0 1,188,315 1,188,315 (399,431 )
Denny's-
Hazard, KY 0 647,622 647,622 (214,997 )
Perkins -
Flagstaff, AZ 0 993,508 993,508 97,685
Denny's -
Hagerstown, MD 0 861,454 861,454 (160,477 )
CNL Income Fund IV, Ltd.:
Taco Bell -
York, PA 0 616,501 616,501 95,499
Burger King -
Hastings, MI 0 419,936 419,936 98,714
Wendy's -
Tampa, FL 0 828,350 828,350 221,200
Checkers -
Douglasville, GA 0 363,768 363,768 16,927
Taco Bell -
Fort Myers, FL (14) 0 597,998 597,998 196,692
Denny's -
Union Township, OH (14) 0 872,850 872,850 (198,715 )
Perkins -
Leesburg, FL 0 737,260 737,260 (207,972 )
Taco Bell -
Naples, FL 0 410,546 410,546 122,581
CNL Income Fund V, Ltd.:
Perkins -
Myrtle Beach, SC (2) 0 986,418 986,418 53,582
Ponderosa -
St. Cloud, FL (14) (22) 0 996,769 996,769 134,243
Franklin National Bank -
Franklin, TN 0 1,138,164 1,138,164 (177,423 )
Shoney's -
Smyrna, TN 0 554,200 554,200 82,588
KFC -
Salem, NH 0 1,079,310 1,079,310 192,827
<PAGE>
TABLE V
SALES OR DISPOSALS OF PROPERTIES
Selling Price, Net of
Closing Costs and GAAP Adjustments
---------------------------------------------------------------
Purchase
Cash Mortgage money Adjustments
received net balance mortgage resulting from
Date Date of of closing at time taken back application of
Property Acquired Sale costs of sale by program GAAP Total
==========================================================================================================================
Perkins -
Port St. Lucie, FL 11/14/89 09/23/97 1,216,750 0 0 0 1,216,750
Hardee's -
Richmond, IN 02/17/89 11/07/97 397,785 0 0 0 397,785
Wendy's -
Tampa, FL (14) 02/16/89 12/29/97 805,175 0 0 0 805,175
Denny's -
Port Orange, FL (14) 07/10/89 01/23/98 1,283,096 0 0 0 1,283,096
Shoney's
Tyler, TX 03/20/89 02/17/98 844,229 0 0 0 894,229
Wendy's -
Ithaca, NY 12/07/89 03/29/99 471,248 0 0 0 471,248
Wendy's -
Endicott, NY 12/07/89 03/29/99 642,511 0 0 0 642,511
Burger King -
Halls, TN (20) 01/05/90 06/03/99 433,366 0 0 0 433,366
CNL Income Fund VI, Ltd.:
Hardee's -
Batesville, AR 11/02/89 05/24/94 791,211 0 0 0 791,211
Hardee's -
Heber Springs, AR 02/13/90 05/24/94 638,270 0 0 0 638,270
Hardee's -
Little Canada, MN 11/28/89 06/29/95 899,503 0 0 0 899,503
Jack in the Box -
Dallas, TX 06/28/94 12/09/96 982,980 0 0 0 982,980
Denny's -
Show Low, AZ (8) 05/22/87 01/31/97 349,200 0 0 0 349,200
KFC -
Whitehall Township, MI 02/26/90 07/09/97 629,888 0 0 0 629,888
Perkins -
Naples, FL 12/26/89 07/09/97 1,487,725 0 0 0 1,487,725
Burger King -
Plattsmouth, NE 01/19/90 07/18/97 699,400 0 0 0 699,400
Shoney's -
Venice, FL 08/03/89 09/17/97 1,206,696 0 0 0 1,206,696
Jack in the Box -
Yuma, AZ (10) 07/14/94 10/31/97 510,653 0 0 0 510,653
Denny's
Deland, FL 03/22/90 01/23/98 1,236,971 0 0 0 1,236,971
Wendy's -
Liverpool, NY 12/08/89 02/09/98 145,221 0 0 0 145,221
Perkin's -
Melbourne, FL 02/03/90 02/12/98 552,910 0 0 0 552,910
Hardee's -
Bellevue, NE 05/03/90 06/05/98 900,000 0 0 0 900,000
<PAGE>
Cost of Properties
Including Closing and
Soft Costs
-------------------------------------
Excess
Total (deficiency)
acquisition of property
cost, operating
capital cash
improvements receipts
Original closing and over
mortgage soft costs cash
Property financing (1) Total expenditures
