Rule 424(b)(3)
No. 333-47411
CNL HEALTH CARE PROPERTIES, INC.
This Supplement is part of, and should be read in conjunction with, the
Prospectus dated March 31, 2000. Capitalized terms used in this Supplement have
the same meaning as in the Prospectus unless otherwise stated herein.
Information as to the type of Property acquired by the Company is
presented as of April 20, 2000, and all references to 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
April 20, 2000, will be reported in a subsequent Supplement.
RECENT DEVELOPMENTS
The Company recently acquired a Brighton Gardens(R) by Marriott(R)
assisted living Property located in Orland Park, Illinois. The assisted living
community, which is located southwest of Chicago, is approximately six miles
from two medical facilities, Palos Community Hospital and Oak Forest Community
Hospital, and less than two miles from the Orland Square Shopping Center.
According to a report published by Project Market Decision and Claritas, a
research and data collection firm, the greater Chicago area is the third largest
seniors market in the country with more than 263,800 seniors age 75 and older.
The number of seniors in the ten-mile area surrounding the Property is expected
to grow by 11% between 1999 and 2004. The newly constructed assisted living
Property, which commenced operations in October 1999, has 106 units. The
Company's interest in the Property is focused on real estate only, not assisted
living operations.
THE OFFERING
As of July 13, 1999, the Company had received aggregate subscription
proceeds of $2,751,052 from 121 investors, which exceeded the minimum offering
amount of $2,500,000, and $2,526,052 of the funds were released from escrow. The
remaining subscription proceeds of $225,000 (representing funds received from
Pennsylvania investors) will be held in escrow until aggregate subscription
proceeds total at least $7,775,000. As of April 20, 2000, the Company had
received aggregate subscriptions for 708,938 Shares totalling $7,089,384 in
Gross Proceeds, including 2,319 Shares ($23,190) issued pursuant to the
Reinvestment Plan and 38,300 Shares ($383,000) from Pennsylvania investors. As
of April 20, 2000, net proceeds to the Company from its offering of Shares and
capital contributions from the Advisor, after deduction of Selling Commissions,
marketing support and due diligence expense reimbursement fees and
Organizational and Offering Expenses paid totalled approximately $6,134,000. The
Company has used approximately $6,100,000 of Net Offering Proceeds and
$8,100,000 in advances relating to the Line of Credit, described in "Business --
Borrowing," to invest approximately $13,900,000 in one assisted living Property
and to pay approximately $302,000 in Acquisition Fees and certain Acquisition
Expenses, leaving approximately $27,000 available to invest in Properties.
April 27, 2000 Prospectus Dated March 31, 2000
<PAGE>
BUSINESS
PROPERTY ACQUISITIONS
Brighton Gardens(R) by Marriott(R) located in Orland Park, Illinois. On
April 20, 2000, the Company acquired a Brighton Gardens assisted living Property
located in Orland Park, Illinois (the "Orland Park Property") for $13,848,900
from Marriott Senior Living Services, Inc. The Company, as lessor, has entered
into a long-term lease agreement relating to this Property. The general terms of
the lease agreement are described in the section of the Prospectus entitled
"Business -- Description of Property Leases." The principal features of the
lease are as follows:
o The initial term of the lease expires in 15 years.
o At the end of the initial lease term, the tenant will have four
consecutive renewal options of five years each.
o The lease will require minimum rent payments of $1,350,268 per year for
the first and second lease years and $1,384,890 for each lease year
thereafter.
o In addition to minimum rent, the lease will require percentage rent
equal to seven percent of gross revenues in excess of the "Baseline
Gross Revenues." The Baseline Gross Revenues will be established when
the facility achieves average occupancy of 93% for four consecutive
quarters.
o A security deposit equal to $553,956 will be retained by the Company as
security for the tenant's obligations under the lease.
o The tenant has established a reserve fund which will be used for the
replacement and renewal of furniture, fixtures and equipment relating
to the assisted living Property (the "FF&E Reserve"). Deposits to the
FF&E Reserve are made every four weeks as follows: 1% of gross receipts
for the first through fourth lease year; 2% of gross receipts for the
fifth through eighth lease year; and 3% of gross receipts every lease
year thereafter.
o Marriott International, Inc. will, with certain limitations, guarantee
the tenant's obligation to pay minimum rent under the lease. The
guarantee terminates on the earlier of the end of the fifth lease year
or at such time as the net operating income from the Property exceeds
minimum rent due under the lease by 25% for any trailing 12-month
period. The maximum amount of the guarantee is $2,769,780.