=========================================================================================
Perkins -
Port St. Lucie, FL 0 1,203,207 1,203,207 13,543
Hardee's -
Richmond, IN 0 695,464 695,464 (297,679 )
Wendy's -
Tampa, FL (14) 0 657,800 657,800 147,375
Denny's -
Port Orange, FL (14) 0 1,021,000 1,021,000 262,096
Shoney's
Tyler, TX 0 770,300 770,300 73,929
Wendy's -
Ithaca, NY 0 471,297 471,297 (49 )
Wendy's -
Endicott, NY 0 471,255 471,255 171,256
Burger King -
Halls, TN (20) 0 329,231 329,231 104,135
CNL Income Fund VI, Ltd.:
Hardee's -
Batesville, AR 0 605,500 605,500 185,711
Hardee's -
Heber Springs, AR 0 532,893 532,893 105,377
Hardee's -
Little Canada, MN 0 821,692 821,692 77,811
Jack in the Box -
Dallas, TX 0 964,437 964,437 18,543
Denny's -
Show Low, AZ (8) 0 272,354 272,354 76,846
KFC -
Whitehall Township, MI 0 725,604 725,604 (95,716 )
Perkins -
Naples, FL 0 1,083,869 1,083,869 403,856
Burger King -
Plattsmouth, NE 0 561,000 561,000 138,400
Shoney's -
Venice, FL 0 1,032,435 1,032,435 174,261
Jack in the Box -
Yuma, AZ (10) 0 448,082 448,082 62,571
Denny's
Deland, FL 0 1,000,000 1,000,000 236,971
Wendy's -
Liverpool, NY 0 341,440 341,440 (196,219 )
Perkin's -
Melbourne, FL 0 692,850 692,850 (139,940 )
Hardee's -
Bellevue, NE 0 899,512 899,512 488
<PAGE>
TABLE V
SALES OR DISPOSALS OF PROPERTIES
Selling Price, Net of
Closing Costs and GAAP Adjustments
---------------------------------------------------------------
Purchase
Cash Mortgage money Adjustments
received net balance mortgage resulting from
Date Date of of closing at time taken back application of
Property Acquired Sale costs of sale by program GAAP Total
==========================================================================================================================
Burger King -
Greeneville, TN 01/05/90 06/03/99 1,059,373 0 0 0 1,059,373
Burger King -
Broadway, TN 01/05/90 06/03/99 1,059,200 0 0 0 1,059,200
Burger King -
Sevierville, TN 01/05/90 06/03/99 1,168,298 0 0 0 1,168,298
Burger King -
Walker Springs, TN 01/10/90 06/03/99 1,031,274 0 0 0 1,031,274
CNL Income Fund VII, Ltd.:
Taco Bell -
Kearns, UT 06/14/90 05/19/92 700,000 0 0 0 700,000
Hardee's -
St. Paul, MN 08/09/90 05/24/94 869,036 0 0 0 869,036
Perkins -
Florence, SC (3) 08/28/90 08/25/95 0 0 1,160,000 0 1,160,000
Church's Fried Chicken -
Jacksonville, FL (14) 04/30/90 12/01/95 0 0 240,000 0 240,000
(23)
Shoney's -
Colorado Springs, CO 07/03/90 07/24/96 1,044,909 0 0 0 1,044,909
Hardee's -
Hartland, MI 07/10/90 10/23/96 617,035 0 0 0 617,035
Hardee's -
Columbus, IN 09/04/90 05/30/97 223,590 0 0 0 223,590
KFC -
Dunnellon, FL 08/02/90 10/07/97 757,800 0 0 0 757,800
Jack in the Box -
Yuma, AZ (10) 07/14/94 10/31/97 471,372 0 0 0 471,372
Burger King -
Maryville, TN 05/04/90 06/03/99 1,059,954 0 0 0 1,059,954
Burger King -
Halls, TN (20) 01/05/90 06/03/99 451,054 0 0 0 451,054
CNL Income Fund VIII, Ltd.:
Denny's -
Ocoee, FL 03/16/91 07/31/95 1,184,865 0 0 0 1,184,865
Church's Fried Chicken -
Jacksonville, FL (4) 09/28/90 12/01/95 0 0 240,000 0 240,000
(14)
Church's Fried Chicken -
Jacksonville, FL (5) 09/28/90 12/01/95 0 0 220,000 0 220,000
(14)
Ponderosa -
Orlando, FL (6) (14) 12/17/90 10/24/96 0 0 1,353,775 0 1,353,775
<PAGE>
Cost of Properties