The estimated federal income tax basis of the depreciable portion of
the Orland Park Property is approximately $12.5 million.
Orland Park Property. The Orland Park Property, which opened in October
1999, is a newly constructed Brighton Gardens by Marriott located in Orland
Park, Illinois. The Orland Park Property includes 82 assisted living units and
24 special care units for residents with Alzheimer's and related memory
disorders. The facility provides assistance with daily living activities such as
bathing, dressing and medication reminders. Special amenities include a common
activities room and common dining room, a private dining area, library and
garden. The assisted living community, which is located southwest of Chicago, is
approximately six miles from two medical facilities, Palos Community Hospital
and Oak Forest Community Hospital, and less than two miles from the Orland
Square Shopping Center. According to a report published by Project Market
Decision and Claritas, a research and data collection firm, the greater Chicago
area is the third largest seniors market in the country with more than 263,800
seniors age 75 and older. The number of seniors in the ten-mile area surrounding
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the Property is expected to grow by 11% between 1999 and 2004. Other senior
living facilities located in proximity to the Orland Park Property include
Victorian Village, Sunrise of Palos Park, Peace Memorial Village and Arden
Courts of Manor Drive. The average occupancy rate and the revenue per available
unit for the period the assisted living facility has been operational are as
follows:
Orland Park Property
----------------------------------------------------
Average Revenue
Occupancy per Available
Year Rate Unit
----------- -------------- ----------------
*1999 23.30% $118.11
**2000 36.30% $109.89
* Data for the Orland Park Property represents the period October 11,
1999 through December 31, 1999.
** Data for 2000 represents the period January 1, 2000 through March 24,
2000.
The Company believes that the results achieved by the Property for 1999
and year-to-date 2000, are not indicative of its long-term operating potential,
as the Property had been open for less than six months during the reporting
period.
Marriott Brands. Brighton Gardens by Marriott is a quality-tier
assisted living concept which generally has 90 assisted living suites, and in
certain locations, 30 to 45 nursing beds in a community. In some communities,
separate on-site centers also provide specialized care for residents with
Alzheimer's or other memory-related disorders. According to Marriott
International, Inc.'s 1999 Form 10-K, Marriott Senior Living Services, Inc.,
which is a wholly owned subsidiary of Marriott International, Inc., operates 99
assisted senior living communities principally under the names "Brighton Gardens
by Marriott," "Village Oaks," and "Marriott MapleRidge," and 45 independent
living communities. Marriott Senior Living Services, Inc. is one of the largest
participants in the seniors' housing industry with $559 million in sales for
1999. The communities are designed in a comfortable, home-like setting and
provide residents with a sense of community through a variety of activities,
restaurant-style dining, on-site security, weekly housekeeping and scheduled
transportation. The communities are distinguished by an innovative wellness
program that enables residents to remain as independent as possible for as long
as possible, while providing a personally tailored program of services and care.
Marriott Senior Living Services, Inc. has provided seniors with excellent
service and quality care since 1984. In 1999, the American Seniors Housing
Association, a seniors housing trade association, ranked Marriott Seniors Living
Services, Inc. as the nation's second largest manager of senior housing.
BORROWING
On April 20, 2000, the Company entered into a revolving Line of Credit
and security agreement with a bank to be used by the Company to acquire and
construct health care Properties. The Line of Credit provides that the Company
will be able to receive advances of up to $25,000,000 until April 19, 2005, with
an annual review to be performed by the bank to indicate that there has been no
substantial deterioration, in the bank's reasonable discretion, of the credit
quality. Interest expense on each advance shall be payable monthly, with all
unpaid interest and principal due no later than five years from the date of the
advance. Generally, advances under the Line of Credit will bear interest at
either (i) a rate per annum equal to LIBOR plus the difference between LIBOR and
the bank's base rate at the time of the advance or (ii) a rate per annum equal
to the bank's base rate, whichever the Company selects at the time advances are
made. The interest rate will be adjusted daily in accordance with fluctuations
with the bank's rate or the LIBOR rate, as applicable. Notwithstanding the
above, the interest rate on the first $9.7 million drawn will be 8.75%. Each
loan made under the Line of Credit will be secured by the assignment of rents
and leases. In addition, the Line of Credit provides that the Company will not
be able to further encumber the applicable health care Property during the term
of the loan without the bank's consent. The Company will be required, at each
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closing, to pay all costs, fees and expenses arising in connection with the Line
of Credit. The Company must also pay the bank's attorneys fees, subject to a
maximum cap, incurred in connection with the Line of Credit and each advance. On
April 20, 2000, the Company obtained one advance totalling $8,100,000 relating
to the Line of Credit. In connection with the Line of Credit, the Company
incurred an origination fee, legal fees and closing costs of $55,917. The
proceeds were used in connection with the purchase of one health care Property
described in "-- Property Acquisitions."