Including Closing and
Soft Costs
-------------------------------------
Excess
Total (deficiency)
acquisition of property
cost, operating
capital cash
improvements receipts
Original closing and over
mortgage soft costs cash
Property financing (1) Total expenditures
=========================================================================================
Burger King -
Greeneville, TN 0 890,240 890,240 169,133
Burger King -
Broadway, TN 0 890,036 890,036 169,164
Burger King -
Sevierville, TN 0 890,696 890,696 277,602
Burger King -
Walker Springs, TN 0 864,777 864,777 166,497
CNL Income Fund VII, Ltd.:
Taco Bell -
Kearns, UT 0 560,202 560,202 139,798
Hardee's -
St. Paul, MN 0 742,333 742,333 126,703
Perkins -
Florence, SC (3) 0 1,084,905 1,084,905 75,095
Church's Fried Chicken -
Jacksonville, FL (14) 0 233,728 233,728 6,272
(23)
Shoney's -
Colorado Springs, CO 0 893,739 893,739 151,170
Hardee's -
Hartland, MI 0 841,642 841,642 (224,607 )
Hardee's -
Columbus, IN 0 219,676 219,676 3,914
KFC -
Dunnellon, FL 0 546,333 546,333 211,467
Jack in the Box -
Yuma, AZ (10) 0 413,614 413,614 57,758
Burger King -
Maryville, TN 0 890,668 890,668 169,286
Burger King -
Halls, TN (20) 0 342,669 342,669 108,385
CNL Income Fund VIII, Ltd.:
Denny's -
Ocoee, FL 0 949,199 949,199 235,666
Church's Fried Chicken -
Jacksonville, FL (4) 0 238,153 238,153 1,847
(14)
Church's Fried Chicken -
Jacksonville, FL (5) 0 215,845 215,845 4,155
(14)
Ponderosa -
Orlando, FL (6) (14) 0 1,179,210 1,179,210 174,565
<PAGE>
TABLE V
SALES OR DISPOSALS OF PROPERTIES
Selling Price, Net of
Closing Costs and GAAP Adjustments
---------------------------------------------------------------
Purchase
Cash Mortgage money Adjustments
received net balance mortgage resulting from
Date Date of of closing at time taken back application of
Property Acquired Sale costs of sale by program GAAP Total
==========================================================================================================================
CNL Income Fund IX, Ltd.:
Burger King -
Woodmere, OH (15) 05/31/91 12/12/96 918,445 0 0 0 918,445
Burger King -
Alpharetta, GA 09/20/91 06/30/97 1,053,571 0 0 0 1,053,571
Shoney's -
Corpus Christi, TX 10/28/91 02/12/99 1,350,000 0 0 0 1,350,000
Perkins -
Rochester, NY 12/20/91 03/03/99 1,050,000 0 0 0 1,050,000
CNL Income Fund X, Ltd.:
Shoney's -
Denver, CO 03/04/92 08/11/95 1,050,186 0 0 0 1,050,186
Jack in the Box -
Freemont, CA 03/26/92 09/23/97 1,366,550 0 0 0 1,366,550
Jack in the Box -
Sacramento, CA 12/19/91 01/20/98 1,234,175 0 0 0 1,234,175
Pizza Hut -
Billings, MT 04/16/92 10/07/98 359,990 0 0 0 359,990
Perkins -
Amherst, NY 02/26/92 03/03/99 1,150,000 0 0 0 1,150,000
CNL Income Fund XI, Ltd.:
Burger King -
Philadelphia, PA 09/29/92 11/07/96 1,044,750 0 0 0 1,044,750
Burger King -
Columubus, OH (19) 06/29/92 09/30/98 795,264 0 0 0 795,264
Burger King -
Nashua, NH 06/29/92 10/07/98 1,630,296 0 0 0 1,630,296
CNL Income Fund XII, Ltd.:
Golden Corral -
Houston, TX 12/28/92 04/10/96 1,640,000 0 0 0 1,640,000
Long John Silver's -
Monroe, NC 06/30/93 12/31/98 483,550 0 0 0 483,550
Long John Silver's -
Morganton, NC (21) 07/02/93 05/17/99 467,300 0 55,000 0 522,300
CNL Income Fund XIII, Ltd.:
Checkers -
Houston, TX 03/31/94 04/24/95 286,411 0 0 0 286,411
Checkers -
Richmond, VA 03/31/94 11/21/96 550,000 0 0 0 550,000
Denny's -
Orlando, FL 09/01/93 10/24/97 932,849 0 0 0 932,849
<PAGE>
Cost of Properties
Including Closing and
Soft Costs
-------------------------------------
Excess
Total (deficiency)
acquisition of property
cost, operating
capital cash
improvements receipts
Original closing and over
mortgage soft costs cash
Property financing (1) Total expenditures
=========================================================================================
CNL Income Fund IX, Ltd.:
Burger King - 0 918,445 918,445 0
Woodmere, OH (15)
Burger King - 0 713,866 713,866 339,705
Alpharetta, GA
Shoney's - 0 1,224,020 1,224,020 125,980
Corpus Christi, TX
Perkins - 0 1,064,815 1,064,815 (14,815 )
Rochester, NY
CNL Income Fund X, Ltd.:
Shoney's - 0 987,679 987,679 62,507
Denver, CO
Jack in the Box - 0 1,102,766 1,102,766 263,784
Freemont, CA
Jack in the Box - 0 969,423 969,423 264,752
Sacramento, CA
Pizza Hut - 0 302,000 302,000 57,990
Billings, MT
Perkins - 0 1,141,444 1,141,444 8,556
Amherst, NY
CNL Income Fund XI, Ltd.:
Burger King - 0 818,850 818,850 225,900
Philadelphia, PA
Burger King - 0 795,264 795,264 0
Columubus, OH (19)
Burger King - 0 1,217,015 1,217,015 413,281
Nashua, NH
CNL Income Fund XII, Ltd.:
Golden Corral - 0 1,636,643 1,636,643 3,357
Houston, TX
Long John Silver's - 0 239,788 239,788 243,762
Monroe, NC
Long John Silver's - 0 304,002 304,002 218,298
Morganton, NC (21)
CNL Income Fund XIII, Ltd.:
Checkers - 0 286,411 286,411 0
Houston, TX
Checkers - 0 413,288 413,288 136,712
Richmond, VA
Denny's - 0 934,120 934,120 (1,271 )
Orlando, FL
<PAGE>
TABLE V
SALES OR DISPOSALS OF PROPERTIES
Selling Price, Net of
Closing Costs and GAAP Adjustments
---------------------------------------------------------------
Purchase
Cash Mortgage money Adjustments
received net balance mortgage resulting from
Date Date of of closing at time taken back application of
Property Acquired Sale costs of sale by program GAAP Total
==========================================================================================================================
CNL Income Fund XIV, Ltd.:
Checkers -
Knoxville, TN 03/31/94 03/01/95 339,031 0 0 0 339,031
Checkers -
Dallas, TX 03/31/94 03/01/95 356,981 0 0 0 356,981
TGI Friday's -
Woodridge, NJ (7) 01/01/95 09/27/96 1,753,533 0 0 0 1,753,533
Wendy's -
Woodridge, NJ (7) 11/28/94 09/27/96 747,058 0 0 0 747,058
Hardee's -
Madison, AL 12/14/93 01/08/98 700,950 0 0 0 700,950
Checkers -
Richmond, VA (#548) 03/31/94 01/29/98 512,462 0 0 0 512,462
Checkers -
Riviera Beach, FL 03/31/94 04/14/98 360,000 0 0 0 360,000
Checkers -
Richmond, VA (#486) 03/31/94 07/27/98 397,985 0 0 0 397,985
Long John Silver's -
Stockbridge, GA 03/31/94 05/25/99 696,300 0 0 0 696,300
CNL Income Fund XV, Ltd.:
Checkers -
Knoxville, TN 05/27/94 03/01/95 263,221 0 0 0 263,221
Checkers -
Leavenworth, KS 06/22/94 03/01/95 259,600 0 0 0 259,600
Checkers -
Knoxville, TN 07/08/94 03/01/95 288,885 0 0 0 288,885
TGI Friday's -
Woodridge, NJ (7) 01/01/95 09/27/96 1,753,533 0 0 0 1,753,533
Wendy's -
Woodridge, NJ (7) 11/28/94 09/27/96 747,058 0 0 0 747,058
CNL Income Fund XVI, Ltd.:
Long John Silver's -