DISTRIBUTION POLICY
DISTRIBUTIONS
In March 2000, the Company declared Distributions of $0.025 per Share
to stockholders of record on March 1, 2000, which were paid in March 2000. In
addition, on April 1 and April 20, 2000, the Company declared Distributions of
$0.025 and $0.012 per Share, respectively, to stockholders of record on April 1,
2000. The Company has also declared Distributions of $0.058 per Share to
stockholders of record on May 1, 2000. These distributions are payable in June
2000.
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<PAGE>
CNL HEALTH CARE PROPERTIES, INC.
AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
Page
----
Pro Forma Consolidated Financial Information (Unaudited):
Unaudited Pro Forma Consolidated Balance Sheet as of December
31, 1999 7
Unaudited Pro Forma Consolidated Statement of Operations for
the year ended December 31, 1999 8
Notes to Unaudited Pro Forma Consolidated Financial Statements
for the year ended December 31, 1999 9
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PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
The following Unaudited Pro Forma Consolidated Balance Sheet of CNL
Health Care Properties, Inc. and subsidiaries (the "Company") gives effect to
(i) the receipt of an initial capital contribution of $200,000 from the Advisor,
$5,200,283 in gross offering proceeds from the sale of 520,028 shares of common
stock for the period from inception through December 31, 1999, and the
application of such funds to pay offering expenses and miscellaneous acquisition
expenses, (ii) the receipt of $1,506,101 in gross offering proceeds from the
sale of 150,610 additional shares for the period January 1, 2000 through April
20, 2000 and the receipt of $8,100,000 from borrowings on a line of credit,
(iii) the application of such funds to purchase a property 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 December 31, 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 December 31, 1999.
The Unaudited Pro Forma Consolidated Statement of Operations for the
year ended December 31, 1999, includes the operating results of the property
described in (iii) above from the date the property became operational 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 consolidated financial information should not
be viewed as indicative of the Company's financial results or conditions in the
future.
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<TABLE>
CNL HEALTH CARE PROPERTIES, INC.
AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1999
<CAPTION>
Pro Forma
ASSETS Historical Adjustments Pro Forma
-------------- --------------- --------------
<S> <C> <C> <C>
Land, buildings and equipment on operating
leases $ -- $ 14,610,170 (a) $ 14,610,170
Cash and cash equivalents 4,744,222 (4,232,890) (a) 511,332
Loan costs -- 55,917 (a) 55,917
Other assets 344,338 (312,210) (a) 32,128
-------------- ------------ ------------
$ 5,088,560 $ 10,120,987 $ 15,209,547
============== ============ ============
LIABILITIES AND STOCKHOLDERS'
EQUITY
Liabilities:
Line of credit $ -- $ 8,100,000 (a) $ 8,100,000
Accounts payable and accrued expenses 21,167 -- 21,167
Due to related parties 1,775,256 81,419 (a) 1,856,675
Security deposits -- 553,956 (a) 553,956
-------------- ------------ ------------
Total liabilities 1,796,423 8,735,375 10,531,798
-------------- ------------ ------------
Stockholders' equity:
Preferred stock, without par value.
Authorized and unissued 3,000,000
shares -- -- --
Excess shares, $0.01 par value per share.
Authorized and unissued 103,000,000
shares -- -- --
Common stock, $.01 par value per share.
Authorized 100,000,000 shares; issued and
outstanding 540,028 shares; issued and
outstanding, as adjusted, 690,638 shares 5,400 1,506 (a) 6,906
Capital in excess of par value 3,365,531 1,384,106 (a) 4,749,637
Accumulated deficit (78,794) -- (78,794)
-------------- ------------ ------------
Total stockholders' equity 3,292,137 1,385,612 4,677,749
-------------- ------------ ------------
$ 5,088,560 $ 10,120,987 $ 15,209,547
============== ============ ============
See accompanying notes to unaudited pro forma consolidated financial statements.
</TABLE>
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<TABLE>
CNL HEALTH CARE PROPERTIES, INC.
AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999
<CAPTION>
Pro Forma
Historical Adjustments Pro Forma
-------------- --------------- --------------
<S> <C> <C> <C>
Revenues:
Rental income from operating
leases $ -- $ 307,964 (1) $ 307,964
FF&E reserve income -- 7,296 (2) 7,296
Interest and other income 86,231 (43,169) (3) 43,062
-------------- ------------ ------------
86,231 272,091 358,322
-------------- ------------ ------------
Expenses:
Interest -- 159,750 (4) 159,750
General operating and
administrative 79,621 -- 79,621
Asset management fees to
related party -- 13,849 (5) 13,849
Organizational costs 35,000 -- 35,000
Depreciation and amortization -- 99,983 (6) 99,983
-------------- ------------ ------------
114,621 273,582 388,203
-------------- ------------ ------------
Net Loss $ (28,390 ) $ (1,491) $ (29,881)
============== ============ ============
Loss Per Share of Common Stock
(Basic and Diluted) (7) $ (.07 ) $ (.06)
============== ============
Weighted Average Number of Shares of Common Stock
Outstanding 412,713 514,035
============== ============
See accompanying notes to unaudited pro forma consolidated financial statements.
</TABLE>
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CNL HEALTH CARE PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1999
Unaudited Pro Forma Consolidated Balance Sheet:
(a) Represents gross proceeds of $1,506,101 from the sale of 150,610 shares
during the period January 1, 2000 through April 20, 2000, the receipt
of $8,100,000 on borrowings from the line of credit, the receipt of
$553,956 from the lessee as a security deposit and $4,232,890 of cash
and cash equivalents used (i) to acquire a property for $13,848,900,
(ii) to pay acquisition fees and costs of $301,788 ($234,013 of which
was accrued as due to related parties at December 31, 1999), (iii) to
pay selling commissions and offering expenses (syndication costs) of
$186,342 which have been netted against stockholders' equity ($65,853
of which was accrued and due to related parties at December 31, 1999)
and (iv) to pay loan costs of $55,917 related to the assumed borrowings
from the line of credit. Also represents the accrual of $381,285 of
acquisition fees and miscellaneous acquisition costs.
Unaudited Pro Forma Consolidated Statement of Operations:
- --------------------------------------------------------
(1) Represents adjustment to rental income from operating leases for the
property acquired by the Company as of April 20, 2000 (the "Pro Forma
Property"), for the period commencing the date the Pro Forma Property
became operational by the previous owner to the end of the pro forma
period presented. The date the Pro Forma Property is treated as
becoming operational as a rental property for purposes of the Pro Forma
Consolidated Statement of Operations was October 11, 1999.
The lease provides for the payment of percentage rent in addition to
base rental income; however, no percentage rent was due under the lease
for the Pro Forma Property during the portion of 1999 the Company was
assumed to have held the property.
(2) Represents reserve funds which will be used for the replacement and
renewal of furniture, fixtures and equipment relating to the Pro Forma
Property (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. In connection therewith, FF&E
Reserve income was earned at approximately $2,700 per month.
(3) Represents adjustment to interest income due to the decrease in the
amount of cash available for investment in interest bearing accounts
during the period commencing the date the Pro Forma Property became
operational by the previous owner through the end of the pro forma
period presented, as described in Note (1). The estimated pro forma
adjustment is based upon the fact that interest income from interest
bearing accounts was earned at a rate of approximately five percent per
annum by the Company during the year ended December 31, 1999.
(4) Represents adjustment to interest expense incurred at a rate of 8.75%
per annum in connection with the assumed borrowings from the line of
credit of $8,100,000 on October 11, 1999.
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CNL HEALTH CARE PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED
FINANCIAL STATEMENTS - CONTINUED
FOR THE YEAR ENDED DECEMBER 31, 1999
Unaudited Pro Forma Consolidated Statement of Operations - Continued:
- --------------------------------------------------------------------
(5) Represents increase in asset management fees relating to the Pro Forma
Property for the period commencing the date the Pro Forma Property
became operational by the previous owners through the end of the pro
forma period presented, as described in Note (1). Asset management fees
are equal to 0.60% per year of the Company's Real Estate Asset Value as
defined in the Company's prospectus.