Appleton, WI 06/24/95 04/24/96 775,000 0 0 0 775,000
Checker's -
Oviedo, FL 11/14/94 02/28/97 610,384 0 0 0 610,384
Boston Market -
Madison, TN (16) 05/05/95 05/08/98 774,851 0 0 0 774,851
Boston Market -
Chattanooga, TN (17) 05/05/95 06/16/98 713,386 0 0 0 713,386
<PAGE>
Cost of Properties
Including Closing and
Soft Costs
-------------------------------------
Excess
Total (deficiency)
acquisition of property
cost, operating
capital cash
improvements receipts
Original closing and over
mortgage soft costs cash
Property financing (1) Total expenditures
==========================================================================================
CNL Income Fund XIV, Ltd.:
Checkers -
Knoxville, TN 0 339,031 339,031 0
Checkers -
Dallas, TX 0 356,981 356,981 0
TGI Friday's -
Woodridge, NJ (7) 0 1,510,245 1,510,245 243,288
Wendy's -
Woodridge, NJ (7) 0 672,746 672,746 74,312
Hardee's -
Madison, AL 0 658,977 658,977 41,973
Checkers -
Richmond, VA (#548) 0 382,435 382,435 130,027
Checkers -
Riviera Beach, FL 0 276,409 276,409 83,591
Checkers -
Richmond, VA (#486) 0 352,034 352,034 45,951
Long John Silver's -
Stockbridge, GA 0 738,340 738,340 (42,040 )
CNL Income Fund XV, Ltd.:
Checkers -
Knoxville, TN 0 263,221 263,221 0
Checkers -
Leavenworth, KS 0 259,600 259,600 0
Checkers -
Knoxville, TN 0 288,885 288,885 0
TGI Friday's -
Woodridge, NJ (7) 0 1,510,245 1,510,245 243,288
Wendy's -
Woodridge, NJ (7) 0 672,746 672,746 74,312
CNL Income Fund XVI, Ltd.:
Long John Silver's -
Appleton, WI 0 613,838 613,838 161,162
Checker's -
Oviedo, FL 0 506,311 506,311 104,073
Boston Market -
Madison, TN (16) 0 774,851 774,851 0
Boston Market -
Chattanooga, TN (17) 0 713,386 713,386 0
<PAGE>
TABLE V
SALES OR DISPOSALS OF PROPERTIES
Selling Price, Net of
Closing Costs and GAAP Adjustments
---------------------------------------------------------------
Purchase
Cash Mortgage money Adjustments
received net balance mortgage resulting from
Date Date of of closing at time taken back application of
Property Acquired Sale costs of sale by program GAAP Total
==========================================================================================================================
CNL Income Fund XVII, Ltd.:
Boston Market -
Troy, OH (18) 07/24/96 06/16/98 857,487 0 0 0 857,487
CNL American Properties
Fund, Inc.:
TGI Friday's -
Orange, CT 10/30/95 05/08/97 1,312,799 0 0 0 1,312,799
TGI Friday's -
Hazlet, NJ 07/15/96 05/08/97 1,324,109 0 0 0 1,324,109
TGI Friday's -
Marlboro, NJ 08/01/96 05/08/97 1,372,075 0 0 0 1,372,075
TGI Friday's -
Hamden, CT 08/26/96 05/08/97 1,245,100 0 0 0 1,245,100
Boston Market -
Southlake, TX 07/02/97 07/21/97 1,035,153 0 0 0 1,035,135
Boston Market -
Franklin, TN (21) 08/18/95 04/14/98 950,361 0 0 0 950,361
Boston Market -
Grand Island, NE (22) 09/19/95 04/14/98 837,656 0 0 0 837,656
Burger King -
Indian Head Park, IL 04/03/96 05/05/98 674,320 0 0 0 674,320
Boston Market -
Dubuque, IA (26) 10/04/95 05/08/98 969,159 0 0 0 969,159
Boston Market -
Merced, CA (27) 10/06/96 05/08/98 930,834 0 0 0 930,834
Boston Market -
Arvada, CO (28) 07/21/97 07/28/98 1,152,262 0 0 0 1,152,262
Boston Market -
Ellisville, MO 09/03/96 04/28/99 822,824 0 0 0 822,824
Golden Corral -