(6) Represents increase in depreciation expense of the building and the
furniture, fixture and equipment ("FF&E") portions of the Pro Forma
Property accounted for as operating leases using the straight-line
method. The building and FF&E are depreciated over useful lives of 40
and seven years, respectively. Also represents amortization of the loan
costs of $55,917 (.5% origination fee on the $8,100,000 from borrowings
on the line of credit, associated legal fees and closing costs)
amortized under the straight-line method over a period of five years.
(7) Historical earnings per share were calculated based upon the weighted
average number of shares of common stock outstanding during the year
ended December 31, 1999.
As a result of the Pro Forma Property being treated in the Pro Forma
Consolidated Statement of Operations as operational since October 11,
1999, the Company assumed approximately 670,638 shares of common stock
were sold, and the net offering proceeds were available for the
purchase of this property. Due to the fact that approximately 150,610
of these shares of common stock were actually sold subsequently, during
the period January 1, 2000 and April 20, 2000, the weighted average
number of shares outstanding for the pro forma period was adjusted.
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CNL HEALTH CARE PROPERTIES, INC.
STATEMENT OF ESTIMATED TAXABLE OPERATING RESULTS
BEFORE DIVIDENDS PAID DEDUCTION
PROPERTIES ACQUIRED FROM INCEPTION
THROUGH APRIL 20, 2000
For the Year Ended December 31, 1999 (Unaudited)
The following schedule presents unaudited estimated taxable operating
results before dividends paid deduction of the Property acquired by the Company
as of April 20, 2000 The statement presents unaudited estimated taxable
operating results for the Property as if it had been acquired and operational on
January 1, 1999 through December 31, 1999. The schedule should be read in light
of the accompanying footnotes.
These estimates do not purport to present actual or expected operations
of the Company for any period in the future. The estimates were prepared on the
basis described in the accompanying notes which should be read in conjunction
herewith.
Brighton Gardens by Marriott
Orland Park Property
---------------------------------
Estimated Taxable Operating
Results Before Dividends
Paid Deduction:
Rental Income (1) $1,350,268
FF&E Reserve Income (2) 32,476
Asset Management Fees (3) (83,093)
Interest Expense (4) (708,750)
General and Administrative
Expenses (5) (110,422)
-----------
Estimated Cash Available from
Operations 480,479
Depreciation and Amortization
Expense (6) (7) (441,243)
-----------
Estimated Taxable Operating
Results Before Dividends
Paid Deduction $ 39,236
===========
See Footnotes
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- ----------------------------
FOOTNOTES:
(1) Rental income does not include percentage rents which will become due
if specified levels of gross receipts are achieved.
(2) Reserve funds will be used for the replacement and renewal of
furniture, fixtures and equipment related to the Orland Park Property
("FF&E Reserve"). The funds in the FF&E Reserve and all property
purchased with the funds from the FF&E Reserve will be paid, granted
and assigned to the Company. In connection therewith, FF&E Reserve
income will be earned at 1% of gross receipts for lease years one
through four and has been estimated based on projected gross revenues.
(3) The Properties will be managed pursuant to an advisory agreement
between the Company and CNL Health Care Corp. (the "Advisor"), pursuant
to which the Advisor will receive monthly asset management fees in an
amount equal to one-twelfth of .60% of the Company's Real Estate Asset
Value as of the end of the preceding month as defined in such
agreement. See "Management Compensation."
(4) Estimated at 8.75% per annum based on the bank's base rate as of April
20, 2000.
(5) Estimated at 8% of gross rental income, based on the previous
experience of Affiliate of the Advisor with another public REIT.
(6) The estimated federal tax basis of the depreciable portion of the
property and the number of years the assets have been depreciated on
the straight-line method is as follows:
Furniture and
Buildings Fixtures
(39 years) (5-15 years)
------------- --------------
Orland Park Property $11,507,105 $1,023,320
(7) Loan costs of $55,917 (.5% origination fee on the $8.1 million from
borrowings on the Line of Credit, legal fees and closing costs)
amortized under the straight-line method over a period of five years.
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