Brooklyn, OH 08/23/96 05/18/99 1,363,896 0 0 0 1,363,896
<PAGE>
Cost of Properties
Including Closing and
Soft Costs
-------------------------------------
Excess
Total (deficiency)
acquisition of property
cost, operating
capital cash
improvements receipts
Original closing and over
mortgage soft costs cash
Property financing (1) Total expenditures
==========================================================================================
CNL Income Fund XVII, Ltd.:
Boston Market -
Troy, OH (18) 0 857,487 857,487 0
CNL American Properties
Fund, Inc.:
TGI Friday's -
Orange, CT 0 1,310,980 1,310,980 1,819
TGI Friday's -
Hazlet, NJ 0 1,294,237 1,294,237 29,872
TGI Friday's -
Marlboro, NJ 0 1,324,288 1,324,288 47,787
TGI Friday's -
Hamden, CT 0 1,203,136 1,203,136 41,964
Boston Market -
Southlake, TX 0 1,035,135 1,035,135 0
Boston Market -
Franklin, TN (21) 0 950,361 950,361 0
Boston Market -
Grand Island, NE (22) 0 837,656 837,656 0
Burger King -
Indian Head Park, IL 0 670,867 670,867 3,453
Boston Market -
Dubuque, IA (26) 0 969,159 969,159 0
Boston Market -
Merced, CA (27) 0 930,834 930,834 0
Boston Market -
Arvada, CO (28) 0 1,152,262 1,152,262 0
Boston Market -
Ellisville, MO 0 1,026,746 1,026,746 (203,922 )
Golden Corral -
Brooklyn, OH 0 997,296 997,296 366,600
</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 $991,331 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 $1,105,715 in July 2000.
(4) 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 $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 $200,063 in December 2005.
(6) Amount shown is face value and does not represent discounted current
value. The mortgage note bears interest at a rate of 10.75% per annum
and provides for 12 monthly payments of interest only and thereafter, 24
equal monthly payments of principal and interest until November 1999,
when the remaining 144 equal monthly payments of principal and interest
will be reduced due to a lump sum payment received in advance from the
borrower in March 1999.
(7) CNL Income Fund XIV, Ltd. and CNL Income Fund XV, Ltd. each owned a 50
percent interest in Wood-Ridge Real Estate Joint Venture, which owned
two properties. The amounts presented for CNL Income Fund XIV, Ltd. and
CNL Income Fund XV, Ltd. represent each partnership's 50 percent
interest in the properties owned by Wood-Ridge Real Estate Joint
Venture.
(8) CNL Income Fund II, Ltd. owns a 64 percent interest and CNL Income Fund
VI, Ltd. owns a 36 percent interest in this joint venture. The amounts
presented for CNL Income Fund II, Ltd. and CNL Income Fund VI, Ltd.
represent each partnership's percent interest in the property owned by
Show Low Joint Venture.
(9) CNL Income Fund, Ltd. owns a 50 percent interest in this joint venture.
The amounts presented represent the partnerships percent interest in the
property owned by Seventh Avenue Joint Venture. A third party owns the
remaining 50 percent interest in this joint venture.
(10) CNL Income Fund VI, Ltd. and CNL Income Fund VII, Ltd. own a 52 percent
and 48 percent interest, respectively, in the property in Yuma, Arizona.
The amounts presented for CNL Income Fund VI, Ltd. and CNL Income Fund
VII, Ltd. represent each partnership's respective interest in the
property.
(11) Cash received net of closing costs includes $198,000 received as a lease
termination fee.
(12) Cash received net of closing costs includes $93,885 received as a lease
termination fee.
(13) Cash received net of closing costs includes $120,115 received as a lease
termination fee.
(14) Closing costs deducted from net sales proceeds do not include deferred,
subordinated real estate disposition fees payable to CNL Fund Advisors,
Inc. or its affiliates.
(15) The Burger King property in Woodmere, Ohio was exchanged on December 12,
1996 for a Burger King property in Carrboro, NC at the option of the
tenant as permitted under the terms of the lease agreement. Due to the
exchange, the Burger King property in Carrboro, NC is being leased under
the same lease as the Burger King property in Woodmere, OH.
(16) The Boston Market property in Madison, TN was exchanged on May 8, 1998
for a Boston Market property in Lawrence, KS at the option of the tenant
as permitted under the terms of the lease agreement. Due to the
exchange, the Boston Market property in Lawrence, KS is being leased
under the same lease as the Boston Market property in Madison, TN.
(17) The Boston Market property in Chattanooga, TN was exchanged on June 16,
1998 for a Boston Market property in Indianapolis, IN at the option of
the tenant as permitted under the terms of the lease agreement. Due to
the exchange, the Boston Market property in Indianapolis, IN is being
leased under the same lease as the Boston Market property in
Chattanooga, TN.
(18) The Boston Market property in Troy, OH was exchanged on June 16, 1998
for a Boston Market property in Inglewood, CA at the option of the
tenant as permitted under the terms of the lease agreement. Due to the
exchange, the Boston Market property in Inglewood, CA is being leased
under the same lease as the Boston Market property in Troy, OH.
(19) The Burger King property in Columbus, OH was exchanged on September 30,
1998 for a Burger King property in Danbury, CT at the option of the
tenant as permitted under the terms of the lease agreement. Due to the
exchange, the Burger King property in Danbury, CT is being leased under
the same lease as the Burger King property in Columbus, OH.
(20) CNL Income Fund V, Ltd. owns a 49 percent interest and CNL Income Fund
VII, Ltd. owns a 51 percent interest in this joint venture. The amounts
presented for CNL Income Fund V, Ltd. and CNL Income Fund VII, Ltd.
represent each partnership's percent interest in the property owned by
Halls Joint Venture.
(21) 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 60 equal monthly payments of principal and interest.
(22) Amount shown is face value and does not represent discounted current
value. The mortgage note bore an interest rate of 10.75% per annum and
provided for 12 monthly payments of interest only and thereafter, 168
equal monthly payments of principal and interest. The borrower prepaid
the mortgage note in full in April 1999.
(23) Amount shown is face value and does not represent discounted current
value. The mortgage note bore an interest rate of 10.00% per annum and
was paid in full in July 1999.
(24) The Boston Market property in Franklin, TN was exchanged on April 14,
1998 for a Boston Market property in Glendale, AZ at the option of the
tenant as permitted under the terms of the lease agreement. Due to the
exchange, the Boston Market property in Glendale, AZ is being leased
under the same lease as the Boston Market property in Franklin, TN.
(25) The Boston Market property in Grand Island, NE was exchanged on April
14, 1998 for a Boston Market property in Warwick, RI at the option of
the tenant as permitted under the terms of the lease agreement. Due to
the exchange, the Boston Market property in Warwick, RI is being leased
under the same lease as the Boston Market property in Grand Island, NE.
(26) The Boston Market property in Dubuque, IA was exchanged on May 8, 1998
for a Boston Market property in Columbus, OH at the option of the tenant
as permitted under the terms of the lease agreement. Due to the
exchange, the Boston Market property in Columbus, OH is being leased
under the same lease as the Boston Market property in Dubuque, IA.
(27) Cash received net of closing costs includes $362,949 in construction
costs incurred but not paid by CNL American Properties Fund, Inc. as of
the closing date, which were deducted from the actual net sales proceeds
received by CNL American Properties Fund, Inc.
(28) Cash received net of closing costs includes $522,827 in construction
costs incurred but not paid by CNL American Properties Fund, Inc. as of
the closing date, which were deducted from the actual net sales proceeds
received by CNL American Properties Fund, Inc.
<PAGE>
